UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K/A
(Amendment No. 1)
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of Report (Date of earliest event reported): December 22, 2015
POSITIVEID
CORPORATION
(Exact
name of registrant as specified in its charter)
| Delaware |
|
001-33297 |
|
06-1637809 |
(State
or Other Jurisdiction
of Incorporation) |
|
(Commission
File Number) |
|
(IRS
Employer
Identification Number) |
1690
South Congress Avenue, Suite 201
Delray
Beach, Florida 33445
(Address
of principal executive offices) (zip code)
(561)
805-8000
(Registrant’s
telephone number, including area code)
(Former
Name or Former Address if Changed Since Last Report)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2. below):
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Cautionary
Note on Forward-Looking Statements
This
Current Report on Form 8-K/A (this “Report”) and any related statements of representatives and partners of the Company
contain, or may contain, among other things, certain “forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Such forward-looking statements involve significant risks and uncertainties.
Such statements may include, without limitation, statements with respect to the Company’s plans, objectives, projections,
expectations and intentions and other statements identified by words such as “projects,” “may,” “will,”
“could,” “would,” “should,” “believes,” “expects,” “anticipates,”
“estimates,” “intends,” “plans,” or similar expressions. These statements are based upon the
current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties, including
those detailed in the Company’s filings with the Securities and Exchange Commission (the “SEC”). Actual results
may differ significantly from those set forth in the forward-looking statements. These forward-looking statements involve certain
risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company’s control).
The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by applicable law.
EXPLANATORY
NOTE
On
December 29, 2015, PositiveID Corporation (“PositiveID” or “Company”), filed a Current Report on Form
8-K under Items 1.01, 2.02, 3.02, and 9.01 (the “Initial Report”) to report, among other developments, that it had
entered into a Stock Purchase Agreement (“SPA”) to acquire all of the outstanding common stock of E-N-G Mobile Systems,
Inc. (“ENG”), dated December 22, 2015. The terms of the SPA were disclosed in the Initial Report. The SPA defines
the agreed upon terms of the Company’s acquisition of all of the common stock of ENG. The Initial Report did not include
disclosure under Item 2.01 that the acquisition of all of the outstanding common stock of ENG was completed on December 24, 2015.
This Amendment Number 1 to Current Report on Form 8-K/A amends the Initial Report to add disclosure under Item 2.01.
In
compliance with parts (a) and (b) of Item 9.01 of the Initial Report, the Company is filing the required financial information
by amendment, as permitted by Item 9.01(a)(4) and 9.01(b)(2) to Form 8-K. This Amendment Number 1 to Current Report on Form 8-K/A
amends Items 9.01(a) and 9.01(b) of the Initial Report to provide the required financial information.
The
Initial Report otherwise remains the same and the Items therein are hereby incorporated by reference into this Current Report
on Form 8-K/A.
Item
2.01. Completion of Acquisition or Disposition of Assets.
The
acquisition of ENG was completed on December 24, 2015. The information provided in Items 1.01 and 3.02 of the Initial Report related
to the aforementioned SPA is incorporated by reference into this Item 2.01.
The
financial statements and pro forma financial information provided in Item 9.01 to this Amendment Number 1 to Current Report on
Form 8-K are incorporated herein by reference into this Item 2.01.
Item
9.01. Financial Statements and Exhibits.
(a)
Financial statements of businesses acquired
The
audited financial statements of ENG as of and for the years ended December 31, 2014 and 2013, and the notes related thereto are
attached hereto as Exhibit 99.1 and are incorporated herein by reference.
The
unaudited financial statements of ENG as of September 30, 2015 and for the nine months ended September 30, 2015 and 2014, and
the unaudited notes related thereto are attached hereto as Exhibit 99.2 and are incorporated herein by reference.
(b)
Pro forma financial information
The
unaudited pro forma condensed combined balance sheet as of September 30, 2015 has been prepared to present the Company’s
financial position as if the acquisition of ENG had occurred on September 30, 2015. The unaudited pro forma condensed combined
statements of operations for the year ended December 31, 2014 and the nine months ended September 30, 2015 have been prepared
to present the Company’s results of operations as if the acquisition of ENG had occurred on January 1, 2014 and January
1, 2015, respectively. The unaudited condensed combined pro forma financial information is attached hereto as Exhibit 99.3 and
is incorporated herein by reference.
(c)
Exhibits
| Exhibit
No. |
|
Description |
| |
|
|
| 99.1 |
|
Financial
statements of E-N-G Mobile Systems, Inc. as of and for the years ended December 31, 2014 and 2013. |
| |
|
|
| 99.2 |
|
Unaudited
financial statements of E-N-G Mobile Systems, Inc. as of September 30, 2015 and for the nine months ended September 30, 2015
and 2014. |
| |
|
|
| 99.3 |
|
Unaudited
pro forma condensed combined financial information. |
SIGNATURES
Pursuant
to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
| |
POSITIVEID
CORPORATION |
| |
|
|
| Date:
March 9, 2016 |
By: |
/s/
William J. Caragol |
| |
Name: |
William
J. Caragol |
Exhibit
99.1
E-N-G
MOBILE SYSTEMS, INC.
Financial
Statements
For
the Years Ended
December
31, 2014 and 2013
INDEX
TO FINANCIAL STATEMENTS
| | |
Page |
| | |
|
| Report of Independent Registered Public Accounting Firm | |
2 |
| | |
|
| Balance Sheets as of December 31, 2014 and 2013 | |
3 |
| | |
|
| Statements of Operations for the years ended December 31, 2014 and 2013 | |
4 |
| | |
|
| Statements of Changes in Stockholder’s Equity for the years ended December 31, 2014 and
2013 | |
5 |
| | |
|
| Statements of Cash Flows for the years ended December 31, 2014 and 2013 | |
6 |
| | |
|
| Notes to the Financial Statements | |
7 |
Report
of Independent Registered Public Accounting Firm
To
the Board of Directors and Stockholder of
E-N-G
Mobile Systems, Inc.
We
have audited the accompanying balance sheets of E-N-G Mobile Systems, Inc. at December 31, 2014 and 2013, and the related statements
of operations, changes in stockholder’s equity and cash flows for each of the two years in the period ended December 31,
2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of E-N-G
Mobile Systems, Inc. as of December 31, 2014 and 2013 and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of
America.
| /s/
Salberg & Company, P.A. |
|
| |
|
| SALBERG
& COMPANY, P.A. |
|
| Boca
Raton, Florida |
|
| March
9, 2016 |
|
2295
NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431-7328
Phone:
(561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920
www.salbergco.com
• info@salbergco.com
Member
National Association of Certified Valuation Analysts • Registered with the PCAOB
Member
CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality
E-N-G
MOBILE SYSTEMS, INC.
BALANCE
SHEETS
| | |
December 31, | |
| | |
2014 | | |
2013 | |
| Assets | |
| | | |
| | |
| Current assets | |
| | | |
| | |
| Cash | |
$ | 923,880 | | |
$ | 190,238 | |
| Accounts receivable - trade | |
| 175,595 | | |
| 203,914 | |
| Inventory | |
| 435,909 | | |
| 439,793 | |
| Prepaid expenses | |
| 31,711 | | |
| 25,612 | |
| Total current assets | |
| 1,567,095 | | |
| 859,557 | |
| Property and equipment | |
| | | |
| | |
| Furniture and fixtures | |
| 13,026 | | |
| 13,026 | |
| Office equipment | |
| 49,528 | | |
| 49,528 | |
| Machinery and equipment | |
| 107,142 | | |
| 107,142 | |
| Leasehold improvements | |
| 169,744 | | |
| 169,744 | |
| Vehicles | |
| 76,889 | | |
| 76,889 | |
| | |
| 416,329 | | |
| 416,329 | |
| Less accumulated depreciation | |
| (380,956 | ) | |
| (370,580 | ) |
| Net property and equipment | |
| 35,373 | | |
| 45,749 | |
| Other Assets | |
| | | |
| | |
| Deposits | |
| 7,200 | | |
| 7,200 | |
| Total other assets | |
| 7,200 | | |
| 7,200 | |
| Total assets | |
$ | 1,609,668 | | |
$ | 912,506 | |
| | |
| | | |
| | |
| Liabilities and Stockholder’s Equity | |
| | | |
| | |
| Current liabilities | |
| | | |
| | |
| Accounts payable | |
$ | 163,431 | | |
$ | 77,072 | |
| Accrued expenses | |
| 63,863 | | |
| 71,719 | |
| Loan payable | |
| 11,130 | | |
| 11,130 | |
| Deferred revenue | |
| 918,715 | | |
| 212,309 | |
| Total current liabilities | |
| 1,157,139 | | |
| 372,230 | |
| Long-term liabilities | |
| | | |
| | |
| Loan payable, net of current portion | |
| 11,120 | | |
| 20,280 | |
| Total liabilities | |
| 1,168,259 | | |
| 392,510 | |
| | |
| | | |
| | |
| Commitments and contingencies (Note 7) | |
| | | |
| | |
| | |
| | | |
| | |
| Stockholder’s Equity | |
| | | |
| | |
| Common stock, $1.00 par value: 1,000 shares authorized 600 and 600 shares
issued and outstanding as of December 31, 2014 and 2013, respectively. | |
| 600 | | |
| 600 | |
| Retained earnings | |
| 440,809 | | |
| 519,396 | |
| Total stockholder’s equity | |
| 441,409 | | |
| 519,996 | |
| Total liabilities and stockholder’s equity | |
$ | 1,609,668 | | |
$ | 912,506 | |
See
accompanying notes to financial statements
E-N-G
MOBILE SYSTEMS, INC.
STATEMENTS
OF OPERATIONS
| | |
Years Ended
December
31, | |
| | |
2014 | | |
2013 | |
| Revenues | |
$ | 2,501,665 | | |
$ | 4,394,861 | |
| | |
| | | |
| | |
| Cost of revenues | |
| 1,536,899 | | |
| 2,894,662 | |
| | |
| | | |
| | |
| Gross profit | |
| 964,766 | | |
| 1,500,199 | |
| | |
| | | |
| | |
| Operating expenses | |
| | | |
| | |
| General and administrative | |
| 1,029,939 | | |
| 1,329,949 | |
| Depreciation | |
| 10,375 | | |
| 9,068 | |
| Total operating expenses | |
| 1,040,314 | | |
| 1,339,017 | |
| (Loss) income from operations | |
| (75,548 | ) | |
| 161,182 | |
| Other (expense) income | |
| | | |
| | |
| Gain on sale of equipment | |
| - | | |
| 1,718 | |
| State income tax | |
| (800 | ) | |
| (1,600 | ) |
| Interest expense | |
| (2,239 | ) | |
| (1,003 | ) |
| Total other (expense) income | |
| (3,039 | ) | |
| (885 | ) |
| Net income (loss) | |
$ | (78,587 | ) | |
$ | 160,297 | |
See
accompanying notes to financial statements
E-N-G
MOBILE SYSTEMS, INC.
STATEMENTS
OF CHANGES IN STOCKHOLDER’S EQUITY
FOR
THE YEARS ENDED DECEMBER 31, 2014 AND 2013
| | |
| | |
| | |
Total | |
| | |
Common Stock | | |
Retained | | |
Stockholder’s | |
| | |
Shares | | |
Amount | | |
Earnings | | |
Equity | |
| Balance December 31, 2012 | |
| 600 | | |
$ | 600 | | |
$ | 359,099 | | |
$ | 359,699 | |
| Net income for the
year ended December 31, 2013 | |
| - | | |
| - | | |
| 160,297 | | |
| 160,297 | |
| Balance December 31, 2013 | |
| 600 | | |
| 600 | | |
| 519,396 | | |
| 519,996 | |
| Net loss for the year
ended December 31, 2014 | |
| - | | |
| - | | |
| (78,587 | ) | |
| (78,587 | ) |
| Balance December 31, 2014 | |
| 600 | | |
$ | 600 | | |
$ | 440,809 | | |
$ | 441,409 | |
See
accompanying notes to financial statements
E-N-G
MOBILE SYSTEMS, INC.
STATEMENTS
OF CASH FLOWS
| | |
Years Ended
December 31, | |
| | |
2014 | | |
2013 | |
| Cash flows from operating activities: | |
| | | |
| | |
| Net (loss) income | |
$ | (78,587 | ) | |
$ | 160,297 | |
| Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 10,375 | | |
| 9,068 | |
| Gain on sale of equipment | |
| - | | |
| (1,718 | ) |
| Changes in assets and liabilities: | |
| | | |
| | |
| (Increase) decrease in: | |
| | | |
| | |
| Accounts receivable | |
| 28,319 | | |
| 41,928 | |
| Prepaid expenses | |
| (6,099 | ) | |
| 4,986 | |
| Inventory | |
| 3,884 | | |
| 320,718 | |
| Other assets | |
| - | | |
| 3,800 | |
| Increase (decrease) in: | |
| | | |
| | |
| Accounts payable | |
| 86,360 | | |
| (91,354 | ) |
| Accrued expenses | |
| (7,856 | ) | |
| 7,159 | |
| Deferred revenue | |
| 706,406 | | |
| (39,420 | ) |
| Net cash provided by operating activities | |
| 742,802 | | |
| 415,464 | |
| Cash flows from investing activities: | |
| | | |
| | |
| Acquisition of property and equipment | |
| - | | |
| (37,585 | ) |
| Net cash (used in) investing activities | |
| - | | |
| (37,585 | ) |
| Cash flows from financing activities: | |
| | | |
| | |
| Bank overdraft repayment | |
| - | | |
| (41,551 | ) |
| Loan proceeds (repayment) | |
| (9,160 | ) | |
| 31,410 | |
| Line of credit, net | |
| - | | |
| (178,000 | ) |
| Net cash (used in) financing activities | |
| (9,160 | ) | |
| (188,141 | ) |
| | |
| | | |
| | |
| Net increase in cash | |
| 733,642 | | |
| 189,738 | |
| | |
| | | |
| | |
| Cash - beginning of year | |
| 190,238 | | |
| 500 | |
| | |
| | | |
| | |
| Cash - end of year | |
$ | 923,880 | | |
$ | 190,238 | |
| | |
| | | |
| | |
| Supplemental cash flow disclosures: | |
| | | |
| | |
| Interest paid | |
$ | 2,239 | | |
$ | 1,003 | |
| State income tax paid | |
$ | 800 | | |
$ | 1,600 | |
See
accompanying notes to financial statements
E-N-G
MOBILE SYSTEMS, INC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
Note
1 – Corporate Organization and Nature of Operations
E-N-G
Mobile Systems, Inc. (“the Company”) was incorporated in the state of California, on August 1, 1988. The Company is
a leader in innovation and creation of products for the mobile technology marketplace, building mobile solutions to customer specifications.
The company builds mobile solutions which include Mobile Laboratories, homeland security vehicles, as well as mobile solutions
for Utilities, News, and high tech companies.
Note
2 – Summary of Significant Accounting Policies
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Use of estimates includes the following: 1) accounts receivable valuation
2) inventory valuation, 3) estimated useful lives of property and equipment.
Cash
and cash equivalents
For
purposes of reporting cash flows, the Company considers all short-term investments with an original maturity of three months or
less when purchased to be cash equivalents. As of December 31, 2014 and 2013, the Company had no cash equivalents.
Account
receivable and Allowance for doubtful accounts
Accounts
receivable is stated at cost, net of any allowance for doubtful accounts. The Company maintains allowances for doubtful accounts
for estimated losses resulting from the failure of customers to meet their obligations. The Company uses the specific identification
method of evaluating collectivity. Based on management’s evaluation of each customer, the Company considers all remaining
accounts receivable to be fully collectible at December 31, 2014 and 2013 and therefore, did not provide for an allowance for
doubtful accounts.
Inventory
Inventory
consists of standard and manufactured frames and bodies of vehicles, and components to be added to mobile units and is stated
at lower of cost or market on a first in first out basis.
Property
and equipment
Property
and equipment are carried at cost. Expenditures that materially increase values or extend useful lives are capitalized while replacements,
maintenance and repairs that do not improve or extend the lives of the respective assets are charged against income as incurred.
The net gain or loss on items retired or otherwise disposed of is credited or charged to other income or expense and the cost
and accumulated depreciation are removed from the accounts.
Revenue
recognition
The
company designs vehicles for its customer pursuant to customer specifications. Revenues are recognized when the four principles
of revenue recognition are met: 1) Pervasive evidence of an arrangement exists, 2) delivery or services performed, 3) fixed or
determinable fees, 4) collectability reasonably assured. Given the short duration of most company projects (less than one year)
the Company recognizes revenue upon completion and delivery in accordance with the customer contract or purchase order.
Revenue
and Accounts Receivable Concentrations
During
the years ended December 31, 2014 and 2013, respectively the Company earned revenue from its three largest customers of 19%, 15%
and 12%, and four largest customers of 15%, 13%, 11% and 10%, respectively. As of December 31, 2014, the Company had accounts
receivable from one customer of 68%. As of December 31, 2013, the Company had accounts receivable from one customer of 93%.
E-N-G
MOBILE SYSTEMS, INC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
Concentrations
of credit risk
Financial
instruments which subject the Company to concentrations of credit risk include cash and accounts receivable. At times throughout
the year, the Company might maintain bank balances that may exceed Federal Deposit Insurance Corporation (FDIC) insured limits.
Periodically, the Company evaluates the credit worthiness of the financial institution and, has not experienced any losses in
such accounts. The Company extends credit based on an evaluation of the customer’s financial condition, and secures its
financial interest by maintaining title to the vehicle until final payment is made. Exposure to losses on receivables is principally
dependent on each customer’s financial condition. The Company monitors its exposure for credit losses and maintains allowances
for anticipated losses, as required.
Depreciation
A
provision for depreciation of property and equipment is made on a basis considered adequate to amortize the related costs (net
of salvage value) over their estimated useful lives using the straight-line method. Estimated useful lives are principally as
follows: vehicles, 5 years; furniture and fixtures and office equipment, 5-7 years; leasehold improvements, 10-40 years; machinery
and equipment 5-7 years.
Advertising
Costs
Advertising
costs are expensed as incurred. Advertising costs for the years ended December 31, 2014 and 2013 were $4,030 and $33,840, respectively.
Shipping
and Handling
Costs
incurred by the Company for freight in are included in costs of revenue. Freight in costs incurred for the years ended December
31, 2014 and 2013 were $31,470 and $60,774, respectively. Freight out cost incurred for the years ended December 31, 2014 and
2013 were minimal.
Legal
Expenses
All
legal costs for litigation matters are charged to expense as incurred.
Income
taxes
E-N-G
Mobile Systems Inc., with consent of the stockholder, has elected to be taxed as an S Corporation. In general, this election provides
that income of the corporation passes through and is taxed directly to the stockholder and not to the E-N-G Mobile Systems Inc.
Therefore, no provision or liability for income taxes is presented in these financial statements.
Management
has evaluated the Company’s tax positions and concluded that the Company has taken no uncertain tax positions that require
adjustment to or disclosures in the financial statements. As of December 31, 2014, tax years since 2011 remain open for
IRS audit. The Company has received no notice of audit from the Internal Revenue Service for any of the open tax years.
Fair
Value
FASB
ASC 820, Fair Value Measurements and Disclosure s (“ASC 820”) establishes a framework for all fair value measurements
and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following
three categories:
Level
1 — Quoted market prices for identical assets or liabilities in active markets or observable inputs;
Level
2 — Significant other observable inputs that can be corroborated by observable market data; and
Level
3 — Significant unobservable inputs that cannot be corroborated by observable market data.
The
carrying amounts of cash, accounts receivable, accounts payable, accrued expense payable and other liabilities approximate fair
value because of the short-term nature of these items.
E-N-G
MOBILE SYSTEMS, INC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
Recent
Accounting Pronouncements
On
May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which is effective for public entities
for annual reporting periods beginning after December 15, 2016. The new revenue recognition standard provides a five-step analysis
of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. ASU 2014-09 shall be applied retrospectively to each period presented
or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact of the pending
adoption of ASU 2014-09 on the financial statements and has not yet determined the method by which the Company will adopt.
In
July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which requires an entity to measure most
inventory at the lower of cost and net realizable value, thereby simplifying the current guidance under which an entity must measure
inventory at the lower of cost or market. The accounting standard is effective prospectively for annual periods beginning after
December 15, 2016, and interim periods therein. Early adoption is permitted as of the beginning of an interim or annual reporting
period. The Company is currently evaluating the impact of this accounting standard.
Note
3 – Inventory
Inventory
consisted of the following at December 31:
| | |
2014 | | |
2013 | |
| Materials inventory | |
$ | 402,118 | | |
$ | 316,094 | |
| Truck and trailer inventory | |
| 33,791 | | |
| 123,699 | |
| | |
$ | 435,909 | | |
$ | 439,793 | |
Note
4 – Loan Payable and Line of Credit
Loan
payable consisted of the following as of December 31:
| | |
2014 | | |
2013 | |
| Auto Loan payable | |
$ | 22,250 | | |
$ | 31,410 | |
| Less current portion | |
| (11,130 | ) | |
| (11,130 | ) |
| Long-term portion | |
$ | 11,120 | | |
$ | 20,280 | |
The
loan payable has an annual interest rate of 3.9% and will mature in February 2017.
The
Company had a line of credit available for $350,000, with a variable interest rate which was 5% at December 31, 2014 and which
matured in November 2015. The line of credit payable, activity and balances consisted of the following:
| Line of credit balance as of December 31, 2012 | |
$ | 178,000 | |
| Borrowed during 2013 | |
| 140,000 | |
| Less repayment during 2013 | |
| (318,000 | ) |
| Line of credit balance as of December 31, 2013 | |
$ | - | |
| Borrowed during 2014 | |
| 60,000 | |
| Less repayment during 2014 | |
| (60,000 | ) |
| Line of credit balance as of December 31, 2014 | |
$ | - | |
Note
5 – Deferred revenue
During
the course of business projects, the Company requires front end funding to acquire the required materials and begin production.
Customers are billed in advance of production to secure the necessary resources to facilitate timely completion of the project.
E-N-G
MOBILE SYSTEMS, INC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
This
advance billing is included in the accompanying balance sheet as of December 31, under the following caption:
| | |
2014 | | |
2013 | |
| Deferred revenue | |
$ | 918,715 | | |
$ | 212,309 | |
Note
6 – Stockholder’s Equity
Common
Stock
At
December 31, 2014 and 2013, the Company had 1,000 shares of common stock authorized and 600 shares of common stock issued and
outstanding.
Note
7 – Commitments and Contingencies
Lease
Commitment
The
Company leases certain office space under an operating lease. The lease is currently on a month-to-month commitment with monthly
rental payments of $7,564. Total rent expense under this lease for the years ended December 31, 2014 and 2013 was $92,226 and
$96,056, respectively.
Legal
Proceedings
Management
is not aware of any legal claims that would have a significant adverse impact on the company’s financial position.
Note
8 – Subsequent events
On
December 22, 2015, PositiveID Corporation (“PositiveID”) entered into a stock purchase agreement with the sole owner
of E-N-G Mobile Systems Inc. (“ENG”), wherein PositiveID purchased all of the stock of ENG. The transaction was finalized
at the end of the day on December 24, 2015, and PositiveID assumed control. The consideration to the owner for the purchase was
a combination of cash ($750,000), a convertible promissory note issued to the owner ($150,000 at 5% per year due on December 31,
2016), and additional “earnout” payments of 5% on contracts and purchase orders on an agreed backlog schedule. As
part of these agreements, the parties also entered into a security agreement securing delivery of the shares and perfecting the
interest in the convertible promissory note.
Additionally,
on December 22, 2015, PositiveID entered into a consulting agreement with the Company’s owner to provide consulting services
as an independent contractor, to assist with the transition of control to PositiveID. PositiveID has committed to pay a consulting
fee of $10,000 per month for a period of 24 months starting in January 2016.
Management
has evaluation the subsequent events through March 9, 2016 the date at which the financial statements were available for issuance.
Exhibit
99.2
E-N-G
MOBILE SYSTEMS, INC.
Financial
Statements (Unaudited)
For
the Nine Months Ended
September
30, 2015 and 2014
INDEX
TO FINANCIAL STATEMENTS
| | |
Page |
| | |
|
| Balance Sheets as of September 30, 2015 (unaudited) and December 31, 2014 | |
2 |
| | |
|
| Statements of Operations (unaudited) for the nine months ended September 30, 2015 and 2014 | |
3 |
| | |
|
| Statements of Cash Flows (unaudited) for the nine months ended September 30, 2015 and 2014 | |
4 |
| | |
|
| Notes to the Financial Statements (unaudited) | |
5 |
E-N-G
MOBILE SYSTEMS, INC.
BALANCE
SHEETS
| | |
September 30, 2015 | | |
December 31, 2014 | |
| | |
(unaudited) | | |
| |
| Assets | |
| | | |
| | |
| Current assets | |
| | | |
| | |
| Cash | |
$ | 993,919 | | |
$ | 923,880 | |
| Accounts receivable - trade | |
| 29,251 | | |
| 175,595 | |
| Inventory | |
| 1,647,919 | | |
| 435,909 | |
| Prepaid expenses | |
| 5,398 | | |
| 31,711 | |
| Total current assets | |
| 2,676,487 | | |
| 1,567,095 | |
| Property and equipment | |
| | | |
| | |
| Furniture and fixtures | |
| 13,026 | | |
| 13,026 | |
| Office equipment | |
| 49,528 | | |
| 49,528 | |
| Machinery and equipment | |
| 107,142 | | |
| 107,142 | |
| Leasehold improvements | |
| 169,744 | | |
| 169,744 | |
| Vehicles | |
| 76,889 | | |
| 76,889 | |
| | |
| 416,329 | | |
| 416,329 | |
| Less accumulated depreciation | |
| (387,031 | ) | |
| (380,956 | ) |
| Net property and equipment | |
| 29,298 | | |
| 35,373 | |
| Other Assets | |
| | | |
| | |
| Deposits | |
| 7,200 | | |
| 7,200 | |
| Total other assets | |
| 7,200 | | |
| 7,200 | |
| Total assets | |
$ | 2,712,985 | | |
$ | 1,609,668 | |
| | |
| | | |
| | |
| Liabilities and Stockholder’s Equity | |
| | | |
| | |
| Current liabilities | |
| | | |
| | |
| Accounts payable | |
$ | 256,824 | | |
$ | 163,431 | |
| Accrued expenses | |
| 122,979 | | |
| 63,863 | |
| Loan payable | |
| 11,130 | | |
| 11,130 | |
| Deferred revenue | |
| 1,682,866 | | |
| 918,715 | |
| Total current liabilities | |
| 2,073,799 | | |
| 1,157,139 | |
| Long-term liabilities | |
| | | |
| | |
| Loan payable, net of current portion | |
| 3,305 | | |
| 11,120 | |
| Total liabilities | |
| 2,077,104 | | |
| 1,168,259 | |
| | |
| | | |
| | |
| Commitments and contingencies (Note 7) | |
| | | |
| | |
| | |
| | | |
| | |
| Stockholder’s equity | |
| | | |
| | |
| Common stock, $1.00 par value: 1,000 shares authorized, 600 and 600 shares issued and outstanding
as of September 30, 2015 and December 31, 2014, respectively. | |
| 600 | | |
| 600 | |
| Retained earnings | |
| 635,281 | | |
| 440,809 | |
| Total stockholder’s equity | |
| 635,881 | | |
| 441,409 | |
| Total liabilities and stockholder’s equity | |
$ | 2,712,985 | | |
$ | 1,609,668 | |
See
accompanying unaudited notes to unaudited financial statements
E-N-G
MOBILE SYSTEMS, INC.
STATEMENTS
OF OPERATIONS
(Unaudited)
| | |
For the Nine Months Ended
September 30, | |
| | |
2015 | | |
2014 | |
| Revenues | |
$ | 3,365,217 | | |
$ | 1,650,970 | |
| | |
| | | |
| | |
| Cost of revenues | |
| 2,042,371 | | |
| 1,009,420 | |
| | |
| | | |
| | |
| Gross profit | |
| 1,322,846 | | |
| 641,550 | |
| | |
| | | |
| | |
| Operating expenses | |
| | | |
| | |
| General and administrative | |
| 1,120,942 | | |
| 738,763 | |
| Depreciation | |
| 6,075 | | |
| 5,507 | |
| Total operating expenses | |
| 1,127,017 | | |
| 744,270 | |
| Income (loss) from operations | |
| 195,829 | | |
| (102,720 | ) |
| | |
| | | |
| | |
| Other (expense) | |
| | | |
| | |
| State income tax | |
| (800 | ) | |
| (800 | ) |
| Interest expense | |
| (557 | ) | |
| (689 | ) |
| Total other (expense) | |
| (1,357 | ) | |
| (1,489 | ) |
| Net income (loss) | |
$ | 194,472 | | |
$ | (104,209 | ) |
See
accompanying unaudited notes to unaudited financial statements
E-N-G
MOBILE SYSTEMS, INC.
STATEMENTS
OF CASH FLOWS
(Unaudited)
| | |
For the Nine Months Ended
September 30, | |
| | |
2015 | | |
2014 | |
| Cash flows from operating activities: | |
| | | |
| | |
| Net income (loss) | |
$ | 194,472 | | |
$ | (104,209 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 6,075 | | |
| 5,507 | |
| Changes in assets and liabilities: | |
| | | |
| | |
| (Increase) decrease in: | |
| | | |
| | |
| Accounts receivable | |
| 146,344 | | |
| (62,068 | ) |
| Prepaid expenses | |
| 26,313 | | |
| (2,807 | ) |
| Inventory | |
| (1,212,010 | ) | |
| 133,672 | |
| Increase (decrease) in: | |
| | | |
| | |
| Accounts payable | |
| 93,392 | | |
| (13,807 | ) |
| Accrued expenses | |
| 59,117 | | |
| 40,988 | |
| Deferred revenue | |
| 764,151 | | |
| (137,097 | ) |
| Net cash provided by (used in) operating activities | |
| 77,854 | | |
| (139,821 | ) |
| | |
| | | |
| | |
| Cash flows from financing activities: | |
| | | |
| | |
| Loan proceeds | |
| - | | |
| 52,581 | |
| Repayment of loan | |
| (7,815 | ) | |
| - | |
| Net cash (used in) provided by financing activities | |
| (7,815 | ) | |
| 52,581 | |
| | |
| | | |
| | |
| Net increase (decrease) in cash | |
| 70,039 | | |
| (87,240 | ) |
| | |
| | | |
| | |
| Cash - beginning of period | |
| 923,880 | | |
| 190,238 | |
| | |
| | | |
| | |
| Cash - end of period | |
$ | 993,919 | | |
$ | 102,998 | |
| | |
| | | |
| | |
| Supplemental cash flow disclosures: | |
| | | |
| | |
| Interest paid | |
$ | 557 | | |
$ | 689 | |
| State income tax paid | |
$ | 800 | | |
$ | 800 | |
See
accompanying unaudited notes to unaudited financial statements
E-N-G
MOBILE SYSTEMS, INC.
NOTES
TO FINANCIAL STATEMENTS
September
30, 2015
(Unaudited)
Note
1 – Corporate Organization and Nature of Operations
E-N-G
Mobile Systems, Inc. (“the Company”) was incorporated in the state of California, on August 1, 1988. The Company is
a leader in innovation and creation of products for the mobile technology marketplace, building mobile solutions to customer specifications.
The company builds mobile solutions which include Mobile Laboratories, homeland security vehicles, as well as mobile solutions
for Utilities, News, and high tech companies.
Note
2 – Summary of Significant Accounting Policies
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Use of estimates includes the following: 1) accounts receivable valuation
2) inventory valuation, 3) estimated useful lives of property and equipment.
Cash
and cash equivalents
For
purposes of reporting cash flows, the Company considers all short-term investments with an original maturity of three months or
less when purchased to be cash equivalents. As of September 30, 2015 and 2014, the Company had no cash equivalents.
Account
receivable and Allowance for doubtful accounts
Accounts
receivable is stated at cost, net of any allowance for doubtful accounts. The Company maintains allowances for doubtful accounts
for estimated losses resulting from the failure of customers to meet their obligations. The Company uses the specific identification
method of evaluating collectivity. Based on management’s evaluation of each customer, the Company considers all remaining
accounts receivable to be fully collectible at September 30, 2015 and December 31, 2014 and, therefore, did not provide for an
allowance for doubtful accounts.
Inventory
Inventory
consists of standard and manufactured frames and bodies of vehicles, and components to be added to mobile units and is stated
at lower of cost or market on a first in first out basis.
Property
and equipment
Property
and equipment are carried at cost. Expenditures that materially increase values or extend useful lives are capitalized while replacements,
maintenance and repairs that do not improve or extend the lives of the respective assets are charged against income as incurred.
The net gain or loss on items retired or otherwise disposed of is credited or charged to other income or expense and the cost
and accumulated depreciation are removed from the accounts.
Revenue
recognition
The
company designs vehicles for its customer pursuant to customer specifications. Revenues are recognized when the four principles
of revenue recognition are met: 1) Pervasive evidence of an arrangement exist, 2) delivery or services performed, 3) fixed or
determinable fees, 4) collectability reasonably assured. Given the short duration of most company projects (less than one year)
the Company recognizes revenue upon completion and delivery in accordance with the customer contract or purchase order.
Revenue
and Account Receivable Concentration
The
Company earned revenue from three of its largest customers of 35%, 23% and 21% during the nine months ended September 30, 2015
and from its largest customer of 17%, during the nine months ended September 30, 2014.
E-N-G
MOBILE SYSTEMS, INC.
NOTES
TO FINANCIAL STATEMENTS
September
30, 2015
(Unaudited)
The
Company had accounts receivable from two of its largest customers of 65% and 29% as of September 30, 2015. The Company had account
receivable from one customer of 68% as of December 31, 2014
Concentration
of Credit Risk
Financial
instruments which subject the Company to concentrations of credit risk include cash and accounts receivable. At times throughout
the year, the Company might maintain bank balances that may exceed Federal Deposit Insurance Corporation (FDIC) insured limits.
Periodically, the Company evaluates the credit worthiness of the financial institution and, has not experienced any losses in
such accounts. The Company extends credit based on an evaluation of the customer’s financial condition, and secures its
financial interest by maintaining title to the vehicle until final payment is made. Exposure to losses on receivables is principally
dependent on each customer’s financial condition. The Company monitors its exposure for credit losses and maintains allowances
for anticipated losses, as required.
Depreciation
A
provision for depreciation of property and equipment is made on a basis considered adequate to amortize the related costs (net
of salvage value) over their estimated useful lives using the straight-line method. Estimated useful lives are principally as
follows: vehicles, 5 years; furniture and fixtures and office equipment, 5-7 years; leasehold improvements, 10-40 years; machinery
and equipment 5-7 years. Depreciation expense for the nine months ended September 30, 2015 and 2014, was $6,075 and $5,507, respectively.
Advertising
Costs
Advertising
costs are expensed as incurred. Advertising costs for the nine months ended September 30, 2015 and 2014 were $20,725 and $3,636,
respectively.
Shipping
and Handling
Costs
incurred by the Company for freight in are included in costs of revenue. Freight in costs incurred for the nine months ended September
30, 2015 and 2014 were $52,305 and $22,479, respectively. Freight out cost incurred for the nine months ended September 30, 2015
and 2014 were minimal.
Legal
Expenses
All
legal costs for litigation matters are charged to expense as incurred.
Income
taxes
E-N-G
Mobile Systems, Inc., with consent of the stockholder, has elected to be taxed as an S Corporation. In general, this election
provides that income of the corporation passes through and is taxed directly to the stockholder and not to the E-N-G Mobile Systems,
Inc. Therefore, no provision or liability for income taxes is presented in these financial statements.
Management
has evaluated the Company’s tax positions and concluded that the Company has taken no uncertain tax positions that require
adjustment to or disclosures in the financial statements. As of December 31, 2014, tax years since 2011 remain open for
IRS audit. The Company has received no notice of audit from the Internal Revenue Service for any of the open tax years.
Fair
Value
FASB
ASC 820, Fair Value Measurements and Disclosure s (“ASC 820”) establishes a framework for all fair value measurements
and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following
three categories:
Level
1 — Quoted market prices for identical assets or liabilities in active markets or observable inputs;
Level
2 — Significant other observable inputs that can be corroborated by observable market data; and
Level
3 — Significant unobservable inputs that cannot be corroborated by observable market data.
E-N-G
MOBILE SYSTEMS, INC.
NOTES
TO FINANCIAL STATEMENTS
September
30, 2015
(Unaudited)
The
carrying amounts of cash, accounts receivable, accounts payable, accrued expense payable and other liabilities approximate fair
value because of the short-term nature of these items.
Recent
Accounting Pronouncements
On
May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which is effective for public entities
for annual reporting periods beginning after December 15, 2016. The new revenue recognition standard provides a five-step analysis
of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. ASU 2014-09 shall be applied retrospectively to each period presented
or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact of the pending
adoption of ASU 2014-09 on the financial statements and has not yet determined the method by which the Company will adopt.
In
July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which requires an entity to measure most
inventory at the lower of cost and net realizable value, thereby simplifying the current guidance under which an entity must measure
inventory at the lower of cost or market. The accounting standard is effective prospectively for annual periods beginning after
December 15, 2016, and interim periods therein. Early adoption is permitted as of the beginning of an interim or annual reporting
period. The Company is currently evaluating the impact of this accounting standard.
Note
3 – Inventory
Inventory
consisted of the following at:
| | |
September 30, 2015 | | |
December 31, 2014 | |
| Materials inventory | |
$ | 1,172,553 | | |
$ | 402,118 | |
| Truck and trailer inventory | |
| 475,366 | | |
| 33,791 | |
| | |
$ | 1,647,919 | | |
$ | 435,909 | |
Note
4 – Loan Payable and Line of Credit
Loan
payable consisted of the following:
| | |
September 30, 2015 | | |
December 31, 2014 | |
| Auto Loan payable | |
$ | 14,435 | | |
$ | 22,250 | |
| Less current portion | |
| (11,130 | ) | |
| (11,130 | ) |
| Long-term portion | |
$ | 3,305 | | |
$ | 11,120 | |
The
loan payable has an annual interest rate of 3.9% and will mature in February 2017.
During
2015, the Company had a line of credit available for $350,000 with a variable interest rate which was 5% at September 30, 2015.
There was no outstanding balance as of September 30, 2015 and the line matured in November 2015.
Note
5 – Deferred revenue
During
the course of business projects require front end funding to acquire the required materials and begin production. Customers are
billed in advance of production to secure the necessary resources to facilitate timely completion of the project.
This
advance billing is included in the accompanying balance sheet under the following caption:
| | |
September 30, 2015 | | |
December 31, 2014 | |
| Deferred revenue | |
$ | 1,682,866 | | |
$ | 918,715 | |
E-N-G
MOBILE SYSTEMS, INC.
NOTES
TO FINANCIAL STATEMENTS
September
30, 2015
(Unaudited)
Note
6 – Shareholder’s Equity
Common
Stock
At
September 30, 2015 and December 31, 2014 the Company had 1,000 shares of common stock authorized and 600 shares of common stock
issued and outstanding.
Note
7 – Commitments and Contingencies
Lease
Commitment
The
Company leases certain office space under an operating lease. The lease is currently on a month-to-month commitment with monthly
rental payments of $7,564. Total rent expense under this lease for the nine months ended September 30, 2015 and 2014 was $70,858
and $69,173, respectively.
Legal
Proceedings
Management
is not aware of any legal claims that would have a significant adverse impact on the company’s financial position.
Note
8 – Subsequent events
On
December 22, 2015, PositiveID Corporation (“PositiveID”) entered into a stock purchase agreement with the sole owner
of E-N-G Mobile Systems Inc. (“ENG”), wherein PositiveID purchased all of the stock of ENG. The transaction was finalized
at the end of the day on December 24, 2015, and PositiveID assumed control. The consideration to the owner for the purchase was
a combination of cash ($750,000), a convertible promissory note issued to the owner ($150,000 at 5% per year due on December 31,
2016), and additional “earnout” payments of 5% on contracts and purchase orders on an agreed backlog schedule. As
part of these agreements, the parties also entered into a security agreement securing delivery of the shares and perfecting the
interest in the convertible promissory note.
Additionally,
on December 22, 2015, PositiveID entered into a consulting agreement with the Company’s owner to provide consulting services
as an independent contractor, to assist with the transition of control to PositiveID. PositiveID has committed to pay a consulting
fee of $10,000 per month for a period of 24 months starting in January 2016.
Management
has evaluation the subsequent events through March 9, 2016 the date at which the financial statements were available for issuance.
Exhibit 99.3
Unaudited
Pro Forma Condensed Combined Financial Information
Basis
of Pro Forma Presentation
On
December 22, 2015, PositiveID Corporation (“PositiveID” or the “Company”) entered into a Stock Purchase
Agreement (“Purchase Agreement”) for the purchase of all of the outstanding common stock of E-N-G Mobile Systems,
Inc. ( “ENG”) from its sole shareholder (the “Seller”) (the “Acquisition”). The Acquisition
was completed on December 24, 2015.
Pursuant
to the Purchase Agreement, as consideration at the time of closing of the Acquisition, PositiveID paid the Seller Seven Hundred
Fifty Thousand Dollars ($750,000) in cash and issued a convertible secured promissory note to the Seller in the amount of One
Hundred Fifty Thousand Dollars ($150,000) (the “ENG Note”). Additional earn-out payments may be earned by the Seller
as described in the Purchase Agreement. Earn-out payments are estimated to be approximately $111,000, to be paid in the four months
following the closing of the acquisition. The Company has also entered into a two year consulting agreement with the Seller.
The
Company has previously reported, in a current Form 8-K/A dated February 19, 2016, the unaudited pro forma information related
to the combination of the Company and its acquisition of Thermomedics, Inc. (“Thermo”). The combined pro forma financial
statements of the Company, including Thermo have been used as the basis for making pro forma adjustments to reflect the acquisition
of ENG disclosed herein.
Under
the acquisition method of accounting the total estimated purchase price as described in Note 1 to this unaudited pro forma condensed
combined financial information was allocated to the net tangible and intangible assets of ENG acquired and liabilities assumed
in connection with the Acquisition based on their estimated fair values. The estimated fair values of certain assets and liabilities
have been estimated by management and are subject to change upon the finalization of the fair value assessments.
The
historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial information
to give effect to pro forma events that are directly attributable to the acquisition, factually supportable, and, with respect
to the statements of operations, expected to have a continuing impact on the combined results. The unaudited pro forma condensed
combined financial information does not purport to be indicative of the financial position or results of operations of PositiveID
that would have been reported had the Acquisition been completed as of the dates or for such periods presented, nor is it intended
to project PositiveID’s future financial position or results of operations. The unaudited pro forma condensed combined financial
information and the accompanying notes should be read together with PositiveID’s audited consolidated financial statements
and accompanying notes for the year ended December 31, 2014, Management’s Discussion and Analysis included in PositiveID’s
Annual Report on Form 10-K for the year ended December 31, 2014, from the Current Report on Form 8-K/A filed on February 19, 2016,
and from ENG’s audited financial statements and accompanying notes for the year ended December 31, 2014 included in Exhibit
99.1 of this Current Report.
The
unaudited pro forma condensed combined financial information as of and for the nine months ended September 30, 2015 has been prepared
from PositiveID’s unaudited condensed consolidated financial statements included in PositiveID’s Quarterly Report
on Form 10-Q as of and for the nine months ended September 30, 2015, from the Current Report on Form 8-K/A filed on February 19,
2016, and from the unaudited financial statements of ENG as of and for the nine months ended September 30, 2015 included in Exhibit
99.2 of this Current Report.
The
unaudited pro forma condensed combined balance sheet as of September 30, 2015 has been prepared to present PositiveID’s
financial position as if the Acquisition had occurred on September 30, 2015. The unaudited pro forma condensed combined statements
of operations for the year ended December 31, 2014 and for the nine months ended September 30, 2015 have been prepared to present
PositiveID’s results of operations as if the Acquisition had occurred on January 1, 2014 and January 1, 2015, respectively.
The
unaudited pro forma adjustments are based on preliminary estimates, available information and certain assumptions, which may be
revised as additional information becomes available. The unaudited pro forma condensed combined financial information does not
reflect any adjustments for nonrecurring items or anticipated synergies resulting from the Acquisition.
PositiveID
Corporation
Pro
Forma Unaudited Condensed Combined Balance Sheet
As
of September 30, 2015
(in
thousands)
| | |
PositiveID
Corporation Historical (a) | | |
Thermomedics
Inc. Historical (a) | | |
Pro
Forma Adjustments (a) | | |
Pro
Forma Combined (a) | | |
ENG
Mobile Systems, Inc. Historical | | |
Pro
Forma Adjustments (ENG) | | |
Pro
Forma Combined | |
| Assets | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Current assets: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cash
and cash equivalents | |
$ | 319 | | |
$ | 10 | | |
$ | (185 | ) | |
$ | 144 | | |
$ | 994 | | |
| $
(893 | )(b)(c)(f) | |
$ | 245 | |
| Accounts
receivable, net | |
| - | | |
| 8 | | |
| 1 | | |
| 9 | | |
| 29 | | |
| 607 | (b) | |
| 645 | |
| Inventory | |
| - | | |
| 31 | | |
| (15 | ) | |
| 16 | | |
| 1,648 | | |
| (399 | )(b) | |
| 1,265 | |
| Prepaid
expenses and other | |
| 39 | | |
| - | | |
| - | | |
| 39 | | |
| 5 | | |
| 28 | (b) | |
| 72 | |
| Total current assets | |
| 358 | | |
| 49 | | |
| (199 | ) | |
| 208 | | |
| 2,676 | | |
| (657 | ) | |
| 2,227 | |
| Property and equipment,
net | |
| 3 | | |
| 10 | | |
| (2 | ) | |
| 11 | | |
| 29 | | |
| 94 | (b) | |
| 134 | |
| Goodwill | |
| 510 | | |
| - | | |
| 513 | | |
| 1,023 | | |
| - | | |
| - | | |
| 1,023 | |
| Intangibles | |
| 164 | | |
| - | | |
| 200 | | |
| 364 | | |
| - | | |
| 211 | (d) | |
| 575 | |
| Other
assets | |
| 11 | | |
| 6 | | |
| (6 | ) | |
| 11 | | |
| 7 | | |
| 95 | (b)(c) | |
| 113 | |
| Total
assets | |
$ | 1,046 | | |
$ | 65 | | |
$ | 506 | | |
$ | 1,617 | | |
$ | 2,712 | | |
$ | (257 | ) | |
$ | 4,072 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liabilities
and Stockholders’ Equity | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Current Liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Accounts
payable | |
$ | 118 | | |
$ | 64 | | |
$ | (32 | ) | |
$ | 150 | | |
$ | 256 | | |
$ | (132 | )(b) | |
$ | 274 | |
| Accrued
expenses | |
| 879 | | |
| 1 | | |
| 116 | | |
| 996 | | |
| 123 | | |
| (12 | )(b) | |
| 1,107 | |
| Notes
payable | |
| 429 | | |
| - | | |
| - | | |
| 429 | | |
| 14 | | |
| (13 | )(b) | |
| 430 | |
| Deferred
revenue | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,683 | | |
| (477 | )(b) | |
| 1,206 | |
| Contingent purchase
price | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 111 | (e) | |
| 111 | |
| Due
to parent | |
| - | | |
| 2,463 | | |
| (2,463 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
| Short-term
convertible debt and accrued interest, net of discounts and premiums | |
| 1,488 | | |
| - | | |
| 75 | | |
| 1,563 | | |
| - | | |
| 902 | (c)(f) | |
| 2,465 | |
| Embedded
conversion option liability | |
| 5,823 | | |
| - | | |
| - | | |
| 5,823 | | |
| - | | |
| - | | |
| 5,823 | |
| Total current liabilities | |
| 8,737 | | |
| 2,528 | | |
| (2,304 | ) | |
| 8,961 | | |
| 2,076 | | |
| 379 | | |
| 11,416 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Long-term liabilities | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Contingent purchase
price | |
| - | | |
| - | | |
| 184 | | |
| 184 | | |
| - | | |
| - | | |
| 184 | |
| Mandatorily
redeemable preferred stock, Series I | |
| 2,132 | | |
| - | | |
| - | | |
| 2,132 | | |
| - | | |
| - | | |
| 2,132 | |
| Total
liabilities | |
| 10,869 | | |
| 2,528 | | |
| (2,120 | ) | |
| 11,277 | | |
| 2,076 | | |
| 379 | | |
| 13,732 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Stockholders’
equity (deficit): | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Preferred
stock, Series J | |
| - | | |
| - | | |
| 163 | | |
| 163 | | |
| - | | |
| - | | |
| 163 | |
| Common
stock | |
| 3,766 | | |
| - | | |
| - | | |
| 3,766 | | |
| - | | |
| - | | |
| 3,766 | |
| Additional
paid – in capital | |
| 126,054 | | |
| - | | |
| - | | |
| 126,054 | | |
| - | | |
| - | | |
| 126,054 | |
| Retained
earnings/Accumulated deficit | |
| (139,643 | ) | |
| (2,463 | ) | |
| 2,463 | | |
| (139,643 | ) | |
| 636 | | |
| (636 | )(b) | |
| (139,643 | ) |
| Total
stockholders’ equity (deficit) | |
| (9,823 | ) | |
| (2,463 | ) | |
| 2,626 | | |
| (9,660 | ) | |
| 636 | | |
| (636 | ) | |
| (9,660 | ) |
| Total
liabilities and stockholders’ equity | |
$ | 1,046 | | |
$ | 65 | | |
$ | 506 | | |
$ | 1,617 | | |
$ | 2,712 | | |
$ | (257 | ) | |
$ | 4,072 | |
The
accompanying notes are an integral part of this pro forma financial information.
PositiveID
Corporation
Pro
Forma Unaudited Condensed Combined Statement of Operations
For
The Nine Months Ended September 30, 2015
(in
thousands)
| | |
PositiveID
Corporation Historical (a) | | |
Thermomedics
Inc. Historical (a) | | |
Pro
Forma Adjustments (a) | | |
Pro
Forma Combined (a) | | |
ENG
Mobile Systems, Inc. Historical | | |
Pro
Forma Adjustments (ENG) | | |
Pro
Forma Combined | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Revenue | |
$ | 2,682 | | |
$ | 415 | | |
$ | - | | |
$ | 3,097 | | |
$ | 3,365 | | |
$ | - | | |
$ | 6,462 | |
| Cost of sales | |
| 148 | | |
| 66 | | |
| - | | |
| 214 | | |
| 2,042 | | |
| - | | |
| 2,256 | |
| Gross
profit | |
| 2,534 | | |
| 349 | | |
| - | | |
| 2,883 | | |
| 1,323 | | |
| - | | |
| 4,206 | |
| Operating expenses: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| General
and administrative | |
| 3,730 | | |
| 347 | | |
| 90 | (h)(i) | |
| 4,167 | | |
| 1,127 | | |
| 112 | (g)(h) | |
| 5,406 | |
| Research
and development | |
| 992 | | |
| - | | |
| - | | |
| 992 | | |
| - | | |
| - | | |
| 992 | |
| Total
operating expenses | |
| 4,722 | | |
| 347 | | |
| 90 | | |
| 5,159 | | |
| 1,127 | | |
| 112 | | |
| 6,398 | |
| Operating income (loss) | |
| (2,188 | ) | |
| 2 | | |
| (90 | ) | |
| (2,276 | ) | |
| 196 | | |
| (112 | ) | |
| (2,192 | ) |
| Other (income)/expense | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Interest
expense | |
| (3,389 | ) | |
| - | | |
| - | | |
| (3,389 | ) | |
| (1 | ) | |
| (87 | )(i) | |
| (3,477 | ) |
| Change
in fair value of embedded conversion option liability | |
| (1,446 | ) | |
| - | | |
| - | | |
| (1,446 | ) | |
| - | | |
| - | | |
| (1,446 | ) |
| Loss
on extinguishment of debt | |
| (233 | ) | |
| - | | |
| - | | |
| (233 | ) | |
| - | | |
| - | | |
| (233 | ) |
| Other
income (expense), net | |
| 370 | | |
| - | | |
| - | | |
| 370 | | |
| (1 | ) | |
| - | | |
| 369 | |
| Total
interest and other income (expense), net | |
| (4,698 | ) | |
| - | | |
| - | | |
| (4,698 | ) | |
| (2 | ) | |
| (87 | ) | |
| (4,787 | ) |
| Net
income (loss) | |
$ | (6,886 | ) | |
$ | 2 | | |
$ | (90 | ) | |
$ | (6,974 | ) | |
$ | 194 | | |
$ | (199 | ) | |
$ | (6,979 | ) |
| Loss
per common share - basic and diluted: | |
$ | (0.03 | ) | |
| | | |
| | | |
$ | (0.03 | ) | |
| - | | |
| - | | |
$ | (0.03 | ) |
| Shares
used in computing net loss per share - basic and diluted | |
| 271,531 | | |
| | | |
| - | | |
| 271,531 | | |
| - | | |
| - | | |
| 271,531 | |
The
accompanying notes are an integral part of this pro forma financial information.
PositiveID
Corporation
Pro
Forma Unaudited Condensed Combined Statement of Operations
For
The Year Ended December 31, 2014
(in
thousands)
| | |
PositiveID
Corporation Historical (a) | | |
Thermomedics
Inc. Historical (a) | | |
Pro
Forma Adjustments(a) | | |
Pro
Forma Combined (a) | | |
ENG
Mobile Systems, Inc. Historical | | |
Pro
Forma Adjustments (ENG) | | |
Pro
Forma Combined | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Revenues | |
$ | 945 | | |
| 677 | | |
$ | - | | |
$ | 1,622 | | |
$ | 2,502 | | |
$ | - | | |
$ | 4,124 | |
| Cost of sales | |
| 294 | | |
| 131 | | |
| - | | |
| 425 | | |
| 1,537 | | |
| - | | |
| 1,962 | |
| Gross profit | |
| 651 | | |
| 546 | | |
| - | | |
| 1,197 | | |
| 965 | | |
| - | | |
| 2,162 | |
| Operating expenses: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| General and administrative | |
| 4,313 | | |
| 494 | | |
| 100 | | |
| 4,907 | | |
| 1,040 | | |
| 126 | (g)(h) | |
| 6,073 | |
| Research
and development | |
| 588 | | |
| 2 | | |
| - | | |
| 590 | | |
| - | | |
| - | | |
| 590 | |
| Total
operating expenses | |
| 4,901 | | |
| 496 | | |
| 100 | | |
| 5,497 | | |
| 1,040 | | |
| 126 | | |
| 6,663 | |
| Operating income (loss) | |
| (4,250 | ) | |
| 50 | | |
| (100 | ) | |
| (4,300 | ) | |
| (75 | ) | |
| (126 | ) | |
| (4,501 | ) |
| Other (income) expense | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Interest expense | |
| (3,010 | ) | |
| - | | |
| - | | |
| (3,010 | ) | |
| (2 | ) | |
| (116 | )(i) | |
| (3,128 | ) |
| Changes in contingent
earn-out liability | |
| 514 | | |
| - | | |
| - | | |
| 514 | | |
| - | | |
| - | | |
| 514 | |
| Change in fair value
of embedded conversion option liability | |
| (198 | ) | |
| - | | |
| - | | |
| (198 | ) | |
| - | | |
| - | | |
| (198 | ) |
| Loss on extinguishment
of debt | |
| (246 | ) | |
| - | | |
| - | | |
| (246 | ) | |
| - | | |
| - | | |
| (246 | ) |
| Other
income (expense) | |
| (1 | ) | |
| - | | |
| - | | |
| (1 | ) | |
| (1 | ) | |
| - | | |
| (2 | ) |
| Total
costs and expenses | |
| (2,941 | ) | |
| - | | |
| - | | |
| (2,941 | ) | |
| (3 | ) | |
| (116 | ) | |
| (3,060 | ) |
| Net income (loss) before
provision for income taxes | |
| (7,191 | ) | |
| 50 | | |
| - | | |
| (7,241 | ) | |
| (78 | ) | |
| (242 | ) | |
| (7,561 | ) |
| Provision
for income taxes | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Net
income (loss) | |
$ | (7,191 | ) | |
$ | 50 | | |
$ | (100 | ) | |
$ | (7,241 | ) | |
$ | (78 | ) | |
$ | (242 | ) | |
$ | (7,561 | ) |
| Net loss per common
share | |
$ | (0.07 | ) | |
| | | |
| | | |
$ | (0.07 | ) | |
$ | - | | |
$ | - | | |
$ | (0.08 | ) |
| Shares
used in computing net loss per share - basic and diluted | |
| 96,602 | | |
| | | |
| - | | |
| 96,602 | | |
| - | | |
| - | | |
| 96,602 | |
The
accompanying notes are an integral part of this pro forma financial information.
PositiveID
Corporation
Notes
to Pro Forma Condensed Combined Financial Information
(Unaudited)
Note
1. Acquisition of E-N-G Mobile Systems, Inc.
On
December 24, 2015, PositiveID Corporation (“PositiveID” or “Company”) acquired all of the outstanding
common stock of E-N-G Mobile Systems, Inc. (“ENG”) from its sole shareholder (the “Seller”). Pursuant
to the Purchase Agreement, as consideration at the time of closing of the Acquisition, PositiveID paid the Seller Seven Hundred
Fifty Thousand Dollars ($750,000) in cash and issued a convertible secured promissory note to the Seller in the amount of One
Hundred Fifty Thousand Dollars ($150,000) (the “ENG Note”). Additional earn-out payments may be earned by the Seller
as described in the Purchase Agreement. Earn-out payments are estimated to be approximately $111,000, to be paid in the four months
following the closing of the acquisition. The Company has also entered into a two year consulting agreement with the Seller.
The
estimated purchase price of the acquisition totaled $909 thousand, comprised of $750 thousand in cash, a convertible seller note
of $150 thousand, the fair value of the contingent consideration estimated at approximately $111 thousand, net of an estimated
recovery based on the closing net worth of ENG, estimated at $102 thousand. The fair value of the contingent consideration was
estimated based upon the present value of the expected future payouts of the contingent consideration and is subject to change
upon the finalization of the purchase accounting.
Under
the acquisition method of accounting, the estimated purchase price of the Acquisition was allocated to ENG’s net tangible
and identifiable intangible assets and liabilities assumed based on their estimated fair values as of the date of the completion
of the Acquisition, as described in the introduction to this unaudited pro forma condensed combined financial information, as
follows:
(in
thousands)
| Assets Acquired: | |
| | |
| Cash | |
$ | 99 | |
| Accounts receivable | |
| 636 | |
| Inventory | |
| 1,249 | |
| Other assets | |
| 33 | |
| Property and equipment, net | |
| 123 | |
| Customer relationships | |
| 211 | |
| | |
| 2,351 | |
| Liabilities assumed: | |
| | |
| Accounts payable and accrued expenses | |
| 236 | |
| Deferred revenue | |
| 1,206 | |
| | |
| 1,442 | |
| Total estimated purchase price | |
$ | 909 | |
Note
2. Pro Forma Adjustments
The
pro forma adjustments included in the unaudited pro forma condensed combined financial information are as follows:
| |
(a)
|
The
balances, adjustments and disclosures related to the acquisition of Thermomedics, Inc.
are included in the Form 8-K/A filed by the Company on February 19, 2016. |
| |
|
|
| |
(b) |
To
record the entry necessary to adjust the tangible assets and liabilities of E-N-G Mobile Systems, Inc. to their estimated
fair values at the time of the acquisition. |
| |
|
|
| |
(c)
|
To
record the purchase price of $750 thousand in cash and a convertible note payable of $150 thousand, net of an estimated recovery
based on the closing net worth of ENG, estimated at $102 thousand. |
| |
|
|
| |
(d) |
To
reflect the preliminary estimate of the fair value of amortizable intangible assets acquired, consisting of customer relationships. |
| |
|
|
| |
(e) |
To
record a liability for the estimated fair value of the contingent consideration. |
| |
|
|
| |
(f) |
To
record a convertible note with a principal value of $902 thousand (the “Financing Note”) used to finance the cash
component of the purchase price. The amount recoded, $752 thousand, is net of original issue discount, fees, legal and diligence
costs. |
| |
|
|
| |
(g) |
To
expense the direct costs of the acquisition comprised of legal, due diligence, and accounting services of $70 thousand. |
| |
|
|
| |
(h) |
To
record amortization of customer lists over an estimated 5-year useful life. |
| |
|
|
| |
(i) |
To
record interest expense related to the Seller convertible note and the Financing Note. |