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8-K/A - FORM 8-K AMENDMENT NO. 1 - CYNOSURE INCd816120d8ka.htm
EX-23.1 - EX-23.1 - CYNOSURE INCd816120dex231.htm
EX-99.1 - EX-99.1 - CYNOSURE INCd816120dex991.htm
EX-99.3 - EX-99.3 - CYNOSURE INCd816120dex993.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
 
ASSETS     

CURRENT ASSETS

    

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   
  

 

 

   

 

 

 

Total Current Assets

     9,009        9,396   
  

 

 

   

 

 

 

PROPERTY AND EQUIPMENT, NET

     713        803   

OTHER ASSETS

    

Intangible assets, net

     26,617        26,617   

Accumulated amortization, net

     (14,574     (13,815
  

 

 

   

 

 

 

Net intangible assets

     12,043        12,802   
  

 

 

   

 

 

 

Goodwill

     2,806        2,806   

Deferred financing costs, net

     28        53   

Other assets

     174        142   
  

 

 

   

 

 

 

Total Other Assets

     15,051        15,803   
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 24,773      $ 26,002   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY     

CURRENT LIABILITIES

    

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   
  

 

 

   

 

 

 

Total Current Liabilities

     16,917        16,064   

LONG-TERM LIABILITIES

    

Subordinated note payable - Sandstone

     1,100        1,100   

Promissory note - Sandstone

     711        683   

Accrued royalty commitment - Long Term

     4,029        3,934   
  

 

 

   

 

 

 

Total Long-Term Liabilities

     5,840        5,717   

Total Liabilities

     22,757        21,781   
  

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY

    

Preferred stock, series B

     —          —     

Preferred stock, series A

     —          —     

Common stock

     37        37   

Additional paid-in capital

     40,851        40,723   

Stock subscription receivable

     (12     (12

Retained earnings

     (38,860     (36,527
  

 

 

   

 

 

 

Total Stockholders’ Equity

     2,016        4,221   
  

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 24,773      $ 26,002   
  

 

 

   

 

 

 

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   
  

 

 

   

 

 

 

Gross Profit

     8,176        8,258   

OPERATING EXPENSES

    

Selling, general and administrative

     8,588        8,696   

Depreciation

     121        150   

Amortization of intangibles

     759        823   

Loss on natural disasters, net

     —          4   
  

 

 

   

 

 

 

Total Operating Expenses

     9,468        9,673   
  

 

 

   

 

 

 

Operating Loss

     (1,292     (1,415
  

 

 

   

 

 

 

OTHER INCOME (EXPENSE)

    

Interest expense

     (1,041     (429
  

 

 

   

 

 

 

NET LOSS

   $ (2,333   $ (1,844
  

 

 

   

 

 

 

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

    

Net loss

   $ (2,333   $ (1,844

Adjustments to reconcile net loss to net cash flows from operating activities

    

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

    

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
  

 

 

   

 

 

 

Net Cash Flows from Operating Activities

     (667     (2,203
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

    

Purchase of property and equipment

     (25     (155
  

 

 

   

 

 

 

Net Cash Flows from Investing Activities

     (25     (155
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

    

Net change on line of credit, bank

     1,500        2,000   

Repayment on long-term debt

     (36     (75

Issuance of Series B Preferred Stock

     —          —     

Stock redemption

     —          —     
  

 

 

   

 

 

 

Net Cash Flows from Financing Activities

     1,464        1,925   
  

 

 

   

 

 

 

Net Change in Cash and Cash Equivalents

     772        (433

CASH AND CASH EQUIVALENTS - Beginning of Year

     570        845   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS - END OF YEAR

   $ 1,342      $ 412   
  

 

 

   

 

 

 

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 Company’s 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 Company’s 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 Company’s 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 Ellman’s 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   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,342       $ —         $ —         $ 1,342   
  

 

 

    

 

 

    

 

 

    

 

 

 

The majority of the Company’s 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   
  

 

 

   

 

 

 
     4,320        5,098   

Less: valuation allowance

     (706     (706
  

 

 

   

 

 

 

Inventories, net

   $ 3,614      $ 4,392   
  

 

 

   

 

 

 

 

 

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 Company’s long term debt on the date of sale.