Exhibit 99.2

C TECHNOLOGIES, INC.

FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2018 AND 2017

AND

INDEPENDENT AUDITORS’ REPORT

C TECHNOLOGIES, INC.

TABLE OF CONTENTS

 

		Page
Independent Auditors’ Report			1
Financial Statements
Balance Sheets			2
Statements of Income			3
Statements of Stockholder’s Equity			4
Statements of Cash Flows			5
Notes to Financial Statements			6

INDEPENDENT AUDITOR’S REPORT

To the Stockholder

of C Technologies, Inc.

We have audited the accompanying financial statements of C Technologies, Inc., which comprise the balance sheets as of December 31, 2018 and 2017, and the related statements of income, stockholder’s equity, and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of C Technologies, Inc. as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ Friedman LLP

March 8, 2019

 

1

C Technologies, Inc.

Balance Sheets

 

		December 31,
		2018				2017
Assets
Current assets:
Cash and cash equivalents		$	7,693,000			$	7,732,000
Accounts receivable			3,302,000				4,132,000
Inventories, net			1,740,000				1,522,000
Prepaid expenses and other current assets			31,000				17,000
Total current assets			12,766,000				13,403,000
Property and equipment, net			44,000				28,000
Other assets			17,000				17,000
Total assets		$	12,827,000			$	13,448,000
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	345,000			$	348,000
Accrued expenses			907,000				610,000
Deferred revenue, current			1,255,000				972,000
Total current liabilities			2,507,000				1,930,000
Deferred revenue, non-current			92,000				145,000
Total liabilities			2,599,000				2,075,000
Commitments and contingencies
Stockholders’ equity:
Common stock, $1.00 par value, 400 authorized, 400 shares at December 31, 2018 and 2017 issued and outstanding			—				—
Retained earnings			10,228,000				11,373,000
Total stockholders’ equity			10,228,000				11,373,000
Total liabilities and stockholders’ equity		$	12,827,000			$	13,448,000

The accompanying notes are an integral part of these financial statements.

 

2

C Technologies, Inc.

Statements of Income

 

		Years Ended December 31,
		2018				2017
Revenue, net		$	23,707,000			$	19,392,000
Operating expenses:
Cost of revenue			8,172,000				6,960,000
Research and development			649,000				360,000
Selling, general and administrative			4,299,000				6,045,000
Total operating expenses			13,120,000				13,365,000
Income from operations			10,587,000				6,027,000
Other income			75,000				18,000
Net income		$	10,662,000			$	6,045,000

The accompanying notes are an integral part of these financial statements.

 

3

C Technologies, Inc.

Statements of Stockholder’s Equity

 

		Number of Shares				Common Stock				Retained Earnings				Total Stockholder’s Equity
December 31, 2016			400			$	—			$	9,232,000			$	9,232,000
Net income			—				—				6,045,000				6,045,000
Distributions			—				—				(3,904,000	)			(3,904,000	)
December 31, 2017			400				—				11,373,000				11,373,000
Net income			—				—				10,662,000				10,662,000
Distributions			—				—				(11,807,000	)			(11,807,000	)
December 31, 2018			400			$	—			$	10,228,000			$	10,228,000

The accompanying notes are an integral part of these financial statements.

 

4

C Technologies, Inc.

Statements of Cash Flows

 

		Years Ended December 31,
		2018				2017
Cash flows from operating activities:
Net income		$	10,662,000			$	6,045,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			18,000				24,000
Changes in assets and liabilities:
Accounts receivable			830,000				(1,248,000	)
Inventories			(218,000	)			(29,000	)
Prepaid expenses and other assets			(14,000	)			(17,000	)
Accounts payable			(3,000	)			(78,000	)
Accrued expenses			297,000				121,000
Deferred revenue			230,000				384,000
Net cash provided by operating activities			11,802,000				5,202,000
Cash flows from investing activities:
Purchases of property, plant and equipment			(34,000	)			—
Net cash used in investing activities			(34,000	)			—
Cash flows from financing activities:
Distributions to stockholder			(11,807,000	)			(3,904,000	)
Net cash used in financing activities			(11,807,000	)			(3,904,000	)
Net increase (decrease) in cash and cash equivalents			(39,000	)			1,298,000
Cash and cash equivalents, beginning of period			7,732,000				6,434,000
Cash, cash equivalents and restricted cash, end of period		$	7,693,000			$	7,732,000

The accompanying notes are an integral part of these financial statements.

 

5

C Technologies, Inc.

Notes to the Financial Statements

NOTE 1 – NATURE OF BUSINESS

The accompanying financial statements include the accounts of C Technologies, Inc. (the “Company”). The Company designs and manufactures solutions for the biopharmaceutical industry. Specifically, it has developed a unique way to perform UV/Vis analysis using Slope Spectroscopy. By leveraging the advantages of this technique, the Company has been able to create a platform by which its customers can now make off line concentration measurements of their drug substance, at various points in the manufacturing process. This testing can be performed now by manufacturing personnel, quality control and formulation laboratories within biopharma. After becoming an accepted standard in the industry, the Company launched an in-line version of the instrument called FlowVPE which over the next few years will allow manufacturing and production facilities to measure protein concentration in line eliminating the need to send samples to quality control labs for testing.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements included herein have been prepared by the Company in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and should be read in conjunction with the audited financial statements and accompanying notes included herein.

Use of Estimates

The preparation of the financial statements require management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

The Company’s operations are affected by numerous factors including market acceptance, changes in technologies and new laws and government regulations and policies. The Company cannot predict what impact, if any, the occurrence of these or other events might have on the Company’s operations.

Significant estimates and assumptions made by management are used for, but not limited to, the allowance for doubtful accounts and sales returns, the reserve for slow moving or obsolete inventories and the fair value of long-lived assets. Actual results could differ from these estimates.

Cash and Cash Equivalents

The Company classifies all highly liquid investments with original maturities of 90 days or less at the time of purchase as cash and cash equivalents.

Concentrations of Credit Risks for Cash

The Company’s cash balances in banks are insured by the Federal Deposit Insurance Corporation subject to certain limitations.

Accounts Receivable

The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Accounts receivable are carried at original invoice amount less any estimate made for doubtful receivables based on a review of all outstanding amounts monthly. No interest is charged on past due accounts. Historically, the Company has not maintained an allowance for doubtful accounts and has incurred zero bad debt expense for the years ended December 31, 2018 and 2017.

 

6

C Technologies, Inc.

Notes to the Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Inventories

Inventories are stated at the lower of cost or net realizable value accounted for using the first-in, first-out method. The Company writes down inventory that has become obsolete, inventory that has a cost basis in excess of its expected net realizable value, and inventory in excess of expected requirements to cost of product revenue. Manufacturing of finished goods is done to order and tested for quality specifications prior to shipment.

Work-in-process and finished products inventories consist of material, labor, outside processing costs and manufacturing overhead.

Long-Lived Assets

Property and equipment are recorded at cost, net of accumulated depreciation and amortization. Depreciation of property and equipment is provided using the straight-line method over the estimated useful lives (ranging from 3 to 20 years). Leasehold improvements are amortized on a straight-line basis over the lesser of the lease term or the estimated useful life of the asset. Amortization of leasehold improvements is included with depreciation expense.

The Company periodically reviews its long-lived assets to determine potential impairment by comparing the carrying value of the long-lived assets with the estimated future net undiscounted cash flows expected to result from the use of the assets, including cash flows from disposition. Long-lived assets evaluated for impairment are grouped with other assets to the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Should the sum of the expected future net cash flows be less than the carrying value, the Company would recognize an impairment loss at that date. An impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value (estimated discounted future cash flows) of the long-lived assets. No impairments related to long-lived assets were recorded during the years ended December 31, 2018 and 2017.

Income Taxes

No provision has been made for federal and state income taxes for the years ended December 31, 2018 and 2017. The Company has elected to be an “S” Corporation whereby the stockholder accounts for his share of the Company’s earnings, losses, deductions and credits on his federal and state income tax returns.

Sales Taxes

Several states impose a sales tax on product sales to non-exempt customers. The taxes are recorded as liabilities until remitted to state agencies. The Company’s accounting policy is to exclude the tax collected and remitted to the appropriate state from revenue and direct costs.

Defined Contribution Profit Sharing 401(k) Plan

The Company has a defined contribution profit sharing 401(k) plan covering all eligible employees. The Company may make discretionary contributions to the plan. Company contributions were approximately $88,000 and $62,000 for the years ended December 31, 2018 and 2017, respectively.

 

7

C Technologies, Inc.

Notes to the Financial Statements

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition

The Company’s revenue recognition policy is to recognize revenues from product sales and services when persuasive evidence of an arrangement exists, product delivery, including customer acceptance, has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Determination of whether these criteria have been met are based on management’s judgments primarily regarding the fixed nature of the fee charged for the product delivered and the collectability of those fees. The Company has had no significant write-offs of uncollectible invoices in the periods presented.

When more than one element such as equipment, consumables, and services are contained in a single arrangement, the Company allocates revenue between the elements based on each element’s relative selling price, provided that each element meets the criteria for treatment as a separate unit of accounting. An item is considered a separate unit of accounting if it has value to the customer on a stand-alone basis. The selling price of the undelivered elements is determined by the price charged when the element is sold separately, or in cases when the item is not sold separately, by third-party evidence of selling price or management’s best estimate of selling price.

The Company’s product revenues are from the sale of measurement systems, consumables, service contracts, accessories and other products. On product sales to end customers, revenue is recognized, net of discounts, when both the title and risk of loss have transferred to the customer, as determined by the shipping terms provided there are no uncertainties regarding acceptance, and all obligations have been completed. Generally, product arrangements for equipment sales are multiple element arrangements, and may include services, such as installation and training, and multiple products, such as consumables and spare parts. Based on terms and conditions of the product arrangements, the Company believes that these services and undelivered products can be accounted for separately from the delivered product element as the delivered products have value to our customers on a standalone basis. Accordingly, revenue for services not yet performed at the time of product shipment are deferred and recognized as such services are performed. Service contracts are sold separately and accordingly recognized over the life of the contract. The relative selling price of any undelivered products is also deferred at the time of shipment and recognized as revenue when these products are delivered. For product sales to distributors, the Company recognizes revenue for both equipment and consumables upon delivery to the distributor unless direct shipment to the end user is requested. In this case, revenue is recognized upon delivery to the end user’s location. In general, distributors are responsible for shipment to the end customer along with installation, training and acceptance of the equipment by the end customer. Sales to distributors are not contingent upon resale of the product.

The Company requires certain customers to prepay for products or services. This prepayment is deferred until appropriate revenue recognition criteria is met.

Product Returns and Warranties

At the time of sale, the Company evaluates the need to accrue for warranty and sales returns. The agreements the Company has with its customers and the related purchase orders identify the terms and conditions of each sale and the price of the goods ordered. Due to the nature of the sales arrangements, inventory produced for sale is tested for quality specifications prior to shipment. Since the product is manufactured to order and in compliance with required specifications prior to shipment, the likelihood of sales return, warranty or other issues is largely diminished. Furthermore, there is no customer right of return in our sales agreements. Sale returns and warranty issues are infrequent and have not had a material impact on the Company’s financial statements historically.

 

8

C Technologies, Inc.

Notes to the Financial Statements

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)

Shipping and Handling

Shipping and handling fees are recorded as a component of net revenue, with the associated costs recorded as a component of cost of revenue. Shipping and handling fees recorded as a component of net revenue were approximately $70,000 and $62,000 for the years ended December 31, 2018 and 2017, respectively.

Research and Development

The Company expenses research and development costs as incurred and include costs associated with the design of new and improved products.

Advertising Costs

Costs associated with advertising and promoting products are expensed as incurred. Advertising and promotion expense was approximately $42,000 and $38,000, during the years ended December 31, 2018 and 2017, respectively.

Fair Value Measurements

The FASB provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under this framework are described as follows:

 

Level 1		Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level 2		Inputs to the valuation methodology include:
		•   quoted prices for similar assets or liabilities in active markets;
		•   quoted prices for identical or similar assets or liabilities in inactive markets;
		•   inputs other than quoted prices that are observable for the asset or liability;
		•   inputs that are derived principally from or corroborated by observable market data by correlation or other means.
		If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3		Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

 

9

C Technologies, Inc.

Notes to the Financial Statements

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value Measurements (Continued)

Accordingly, the Company believes the carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses to be representative of their fair values based on their short-term nature. For investments in marketable securities, the carrying amount is fair market value based on quoted market prices.

As of December 31, 2018 and 2017, the Company had no assets or liabilities for which fair value measurement is either required or has been elected to be applied.

New Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates on its financial statements. Updates not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our financial position or results of operations. Recently issued Accounting Standards Updates which management feels may be applicable to the Company are as follows:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”), which supersedes current revenue recognition guidance, including most industry-specific guidance. ASU 2014-09, as amended, requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services, and also requires enhanced disclosures. The new guidance will be effective for the Company beginning January 1, 2019. The Company is assessing the impact this standard will have on its financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases, which replaces the existing guidance in ASC 842, Leases. The new standard establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. The new guidance will be effective for the Company beginning January 1, 2020 and early adoption is permitted. The Company is assessing the impact this standard will have on its financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 includes amendments that aim to improve the effectiveness of fair value measurement disclosures. The amendments in this guidance modify the disclosure requirements on fair value measurements based on the concepts in FASB Concepts Statement, “Conceptual Framework for Financial Reporting – Chapter 8: Notes to Financial Statements,” including the consideration of costs and benefits. The amendments become effective for the Company in the year ending December 31, 2020 and early adoption is permitted. The Company is currently assessing the impact that this guidance will have on its financial statements and related disclosures.

 

10

C Technologies, Inc.

Notes to the Financial Statements

 

NOTE 3 – INVENTORY, NET

Inventories, net consist of the following:

 

		Years Ended December 31,
		2018				2017
Raw materials		$	900,000			$	741,000
Work-in-process			183,000				343,000
Finished products			657,000				438,000
Total inventories, net		$	1,740,000			$	1,522,000

NOTE 4 – PROPERTY AND EQUIPMENT, NET

Property and equipment, net consist of the following:

 

		Year Ended December 31,
		2018				2017
Manufacturing and other equipment		$	382,000			$	382,000
Capitalized software			104,000				104,000
Automobiles			75,000				75,000
Furniture and fixtures			24,000				24,000
Leasehold improvements			13,000				13,000
Equipment not placed in service			34,000				—
Total property and equipment			632,000				598,000
Less: accumulated depreciation			(588,000	)			(570,000	)
Property and equipment, net		$	44,000			$	28,000

Depreciation expense was $18,000 and $24,000 for the years ended December 31, 2018 and 2017, respectively.

NOTE 5 – ACCRUED EXPENSES

Accrued expenses consist of the following:

 

		Years Ended December 31,
		2018				2017
Employee compensation		$	475,000			$	394,000
Accrued purchases			207,000				55,000
Other accrued expenses			225,000				161,000
Total		$	907,000			$	610,000

 

11

C Technologies, Inc.

Notes to the Financial Statements

 

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company is obligated under the terms of a third-party operating lease agreement for its facility in Bridgewater, New Jersey. The original agreement entered in July 2004 was renewed several times and currently expires in October 2019. Total rent expense incurred under this agreement during the years ended December 31, 2018 and 2017 was approximately $241,000.

In 2019, the Company will move to a new office and manufacturing facility in Bridgewater, New Jersey. A new operating lease was signed as of September 2018 and expires in February 2028. This new lease also includes an 8-year commitment to lease furniture provided by the lessor for approximately $31,000 annually. (See Note 11 – Subsequent Event ).

The Company currently leases one office copier machine through January 2023. Total lease expense related to this copier lease and the predecessor lease approximated $5,000 in each of the years ended December 31, 2018 and 2017, respectively.

Obligations under non-cancelable operating leases, including the facility leases discussed above, as of December 31, 2018 are approximately as follows:

 

Years Ending		Total
December 31, 2019		$	185,000
December 31, 2020			560,000
December 31, 2021			572,000
December 31, 2022			585,000
December 31, 2023			592,000
Thereafter			3,113,000
Minimum payments		$	5,607,000

NOTE 7 – GEOGRAPHIC INFORMATION

Net sales by geographic region for the years ended December 31, 2018 and 2017 are as follows:

 

		Years Ended December 31,
		2018				2017
North America		$	15,303,000			$	12,232,000
Europe			5,224,000				5,358,000
Asia and the rest of the world			3,180,000				1,802,000
Total		$	23,707,000			$	19,392,000

Sales to all foreign countries are denominated in U.S. dollars and there are no material differences in gross margin in sales to different countries. There were no significant assets located outside of the United States of America.

NOTE 8 – CONCENTRATIONS OF RISK

During fiscal years 2018 and 2017, the Company did not have a concentration in net revenue as no one customer represented more than 10% of net revenue.

As of December 31, 2018, the Company did not have a single customer’s accounts receivable balance that represented more than 10% of total accounts receivable. As of December 31, 2017, the Company had a concentration in receivables due from one customer which represented 16% of total accounts receivable.

 

12

C Technologies, Inc.

Notes to the Financial Statements

 

NOTE 9 – PRODUCT GROUP INFORMATION

The Company’s product groups are based on specific product characteristics and are grouped into systems, consumables, service and fiber optic products. Systems consist primarily of Solo and Flow VPE systems and other materials or accessories utilized by the Company’s systems. Consumables consist of single use items that are used with the Company’s systems to provide variable pathlength measurements. Service products primarily relate to system installation, training and preventative maintenance agreements, which typically cover one to three year periods. Fiber optic products consist of custom fiber optic assemblies.

Revenue by product group for the years ended December 31, 2018 and 2017 is as follows:

 

		Years Ended December 31,
		2018				2017
System		$	12,972,000			$	10,871,000
Consumables			4,467,000				3,175,000
Service			3,939,000				3,036,000
Fiber optics			2,329,000				2,310,000
Total		$	23,707,000			$	19,392,000

NOTE 10 – RELATED PARTY TRANSACTIONS

As the Company has elected to be an “S” Corporation, the stockholder has undistributed earnings relating to prior years which has been previously taxed. At December 31, 2018 and 2017, the undistributed earnings were approximately $10,228,000 and $11,373,000, respectively. The Company has elected not to accrue for the undistributed earnings at December 31, 2018 and 2017, as the stockholder can elect to remove them from the Company when desired.

The sole stockholder of the Company is also the Chief Executive Officer of the Company. He receives compensation in the form of salaries, bonus and benefits which are recognized as a component of selling, general and administrative expenses in the Company’s statements of income. During the years ended December 31, 2018 and 2017, total compensation related to the stockholder was approximately $1,097,000 and $3,329,000, respectively.

NOTE 11 – SUBSEQUENT EVENT

The Company evaluated subsequent events through March 8, 2019 which is the date the financial statements were available to be issued. Based upon this evaluation, other than subsequent events previously disclosed in the footnotes, no events required disclosure in or adjustment to the financial statements, other than the following:

The Company began moving its headquarters and operations to a new location in Bridgewater, NJ during the subsequent year. This move was associated with a new building lease which was signed as of October 2018 and expires in February 2028. Monthly cash rent expense on the new office space does not begin until January 2020. This new lease also includes an 8-year commitment to lease furniture provided by the lessor for approximately $31,000 annually. (See Note 6 – Commitments and Contingencies ).

 

13

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

INDEX TO FINANCIAL STATEMENTS

 

UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS:
Introduction			2
Pro Forma Condensed Combined Consolidated Balance Sheet as of December 31, 2018 (Unaudited)			3
Pro Forma Condensed Combined Consolidated Statements of Income for the Year Ended December 31, 2018 (Unaudited)			4
Notes to Pro Forma Condensed Combined Consolidated Financial Statements (Unaudited)			5

 

1

INTRODUCTION

On April 25, 2019, Repligen Corporation (“Repligen”) agreed to acquire C Technologies, Inc. (“C Technologies”), pursuant to the terms of a Stock Purchase Agreement (the “Agreement”), by and among Repligen and C Technologies (such acquisition, the “Acquisition”).

C Technologies’ business consists of two major product categories (i) biotechnology, or Biotech, and (ii) Legacy and Other. Through its Biotech category, C Technologies sells instruments, consumables and accessories that are designed to allow bioprocessing technicians to measure the protein concentration of a liquid sample using C Technologies’ Slope Spectroscopy method, which eliminates the need for manual sample dilution. C Technologies’ lead product, the SoloVPE instrument platform, was launched in 2008 for off-line and at-line protein concentration measurements conducted in quality control, process development and manufacturing labs in the production of biological therapeutics. C Technologies’ FlowVPE platform, an extension of the SoloVPE technology, was designed to allow end users to make in-line protein concentration measurements in filtration, chromatography and fill-finish applications, designed to allow for real-time process monitoring.

The Acquisition will be accounted for as a purchase of a business under ASC 805, Business Combinations. The cash paid for the Acquisition is estimated to be $201.3 million, $192.3 million of which will be consideration transferred pursuant to ASC 805, and $9.0 million of which will be compensation expense for future employment, and an estimated 857,142 unregistered common shares totaling $48.0 million (based on an assumed per share price of $56.00), for a total purchase price of $240.3 million. The estimate of $201.3 million in cash paid for the Acquisition consists of $192.0 million per the terms of the Agreement, $7.7 million for the existing cash balance of C Technologies at December 31, 2018, and $1.6 million of estimated state tax liabilities assumed that are directly related to the 338(h)(10) election expected to be made as part of the Acquisition.

The accompanying unaudited pro forma condensed combined financial statements combine the historical consolidated financial statements of Repligen and those of C Technologies after giving effect to the Acquisition, using the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) 805, “Business Combinations”, and applying the assumptions and adjustments described in the accompanying notes.

The unaudited pro forma condensed combined statement of operations are based on our audited historical consolidated financial statements and the audited historical consolidated financial statements of C Technologies, which are incorporated by reference in this Form 8-K. The unaudited pro forma condensed combined balance sheet gives effect to the Acquisition as if such acquisition had occurred on December 31, 2018. The unaudited pro forma condensed combined statement of operations gives effect to the Acquisition as if such acquisition had occurred on January 1, 2018. The unaudited pro forma condensed combined financial statements include all material pro forma adjustments necessary for this purpose that are directly attributable to the Acquisition, are factually supportable, and with respect to the pro forma condensed combined statements of operations, are expected to have a continuing impact on the combined results following the Acquisition.

The unaudited pro forma condensed combined financial information herein should be read in conjunction with the historical financial statements and the related notes thereto of Repligen Corporation which are presented in the Annual Report on Form 10-K for the year ended December 31, 2018, filed on March 1, 2019 (File No. 000-14656), and the historical financial statements of C Technologies, Inc. which are presented as exhibits to this Form 8-K.

The unaudited pro forma condensed combined financial statements of operations is presented for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have been achieved if the Acquisition had been consummated as of the beginning of the period presented, nor are they necessarily indicative of the future operating results of the combined company. The pro forma adjustments are based upon available information and assumptions that we believe are reasonable. No effect has been given in the pro forma financial statements for synergistic benefits that may be realized through the combination or costs that may be incurred in integrating operations.

 

2

Repligen Corporation

Pro Forma Condensed Combined Consolidated Balance Sheet

December 31, 2018

(Unaudited, amounts in thousands)

 

		Historical Repligen				Historical C Technologies, Inc.				Pro Forma Adjustments				Notes (1)				Pro Forma Combined
Assets
Current assets
Cash and cash equivalents		$	193,822			$	7,693			$	(77,873	)			(a), (k)			$	123,642
Restricted cash			—				—				35,904				(i)				35,904
Accounts receivable, net			33,015				3,302				—								36,317
Other receivables			136				—				—								136
Unbilled receivables			2,602				—				—								2,602
Inventories			42,263				1,740				1,236				(b)				45,239
Prepaid expenses and other current assets			3,901				31				—								3,932
Total current assets			275,739				12,766				(40,733	)							247,772
Property and equipment, net			32,180				44				—								32,224
Intangible assets, net			135,438				—				87,860				(c)				223,298
Goodwill			326,735				—				142,458				(d)				469,193
Deferred Tax Asset - LT			4,355				—				—								4,355
Other assets			174				17				—								191
Total assets		$	774,621			$	12,827			$	189,585							$	977,033
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		$	10,489			$	345			$	—							$	10,834
Accrued liabilities			15,865				2,162				29,926				(e), (f), (g), (h), (i)				47,953
Convertible senior notes, current portion			103,488				—				—								103,488
Short term debt			—				—				123,438				(k)				123,438
Total current liabilities			129,842				2,507				153,364								285,713
Deferred tax liabilities			25,086				—				(2,842	)			(n), (o), (p), (q)				22,244
Other long-term liabilities			4,125				92				(17	)			(e)				4,200
Total liabilities			159,053				2,599				150,505								312,157
Commitments and contingencies
Stockholders’ equity:
Preferred stock			—				—				—								—
Common stock			439				—				9				(m)				448
Additional paid-in capital			642,590				—				47,991				(m)				690,581
Accumulated other comprehensive loss			(11,893	)			—				—								(11,893	)
Accumulated (deficit) earnings			(15,568	)			10,228				(8,920	)			(f), (g), (n), (o), (p)				(14,260	)
Total stockholders’ equity			615,568				10,228				39,080								664,876
Total liabilities and stockholders’ equity		$	774,621			$	12,827			$	189,585							$	977,033

 

(1)	See Note 4 to the accompanying notes to unaudited pro forma condensed combined financial statements.

 

3

Repligen Corporation

Pro Forma Condensed Combined Consolidated Statements of Operations

For the Twelve Months Ended December 31, 2018

(Unaudited, amounts in thousands, except share and per share data)

 

		Historical Repligen Year Ended December 31, 2018				Historical C Technologies, Inc. Year Ended December 31, 2018				C Technologies, Inc. Pro Forma Adjustments				Notes (1)		Pro Forma Combined
Revenue		$	194,032			$	23,707			$	(154	)		(e)		$	217,585
Cost of revenue			86,531				8,172				—						94,703
Gross profit			107,501				15,535				(154	)					122,882
Research and development			15,821				649				—						16,470
Selling, general and administrative			65,692				4,299				5,879			(c), (j)			75,870
Total operating expenses			81,513				4,948				5,879						92,340
Operating income (loss)			25,988				10,587				(6,033	)					30,542
Other (expense) income, net			(4,552	)			75				(14,025	)		(l)			(18,502	)
Income (loss) before income taxes			21,436				10,662				(20,058	)					12,040
Income tax expense			4,819				—				(2,840	)		(n), (o), (p)			1,979
Net income (loss)		$	16,617			$	10,662			$	(17,218	)				$	10,061
Net income per share:
Basic		$	0.38													$	0.23
Diluted		$	0.37													$	0.22
Weighted average common shares outstanding:
Basic			43,767,402								857,142			(m)			44,624,544
Diluted			45,471,169								857,142			(m)			46,328,311

 

(1)	See Note 4 to the accompanying notes to unaudited pro forma condensed combined financial statements.

 

4

Repligen Corporation

Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial Statements

For the Year Ended December 31, 2018

1. Description of the Transaction

On April 25, 2019, Repligen Corporation (“Repligen”) agreed to acquire C Technologies, Inc. (“C Technologies”), pursuant to the terms of a Stock Purchase Agreement (the “Agreement”), by and among Repligen and C Technologies (such acquisition, the “Acquisition”).

The Acquisition will be accounted for as a purchase of a business under ASC 805, Business Combinations. The cash paid for the Acquisition is estimated to be $201.3 million, $192.3 million of which will be consideration transferred pursuant to ASC 805, and $9.0 million of which will be compensation expense for future employment, and an estimated 857,142 unregistered common shares totaling $48.0 million (based on an assumed per share price of $56.00), for a total purchase price of $240.3 million. The estimate of $201.3 million in cash paid for the Acquisition consists of $192.0 million per the terms of the Agreement, $7.7 million for the existing cash balance of C Technologies at December 31, 2018, and $1.6 million of estimated state tax liabilities assumed that are directly related to the 338(h)(10) election expected to be made as part of the Acquisition.

2. Basis of Presentation

The accompanying unaudited pro forma condensed combined financial statements combine the historical consolidated financial statements of Repligen and those of C Technologies after giving effect to the Acquisition, using the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) 805, “Business Combinations”, and applying the assumptions and adjustments described in the accompanying notes.

The unaudited pro forma condensed combined statements of operations combine Repligen’s operating results for the year ended December 31, 2018, with the operating results of C Technologies for the year ended December 31, 2018. The unaudited pro forma condensed combined statements of operations give effect to the Acquisition as if such acquisitions had occurred on January 1, 2018.

The historical consolidated financial statements have been adjusted in the pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the business combination, (2) factually supportable and (3) with respect to the pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results following the business combination. The unaudited pro forma condensed combined financial information herein should be read in conjunction with the historical financial statements and the related notes thereto of Repligen which are presented in the Annual Report on Form 10-K for the year ended December 31, 2018, filed on March 1, 2019 (File No. 000-14656), and the historical financial statements of C Technologies. The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the operating results that would have been achieved if the Acquisition had been consummated as of the beginning of the period presented, nor are they necessarily indicative of the future operating results of the combined company. No effect has been given in these pro forma financial statements for synergistic benefits that may be realized through the combination or costs that may be incurred in integrating operations.

3. Estimated consideration and preliminary purchase price allocation

Repligen accounted for the Acquisition as the purchase of a business under U.S. GAAP. Under the acquisition method of accounting, the assets of C Technologies will be recorded as of the acquisition date, at their respective fair values, and consolidated with those of Repligen. The fair value of the net tangible assets acquired is

 

5

estimated to be approximately $10.0 million, the fair value of the intangible assets acquired is estimated to be approximately $87.9 million, and the residual goodwill is estimated to be approximately $142.4 million. The estimated consideration and preliminary purchase price information has been prepared using a preliminary valuation. The final purchase price allocation will be completed upon closing of the transaction. The preparation of the valuation required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that Repligen believes to be reasonable. However, actual results may differ from these estimates.

The total consideration transferred follows (amounts in thousands):

 

Cash consideration		$	192,335
Equity consideration			48,000
Plus: estimated working capital adjustment			—
Total consideration transferred		$	240,335

Acquisition related costs are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred. In connection with the transaction, an additional $9.0 million in cash will be due to employees based on their continued employment with the Company one year after the date of the close of the Acquisition.

Fair Value of Net Assets Acquired

Repligen has performed a preliminary valuation analysis of the fair market value of C Technologies’ assets to be acquired and liabilities to be assumed. Using the total consideration for the Acquisition, Repligen has estimated the allocations to such assets and liabilities. The following table summarizes the allocation of the preliminary purchase price as of December 31, 2018 (amounts in thousands):

 

Cash and cash equivalents		$	7,693
Restricted cash			26,928
Accounts receivable			3,302
Inventory			2,976
Prepaid expenses and other current assets			31
Fixed assets			44
Customer relationships			57,390
Developed technology			28,390
Trademark and tradename			1,560
Non-competition agreements			520
Other assets			17
Goodwill			142,458
Accounts payable			(345	)
Accrued liabilities			(29,282	)
Deferred revenue			(1,176	)
Deferred tax liability			(171	)
Fair value of net assets acquired		$	240,335

This preliminary purchase price allocation has been used to prepare pro forma adjustments in the pro forma balance sheet and income statement and is subject to adjustment as purchase accounting is finalized. The final purchase price allocation will be determined when Repligen has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. The final allocation may include, but not be limited to: (1) changes in fair values of property, plant and equipment, (2) changes in allocations to intangible assets such as trade names, technology and customer relationships as well as goodwill and (3) other changes to assets and liabilities.

 

6

4. Pro Forma Adjustments

This note should be read in conjunction with Notes 1 and 2. Adjustments included in the pro forma adjustments column of the pro forma condensed combined consolidated statement of operations and the pro forma condensed combined consolidated balance sheet include the following, as indicated in the “Notes” column thereto:

 

(a)	An adjustment to cash of $201.3 million for the estimated cash portion of the transaction price, $192.3 million of which will be consideration transferred, and $9.0 million of which will be compensation expense for future employment.

 

(b)

This adjustment represents the estimated step-up of C Technologies’ inventory by $1.2 million from the carrying value. The fair value calculation is preliminary and subject to change. After the closing of the Acquisition, the step-up in inventory fair value of $1.2 million will increase cost of sales as the inventory is sold. This increase is not reflected in the pro forma condensed combined statements of operations because it does not have a continuing impact.

 

(c)

Reflects the adjustment of intangible assets to be acquired by Repligen to their estimated fair values of $87.9 million, with a continuing annual amortization impact of $5.2 million. As part of the preliminary valuation analysis, Repligen identified intangible assets, including developed technology, customer relationships, trade names, and a non-compete. The fair value of identifiable intangible assets is determined primarily using the “income approach,” which requires a forecast of all the expected future cash flows. These preliminary estimates of fair value and estimated useful lives will likely differ from final amounts Repligen will calculate after completing a detailed valuation analysis, and the difference could have a material effect on the accompanying unaudited pro forma condensed combined financial statements.

 

(d)	Reflects adjustment to record goodwill associated with the Acquisition.

 

(e)

Represents the estimated adjustment to decrease the assumed deferred revenue obligations to a fair value of approximately $1.2 million, a $171 thousand decrease from the carrying value. The calculation of fair value is preliminary and subject to change. The fair value was determined based on the estimated costs to fulfill the remaining extended maintenance obligations plus a normal profit margin. After the Acquisition, this adjustment will have a continuing impact and will reduce revenue related to the assumed performance obligations as the maintenance services are provided over the next one to three years. The pro forma adjustment to reduce revenue by $154 thousand for the year ended December 31, 2018 reflects the difference between prepayments related to extended maintenance arrangements and the fair value of the assumed performance obligations as they are satisfied, assuming the transaction was completed on January 1, 2018.

 

(f)

To adjust for bonuses totaling $700 thousand with key management personnel tied to integration activities related to the Acquisition. The adjustment is reflected as an increase to accrued liabilities and accumulated deficit. The pro forma statement of operations does not reflect the adjustment as it will not have a continuing impact on operations.

 

(g)

To adjust for $1.0 million of estimated transaction costs incurred subsequent to December 31, 2018 that are directly related to the Acquisition. The transaction cost amount has been recorded as an adjustment to accrued liabilities and accumulated deficit, and has not been reflected in the pro forma condensed combined consolidated income statement as these costs will not have a continuing impact.

 

(h)

To adjust for $1.4 million of estimated state tax liabilities assumed that are directly related to the 338(h)(10) election expected to be made as part of the Acquisition. The estimated amount of the state tax liability has been recorded as an adjustment to accrued liabilities and has not been reflected in the pro forma condensed combined consolidated income statement as these liabilities will not have a continuing impact.

 

(i)

To adjust for $35.9 million of estimated bonuses payable to C Technologies’ employees that are directly related to the Acquisition. The amount of the bonus will be paid in two installments, the initial $26.9 million of which is an assumed liability will be paid at the time of closing, and the final $9.0 million due to employees based on their continued employment with the Company one year after the date of the close of the Acquisition.

 

7

(j)

This pro forma adjustment represents a stock based compensation expense increase of $718 thousand for the year ended December 31, 2018 related to time and performance based restricted stock units issued to two key executives as part of the Acquisition. The fair value of the awards assumes a stock price of $68.89, and will be recognized over post-combination service periods ranging from two to three years assuming the service and performance conditions are achieved.

 

(k)

Adjustment includes proceeds from a $125 million bridge loan to finance the cash consideration portion of total consideration, less $1.6 million in debt issuance costs incurred to obtain the bridge loan financing. This obligation is classified as current debt based on its term of one year amortization. See (l) below for the amortization of these issuance costs.

 

(l)

The adjustment to record interest expense assumes the bridge loan was obtained on January 1, 2018 and was outstanding for the entire year ended December 31, 2018. The base interest rate assumed for purposes of preparing this pro forma financial information is 5.22%. This rate comprises the one-year LIBOR rate of 2.72% as of March 26, 2019, plus certain margins specified in the bridge facility agreement. The resulting pro forma adjustment consists of $12.5 million of interest expense and $1.6 million of debt issuance cost amortization.

 

(m)

Represents the elimination of the historical equity of C Technologies, and the increase to common stock and additional paid in capital resulting from the estimated issuance of 857,142 shares of common stock at a price of $56.00 for the equity portion of the transaction price. The par value of common stock is $0.01 and results in a $9 thousand increase to common stock. The value in excess of par, or $48.0 million is recognized in additional paid-in capital. These preliminary estimates of shares issued and share price will likely differ from the final amounts, and the difference could have a material effect on the accompanying unaudited pro forma condensed combined financial statements.

 

(n)	Represents the tax effect of pro forma adjustments made as a result of the Acquisition, based on an estimated tax rate of 25%. The resulting tax benefit of $5.1 million is a decrease to accumulated deficit.

 

(o)	Represents the tax effect of C Technologies’ income being taxed at a corporate rate versus an S-Corporation, based on an estimated tax rate of 25%. The resulting tax expense increase of $2.6 million is an increase to accumulated deficit.

 

(p)

This adjustment reflects the increase in Repligen’s U.S. Federal Section 250 Deduction for 2018. The Section 250 Deduction is a deduction for Foreign-Derived Intangible Income and Global Intangible Low-Taxed Income that can be limited based on U.S. federal taxable income computed without regards to those deductions. Assuming the transaction closed on January 1, 2018, the Acquisition would result in an increase to U.S. taxable income in 2018, which reduces the limitation on Repligen Section 250 deduction and increases the amount allowed to be deducted for 2018. The resulting estimated tax benefit of $0.5 million is a decrease to accumulated deficit.

 

(q)

Represents the tax effect related to the difference between book and tax useful lives of intangible assets acquired as a result of the Acquisition. This estimate of $171 thousand in deferred tax liabilities balances is preliminary and subject to change based on management’s final determination of the fair value of assets acquired and liabilities assumed by jurisdiction.

 

8

Exhibit 99.4

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION OF C TECHNOLOGIES, INC.

The information contained in this section is based on C Technologies’ historical financial condition and results of operations and does not give effect to the Acquisition. The Acquisition will have a material impact on the results of operations of the C Technologies business going forward. You should read the following in conjunction with C Technologies’ audited and unaudited financial statements and the related notes thereto incorporated by reference in this Current Report on Form 8-K.

Overview

C Technologies’ business consists of two major product categories (i) biotechnology, or Biotech, and (ii) Legacy and Other. Through its Biotech category, C Technologies sells instruments, consumables and accessories that are designed to allow bioprocessing technicians to measure the protein concentration of a liquid sample using C Technologies’ Slope Spectroscopy method, which eliminates the need for manual sample dilution. C Technologies’ lead product, the SoloVPE instrument platform, was launched in 2008 for off-line and at-line protein concentration measurements conducted in quality control, process development and manufacturing labs in the production of biological therapeutics. C Technologies’ FlowVPE platform, an extension of the SoloVPE technology, was designed to allow end users to make in-line protein concentration measurements in filtration, chromatography and fill-finish applications, designed to allow for real-time process monitoring.

C Technologies’ is located in Bridgewater, NJ, and has a direct sales presence in North America, the United Kingdom and Ireland, and currently sells its products through third-party distributors in Western Europe, Japan and China.

Critical Accounting Policies

C Technologies defines critical accounting policies as the ones which are necessary to understand C Technologies’ financial results. C Technologies believes the most critical accounting issues that require the most complex and difficult judgments and that are particularly susceptible to significant change to its financial condition and results of operations include the following:

 

•

Basis of Presentation

 

•

Use of Estimates

 

•

Cash and Cash Equivalents

 

•

Concentrations of Credit Risks for Cash

 

•

Accounts Receivable

 

•

Inventories

 

•

Long-Lived Assets

 

•

Income Taxes

 

•

Sales Taxes

 

•

Defined Contribution Profit Sharing 401(k) Plan

 

•

Revenue Recognition

 

•

Product Returns and Warranties

 

•

Shipping and Handling

 

•

Research and Development

 

•

Advertising Costs

 

•

Fair Value Measurements

For more information about C Technologies’ critical accounting policies, see Note 2 to C Technologies’ annual audited financial statements which are presented as exhibits to this Form 8-K.

Results of Operations

Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017

 

		Years Ended December 31,
		2018				2017
Revenue, net		$	23,707,000			$	19,392,000
Operating expenses:
Cost of revenue			8,172,000				6,960,000
Research and development			649,000				360,000
Selling, general and administrative			4,299,000				6,045,000
Total operating expenses			13,120,000				13,365,000
Income from operations			10,587,000				6,027,000
Other income			75,000				18,000
Net income		$	10,662,000			$	6,045,000

Net revenue

Net revenue for the years ended December 31, 2018 and 2017 were $23.7 million and $19.4 million, respectively, representing an increase of $4.3 million or 22%, primarily as a result of sales growth in systems and service products of 24% and 30%, respectively, over the prior year. This sales growth in 2018 represented a 25% increase in revenue from North America and a 76% increase in revenue from Asia and the rest of the world.

Operating expenses

Cost of revenue was approximately $8.2 million and $7.0 million for the years ended December 31, 2018 and 2017, respectively, representing an increase of $1.2 million or 17%. This increase was driven by increased material and labor costs directly related to growth of revenues in fiscal year 2018.

Research and development expenses were approximately $649 thousand and $360 thousand for the years ended December 31, 2018 and 2017, respectively, an increase of $289 thousand or 80%. This increase was primarily the result of increased headcount in research and development personnel during 2018.

Selling, general and administrative expenses were approximately $4.3 million and $6.0 million for the years ended December 31, 2018 and 2017, respectively, a decrease of $1.7 million or 29%. This decrease was primarily driven by a $2.2 million decrease in executive compensation paid during 2018 as compared to the prior year, partially offset by increased selling expense and general overhead costs.

Other Income

Other income is primarily related to interest income, which increased by $57 thousand for the year ended December 31, 2018 as compared to the prior year due to higher average invested cash balances and higher interest rates on such cash balances.

Liquidity and Capital Resources

C Technologies has financed operations through revenues derived from product sales.

At December 31, 2018, C Technologies had cash and cash equivalents of $7.7 million compared to $7.7 million at December 31, 2017.

The following table summarizes C Technologies’ sources and uses of cash for each of the periods presented:

 

		Years Ended December 31,
		2018				2017
Net cash provided by operating activities		$	11,802,000			$	5,202,000
Net cash used in investing activities		$	(34,000	)		$	—
Net cash used in financing activities		$	(11,807,000	)		$	(3,904,000	)

Operating Activities

For the year ended December 31, 2018, operating activities provided cash of $11.8 million reflecting net income of $10.7 million, net favorable changes in working capital accounts of $1.1 million and depreciation expense of $18 thousand. The favorable changes in working capital accounts were driven by $830 thousand of net cash provided by changes in accounts receivable, $297 thousand in net cash from changes in accrued expenses and $230 thousand of net increases in deferred revenue. This was slightly offset by $235 thousand in net cash consumed due to an increase in inventories, prepaid expenses and accounts payable.

For the year ended December 31, 2017, operating activities provided net cash of $5.2 million reflecting net income of $6.0 million, net unfavorable changes in working capital accounts of $867 thousand and $24 thousand related to depreciation expense. An increase in accounts receivable consumed $1.2 million of cash and was primarily due to the timing of and cash receipts from customers. An increase in accounts payable decreased available cash by $78 thousand due to unfavorable timing of payments on accounts payable. Increases in inventories, prepaid expenses and other assets consumed $46 thousand of cash. This was slightly offset by $384 thousand in net increases of deferred revenue and $121 thousand in cash from net changes in accrued expenses.

Investing Activities

Cash used in investing activities was $34 thousand for the year ended December 31, 2018, primarily due to purchases of manufacturing equipment.

Financing Activities

For the years ended December 31, 2018 and 2017, C Technologies used $11.8 million and $3.9 million, respectively, of cash in financing activities related to distributions to the stockholder.

Off-Balance Sheet Arrangements

C Technologies does not have any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

Commitments and Contingencies

As of December 31, 2018, C Technologies’ had the following fixed obligations and commitments:

 

		Total				Less than one year				One to three years				Three to five years				Over five years
Operating lease obligations		$	5,607,000			$	185,000			$	1,132,000			$	1,177,000			$	3,113,000
Total		$	5,607,000			$	185,000			$	1,132,000			$	1,177,000			$	3,113,000