Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - CRAWFORD UNITED Corp | ex_123844.htm |
| EX-23 - EXHIBIT 23 - CRAWFORD UNITED Corp | ex_123857.htm |
| 8-K/A - FORM 8-K/A - CRAWFORD UNITED Corp | hicka20180912_8ka.htm |
Exhibit 99.2
HICKOK INCORPORATED AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED COMBINED FINANCIAL INFORMATION
INDEX
| Page | |
| Unaudited Pro Forma Consolidated Combined Balance Sheet as of June 30, 2018 | 1 |
| Unaudited Pro Forma Consolidated Combined Statement of Income for the Six Months June 30, 2018 | 3 |
| Unaudited Pro Forma Consolidated Combined Statement of Income for the Year Ended September 30, 2017 | 5 |
Effective July 1, 2018, Hickok Incorporated, an Ohio corporation (the “Company”), completed the acquisition of all of the issued and outstanding shares of capital stock of CAD Enterprises, Inc., an Arizona corporation (“CAD”), pursuant to a Share Purchase Agreement entered into as of July 5, 2018 by and among the Company, the sellers named therein and the Sellers’ representative named therein. The following unaudited pro forma consolidated combined financial statements give effect to the acquisition of CAD.
The acquisition will be a business combination accounted for in accordance with Accounting Standards Codification (ASC) 805, Business Combinations. Accordingly, for accounting purposes, the fair value of the assets acquired and liabilities assumed will be recorded on the balance sheet. The difference between the purchase price and fair value of the assets acquired, net of liabilities assumed, will be recorded as goodwill and other intangible assets. The intangible assets, other than goodwill, will be amortized to expense over the estimated useful lives. Goodwill is of an indefinite life and will not be amortized but will be tested at least annually for impairment.
Acquisition-related transaction costs (i.e. advisory, legal, accounting, valuation and other professional or accounting fees) are not included as a component of consideration transferred but are accounted for as expense in the periods in which the costs are incurred and the services are received.
The unaudited pro forma consolidated combined financial statements are based on the Company’s historical financial statements and CAD’s historical financial statements.
The unaudited pro forma consolidated combined balance sheet as of June 30, 2018 and unaudited pro forma consolidated combined statements of income for the six months ended June 30, 2018 give effect to the transaction as if the acquisition was consummated January 1, 2018. The unaudited pro forma consolidated combined statements of income for the year ended September 30, 2017 gives effect to the transaction as if the acquisition was consummated October 1, 2016.
The unaudited pro forma consolidated combined financial information should be read together with the Company’s historical financial statements, which are included in the Company’s latest annual report on Form 10-K and Form 10-KT and quarterly report on Form 10-Q, and CAD Enterprises Inc. historical information, included herein.
|
HICKOK INCORPORATED AND SUBSIDIARIES |
|
UNAUDITED PRO FORMA CONSOLIDATED COMBINED BALANCE SHEET |
|
ASSETS |
|
Hickok |
CAD |
Hickok |
|||||||||||||||
|
Incorporated |
Enterprises, Inc. |
Incorporated |
|||||||||||||||
|
6/30/2018 |
3/31/2018 |
Pro Forma |
6/30/2018 |
||||||||||||||
|
Unaudited |
Audited |
Adjustments |
Combined |
||||||||||||||
|
CURRENT ASSETS: |
|||||||||||||||||
|
Cash and Cash Equivalents |
$ | 2,663,566 | $ | 1,282,308 | $ | (949,236 | ) |
(e) |
$ | 2,996,638 | |||||||
|
Accounts receivable-less allowance for doubtful accounts |
7,351,867 | 1,897,086 | - | 9,248,953 | |||||||||||||
|
Costs in Excess of Billings and estimated costs |
2,217,344 | - | - | 2,217,344 | |||||||||||||
|
Inventories-less allowance for obsolete inventory |
1,980,496 | 2,262,198 | - | 4,242,694 | |||||||||||||
|
Prepaid Expenses and other current assets |
398,477 | 50,091 | - | 448,568 | |||||||||||||
|
Total Current Assets |
14,611,750 | 5,491,683 | (949,236 | ) | 19,154,197 | ||||||||||||
|
PROPERTY, PLANT AND EQUIPMENT |
4,110,252 | 15,688,626 | (4,658,626 | ) |
(a) |
15,140,252 | |||||||||||
|
Less accumulated depreciation |
1,239,029 | 10,744,597 | (10,744,597 | ) |
(a) |
1,239,029 | |||||||||||
|
Property, Plant and Equipment, Net |
2,871,223 | 4,944,029 | 6,085,971 | 13,901,223 | |||||||||||||
|
OTHER ASSETS: |
|||||||||||||||||
|
Goodwill |
2,255,912 | - | 4,968,315 |
(c) |
7,224,227 | ||||||||||||
|
Intangibles, net of accumulated amortization |
1,519,384 | - | 3,000,000 |
(b) |
4,519,384 | ||||||||||||
|
Deferred income taxes-less valuation allowance |
2,173,892 | - | - | 2,173,892 | |||||||||||||
|
Other non-current assets |
- | 25,263 | - | 25,263 | |||||||||||||
|
Total Non-Current Other Assets |
5,949,188 | 25,263 | 7,968,315 | 13,942,766 | |||||||||||||
|
Total Assets |
$ | 23,432,161 | $ | 10,460,975 | $ | 13,105,050 | $ | 46,998,186 | |||||||||
See accompanying notes to unaudited pro forma consolidated combined financial statements.
|
HICKOK INCORPORATED AND SUBSIDIARIES |
|
UNAUDITED PRO FORMA CONSOLIDATED COMBINED BALANCE SHEET |
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
Hickok |
CAD |
Hickok |
|||||||||||||||
|
Incorporated |
Enterprises, Inc. |
Incorporated |
|||||||||||||||
|
6/30/2018 |
3/31/2018 |
Pro Forma |
6/30/2018 |
||||||||||||||
|
Unaudited |
Audited |
Adjustments |
Combined |
||||||||||||||
|
CURRENT LIABILITIES: |
|||||||||||||||||
|
Convertible notes payable - related party |
$ | 200,000 | $ | - | $ | - | 200,000 | ||||||||||
|
Notes payable - related party |
432,910 | 134,059 | (134,059 | ) |
(e) |
432,910 | |||||||||||
|
Bank Debt - Current |
500,000 | 512,820 | (512,820 | ) |
(e) |
500,000 | |||||||||||
|
Leases payable |
16,944 | - | - | 16,944 | |||||||||||||
|
Accounts payable |
2,462,941 | 1,909,212 | - | 4,372,153 | |||||||||||||
|
Unearned revenue |
3,182,213 | - | - | 3,182,213 | |||||||||||||
|
Accrued payroll and related expenses |
828,118 | - | - | 828,118 | |||||||||||||
|
Accrued expenses |
1,296,444 | 170,198 | - | 1,466,642 | |||||||||||||
|
Accrued Income Taxes |
227,595 | - | - | 227,595 | |||||||||||||
|
Total Current Liabilities |
9,147,165 | 2,726,289 | (646,879 | ) | 11,226,575 | ||||||||||||
|
LONG-TERM LIABILITIES: |
|||||||||||||||||
|
Notes payable - related party |
3,428,586 | 74,903 | (74,903 | ) |
(e) |
3,428,586 | |||||||||||
|
Sellers Note |
- | - | 9,000,000 |
(d) |
9,000,000 | ||||||||||||
|
Bank Debt |
1,074,235 | 227,454 | 11,772,546 |
(d), (e) |
13,074,235 | ||||||||||||
|
Leases payable |
7,789 | - | - | 7,789 | |||||||||||||
|
Deferred income taxes |
- | 486,615 | - | 486,615 | |||||||||||||
|
Total Long-Term Liabilities |
4,510,610 | 788,972 | 20,697,643 | 25,997,225 | |||||||||||||
|
TOTAL LIABILITIES |
13,657,775 | 3,515,261 | 20,050,764 | 37,223,800 | |||||||||||||
|
STOCKHOLDERS' EQUITY |
|||||||||||||||||
|
Common shares - no par value |
|||||||||||||||||
|
Class A 10,000,000 shares authorized, 2,123,806 shares issued and outstanding |
2,495,534 | 30,000 | (30,000 | ) |
(f) |
2,495,534 | |||||||||||
|
Class B 2,500,000 convertible shares authorized, 596,848 shares issued and outstanding |
710,272 | - | - | 710,272 | |||||||||||||
|
Preferred 1,000,000 shares authorized, no shares outstanding |
- | - | - | - | |||||||||||||
|
Contributed capital |
1,741,901 | - | - | 1,741,901 | |||||||||||||
|
Treasury shares |
(1,905,780 | ) | (1,905,780 | ) | |||||||||||||
|
Class A - 37,208 shares |
- | - | - | - | |||||||||||||
|
Class B - 182,435 shares |
- | - | - | - | |||||||||||||
|
Retained earnings |
6,732,459 | 6,915,714 | (6,915,714 | ) |
(f) |
6,732,459 | |||||||||||
|
Total Stockholders' Equity |
9,774,386 | 6,945,714 | (6,945,714 | ) | 9,774,386 | ||||||||||||
|
Total Liabilities and Stockholders' Equity |
$ | 23,432,161 | $ | 10,460,975 | $ | 13,105,050 | $ | 46,998,186 | |||||||||
See accompanying notes to unaudited pro forma consolidated combined financial statements.
|
HICKOK INCORPORATED AND SUBSIDIARIES |
||||||||||
|
UNAUDITED PRO FORMA CONSOLIDATED COMBINED STATEMENT OF INCOME |
||||||||||
|
FOR THE SIX MONTHS ENDED |
|
Hickok |
CAD |
Hickok |
|||||||||||||||
|
Incorporated |
Enterprises, Inc. |
Incorporated |
|||||||||||||||
|
6/30/2018 |
3/31/2018 |
Pro Forma |
6/30/2018 |
||||||||||||||
|
Unaudited |
Unaudited |
Adjustments |
Combined |
||||||||||||||
|
Total Sales |
$ | 25,471,892 | $ | 14,127,927 | $ | - | $ | 39,599,819 | |||||||||
|
Cost of Sales |
18,966,873 | 12,310,603 | $ | 31,277,476 | |||||||||||||
|
Gross Profit |
6,505,019 | 1,817,324 | $ | 8,322,343 | |||||||||||||
|
Operating Expenses: |
|||||||||||||||||
|
Product Development |
220,418 | - | - | 220,418 | |||||||||||||
|
Selling, General and Administrative Expenses |
3,824,571 | 1,577,068 | 100,000 |
(b) |
5,501,639 | ||||||||||||
| 2,460,030 | 240,256 | 2,600,286 | |||||||||||||||
|
Other (Income) and Expenses: |
|||||||||||||||||
|
Interest Charges |
166,688 | 19,735 | 400,265 |
(d), (e) |
586,688 | ||||||||||||
|
Loss on sale of business |
1,160,574 | - | - | 1,160,574 | |||||||||||||
|
Cash balance plan termination |
- | 2,364,241 | - | 2,364,241 | |||||||||||||
|
Other (income) expense, net |
108,266 | 3,756 | - | 112,022 | |||||||||||||
|
Total Other (Income) and Expenses |
1,435,528 | 2,387,732 | 400,265 | 4,223,525 | |||||||||||||
|
Income before Provision for Income Taxes |
1,024,502 | (2,147,476 | ) | (400,265 | ) | (1,623,239 | ) | ||||||||||
|
Provision for Income Taxes |
256,125 | (911,947 | ) | - | (655,822 | ) | |||||||||||
|
Net Income (Loss) |
$ | 768,377 | $ | (1,235,529 | ) | $ | (400,265 | ) | $ | (967,417 | ) | ||||||
|
Earnings (Loss) Per Common Share - Basic |
$ | 0.27 | $ | (0.34 | ) | ||||||||||||
|
Earnings (Loss) Per Common Share - Diluted |
$ | 0.24 | $ | (0.30 | ) | ||||||||||||
|
Weighted Average Shares of Common Stock Outstanding - Basic |
2,880,070 | - | 2,880,070 | ||||||||||||||
|
Weighted Average Shares of Common Stock Outstanding - Diluted |
3,236,590 | - | 3,236,590 | ||||||||||||||
See accompanying notes to unaudited pro forma consolidated combined financial statements.
|
HICKOK INCORPORATED AND SUBSIDIARIES |
|
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMTION |
|
JUNE 30, 2018 PRO FORMA ADJUSTMENTS |
|
(a) |
Reflects the adjustment to increase the basis in the acquired property plant and equipment to the estimated fair value. |
|
Book value of Fixed Assets - Gross |
$ | 15,688,626 | |||
|
Accumulated Depreciation |
10,744,597 | ||||
|
Net Book Value - Fixed |
4,944,029 | ||||
|
Fair Market Value of Fixed Assets |
11,030,000 | ||||
|
Adjustment to Increase Fixed Assets |
$ | 6,085,971 |
|
(b) |
Reflects the adjustment of intangible assets acquired by the Company to their estimated fair values, and related amortization expense for the period. The following table summarized the estimated fair values of CAD Enterprises, Inc. identifiable intangible assets and their estimated useful lives. |
|
Useful Life |
Amortization |
|||||||||||
|
Fair Value |
in Years |
Expense |
||||||||||
|
Customer List |
$ | 3,000,000 | 15 | $ | 100,000 | |||||||
|
Other Identifiable Intangibles |
- | 15 | - | |||||||||
|
Total Intangibles, Other than Goodwill |
$ | 3,000,000 | $ | 100,000 | ||||||||
|
(c) |
Reflects adjustment to record goodwill associated with the acquisition of CAD Enterprises, Inc. as shown below: |
|
Assets Acquired: |
|||||
|
Current Assets |
$ | 4,542,447 | |||
|
Net Property and Equipment |
11,030,000 | ||||
|
Intangible Assets |
3,000,000 | ||||
|
Goodwill |
4,968,315 | ||||
|
Non-Current Assets |
25,263 | ||||
|
Total Assets Acquired |
$ | 23,566,025 | |||
|
Liabilities Assumed |
2,566,025 | ||||
|
Net Assets Acquired |
$ | 21,000,000 |
|
(d) |
Reflects the new debt incurred to finance the acquisition of CAD Enterprises, Inc. and related interest expense as shown below: |
|
Interest |
Interest |
|||||||||||
|
Debt |
Rate |
Expense |
||||||||||
|
Sellers Note |
$ | 9,000,000 | 4.0 | % | $ | 180,000 | ||||||
|
Term Loan A Debt |
4,500,000 | 4.0 | % | 90,000 | ||||||||
|
Revolving Credit Facility |
7,500,000 | 4.0 | % | 150,000 | ||||||||
|
Total Debt |
$ | 21,000,000 | $ | 420,000 | ||||||||
|
Cash used |
- | |||||||||||
|
Debt incurred |
21,000,000 | |||||||||||
|
Total purchase price |
$ | 21,000,000 | ||||||||||
|
(e) |
Represents the elimination of the historical debt and related interest expense of CAD Enterprises, Inc. not included in purchase. |
|
Interest |
||||||||||||
|
Debt |
Expense |
|||||||||||
|
Notes Payable - Related Party, Short Term |
$ | 134,059 | ||||||||||
|
Notes Payable - Related Party, Long Term |
74,903 | |||||||||||
|
Bank Debt - Current |
512,820 | |||||||||||
|
Bank Debt - Non Current |
227,454 | |||||||||||
|
Total Debt |
$ | 949,236 | 19,735 | |||||||||
|
Cash used to extinguish debt |
$ | 949,236 | ||||||||||
|
(f) |
Represents the elimination of the historical equity of CAD Enterprises, Inc. |
|
HICKOK INCORPORATED AND SUBSIDIARIES |
||||||||||
|
UNAUDITED PRO FORMA CONSOLIDATED COMBINED STATEMENT OF INCOME |
||||||||||
|
FOR THE YEAR ENDED SEPTEMBER 30, 2017 |
|
Hickok |
CAD |
Hickok |
|||||||||||||||
|
Incorporated |
Enterprises, Inc. |
Incorporated |
|||||||||||||||
|
9/30/2017 |
3/31/2018 |
Pro Forma |
9/30/2017 |
||||||||||||||
|
Audited |
Audited |
Adjustments |
Combined |
||||||||||||||
|
Total Sales |
$ | 23,816,735 | $ | 30,196,920 | $ | - | $ | 54,013,655 | |||||||||
|
Cost of Sales |
15,792,458 | 26,463,788 | $ | 42,256,246 | |||||||||||||
|
Gross Profit |
8,024,277 | 3,733,132 | $ | 11,757,409 | |||||||||||||
|
Operating Expenses: |
|||||||||||||||||
|
Product Development |
795,957 | - | - | 795,957 | |||||||||||||
|
Selling, General and Administrative Expenses |
4,546,383 | 2,670,058 | 200,000 |
(a) |
7,416,441 | ||||||||||||
| 2,681,937 | 1,063,074 | 3,545,011 | |||||||||||||||
|
Other (Income) and Expenses: |
|||||||||||||||||
|
Interest Charges |
282,648 | 46,834 | 793,166 |
(b), (c) |
1,122,648 | ||||||||||||
|
Legal Matter |
(50,000 | ) | - | - | (50,000 | ) | |||||||||||
|
Cash balance plan termination |
- | 2,364,241 | - | 2,364,241 | |||||||||||||
|
Other (income) expense, net |
260,529 | 2,423 | - | 262,952 | |||||||||||||
|
Total Other (Income) and Expenses |
493,177 | 2,413,498 | 793,166 | 3,699,841 | |||||||||||||
|
Income before Provision for Income Taxes |
2,188,760 | (1,350,424 | ) | (793,166 | ) | (154,830 | ) | ||||||||||
|
Provision for Income Taxes |
780,364 | (1,025,783 | ) | - | (245,419 | ) | |||||||||||
|
Net Income (Loss) |
$ | 1,408,396 | $ | (324,641 | ) | $ | (793,166 | ) | $ | 90,589 | |||||||
|
Earnings (Loss) Per Common Share - Basic |
$ | 0.49 | $ | 0.03 | |||||||||||||
|
Earnings (Loss) Per Common Share - Diluted |
$ | 0.46 | $ | 0.03 | |||||||||||||
|
Weighted Average Shares of Common Stock Outstanding - Basic |
2,874,926 | - | 2,874,926 | ||||||||||||||
|
Weighted Average Shares of Common Stock Outstanding - Diluted |
3,069,077 | - | 3,069,077 | ||||||||||||||
See accompanying notes to unaudited pro forma consolidated combined financial statements.
|
HICKOK INCORPORATED AND SUBSIDIARIES |
|
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMTION |
|
SEPTEMBER 30, 2017 PRO FORMA ADJUSTMENTS |
|
(a) |
Reflects the adjustment of intangible assets acquired by the Company to their estimated fair values, and related amortization expense for the period. The following table summarized the estimated fair values of CAD Enterprises, Inc. identifiable intangible assets and their estimated useful lives. |
|
Useful Life |
Amortization |
|||||||||||
|
Fair Value |
in Years |
Expense |
||||||||||
|
Customer List |
$ | 3,000,000 | 15 | $ | 200,000 | |||||||
| Other Identifiable Intangibles | - | 15 | - | |||||||||
|
Total Intangibles, Other than Goodwill |
$ | 3,000,000 | $ | 200,000 | ||||||||
|
(b) |
Reflects the new debt incurred to finance the acquisition of CAD Enterprises, Inc. and related interest expense as shown below: |
|
Interest |
Interest |
|||||||||||
|
Rate |
Expense |
|||||||||||
|
Sellers Note |
$ | 9,000,000 | 4.0 | % | $ | 360,000 | ||||||
|
Term Loan A Debt |
4,500,000 | 4.0 | % | 180,000 | ||||||||
|
Revolving Credit Facility |
7,500,000 | 4.0 | % | 300,000 | ||||||||
|
Total Debt |
$ | 21,000,000 | $ | 840,000 | ||||||||
|
Cash used |
- | |||||||||||
|
Debt incurred |
21,000,000 | |||||||||||
|
Total purchase price |
21,000,000 | |||||||||||
|
(c) |
Represents the elimination of the historical debt and related interest of CAD Enterprises, Inc. not included in purchase. |
|
Notes & |
Interest |
|||||||||||
|
Bank Debt |
Expense |
|||||||||||
|
Notes Payable - Related Party, Short Term |
$ | 134,059 | ||||||||||
|
Notes Payable - Related Party, Long Term |
74,903 | |||||||||||
|
Bank Debt - Current |
512,820 | |||||||||||
|
Bank Debt - Non Current |
227,454 | |||||||||||
|
Total Debt |
$ | 949,236 | $ | 46,834 | ||||||||
6