Exhibit 99.2
HANDSTANDS HOLDING CORPORATION
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2016
C O N T E N T S
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| |
| | Page |
| | |
| CONDENSED CONSOLIDATED BALANCE SHEETS | 3 |
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | 4 |
| CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY | 5 |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | 6 |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 7 |
HANDSTANDS HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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| | | | | | | |
| | March 31, 2016 | December 31, 2015 | |
| ASSETS | | | |
| CURRENT ASSETS | | | |
| Cash and cash equivalents | $ | 10,795,368 |
| $ | 8,759,617 |
| |
Trade accounts receivable, net of allowance for doubtful
accounts of $153,615 and $45,270, respectively | 20,657,479 |
| 15,127,572 |
| |
| Other receivables | 1,578,754 |
| 1,847,230 |
| |
| Inventories, net | 18,199,503 |
| 20,722,476 |
| |
| Other current assets | 3,860,634 |
| 3,153,416 |
| |
| TOTAL CURRENT ASSETS | 55,091,738 |
| 49,610,311 |
| |
| EQUIPMENT AND IMPROVEMENTS, NET | 3,071,093 |
| 3,253,708 |
| |
| OTHER ASSETS | | | |
| Intangibles, net | 100,910,645 |
| 103,511,142 |
| |
| Goodwill | 58,050,620 |
| 58,028,753 |
| |
| Deposits | 87,912 |
| 65,412 |
| |
| TOTAL ASSETS | $ | 217,212,008 |
| $ | 214,469,326 |
| |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | |
| CURRENT LIABILITIES | | | |
| Accounts payable | $ | 5,933,036 |
| $ | 5,436,064 |
| |
| Accrued expenses | 5,169,363 |
| 4,576,301 |
| |
| Other current liabilities | 2,843,019 |
| 3,112,851 |
| |
| TOTAL CURRENT LIABILITIES | 13,945,418 |
| 13,125,216 |
| |
| LONG‑TERM DEBT | 132,753,761 |
| 131,353,820 |
| |
| DEFERRED INCOME TAXES | 22,650,585 |
| 22,650,585 |
| |
| TOTAL LONG‑TERM LIABILITIES | 155,404,346 |
| 154,004,405 |
| |
| TOTAL LIABILITIES | 169,349,764 |
| 167,129,621 |
| |
| COMMITMENTS AND CONTINGENCIES (NOTE 13) | | | |
| STOCKHOLDERS' EQUITY | | | |
| Common stock, $0.001 par value, 600,000 shares authorized, 521,451 shares issued and outstanding | 521 |
| 521 |
| |
| Capital in excess of par value | 53,584,479 |
| 53,584,479 |
| |
| Stock subscriptions receivable | (2,588,333) |
| (2,588,333) |
| |
| Accumulated other comprehensive loss | (35,589) |
| (45,811) |
| |
| Retained deficit | (3,098,834) |
| (3,611,151) |
| |
| TOTAL STOCKHOLDERS' EQUITY | 47,862,244 |
| 47,339,705 |
| |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 217,212,008 |
| $ | 214,469,326 |
| |
The accompanying notes are an integral part of the financial statements.
3
HANDSTANDS HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (UNAUDITED)
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| | | | | | | |
| | Three months ended
March 31, 2016 | Three months ended
March 31, 2015 | |
| INCOME | | | |
| Net sales | $ | 30,116,750 |
| $ | 21,082,935 |
| |
| Cost of sales | 16,869,099 |
| 12,430,910 |
| |
| GROSS PROFIT | 13,247,651 |
| 8,652,025 |
| |
| EXPENSES | | | |
| Selling and marketing | 2,080,314 |
| 1,650,495 |
| |
| General and administrative | 3,523,740 |
| 2,167,190 |
| |
| Research and development | 657,496 |
| 523,699 |
| |
| Foreign exchange losses | — |
| 4,890 |
| |
| Acquisition and related charges | 527,261 |
| 8,650 |
| |
| Amortization of intangible assets | 2,837,456 |
| 1,795,850 |
| |
| | 9,626,267 |
| 6,150,774 |
| |
| OPERATING INCOME | 3,621,384 |
| 2,501,251 |
| |
| OTHER INCOME (EXPENSE) | | | |
| Interest income | 7,129 |
| 6,383 |
| |
| Interest expense | (2,503,038) |
| (909,796) |
| |
| Stockholder management fees | (5,822) |
| (1,289) |
| |
| Other expenses | (304,338) |
| (15,854) |
| |
| | (2,806,069) |
| (920,556) |
| |
| Income before income taxes | 815,315 |
| 1,580,695 |
| |
| Income tax expense | (302,998) |
| (579,167) |
| |
| NET INCOME | 512,317 |
| 1,001,528 |
| |
| OTHER COMPREHENSIVE LOSS, NET OF TAX | | | |
| Foreign currency translation gain (loss) | 10,222 |
| (8,126) |
| |
| TOTAL COMPREHENSIVE INCOME | $ | 522,539 |
| $ | 993,402 |
| |
The accompanying notes are an integral part of the financial statements.
4
HANDSTANDS HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
For the quarter ended March 31, 2016
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| | | | | | | | | | | | | | | | | | | | |
| | Common Stock | Capital in Excess of | Stock Subscriptions | Accumulated
Other
Comprehensive | Retained | Total Stockholders' |
| | Shares | Amount | Par Value | Receivable | Loss | Deficit | Equity |
| Balance January 1, 2016 | 521,451 |
| $ | 521 |
| $ | 53,584,479 |
| $ | (2,588,333 | ) | $ | (45,811 | ) | $ | (3,611,151 | ) | $ | 47,339,705 |
|
| Net income | — |
| — |
| — |
| — |
| — |
| 512,317 |
| 512,317 |
|
| Foreign currency translation loss | — |
| — |
| — |
| — |
| 10,222 |
| — |
| 10,222 |
|
| Balance March 31, 2016 | 521,451 |
| $ | 521 |
| $ | 53,584,479 |
| $ | (2,588,333 | ) | $ | (35,589 | ) | $ | (3,098,834 | ) | $ | 47,862,244 |
|
The accompanying notes are an integral part of the financial statements.
5
HANDSTANDS HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
| | | | | | | |
| | Three months ended
March 31, 2016 | Three months ended
March 31, 2015 | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 512,317 |
| $ | 1,001,528 |
| |
| | | | |
Adjustments to reconcile net income to net cash flows
from operating activities: | | | |
| Depreciation | 295,210 |
| 195,894 |
| |
| Amortization | 2,967,249 |
| 1,846,057 |
| |
| Bad debts | 20,607 |
| 5,627 |
| |
| | | | |
| Changes in operating assets and liabilities: | | | |
| Trade accounts receivable | (5,550,514) |
| (4,094,281) |
| |
| Other receivables | 268,476 |
| 21,898 |
| |
| Inventories | 2,522,973 |
| 1,506,035 |
| |
| Prepaid expenses | (707,218) |
| (1,225,056) |
| |
| Deposits | (22,500) |
| — |
| |
| Accounts payable | 496,972 |
| (376,882) |
| |
| Accrued expenses | 593,062 |
| 481,134 |
| |
| Other current liabilities | 1,019,632 |
| 1,002,134 |
| |
| Net cash flows from operating activities | 2,416,266 |
| 364,088 |
| |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Cash paid for purchase of equipment | (112,595) |
| (163,087) |
| |
| Cash paid for purchase of Eagle One | (33,300) |
| — |
| |
| Cash paid for purchase of International Market Access, Ltd. | (236,959) |
| — |
| |
| Purchase accounting adjustments | 11,433 |
| — |
| |
| Net cash used by investing activities | (371,421) |
| (163,087) |
| |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Borrowings on revolving line of credit | — |
| 800,000 |
| |
| Cash paid to reduce long‑term liabilities | (19,316) |
| (19,007) |
| |
| Net cash flows from (used by) financing activities | (19,316) |
| 780,993 |
| |
| Effect of exchange rates | 10,222 |
| (8,126) |
| |
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 2,035,751 |
| 973,868 |
| |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 8,759,617 |
| 1,126,960 |
| |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 10,795,368 |
| $ | 2,100,828 |
| |
The accompanying notes are an integral part of the financial statements.
6
HANDSTANDS HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2016
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|
| NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION |
Description of Business |
Handstands Holding Corporation (Handstands) was formed on April 23, 2013 as a Delaware corporation and purchased American Covers, Inc. dba Handstands (ACI), a Utah Corporation, on May 1, 2013.
ACI designs and distributes automotive fragrance and appearance products, automotive accessories, consumer electronic accessories, and custom branded merchandise in the United States and certain countries around the world.
Handstands formed Handstands Promo, Inc. (HPI) as a Utah Corporation on November 14, 2013 to transfer operations relating to ACI's promotional products division to a separate legal entity beginning December 31, 2013. HPI is 100% owned by ACI. The purpose of creating HPI was to more easily track the operations of the promotional products division in separate financial reports.
On May 1, 2015, ACI acquired certain assets and properties of the Lexol brand of Summit Industries, Inc. a Georgia corporation. The assets and properties acquired were Lexol branded leather cleaning and conditioning products.
On September 1, 2015, ACI purchased the stock of California Scents, a California corporation, and subsidiary. California Scents is engaged in the business of manufacturing and distributing air freshener products.
Handstands Holding Corporation and subsidiaries' (collectively, the Company) accounting policies conform to accounting principles generally accepted in the United States of America (GAAP). The accompanying consolidated financial statements include the accounts of Handstands and its wholly‑owned subsidiaries. All significant intercompany balances and transactions have been eliminated in these consolidated financial statements.
In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of March 31, 2016, and its results of operations and cash flows for the three months ended March 31, 2016, and 2015. The consolidated balance sheet at December 31, 2015, was derived from audited annual financial statements, but does not contain all of the footnote disclosures from the annual financial statements. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for the full year. These statements should be read in conjunction with the financial statements and notes thereto for Handstands for the year ended December 31, 2015.
HANDSTANDS HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2016
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|
| NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (CONTINUED) |
|
|
New Accounting Pronouncements |
On May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2014‑09, Revenue from Contracts with Customers ("ASU 2014‑09"). ASU 2014‑09 provides a single comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries, and across capital markets. On August 12, 2015, the FASB issued a one‑year deferral of the effective date of the ASU. The update will now be effective for the Company beginning in 2018. The Company is in the process of evaluating the impact the revised guidance will have on its financial statements.
In April 2015, the FASB issued ASU 2015‑03, Interest Imputation of Interest (Subtopic 83530): Simplifying the Presentation of Debt Issuance Cost ("ASU 2015‑03"). ASU 2015‑03 requires that debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of the debt, consistent with debt discounts. ASU 2015‑03 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early application is permitted. Retrospective application is required for all relevant prior periods. The Company adopted ASU 2015‑03 effective January 1, 2016 and applied it retrospectively to December 31, 2015. (See Note 9, Long‑Term Debt.) The balance for unamortized debt issuance costs that were reclassified to debt and from other assets were $2,293,007 and $2,422,800 at March 31, 2016 and December 31, 2015, respectively.
In November 2015, the FASB issued ASU 2015‑17, Balance Sheet Classification of Deferred Taxes (Topic 740) (“ASU 2015‑17”), which eliminates the current requirement for companies to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. To simplify the presentation of deferred income taxes, ASU 2015‑17 requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. ASU 2015‑17 is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted as of the beginning of an interim or annual period. The Company is currently in the process of evaluating the impact of ASU 2015‑17 on their financial position and results of operations.
In February 2016, the FASB issued ASU 2016‑02, “Leases (Topic 842)” (“ASU 2016‑02”). The new guidance requires the recording of assets and liabilities arising from leases on the balance sheet accompanied by enhanced qualitative and quantitative disclosures in the notes to the financial statements. The new guidance is expected to provide transparency of information and comparability among organizations. ASU 2016‑02 is effective for fiscal years beginning after December 31, 2018, including interim periods within that reporting period. Early adoption is permitted as of the beginning of an interim or annual period. The Company is currently in the process of evaluating the impact of ASU 2016‑02 on their financial position and results of operations.
HANDSTANDS HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2016
NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (CONTINUED)
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results could differ from those estimates.
|
|
Advertising and Promotion |
All costs associated with advertising and promoting the Company's goods and services are expensed in the year incurred. Advertising expense totaled $453,789 and $596,089 for the three month period ended March 31, 2016 and 2015, respectively.
|
|
| NOTE 2 - OTHER RECEIVABLES |
Other receivables are as follows:
|
| | | | | | |
| | March 31, 2016 | December 31, 2015 |
| Miscellaneous receivables | $ | 251,586 |
| $ | 414,440 |
|
| Income tax refunds receivable | 1,327,168 |
| 1,432,790 |
|
| | $ | 1,578,754 |
| $ | 1,847,230 |
|
Inventories consist of the following:
|
| | | | | | |
| | March 31, 2016 | December 31, 2015 |
| Raw materials | $ | 5,616,669 |
| $ | 5,681,673 |
|
| Finished goods | 13,198,007 |
| 15,629,015 |
|
| Obsolescence reserve | (615,173) |
| (588,212) |
|
| | $ | 18,199,503 |
| $ | 20,722,476 |
|
HANDSTANDS HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2016
|
|
| NOTE 4 - OTHER CURRENT ASSETS |
Other current assets are as follows:
|
| | | | | | |
| | March 31, 2016 | December 31, 2015 |
| Deferred income taxes | $ | 782,216 |
| $ | 782,216 |
|
| Prepaid income taxes | 1,028,913 |
| — |
|
| Prepaid expenses | 2,049,505 |
| 2,371,200 |
|
| | $ | 3,860,634 |
| $ | 3,153,416 |
|
|
|
| NOTE 5 - EQUIPMENT AND IMPROVEMENTS |
Equipment and improvements are as follows:
|
| | | | | | |
| | March 31, 2016 | December 31, 2015 |
| Cost: | | |
| Autos and trucks | $ | 98,036 |
| $ | 98,036 |
|
| Warehouse and plant equipment | 2,522,564 |
| 2,486,501 |
|
| Furniture and equipment | 1,518,188 |
| 1,459,504 |
|
| Leasehold improvements | 1,491,818 |
| 1,473,970 |
|
| | 5,630,606 |
| 5,518,011 |
|
| Less accumulated depreciation | (2,559,513) |
| (2,264,303) |
|
| Net book value | $ | 3,071,093 |
| $ | 3,253,708 |
|
HANDSTANDS HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2016
|
|
| NOTE 6 - INTANGIBLE ASSETS |
Intangible assets consist of the following:
|
| | | | | | | | | |
| March 31, 2016 | Cost | Accumulated Amortization | Net Book Value |
| Customer relationships | $ | 83,948,958 |
| $ | (15,452,834 | ) | $ | 68,496,124 |
|
| Trademarks | 21,608,000 |
| (4,543,965 | ) | 17,064,035 |
|
| Patents | 11,520,000 |
| (3,386,590 | ) | 8,133,410 |
|
| Noncompete agreements | 3,357,000 |
| (3,329,646 | ) | 27,354 |
|
| Trade names | 7,500,000 |
| (310,278 | ) | 7,189,722 |
|
| | $ | 127,933,958 |
| $ | (27,023,313 | ) | $ | 100,910,645 |
|
|
| | | | | | | | | |
| December 31, 2015 | Cost | Accumulated Amortization | Net Book Value |
| Customer relationships | $ | 83,712,000 |
| $ | (13,427,287 | ) | $ | 70,284,713 |
|
| Trademarks | 21,608,000 |
| (4,154,483 | ) | 17,453,517 |
|
| Patents | 11,520,000 |
| (3,096,311 | ) | 8,423,689 |
|
| Noncompete agreements | 3,357,000 |
| (3,323,333 | ) | 33,667 |
|
| Trade names | 7,500,000 |
| (184,444 | ) | 7,315,556 |
|
| | $ | 127,697,000 |
| $ | (24,185,858 | ) | $ | 103,511,142 |
|
Amortization of intangible assets for the quarter ended March 31, 2016 and 2015 totaled $2,837,456 and $1,795,850, respectively. Future estimated amortization is as follows:
|
| | | |
| 2016 | $ | 5,643,660 |
|
| 2017 | 11,264,304 |
|
| 2018 | 11,162,495 |
|
| 2019 | 11,001,689 |
|
| 2020 | 10,946,603 |
|
| Thereafter | 50,891,894 |
|
| | $ | 100,910,645 |
|
HANDSTANDS HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2016
|
|
| NOTE 7 - ACCRUED EXPENSES |
Other non‑current liabilities are as follows:
|
| | | | | | |
| | March 31, 2016 | December 31, 2015 |
| Accrued customer programs | $ | 2,019,505 |
| $ | 1,163,615 |
|
| Accrued employee compensation | 1,455,110 |
| 1,154,999 |
|
| Accrued interest payable | 1,197,783 |
| 1,213,275 |
|
| Other accrued liabilities | 496,965 |
| 1,044,412 |
|
| | $ | 5,169,363 |
| $ | 4,576,301 |
|
|
|
| NOTE 8 - OTHER CURRENT LIABILITIES |
Other current liabilities are as follows:
|
| | | | | | |
| | March 31, 2016 | December 31, 2015 |
| Short‑term liabilities | $ | 45,277 |
| $ | 85,791 |
|
| Customer deposits | 657,421 |
| 898,133 |
|
| Current portion of long‑term debt | 839,463 |
| 2,128,927 |
|
| Federal income taxes payable | 1,297,074 |
| — |
|
| State income taxes payable | 3,784 |
| — |
|
| | $ | 2,843,019 |
| $ | 3,112,851 |
|
HANDSTANDS HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2016
On April 7, 2015, the FASB issue ASU 2015‑03 which requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. On January 1, 2016, the Company adopted this standard and applied them retroactively to December 31, 2015. See further discussion in Note 1.
|
| | | | | | |
| | March 31, 2016 | December 31, 2015 |
| Principal amount | $ | 135,886,231 |
| $ | 135,905,547 |
|
| Less unamortized debt issuance costs | (2,293,007) |
| (2,422,800) |
|
| Long‑term debt less unamortized debt issuance costs | 133,593,224 |
| 133,482,747 |
|
| Less current portion of long‑term debt | (839,463) |
| (2,128,927) |
|
| Long‑term debt excluding current portion | $ | 132,753,761 |
| $ | 131,353,820 |
|
Long‑term debt as of March 31, 2016 consists of the following:
|
| | | | | | |
| | Principal | Unamortized Debt Issuance Costs |
| Term note to a financial institution, interest at LIBOR rate plus 4.75% (5.75% at December 31, 2015), due in quarterly installments including various principal amounts including interest, secured by certain ACI assets, due in 2020 | $ | 95,800,000 |
| $ | 1,683,633 |
|
| Second lien term notes to a financial institution, interest at LIBOR rate plus 8.5% (9.5% at December 31, 2015), interest due monthly, principal payment is due in 2020 | 40,000,000 |
| 609,374 |
|
| Note to an equipment finance company, interest at 2.9%, principal and interest payments of $6,746 due monthly, maturity date is May 2017, secured by certain ACI assets | 86,231 |
| — |
|
| | $ | 135,886,231 |
| $ | 2,293,007 |
|
HANDSTANDS HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2016
NOTE 9 - LONG‑TERM DEBT (CONTINUED)
Long‑term liabilities as of December 31, 2015 consist of the following:
|
| | | | | | |
| | Principal | Unamortized Debt Issuance Costs |
| Term note to a financial institution, interest at LIBOR rate plus 4.75% (5.75% at December 31, 2015), due in quarterly installments including various principal amounts including interest, secured by certain ACI assets, due in 2020 | $ | 95,800,000 |
| $ | 1,778,933 |
|
| Second lien term notes to a financial institution, interest at LIBOR rate plus 8.5% (9.5% at December 31, 2015), interest due monthly, principal payment is due in 2020 | 40,000,000 |
| 643,867 |
|
| Note to an equipment finance company, interest at 2.9%, principal and interest payments of $6,746 due monthly, maturity date is May 2017, secured by certain ACI assets | 105,547 |
| — |
|
| | $ | 135,905,547 |
| $ | 2,422,800 |
|
Amortization of debt issuance costs recorded during the three month period ended March 31, 2016 and 2015 was $129,792 and $51,407 and is included in interest expense in the accompanying consolidated statement of comprehensive income.
Aggregate maturities of long‑term debt in each of the next five years are as follows:
|
| | | |
| 2016 | $ | 839,463 |
|
| 2017 | 5,046,768 |
|
| 2018 | 5,000,000 |
|
| 2019 | 5,000,000 |
|
| 2020 | 120,000,000 |
|
| Thereafter | — |
|
| | $ | 135,886,231 |
|
HANDSTANDS HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2016
|
|
| NOTE 10 - REVOLVING LINE OF CREDIT |
As of March 31, 2016, the Company had a $15,000,000 revolving line of credit. Interest incurred on the revolving line of credit is at LIBOR rate plus 4.75% (5.75% at March 31, 2016), with the financial institution that holds the term loan. The revolving line of credit agreement expires in 2020. As of March 31, 2016, the total amount drawn on the revolving line of credit was $0.
|
|
| NOTE 11 - STOCK SUBSCRIPTIONS RECEIVABLE |
The amount advanced by the Company outstanding as of March 31, 2016 was $2,588,333 and is reported as stock subscriptions receivable in the equity section of the balance sheet. The Company reported interest income of $7,053 on the outstanding notes during the three month period ending March 31, 2016. Interest receivable of $73,889 was included in other receivables on the balance sheet as of March 31, 2016.
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| NOTE 12 - OPERATING LEASES |
The Company leases office space in Draper, Utah, from an office leasing company which is owned by certain individuals that own stock in the Company. The lease is considered to be an operating lease which expires in October 2021. Total rent expense for the office space in Draper, Utah, for the quarter ended March 31, 2016 and 2015 was $87,750 and $87,750, respectively.
As part of the the acquisition of California Scents, on September 1, 2015, the Company entered into lease agreements for office space in Irvine, California, and warehouse space in Glenshaw, Pennsylvania. The lease in Irvine, California, is with an individual who purchased stock in the Company on September 1, 2015. Subsequent to the quarter end, the lease expired in August 2016 and was not renewed. Total rent expense for the office space in Irvine, California, totaled $112,575 during the quarter ended March 31, 2016.
The lease for warehouse space in Glenshaw, Pennsylvania, is with an individual who purchased stock in the Company on September 1, 2015. The lease expires in 2019. Total rent expense for the warehouse lease in Pennsylvania totaled $169,689 for the quarter ended March 31, 2016.
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| NOTE 13 - COMMITMENTS AND CONTINGENCIES |
Litigation ‑ In the normal course of business, the Company is party to various claims, actions, and complaints. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company's financial position.
Warranty Obligations ‑ The Company provides a satisfaction guarantee on all products. Historically, these obligations have not been significant and the Company does not expect these obligations to become significant in the future. No related liability has been accrued as of March 31, 2016.
HANDSTANDS HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2016
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| NOTE 14 - RELATED PARTY TRANSACTIONS |
The majority stockholder charged the Company management fees totaling $5,822 and $1,289 during the three month period ended March 31, 2016 and 2015, respectively.
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| NOTE 15 - BUSINESS COMBINATION |
On January 25, 2016, the Company purchased a customer list from International Market Access, Ltd. The consideration paid for the purchased asset was $236,958. The Company has concluded that the purchase of the customer list does not constitute a business combination under ASC 805, Business Combinations.
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| NOTE 16 - SUBSEQUENT EVENTS |
Management of the Company has evaluated subsequent events through September 12, 2016 which is also the date the financial statements were available to be issued. No subsequent events were noted during this evaluation that require recognition or disclosure in these financial statements, except those discussed in Note 16.
During 2016, the Company has made multiple draws on its revolving line of credit totaling $7,500,000.
On March 3, 2016, and closed under an accelerated date of April 29, 2016, the Company acquired certain assets and properties and assumed certain liabilities of the Eagle One brand of Niteo Products, LLC. The consideration paid for the conveyed assets was $9,500,000, plus an accelerated closing increased cost of $2,028,160, for a total of $11,528,160. The consideration paid was financed from cash on the Company's balance sheet and a draw on its revolving line of credit.
On May 24, 2016, the Company entered into an agreement and plan of merger with Energizer Holdings, Inc., a Missouri corporation, and Energizer Reliance, Inc., a Delaware corporation, effective July 1, 2016. At the effective time of the merger all shares of the outstanding stock of the Company were exchanged for the purchase price of $340,000,000, subject to adjustments in respect of working capital, cash, debt and transaction expenses. In conjunction with the merger, the long‑term debt, the bank revolving line of credit, and the stock subscriptions receivable were paid in full.
