UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K/A
(Amendment
No. 2)
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date
of Report (Date of Earliest Event Reported): January 22, 2015
SYNERGY
STRIPS CORP.
(Exact
name of registrant as specified in its charter)
Nevada |
|
000-55098 |
|
99-0379440 |
(State
or other jurisdiction
of incorporation) |
|
(Commission
File Number) |
|
(I.R.S.
Employer
Identification No.) |
865
Spring Street
Westbrook,
Maine |
|
04092 |
(Address
of principal executive offices) |
|
(Zip
Code) |
(615)
939-9004
(Registrant’s
telephone number, including area code)
(Former
name if changed since last report) |
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
EXPLANATORY
NOTE
This
Current Report on Form 8-K/A (Amendment No. 2) amends the Current Report on Form 8-K filed with the Securities and Exchange Commission
(the “SEC”) by Synergy Strips Corp. (the “Company”) on January 27, 2015, as amended by Form 8-K/A filed
on February 9, 2015 (the “Original 8-K”) announcing the completion on January 22, 2015 of the acquisition (the “Acquisition”)
of substantially all of the assets of Factor Nutrition Labs, LLC (the “Focus Factor Business”), a limited liability
company formed under the laws of Delaware.
In
the Original 8-K, the Company indicated that it would file the historical and pro forma financial information required under Item
9.01 with respect to the Acquisition within 71 days of the due date of the Original 8-K, as permitted by the SEC rules. The Company
is now filing this Amendment No. 2 to include the required financial statements and pro forma financial information as a result
of the completion of the Acquisition.
ITEM
9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a)
|
Financial
statements of businesses acquired. |
The
audited historical financial statements of Factor Nutrition Labs, LLC for the years ended December 31, 2014 and 2013 are filed
herewith as Exhibit 99.1 and are incorporated herein by reference.
(b)
|
Pro
forma financial information. |
The
unaudited pro forma condensed combined financial statements of the Company giving effect to the Acquisition, are filed herewith
as Exhibit 99.2 and are incorporated herein by reference.
(c) | Shell
company transactions. |
Not
applicable
Exhibit
No |
|
Description |
|
|
|
99.1 |
|
The
audited historical financial statements of Factor Nutrition Labs, LLC for the years ended December 31, 2014 and
2013 |
|
|
|
99.2 |
|
The
unaudited pro forma combined financial statements of the Company
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
|
SYNERGY
STRIPS CORP. |
|
|
|
Dated:
March 30, 2015 |
By: |
/s/
Jack Ross |
|
|
|
|
Name: |
Jack Ross |
|
Title: |
Chief Executive
Officer |
Exhibit
99.1
The
Audited historical financial statements of Factor Nutrition Labs, LLC for the years ended December 31, 2014 and 2013.
Factor
Nutrition Labs, LLC
(A
Limited Liability Company)
Audited
Financial Statements
For
the years ending December 31, 2014 and 2013
INDEX
TO FINANCIAL STATEMENTS
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board
of Directors and Shareholders
Factor Nutrition
Labs, LLC
Westbrook,
Maine
We
have audited the accompanying balance sheets of Factor Nutrition Labs, LLC (the “Company”), as of December 31, 2014
and 2013, and the related statements of operations, members’ capital and cash flows for each of the two years in the period
ended December 31, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We
have conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of
America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion,
the financial statements referred to above present fairly, in all material respects, the financial position of Factor Nutrition
Labs, LLC as of December 31, 2014 and 2013, and the results of its operations and its cash flows for each of the two years in
the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.
/s/
RBSM LLP |
|
RBSM LLP |
|
New
York, New York |
|
March
27, 2015 |
|
FACTOR
NUTRITION LABS, LLC
BALANCE
SHEETS
DECEMBER
31, 2014 AND 2013
| |
2014 | | |
2013 | |
ASSETS | |
| | | |
| | |
| |
| | | |
| | |
Current assets | |
| | | |
| | |
Cash and cash equivalents | |
$ | 1,887,658 | | |
$ | 3,814,966 | |
Investment in CD’s | |
| - | | |
| 355,160 | |
Accounts receivable, net | |
| 3,066,082 | | |
| 961,731 | |
Prepaid and other current assets | |
| 111,829 | | |
| 166,815 | |
| |
| | | |
| | |
Total current assets | |
| 5,065,569 | | |
| 5,298,672 | |
| |
| | | |
| | |
Fixed assets, net of accumulated depreciation of $52,219 and $51,444 | |
| - | | |
| 775 | |
| |
| | | |
| | |
Other assets | |
| | | |
| | |
Deposits | |
| 9,000 | | |
| 9,000 | |
Total other assets | |
| 9,000 | | |
| 9,000 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 5,074,569 | | |
$ | 5,308,447 | |
| |
| | | |
| | |
LIABILITIES AND MEMBERS’ CAPITAL | |
| | | |
| | |
| |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 2,431,881 | | |
$ | 820,379 | |
Total current liabilities | |
| 2,431,881 | | |
| 820,379 | |
| |
| | | |
| | |
Total liabilities | |
| 2,431,881 | | |
| 820,379 | |
| |
| | | |
| | |
Commitments and contingencies | |
| - | | |
| - | |
| |
| | | |
| | |
Members Capital | |
| 2,642,688 | | |
| 4,488,068 | |
| |
| | | |
| | |
TOTAL LIABILITIES AND MEMBERS’ CAPITAL | |
$ | 5,074,569 | | |
| 5,308,447 | |
See
the accompanying notes to these financial statements
FACTOR
NUTRITION LABS, LLC
STATEMENTS
OF OPERATIONS
| |
Year ended December 31, | |
| |
2014 | | |
2013 | |
Revenues: | |
| | | |
| | |
Gross revenues | |
$ | 13,159,237 | | |
$ | 11,092,609 | |
Less: returns, allowances and discounts | |
| 473,100 | | |
| 463,438 | |
Total revenue, net | |
| 12,686,137 | | |
| 10,629,171 | |
| |
| | | |
| | |
Cost of goods sold | |
| 5,324,945 | | |
| 4,810,170 | |
| |
| | | |
| | |
Gross profit | |
| 7,361,192 | | |
| 5,819,001 | |
| |
| | | |
| | |
Operating expenses: | |
| | | |
| | |
Retail promotions and in-store demos | |
| 5,311,201 | | |
| 2,597,586 | |
Salaries and benefits | |
| 615,325 | | |
| 551,143 | |
General and administrative | |
| 663,375 | | |
| 760,617 | |
Bad debts | |
| - | | |
| 956,134 | |
Depreciation | |
| 775 | | |
| 8,697 | |
Total operating expenses | |
| 6,590,676 | | |
| 4,874,177 | |
| |
| | | |
| | |
Income from operations | |
| 770,516 | | |
| 944,824 | |
| |
| | | |
| | |
Other income (expense): | |
| | | |
| | |
Other income | |
| 6,104 | | |
| 12,336 | |
| |
| | | |
| | |
Income before provision for income taxes | |
| 776,620 | | |
| 957,160 | |
| |
| | | |
| | |
Income taxes (benefit) | |
| - | | |
| - | |
| |
| | | |
| | |
Net income | |
$ | 776,620 | | |
$ | 957,160 | |
See
the accompanying notes to these financial statements
FACTOR
NUTRITION LABS, LLC
STATEMENT
OF MEMBERS’ CAPITAL
TWO
YEARS ENDED DECEMBER 31, 2014
| |
Total Member’s Capital | |
| |
| |
Balance at December 31, 2012 | |
$ | 3,872,908 | |
| |
| | |
Distributions to members | |
| (342,000 | ) |
| |
| | |
Net income | |
| 957,160 | |
| |
| | |
Balance at December 31, 2013 | |
$ | 4,488,068 | |
| |
| | |
Distributions to members | |
| (2,622,000 | ) |
| |
| | |
Net income | |
| 776,620 | |
| |
| | |
Balance at December 31, 2014 | |
$ | 2,642,688 | |
See
the accompanying notes to these financial statements
FACTOR
NUTRITION LABS, LLC
STATEMENTS
OF CASH FLOWS
| |
Year ended December 31, | |
| |
2014 | | |
2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net Income | |
$ | 776,620 | | |
$ | 957,160 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
Depreciation | |
| 775 | | |
| 8,697 | |
Bad Debt | |
| - | | |
| 956,134 | |
| |
| | | |
| | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (2,104,351 | ) | |
| (493,461 | ) |
Prepaid expenses and other | |
| 54,986 | | |
| 20,173 | |
Accounts payable and accrued expenses | |
| 1,611,502 | | |
| (344,257 | ) |
Net cash provided by operating activities | |
| 339,532 | | |
| 1,104,446 | |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
| |
| | | |
| | |
Proceeds from investments in CD’s | |
| 355,160 | | |
| (2,000 | ) |
Net cash provided by (used) in investing activities | |
| 355,160 | | |
| (2,000 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
| |
| | | |
| | |
Member distributions | |
| (2,622,000 | ) | |
| (342,000 | ) |
Net cash used in financing activities | |
| (2,622,000 | ) | |
| (342,000 | ) |
| |
| | | |
| | |
Net (decrease) increase in cash and cash equivalents | |
| (1,927,308 | ) | |
| 760,446 | |
| |
| | | |
| | |
Cash and cash equivalents, beginning of period | |
| 3,814,966 | | |
| 3,054,520 | |
| |
| | | |
| | |
Cash and cash equivalents, end of period | |
$ | 1,887,658 | | |
$ | 3,814,966 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information | |
| | | |
| | |
Cash paid during the year for: | |
| | | |
| | |
Interest | |
$ | - | | |
$ | - | |
Income tax | |
$ | - | | |
$ | - | |
See
the accompanying notes to these financial statements
FACTOR
NUTRITION LABS, LLC
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A
summary of the significant accounting policies applied in the presentation of the accompanying financial statements follows:
Organization
and nature of operations
Factor
Nutrition Labs, LLC (the “Company”, “we”, “us” or “our”) is in the business of
marketing and selling nutritional supplements to major retailers across the United States.
As
a limited liability company, the members are not personally liable for any of the debts, obligations, losses, claims, or judgements
on any of the liabilities of the Company, whether arising in tort, contract, or otherwise, unless a member has signed a specific
guarantee.
Use
of estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from those estimates.
Revenue
recognition
The Company
recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition (“ASC
605”). ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of
an arrangement exists; (2) delivery has occurred and/or service has been performed; (3) the selling price is fixed and determinable;
and (4) collectability is reasonably assured. Ownership and title of our products pass to customers upon delivery of the products
to the customers. Freight billed to customers is presented as revenues, and the related freight costs are presented as cost of
goods sold.
Cash
and cash equivalents
For
financial statement purposes, the Company considers all highly-liquid investments with original maturities of three months or
less at the time of purchase to be cash equivalents.
Accounts
receivable - trade
Accounts
receivable are stated net of allowances for possible bad debt and future chargebacks. Management estimates these possible losses
based on payment history of specific customers having specific balances, and establishes an allowance for the remaining accounts
receivable based on historical experience. Accounts are written off after all reasonable collection efforts have been exhausted
and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for
doubtful accounts. The Company’s policy is to extend credit to customers that management has determined to be credit worthy.
FACTOR
NUTRITION LABS, LLC
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
Trade
accounts receivable and the allowance as of December 31, 2014 and 2013 were as follows:
| |
2014 | | |
2013 | |
Trade accounts receivable | |
$ | 3,066,082 | | |
$ | 961,731 | |
Allowance | |
| - | | |
| - | |
Trade accounts receivable, net | |
$ | 3,066,082 | | |
$ | 961,731 | |
The
allowance for doubtful account was $0 and $0 at December 31, 2014 and 2013. The Company writes off receivables that are deeded
uncollectible. In 2013 management determined there were material balances that were uncollectible due to a launch of a new product
that was unsuccessful. These receivables were written off. Total of $956,134 was written off in year 2013. A review of 2014 accounts
receivable was performed to determine if an allowance should be accrued for. It was determined that all balances are collectible.
Fixed
assets
Fixed
assets are carried at cost. Expenditures for maintenance and repairs are expensed currently, while costs of major additions and
betterments are capitalized. The costs of assets sold, retired, or otherwise disposed of, and the related accumulated depreciation,
are eliminated from the accounts, and any resulting gain or loss is reflected in income.
Depreciation
is recorded on a straight-line basis over the estimated useful lives of the respective assets as follows:
Computer equipment and software | |
| 3-5 years | |
Office equipment | |
| 7 years | |
Inventory
Inventory
consists of finished goods. The Company’s inventory is stated at the lower of cost (FIFO cost basis) or market. Inventory
is shown on the balance sheet net of a reserve, which represents older packaging that may still be used as samples. In year 2013
the Company wrote off $488,700 of obsolete inventory. The Company does not anticipate taking additional inventory reserves in
the future.
Advertising
The
Company expenses advertising costs as they are incurred. Advertising expenses amounted to $5,291,652 and $2,645,625 for the years
ended December 31, 2014 and 2013, respectively. Advertising consists of the following items: in-store demonstrations, online advertising,
print advertising and coupons.
Income
taxes
As
a limited liability company, the Company is generally not subject to income taxes. Instead, the members report their distributive
share of the Company’s profits and losses on their individual income tax return. A provision for taxes has been made where
applicable.
Uncertain
tax positions
The
Company recognizes and measures its uncertain tax positions in accordance with FASB ASC 740, Income Taxes. Under that guidance,
the Company assesses the likelihood, based on their technical merit, that tax positions will be sustained upon examination based
on the facts, circumstances and information available at the end of each period. The measurement of uncertain tax positions is
adjusted when new information is available, or when an event occurs that requires a change.
FACTOR
NUTRITION LABS, LLC
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
Recent
accounting pronouncements
There
are various other updates recently issued, most of which represented technical corrections to the accounting literature or application
to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations
or cash flows.
NOTE
2 - CONCENTRATION OF CREDIT RISK
Cash
and cash equivalents
The
Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts
that at times may be in excess of the federally insured limit of $250,000. The Company minimizes this risk by placing its cash
deposits with major financial institutions. At December 31, 2014 and 2013, the uninsured balances amounted to $1,472,552 and $3,359,478,
respectively.
Accounts
receivable
As
of December 31, 2014, one customer accounted for 79% of the Company’s accounts receivable. As of December 31, 2013, three
customers accounted for 73% of the Company’s accounts receivable.
Major
customers
For
the year ended December 31, 2014, two customers accounted for approximately 90% of the Company’s gross revenues. For the
year ended December 31, 2013, two customers accounted for approximately 84% of the Company’s gross revenues. Substantially
all of the Company’s business is with companies in the United States.
Major
supplier
For
the year ended December 31, 2014, the Company’s products were manufactured by two suppliers located in Pittsburgh, Pennsylvania
and Tustin, California. For the year ended December 31, 2013, the Company’s products were manufactured by one supplier located
in Pittsburgh, Pennsylvania. It is the opinion of management that the product can be produced by other manufacturers and the choice
to utilize these suppliers is not a significant concentration.
NOTE
3 - FIXED ASSETS
At
December 31, 2014 and 2013, fixed assets consisted of the following:
| |
2014 | | |
2013 | |
Office equipment | |
$ | 43,173 | | |
$ | 43,173 | |
Computer software | |
| 9,046 | | |
| 9,046 | |
| |
| 52,219 | | |
| 52,219 | |
Less: accumulated depreciation | |
| (52,219 | ) | |
| (51,444 | ) |
Fixed assets, net | |
$ | - | | |
$ | 775 | |
Depreciation
expense for the years ended December 31, 2014 and 2013 amounted to $775 and $8,697, respectively.
FACTOR
NUTRITION LABS, LLC
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
4 - COMMITMENTS AND CONTINGENCIES
Operating
leases
In
November 2014, the Company entered into a non-cancellable operating lease for office and warehouse space located in Westbrook,
Maine, that expires on October 31, 2015. From January 1, 2013 through October 31, 2014, the Company had the same operating lease.
Rent expense under these leases for the years ended December 31, 2014 and 2013 was $50,472 and $53,477, respectively.
Total
future minimum annual rental commitments through October 31, 2015 amount to $42,900.
Litigation
and claims
Certain
conditions may exists as of the date of the financial statements are issued that may result in a loss to the Company but which
will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel
asses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies
related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the
Company’s legal counsel evaluates the perceived merits of the amount of relief sought or expected to be sought therein.
If
the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability
can be estimated, the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates
that a potentially material loss contingency is not probable, but is reasonably probable, or is probably but cannot be estimated,
then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material,
would be disclosed.
Management
believes that there are no current legal matters that would have a material effect on the Company’s financial position or
results of operations.
NOTE
5 - MEMBERS’ EQUITY
The
Company is owned by 3 members. During the years ended December 31, 2014 and 2013, the Company distributed $2,622,000 and $342,000
to its members, respectively.
NOTE
6 - SUBSEQUENT EVENTS
In
accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through March, 20, 2015, the
date on which these financial statements were available to be issued.
On
January 22, 2015 substantially all the assets of the Company were sold to Synergy Strips Corp., is a Nevada based corporation
that is in the process of building a portfolio of best-in-class consumer product brands. The aggregate purchase price was $6.0
million, with $4.5 million paid on the closing date, $750,000 to be paid on or before January 20, 2016 and a the final $750,000
to be paid on or before January 20, 2017. The transaction was financed through an agreement with Knight Therapeutics Inc. with
a secured loan bearing interest of 15% per annum, plus other considerations. The interest rate will decrease to 13% provided Synergy
meets specified equity-fundraising targets. In January 2017 the loan matures and may be extended for up to an additional two years
if revenue and profitability milestones are met.
Exhibit
99.2
PRO
FORMA FINANCIAL INFORMATION
● |
Condensed
Consolidated Pro Forma Unaudited Balance Sheet as of September 30, 2014 |
|
|
● |
Condensed
Consolidated Pro Forma Unaudited Statement of Operations for the year ended July 31, 2013 |
|
|
● |
Condensed
Consolidated Pro Forma Unaudited Statement of Operations for the nine months ended September 30, 2014 |
|
|
● |
Notes
to Condensed Consolidated Pro Forma Unaudited Financial Statements |
On
January 22, 2015, Synergy Strips Corp., a Nevada corporation (the “Company”) entered into an Asset Purchase Agreement
(the “Purchase Agreement”) with Factor Nutrition Labs, LLC, a Delaware limited liability company (the “Seller”),Vita
Partners, LLC, RPR Partners, LLC, and Thor Associates, Inc. (each a “Principle Owner”). Pursuant to the Purchase Agreement,
the Company purchased all of the assets of the Seller’s line of business and products called FOCUS Factor (the product plus
the business related to the product is collectively referred to as the “Focus Factor Business”) and assumed the accounts
payable and contractual obligations of the Focus Factor Business for an aggregate purchase price of $6.0 million, with $4.5 million
paid on the Closing Date, and $750,000 to be paid on or before January 20, 2016 and an additional $750,000 to be paid on or before
January 20, 2017 (the “Acquisition”).
The
unaudited condensed combined pro forma balance sheet gives effect to the Acquisition as if the Acquisition had taken place on
September 30, 2014 and combines the Focus Factor Business audited condensed balance sheet as of December 31, 2014 with the Company’s
condensed unaudited balance sheet as of September 30, 2014. The unaudited condensed combined pro forma statements of operations
are presented as if the Acquisition had been completed on August 1, 2012 combining the Focus Factor Business condensed audited
statement of operations for the year ended December 31, 2013 and the Company’s audited condensed statement of operations
for the year ended July 31, 2013 and the Focus Factor Business condensed audited statement of operations for the year ended December
31, 2014 and the Company’s unaudited condensed statement of operations for the nine months ended September 30, 2014.
The
unaudited pro forma combined statement of operations is presented for illustrative purposes only and, therefore, is not necessarily
indicative of the operating results that might have been achieved had the transaction occurred as of an earlier date, nor is it
necessarily indicative of the operating results that may be achieved in the future. You should not rely on the pro forma condensed
combined financial information as being indicative of the historical results that would have been achieved had the companies always
been combined or the future results that the combined companies will experience after the Acquisition.
The
unaudited pro forma combined statement of income, including the notes thereto, should be read in conjunction with the Company’s
audited historical consolidated financial statements for the year ended December 31, 2013 included in our Annual Report on Form
10-K for the year ended December 31, 2013, as well as the Seller’s audited financial statements for the years ended December
31, 2014 September 30, 2014 and 2013 included in Exhibit 99.1 to this Form 8-K.
Synergy
Strips Corp.
Unaudited
Pro Forma Balance Sheet
September
30, 2014
|
|
Balance
Sheet
Synergy Strips Corp.
September 30, 2014 |
|
|
Balance
Sheet
Factor Nutrition Labs, LLC
December 31, 2014 |
|
|
Pro
Forma
Adjustments |
|
|
Balance
Sheet
Consolidated Pro Forma
September 30, 2014 |
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|
|
Cash
and cash equivalents |
|
$ |
11,937 |
|
|
$ |
1,887,658 |
|
|
|
1,210,955 |
(1) |
|
|
|
|
$ |
3,110,550 |
Accounts
receivable |
|
|
150 |
|
|
|
3,066,082 |
|
|
|
|
|
|
|
|
|
|
3,066,232 |
Inventory |
|
|
30,500 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
30,500 |
Prepaid
expenses |
|
|
30,000 |
|
|
|
111,829 |
|
|
|
|
|
|
|
|
|
|
141,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets |
|
|
72,587 |
|
|
|
5,065,569 |
|
|
|
|
|
|
|
|
|
|
6,349,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
issuance costs |
|
|
|
|
|
|
|
|
|
|
289,044 |
(1) |
|
|
|
|
|
289,044 |
Goodwill
and intangibles |
|
|
|
|
|
|
|
|
|
|
3,357,313 |
(1) |
|
|
|
|
|
3,357,313 |
Deposits |
|
|
- |
|
|
|
9,000 |
|
|
|
|
|
|
|
|
|
|
9,000 |
Total
other assets |
|
|
|
|
|
|
9,000 |
|
|
|
|
|
|
|
|
|
|
3,655,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets |
|
$ |
72,587 |
|
|
$ |
5,074,569 |
|
|
|
|
|
|
|
|
|
$ |
10,004,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’/Members’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities |
|
$ |
25,756 |
|
|
$ |
2,431,881 |
|
|
|
|
|
|
|
|
|
$ |
2,457,637 |
Notes
payable |
|
|
11,200 |
|
|
|
|
|
|
|
|
|
|
|
7,500,000 |
(1) |
|
7,511,200 |
Total
liabilities |
|
|
36,956 |
|
|
|
2,431,881 |
|
|
|
|
|
|
|
|
|
|
9,968,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’/Members’
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.00001 par value; 300,000,000 and 75,000,000 shares authorized, respectively; 62,100,000 and 180,000,000 shares issued
and outstanding, respectively |
|
|
621 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
621 |
Common
stock to be issued |
|
|
28,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
28,000 |
Additional
paid in capital |
|
|
868,744 |
|
|
|
3,339,049 |
|
|
|
3,339,049 |
(1) |
|
|
|
|
|
868,744 |
Shareholder
distributions |
|
|
- |
|
|
|
(5,174,757 |
) |
|
|
|
|
|
|
5,174,757 |
(1) |
|
- |
Accumulated
equity (deficit) |
|
|
(861,734 |
) |
|
|
4,478,396 |
|
|
|
4,478,396 |
(1) |
|
|
|
|
|
(861,734) |
Total
stockholders’/members’ equity |
|
|
35,631 |
|
|
|
2,642,688 |
|
|
|
|
|
|
|
|
|
|
35,631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’/members’ equity |
|
$ |
72,587 |
|
|
$ |
5,074,569 |
|
|
|
|
|
|
|
|
|
$ |
10,004,468 |
(1) |
To
record the issuance of $7,500,00 of debt in connection with the acquisition of Factor Nutrition Labs, LLC and eliminate
the Factor Nutrition Labs, LLC members’ equity as of September 30, 2014. |
Synergy
Strips Corp.
Unaudited
Pro Forma Statement of Operations
Year
ended July 30, 2013
| |
Synergy Strips
Corp. Year ended July 31, 2013 | | |
Factor Nutrition
Labs, LLC
Year ended
December 31, 2013 | | |
Pro Forma Adjustments | | |
Consolidated Pro Forma year ended July 31, 2013 | |
| |
| | |
| | |
| | |
| |
Revenue | |
| | | |
| | | |
| | | |
| | |
Gross revenues | |
$ | - | | |
$ | 11,092,609 | | |
| | | |
$ | 11,092,609 | |
Less: returns, allowances and discounts | |
| - | | |
| 463,438 | | |
| | | |
| 463,438 | |
Total revenue, net | |
| - | | |
| 10,629,171 | | |
| | | |
| 10,629,171 | |
| |
| | | |
| | | |
| | | |
| | |
Cost of goods sold | |
| - | | |
| 4,810,170 | | |
| | | |
| 4,810,170 | |
| |
| | | |
| | | |
| | | |
| | |
Gross profit | |
| - | | |
| 5,819,001 | | |
| | | |
| 5,819,001 | |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Retail promotions and in-store demos | |
| - | | |
| 2,597,586 | | |
| | | |
| 2,597,586 | |
Salaries and benefits | |
| - | | |
| 551,143 | | |
| | | |
| 551,143 | |
General and administrative | |
| 21,783 | | |
| 760,617 | | |
| | | |
| 782,400 | |
Bad debts | |
| - | | |
| 956,134 | | |
| | | |
| 956,134 | |
Depreciation | |
| - | | |
| 8,697 | | |
| | | |
| 8,697 | |
Total operating expenses | |
| 21,783 | | |
| 4,874,177 | | |
| | | |
| 4,895,960 | |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) from operations | |
| (21,783 | ) | |
| 944,824 | | |
| | | |
| 923,041 | |
| |
| | | |
| | | |
| | | |
| | |
Other income | |
| - | | |
| 12,336 | | |
| | | |
| 12,336 | |
Imputed interest expense | |
| 1,418 | | |
| - | | |
| | | |
| 1,418 | |
Amortization of debt issuance costs | |
| - | | |
| - | | |
| 144,522 | (2) | |
| 144,522 | |
Interest expense | |
| - | | |
| - | | |
| 801,217 | (2) | |
| 801,217 | |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | (23,201 | ) | |
$ | 957,160 | | |
| | | |
$ | (11,780 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss per share - basic and diluted | |
$ | (0.0 | ) | |
| - | | |
| | | |
$ | (0.0 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average common shares - basic and diluted | |
| 5,096,541 | | |
| - | | |
| | | |
| 5,096,541 | |
(2) |
To
record interest expense and amortization of debt issuance costs in connection with the
debt issuance of $7,500,000. |
Synergy
Strips Corp.
Unaudited
Pro Forma Statement of Operations
Nine
months ended September 30, 2014
| |
Synergy Strips Corp. Nine
months ended
September 30, 2014 | | |
Factor Nutrition Labs,
LLC year ended
December 31, 2014 | | |
Pro Forma Adjustments | | |
Consolidated Pro Forma Nine months ended
September 30, 2014 | |
| |
| | |
| | |
| | |
| |
Revenue | |
| | | |
| | | |
| | | |
| | |
Gross revenues | |
$ | 2,748 | | |
$ | 13,159,237 | | |
| | | |
$ | 13,161,985 | |
Less: returns, allowances and discounts | |
| - | | |
| 473,100 | | |
| | | |
| 473,100 | |
Total revenue, net | |
| 2,748 | | |
| 12,686,137 | | |
| | | |
| 12,688,885 | |
| |
| | | |
| | | |
| | | |
| | |
Cost of goods sold | |
| 1,685 | | |
| 5,324,945 | | |
| | | |
| 5,326,630 | |
| |
| | | |
| | | |
| | | |
| | |
Gross profit | |
| 1,063 | | |
| 7,361,192 | | |
| | | |
| 7,362,255 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Retail promotions and in-store demos | |
| - | | |
| 5,311,201 | | |
| | | |
| 5,311,201 | |
Salaries and benefits | |
| - | | |
| 615,325 | | |
| | | |
| 615,325 | |
General and administrative | |
| 787,858 | | |
| 663,375 | | |
| | | |
| 1,451,233 | |
Depreciation | |
| - | | |
| 775 | | |
| | | |
| 775 | |
Total operating expenses | |
| 787,858 | | |
| 6,590,676 | | |
| | | |
| 7,378,534 | |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) from operations | |
| (786,795 | ) | |
| 770,516 | | |
| | | |
| (16,279 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income | |
| - | | |
| 6,104 | | |
| | | |
| 6,104 | |
| |
| | | |
| | | |
| | | |
| | |
Amortization of debt issuance costs | |
| - | | |
| - | | |
| 144,522 | (2) | |
| 144,522 | |
| |
| | | |
| | | |
| | | |
| - | |
Interest expense | |
| - | | |
| - | | |
| 604,881 | (2) | |
| 604,881 | |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | (786,795 | ) | |
$ | 776,620 | | |
| | | |
$ | (759,578 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss per share - basic and diluted | |
$ | (0.01 | ) | |
| - | | |
| | | |
$ | (0.01 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average common shares - basic and diluted | |
| 108,850,549 | | |
| - | | |
| | | |
| 108,850,549 | |
(2) |
To
record interest expense and amortization of debt issuance costs in connection with the debt issuance of $7,500,000. |
SYNERGY
STRIPS CORP.
NOTES
TO CONDENSED PRO FORMA UNAUDITED FINANCIAL STATEMENTS
Unaudited
Pro Forma Condensed Financial Information.
The unaudited pro forma financial statements
have been prepared in order to present consolidated financial position and results of operations of the Company and Factor Nutrition
Labs LLC as if the Acquisition had occurred as of September 30, 2014 for the pro forma condensed consolidated balance sheet and
to give effect to the Acquisition as if the transaction had taken place at August 1, 2012 for the pro forma condensed consolidated
statement of operations for the year ended July 31, 2013 and the nine months ended September 30, 2014, respectively.
The acquisition has been
accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition consideration
price is allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value
measurements utilize estimates based on key assumptions of the acquisition, and historical and current market data. The excess
of the purchase price over the total of estimated fair values assigned to tangible and identifiable intangible assets acquired
and liabilities assumed is recognized as goodwill. In order to ultimately determine the fair values of tangible and intangible
assets acquired and liabilities assumed for Factor Nutrition Labs LLC, we may engage a third party independent valuation specialist;
however as of the date of this report, the valuation has not been undertaken. During
the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date,
or to conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized,
or there could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information
is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition
of those assets or liabilities as of that date. The Company expects the purchase price allocations for the acquisition of Factor
Nutrition Labs LLC to be completed by September 30, 2015.
The
pro forma adjustments do not reflect the amortization of intangible assets acquired, if any, in the acquisition.
In
connection with the financing of the Acquisition, the Company issued a warrant to the lender that entitles the lender to purchase
4,595,187 shares of the Company’s common stock with an aggregate exercise price of $1.00. The lender exercised the warrant
on January 22, 2015.
In
addition, the Company issued to the lender a warrant to purchase 3,584,759 shares of the Company’s common stock on or prior
to the close of business of January 22, 2025 with an exercise price of $0.34 per share.
The
Company believes the warrants issued to the lender have nominal value and the pro forma adjustments do not reflect the issuance
of the warrants. In order to ultimately determine the fair values of the warrants issued to the lender , we may engage a third
party independent valuation specialist; however as of the date of this report, the valuation has not been undertaken.
The
following pro forma adjustments are incorporated into the pro forma condensed consolidated balance sheet as of September 30, 2014
and the pro forma condensed consolidated statement of operations for the year ended July 31, 2013 and the nine months ended September
30, 2014 , respectively.
The pro forma balance sheet condensed balance
sheet is presented using the Company’s September 30, 2014 balance sheet with the Factor Nutrition Labs LLC balance sheet
as of December 31, 2014; due to the minimal operations of the Company , adjusting the Factor Nutrition Labs LLC balance sheet
to September 30, 2014 is impractical and has not been presented.
The pro forma condensed statement of operations
for the Company’s fiscal year is presented using the Company’s July 31 2013 statement of operations with Factor Nutrition
Labs LLC’s fiscal year statement of operations for the year ended December 31, 2013; subsequent to the issuance of its July
31, 2013 financial statement, the Company changed its fiscal year end to December 31, 2013. Due to the minimal operations of the
Company , adjusting the Factor Nutrition Labs LLC statement of operations to a fiscal year ended July 31, 2013 is impractical
and has not been presented.
The pro forma condensed statement of operations
for the Company’s nine months ended September 30, 2014 is presented using the Company’s September 30, 2014 unaudited
statement of operations with Factor Nutrition Labs LLC’s fiscal year statement of operations for the year ended December
31, 2014; the difference in the periods is less than 93 days of the Company’s most recent reporting period and therefore,
we have not adjusted the Factor Nutrition Labs LLC statement of operations to a fiscal year ended December 31, 2014.
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