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PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
Exhibit 99.2
CHOLESTECH CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
On January 21, 2000, Cholestech Corporation ("Cholestech" or the
"Company")acquired certain assets of Health Net, Inc. ("Health Net"). The
acquisition was accounted for using the purchase method of accounting and,
accordingly, the purchase price was allocated to the tangible and intangible
assets acquired on the basis of their estimated fair values on the acquisition
date as determined by the Company's management. The unaudited pro forma combined
condensed balance sheet is based on the balance sheet of the Company and the
unaudited balance sheet of Health Net at December 24, 1999 assuming the
transaction was consummated on December 24, 1999. The unaudited pro forma
combined condensed statements of operations are based on the individual
statements of operations of the Company for the year ended March 26, 1999 and
the nine months ended December 24, 1999. The operations of Health Net have been
included in the unaudited pro forma combined condensed statements of operations
as though the acquisition had been consummated on March 28, 1998.
The unaudited pro forma combined condensed financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission and do not purport to represent what the Company's results
of operations would have been or what operations would be if the transactions
that give rise to the pro forma adjustments had occurred on the dates assumed
and are not necessarily indicative of future results. The unaudited pro forma
combined condensed statements of operations should be read in conjunction with
the historical financial statements and related notes of Cholestech and the
unaudited historical financial statements and related notes of Health Net.
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CHOLESTECH CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF DECEMBER 24, 1999
(IN THOUSANDS)
AS HEALTH PRO
REPORTED NET ADJUSTMENTS FORMA
- ----------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $7,217 $53 $(2,200) (A) $ 5,070
Marketable securities 3,858 3,858
Accounts receivable, net 2,284 282 (75) (B) 2,491
Inventories 3,391 25 (15) (B) 3,401
Prepaid expenses and other current assets 316 6 322
-------------------------------------- ---------
Total current assets 17,066 366 (2,290) 15,142
Property and equipment, net 6,384 112 6,496
Long-term investments 4,923 4,923
Goodwill 2,745 (C) 2,745
Other assets, net 54 54
-------------------------------------- ---------
Total assets $28,427 $478 $ 455 $29,360
====================================== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $2,024 $72 $ 561 (D),(E) $ 2,657
Accrued payroll and benefits 1,572 1,572
Taxes payable 4 (4) (D) 0
Notes payable 15 (15) (D) 0
Product warranty 91 91
-------------------------------------- ---------
Total current liabilities 3,687 91 542 4,320
Long-term liabilities 8 (8) (D) 0
-------------------------------------- ---------
Total liabilities 3,687 99 534 4,320
-------------------------------------- ---------
Shareholders' equity:
Preferred stock -- -- -- 0
Common stock 71,652 300 (A) 71,952
Additional paid-in capital 9 (9) (F) 0
Accumulated other comprehensive income (loss) (56) (56)
Accumulated deficit (46,856) 370 (370) (F) (46,856)
-------------------------------------- ---------
Total shareholders' equity 24,740 379 (79) 25,040
-------------------------------------- ---------
Total liabilities and shareholders' equity $28,427 $478 $ 455 $29,360
====================================== =========
SEE NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
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CHOLESTECH CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 26, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
AS
REPORTED HEALTH NET ADJUSTMENTS PRO FORMA
-------------------------------------------- -----------
Revenues $22,032 $1,191 $(489) (G) $22,734
Cost of revenues 10,252 467 (489) (G) 10,230
-------------------------------------------- ----------
Gross profit 11,780 724 0 12,504
-------------------------------------------- ----------
Operating expenses:
Sales and marketing 6,606 437 7,043
Research and development 2,703 2,703
General and administrative 2,381 131 2,512
Amortization of goodwill 549 (H) 549
Other 826 826
-------------------------------------------- ----------
Total operating expenses 12,516 568 549 13,633
-------------------------------------------- ----------
Income (loss) from operations (736) 156 (549) (1,129)
Interest and other income (expense),
net 663 (19) (110) (I) 534
-------------------------------------------- ----------
Income (loss) before taxes (73) 137 (659) (595)
-------------------------------------------- ----------
Net income (loss) $ (73) $ 137 $(659) $ (595)
============================================ ==========
Net loss per share:
Basic and diluted $ (0.01) $ (0.05)
=========== ==========
Shares used in computing basic and
diluted net loss per share 11,484 11,535
=========== ==========
SEE NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
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CHOLESTECH CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 24, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
AS
REPORTED HEALTH NET ADJUSTMENTS PRO FORMA
-------------------------------------------- -----------
Revenues $18,858 $1,924 $(632) $20,150
Cost of revenues 7,888 718 (618) (G) 7,988
-------------------------------------------- ----------
Gross profit 10,970 1,207 (14) 12,163
-------------------------------------------- ----------
Operating expenses:
Sales and marketing 5,048 662 5,710
Research and development 2,247 2,247
General and administrative 2,242 226 2,468
Amortization of goodwill 412 (H) 412
Other 219 219
-------------------------------------------- ----------
Total operating expenses 9,756 888 412 11,056
-------------------------------------------- ----------
Income from operations 1,214 319 (426) 1,107
Interest and other income, net 556 (13) (83) (I) 460
-------------------------------------------- ----------
Income before taxes 1,770 306 (509) 1,567
Provision for income taxes 71 71
-------------------------------------------- ----------
Net income $ 1,699 $ 306 $(509) $ 1,496
============================================ ==========
Net income per share:
Basic $ 0.15 $ 0.13
============ ==========
Diluted $ 0.14 $ 0.12
============ ==========
Shares used in computing basic
and diluted net income per share:
Basic 11,661 11,712
============ ==========
Diluted 11,929 11,980
============ ==========
SEE NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
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Cholestech Corporation
Notes to Unaudited Combined Condensed Financial Information
NOTE 1 SUMMARY OF TRANSACTION
On January 21, 2000, Cholestech Corporation ("Cholestech" or the
"Company") acquired certain assets of Health Net, Inc. ("Health Net"). The
acquisition was accounted for using the purchase method of accounting and,
accordingly, the purchase price was allocated to the tangible and intangible
assets acquired on the basis of their estimated fair market values on the
acquisition date as determined by the Company's management. The purchase price
consisted of approximately $2,200,000 of cash and 51,010 shares of common stock
valued at $300,000 and acquisition related expenses of approximately $633,000.
The Agreement also provides that an additional amount of cash consideration, up
to $1,000,000 (the "Earnout Consideration"), may be issued to the former owners
of Health Net if certain performance milestones described in the Agreement are
achieved for the calendar year ending December 31, 2000. The preliminary
allocation of the purchase price was determined by management as follows (in
thousands):
Total current assets...................................... $ 276
Property and equipment and other noncurrent assets........ 106
Goodwill.................................................. 2,745
-------
Total purchase price................................. $ 3,127
=======
Goodwill represents the excess of the purchase price over the estimated fair
value of the net assets acquired and will be amortized over 5 years.
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NOTE 2 -- UNAUDITED PRO FORMA COMBINED CONDENSED NET INCOME (LOSS) PER SHARE:
Basic net income (loss) per share and shares used in computing the basic net
income (loss) per share for the year ended March 26, 1999 and the nine months
ended December 24, 1999 are based upon the historical weighted average common
shares outstanding. Dilutive net income (loss) per share reflects the potential
dilution that could occur from common shares issuable through stock options,
warrants and other convertible securities. Potential common stock are excluded
from the computation of net loss per share if their effect would be
anti-dilutive.
The 51,010 shares of common stock issued in connection with the acquisition have
been included in the calculation of pro forma basic and diluted net income
(loss) per share as follows:
Nine Months Ended Year Ended
December 24, March 26,
1999 1999
-------------------- ----------------------
Basic Diluted Basic Diluted
----- ------- ----- -------
(in thousands, except per share data)
Shares used in computing basic
and diluted net income (loss)
per share 11,661 11,929 11,484 11,484
Adjustment to reflect common stock
issued in acquisition 51 51 51 51
------- ------- ------- -------
Shares used in computing
pro forma basic and diluted
net income (loss) per share 11,712 11,980 11,535 11,535
======= ======= ======= =======
Pro forma net income (loss)
per share $ 0.13 $ 0.12 $ (0.05) $ (0.05)
======= ======= ======= =======
NOTE 3 -- PRO FORMA ADJUSTMENTS
The following pro forma adjustments are based upon management's preliminary
estimates of the value of the tangible and intangible assets acquired. These
estimates are subject to finalization.
(A) Represents the cash paid and common stock issued in connection with the
acquisition.
(B) Represents the elimination of intercompany receivables and profit in
inventory.
(C) Represents $2,745,000 of goodwill.
(D) Represents the elimination of the liability accounts of Health Net that
were not assumed in the transaction.
(E) Represents accrued transaction costs of $633,000 associated with the
acquisition.
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(F) Represents the elimination of equity accounts of Health Net.
(G) Represents the elimination of intercompany revenues and related cost of
revenues.
(H) Represents amortization of goodwill over a five year period.
(I) Represents reduced interest income on the funds used to purchase Health
Net.
(J) On a pro forma basis, income taxes for the nine months ended December 24,
1999 were not material.
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