EX-99 14 ex99-2.txt EX-99.2 EXHIBIT 99.2 Alpha Innotech Corporation Unaudited Financial Information For the Six Months Ended June 30, 2005 Page ---- Condensed Consolidated Balance Sheets ................................... 2 Condensed Consolidated Statements of Operations ......................... 3 Condensed Consolidated Statement of Changes in Shareholders' Deficit .... 4 Condensed Consolidated Statements of Cash Flow .......................... 5 Notes to the Condensed Consolidated Financial Statements ................ 6-8 1 ALPHA INNOTECH CORPORATION Condensed Consolidated Balance Sheets As of June 30, 2005 and December 31, 2004 (in thousands, except share data) (Unaudited) June 30, Dec. 31, 2005 2004 -------- -------- ASSETS Current assets: Cash and cash equivalents ......................... $ 566 $ 40 Accounts receivable, net .......................... 1,261 1,975 Inventory, net .................................... 799 725 Prepaid expenses and other current assets ......... 110 170 -------- -------- Total current assets .......................... 2,736 2,910 Property and equipment, net ............................ 1,243 1,434 Other assets ........................................... 75 80 -------- -------- Total assets ............................. $ 4,054 $ 4,424 ======== ======== IABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' DEFICIT Current liabilities: Accounts payable .................................. $ 1,918 $ 1,617 Accrued liabilities ............................... 1,092 1,089 Current portion of debt ........................... 1,635 1,610 Deferred revenue .................................. 586 575 Other current liabilities ......................... 167 181 -------- -------- Total current liabilities ..................... 5,398 5,072 -------- -------- Debt, less current portion ............................. 1,100 -- -------- -------- Commitments and contingencies .......................... -- -- -------- -------- Redeemable Convertible Preferred stock, no par value, authorized 24,000,000 shares: Series A, issued and outstanding 10,533,334 and 10,533,334 shares (liquidation value of $7,900 at June 30, 2005 and December 31, 2004) ..... 10,610 10,273 Series A-1, issued and outstanding 7,343,418 and 7,343,418 shares (liquidation value of $2,203 at June 30, 2005 and December 31, 2004) ..... 2,272 2,181 -------- -------- Total redeemable convertible preferred stock ...................... 12,882 12,454 -------- -------- Shareholders' deficit: Common stock, Series A, no par value per share: Authorized 60,000,000 shares Issued and outstanding 23,180,587 and 23,177,526 shares ................. 1,148 1,147 Accumulated deficit ............................... (16,474) (14,249) -------- -------- Total shareholders' deficit ................... (15,326) (13,102) -------- -------- Total liabilities, redeemable convertible preferred stock and shareholders' deficit ............. $ 4,054 $ 4,424 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements. 2 ALPHA INNOTECH CORPORATION Condensed Consolidated Statements of Operations For the Six Months Ended June 30, 2005 and 2004 (in thousands, except share data) (Unaudited) June 30, June 30, 2005 2004 ------------ ------------ Revenue ........................................ $ 5,018 $ 4,810 Cost of goods sold ............................. 2,773 2,526 ------------ ------------ Gross profit .............................. 2,245 2,284 Operating expenses: Sales and marketing ....................... 2,428 1,939 Research and development expenses ......... 807 1,038 General and administrative expenses ....... 643 662 ------------ ------------ Total operating expenses .............. 3,878 3,639 ------------ ------------ Loss from operations ............. (1,633) (1,355) Other income (expense): Interest expense .......................... (159) (142) Other income (expense) .................... (5) (3) ------------ ------------ Total other income (expense) .......... (164) (145) ------------ ------------ Net loss .................................. (1,797) (1,500) Accretions on redeemable convertible preferred stock ............................ (428) (352) ------------ ------------ Net loss applicable to common shareholders $ (2,225) $ (1,852) ============ ============ Net loss per share - basis and diluted ......... $ (0.10) $ (0.08) ============ ============ Number of shares used in computing basis and diluted net loss per share 23,179,057 23,173,935 ============ ============ The accompanying notes are an integral part of these condensed consolidated financial statements. 3 ALPHA INNOTECH CORPORATION Condensed Consolidated Statement of Changes in Shareholders' Deficit For the Period Ended June 30, 2005 (in thousands, except share data) (Unaudited)
Redeemable Convertible Preferred Stock ---------------------------------------------- Series A Series A-1 Common Stock ---------------------- ---------------------- ---------------------- Number Number Number Accumulated of Shares Value of Shares Value of Shares Value Deficit Total ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance at January 1, 2005 . 10,533,334 $ 10,273 7,343,418 $ 2,181 23,177,526 $ 1,147 $ (14,249) $ (13,102) Accretion of preferred stock to redemption value ..... -- 21 -- 3 -- -- (24) (24) Accretion of cumulative preferred dividend ...... -- 316 -- 88 -- -- (404) (404) Exercise of common stock options for cash ........ -- -- -- -- 3,061 1 -- 1 Net loss ................... -- -- -- -- -- -- (1,797) (1,797) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance at June 30, 2005 . 10,533,334 $ 10,610 7,343,418 $ 2,272 23,180,587 $ 1,148 $ (16,474) $ (15,326) ========== ========== ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 ALPHA INNOTECH CORPORATION Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2005 and 2004
June 30, June 30, 2005 2004 ------- ------- Cash flows from operating activities: Net loss ......................................................... $(1,797) $(1,500) Adjustments to reconcile net income to net cash used in operating activities: Depreciation ............................................ 331 388 Allowance for doubtful accounts ......................... 10 33 Interest on convertible notes payable ................... -- 24 Amortization of deferred stock-based compensation ....... -- 2 Change in operating assets and liabilities: Accounts receivables ......................................... 705 (94) Inventories .................................................. (74) 458 Prepaid expenses and other current assets .................... 60 (36) Other assets ................................................. 4 (2) Accounts payable ............................................. 301 448 Accrued liabilities .......................................... 3 158 Other accrued liabilities .................................... (14) (66) Deferred revenue ............................................. 11 (23) ------- ------- Net cash used in operating activities ................... (460) (210) ------- ------- Cash flows from investing activities: Purchase of property, plant and equipment ........................ (140) (149) ------- ------- Net cash used in investing activities ........................ (140) (149) ------- ------- Cash flows from financing activities: Proceeds from borrowing of debt obligation ....................... 1,500 800 Repayment of debt obligation ..................................... (375) (742) Proceeds from issuance of convertible notes ...................... -- 337 Proceeds from exercise of common stock options ................... 1 -- ------- ------- Net cash provided by financing activities .................... 1,126 395 ------- ------- Net increase in cash and cash equivalents ............... 526 36 Cash and cash equivalents - beginning of the period ................... 40 172 ------- ------- Cash and cash equivalents - end of the period .................... $ 566 $ 208 ======= ======= Supplemental disclosure of non-cash investing and financing activities: Accretion of preferred stock to redemption value ................. $ 428 $ 352 ======= =======
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 ALPHA INNOTECH CORPORATION Notes to the Condensed Consolidated Financial Statements (in thousands, except share data) 1. Formation and Business of the Company GENERAL - Alpha Innotech Corporation and subsidiary (the "Company") was incorporated and began operations in June, 1992, in the state of California, with facilities in San Leandro, California. The Company develops and markets digital imaging systems for image documentation, quantitative analysis, and image archiving. These systems are used with electrophoresis samples (gel, blots, autoradiographs, etc), microscopy applications, and general imaging from insects to culture plates. The Company has a wholly owned subsidiary, Alpha Innotech Limited, which is located in the UK and commenced sales operation in September 2001. This office location closed its operations in August 2003. The Company obtained an additional convertible notes payable financing offering totaling $670 during March and September of 2004. However, the Company has incurred substantial losses and negative cash flows from operations. For the year ended December 31, 2004, the Company incurred a loss from operations of $3,298 and negative cash flows from operations of $1,299 and has a working capital deficiency as of December 31, 2004. Management expects operating losses to continue for the foreseeable future because of additional costs and expenses related to research and development activities. Failure to generate sufficient revenues, raise additional capital or reduce certain discretionary spending could have a material adverse effect on the Company's ability to achieve its intended business objectives. GOING CONCERN - The accompanying condensed consolidated financial statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of liabilities in the normal course of business. From inception, the Company has incurred recurring losses from operation totaling approximately $13,600 and has been unable to generate positive cash flow from operations. These conditions raise substantial doubts about the Company's ability to continue as a going concern. The Company has been able to fund its operating losses to date primarily through the sale of preferred stock. The ability of the Company to manage its operating expenses to a level that can be financed by existing cash is critical to the Company's ability to continue as a going concern. Management plans to manage expenses and obtain additional funds through reverse merge with a public company. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. 2. Summary of Significant Accounting Policies BASIS OF PRESENTATION - The accompanying interim condensed consolidated financial statements do not include all disclosures included in the consolidated financial statements for the year ended December 31, 2004, and therefore, these consolidated financial statements should be read in conjunction with these interim condensed consolidated financial in this filing. In the opinion of management, these interim condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods and dates presented. STOCK-BASED COMPENSATION - The Company has adopted the interim disclosure provisions of SFAS No. 148, "Accounting for Stock-based Compensation and Disclosures." Related interim disclosures are as follows. The Company Measures compensation expense for its employee stock-based compensation awards using the intrinsic value method and provides pro forma disclosures of net loss and loss per share as if a fair value has been applied. Therefore, compensation cost for employee stock awards is measured as the excess, if any, of the fair value of our common stock at the grant date or remeasurement date over the amount an employee must pay to acquire the stock and is amortized over the related service periods using the straight-line method. Compensation expense previously recorded for unvested employee stock-based compensation awards that are forfeited upon the employee termination is reversed in the period of forfeiture. 6 ALPHA INNOTECH CORPORATION Notes to the Condensed Consolidated Financial Statements (in thousands, except share data) 2. Summary of Significant Accounting Policies (Continued) Had compensation cost for the Company's stock option plans been determined based on the fair market value at the grant dates for stock options granted consistent with the provisions of SFAS 123, the expense, net of the related tax effect, would have been immaterial to the Company's net loss. 3. Balance Sheet Components JUNE 30, DEC. 31, 2005 2004 ------- ------- Accounts receivable, net Accounts receivable ................................. $ 1,353 $ 2,057 Less allowance for sales returns .................... (75) (35) Less allowance for doubtful accounts ................ (17) (47) ------- ------- Accounts receivable, net ........................ $ 1,261 $ 1,975 ======= ======= Inventory, net Raw materials ....................................... $ 872 $ 775 Finished goods ...................................... -- 18 Inventory in transit ................................ 41 13 Less allowance for excess and obsolete inventory .... (114) (81) ------- ------- Inventory, net .................................. $ 799 $ 725 ======= ======= Property and equipment, net Machinery and equipment ............................. $ 390 $ 353 Furniture and fixtures .............................. 208 203 Leasehold improvements .............................. 1,508 1,508 Loaner and demonstration units ...................... 1,128 1,110 Computers ........................................... 308 300 Software ............................................ 91 87 ------- ------- Property and equipment .......................... 3,633 3,561 Less accumulated depreciation and amortization ...... (2,390) (2,127) ------- ------- Property and equipment, net ..................... $ 1,243 $ 1,434 ======= ======= Accrued liabilities: Payroll and related ................................. $ 628 $ 626 Warranty ............................................ 107 101 Audit and tax accrual ............................... 35 73 Finder's fee ........................................ 198 175 Other ............................................... 124 114 ------- ------- Accrued liabilities ............................. $ 1,092 $ 1,089 ======= ======= 7 ALPHA INNOTECH CORPORATION Notes to the Condensed Consolidated Financial Statements (in thousands, except share data) 4. Xtrana On December 14, 2004, Xtrana, Inc. a Delaware corporation ("Xtrana"), AIC Merger Corporation, a California corporation and a wholly-owned subsidiary of Xtrana ("Xtrana Sub"), and the Company entered into an Agreement and Plan of Merger pursuant to which Xtrana Sub will be merged with and into the Company, with the Company continuing after the Merger as the surviving corporation and a wholly-owned subsidiary of Xtrana. This plan of merger was approved on October 3, 2005. 5. Debt On April 8, 2005, the Company secured a loan in the amount of $1,500 from Alexandria Finance, LLC. The loan bears interest at the rate of 12.5% per annum and the outstanding principal amount of the loan is due and payable in 30 equal monthly installments beginning on November 1, 2005. The obligations under the loan are secured by a second priority lien and security interest in substantially all assets of the Company. The Company has issued a seven-year warrant to purchase 900,000 shares of its common stock at a purchase price of $0.20 per share in connection with this loan financing. 8