<PAGE> 1
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
Exhibit 99.2
CHOLESTECH CORPORATION
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
On January 21, 2000, Cholestech Corporation ("Cholestech" or the
"Company")acquired certain assets of Health Net, Inc. ("Health Net"). The
acquisition was accounted for using the purchase method of accounting and,
accordingly, the purchase price was allocated to the tangible and intangible
assets acquired on the basis of their estimated fair values on the acquisition
date as determined by the Company's management. The pro forma combined condensed
balance sheet is based on the balance sheet of the Company and the balance sheet
of Health Net at December 24, 1999 assuming the transaction was consummated on
December 24, 1999. The pro forma combined condensed statements of operations are
based on the individual statements of operations of the Company for the year
ended March 26, 1999 and the nine months ended December 24, 1999. The operations
of Health Net have been included in the pro forma combined condensed statements
of operations as though the acquisition had been consummated on March 28, 1998.
The pro forma combined condensed financial statements have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission and do not purport to represent what the Company's results of
operations would have been or what operations would be if the transactions that
give rise to the pro forma adjustments had occurred on the dates assumed and are
not necessarily indicative of future results. The pro forma combined condensed
statements of operations should be read in conjunction with the historical
financial statements and related notes of Cholestech and the historical
financial statements and related notes of Health Net.
14
<PAGE> 2
CHOLESTECH CORPORATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF DECEMBER 24, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS HEALTH PRO
REPORTED NET ADJUSTMENTS FORMA
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $7,217 $53 $(2,200) (A) $ 5,070
Marketable securities 3,858 3,858
Accounts receivable, net 2,284 288 (75) (B) 2,497
Inventories 3,391 27 (15) (B) 3,403
Prepaid expenses and other current assets 316 6 322
-------------------------------------- ---------
Total current assets 17,066 374 (2,290) 15,150
Property and equipment, net 6,384 112 6,496
Long-term investments 4,923 4,923
Goodwill 2,761 (C) 2,761
Other assets, net 54 54
-------------------------------------- ---------
Total assets $28,427 $486 $ 471 $29,384
====================================== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $2,024 $60 $ 597 (D),(E) $ 2,681
Accrued payroll and benefits 1,572 16 (16) (D) 1,572
Notes payable 15 (15) (D) 0
Product warranty 91 91
-------------------------------------- ---------
Total current liabilities 3,687 91 566 4,344
Long-term liabilities 8 (8) (D) 0
-------------------------------------- ---------
Total liabilities 3,687 99 558 4,344
-------------------------------------- ---------
Shareholders' equity:
Preferred stock -- -- -- 0
Common stock 71,652 0 300 (A) 71,952
Additional paid-in capital -- 9 (9) (D) --
Accumulated other comprehensive income (loss) (56) (56)
Accumulated deficit (46,856) 378 (378) (F) (46,856)
-------------------------------------- ---------
Total shareholders' equity 24,740 387 (87) 25,040
-------------------------------------- ---------
Total liabilities and shareholders' equity $28,427 $486 $ 471 $29,384
====================================== =========
</TABLE>
SEE NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
15
<PAGE> 3
CHOLESTECH CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 26, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS
REPORTED HEALTH NET ADJUSTMENTS PRO FORMA
-------------------------------------------- -----------
<S> <C> <C> <C> <C>
Revenues $22,032 $1,191 $(489) (G) $22,734
Cost of revenues 10,252 475 (489) (G) 10,238
-------------------------------------------- ----------
Gross profit 11,780 716 0 12,496
-------------------------------------------- ----------
Operating expenses:
Sales and marketing 6,606 437 7,043
Research and development 2,703 2,703
General and administrative 2,381 131 2,512
Amortization of goodwill 552 (H) 552
Other 826 826
-------------------------------------------- ----------
Total operating expenses 12,516 568 552 13,636
-------------------------------------------- ----------
Income (loss) from operations (736) 148 (552) (1,140)
Interest and other income (expense),
net 663 (19) (110) (I) 534
-------------------------------------------- ----------
Income (loss) before taxes (73) 129 (662) (606)
-------------------------------------------- ----------
Net income (loss) $ (73) $ 129 $(662) $ (606)
============================================ ==========
Net loss per share:
Basic and diluted $ (0.01) $ (0.05)
=========== ==========
Shares used in computing basic and
diluted net loss per share 11,484 11,535
=========== ==========
</TABLE>
SEE NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
16
<PAGE> 4
CHOLESTECH CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 24, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS
REPORTED HEALTH NET ADJUSTMENTS PRO FORMA
-------------------------------------------- -----------
<S> <C> <C> <C> <C>
Revenues $18,858 $1,924 $(632) $20,150
Cost of revenues 7,888 709 (618) (G) 7,979
-------------------------------------------- ----------
Gross profit 10,970 1,215 (14) 12,171
-------------------------------------------- ----------
Operating expenses:
Sales and marketing 5,048 650 5,698
Research and development 2,247 2,247
General and administrative 2,242 226 2,468
Amortization of goodwill 414 (H) 414
Other 219 219
-------------------------------------------- ----------
Total operating expenses 9,756 876 414 11,046
-------------------------------------------- ----------
Income from operations 1,214 339 (428) 1,125
Interest and other income, net 556 (13) (83) (I) 460
-------------------------------------------- ----------
Income before taxes 1,770 326 (511) 1,585
Provision for income taxes 71 71
-------------------------------------------- ----------
Net income $ 1,699 $ 326 $(511) $ 1,514
============================================ ==========
Net income per share:
Basic $ 0.15 $ 0.13
============ ==========
Diluted $ 0.14 $ 0.13
============ ==========
Shares used in computing basic
and diluted net income per share:
Basic 11,661 11,712
============ ==========
Diluted 11,929 11,980
============ ==========
</TABLE>
SEE NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
17
<PAGE> 5
Cholestech Corporation
Notes to Combined Condensed Financial Information
NOTE 1 SUMMARY OF TRANSACTION
On January 21, 2000, Cholestech Corporation ("Cholestech" or the "Company")
acquired certain assets of Health Net, Inc. ("Health Net"). The acquisition was
accounted for using the purchase method of accounting and, accordingly, the
purchase price was allocated to the tangible and intangible assets acquired on
the basis of their estimated fair market values on the acquisition date as
determined by the Company's management. The purchase price to date consisted of
approximately $2,200,000 of cash and 51,010 shares of common stock valued at
$300,000 and acquisition related expenses of approximately $643,000. Pursuant to
the terms of the purchase agreement, the final purchase price will be determined
upon completion of the Health Net Audit for the year ended December 31, 1999.
The Agreement also provides that an additional amount of cash consideration, up
to $1,000,000 (the "Earnout Consideration"), may be issued to the former owners
of Health Net if certain performance milestones described in the Agreement are
achieved for the calendar year ending December 31, 2000. The preliminary
allocation of the purchase price was determined by management as follows (in
thousands):
<TABLE>
<S> <C>
Total current assets...................................... $ 276
Property and equipment and other noncurrent assets........ 106
Goodwill.................................................. 2,761
-------
Total purchase price................................. $ 3,143
=======
</TABLE>
Goodwill represents the excess of the purchase price over the estimated fair
value of the net assets acquired and will be amortized over 5 years.
18
<PAGE> 6
NOTE 2 -- PRO FORMA COMBINED CONDENSED NET INCOME (LOSS) PER SHARE:
Basic net income (loss) per share and shares used in computing the basic net
income (loss) per share for the year ended March 26, 1999 and the nine months
ended December 24, 1999 are based upon the historical weighted average common
shares outstanding. Dilutive net income (loss) per share reflects the potential
dilution that could occur from common shares issuable through stock options,
warrants and other convertible securities. Potential common stock are excluded
from the computation of net loss per share if their effect would be
anti-dilutive.
The 51,010 shares of common stock issued in connection with the acquisition have
been included in the calculation of pro forma basic and diluted net income
(loss) per share as follows:
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
December 24, March 26,
1999 1999
-------------------- ----------------------
Basic Diluted Basic Diluted
----- ------- ----- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Shares used in computing basic
and diluted net income (loss)
per share 11,661 11,929 11,484 11,484
Adjustment to reflect common stock
issued in acquisition 51 51 51 51
------- ------- ------- -------
Shares used in computing
pro forma basic and diluted
net income (loss) per share 11,712 11,980 11,535 11,535
======= ======= ======= =======
Pro forma net income (loss)
per share $ 0.13 $ 0.13 $ (0.05) $ (0.05)
======= ======= ======= =======
</TABLE>
NOTE 3 -- PRO FORMA ADJUSTMENTS
The following pro forma adjustments are based upon management's preliminary
estimates of the value of the tangible and intangible assets acquired. These
estimates are subject to finalization.
(A) Represents the cash paid and common stock issued in connection with the
acquisition.
(B) Represents the elimination of intercompany receivables and profit in
inventory.
(C) Represents $2,761,000 of goodwill.
(D) Represents the elimination of the liability accounts of Health Net that
were not assumed in the transaction.
(E) Represents accrued transaction costs of $643,000 associated with the
acquisition.
19
<PAGE> 7
(F) Represents the elimination of equity accounts of Health Net.
(G) Represents the elimination of intercompany revenues and related cost of
revenues.
(H) Represents amortization of goodwill over a five year period.
(I) Represents reduced interest income on the funds used to purchase Health
Net.
(J) On a pro forma basis, income taxes for the nine months ended December 24,
1999 were not material.
20
