Exhibit 99.2
Combined Financial Statements (Unaudited)
Efmark Deployment I, Inc. d/b/a EDC and EDC ATM Subsidiary, LLC
June 30, 2011
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| Contents | |
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| | Page |
| Combined Balance Sheet (unaudited) | 3 |
| Combined Statement of Operations (unaudited) | 4 |
| Combined Statement of Cash Flows (unaudited) | 5 |
| Notes to Combined Financial Statements | 6 |
| Efmark Deployment I, Inc. |
d/b/a EDC and EDC ATM Subsidiary, LLC |
| COMBINED BALANCE SHEET |
| (UNAUDITED) |
| June 30, 2011 |
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| ASSETS | | | |
| CURRENT ASSETS: | | | |
| Cash and cash equivalents | $ | 4,114,556 | |
| Accounts receivable | | | |
| Trade | | 549,467 | |
| Other | | 1,118,961 | |
| Inventory | | 156,257 | |
| Prepaid expenses | | 3,150,034 | |
| Total current assets | | 9,089,275 | |
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| Property and equipment: | | | |
| Property and equipment | | 28,045,575 | |
| Less accumulated depreciation and amortization | | (19,150,964 | ) |
| Net property and equipment | | 8,894,611 | |
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| Other assets: | | | |
| Goodwill | | 40,198,815 | |
| Customer contracts, net | | 1,811,504 | |
| Deferred financing costs, net | | 533,224 | |
| Deposits | | 8,593 | |
| Total other assets | | 42,552,136 | |
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| Total assets | $ | 60,536,022 | |
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| LIABILITIES AND EQUITY | | | |
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| CURRENT LIABILITIES: | | | |
| Current portion of long-term debt | $ | 3,350,000 | |
| Accounts payable | | 6,325,536 | |
| Other accrued expenses | | 3,901,001 | |
| Income taxes payable | | 394,579 | |
| Total current liabilities | | 13,971,116 | |
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| Long-term debt, less current portion | | 34,623,600 | |
| Deferred income taxes | | 10,027,069 | |
| Total liabilities | | 58,621,785 | |
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| Equity: | | | |
| Common stock, $0.01 par value, 90,000shares authorized, issued, and outstanding | | 900 | |
| Paid-in-capital | | 25,095,119 | |
| Retained earnings | | 13,682,896 | |
| Member's deficit | | (36,864,678 | ) |
| Total equity | | 1,914,237 | |
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| Total liabilities and equity | $ | 60,536,022 | |
The accompanying notes are an integral part of these combined financial statements.
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| Efmark Deployment I, Inc. |
| d/b/a EDC and EDC ATM Subsidiary, LLC |
| COMBINED STATEMENT OF OPERATIONS |
| (UNAUDITED) |
| | | Six Months Ended June 30, | |
| | | 2011 | | | | 2010 | |
| Net Sales | $ | 30,062,750 | | | $ | 25,345,601 | |
| Cost of sales | | 22,618,787 | | | | 19,644,097 | |
| Gross profit | | 7,443,963 | | | | 5,701,504 | |
| Operating expenses | | 4,878,357 | | | | 7,400,257 | |
| Income (loss) from operations | | 2,565,606 | | | | (1,698,753 | ) |
| Other Expenses | | | | | | | |
| Loss on the sale of property and equipment | | (324,763 | ) | | | (7,045 | ) |
| Write-off of Due from Affiliate | | (1,000,000 | ) | | | — | |
| Interest expense, net | | (2,319,329 | ) | | | — | |
| Other expenses | | (6,213 | ) | | | (2,487,990 | ) |
| Total other expenses | | (3,650,305 | ) | | | (2,495,035 | ) |
| Loss before provision for income taxes | | (1,084,699 | ) | | | (4,193,788 | ) |
| (Provision) benefit for income taxes | | (285,896 | ) | | | 1,253,876 | |
| Net Loss | $ | (1,370,595 | ) | | $ | (2,939,912 | ) |
The accompanying notes are an integral part of these combined financial statements. |
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| Efmark Deployment I, Inc. |
| d/b/a EDC and EDC ATM Subsidiary, LLC |
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| COMBINED STATEMENT OF CASH FLOWS |
| (UNAUDITED) |
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| | | Six Months Ended June 30, | |
| | | 2011 | | | | 2010 | |
| Cash flows from operating activities: | | | | | | | |
| Net loss | $ | (1,370,595 | ) | | $ | (2,939,912 | ) |
| Adjustments to reconcile net loss to net cash provided byoperating activities: | | | | | | | |
| Depreciation and amortization expense | | 3,407,491 | | | | 6,288,058 | |
| Loss on sale of assets | | 324,763 | | | | 7,045 | |
| Write-off of Due from Affiliate | | 1,000,000 | | | | - | |
| Amortization of debt issuance costs | | 165,414 | | | | 165,414 | |
| Stock-based compensation | | 100,931 | | | | 134,222 | |
| Interest paid in kind | | 365,381 | | | | 348,499 | |
| Changes in operating assets and liabilities | | | | | | | |
| Accounts receivable | | 219,476 | | | | (750,514 | ) |
| Inventory | | 11,531 | | | | - | |
| Prepaid expenses | | (1,200,919 | ) | | | (1,820,474 | ) |
| Accounts payable | | 1,297,347 | | | | 1,130,733 | |
| Accrued liabilities | | 530,017 | | | | 1,254,068 | |
| Income tax payable | | 262,351 | | | | 56,405 | |
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| Net cash provided by operating activities | | 5,113,188 | | | | 3,873,544 | |
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| Cash flows from investing activities: | | | | | | | |
| Purchases of property and equipment | | (1,730,349 | ) | | | (2,917,981 | ) |
| Net cash used in investing activities | | (1,730,349 | ) | | | (2,917,981 | ) |
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| Cash flows from financing activities: | | | | | | | |
| Contributing capital | | - | | | | 1,600,000 | |
| Revolver payments of long-term debt | | - | | | | (3,000,000 | ) |
| Principal payments of long-term debt | | (1,675,000 | ) | | | (2,031,788 | ) |
| Net cash used in financing activities | | (1,675,000 | ) | | | (3,431,788 | ) |
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| Net decrease in cash and cash equivalents | | 1,707,839 | | | | (2,476,225 | ) |
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| Cash and cash equivalents at beginning of year | | 2,406,717 | | | | 4,115,474 | |
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| Cash and cash equivalents at end of year | $ | 4,114,556 | | | $ | 1,639,249 | |
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| Supplemental disclosures of cash flow information: | | | | | | | |
| Cash paid for interest | $ | 1,960,261 | | | $ | 1,368,225 | |
| Cash paid for taxes | $ | 22,872 | | | $ | 33,974 | |
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| The accompanying notes are an integral part of these combined financial statements. |
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Efmark Deployment I, Inc.
d/b/a EDC and EDC ATM Subsidiary, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 2011
NOTE 1 – THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business and Basis of Presentation
EFMARK Deployment I, Inc. d/b/a EDC (the “Corporation”) and EDC ATM Subsidiary, LLC (the“LLC”) deploy and operate ATM equipment in retail locations throughout the United States.
The following is a summary of the significant accounting policies of the Corporation and the LLC (collectively, the “Company”):
Principles of Combination and Presentation
EDC Holding Company, LLC owns 100% of the Corporation and 22.77% of the LLC. The Corporation owns the remaining 77.23% of the LLC. The combined financial statements are prepared due to common ownership and are prepared as a single entity.
The combined financial statements include the following companies:
- EFMARK Deployment I, Inc. d/b/a EDC
- EDC ATM Subsidiary, LLC
All intercompany accounts and transactions have been eliminated. The LLC has a guaranteed payment to the Corporation in the amount of 7.28% of the average Unreturned Capital. The allocation of profit/losses and distributions are done in accordance with provisions of the amended and restated Operating Agreement.
Subsequent Events
Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. These events and transactions either provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements (that is, recognized subsequent events), or provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date (that is, non-recognized subsequent events).
On June 19, 2011, the Company signed a definitive agreement to be acquired by Cardtronics USA, Inc. for approximately $145.0 million in cash. On July 25, 2011, this acquisition was completed.
The Company has evaluated subsequent events throughOctober 3, 2011, which was the date that these financial statements were available for issuance, and determined that there were no significant non-recognized subsequent events through that date.
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Efmark Deployment I, Inc.
d/b/a EDC and EDC ATM Subsidiary, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
June 30, 2011
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| NOTE 2 – PROPERTY AND EQUIPMENT | | | |
| A summary of property and equipment at June 30, 2011 follows: | | | |
| Furniture | $ | 47,212 | |
| ATM equipment | | 26,570,475 | |
| Computer equipment | | 1,427,887 | |
| Subtotal | | 28,045,575 | |
| Less accumulated depreciation and amortization | | (19,150,964 | ) |
| Net property and equipment | $ | 8,894,611 | |
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| NOTE 3 – INTANGIBLE ASSETS | | | |
| Following is a summary of intangibles other than goodwill as of June 30, 2011: | | | |
| Customer contracts | $ | 40,430,806 | |
| Deferred financing cost | | 1,724,996 | |
| Less accumulated amortization | | (39,811,074 | ) |
| Net intangibles | $ | 2,344,728 | |
Amortization expense for the six month periods ended June 30, 2011 and 2010 was $1,977,549 and $4,552,296, respectively.
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| NOTE 4 – LONG-TERM DEBT | | |
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| Long-term debt consists of the following: | | |
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| Term note to ING Capital LLC, secured by substantially all of theCompany's assets, due in quarterly principal payments of $800,000 plus interest at LIBOR with a floor of 2.25% (2.25% at June 30, 2011) plus 4.5%. The note expires on October 3, 2012. | $ | 4,443,212 |
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| Term note to ING Capital LLC, secured by substantially all of theCompany's assets, due in quarterly principal payments of $37,500 plus interest at LIBOR with a floor of 2.25% (2.25% at June 30, 2011) plus 5.0%. The note expires on October 3, 2013. | | 14,437,500 |
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Efmark Deployment I, Inc.
d/b/a EDC and EDC ATM Subsidiary, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
June 30, 2011
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| NOTE 4 – LONG-TERM DEBT (continued) | | |
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| Term note to Crystal Capital, secured by substantially all of theCompany's assets. The principal balance of $6,000,000 is due onOctober 3, 2013 as a balloon payment. Interest at LIBOR with afloor of 3.0% plus 12.15% shall be payable quarterly in arrears. Inaddition, the Company is required to pay payment in kind (“PIK”)interest at a rate of 4.50%, by capitalizing such interest and addingthe same to the then outstanding principal amount of the loan. Theamount of PIK interest added to principal for the six monthsendingJune 30, 2011 was $145,747. The PIK interest is due on April 3, 2014. | $ | 6,556,750 |
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| Term note to Crystal Capital, secured by substantially all of theCompany's assets. The principal balance of $9,000,000 is due onOctober 3, 2013 as a balloon payment. Interest at LIBOR with afloor of 3.0% plus 12.15% shall be payable quarterly in arrears. Inaddition, the Company is required to pay (PIK) interest at a rateof 4.50%, by capitalizing such interest and adding the same to thethen outstanding principal amount of the loan. The amount ofPIK interest added to principal for the six months ending June 30,2011 was $219,634. The PIK interest is due on April 3, 2014. | | 9,836,138 |
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| Revolving line of credit with ING Capital LLC in the amount of$5,000,000, secured by substantially all the Company's assets, bearing interest at the LIBOR rate with a floor of 2.25% (2.25% atJune 30, 2011) plus 4.5%, interest paid monthly, with principal due October 3, 2012. | | 2,700,000 |
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| Subtotal | | 37,973,600 |
| Less current maturities | | 3,350,000 |
| Total long-term debt | $ | 34,623,600 |
All debt agreements above contain provisions requiring maintenance of certain financial and nonfinancial covenants. At June 30, 2011, the Company was in compliance with its covenants.
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Efmark Deployment I, Inc.
d/b/a EDC and EDC ATM Subsidiary, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
June 30, 2011
NOTE 5 –EQUITY
Common Stock
The Corporation is authorized to issue up to 90,000 shares of common stock at $.001 par value. There were 90,000 shares issued and outstanding as of June 30, 2011.
Members Units
The LLC has two types of members, Class A and Class B, which are authorized by the amended and restated operating agreement. Allocation of income, losses, and distributions is dependent on member class and is determined based on capital accounts as defined by the operating agreement.
Stock Option Plans
Effective January 1, 2010, the Board of Managers (the “Board”) adopted and approved the EDC Holding Company, LLC 2010 Unit Option Plan (the “2010 Plan”). Under the 2010 Plan, the Company can grant incentive stock options to employees, consultants and nonemployee directors. Each option equates to a single unit. A unit represents an interest in the value of the parent company (i.e. 1 unit out of a total of 100 units represents a 1% ownership interest). The units issued are deemed capital contributions by the parent to the Company. The maximum number of units which may be optioned and sold under the 2010 Plan shall not, at any point in time, exceed 3.5% of the outstanding units of the Company. As of June 30, 2011, there were 3,000,577 units outstanding, equating to approximately 105,000 options available for issuance, of which 100,804 had been issued. The exercise price for each of these options is $6.21. The options vest ratably over four years and expire ten years from the date of grant. The Company recognizes compensation costs for these options on a straight-line basis over the requisite service period.
Information regarding options outstanding as of June 30, 2011 was as follows:
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| | | | Options Outstanding | | Options Exercisable |
| | Exercise Prices | | Number Outstanding | | WeightedAverage Remaining Contractual Life (Years) | | | WeightedAverage Exercise Price | | WeightedAverage Number Exercisable | | | WeightedAverage Exercise Price |
| $ | 6.21 | | 100,804 | | 9 | | $ | 6.21 | | 25,201 | | $ | 6.21 |
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Efmark Deployment I, Inc.
d/b/a EDC and EDC ATM Subsidiary, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
June 30, 2011
NOTE 5 – EQUITY (continued)
The following tables reflect the activity under the Company’s stock option plans during the six months ended June 30, 2011:
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| | Common StockOptions | | | WeightedAverage Exercise Price |
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| Balance, December 31, 2010 | 100,804 | | $ | 6.21 |
| Granted | - | | $ | - |
| Exercised | - | | $ | - |
| Cancelled | - | | $ | - |
| Balance,June 30, 2011 | 100,804 | | $ | 6.21 |
As of June 30, 2011, the Company had issued 309,950 profit interests to one employee. Profit interests act in the same manner as a Unit (described above) in that they provide the holder with an ownership stake in the Company. The profit interests were granted on December 1, 2008. They have no exercise price and vest over a period of four years. The Company recorded no expense for these profit interests prior to 2010 due to a decline in the valuation of the Company from the date of grant through to December 31, 2009. The company recorded $317,787 in compensation expense for the six months ended June 30, 2011 relating to these units.
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