QUEST SOLUTION, INC. AND HTS IMAGE PROCESSING, INC
UNAUDITED PROFORMA CONDENSED COMBINED STATEMENTS OF INCOME AND
COMPREHENSIVE LOSS
FOR THE YEAR ENDED DECEMBER 31, 2017
Historical | Pro Forma | |||||||||||||||
Quest | HTS | Adjustments | Combined | |||||||||||||
(In thousands except per share data) | ||||||||||||||||
Revenue | $ | 54,459 | $ | 4,851 | $ | - | $ | 59,310 | ||||||||
Cost of revenue | 43,089 | 3,820 | - | 46,909 | ||||||||||||
Gross profit (loss) | 11,370 | 1,031 | - | 12,401 | ||||||||||||
Operating expenses | ||||||||||||||||
General and administrative | 1,859 | 408 | - | 2,267 | ||||||||||||
Salary and employee benefits | 7,952 | 193 | - | 8,145 | ||||||||||||
Professional fees | 674 | 40 | 714 | |||||||||||||
Depreciation and amortization | 1,763 | - | - | 1,763 | ||||||||||||
Total operating expenses | 12,248 | 641 | - | 12,889 | ||||||||||||
Income (loss) from operations | (878 | ) | 390 | - | (488 | ) | ||||||||||
Other income (expenses) | (1,553 | ) | (389 | ) | - | (1,942 | ) | |||||||||
Loss before income taxes | (2,431 | ) | 1 | - | (2,430 | ) | ||||||||||
Income tax benefit (provision) | - | (182 | ) | - | (182 | ) | ||||||||||
Net income (loss) | (2,431 | ) | (181 | ) | - | (2,612 | ) | |||||||||
Less: Preferred stock - Series C dividend | (290 | ) | - | - | (290 | ) | ||||||||||
Net income (loss) available to common stockholders | $ | (2,141 | ) | $ | (181 | ) | $ | - | $ | (2,322 | ) | |||||
Basic and diluted net loss per common share | $ | (0.06 | ) | $ | (1.81 | ) | $ | - | $ | (0.06 | ) | |||||
Basic and diluted weighted average common shares outstanding | 35,814,751 | 100,000 | 35,814,751 |
QUEST SOLUTION, INC. AND HTS IMAGE PROCESSING, INC
UNAUDITED PROFORMA CONDENSED COMBINED STATEMENTS OF INCOME AND
COMPREHENSIVE LOSS
FOR THE 9-MONTH PERIOD ENDED SEPTEMBER 30, 2018
Historical | Pro Forma | |||||||||||||||
Quest | HTS | Adjustments | Combined | |||||||||||||
(In thousands except per share data) | ||||||||||||||||
Revenue | $ | 42,368 | $ | 6,419 | $ | (2,913 | ) (a1) | $ | 45,874 | |||||||
Cost of revenue | 33,687 | 3,581 | (2,635 | ) (a1) | 34,633 | |||||||||||
Gross profit (loss) | 8,681 | 2,838 | (278 | ) | 11,241 | |||||||||||
Operating expenses | ||||||||||||||||
General and administrative | 1,724 | 117 | - | 1,841 | ||||||||||||
Salary and employee benefits | 6,426 | 1,668 | - | 8,094 | ||||||||||||
Research and development | 43 | 43 | ||||||||||||||
Professional fees | 1,168 | 440 | (278 | ) (a1) | 1,330 | |||||||||||
Depreciation and amortization | 1,312 | 50 | - | 1,362 | ||||||||||||
Total operating expenses | 10,630 | 2,317 | (278 | ) | 12,669 | |||||||||||
Income (loss) from operations | (1,949 | ) | 520 | - | (1,429 | ) | ||||||||||
Other income (expenses) | (2,344 | ) | (336 | ) | - | (2,680 | ) | |||||||||
Loss before income taxes | (4,293 | ) | 185 | - | (4,108 | ) | ||||||||||
Income tax benefit (provision) | (44 | ) | (127 | ) | - | (171 | ) | |||||||||
Net income (loss) | (4,337 | ) | 58 | - | (4,279 | ) | ||||||||||
Less: Preferred stock - Series C dividend | (142 | ) | - | - | (142 | ) | ||||||||||
Net income (loss) available to common stockholders | $ | (4,479 | ) | $ | 58 | $ | - | $ | (4,137 | ) | ||||||
Basic and diluted net loss per common share | $ | (0.11 | ) | $ | 0.58 | $ | - | $ | (0.06 | ) | ||||||
Basic and diluted weighted average common shares outstanding | 42,592,783 | 100,000 | 22,352,954 | 65,045,737 |
(a1) | The Pro Forma Income Statement has been adjusted to eliminate certain intercompany items. |
QUEST SOLUTION, INC. AND HTS IMAGE PROCESSING, INC
UNAUDITED PROFORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2018
Historical | Pro Forma | |||||||||||||||
(In thousands) | Quest | HTS | Adjustments | Combined | ||||||||||||
ASSETS | ||||||||||||||||
CURRENT ASSETS | ||||||||||||||||
Cash and cash equivalents | $ | 56 | $ | 770 | $ | $ | 826 | |||||||||
Restricted cash | 532 | - | 532 | |||||||||||||
Accounts receivable, net | 10,669 | 3,435 | (1,909 | )(a4) | 12,195 | |||||||||||
Inventories, net | 1,058 | 1,421 | 2,479 | |||||||||||||
Prepaid expenses and other current assets | 413 | 171 | 584 | |||||||||||||
TOTAL CURRENT ASSETS | 12,728 | 5,797 | (1,909 | ) | 16,616 | |||||||||||
Fixed assets, net | 64 | 179 | 243 | |||||||||||||
Goodwill | 10,114 | 2,684 | 6,901 | (a) | 19,699 | |||||||||||
Trade name, net | 1,927 | - | 1,927 | |||||||||||||
Customer relationships, net | 4,467 | - | 4,467 | |||||||||||||
Other assets | 33 | - | 33 | |||||||||||||
TOTAL ASSETS | $ | 29,333 | $ | 8,660 | $ | 4,992 | $ | 42,985 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
CURRENT LIABILITIES | ||||||||||||||||
Accounts payable and accrued expenses | $ | 11,409 | $ | 2,466 | $ | (578 | )(a4) | $ | 13,297 | |||||||
Line of credit | 4,637 | - | 4,637 | |||||||||||||
Accrued payroll and salestax | 2,381 | 137 | 2,518 | |||||||||||||
Deferred revenue, net | 9 | - | 9 | |||||||||||||
Current portion of note payable | 8,752 | - | 8,752 | |||||||||||||
Notes payable, related party | 426 | 127 | 553 | |||||||||||||
Other current liabilities | 119 | 3,975 | (1,331 | )(a4) | 2,763 | |||||||||||
TOTAL CURRENT LIABILITIES | 27,733 | 6,705 | (1,909 | ) | 32,529 | |||||||||||
LONG TERM LIABILITIES | ||||||||||||||||
Note payable, related party | 1,704 | - | 1,000 | (a2) | 2,704 | |||||||||||
Accrued interest, related party | 5 | - | 5 | |||||||||||||
Long term portion of note payable | 130 | - | 130 | |||||||||||||
Other long term liabilities | 431 | 2,556 | 2,987 | |||||||||||||
TOTAL LIABILITIES | $ | 30,003 | $ | 9,262 | $ | (909 | ) | $ | 38,356 | |||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||||||||
STOCKHOLDERS’ EARNINGS (DEFICIT) | ||||||||||||||||
Series C Preferred stock | $ | 5 | $ | - | $ | $ | 5 | |||||||||
Common stock | 49 | 2 | 18 | (a1), (a3) | 69 | |||||||||||
Common stock to be repurchased by the Company | (231 | ) | - | (231 | ) | |||||||||||
Additional paid-in capital | 38,328 | - | 5,279 | (a3) | 43,607 | |||||||||||
Accumulated earnings (deficit) | (38,821 | ) | (604 | ) | 604 | (a1) | (38,821 | ) | ||||||||
TOTAL STOCKHOLDERS’ EARNINGS (DEFICIT) | (670 | ) | (602 | ) | 5,901 | 4,629 | ||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 29,333 | $ | 8,660 | $ | 4,992 | $ | 42,925 |
Notes:
(a) | This entry reflects the preliminary allocation of the purchase price to identifiable net assets acquired and the excess purchase price to Goodwill as follows: |
Book value of net assets acquired | ||||
HTS’s equity | (602 | ) | ||
Preliminary fair value adjustment of HTS | ||||
Preliminary estimate of fair value of identifiable net assets (liabilities) acquired | (602 | ) | ||
Goodwill | 6,901 |
(a1) | The Pro Forma Balance Sheet has been adjusted to eliminate the historical shareholders’ equity accounts of HTS. |
(a2) | The Pro Forma Balance Sheet has been adjusted by the amount of cash investment required pursuant to the terms of the Asset Purchase Agreement. |
(a3) | The Pro Forma Balance Sheet has been adjusted by the amount of common stock issued to the sellers pursuant to the terms of the Asset Purchase Agreement. |
(a4) | The Pro Forma Balance Sheet has been adjusted by the amount of related party balances. |