EX-99.2 3 usdry_ex9902.htm UNAUDITED PRO FORMA unaudited pro forma
Exhibit 99.2

 
 

U.S. DRY CLEANING CORPORATION
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
 
U.S. DRY CLEANING CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
 
INTRODUCTION
 
On February 15, 2007, U.S. Dry Cleaning Corporation (the "Company") completed the acquisition of all of the outstanding voting stock of Cleaners Club, Inc. ("Cleaners Club”) in a purchase business combination by issuing 780,000 shares of its restricted common stock. Cleaners Club has a December 31 year-end.
 
The following unaudited pro forma combined consolidated financial statements (hereinafter collectively referred to as "the pro forma financial statements") are presented for illustrative purposes only. The pro forma financial statements are subject to a number of estimates, assumptions, and other uncertainties and are not necessarily indicative of the combined financial position at an earlier date, the results of operations for future periods, or the results that would have been realized had the Company and Cleaners Club been a combined entity during the specified periods. The pro forma financial statements (including the notes thereto) are qualified in their entirety by reference to, and should be read in conjunction with, the historical financial statements and notes of the Company and Cleaners Club incorporated herein by reference or included elsewhere herein. The Company's historical financial statements incorporated herein by reference are the audited September 30, 2006 consolidated financial statements included in the related Form 10-KSB/A filed with the Securities and Exchange Commission.
 
The following pro forma financial statements give effect to the purchase of 100% of the equity interest in Cleaners Club by the Company using the purchase method of accounting. The pro forma financial statements are based on the respective historical financial statements and the notes thereto of the Company and Cleaners Club. The December 31, 2006 pro forma combined consolidated balance sheet, which assumes that the purchase took place on December 31, 2006, combines the unaudited interim consolidated balance sheet of the Company and the audited year-end balance sheet of Cleaners Club as of such date. The pro forma combined consolidated statements of operations for the year ended September 30, 2006 and the three months ended December 31, 2006, which assume that the purchase took place on October 1, 2005, combine (1) the audited consolidated statement of operations of the Company for the year ended September 30, 2006 and the unaudited statements of operations of Cleaners Club for the year ended September 30, 2006 and (2) the unaudited statements of operations for both the Company (consolidated) and Cleaners Club for the three months ended December 31, 2006.
 
 
 
1
 
U.S. DRY CLEANING CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2006
 
   
HISTORICAL
              
                   
U.S. DRY CLEANING
  
   
U.S. DRY CLEANING
  
CLEANERS
  
PRO FORMA ADJUSTMENTS
  
COMBINED
CONSOLIDATED
  
   
CONSOLIDATED
  
CLUB
  
AMOUNT
 
REF
  
PRO FORMA
  
ASSETS
                      
Current Assets
                      
Cash
  
$
1,199,404
  
$
1,767
  
$
-
        
$
1,201,171
  
Accounts receivable, net
    
478,529
   
885
   
-
         
479,414
 
Deferred financing costs, net
    
70,444
   
-
   
-
         
70,444
 
Deferred acquisition costs
    
123,284
   
-
   
-
         
123,284
 
Prepaid expenses and other current assets
    
173,933
   
21,004
   
-
         
194,937
 
Total Current Assets
    
2,045,594
   
23,656
               
2,069,250
 
Property and Equipment, net
    
1,129,761
   
427,649
   
-
         
1,557,410
 
Other Assets
                                
Notes receivable
    
233,803
   
-
   
-
         
233,803
 
Deposits
    
202,450
   
40,400
   
-
         
242,850
 
Goodwill
    
5,004,699
   
-
   
1,938,826
   
C
   
6,943,525
 
Intangible assets and other assets
    
365,060
   
-
   
-
         
365,060
 
Total Other Assets
    
5,806,012
   
40,400
               
7,785,238
 
Total Assets
  
$
8,981,367
  
$
491,705
  
$
1,938,826
        
$
11,411,898
  
                                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                                
Current Liabilities
                                
Accounts payable and accrued liabilities
  
$
1,385,630
  
$
234,283
  
$
-
        
$
1,619,913
  
Liquidated damages
    
71,250
   
-
   
-
         
71,250
 
Capital lease obligation, current
    
121,781
   
118,860
   
-
         
240,641
 
Notes payable, current
    
268,681
   
97,268
   
-
         
365,949
 
Related party notes payable, current
    
152,822
   
224,000
   
-
         
376,822
 
Convertible notes payable, net of discount
    
801,693
   
-
   
-
         
801,693
 
Related party convertible notes payable, net of discount
    
136,555
   
-
   
-
         
136,555
 
Total Current Liabilities
    
2,938,412
   
674,411
   
-
         
3,612,823
 
Long Term Liabilities
                                
Capital lease obligation, net of current
    
190,181
   
169,650
   
-
         
359,831
 
Notes payable, net of current
    
71,081
   
38,827
   
-
         
109,908
 
Related party notes payable, net of current
    
9,838
   
104,643
   
-
         
114,481
 
Convertible notes payable, net of current
    
200,000
   
-
   
-
         
200,000
 
Total Long Term Liabilities
    
471,100
   
313,120
   
-
         
784,220
 
Total Liabilities
    
3,409,512
   
987,531
   
-
         
4,397,043
 
                                 
Stockholders' Equity
                                
Convertible preferred stock at par value
    
1,200
   
-
   
-
         
1,200
 
Common stock at par value
    
16,969
   
1,000
   
(220
)
  
C,D
   
17,749
 
Additional paid-in capital
    
16,614,594
   
119,652
   
1,322,568
   
C,D
   
18,056,814
 
Accumulated deficit
    
(11,060,908
)
  
(616,478
)
  
616,478
   
C,D
   
(11,060,908
)
Total Stockholders' Equity (Deficit)
    
5,571,855
   
(495,826
)
              
7,014,855
 
Total Liabilities and Stockholders' Equity (Deficit)
  
$
8,981,367
  
$
491,705
  
$
1,938,826
        
$
11,411,898
  
                                 
 
The accompanying notes are an integral part of these financial statements.
 
2
 
U.S. DRY CLEANING CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2006
                       
   
HISTORICAL
              
                   
U.S. DRY CLEANING
  
   
U.S. DRY CLEANING
  
CLEANERS
  
PRO FORMA ADJUSTMENTS
 
COMBINED
CONSOLIDATED
  
   
CONSOLIDATED
  
CLUB
  
AMOUNT
 
REF
  
PRO FORMA
  
                       
Net Sales
  
$
6,082,103
  
$
2,672,387
  
$
-
        
$
8,754,490
  
                                 
Cost of Sales
    
3,233,763
   
1,416,365
   
-
         
4,650,128
 
                                 
Gross Profit
    
2,848,340
   
1,256,022
   
-
         
4,104,362
 
                                 
Operating Expenses
                                
Delivery expenses
    
566,145
   
198,478
   
-
         
764,623
 
Store expenses
    
1,422,765
   
296,571
   
-
         
1,719,336
 
Selling expenses
    
603,209
   
191,244
   
-
         
794,453
 
Administrative expenses
    
1,353,310
   
267,239
   
-
         
1,620,549
 
Related party consulting
    
1,518,000
   
-
   
-
         
1,518,000
 
Professional fees and other
    
910,613
   
54,572
   
-
         
965,185
 
Depreciation and amortization expense
    
272,314
   
96,137
   
-
         
368,451
 
Total Operating Expenses
    
6,646,356
   
1,104,241
   
-
         
7,750,597
 
                                 
Operating Income (Loss)
    
(3,798,016
)
  
151,781
   
-
         
(3,646,235
)
                                 
Other Expense
    
(4,627,670
)
  
(78,271
)
  
-
         
(4,705,941
)
                                 
Income (Loss) Before Income Taxes
    
(8,425,686
)
  
73,510
   
-
         
(8,352,176
)
                                 
Provision for Income Taxes
    
-
   
800
   
-
         
800
 
                                 
Net Income (Loss)
  
$
(8,425,686
)
$
72,710
  
$
-
        
$
(8,352,976
)
                                 
 
 
The accompanying notes are an integral part of these financial statements.
 
3
 
U.S. DRY CLEANING CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2006
                       
   
HISTORICAL
              
                   
U.S. DRY CLEANING
  
   
U.S. DRY CLEANING
  
CLEANERS
  
PRO FORMA ADJUSTMENTS
     
COMBINED
CONSOLIDATED
  
   
CONSOLIDATED
  
CLUB
  
AMOUNT
 
REF
  
PRO FORMA
  
                       
Net Sales
  
$
1,601,411
  
$
738,395
  
$
-
        
$
2,339,806
  
                                 
Cost of Sales
    
848,543
   
391,349
   
-
         
1,239,892
 
                                 
Gross Profit
    
752,868
   
347,046
   
-
         
1,099,914
 
                                 
Operating Expenses
                                
Delivery expenses
    
164,362
   
77,686
   
-
         
242,048
 
Store expenses
    
399,277
   
159,133
   
-
         
558,410
 
Selling expenses
    
151,474
   
77,909
   
-
         
229,383
 
Administrative expenses
    
696,845
   
73,840
   
-
         
770,685
 
Professional fees and other
    
679,035
   
13,044
   
-
         
692,079
 
Depreciation and amortization expense
    
77,293
   
91,950
   
-
         
169,243
 
Total Operating Expenses
    
2,168,286
   
493,562
   
-
         
2,661,848
 
                                 
Operating Loss
    
(1,415,418
)
  
(146,516
)
  
-
         
(1,561,934
)
                                 
Other Expense
    
(122,940
)
  
(79,216
)
  
-
         
(202,156
)
                                 
Loss Before IncomeTaxes
    
(1,538,358
)
  
(225,732
)
  
-
         
(1,764,090
)
                                 
Provision for Income Taxes
    
-
   
-
   
-
         
-
 
                                 
Net Loss
  
$
(1,538,358
)
$
(225,732
)
$
-
        
$
(1,764,090
)
                                 
 
 The accompanying notes are an integral part of these financial statements.
 
4
 
U.S. DRY CLEANING CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 
Note (A) Basis of Presentation
 
The pro forma combined consolidated balance sheet assumes that the purchase took place on December 31, 2006 and that 100% of the equity interest in Cleaners Club was acquired by the Company. Such financial statement combines the historical balance sheets of the Company and Cleaners Club at December 31, 2006. The pro forma combined consolidated statements of operations assume that the purchase took place on October 1, 2005, and combines the historical statement of operations of the Company (consolidated) and Cleaners Club for the year ended September 30, 2006 and the three months ended December 31, 2006. The aforementioned historical financial statements have been adjusted as discussed in the notes below.
 
There were no significant transactions on a combined basis between the acquired entity and the Company during the periods presented.
 
Note (B) Introduction to the Unaudited Preliminary Pro Forma Adjustments
 
The accompanying pro forma information, including the allocation of the purchase price, is based on management's preliminary estimates of (1) the net assets acquired and (2) the fair value of the equity securities issued by the Company to consummate the purchase. Based on management obtaining a third-party valuation and other factors, the final purchase price adjustments may differ materially from those presented in the accompanying pro forma combined consolidated financial statements.
 
Note (C)
 
To reflect the excess of the total acquisition cost over the estimated fair value of the tangible and identifiable intangible assets acquired. The purchase price, purchase price allocation and financing of the transaction are summarized as follows:
 
Purchase price paid as:       
       
Common stock issued 
   $ 1,443,000  
         
Total purchase consideration  
     1,443,000  
         
Allocated to:         
         
Historical book value of Cleaners Club assets and liabilities
     (496,000 )
         
Adjustments to reflect assets and liabilities at estimated fair value: 
        
         
None 
     --  
         
Excess of purchase price over allocation to identifiable
assets and liabilities (goodwill)
  $ 1,939,000  
 
5

Note (D)
 
To reflect (1) the elimination of the stockholders' equity accounts of Cleaners Club, and (2) the issuance of common stock by the Company as consideration for the purchase.
 
Note (E)
 
Since the unaudited pro forma combined statement of operations reports a loss, there is no income tax effect of the above pro forma adjustments.
 
Note (F)
 
Since the purchase is intended to qualify as a non-taxable transaction, the tax bases of Cleaners Club assets and liabilities are carried forward for U.S. income tax purposes. Therefore, any amortization of the purchase consideration allocated to certain assets acquired may not be deductible by the Company in its future income tax returns. Such amounts are not significant.
 


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