Attached files
| file | filename |
|---|---|
| 8-K/A - FORM 8-K/A - TRISTAR WELLNESS SOLUTIONS, INC. | tristar_8ka.htm |
| EX-99.1 - AUDITED FINANCIAL STATEMENTS - TRISTAR WELLNESS SOLUTIONS, INC. | tristar_ex991.htm |
EXHIBIT 99.2
Unaudited Pro Forma Combined Financial Statements
The following unaudited pro forma condensed combined financial information is provided for informational purposes only. The unaudited pro forma condensed combined financial information was based on and should be read in conjunction with the (i) historical financial statements of TriStar Wellness Solutions Inc. (TriStar) included in its Annual Report on Form 10-K for the year ended December 31, 2012; (ii) the historical financial statements of TriStar for the three months ended March 31, 2013 included in its Form 10-Q; and (iii) the audited financial statements of HemCon Medical Technologies, Inc. ("HemCon") as of and for the year ended December 31, 2012, which are included in Exhibit 99.2 to this Current Report Form 8-K/A; (iv) the historical financial statements of HemCon for the three months ended March 31, 2013 which are also included in Exhibit 99.2 to this Current Report Form 8-K/A.
The unaudited pro forma condensed combined balance sheet as of March 31, 2013 and December 31, 2012, and the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2013 and year ended December 31, 2012 are presented herein. The unaudited pro forma condensed combined balance sheet as of March 31, 2013 gives effect to the acquisition as if it had been completed on March 31, 2013 and combines the balance sheet of TriStar and the assets acquired from HemCon. The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2013 give effect to the acquisition as if it had occurred on January 1, 2013. The unaudited pro forma condensed combined balance sheet as of December 31, 2012 gives effect to the acquisition as if it had been completed on December 31, 2012, and combines the balance sheet of TriStar and the assets acquired from HemCon. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012 give effect to the acquisition as if it had occurred on January 1, 2012.
The unaudited pro forma condensed combined balance sheet was prepared using the historical balance sheets of TriStar and HemCon as of March 31, 2013 and December 31, 2012. The unaudited pro forma combined statements of operations were prepared using the historical statements of operations of TriStar for the three months ended March 31, 2013 and year ended December 31, 2012 and the historical statements of operations of HemCon for the three months ended March 31, 2013 and twelve months ended December 31, 2012.
The historical financial information has been adjusted to give effect to pro forma events that are directly attributable to the acquisition, are factually supportable and are expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes to the unaudited condensed combined financial statements, and is not necessarily indicative of the combined results of operations or financial condition had the acquisition been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future results of operations or financial position of the combined company. The pro forma adjustments are based on preliminary estimates of the fair values of assets acquired and information available as of the date of this Current Report on Form 8-K/A. Actual results may differ from the amounts reflected in the unaudited pro forma condensed combined financial statements, and the differences may be material.
1
TriStar Wellness Solutions, Inc. (“TWSI”)
Pro Forma Condensed Combined Balance Sheet
As of March 31, 2013
(in thousands, except share and per share amounts)
|
Historical
|
Pro Forma
|
Pro Forma
|
|||||||||||||||||
|
TWSI
|
Hemcon
|
Adjustments
|
Notes
|
Combined
|
|||||||||||||||
|
Assets
|
|||||||||||||||||||
|
Current Assets
|
|||||||||||||||||||
|
Cash and cash equivalents
|
$ | 54 | $ | 1,814 | $ | (1,814 | ) | B | $ | 179 | |||||||||
| 3,200 | A | ||||||||||||||||||
| (3,075 | ) | C | |||||||||||||||||
|
Accounts receivable, net
|
3 | 809 | 809 | C | 812 | ||||||||||||||
| (809 | ) | B | |||||||||||||||||
|
Inventories
|
27 | 1,241 | (1,241 | ) | B | 1,268 | |||||||||||||
| 1,241 | C | ||||||||||||||||||
|
Other current assets
|
- | 1,791 | (1,791 | ) | B | - | |||||||||||||
|
Total current assets
|
84 | 5,655 | (3,480 | ) | 2,259 | ||||||||||||||
|
Property and equipment, net
|
1 | 1,404 | (1,404 | ) | B | 1,405 | |||||||||||||
| 1,404 | C | ||||||||||||||||||
|
Deposits and other assets
|
- | 53 | (53 | ) | B | - | |||||||||||||
|
Goodwill
|
- | 791 | (791 | ) | B | 121 | |||||||||||||
| 121 | C | ||||||||||||||||||
|
Total assets
|
85 | $ | 7,903 | (4,203 | ) | 3,785 | |||||||||||||
|
Liabilities and Stockholders' Equity
|
|||||||||||||||||||
|
Current Liabilities
|
|||||||||||||||||||
|
Short term debt
|
368 | $ | 21,911 | (21,911 | ) | B | 785 | ||||||||||||
| 500 | A | ||||||||||||||||||
| (83 | ) | A | |||||||||||||||||
|
Short term debt due to related parties
|
- | $ | - | 2,700 | A | 178 | |||||||||||||
| (2,522 | ) | A | |||||||||||||||||
|
Accounts payable and accrued expenses
|
633 | 40,463 | (40,463 | ) | B | 1,133 | |||||||||||||
| 500 | C | ||||||||||||||||||
|
Other current liabilities
|
- | 8,753 | (8,753 | ) | B | ||||||||||||||
|
Total current liabilities
|
1,001 | 71,127 | (70,032 | ) | 2,096 | ||||||||||||||
|
Total liabilities
|
$ | 1,001 | $ | 71,127 | $ | (70,032 | ) | $ | 2,096 | ||||||||||
|
Redeemable convertible preferred Subject to Compromise
|
|||||||||||||||||||
|
Series A
|
- | 801 | (801 | ) | B | - | |||||||||||||
|
Series B
|
- | 5,904 | (5,904 | ) | B | - | |||||||||||||
|
Series C
|
- | 12,000 | (12,000 | ) | B | - | |||||||||||||
|
Total redeemable convertible preferred
|
- | $ | 18,705 | (18,705 | ) | - | |||||||||||||
|
Stockholders' equity
|
|||||||||||||||||||
|
Convertible preferred stock
|
5 | 5 | |||||||||||||||||
|
Common stock
|
4 | 5 | (5 | ) | B | 4 | |||||||||||||
|
Additional paid in capital
|
11,063 | 6,275 | (6,275 | ) | B | 13,668 | |||||||||||||
| 2,605 | A | ||||||||||||||||||
|
Retained earnings
|
- | (89,308 | ) | 89,308 | B | - | |||||||||||||
|
Accumulated other comprehensive income
|
- | 1,099 | (1,099 | ) | B | - | |||||||||||||
|
Accumulated deficit
|
(11,988 | ) | - | (11,988 | ) | ||||||||||||||
|
Total stockholders equity (deficit)
|
(916 | ) | $ | (81,929 | ) | 84,534 | 1,689 | ||||||||||||
|
Total liabilities and stockholders' equity
|
$ | 85 | $ | 7,903 | $ | (4,203 | ) | $ | 3,785 | ||||||||||
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements
2
|
Short
|
||||||||||||||||||||||||||||||
|
Short
|
Term
|
Additional
|
||||||||||||||||||||||||||||
|
|
Term
|
Debt
|
Paid-in
|
|||||||||||||||||||||||||||
|
Cash
|
Debt
|
(Related Party)
|
Capital
|
Total
|
||||||||||||||||||||||||||
|
Issuance of promissory notes with detachable warrants
|
||||||||||||||||||||||||||||||
| A |
Issuance of promissory notes
|
$ | 3,200 | (500 | ) | (2,700 | ) | - | - | |||||||||||||||||||||
|
Issuance of warrants to purchase 1,650,000 of TWSI common stock at an exercise price of $2.74 (1)
|
- | 83 | 2,522 | (2,605 | ) | - | ||||||||||||||||||||||||
| $ | 3,200 | (417 | ) | (178 | ) | (2,605 | ) | - | ||||||||||||||||||||||
| B |
Elimination of of the assets, liabilities and equity not acquired in the transaction
|
|||||||||||||||||||||||||||||
|
Cash
|
$ | (1,814 | ) | ||||||
|
Accounts receivable, net
|
(809 | ) | |||||||
|
Inventories
|
(1,241 | ) | |||||||
|
Other current assets
|
(1,791 | ) | |||||||
|
Property and equipment, net
|
(1,404 | ) | |||||||
|
Deposits and other assets
|
(53 | ) | |||||||
|
Goodwill
|
(791 | ) | |||||||
|
Short term debt
|
21,911 | ||||||||
|
Accounts payable and accrued expenses
|
40,463 | ||||||||
|
Other current liabilities
|
8,753 | ||||||||
|
Total redeemable convertible preferred
|
18,705 | ||||||||
|
Common stock
|
5 | ||||||||
|
APIC
|
6,275 | ||||||||
|
Retained earnings
|
(89,308 | ) | |||||||
|
Accumulated other comprehensive income
|
1,099 | ||||||||
|
Total
|
- |
| C |
Purchase Business Combination
|
Cash
|
Accounts receivable
|
Inventories
|
Property and Equipment
|
Goodwill and other intangible assets
|
Accounts payable and accrued expenses | Total | ||||||||||||||||||||||
|
Purchase of 100% of Hemcon's voting securties in exchnage for $3,075,000
|
$ | (3,075 | ) | 809 | 1,241 | 1,404 | 121 |
(500
|
) |
-
|
||||||||||||||||||||
|
(1)
|
The debt is recognized and measured by allocating a portion of the proceeds to warrants, based on their relative fair value, and as a reduction to the carrying amount of the debt. The discount recorded in connection with the warrant valuation is recognized as non-cash interest expense and is amortized over the term of the debt.
|
|
The warrants issued are based on the Black Scholes Model using the following assumptions:
|
||||
|
Exercise price:
|
$ | 2.74 | ||
|
Market price at date of issue:
|
$ | 2.74 | ||
|
Expected volatility:
|
85% | |||
|
Term:
|
4 years
|
|||
|
Risk-free interest rate:
|
0.40% | |||
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements
3
TriStar Wellness Solutions, Inc. (“TWSI”)
Pro Forma Combined Statement of Operations
For the Three Months Ended March 31, 2013
(in thousands, except share and per share amounts)
|
Historical
|
Pro Forma
|
Pro Forma
|
|||||||||||||||||
|
TWSI
|
Hemcon
|
Adjustments
|
Notes
|
Combined
|
|||||||||||||||
|
Revenue
|
$ | 7 | $ | 1,283 | $ | - | $ | 1,290 | |||||||||||
|
Cost of reveunes
|
44 | 997 | - | 1,041 | |||||||||||||||
|
Gross profit
|
(37 | ) | 286 | - | 249 | ||||||||||||||
|
Operating expenses
|
|||||||||||||||||||
|
Research and development and clinical trials
|
921 | 116 | - | 1,037 | |||||||||||||||
|
Sales and marketing
|
- | 98 | - | 98 | |||||||||||||||
|
Amortization of intangible assets
|
2 | - | - | 2 | |||||||||||||||
|
General and administrative
|
1,204 | 660 | - | 1,864 | |||||||||||||||
|
Total operating expenses
|
2,127 | 874 | - | 3,001 | |||||||||||||||
|
Income (loss) from operations
|
(2,164 | ) | (588 | ) | - | (2,752 | ) | ||||||||||||
|
Other income (expense)
|
|||||||||||||||||||
|
Interest expense
|
(9 | ) | (3 | ) | (1,464 | ) | D | (1,476 | ) | ||||||||||
|
Foreign currency losses
|
- | (131 | ) | - | (131 | ) | |||||||||||||
|
Other income
|
- | (1 | ) | - | (1 | ) | |||||||||||||
|
Total other expenses
|
(9 | ) | (135 | ) | (1,464 | ) | (1,608 | ) | |||||||||||
|
Loss before reorganization Items
|
(2,173 | ) | (723 | ) | (1,464 | ) | (4,360 | ) | |||||||||||
|
Reorganization Expenses
|
- | 128 | - | 128 | |||||||||||||||
|
Loss from continuing operations before provision for income taxes
|
(851 | ) | (1,464 | ) | (2,315 | ) | |||||||||||||
|
Provision for income taxes
|
(5 | ) | - | (5 | ) | ||||||||||||||
|
Income (loss) from continuing operations
|
(2,173 | ) | (856 | ) | (1,464 | ) | (4,493 | ) | |||||||||||
|
Income (loss) from discontinued operations, net of taxes
|
- | 5,150 | - | 5,150 | |||||||||||||||
|
Net loss
|
$ | (2,173 | ) | $ | 4,294 | $ | (1,464 | ) | $ | 658 | |||||||||
|
Continuing operation
|
|||||||||||||||||||
|
Basic and diluted loss per share
|
$ | (0.08 | ) | $ | (0.16 | ) | |||||||||||||
|
Discontinued operations
|
|||||||||||||||||||
|
Basic and diluted loss per share
|
$ | - | $ | 0.19 | |||||||||||||||
|
Basic and diluted weighted average common shares outstanding
|
26,865,090 | 26,865,090 | |||||||||||||||||
| D |
Interest expense on debt - Three Months Ended March 31, 2013
|
|||||
|
Total Interest Expense
|
||||||
|
Face value of debt $2,800,000 multiplied by coupon of 18%
|
$ | 126 | ||||
|
Face value of debt $400,000 multiplied by coupon of 10%
|
10 | |||||
|
Loan fee due to related party
|
25 | |||||
|
Amortization of debt discount (3 months)
|
1,303 | |||||
|
Total
|
1,464 | |||||
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements
4
TriStar Wellness Solutions, Inc. (“TWSI”)
Pro Forma Condensed Combined Balance Sheet
As of December 31, 2012
(in thousands, except share and per share amounts)
|
Historical
|
Pro Forma
|
Pro Forma
|
|||||||||||||||||
|
TWSI
|
Hemcon
|
Adjustments
|
Notes
|
Combined
|
|||||||||||||||
|
Assets
|
|||||||||||||||||||
|
Current Assets
|
|||||||||||||||||||
|
Cash and cash equivalents
|
$ | 11 | $ | 413 | $ | (413 | ) | B | $ | 136 | |||||||||
| 3,200 | A | ||||||||||||||||||
| (3,075 | ) | C | |||||||||||||||||
|
Accounts receivable, net
|
- | 802 | 802 | C | 802 | ||||||||||||||
| (802 | ) | B | |||||||||||||||||
|
Inventories
|
12 | 1,111 | (1,111 | ) | B | 1,123 | |||||||||||||
| 1,111 | C | ||||||||||||||||||
|
Other current assets
|
- | 328 | (328 | ) | B | - | |||||||||||||
|
Total current assets
|
23 | 2,654 | (616 | ) | 2,061 | ||||||||||||||
|
Property and equipment, net
|
1 | 1,530 | (1,530 | ) | B | 1,531 | |||||||||||||
| 1,530 | C | ||||||||||||||||||
|
Deposits and other assets
|
- | 53 | (53 | ) | B | - | |||||||||||||
|
Goodwill
|
- | 791 | (791 | ) | B | 132 | |||||||||||||
| 132 | C | ||||||||||||||||||
|
Total assets
|
24 | 5,028 | (1,328 | ) | 3,724 | ||||||||||||||
|
Liabilities and Stockholders' Equity
|
|||||||||||||||||||
|
Current Liabilities
|
|||||||||||||||||||
|
Short term debt
|
50 | $ | 22,411 | (22,411 | ) | B | 467 | ||||||||||||
| 500 | A | ||||||||||||||||||
| (83 | ) | A | |||||||||||||||||
|
Short term debt due to related parties
|
525 | $ | - | 2,700 | A | 703 | |||||||||||||
| (2,522 | ) | A | |||||||||||||||||
|
Accounts payable and accrued expenses
|
318 | 40,649 | (40,649 | ) | B | 818 | |||||||||||||
| 500 | C | ||||||||||||||||||
|
Other current liabilities
|
- | 9,601 | (9,601 | ) | B | - | |||||||||||||
|
Total current liabilities
|
893 | 72,661 | (71,566 | ) | 1,988 | ||||||||||||||
|
Total liabilities
|
893 | $ | 72,661 | $ | (71,566 | ) | $ | 1,988 | |||||||||||
|
Redeemable convertible preferred Subject to Compromise
|
|||||||||||||||||||
|
Series A
|
- | 801 | (801 | ) | B | - | |||||||||||||
|
Series B
|
- | 5,904 | (5,904 | ) | B | - | |||||||||||||
|
Series C
|
- | 12,000 | (12,000 | ) | B | - | |||||||||||||
|
Total redeemable convertible preferred
|
- | $ | 18,705 | (18,705 | ) | - | |||||||||||||
|
Stockholders' equity
|
|||||||||||||||||||
|
Convertible preferred stock
|
6 | 6 | |||||||||||||||||
|
Common stock
|
0 | 5 | (5 | ) | B | 0 | |||||||||||||
|
Additional paid in capital
|
8,939 | 6,275 | (6,275 | ) | B | 11,544 | |||||||||||||
| 2,605 | A | ||||||||||||||||||
|
Retained earnings
|
- | (93,602 | ) | 93,602 | B | - | |||||||||||||
|
Accumulated other comprehensive income
|
- | 984 | (984 | ) | B | - | |||||||||||||
|
Accumulated deficit
|
(9,814 | ) | - | (9,814 | ) | ||||||||||||||
|
Total stockholders equity (deficit)
|
(869 | ) | (86,338 | ) | 88,943 | 1,736 | |||||||||||||
|
Total liabilities and stockholders' equity
|
$ | 24 | $ | 5,028 | $ | (1,328 | ) | $ | 3,724 | ||||||||||
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements
5
|
Short
|
||||||||||||||||||||||||||||||
|
|
Short
|
Term
|
Additional
|
|||||||||||||||||||||||||||
|
Cash
|
Term
Debt |
Debt
(Related Party) |
Paid-in
Capital |
Total
|
||||||||||||||||||||||||||
|
Issuance of promissory notes with detachable warrants
|
||||||||||||||||||||||||||||||
| A |
Issuance of promissory notes
|
$ | 3,200 | (500 | ) | (2,700 | ) | - | - | |||||||||||||||||||||
|
Issuance of warrants to purchase 1,650,000 of TWSI common stock at an exercise price of $2.74 (1)
|
- | 83 | 2,522 | (2,605 | ) | - | ||||||||||||||||||||||||
| $ | 3,200 | (417 | ) | (178 | ) | (2,605 | ) | - | ||||||||||||||||||||||
| B |
Elimination of of the assets, liabilities and equity not acquired in the transaction
|
|||||||||||||||||||||||||||||
|
Cash
|
$ | (413 | ) | |||||||
|
Accounts receivable, net
|
(802 | ) | ||||||||
|
Inventories
|
(1,111 | ) | ||||||||
|
Other current assets
|
(328 | ) | ||||||||
|
Property and equipment, net
|
(1,530 | ) | ||||||||
|
Deposits and other assets
|
(53 | ) | ||||||||
|
Goodwill
|
(791 | ) | ||||||||
|
Short term debt
|
22,411 | |||||||||
|
Accounts payable and accrued expenses
|
40,649 | |||||||||
|
Other current liabilities
|
9,601 | |||||||||
|
Total redeemable convertible preferred
|
18,705 | |||||||||
|
Common stock
|
5 | |||||||||
|
APIC
|
6,275 | |||||||||
|
Retained earnings
|
(93,602 | ) | ||||||||
|
Accumulated other comprehensive income
|
984 | |||||||||
|
Total
|
- |
| C |
Purchase Business Combination
|
Cash
|
Accounts receivable
|
Inventories
|
Property and Equipment
|
Goodwill and other intangible assets
|
Accounts payable and accrued expenses
|
Total
|
||||||||||||||||||||||
|
Purchase of 100% of Hemcon's voting securties in exchnage for $3,075,000
|
$ | (3,075 | ) | 802 | 1,111 | 1,530 | 132 | (500 | ) | - | ||||||||||||||||||||
|
(1)
|
The debt is recognized and measured by allocating a portion of the proceeds to warrants, based on their relative fair value, and as a reduction to the carrying amount of the debt. The discount recorded in connection with the warrant valuation is recognized as non-cash interest expense and is amortized over the term of the debt.
|
|
The warrants issued are based on the Black Scholes Model using the following assumptions:
|
||||
|
Exercise price:
|
$ | 2.74 | ||
|
Market price at date of issue:
|
$ | 2.74 | ||
|
Expected volatility:
|
85% | |||
|
Term:
|
4 years
|
|||
|
Risk-free interest rate:
|
0.40% | |||
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements
6
TriStar Wellness Solutions, Inc. (“TWSI”)
Pro Forma Combined Statement of Operations
For the Year Ended December 31, 2012
(in thousands, except share and per share amounts)
|
Historical
|
Pro Forma
|
Pro Forma
|
|||||||||||||||||
|
TWSI
|
Hemcon
|
Adjustments
|
Notes
|
Combined
|
|||||||||||||||
|
Revenue
|
$ | - | $ | 4,943 | $ | - | $ | 4,943 | |||||||||||
|
Cost of reveunes
|
- | 4,359 | - | 4,359 | |||||||||||||||
|
Gross profit
|
- | 584 | - | 584 | |||||||||||||||
|
Operating expenses
|
|||||||||||||||||||
|
Research and development and clinical trials
|
700 | 990 | - | 1,690 | |||||||||||||||
|
Sales and marketing
|
- | 1,138 | - | 1,138 | |||||||||||||||
|
Amortization of intangible assets
|
84 | - | - | 84 | |||||||||||||||
|
General and administrative
|
999 | 3,328 | - | 4,327 | |||||||||||||||
|
Total operating expenses
|
1,784 | $ | 5,456 | - | 7,240 | ||||||||||||||
|
Income (loss) from operations
|
(1,784 | ) | $ | (4,872 | ) | - | (6,656 | ) | |||||||||||
|
Other income (expense)
|
|||||||||||||||||||
|
Interest expense
|
(35 | ) | (704 | ) | (2,927 | ) | E | (3,666 | ) | ||||||||||
|
Foreign currency losses
|
- | 84 | - | 84 | |||||||||||||||
|
Other income
|
- | (57 | ) | - | (57 | ) | |||||||||||||
|
Total other expenses
|
(35 | ) | (677 | ) | (2,927 | ) | (3,639 | ) | |||||||||||
|
Loss before reorganization Items
|
(1,818 | ) | (5,549 | ) | (2,927 | ) | (10,294 | ) | |||||||||||
|
Reorganization Expenses
|
- | 1,556 | - | 1,556 | |||||||||||||||
|
Loss from continuing operations before provision for income taxes
|
(7,105 | ) | (2,927 | ) | (10,032 | ) | |||||||||||||
|
Provision for income taxes
|
467 | - | 467 | ||||||||||||||||
|
Loss from continuing operations
|
(1,818 | ) | (6,638 | ) | (2,927 | ) | (11,383 | ) | |||||||||||
|
Income (loss) from discontinued operations, net of taxes
|
(430 | ) | 2,063 | - | 1,633 | ||||||||||||||
|
Net loss
|
$ | (2,249 | ) | $ | (4,575 | ) | $ | (2,927 | ) | $ | (9,751 | ) | |||||||
|
Continuing operation
|
|||||||||||||||||||
|
Basic and diluted loss per share
|
$ | (44.32 | ) | $ | (277.43 | ) | |||||||||||||
|
Discontinued operations
|
|||||||||||||||||||
|
Basic and diluted loss per share
|
$ | (10.48 | ) | $ | 39.79 | ||||||||||||||
|
Basic and diluted weighted average common shares outstanding
|
41,032 | 41,032 | |||||||||||||||||
| E |
Interest expense on debt - Year Ended December 31, 2012
|
|||||
|
Total Interest Expense
|
||||||
|
Face value of debt $2,800,000 multiplied by coupon of 18%
|
$ | 252 | ||||
|
Face value of debt $400,000 multiplied by coupon of 10%
|
20 | |||||
|
Loan fee due to related party
|
50 | |||||
|
Amortization of debt discount (6 months)
|
2,605 | |||||
|
Total
|
2,927 | |||||
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements
7
TriStar Wellness Solutions Inc.
Notes to Unaudited Pro Forma Condensed
Combined Financial Statements
Note 1 - Basis of Presentation
The unaudited pro forma condensed combined balance sheet as of March 31, 2013 and December 31, 2012, and the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2013 and the year ended December 31, 2012 are presented herein. The unaudited pro forma condensed combined balance sheet as of March 31, 2013 gives effect to the acquisition as if it had been completed on March 31, 2013, and combines the unaudited balance sheet of TriStar Wellness Solutions Inc. ("the Company or TWSI") and the assets acquired from HemCon Medical Technologies, Inc. (“HemCon”). The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2013 give effect to the acquisition as if it had occurred on January 1, 2013. The unaudited pro forma condensed combined balance sheet as of December 31, 2012 gives effect to the acquisition as if it had been completed on December 31, 2012, and combines the unaudited balance sheet of TriStar and the assets acquired from HemCon. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012 give effect to the acquisition as if it had occurred on January 1, 2012.
The unaudited pro forma condensed combined balance sheet was prepared using the historical balance sheets of TWSI and HemCon as of March 31, 2013 and December 31, 2012. The unaudited pro forma condensed combined statements of operations were prepared using the historical statements of operations of TWSI for the three months ended March 31, 2013 and year ended December 31, 2012, and the historical statements of operations of HemCon for the three months ended March 31, 2013 and the year ended December 31, 2012.
The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes to the unaudited condensed combined financial statements, and is not necessarily indicative of the condensed combined results of operations or financial condition had the acquisition been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not reflect any cost savings or integration costs. The unaudited pro forma condensed combined financial information does not purport to project the future results of operations or financial position of the condensed combined company. The pro forma adjustments are based on preliminary estimates of the fair values of assets acquired and information available as of the date of this Current Report on Form 8-K/A. Certain valuations are currently in process. Actual results may differ from the amounts reflected in the unaudited pro forma condensed combined financial statements, and the differences may be material.
Note 2 - Transaction and Purchase Consideration
On May 6, 2013, we closed the acquisition of HemCon Medical Technologies Inc., an Oregon corporation (“HemCon”), pursuant to the terms of an Agreement for Purchase and Sale of Stock entered into by and between us and HemCon (the “Agreement”). The Agreement was entered into as part of HemCon’s Fifth Amended Plan of Reorganization in its bankruptcy proceeding (United States Bankruptcy Court, District of Oregon, Case No. 12-32652-elp11) and was approved by the Court as part of HemCon’s approved Plan of Reorganization. Under the Agreement, we purchased 100 shares of HemCon’s common stock, representing 100% of HemCon’s then-outstanding voting securities, in exchange for $3,075,000 (the “Purchase Price”). The Purchase Price was paid to the Court and the Trustee of the bankruptcy proceeding to be distributed to HemCon’s creditors in accordance with the Plan of Reorganization.
Prior to closing the acquisition of HemCon we borrowed money from several different parties, primarily the following:
|
1)
|
A Promissory Note with DayStar Funding, LP, a Texas limited partnership and a party controlled by Frederick A. Voight one of our officers and directors, in the principal amount of $2,500,000. The note has an interest rate of 1.5% per month and is due on or before November 6, 2013. Additionally, a loan fee of 2% of the principal amount is due and payable by us to lender on or before the maturity date. In connection with this promissory note, we issued DayStar Funding, LP, warrants to purchase 1,500,000 shares of our common stock at an exercise price $2.74 per share, which was the fair market value of our common stock on the date of issuance.
|
|
2)
|
A Promissory Note with the Lawrence K. Ingber Trust, dated June 14, 1980, as amended and restated March 6, 2006, in the principal amount of $100,000. The note has an interest rate of 1.5% per month, simple interest, and is due on or before November 6, 2013. In connection with this promissory note, we issued the Lawrence K. Ingber Trust warrants to purchase 50,000 shares of our common stock at an exercise price $2.74 per share, which was the fair market value of our common stock on the date of issuance.
|
|
3)
|
A Promissory Note with James Linderman, the father of one of our officers and directors, in the principal amount of $100,000. The note has an interest rate of 1.5% per month, simple interest, and is due on or before August 6, 2013. In connection with this promissory note, we issued Mr. James Linderman warrants to purchase 50,000 shares of our common stock at an exercise price $2.74 per share, which was the fair market value of our common stock on the date of issuance.
|
|
4)
|
A Promissory Note with James Barickman, one of our officers and directors, in the principal amount of $50,000. The note has an interest rate of 1.5% per month, simple interest, and is due on or before November 6, 2013. In connection with this promissory note, we issued Mr. James Barickman warrants to purchase 25,000 shares of our common stock at an exercise price $2.74 per share, which was the fair market value of our common stock on the date of issuance.
|
|
5)
|
A Promissory Note with John Linderman, one of our officers and directors, in the principal amount of $50,000. The note has an interest rate of 1.5% per month, simple interest, and is due on or before November 6, 2013. In connection with this promissory note, we issued Mr. John Linderman warrants to purchase 25,000 shares of our common stock at an exercise price $2.74 per share, which was the fair market value of our common stock on the date of issuance.
|
|
6)
|
A Loan Agreement with an unaffiliated third party for a loan of up to $750,000, payable in two tranches, $400,000 was paid in connection with the closing of the acquisition of HemCon, and $350,000 payable within 20 days after the closing of the acquisition of HemCon. The loan has an interest rate of 10% per annum and is due on or before November 6, 2013.
|
8
The acquisition has been accounted for as a business combination and the Company valued all assets and liabilities acquired at their estimated fair values on the date of acquisition. Accordingly, the assets and liabilities of the acquired entity were recorded at their estimated fair values at the date of the acquisition.
The estimated purchase price allocation is based on preliminary estimates of fair value as of March 31, 2013 is as follows (dollars in thousands):
|
Accounts receivable
|
$ | 809 | ||
|
Inventories
|
1,241 | |||
|
Property and equipment
|
1,404 | |||
|
Accounts payable and accrued expenses
|
(500 | ) | ||
|
Goodwill and other intangible assets
|
121 | |||
|
Total acquisition cost allocated
|
$ | 3,075 |
The purchase price consists of the following:
|
Cash
|
$ | 3,075 |
The estimated purchase price allocation is based on preliminary estimates of fair value as of December 31, 2012 is as follows (dollars in thousands):
|
Accounts receivable
|
$ | 802 | ||
|
Inventories
|
1,111 | |||
|
Property and equipment
|
1,530 | |||
|
Accounts payable and accrued expenses
|
(500 | ) | ||
|
Goodwill and other intangible assets
|
132 | |||
|
Total acquisition cost allocated
|
$ | 3,075 |
The purchase price consists of the following:
|
Cash
|
$ | 3,075 |
9