UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS INFORMATION
Exhibit 99.3
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS INFORMATION
On
June 18, 2010, United American Healthcare Agreement ("UAHC") entered into a Securities Purchase and a Warrant Purchase Agreement to
acquire 100% of the outstanding common units and warrants to purchase common units of Pulse
Systems, LLC (“Pulse”). The consideration paid to acquire the common units and warrants of Pulse
totaled approximately $9.46 million, which consisted of (a) cash paid at closing of $3.4 million, (b) a
non-interest bearing note payable of $1.75 million (secured by a subordinated pledge of all the
common units of Pulse), (c) 1,608,039 shares of UAHC common stock determined based on an initial
value of $1.6 million, (d) an estimated purchase price adjustment of $210,364 based on targeted
levels of net working capital, cash and debt of Pulse at the acquisition date and (e) the funding
of $2.5 million for certain obligations of Pulse as discussed below. The shares of UAHC common
stock were issued on July 12, 2010, upon approval by the UAHC
board of directors on July 7, 2010 and,
therefore, were revalued at each balance sheet date until issued. The shares of UAHC common stock
had a fair value of $1.05 million as of June 30, 2010, and a fair value of $884,000 on July 12,
2010, the date the shares were issued and recorded. The Company also assumed Xxxxx’s notes payable
to a bank of $4.25 million, after making a payment at closing as discussed below.
In connection with the acquisition of the Pulse common units, Pulse entered into a redemption
agreement with the holders of its preferred units to redeem the preferred units for $3.99 million.
Pulse is only allowed to redeem the preferred units if UAHC makes additional cash equity
contributions to Pulse in an amount necessary to fully fund each such redemption. UAHC funded an
initial payment of $1.75 million to the preferred unit holders on June 18, 2010. Pulse has agreed
to redeem the remaining preferred units over a two-year period ending in June 2012. Finally, as an
additional condition of closing, UAHC funded a $750,000 payment toward Pulse’s outstanding term
loan with a bank and pledged all of the common units of Pulse to the bank as additional security
for the remaining $4.25 million outstanding under the loan. The initial payment of $1.75 million
to the preferred unit holders and the $750,000 payment to the bank by UAHC are considered
additional consideration for the acquisition of Pulse. The funding of the remaining redemption
payments totaling $2.24 million and the assumption of Pulse’s notes payable are not included in the
$9.46 million purchase price listed above.
The unaudited pro forma combined balance sheet and statements of income, together referred to as
the “Unaudited Pro Forma Combined Financial Statements” should be read in conjunction with:
• | the accompanying Notes to the Unaudited Pro Forma Combined Financial Statements; | ||
• | the separate historical unaudited financial statements of UAHC as of and for the three and nine months ended March 31, 2010, included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 17, 2010; | ||
• | the separate historical audited financial statements of UAHC as of June 30, 2009 and 2008 and for each of the years in the three-year period ended June 30, 2009, included in the Company’s Annual Report on Form 10-K filed with the SEC on September 24, 2009; | ||
• | the separate historical unaudited financial statements of Pulse as of and for the three months ended March 31, 2010; and | ||
• | the separate historical audited financial statements of Pulse as of and for the years ended December 31, 2009 and 2008. |
The unaudited pro forma combined balance sheet as of March 31, 2010 gives effect to the acquisition
of Pulse as if it occurred on that date. The unaudited pro forma combined statements of income for
the nine months ended March 31, 2010 and the year ended June 30, 2009 give effect to the
acquisition as if it
occurred on July 1, 2008 by combining the results for the nine months ended March 31, 2010 of UAHC
with the results for the same period of Pulse, and combining the results for the year ended June
30, 2009 of UAHC with the results for the same period of Pulse.
The Unaudited Pro Forma Combined Financial Statements are based on preliminary assumptions and
adjustments related to the valuation of the fixed and intangible assets and are dependent upon
finalizing these valuations. Accordingly, the pro forma purchase price allocation and amortization
adjustments are preliminary, subject to future adjustments and have been made solely for purpose of
providing the Unaudited Pro Forma Combined Financial Statements.
The Unaudited Pro Forma Combined Financial Statements are presented for illustrative purposes and
do not purport to represent what the financial position or results of operations would actually
have been if the acquisition occurred as of the dates indicated or what such financial position or
results would be for any future periods.
2
UNITED AMERICAN HEALTH CARE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS
As of March 31, 2010
(in thousands)
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS
As of March 31, 2010
(in thousands)
Historical | Historical Pulse | Pro Forma | Pro Forma | |||||||||||||
UAHC (1) | (2) | Adjustments | Combined | |||||||||||||
Assets |
||||||||||||||||
Current Assets |
||||||||||||||||
Cash |
$ | 9,416 | $ | 84 | $ | (5,900 | ) | A | $ | 3,600 | ||||||
Accounts receivable, net |
96 | 981 | — | 1,077 | ||||||||||||
Inventories |
— | 239 | — | 239 | ||||||||||||
Prepaid expenses and other |
281 | 90 | — | 371 | ||||||||||||
Total Current Assets |
9,793 | 1,394 | (5,900 | ) | 5,287 | |||||||||||
Property and equipment, net |
14 | 980 | — | 994 | ||||||||||||
Other Assets |
||||||||||||||||
Intangible assets, net |
— | 2,541 | 891 | B | 3,432 | |||||||||||
Goodwill |
— | 13,049 | (2,779 | ) | C | 10,270 | ||||||||||
Deferred financing costs, net |
— | 232 | (232) | L | — | |||||||||||
Marketable securities |
2,370 | — | — | 2,370 | ||||||||||||
Other |
486 | 7 | — | 493 | ||||||||||||
Total Other Assets |
2,856 | 15,829 | (2,120 | ) | 16,565 | |||||||||||
Total Assets |
$ | 12,663 | $ | 18,203 | $ | (8,020 | ) | $ | 22,846 | |||||||
Liabilities & Equity |
||||||||||||||||
Current Liabilities |
||||||||||||||||
Current portion of notes payable |
$ | — | $ | 1,400 | $ | 1,374 | D | $ | 2,774 | |||||||
Current portion of capital
lease obligations |
— | 90 | — | 90 | ||||||||||||
Accounts payable |
1,072 | 170 | — | 1,242 | ||||||||||||
Accrued liabilities |
340 | 196 | — | 536 | ||||||||||||
Accrued purchase price |
— | — | 210 | E | 210 | |||||||||||
Total Current Liabilities |
1,412 | 1,856 | 1,584 | 4,852 | ||||||||||||
Notes payable |
— | 3,600 | (475 | ) | D | 3,125 | ||||||||||
Capital lease obligations |
— | 228 | — | 228 | ||||||||||||
Warrant liability |
— | 1,082 | (1,082 | ) | F | — | ||||||||||
Interest rate swap |
— | 45 | — | 45 | ||||||||||||
Redeemable preferred member units |
— | — | 1,850 | H | 1,850 | |||||||||||
Total Liabilities |
1,412 | 6,811 | 1,877 | 10,100 | ||||||||||||
Common stock |
17,711 | — | 1,495 | G | 19,206 | |||||||||||
Additional paid-in capital |
2,104 | — | — | 2,104 | ||||||||||||
Accumulated deficit |
(8,564 | ) | — | — | (8,564 | ) | ||||||||||
Members’ Equity |
— | 11,392 | (11,392 | ) | H | — | ||||||||||
Total Liabilities & Equity |
$ | 12,663 | $ | 18,203 | $ | (8,020 | ) | $ | 22,846 | |||||||
(1) | As reported in UAHC’s unaudited quarterly report on Form 10-Q for the nine months ended March 31, 2010 that was filed with the U.S. Securities and Exchange Commission on May 17, 2010. | |
(2) | As reported in Pulse’s unaudited financial statements for the period ending March 31, 2010. |
See accompanying Notes to the Unaudited Pro Forma Combined Financial Statements.
3
UNITED AMERICAN HEALTH CARE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the year ended June 30, 2009
(In Thousands, except per share data)
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the year ended June 30, 2009
(In Thousands, except per share data)
Historical | Historical | Pro Forma | Pro Forma | |||||||||||||
UAHC (1) | Pulse (2) | Adjustments | Combined | |||||||||||||
Net revenue |
$ | 16,659 | $ | 10,798 | $ | — | $ | 27,457 | ||||||||
Cost of revenue |
10,181 | 5,531 | — | 15,712 | ||||||||||||
Gross profit |
6,478 | 5,267 | — | 11,745 | ||||||||||||
Xxxxxxx, general & administrative expenses |
15,876 | 3,272 | 34 | I | 19,182 | |||||||||||
Operating income (loss) |
(9,398 | ) | 1,995 | (34 | ) | (7,437 | ) | |||||||||
Other income (expense): |
||||||||||||||||
Amortization of deferred financing costs |
— | (111 | ) | — | (111 | ) | ||||||||||
Interest income |
688 | 3 | — | 691 | ||||||||||||
Interest expense |
— | (1,314 | ) | (139 | ) | J | (1,453 | ) | ||||||||
Warrant, fair value adjustment |
— | 157 | (157 | ) | K | — | ||||||||||
Income (loss) before income tax benefit |
(8,710 | ) | 730 | (330 | ) | (8,310 | ) | |||||||||
Income tax benefit |
(5 | ) | — | — | (5 | ) | ||||||||||
Net income (loss) |
$ | (8,705 | ) | $ | 730 | $ | (330 | ) | $ | (8,305 | ) | |||||
Earnings (loss) per share — basic and diluted |
$ | (1.02 | ) | $ | (0.82 | ) | ||||||||||
Weighted average shares outstanding |
8,532 | 1,608 | G | 10,140 |
(1) | As reported in UAHC’s annual report on Form 10-K that was filed with the U.S. Securities and Exchange Commission on September 24, 2009. | |
(2) | As compiled from Pulse’s unaudited monthly financial statements for the twelve months beginning July 1, 2008, as Pulse historically reported on a calendar year basis. |
See accompanying Notes to the Unaudited Pro Forma Combined Financial Statements.
4
UNITED AMERICAN HEALTH CARE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Nine Months Ended March 31, 2010
(in thousands, except per share data)
Historical | Historical Pulse | Pro Forma | Pro Forma | |||||||||||||||||
UAHC (1) | (2) | Adjustments | Combined | |||||||||||||||||
Net revenue |
$ | 3,475 | $ | 5,844 | $ | — | $ | 9,319 | ||||||||||||
Cost of revenue |
2,752 | 2,922 | — | 5,674 | ||||||||||||||||
Gross profit |
723 | 2,922 | — | 3,645 | ||||||||||||||||
Xxxxxxx, general & administrative expenses |
4,919 | 1,739 | (279 | ) | I | 6,379 | ||||||||||||||
Operating income (loss) |
(4,196 | ) | 1,183 | 279 | (2,734 | ) | ||||||||||||||
Other income (expense): |
||||||||||||||||||||
Amortization of deferred financing
costs |
— | (43 | ) | — | (43 | ) | ||||||||||||||
Interest income |
105 | 0 | — | 105 | ||||||||||||||||
Interest expense |
— | (534 | ) | (104 | ) | J | (638 | ) | ||||||||||||
Warrant, fair value adjustment |
— | 261 | (261 | ) | K | 0 | ||||||||||||||
Net income |
$ | (4,091 | ) | $ | 867 | $ | (86 | ) | $ | (3,310 | ) | |||||||||
Earnings (loss) per share — basic and diluted |
$ | (0.50 | ) | $ | (0.34 | ) | ||||||||||||||
Weighted average shares outstanding |
8,149 | — | 1,608 | G | 9,757 |
(1) | As reported in UAHC’s unaudited quarterly report on report on Form 10-Q for the nine months ending March 31, 2010 that was filed with the U.S. Securities and Exchange Commission on May 17, 2010. | |
(2) | As per Pulse’s unaudited financial statements for the nine month period ending March 31, 2010. |
5
UNITED AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Pro Forma Combined Financial Statements
Note 1 — ACQUISITION OF PULSE SYSTEMS, LLC
The fair value of the consideration paid for the acquisition of the net assets as of June 18, 2010,
was as follows:
In Thousands | ||||
Cash at closing |
$ | 5,900 | ||
Note payable, net of discount |
1,649 | |||
UAHC common stock |
1,495 | |||
Obligation for estimated purchase price adjustment |
210 | |||
Total consideration |
$ | 9,254 | ||
The UAHC common stock paid as consideration had a fair value of $884,000 on July 12, 2010, the date
the shares were issued upon approval by the UAHC board of directors on that date.
The Unaudited Pro Forma Combined Financial Statements are based on preliminary assumptions and
adjustments related to the valuation of the fixed and intangible assets and are dependent upon
finalizing these valuations. Accordingly, the pro forma purchase price allocation and amortization
adjustments are preliminary, subject to future adjustments and have been made solely for purpose of
providing the Unaudited Pro Forma Combined Financial Statements. The amounts preliminarily
assigned to the Company’s identifiable intangible assets acquired are based on their respective
fair values determined as of the acquisition date. The excess of the purchase price over the
tangible and identifiable intangible assets will be recorded as goodwill and estimated to be
approximately $10.4 million, as of June 18, 2010. In accordance with current accounting standards,
the goodwill will not be amortized and will be tested for impairment annually or as circumstances
require.
6
UNITED AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Pro Forma Combined Financial Statements
Note 2 — PRO FORMA ADJUSTMENTS
Pro forma adjustments reflect only those adjustments that are factually determinable. The
allocation of the purchase price relating to this acquisition is preliminary, pending the
finalization of the Company’s valuation of the identifiable intangible assets.
The unaudited pro forma combined statements of operations and balance sheet reflect the effect of
the following pro forma adjustments:
(A) To record the amount of cash paid at closing ($3.4 million toward the common units and
warrants, $1.75 million toward the redemption of preferred units, and $750,000 to pay down
debt).
(B) To adjust the estimated fair value of identifiable intangible assets acquired. The Customer
List is expected to be amortized over seven years and the Customer Back Log is expected to be
amortized over the next six months.
(C) To adjust goodwill as the excess of the purchase price paid over the estimated fair value of
the identified net assets acquired.
(D) To record the fair value of notes payable issued to common unit holders ($1.65 million) and
the pay down of Pulse notes payable ($750,000).
(E) To record the amount due the former common unit holders for the purchase price adjustment.
(F) To record the sale and cancellation of outstanding warrants.
(G) To
record the issuance of 1,608,039 shares of UAHC common stock and
their fair value as of the acquisition
date.
(H) To remove the historical equity of Pulse Systems, LLC and reflect the fair value of the
unredeemed preferred member units as a liability.
(I) To adjust amortization expense for identifiable intangibles assets based on the preliminary
allocation of the purchase price. These amounts were adjusted for the actual amortization that
was expensed in each of these periods.
(J) To record interest expense for the notes payable issued to common unit holders and
redeemable preferred member units.
(K) To remove the gain on the fair value adjustment for the warrants since the warrants were
acquired in the transaction.
(L) To remove the deferred financing costs as the fair value of this asset at the acquisition
date is $0.
7