EX-99.2 6 ex99_2.htm EXHIBIT 99,2

Applied UV, Inc.

Unaudited Pro Forma Condensed Combined Financial Information

 

 

Akida Acquisition

On February 8, 2021, Applied UV, Inc. (the “Company”) completed an Asset Purchase Agreement (“the Akida Agreement”) with Akida Holdings LLC (“Akida”) and its members, Simba Partners, LLC, JJH Holdings, LLC and Fakhruddin Holdings FZC (collectively, the “Sellers”), pursuant to which the Company purchased the Sellers’ air filtration business known as AiroCideTM by acquiring certain assets and liabilities of Akida.

 

Under the terms of the Akida Agreement, the Company paid $901,275 and issued 1,375,000 common shares of the Company as consideration for the Transaction.

 

KES and JJS Acquisition

On September 28, 2021, the Company and its wholly owned subsidiary SteriLumen, Inc. completed an Asset Purchase Agreement (the “KES Agreement”) with the combined entities consisting of JJS Technologies, LLC (“JJS”), a Georgia limited liability company, and KES Science & Technology, Inc. (“KES”), a Georgia corporation. On September 28, 2021 (the “Closing Date”) the transactions contemplated by the KES Agreement were completed.

As contemplated by the KES Agreement, the Company acquired substantially all of the assets of KES and JJS and assumed certain liabilities and contract obligations. The Company was also assigned contracts related to the supply chain management and sale of the Airocide™ system of air purification technologies, originally developed for NASA with assistance from the University of Wisconsin at Madison, that uses a combination of UV-C and a proprietary, titanium dioxide-based photocatalyst that has applications in the hospitality, hotel, healthcare, nursing homes, grocer, wine, commercial buildings, post-harvest, and retail sectors.

 

Pursuant to the KES Agreement, KES and JJS received (i) cash consideration in an amount equal to $4,300,000 and (ii) 300,000 shares of the Company’s common stock.

 

SAM Acquisition

On October 13, 2021, the Company completed an Asset Purchase Agreement (the “SAM Agreement”) with Old SAM Partners, LLC (“SAM”), formerly known as Scientific Air Management, LLC, a Florida limited liability company. Pursuant to the SAM Agreement, the Company acquired substantially all of the assets of SAM and assumed certain liabilities. The consideration paid by the Company pursuant to the SAM Agreement consists of (i) cash consideration in an amount equal to $9,500,000, less any prepayments actually received by SAM prior to the closing for customer orders that will have to be fulfilled by the Company, plus the aggregate amounts of any prepaid expenses of SAM related to the operations existing on the closing date; (ii) 200,000 shares of the Company UV, Inc’s common stock. If the volume weighted average price for the 20 trading days prior to the six-month anniversary of the closing are less than $10.00 per share, the Company shall pay SAM an amount in cash equal to the difference; (iii) 200,000 shares of the Company’s common stock which will vest March 31, 2023 if not previously cancelled due to certain EBITDA targets for 2021 and 2022.

 

Preferred Stock Offering

On July 13, 2021, the Company entered into an underwriting agreement with Ladenburg Thalmann & Co. Inc. as representative of the underwriters, related to the offering of 480,000 shares of the Company’s 10.5% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share, at a public offering price of $25.00 per share, which excludes 72,000 shares of Series A Cumulative Perpetual Preferred Stock that may be purchased by the

 

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Applied UV, Inc.

Unaudited Pro Forma Condensed Combined Financial Information

 

 

Preferred Stock Offering (continued)

Underwriters pursuant to their overallotment option granted to the Underwriters under the terms of the Underwriting Agreement. The Shares were offered and sold by the Company pursuant to the terms of the Underwriting Agreement and registered pursuant to the Company’s registration statement on (i) Form S-1, as amended, which was filed with the Securities and Exchange Commission and declared effective by the Commission on July 12, 2021 and (ii) the Company’s registration statement on Form S-1MEF, which was filed with the Commission on July 13, 2021 and declared effective upon filing. The closing of the offering for the Shares took place on July 16, 2021. The Shares have been approved for listing on Nasdaq under the trading symbol “AUVIP” and trading on Nasdaq began on July 14, 2021. On July 29, 2021, the Company issued a press release announcing that in connection with its previously announced public offering of its 10.5% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share, it had closed the exercise of the underwriter’s overallotment option of 72,000 shares at $25.00 per share. Aggregate gross proceeds including the exercise of the underwriter's overallotment option was $12,272,440 after deducting underwriting discounts and commissions and fees and other estimated offering expenses.

 

Pro forma Information

The following unaudited pro forma condensed combined balance sheet of the Company as of June 30, 2021 gives effect to the KES Agreement and the SAM Agreement as if they had occurred on June 30, 2021. The following unaudited pro forma condensed combined statements of operations for the year ended December 31, 2020 and the six months ended June 30, 2021 give effect to the KES Agreement, the SAM Agreement and the Akida Agreement as if they had occurred on January 1, 2020. The historical financial information is based on the Company’s audited and unaudited interim consolidated financial statements, KES and JJS audited and unaudited interim combined financial statements, SAM’s audited and unaudited interim financial statements and Akida’s audited and unaudited interim financial statements.

 

The unaudited pro forma condensed combined financial statements reflect management’s preliminary estimates of fair value of purchase price consideration and the fair values of tangible and intangible assets acquired and liabilities assumed in the acquisitions, with the remaining estimated purchase consideration recorded as goodwill. Independent valuation specialists have conducted analysis to assist management of the Company in determining the fair value of the assets acquired and liabilities assumed. the Company’s management is responsible for these third-party valuations. Since these unaudited pro forma condensed combined financial statements have been prepared based on preliminary estimates of the fair value of purchase consideration and fair values of assets acquired and liabilities assumed, the actual amounts to be reported in future filings may differ materially from the amounts used in the pro forma condensed combined financial statements.

 

 

 

 

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Applied UV, Inc.

Unaudited Pro Forma Condensed Combined Financial Information

 

 

 

Pro forma Information (Continued)

 

 

The unaudited pro forma condensed combined financial statements are presented for information purposes only, in accordance with Article 11 of Regulation S-X and are not intended to represent or to be indicative of the income or financial position that the Company would have reported had the acquisitions been completed as of the dates set forth in the unaudited pro forma condensed combined financial statements due to various factors. The unaudited pro forma condensed combined balance sheet does not purport to represent the future financial position of the Company and the unaudited pro forma condensed combined statements of operations do not purport to represent the future results of operations of the Company. Given the comparable fiscal periods of Akida, KES, and JJS differ by less than 93 days, as permitted by Regulation S-X, the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 combines Akida’s condensed statement of operations for the year ended September 30, 2020 and KES and JJS condensed combined statement of operations for the year ended October 31, 2020 with the consolidated statement of operations of the Company for the year ended December 31, 2020. The unaudited pro forma condensed combined balance sheet as of June 30, 2021 combines KES and JJS condensed balance sheet as of July 31, 2021 with the consolidated condensed balance sheet of the Company as of June 30, 2021.

 

 

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Applied UV, Inc.

Unaudited Pro Forma Condensed Combined Financial Information

 

 

 

These unaudited pro forma condensed financial statements should be read in conjunction with the following:

 

·The accompanying notes to the unaudited pro forma condensed financial statements.

 

·The historical consolidated financial statements and accompanying notes of the Company included in the annual report on form 10-K for the year ended December 31, 2020.

 

·The historical consolidated financial statements and accompanying notes of the Company included in the interim report on form 10-Q for the six months ended June 30, 2021.
·The SAM audited and unaudited combined financial statements included as Exhibit 99.1 in this Current Report on Form 8-K/A to which these unaudited pro forma condensed combined financial statements are attached.
·The KES and JJS audited and unaudited financial statements included as Exhibit 99.1 in the Current Report on Form 8-K/A filed on November 12, 2021 and related to the Company’s acquisition of KES and JJS.
·Akida’s audited consolidated financial statements and notes thereto for the years ended September 30, 2020 and 2019, included in Exhibit 99.1 to the Current Report on Form 8-K/A, filed with the SEC on February 11, 2021.

 

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Applied UV, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

As of June 30, 2021

      KES and     Transaction      
   Applied  JSS  SAM  Accounting     Pro Forma
   Historical (1)  Historical  Historical  Adjustments  Notes  Combined
Assets                            
Current Assets:                            
Cash  $7,017,558   $—     $2,048,593   $(3,576,153)  A, B  $5,489,998 
Vendor deposit   1,189,364    —      —      —         1,189,364 
Accounts receivable, net of allowances   384,657    263,548    271,232    —         919,437 
Inventory   592,117    622,359    428,266    —         1,642,742 
Prepaid expenses and other current assets   242,451    74,178    —      —         316,629 
 Note receivable, related party   500,000    —      —      —         500,000 
Total current assets   9,926,147    960,085    2,748,091    (3,576,153)      10,058,170 
                             
Machinery and equipment, net   198,883    347,510    1,982    (312,893)  B   253,482 
Right of use asset   461,580    —      —      128,175   G   589,755 
Other intangible assets, net   4,938,250    —      —      14,430,000   D   19,368,250 
Goodwill   2,728,279    —      —      1,943,803   E   4,672,082 
Patents, net   187,595    —      —      —         187,595 
Notes receivable, related party   —      546,429    —      (546,429)  B   —   
Notes receivable, stockholder   —      78,421    —      (78,421)  B   —   
Other non-current assets   —      2,556    —      —         2,556 
Total assets  $18,440,734   $1,935,001   $2,750,073   $11,988,082      $35,113,890 
                             
Liabilities and Stockholders’ Equity                            
Current Liabilities                            
Accounts payable and accrued expenses  $1,062,330   $264,817   $48,724   $163,500      $1,539,371 
 Line of credit   —      111,650    —      (111,650)  B   —   
Deferred revenue   1,745,424    —      —      —         1,745,424 
Warrant liability   435,577    —      —      —         435,577 
Capital lease obligations   6,648    —      —      —         6,648 
Lease liability   160,568    —      —      32,975   G   193,543 
Payroll protection program loan   296,827    —      —      —         296,827 
Loan payable   67,500    65,657    —      (65,657)  B   67,500 
Total Current Liabilities   3,774,874    442,124    48,724    19,168       4,284,890 
                             
Long-term Liabilities                            
Capital lease obligations   4,982    —      —      —         4,982 
Loan payable   90,000    458,978    —      (458,978)  B   90,000 
 Lease liability   301,012    —      —      107,349   G   408,361 
Total Liabilities   4,170,868    901,102    48,724    (332,461)      4,788,233 
                             
Stockholders’ Equity/Members’ Deficit                            
Series X preferred stock   1    —      —      —         1 
Series A Cumulative Perpetual   —      —      —      55   A   55 
Common stock   942    500    —      -450   A   992 
Additional paid-in capital   19,659,197    —      —      16,231,335   A   35,890,532 
Members’ equity   —      —      2,701,349    (2,701,349)  C   —   
Treasury stock   —      (200,000)   —      200,000   C   —   
Retained earnings (deficit)   (5,390,274)   1,233,399    —      (1,409,048)  C, F   (5,565,923)
Total Stockholders’ Equity/Members’ Equity   14,269,866    1,033,899    2,701,349    12,320,543       30,325,657 
Total Liabilities and Stockholders’ Equity/Members’ Equity  $18,440,734   $1,935,001    2,750,073   $11,988,082      $35,113,890 
(1)Includes the balance sheet of Akida as the acquisition occurred on February 8, 2021.
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Applied UV, Inc.

Unaudited Pro Forma Condensed Combined Statements of Operations

For the Year Ended December 31, 2020

 

 

 

               Transaction      
   Applied  KES and JSS  SAM  Akida  Accounting     Pro Forma
   Historical  Historical  Historical  Historical  Adjustments  Notes  Combined
Net Sales  $5,732,734   $4,524,542   $9,125,928   $4,399,295   $—          $23,782,499 
Cost of Goods Sold   4,723,398    2,045,800    3,286,395    2,855,282    —           12,910,875 
Gross Profit   1,009,336    2,478,742    5,839,533    1,544,013    —           10,871,624 
                                    
Research and development   310,672    —      —      —                310,672 
Stock based compensation   687,505    —      —      —                687,505 
Selling, general and administrative expenses   3,324,051    2,475,769    1,300,586    981,781    1,758,048    AA    9,840,235 
      Total Operating Expenses   4,322,228    2,475,769    1,300,586    981,781    1,758,048         10,838,412 
                                    
Operating Income (Loss)   (3,312,892)   2,973    4,538,947    562,232    (1,758,048)        33,212 
                                    
Other Income (Expense)                                   
  Interest expense   —      (40,701)   —      —      —           (40,701)
  Other income   10,936    33,476    8    —      —           44,420 
  Total Other Income (Expense)   10,936    (7,225)   8    —      —           3,719 
                                    
Income (Loss) Before Provision of Income Taxes   (3,301,956)   (4,252)   4,538,955    562,232    (1,758,048)        36,931 
                                    
Provision for Income Taxes   66,854    16,747    —      —      —      BB    83,601 
                                    
Net Income (Loss)  $(3,368,810)  $(20,999)  $4,538,955   $562,232   $(1,758,048)       $(46,670)
                                    
Basic and Diluted Loss) Per Common Share  $(0.59)                            (0.01)
                                    
Weighted-average number of shares used in computing net income per share   5,733,591                   500,000    CC    6,233,591 

 

 

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Applied UV, Inc.

Unaudited Pro Forma Condensed Combined Statements of Operations

For the Six Months Ended June 30, 2021

 

 

               Transaction      
   Applied  KES and JSS  SAM  Akida  Accounting     Pro Forma
   Historical  Historical  Historical  Historical (2)  Adjustments  Notes  Combined
Net Sales  $4,196,935   $2,765,090   $2,988,132   $305,524             $10,255,681 
Cost of Goods Sold   2,739,440    1,173,163    1,009,433    270,826              5,192,862 
Gross Profit   1,457,495    1,591,927    1,978,699    34,698              5,062,819 
Operating Expenses
Research and development		   53,408    —                —           53,408 
Stock based compensation   676,341    —      950,000    —      —           1,626,341 
Selling, general and administrative expenses   3,623,658    1,528,304    1,152,958    161,527    432,511    DD    6,898,958 
Total Operating Expenses   4,353,407    1,528,304    2,102,958    161,527    432,511         8,578,707 
                                    
Operating Income (Loss)   (2,895,912)   63,623    (124,259)   (126,829)   (432,511)        (3,515,888)
                                    
Other Income (Expense)                                   
Change in fair market value of warrant liability   (300,452)   —      —      —      —           (300,452)
Other income   25,182    238,915    5    —      —           264,102 
Total Other Income (Loss)   (275,270)   238,915    5    —      —           (36,350)
                                    
Income (Loss) Before Provision of Income Taxes   (3,171,182)   302,538    (124,254)   (126,829)   (432,511)        (3,552,238)
                                    
Provision for Income Taxes   —      —      —      —      —      EE    —   
                                    
Net Income (Loss)  $(3,171,182)  $302,539    (124,254)  $(126,829)   (432,511)       $(3,552,238)
                                    
Basic and Diluted Earnings Per Common Share  $(0.35)                            (0.37)
                                    
Weighted-average number of shares used in computing net income per share   9,102,677                   500,000    FF    9,602,677 

 

(2)Includes the profit and loss activity of Akida from January 1, 2021 through February 8, 2021 (date of acquisition).
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Applied UV, Inc.

Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

 

 

Note 1. Basis of Pro Forma Presentation

 

The Pro Forma Combined Financial Information has been prepared assuming the Transaction is accounted for using the acquisition method of accounting with the Company as the acquiring entity and Akida, KES, JJS, and SAM as the acquirees. Under the acquisition method of accounting, the Company’s assets and liabilities will retain their carrying amounts while the assets acquired, and liabilities assumed of the acquirees will be recorded at their fair values measured as of the acquisition date. The excess of the purchase price over the estimated fair values of net assets acquired will be recorded as goodwill. The transaction accounting adjustments have been prepared as if the Transaction had taken place on June 30, 2021 in the case of the Condensed Combined Balance Sheet, and on January 1, 2020 in the case of the Combined Condensed Statements of Operations for the year ended December 31, 2020 and the six months ended June 30, 2021.

 

The transaction accounting adjustments represent management’s estimates based on information available as of the date of this filing and are subject to change as additional information becomes available and additional analyses are performed. The Pro Forma Condensed Combined Financial Information does not reflect possible adjustments related to restructuring or integration activities that have yet to be determined.

 

The accounting policies used in the preparation of the Pro Forma Condensed Combined Financial Information are those set out in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2020.

 

 

Note 2. Preliminary Estimated Purchase Price Allocation

 

The following table sets forth a preliminary allocation of the estimated purchase consideration to the identifiable tangible and intangible assets acquired and liabilities assumed of KES and JJS based on KES and JJS’ June 30, 2021 balance sheet, with the excess recorded as goodwill.

 

Consideration paid:   
Fair value of share consideration  $1,959,000 
Cash consideration   4,300,000 
Total estimated consideration  $6,259,000 
Current assets  $960,085 
Other non-current assets   2,556 
Machinery and equipment   34,617 
Intangible assets   4,570,000 
Assumed liabilities   (264,817)
Total net assets acquired   5,302,441 
Goodwill  $956,559 

 

 

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Applied UV, Inc.

Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

 

 

Note 2. Preliminary Estimated Purchase Price Allocation (continued)

 

The following table sets forth a preliminary allocation of the estimated purchase consideration to the identifiable tangible and intangible assets acquired and liabilities assumed of SAM based on SAM’s June 30, 2021 balance sheet, with the excess recorded as goodwill.

 

Consideration paid:   
Fair value of share consideration  $2,000,000 
Cash consideration   9,500,000 
Total estimated consideration  $11,500,000 
Current assets  $699,498 
Machinery and equipment   1,982 
Intangible assets   9,860,000 
Assumed liabilities   (48,724)
Total net assets acquired   10,512,756 
Goodwill  $987,244 

 

 

The allocation of the estimated purchase consideration to the identifiable tangible and intangible assets acquired and liabilities assumed of Akida is included in the Company balance sheet as of June 30, 2021 as the transaction occurred on February 8, 2021.

 

 

Note 3. Transaction Adjustments

 

Transaction adjustments are necessary to reflect the acquisition consideration exchanged and to adjust amounts related to the tangible and intangible assets and liabilities of KES, JJS, and SAM to a preliminary estimate of their fair values, and to reflect the impact on the statements of operations as if the Transaction had occurred during those periods.

 

Balance Sheet Adjustments

 

A.Reflects cash of $13,800,000 paid and the issuance of 500,000 common shares for the acquisitions and cash of $12,272,440 raised and the issuance of 552,000 series a cumulative perpetual preferred shares during the July preferred stock offering.
B.Reflects the elimination of KES, JJS and SAM’s liabilities not assumed, and assets not acquired by the Company.
C.Reflects the elimination of KES, JJS and SAM’s members’ equity, treasury stock, and retained earnings.

 

 

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Applied UV, Inc.

Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

 

 

Note 4. Transaction Adjustments (continued)

 

D.Reflects the pro forma adjustments to intangible assets to reflect the fair value of identifiable intangible assets, as follows:

 

KES and JJS:             Amortization Expense      
              Year    Six Months 
              Ended    Ended 
    Estimated    Estimated    December 31,    June 30, 
    Fair Value    Useful Life    2020    2021 
Trade names  $914,000    10.0   $91,400   $45,700 
Technology and know-how   3,656,000    10.0    365,600    182,800 
Total  $4,570,000        $457,000   $228,500 

 

SAM:        Amortization Expense
         Year  Six Months
         Ended  Ended
   Estimated  Estimated  December 31,  June 30,
   Fair Value  Useful Life  2020  2021
Trade names  $326,000    5.0   $65,200   $32,600 
Customer relationships   6,784,000    14.0    484,571    242,286 
Patents   1,533,000    17.0    90,176    45,088 
Technology and know-how   1,217,000    10.0    121,700    60,850 
Total  $9,860,000        $761,648   $380,824 

 

AKIDA:        Amortization Expense
         Year  For the Period January 1,
         Ended  2021 through
   Estimated  Estimated  December 31,  February 8,
   Fair Value  Useful Life  2020  2021
Trade names  $1,156,000    10.0   $115,600   $12,042 
Customer relationships   539,000    7.0    77,000    8,021 
Technology and know-how   3,468,000    10.0    346,800    36,125 
Total  $5,163,000        $539,400   $56,188 
E.Reflects the preliminary fair value adjustment related to intangible assets and goodwill acquired.
F.Reflects the accrual of transaction and other acquisition related costs that had been incurred through the closing date but not recorded in the historical financial statements.
G.Reflects the adjustment to account for leases of the acquired entities under Accounting Standards Codification 842, which is consistent with the accounting policies set out in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2020
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Applied UV, Inc.

Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

 

 

Statement of Operations for the Year Ended December 31, 2020 Adjustment

 

AA Reflects amortization expensed based on preliminary fair value estimates for acquired intangible assets.

 

BB The Company determined that the proforma income tax expense (benefit) adjustment to be immaterial.

 

CC Reflects the issuance of 500,000 common shares as stock consideration for the acquisitions.

 

 

Statement of Operations for the Six Months Ended June 30, 2021 Adjustment

 

DD Reflects amortization expensed based on preliminary fair value estimates for acquired intangible assets and the reversal of transaction and other acquisition related costs that had been recorded in the historical financial statements in the amount of $233,000.

 

EE The Company determined that the proforma income tax expense (benefit) adjustment to be immaterial.

 

FF Reflects the issuance of 500,000 common shares as stock consideration for the acquisitions.

 

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