EX-99.3 4 cfn_ex99z3.htm PRO FORMA FINANCIAL STATEMENTS AS OF JUNE 30, 2023.

Exhibit 99.3

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

 

The following unaudited pro forma combined financial information presents the unaudited pro forma combined balance sheet and statement of operations based upon the combined historical financial statements of CFN Enterprises and RAN CoPacking Solutions LLC (“Ranco”) after giving effect to the business combinations and adjustments described in the accompanying notes.

 

The unaudited pro forma combined balance sheets of CFN and Ranco as of June 30, 2023 has been prepared to reflect the effects of the acquisition as if it occurred on June 30, 2023. The unaudited pro forma combined statements of operations for six months ended June 30, 2023 combine the historical results and operations of CFN and Ranco giving effect to the transaction as if it occurred on January 1, 2023. The unaudited pro forma combined statements of operations for the period ended December 31, 2022 combine the historical results and operations of CFN and Ranco giving effect to the transactions as if they occurred on July 1, 2022.

 

The unaudited pro forma combined financial information should be read in conjunction with the audited and unaudited historical financial statements of CFN and Ranco and the notes thereto. Additional information about the basis of presentation of this information is provided in Note 2 below.

 

The unaudited pro forma combined financial information was prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma adjustments reflecting the transaction have been prepared in accordance with business combination accounting guidance as provided in Accounting Standards Codification Topic 805, Business Combinations and reflect the preliminary allocation of the purchase price to the acquired assets and liabilities based upon the preliminary estimate of fair values, using the assumptions set forth in the notes to the unaudited pro forma combined financial information.

 

The unaudited pro forma combined financial information is provided for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the transaction had been completed as of the dates set forth above, nor is it indicative of the future results or financial position of the combined company. In connection with the pro forma financial information, CFN allocated the purchase price using its best estimates of fair value. Accordingly, the pro forma acquisition price adjustments are preliminary and subject to further adjustments as additional information becomes available and as additional analyses are performed. The unaudited pro forma combined financial information also does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the transaction or any integration costs.

 

Furthermore, the unaudited pro forma combined statements of operations do not include certain nonrecurring charges and the related tax effects which result directly from the transaction as described in the notes to the unaudited pro forma combined financial information.

Exhibit 99.3

CFN Enterprises, Inc.

Unaudited Pro Forma Combined Balance Sheets

As of June 30, 2023

 

 

 

 

 

 

Pro Forma

 

 

 

Combined

 

 

CFN

 

Ranco

 

Adjustments

 

Notes

 

Pro Forma

ASSETS

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

Cash

 

$1,048,166  

 

$134,060  

 

$5,000,000 

 

(c)

 

$6,182,226  

Restricted cash

 

20,284  

 

-  

 

- 

 

 

 

20,284  

Accounts receivable, net

 

36,100  

 

175,340  

 

- 

 

 

 

211,440  

Total current assets

 

1,104,550  

 

309,400  

 

5,000,000 

 

 

 

6,413,950  

Property and equipment, net

 

47,907  

 

-  

 

- 

 

 

 

47,907  

Goodwill

 

-  

 

-  

 

9,694,243 

 

(a)

 

9,694,243  

Deposits

 

268,696  

 

297,269  

 

- 

 

 

 

565,965  

Right of use asset

 

-  

 

2,272,059  

 

- 

 

 

 

2,272,059  

Other assets

 

55,676  

 

-  

 

- 

 

 

 

55,676  

Total assets

 

$1,476,829  

 

$2,878,728  

 

$14,694,243 

 

 

 

$19,049,800  

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' / MEMBERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$2,318,201  

 

$43,272  

 

$- 

 

 

 

$2,361,473  

Accrued liabilities

 

2,436,785  

 

-  

 

- 

 

 

 

2,436,785  

Due to related party

 

501,140  

 

1,022,972  

 

- 

 

 

 

1,524,112  

Deferred revenue

 

16,327  

 

-  

 

- 

 

 

 

16,327  

Due to seller

 

-  

 

-  

 

1,000,000 

 

(a)

 

1,000,000  

Contingent consideration

 

-  

 

-  

 

208,000 

 

(a)

 

208,000  

Current portion of notes payable

 

3,794,914  

 

-  

 

- 

 

 

 

3,794,914  

Current portion of right of use liability

 

312,033  

 

538,243  

 

- 

 

 

 

850,276  

Current liabilities of discontinued operations

 

79,823  

 

-  

 

- 

 

 

 

79,823  

Total current liabilities

 

9,459,223  

 

1,604,486  

 

1,208,000 

 

 

 

12,271,709  

Right of use liability

 

223,822  

 

1,760,485  

 

- 

 

 

 

1,984,307  

Long-term note payable, net of current portion and discounts

 

746,180  

 

-  

 

5,000,000 

 

(b)

 

5,746,180  

Total liabilities

 

10,429,225  

 

3,364,971  

 

6,208,000 

 

 

 

20,002,196  

 

 

 

 

 

 

 

 

 

 

 

Stockholders' / members' deficit:

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

4  

 

-  

 

- 

 

 

 

4  

Common stock

 

41,710  

 

-  

 

40,000 

 

(a)

 

81,710  

Additional paid-in capital

 

52,128,924  

 

-  

 

7,960,000 

 

(a)

 

60,088,924  

Accumulated deficit

 

(61,123,034) 

 

-  

 

- 

 

 

 

(61,123,034) 

Members' deficit

 

-  

 

(486,243) 

 

486,243 

 

 

 

-  

Total stockholders' / members' deficit

 

(8,952,396) 

 

(486,243) 

 

8,486,243 

 

 

 

(952,396) 

Total liabilities and stockholders' / members' deficit

 

$1,476,829  

 

$2,878,728  

 

$14,694,243 

 

 

 

$19,049,800  

Exhibit 99.3

CFN Enterprises, Inc.

Unaudited Pro Forma Combined Statements of Operations

Six Months Ended June 30, 2023

 

 

 

 

 

 

Pro Forma

 

 

 

Combined

 

 

CFN

 

Ranco

 

Adjustments

 

Notes

 

Pro Forma

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$265,259  

 

$2,193,741  

 

$-  

 

 

 

$2,459,000  

Cost of revenues

 

223,675  

 

1,804,746  

 

-  

 

 

 

2,028,421  

Gross profit

 

41,584  

 

388,995  

 

-  

 

 

 

430,579  

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

2,125,148  

 

659,216  

 

-  

 

 

 

2,784,364  

Total operating expenses

 

2,125,148  

 

659,216  

 

-  

 

 

 

2,784,364  

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(2,083,564) 

 

(270,221) 

 

-  

 

 

 

(2,353,785) 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(103,501) 

 

-  

 

(1,000,000) 

 

(b)

 

(1,103,501) 

Gain on property and equipment

 

9,253  

 

-  

 

-  

 

 

 

9,253  

Gain on extinguishment of debt

 

13,219  

 

-  

 

-  

 

 

 

13,219  

Other income

 

157,502  

 

-  

 

-  

 

 

 

157,502  

Interest income

 

157  

 

-  

 

-  

 

 

 

157  

Total other income (expense), net

 

76,630  

 

-  

 

(1,000,000) 

 

 

 

(923,370) 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

-  

 

-  

 

-  

 

 

 

-  

Net loss

 

$(2,006,934) 

 

$(270,221) 

 

$(1,000,000) 

 

 

 

$(3,277,155) 

Preferred stock interest

 

120,000  

 

-  

 

-  

 

 

 

120,000  

Net loss available to common shareholders

 

$(2,126,934) 

 

$(270,221) 

 

$(1,000,000) 

 

 

 

$(3,397,155) 

Net loss attributable to non-controlling interest

 

-  

 

-  

 

-  

 

 

 

-  

Net loss available to CFN Enterprises common shareholders

 

$(2,126,934) 

 

$(270,221) 

 

$(1,000,000) 

 

 

 

$(3,397,155) 

Weighted average common shares outstanding -

 

 

 

 

 

 

 

 

 

 

basic and diluted

 

40,255,331  

 

-  

 

 

 

 

 

40,255,331  

Net loss per common share - basic and diluted

  

$(0.05) 

 

$-  

 

 

 

 

 

$(0.08) 

Exhibit 99.3

CFN Enterprises, Inc.

Unaudited Pro Forma Combined Statements of Operations

Period Ended December 31, 2022

 

 

 

 

 

 

Pro Forma

 

 

 

Combined

 

 

CFN

 

Ranco

 

Adjustments

 

Notes

 

Pro Forma

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$4,317,490  

 

$1,775,883  

 

$-  

 

 

 

$6,093,373  

Cost of revenues

 

6,512,109  

 

1,402,610  

 

-  

 

 

 

7,914,719  

Gross profit (loss)

 

(2,194,619) 

 

373,273  

 

-  

 

 

 

(1,821,345) 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Impairment expense

 

3,615,961  

 

-  

 

-  

 

 

 

3,615,961  

Selling, general and administrative

 

2,641,842  

 

400,296  

 

-  

 

 

 

3,042,138  

Total operating expenses

 

6,257,803  

 

400,296  

 

-  

 

 

 

6,658,099  

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

(8,452,422) 

 

(27,022) 

 

-  

 

 

 

(8,479,444) 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

Loss on conversion of debt

 

(563,220) 

 

-  

 

-  

 

 

 

(563,220) 

Unrealized loss on marketable securities

 

(46,516) 

 

-  

 

-  

 

 

 

(46,516) 

Impairment of investments

 

(200,000) 

 

-  

 

-  

 

 

 

(200,000) 

Interest expense

 

(694,380) 

 

-  

 

(2,000,000) 

 

(b)

 

(2,694,380) 

Other income

 

34,206  

 

-  

 

-  

 

 

 

34,206  

Interest income

 

113  

 

-  

 

-  

 

 

 

113  

Total other income (expense), net

 

(1,469,797) 

 

-  

 

(2,000,000) 

 

 

 

(3,469,797) 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

-  

 

-  

 

-  

 

 

 

-  

Net income (loss)

 

$(9,922,219) 

 

$(27,022) 

 

$(2,000,000) 

 

 

 

$(11,949,241) 

Preferred stock interest

 

240,000  

 

-  

 

-  

 

 

 

240,000  

Net income (loss) available to common shareholders

 

$(10,162,219) 

 

$(27,022) 

 

$(2,000,000) 

 

 

 

$(12,189,241) 

Net loss attributable to non-controlling interest

 

(19,826) 

 

-  

 

-  

 

 

 

(19,826) 

Net income (loss) available to CFN Enterprises common shareholders

 

$(10,142,393) 

 

$(27,022) 

 

$(2,000,000) 

 

 

 

$(12,169,415) 

Weighted average common shares outstanding -

 

 

 

 

 

 

 

 

 

 

basic and diluted

 

34,258,898  

 

-  

 

 

 

 

 

34,258,898  

Net loss per common share - basic and diluted

  

$(0.29) 

 

$-  

 

 

 

 

 

$(0.35) 

 

 

Exhibit 99.3

CFN Enterprises, Inc.

Notes to Unaudited Pro Forma Financial Statements

1.Description of Transactions 

 

On July 1, 2023, CFN Enterprises, Inc. and its wholly owned subsidiary, RANCO, LLC, a Delaware limited liability company (“Ranco”), entered into an asset purchase agreement (the “Asset Purchase Agreement”) with RAN CoPacking Solutions LLC, a California limited liability company (the “Seller”) and the members of the Seller (collectively, the “Founders”). The assets of the Seller acquired by Ranco consist of assets for co-packing and white label manufacturing services, including comprehensive solutions for third party logistics (3PL) related areas such as storage, order fulfillment, solutions for custom packaging and hardware needs for many different industries, and media and design services, along with strategic marketing support, to help clients establish and enhance their brand presence in the market (the “Purchased Assets”). Ranco acquired the Purchased Assets and assumed certain liabilities of the Seller (the “Acquisition”) in exchange for an aggregate of 40 million shares of Company common stock (the “Acquisition Shares”), and $1 million in cash consideration, payable in quarterly installments in an amount equal to the lesser of (i) Ranco’s gross revenues attributable to the Purchased Assets from and after the closing, net of all accrued debts, liabilities, and obligations of the Ranco and all amounts necessary or advisable to reserve, designate, or set aside for actual or anticipated costs, payments, liabilities, obligations, and claims with respect to the Purchased Assets, all as determined in good faith by Ranco, and (ii) $250,000, until paid in full (the “Cash Consideration”). The Asset Purchase Agreement also contains an earn out provision providing for the issuance of (i) 8 million shares of Company common stock to be issued upon Ranco achieving $19 million in gross revenue attributable to the Purchased Assets and a net profit of $3.9 million within the twelve month period beginning three months from the closing of the Acquisition (the “First Earnout Period”), and (ii) 8 million shares of Company common stock to be issued upon Ranco achieving $29 million in gross revenue attributable to the Purchased Assets and a net profit of $5.9 million within the twelve month period beginning on the day immediately following the end of the First Earnout Period. The Buyer also agreed to assume the Seller’s lease for property related to the Purchased Assets in Los Angeles, California, consisting of approximately 46,000 square feet, a current monthly rent of $77,286.14 with four years remaining on the term (increasing annually to $86,936.85 for the last year of the term) with a three-year option to extend, including the Seller’s security deposit of approximately $297,000.  The Company agreed to enter into employment agreements with the Founders and to guarantee the Cash Consideration portion of the purchase price.

Also on July 1, 2023, Ranco entered into promissory notes with certain lenders to borrow an aggregate of $5 million(the “Notes”). The Notes have a 15 month term and are subject to mandatory equal repayments commencing on the fourth month following issuance, for an aggregate repayment of $7.5 million. The Notes are secured by the assets of Ranco and guaranteed by the Company. Two of the lenders, Isaac Shehebar 2008 AIJJ Grantor Retained Annuity Trust and Ezra A. Chehebar, are existing shareholders of, and advisors to, the Company.

2.Basis of Presentation 

​

 

The historical financial information has been adjusted to give pro forma effect to events that are directly attributable to the transaction, (ii) factually supportable, and (iii) with respect to the unaudited pro forma combined balance sheets and unaudited pro forma combined statements of operations, expected to have a continuing impact on the combined results.

The transaction was accounted for as a business acquisition whereas Ranco is the accounting acquiree and CFN is the accounting acquirer.

Exhibit 99.3

3.Consideration Transferred 

Cash (due to seller)

$1,000,000 

Common stock

8,000,000 

Contingent consideration

208,000 

Purchase price consideration

$9,208,000 

 

The following table shows the preliminary allocation of the purchase price for Ranco to the acquired net identifiable assets and pro forma goodwill:

Assets acquired

$2,878,728  

Goodwill

9,694,243  

Liabilities assumed

(3,364,971) 

Purchase price consideration

$9,208,000  

 

a)To record the purchase price allocation of the Ranco pro forma acquisition, including the recognition of goodwill, purchase price consideration by Ranco, and elimination of Ranco’s equity. 

 

b)To record the promissory note entered into by Ranco on July 1, 2023 and related pro forma interest expense.