Exhibit 99.2
IZI HOLDINGS, LLC
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2011 AND 2010
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
IZI HOLDINGS, LLC.
Table of Contents
| | Page Number |
| Financial Statements: | |
| | |
| Unaudited Consolidated Balance Sheets | 1 |
| | |
| Unaudited Consolidated Statements of Income | 2 |
| | |
| Unaudited Consolidated Statements of Cash Flows | 3 |
| | |
| Notes to Unaudited Consolidated Financial Statements | 4 - 6 |
| IZI HOLDINGS, LLC. |
| | | | | | | | |
| Unaudited Consolidated Balance Sheets |
| As of September 30, |
| |
| | | | | | | | |
| | | | | | 2011 | | 2010 |
| Assets | | | | | | |
| | | | | | | | |
| Current Assets | | | | | | |
| | Cash | | | | $ 864,408 | | $ 996,944 |
| | Accounts Receivable, net | | 2,197,061 | | 2,366,997 |
| | Inventories, net | | | 972,188 | | 736,367 |
| | Prepaid Expenses | | | 187,051 | | 253,698 |
| | | | | | 4,220,708 | | 4,354,006 |
| | | | | | | | |
| Property and Equipment, net | | 1,411,288 | | 1,793,550 |
| | | | | | | | |
| Other Assets | | | | | | |
| | Goodwill | | | | 47,072,620 | | 47,072,620 |
| | Security Deposit | | | 23,608 | | 23,608 |
| | Deferred Financing Fees, net | | | 309,770 | | 433,682 |
| | | | | | 47,405,998 | | 47,529,910 |
| | | | | | | | |
| Total Assets | | | | $ 53,037,994 | | $ 53,677,466 |
| | | | | | | | |
| | | | | | | | |
| Liabilities and Members' Equity | | | | |
| | | | | | | | |
| Current Liabilities | | | | | |
| | Current Maturities of Long-term Debt | $ 1,400,000 | | $ 1,000,000 |
| | Commissions Payable | | 1,223,213 | | 1,333,789 |
| | Accrued Expenses and Other Current Liabilities | 997,951 | | 992,895 |
| | Distribution Payable | | | 723,849 | | 301,920 |
| | Accounts Payable | | | 153,049 | | 188,095 |
| | | | | | 4,498,062 | | 3,816,699 |
| | | | | | | | |
| | Long-Term Debt, net of Current Maturities | 18,823,810 | | 20,347,150 |
| | Long-Term Subordinated Debt | | 5,267,000 | | 5,267,000 |
| | | | | | | | |
| Total Liabilities | | | 28,588,872 | | 29,430,849 |
| | | | | | | | |
| Members' Equity | | | 24,449,122 | | 24,246,617 |
| | | | | | | | |
| Total Liabilities and Members' Equity | $ 53,037,994 | | $ 53,677,466 |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| See notes to unaudited consolidated financial statements. |
-1-
| IZI HOLDINGS, LLC. |
| | | | | | | | | | | |
| Unaudited Consolidated Statements of Income |
| For the Nine Months Ended September 30, |
| |
| | | | | | | | | | | |
| | | | | | | | | 2011 | | 2010 |
| | | | | | | | | | | |
| Sales, net | | | | | | | $ 14,024,654 | | $ 13,752,006 |
| | | | | | | | | | | |
| Cost of Sales | | | | | | | 2,628,111 | | 2,110,056 |
| | | | | | | | | | | |
| Gross Profit | | | | | | | 11,396,543 | | 11,641,950 |
| | | | | | | | | | | |
| Operating Expenses | | | | | | | | |
| | Selling | | | | | | | 5,654,142 | | 5,848,653 |
| | General and Administrative | | | 1,473,266 | | 1,247,998 |
| | Research and Development | | | 54,157 | | 112,810 |
| | | | | | | | | 7,181,565 | | 7,209,461 |
| | | | | | | | | | | |
| Operating Income | | | | | | 4,214,978 | | 4,432,489 |
| | | | | | | | | | | |
| Other Income (Expense) | | | | | | | |
| | Interest Expense, net | | | | (3,242,398) | | (3,362,132) |
| | Loss on Sale of Property and Equipment | - | | 86 |
| | Other Income | | | | | | (1,980) | | 1,011 |
| | | | | | | | | (3,244,378) | | (3,361,035) |
| | | | | | | | | | | |
| Net Income | | | | | | | $ 970,600 | | $ 1,071,454 |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| See notes to unaudited consolidated financial statements. |
-2-
IZI Medical Products, LLC
| |
| Unaudited Consolidated Statements of Cash Flows |
| For the Nine Month Period Ended September 30, |
| |
| | | | | | | | |
| | | | | | 2011 | | 2010 |
| | | | | | | | |
| Cash flows from operating activities | | | |
| | Net Income | | $ 970,600 | | $1,071,454 |
| | Adjustments to reconcile net income | | | |
| | | | | | | | |
| | | Depreciation and amortization | 520,841 | | 517,359 |
| | | Capitalized interest on long-term debt | - | | 171,079 |
| | | Gain on sale of property and equipment | - | | (86) |
| | | Changes in operating assets and liabilities, net of assets acquired | | | |
| | | | (Increase) decrease in: | | | |
| | | | | Accounts receivable, net | (356,528) | | (171,977) |
| | | | | Inventories, net | (74,317) | | (349,185) |
| | | | | Prepaid expenses | (45,132) | | (181,425) |
| | | | | Security deposit | - | | �� (23,608) |
| | | | Increase (decrease) in: | | | |
| | | | | Commissions payable | (195,676) | | 3,838 |
| | | | | Accounts payable | (14,450) | | 16,647 |
| | | | | Accrued expenses and other current liabilities | (351,021) | | 159,953 |
| Net cash provided by operating activities | 454,317 | | 1,214,049 |
| | | | | | | | |
| Cash flows from investing activities | | | |
| | Acquisition of assets, net | - | | - |
| | Acquisition of property and equipment | (71,736) | | (413,922) |
| | Proceeds from sale of property and equipment | - | | 1,400 |
| Net cash used for investing activities | (71,736) | | (412,522) |
| | | | | | | | |
| Cash flows from financing activities | | | |
| | Proceeds from long-term debt | - | | - |
| | Capital contributions | - | | - |
| | Payments on long-term debt | (1,014,096) | | (950,225) |
| | Distributions to members | - | | (150,000) |
| Net cash (used for) provided by financing activities | (1,014,096) | | (1,100,225) |
| | | | | | | | |
| Net decrease in cash and cash equivalents | (631,515) | | (298,698) |
| | | | | | | | |
| Cash- beginning | 1,495,923 | | 1,295,642 |
| | | | | | | | |
| Cash- ending | | $ 864,408 | | $ 996,944 |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| See notes to unaudited consolidated financial statements. |
-3-
IZI HOLDINGS, LLC.
Notes to Unaudited Consolidated Financial Statements
For the Nine Months Ended September 30, 2011 and 2010
1. Nature of Operations
IZI Holdings, LLC, and its wholly owned subsidiary IZI, LLC (collectively, the Company), are engaged in the manufacturing of medical imaging accessories, including high quality, low cost, versatile reference markers that aid technicians and physicians in the fields of radiology, radiation therapy, and surgery.
2. Acquisition and Basis of Presentation
IZI Holdings, LLC was formed for the purpose of acquiring 100% of the assets of IZI, LLC on March 31, 2009. The acquisition allowed the Company to expand its geographic reach, customer base, and manufacturing capabilities.
The total cost of the acquisition was $50,101,000, which includes the purchase price less acquisition costs of $2,500,000. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
| | | March 31, 2009 |
| | | |
| Current assets | | $ 2,701,899 |
| Property and equipment | | 1,420,848 |
| Intangible assets | | 619,550 |
| Goodwill | | 47,072,620 |
| | | 51,814,917 |
| Less: Liabilities assumed | | 1,713,917 |
| | | $ 50,101,000 |
The acquired assets and liabilities shown above have been netted from the balance sheet account changes in the consolidated statement of cash flows for the period ended December 31, 2009.
The transaction includes an opportunity for additional consideration if the Company achieves certain financial performance thresholds through the year 2013, as defined in the purchase agreement. Based on the Company’s assessment of the probability of reaching the financial performance thresholds no liability has been recorded.
On March 31, 2009 IZI Holdings, Inc., an entity affiliated through common ownership, issued a subordinated promissory note to the Company in the amount of $5,267,000. The promissory note is due on March 31, 2015 and incurs interest at a fixed rate of 14% per annum which is payable quarterly, in arrears, on or before the 15th day after the end of each fiscal quarter. At September 30, 2011 and 2010 the principal balance outstanding was $5,267,000.
-4-
IZI HOLDINGS, LLC.
Notes to Unaudited Consolidated Financial Statements
For the Nine Months Ended September 30, 2011 and 2010
3. Accounts Receivable
Accounts receivable are presented net of an allowance for doubtful collections of $17,122 and $10,326 at September 30, 2011 and 2010, respectively. In determining this allowance, objective evidence that a single receivable is uncollectible as well as a historical pattern of collections of accounts receivable that indicates the entire face amount of a portfolio of accounts receivable may not be collectible is considered at each consolidated balance sheet date.
4. Inventories
Inventories consist of the following as of September 30, 2011 and 2010:
| | 2011 | 2010 |
| Raw materials | $ 771,400 | $ 506,785 |
| Work in process | 47,582 | 110,536 |
| Finished goods | 186,112 | 156,438 |
| | 1,005,094 | 773,759 |
| Less: Inventory allowances | 32,906 | 37,392 |
| | $ 972,188 | $ 736,367 |
5. Revolving Line of Credit
On March 31, 2009 the Company entered into a line of credit agreement which provides for advances of up to $2,500,000. All borrowings are collateralized by a security interest in substantially all assets of the Company. The line of credit facility will mature in March 2014 and has an interest rate of 10% per annum. There were no borrowings during the interim period ended September 30, 2011 and the interim period ended September 30, 2010. There were no amounts outstanding on the revolving line of credit at September 30, 2011 and 2010.
-5-
IZI HOLDINGS, LLC.
Notes to Unaudited Consolidated Financial Statements
For the Nine Months Ended September 30, 2011 and 2010
6. Related Party Transactions
On March 31, 2009 the Company entered into a management services agreement with its majority member for management, consulting and financial advising services. Charges for these services for the nine months ended September 30, 2011 and 2010 were $406,342 and $391,452, respectively. The amount owed to the member at September 30, 2011 and 2010 was $130,000 and $130,000, respectively.
On March 31, 2009 the Company entered an agreement to lease office space from an entity affiliated by common ownership. The Company terminated the lease during November 2010 to move into a new facility. Rent expense for the interim period ended September 30, 2011 and 2010 was $0 and $108,000, respectively.
7. Contingencies
In the ordinary course of business the Company is a defendant in various claims and legal proceedings. It is the opinion of management that the outcome of these matters will not have a material effect on the financial position of the Company.
8. Subsequent Event
On November 14, 2011, Landauer, Inc. (NYSE: LDR) acquired all of the outstanding equity interest of IZI Medical Products, LLC.
-6-
