UNAUDITED PRO FORMA FINANCIAL INFORMATION
We are providing the following information to aid you in your financial analysis of the proposed Asset Sale Transaction. The following unaudited pro forma financial data gives effect to the sale of the Purchased Assets. The unaudited pro forma balance sheet as of June 30, 2018 has been prepared assuming the Asset Sale Transaction was consummated as of that date. The unaudited pro forma statements of operations for the six months ended June 30, 2018, the twelve months ended December 31, 2017 and the twelve months ended December 31, 2016, have been prepared in accordance with the SEC’s pro forma rules under S-X Article 11 assuming that the Asset Sale Transaction occurred as of January 1, 2016, the first day of the first year presented. All material adjustments required to reflect the consummation of the Asset Sale Transaction are set forth in the columns labeled “Pro Forma Adjustments”. The data contained in the columns labeled “Bovie Medical Corporation As Reported”, is derived from the Company’s historical unaudited consolidated balance sheet as of June 30, 2018 and consolidated statements of operations for the six months ended June 30, 2018, the twelve months ended December 31, 2017 and the twelve months ended December 31, 2016. The unaudited pro forma financial data is presented for informational purposes only and is not necessarily indicative of the results of future operations or future financial position of the Company or the actual results of operations or financial position that would have occurred had the Asset Sale Transaction been consummated as of the dates indicated above.
The pro forma adjustments were based upon available information at the date of this filing and upon certain assumptions as described in the notes to the unaudited pro forma condensed financial statements that our management believes are reasonable under the circumstances.
The unaudited pro forma financial statements and accompanying notes should be read in conjunction with our historical financial statements and accompanying notes thereto, and our “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in our Quarterly Report on Form 10-Q for the three and six months ended June 30, 2018 and Annual Report on Form 10-K for the twelve months ended December 31, 2017 and December 31, 2016, a copy of which has been provided to you as part of the proxy materials for the Annual Meeting.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2018
(In thousands, except share and per share data, Unaudited)
|
| | | | | | | | | | | |
| | As Reported | | Pro Forma Adjustments (a) | | As Adjusted |
| ASSETS | | | | | |
| Current assets: | | | | | |
| Cash and cash equivalents | $ | 7,875 |
| | $ | 92,000 |
| | $ | 99,875 |
|
| Restricted cash | 660 |
| | — |
| | 660 |
|
| Trade accounts receivable, net of allowance of $180 and $204 | 5,592 |
| | — |
| | 5,592 |
|
| Inventories, net | 7,533 |
| | (2,400 | ) | | 5,133 |
|
| Prepaid expenses and other current assets | 568 |
| | — |
| | 568 |
|
| Total current assets | 22,228 |
| | 89,600 |
| | 111,828 |
|
| Property and equipment, net | 6,314 |
| | (96 | ) | | 6,218 |
|
| Brand name and trademark | 1,510 |
| | (1,510 | ) | | — |
|
| Purchased technology and license rights, net | 235 |
| | (112 | ) | | 123 |
|
| Goodwill | 185 |
| | — |
| | 185 |
|
| Deposits | 115 |
| | — |
| | 115 |
|
| Other assets | 67 |
| | — |
| | 67 |
|
| Total assets | $ | 30,654 |
| | $ | 87,882 |
| | $ | 118,536 |
|
| | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | |
| Current liabilities: | | | | | |
| Accounts payable | $ | 2,745 |
| | $ | — |
| | $ | 2,745 |
|
| Accrued severance and related | 439 |
| | — |
| | 439 |
|
| Accrued payroll | 394 |
| | — |
| | 394 |
|
| Current portion of mortgage note payable | 239 |
| | — |
| | 239 |
|
| Accrued and other liabilities | 2,420 |
| | 2,100 |
| | 4,520 |
|
| Total current liabilities | 6,237 |
| | 2,100 |
| | 8,337 |
|
| Mortgage note payable, net of current portion | 2,335 |
| | — |
| | 2,335 |
|
| Note payable | 140 |
| | — |
| | 140 |
|
| Deferred tax liability | 368 |
| | 17,777 |
| | 18,145 |
|
| Derivative liabilities | — |
| | — |
| | — |
|
| Total liabilities | $ | 9,080 |
| | $ | 19,877 |
| | $ | 28,957 |
|
| STOCKHOLDERS’ EQUITY | | | | | |
| Common stock, $0.001 par value; 75,000,000 shares authorized; 33,055,131 issued and 32,912,556 outstanding as of June 30, 2018 and 75,000,000 shares authorized; 33,021,170 issued and 32,878,091 outstanding as of December 31, 2017, respectively | 33 |
| | — |
| | 33 |
|
| Additional paid-in capital | 51,244 |
| | — |
| | 51,244 |
|
| Accumulated deficit | (29,703 | ) | | 68,005 |
| | 38,302 |
|
| Total stockholders’ equity | 21,574 |
| | 68,005 |
| | 89,579 |
|
| Total liabilities and stockholders’ equity | $ | 30,654 |
| | $ | 87,882 |
| | $ | 118,536 |
|
See accompanying notes to unaudited Pro Forma financial information
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended
June 30, 2018 | | Twelve Months Ended
December 31, 2017 | | Twelve Months Ended
December 31, 2016 |
| | As Reported | | Pro Forma Adjustments (b) | | As Adjusted | | As Reported | | Pro Forma Adjustments (b) | | As Adjusted | | As Reported | | Pro Forma Adjustments (b) | | As Adjusted |
| Sales | $ | 21,391 |
| | $ | (14,303 | ) | | $ | 7,088 |
| | $ | 38,883 |
| | $ | (28,649 | ) | | $ | 10,234 |
| | $ | 36,627 |
| | $ | (27,808 | ) | | $ | 8,819 |
|
| Cost of sales | 10,124 |
| | (7,785 | ) | | 2,339 |
| | 19,122 |
| | (15,846 | ) | | 3,276 |
| | 18,712 |
| | (15,009 | ) | | 3,703 |
|
| Gross profit | 11,267 |
| | (6,518 | ) | | 4,749 |
| | 19,761 |
| | (12,803 | ) | | 6,958 |
| | 17,915 |
| | (12,799 | ) | | 5,116 |
|
| Other costs and expenses: | | | | | | | | | | | | | | | | | |
| Research and development | 1,378 |
| | (101 | ) | | 1,277 |
| | 2,455 |
| | (514 | ) | | 1,941 |
| | 2,618 |
| | (1,585 | ) | | 1,033 |
|
| Professional services | 1,187 |
| | — |
| | 1,187 |
| | 1,771 |
| | (2 | ) | | 1,769 |
| | 1,486 |
| | (13 | ) | | 1,473 |
|
| Salaries and related costs | 4,234 |
| | (619 | ) | | 3,615 |
| | 7,906 |
| | (986 | ) | | 6,920 |
| | 9,038 |
| | (1,221 | ) | | 7,817 |
|
| Selling, general and administrative | 5,599 |
| | (1,276 | ) | | 4,323 |
| | 11,370 |
| | (2,681 | ) | | 8,689 |
| | 8,565 |
| | (2,380 | ) | | 6,185 |
|
| Severance and related expense | — |
| | — |
| | — |
| | 1,524 |
| | — |
| | 1,524 |
| | | | — |
| | — |
|
| Total other costs and expenses | 12,398 |
| | (1,996 | ) | | 10,402 |
| | 25,026 |
| | (4,183 | ) | | 20,843 |
| | 21,707 |
| | (5,199 | ) | | 16,508 |
|
| Loss from operations | (1,131 | ) | | (4,522 | ) | | (5,653 | ) | | (5,265 | ) | | (8,620 | ) | | (13,885 | ) | | (3,792 | ) | | (7,600 | ) | | (11,392 | ) |
| Interest expense, net | (72 | ) | | — |
| | (72 | ) | | (136 | ) | | — |
| | (136 | ) | | (158 | ) | | — |
| | (158 | ) |
| Change in fair value of derivative liabilities | 20 |
| | — |
| | 20 |
| | 183 |
| | — |
| | 183 |
| | 64 |
| | — |
| | 64 |
|
| Total other income (expense), net | (52 | ) | | — |
| | (52 | ) | | 47 |
| | — |
| | 47 |
| | (94 | ) | | — |
| | (94 | ) |
| Loss before income taxes | (1,183 | ) | | (4,522 | ) | | (5,705 | ) | | (5,218 | ) | | (8,620 | ) | | (13,838 | ) | | (3,886 | ) | | (7,600 | ) | | (11,486 | ) |
| Income tax expense (benefit) | 24 |
| | (950 | ) | | (926 | ) | | (156 | ) | | (1,810 | ) | | (1,966 | ) | | 64 |
| | (1,596 | ) | | (1,532 | ) |
| Net loss | $ | (1,207 | ) | | $ | (3,572 | ) | | $ | (4,779 | ) | | $ | (5,062 | ) | | $ | (6,810 | ) | | $ | (11,872 | ) | | $ | (3,950 | ) | | $ | (6,004 | ) | | $ | (9,954 | ) |
| | | | | | | | | | | | | | | | | | |
| Loss per share | | | | | | | | | | | | | | | | | |
| Basic | (0.04 | ) | | | | $ | (0.15 | ) | | $ | (0.16 | ) | | | | $ | (0.38 | ) | | $ | (0.14 | ) | | | | $ | (0.36 | ) |
| Diluted | (0.04 | ) | | | | $ | (0.15 | ) | | $ | (0.17 | ) | | | | $ | (0.38 | ) | | $ | (0.15 | ) | | | | $ | (0.36 | ) |
| | | | | | | | | | | | | | | | | | |
| Weighted average number of shares outstanding - basic | 32,884 |
| | | | 32,884 |
| | 31,420 |
| | | | 31,420 |
| | 27,433 |
| | | | 27,433 |
|
| Weighted average number of shares outstanding - dilutive | 32,884 |
| | | | 32,884 |
| | 31,427 |
| | | | 31,427 |
| | 27,449 |
| | | | 27,449 |
|
See accompanying notes to unaudited Pro Forma financial information
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The historical unaudited consolidated balance sheet as of June 30, 2018 reflects the reported assets, liabilities, and stockholders’ equity of the Company with the proposed sale of assets by the Company, consisting principally of our Core Segment, referred to as the “Purchased Assets.”
The unaudited pro forma balance sheet as of June 30, 2018 has been prepared assuming the Asset Sale Transaction was consummated as of that date. The unaudited pro forma consolidated statements of operations for the six months ended June 30, 2018, the twelve months ended December 31, 2017 and the twelve months ended December 31, 2016, have been prepared in accordance with the SEC’s pro forma rules under S-X Article 11 assuming that the Asset Sale Transaction occurred as of January 1, 2016, the first day of the first year presented. All material adjustments required to reflect the consummation of the Asset Sale Transaction are set forth in the columns labeled “Pro Forma Adjustments.” The data contained in the columns labeled “Bovie Medical Corporation As Reported”, is derived from Bovie Medical Corporation’s historical unaudited balance sheet as of June 30, 2018 and consolidated statements of operations for the six months ended June 30, 2018, the twelve months ended December 31, 2017 and the twelve months ended December 31, 2016.
NOTE 2. PRO FORMA ADJUSTMENTS
The following adjustments were made in the preparation of the unaudited pro forma consolidated balance sheet:
| |
| (a) | To record as of June 30, 2018 (i) the expected net proceeds received from the sale of the Purchased Assets and (ii) the expected gain on the sale of the Purchased Assets pursuant to the terms of the Asset Purchase Agreement: |
|
| | | |
| (In thousands) | |
| Gross consideration from the sale of Purchased Assets | $ | 97,000 |
|
| Estimated closing and transaction costs | 5,000 |
|
| Expected net proceeds from sale of assets before taxes | $ | 92,000 |
|
| | |
| Book value of Purchased Assets | |
| Current assets: | |
| Inventories, net | $ | 2,400 |
|
| Total current assets | 2,400 |
|
| Property and equipment, net of depreciation | 96 |
|
| Brand name and trademark | 1,510 |
|
| Purchased technology and license rights, net of depreciation | 112 |
|
| Total assets | $ | 4,118 |
|
| | |
| Current liabilities: | |
| Accrued inventory liability | $ | 2,100 |
|
| Total current liabilities | 2,100 |
|
| Total book value of purchased assets | $ | 6,218 |
|
| | |
| Expected net gain on sale of assets before taxes | $ | 85,782 |
|
| Income tax expense | 17,777 |
|
| Expected gain on sale of assets after income taxes * | $ | 68,005 |
|
* The expected net gain on the sale of the Purchased Assets has not been reflected in the pro forma consolidated statements of operations as it is considered to be nonrecurring in nature. Income tax expense is the Company’s estimate of taxes associated with the gain recognized on the sale of the Core business.
| |
| (b) | To eliminate the operating activity related to the Purchased Assets which includes, revenue, net of returns, allowance and discounts, cost of revenues and operating expenses: |
|
| | | | | | | | | | | |
| | Six Months Ended June 30, 2018 | | Twelve Months Ended
December 31, 2017 | | Twelve Months Ended
December 31, 2016 |
| Sales | $ | 14,303 |
| | $ | 28,649 |
| | $ | 27,808 |
|
| Cost of sales | 7,785 |
| | 15,846 |
| | 15,009 |
|
| Gross profit | 6,518 |
| | 12,803 |
| | 12,799 |
|
| Other costs and expenses: | | | | | |
| Research and development | 101 |
| | 514 |
| | 1,585 |
|
| Professional services | — |
| | 2 |
| | 13 |
|
| Salaries and related costs | 619 |
| | 986 |
| | 1,221 |
|
| Selling, general and administrative | 1,276 |
| | 2,681 |
| | 2,380 |
|
| Total other costs and expenses | 1,996 |
| | 4,183 |
| | 5,199 |
|
| Income from operations | 4,522 |
| | 8,620 |
| | 7,600 |
|
| Income tax expense | 950 |
| | 1,810 |
| | 1,596 |
|
| Net income | $ | 3,572 |
| | $ | 6,810 |
| | $ | 6,004 |
|
