Attached files
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8-K/A - FORM 8-K AMENDMENT NO. 1 - CYNOSURE INC | d816120d8ka.htm |
EX-23.1 - EX-23.1 - CYNOSURE INC | d816120dex231.htm |
EX-99.1 - EX-99.1 - CYNOSURE INC | d816120dex991.htm |
EX-99.3 - EX-99.3 - CYNOSURE INC | d816120dex993.htm |
Exhibit 99.2
ELLMAN HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30, 2014 and December 31, 2013
(amounts in thousands)
Unaudited 2014 |
Audited 2013 |
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ASSETS | ||||||||
CURRENT ASSETS |
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Cash and cash equivalents |
$ | 1,342 | $ | 570 | ||||
Accounts receivable, less allowance for doubtful accounts of $408 at June 30, 2014 and December 31, 2013 |
3,483 | 4,193 | ||||||
Inventories, net |
3,614 | 4,392 | ||||||
Prepaid expenses and other current assets |
570 | 241 | ||||||
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Total Current Assets |
9,009 | 9,396 | ||||||
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PROPERTY AND EQUIPMENT, NET |
713 | 803 | ||||||
OTHER ASSETS |
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Intangible assets, net |
26,617 | 26,617 | ||||||
Accumulated amortization, net |
(14,574 | ) | (13,815 | ) | ||||
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Net intangible assets |
12,043 | 12,802 | ||||||
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Goodwill |
2,806 | 2,806 | ||||||
Deferred financing costs, net |
28 | 53 | ||||||
Other assets |
174 | 142 | ||||||
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Total Other Assets |
15,051 | 15,803 | ||||||
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TOTAL ASSETS |
$ | 24,773 | $ | 26,002 | ||||
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LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
CURRENT LIABILITIES |
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Line of credit, bank |
$ | 2,500 | $ | 1,000 | ||||
Current portion of senior term note payable |
4,101 | 4,101 | ||||||
Subordinated note payable (majority stockholder) |
1,500 | 1,500 | ||||||
SBA term note payable |
964 | 1,000 | ||||||
Accounts payable |
1,939 | 2,505 | ||||||
Accrued expenses |
5,321 | 5,387 | ||||||
Deferred revenue |
592 | 571 | ||||||
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Total Current Liabilities |
16,917 | 16,064 | ||||||
LONG-TERM LIABILITIES |
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Subordinated note payable - Sandstone |
1,100 | 1,100 | ||||||
Promissory note - Sandstone |
711 | 683 | ||||||
Accrued royalty commitment - Long Term |
4,029 | 3,934 | ||||||
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Total Long-Term Liabilities |
5,840 | 5,717 | ||||||
Total Liabilities |
22,757 | 21,781 | ||||||
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STOCKHOLDERS EQUITY |
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Preferred stock, series B |
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Preferred stock, series A |
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Common stock |
37 | 37 | ||||||
Additional paid-in capital |
40,851 | 40,723 | ||||||
Stock subscription receivable |
(12 | ) | (12 | ) | ||||
Retained earnings |
(38,860 | ) | (36,527 | ) | ||||
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Total Stockholders Equity |
2,016 | 4,221 | ||||||
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
$ | 24,773 | $ | 26,002 | ||||
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See accompanying notes to consolidated financial statements.
ELLMAN HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2014 and 2013
(unaudited, amounts in thousands)
2014 | 2013 | |||||||
NET SALES |
$ | 12,890 | $ | 13,425 | ||||
COST OF GOODS SOLD |
4,714 | 5,167 | ||||||
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Gross Profit |
8,176 | 8,258 | ||||||
OPERATING EXPENSES |
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Selling, general and administrative |
8,588 | 8,696 | ||||||
Depreciation |
121 | 150 | ||||||
Amortization of intangibles |
759 | 823 | ||||||
Loss on natural disasters, net |
| 4 | ||||||
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Total Operating Expenses |
9,468 | 9,673 | ||||||
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Operating Loss |
(1,292 | ) | (1,415 | ) | ||||
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OTHER INCOME (EXPENSE) |
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Interest expense |
(1,041 | ) | (429 | ) | ||||
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NET LOSS |
$ | (2,333 | ) | $ | (1,844 | ) | ||
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See accompanying notes to consolidated financial statements.
ELLMAN HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2014 and 2013
(unaudited, amounts in thousands)
2014 | 2013 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
$ | (2,333 | ) | $ | (1,844 | ) | ||
Adjustments to reconcile net loss to net cash flows from operating activities |
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Depreciation and amortization |
171 | 125 | ||||||
Amortization of intangibles and other assets |
759 | 823 | ||||||
Amortization of deferred financing costs |
25 | 14 | ||||||
Interest accrued on promissory note |
28 | 80 | ||||||
Provision for doubtful accounts |
(58 | ) | | |||||
Stock-based compensation |
128 | 128 | ||||||
Changes in assets and liabilities |
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Accounts receivable |
768 | 225 | ||||||
Inventory |
778 | (1,081 | ) | |||||
Prepaid expense and other current assets |
(262 | ) | 152 | |||||
Other assets |
(155 | ) | (329 | ) | ||||
Accounts payable and accrued expenses |
(537 | ) | (477 | ) | ||||
Deferred revenue |
21 | (19 | ) | |||||
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Net Cash Flows from Operating Activities |
(667 | ) | (2,203 | ) | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Purchase of property and equipment |
(25 | ) | (155 | ) | ||||
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Net Cash Flows from Investing Activities |
(25 | ) | (155 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Net change on line of credit, bank |
1,500 | 2,000 | ||||||
Repayment on long-term debt |
(36 | ) | (75 | ) | ||||
Issuance of Series B Preferred Stock |
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Stock redemption |
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Net Cash Flows from Financing Activities |
1,464 | 1,925 | ||||||
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Net Change in Cash and Cash Equivalents |
772 | (433 | ) | |||||
CASH AND CASH EQUIVALENTS - Beginning of Year |
570 | 845 | ||||||
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CASH AND CASH EQUIVALENTS - END OF YEAR |
$ | 1,342 | $ | 412 | ||||
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See accompanying notes to consolidated financial statements.
ELLMAN HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2014 and December 31, 2013 and for the Six Months Ended June 30, 2014 and 2013
(amounts in thousands)
NOTE 1 - General
Nature of Operations
Ellman Holding Corporation (the Company), a Delaware corporation, was incorporated on January 31, 2008 to acquire the stock of Ellman International, Inc., a company principally engaged in the manufacturing and distribution of equipment for medical, dental and veterinary professionals, both domestically and internationally.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with U.S.generally accepted accounting principles (GAAP) for interim financial information. Accordingly, certain information and footnote disclosures normally included in complete financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations applicable to interim financial statements. In the opinion of management, the accompanying unaudited financial statements reflect all adjustments (including normally recurring accruals) necessary to present fairly the Companys financial position at June 30, 2014, its results of operations and its cash flows for the six months ended June 30, 2014 and 2013. The accompanying financial statements should be read in conjunction with the Companys audited financial statements as of and for the year ended December 31, 2013, incorporated by reference within this document.
Fair Value of Financial Instruments
Carrying amounts of the Companys financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate their fair values due to their short maturities. Based on the borrowing rates available to the Company for loans with similar terms, the carrying value of the borrowings approximates their fair value. The carrying amounts of other assets and liabilities approximate their fair values based upon their nature and size.
Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. A fair value hierarchy prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly and (Level 3) unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.
Financial assets that are measured at fair value on a recurring basis have been segregated into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement dates. The following table represents Ellmans fair value hierarchy for its financial assets (cash equivalents) measured at fair value as of June 30, 2014:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Cash and cash equivalents |
$ | 1,342 | $ | | $ | | $ | 1,342 | ||||||||
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Total |
$ | 1,342 | $ | | $ | | $ | 1,342 | ||||||||
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The majority of the Companys non-financial assets and liabilities are not required to be carried at fair value on a recurring basis. However, the Company is required on a nonrecurring basis to use fair value measurements when analyzing asset impairment as it relates to goodwill and other indefinite-lived intangible assets and long-lived assets. For its annual goodwill impairment testing, the Company utilized a combination of income and market approaches (Level 3 inputs).
ELLMAN HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2014 and December 31, 2013 and for the Six Months Ended June 30, 2014 and 2013
(amounts in thousands)
Subsequent Events
The Company has evaluated subsequent events occurring after the date of the consolidated financial statements for events requiring recording or disclosure in the financial statements.
NOTE 2 - Inventories, net
Ellman states al inventories at the lower of cost or market with cost determined on an average cost basis, which approximates the first-in first-out inventory costing method. Inventories are summarized as follows:
June 30, 2014 | December 31, | |||||||
2013 (audited) | ||||||||
Raw Materials |
$ | 1,424 | $ | 1,434 | ||||
Finished Goods |
2,896 | 3,664 | ||||||
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4,320 | 5,098 | |||||||
Less: valuation allowance |
(706 | ) | (706 | ) | ||||
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Inventories, net |
$ | 3,614 | $ | 4,392 | ||||
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NOTE 3 - Stock-Based Compensation
Ellman recorded stock-based compensation expense of $128 and $128 for the six months ended June 30, 2014 and 2013, respectively. There were no exercises of stock options for the six months period ended June 30, 2014.
NOTE 4 - Income Taxes
The Company files income tax returns in the federal jurisdiction, and various state jurisdictions. The Company has not been audited for federal or state purposes, and as a result of its carryforwards, all years are effectively open to adjustment.
NOTE 5 - Subsequent Events
On September 5, 2014, Cynosure, Inc., acquired (the Acquisition) substantially all of the assets of the Company, for a cash purchase price of approximately $13,200. In addition, Cynosure assumed certain contractual and current liabilities associated with normal working capital. The purchase price was based primarily on the net working capital on the date of purchase plus an amount required to retire all the of the Companys long term debt on the date of sale.