SOLTA MEDICAL INC

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The Company tests goodwill for impairment at least annually or more frequently if events or changes in circumstances indicate that this asset may be impaired. The goodwill test is based on the Company’s single operating segment and reporting unit structure. The decline in the Company’s stock price during the three months ended September 30, 2013, and a decline in actual and projected results for relative periods appeared to be indicators that goodwill might be impaired at September 30, 2013. As a result the Company performed a goodwill impairment analysis at September 30, 2013 and determined that the fair value of the Company exceeded the carrying by more than 15% and thus no goodwill impairment was identified at September 30, 2013. The income and market approach was used to determine fair value and the key assumptions used in the goodwill impairment analysis were: 1) the income approach using a discounted cash flow model which included projected results for the periods from October 1, 2013 through December 2020 and a weighted-average cost of capital; and 2) the market approach used the Company’s market capitalization at September 30, 2013 plus a control premium. Some of the uncertainties around these key assumptions include variability in future cash flows of the Company due to changes in demand of the Company’s products due to competitive market pressures and changes in the Company’s stock price. Significant declines in any of the key assumptions could cause the assessed fair value of the Company to be below its carrying value, and as a result, goodwill will be considered impaired. The balance of goodwill is $103,981 as of September 30, 2013 and, there can be no assurance that future goodwill impairments will not occur.

A secured revolving loan facility for an amount of up to $12,000. The Company may borrow, repay and reborrow funds under the revolving loan facility until August 30, 2016, at which time the revolving loan facility expires and all outstanding amounts under the facility must be repaid. Borrowings under the revolving loan facility accrue interest at a per annum rate equal to the Lender’s prime rate as in effect from time to time plus 1%, subject to a minimum per annum rate of 5%. Interest on borrowings under the revolving loan facility is payable monthly. In the event the Company elects to terminate the revolving loan facility before the expiration date, the Company is required to pay a fee in the amount of $360. In addition, there are three non-refundable facility fees of $240 each payable to the Lender as follows (i) on the date of the Amendment, (ii) on the earlier of the first anniversary of the date of the Amendment or the date that the revolving loan is terminated early, and (iii) on the earlier of the second anniversary of the date of the Amendment or the date that the revolving loan is terminated early.

Borrowings under the New Term Loan accrue interest at a fixed per annum rate of 13.5% which will be paid quarterly in arrears. Before the fourth anniversary of the initial borrowing, interest-only payments shall be payable on the last day of each quarter, at the Company’s option, as either 13.5% cash, or 9.00% cash interest and 4.50% paid in-kind interest in the form of additional secured term loans. The payment dates for the principal amounts borrowed under the New Term Loan must be repaid in eight equal quarterly installments on the last day of the quarter during the final two years of the term. The Company may prepay all but not less than all amounts under the Secured Loan and in connection with such prepayment, the Company is required to pay a prepayment fee as follows: (i) if the prepayment date is on or before the fourth payment date, a 5.00% fee of the New Term Loan principal amount prepaid; (ii) if the prepayment date is after the fourth payment date but before the eighth payment date, a 4.00% fee of the New Term Loan principal amount prepaid; (iii) if the prepayment date is after the eighth payment date but before the twelve payment date, a 3.00% fee of the New Term Loan principal amount prepaid; (iv) if the prepayment date is after the twelve payment date but before the sixteenth payment date, a 2.00% fee of the New Term Loan principal amount prepaid; (v) if the prepayment date is after the sixteenth payment date but before the twentieth payment date, a 1.00% fee of the New Term Loan principal amount prepaid; and (vi) if the prepayment date is after the twentieth payment date, there is no fee on the New Term Loan principal amount prepaid. In addition, the Company must pay a financing fee of 1.25% of aggregate proceeds due at each draw down on the New Term Loan

All obligations under the New Term Loan are secured by substantially all of the personal property of the Company, except the Company may maintain one line of financing senior to the New Term Loan as long as: (i) such line is secured solely by the Company’s accounts receivable, inventory and cash, (ii) the aggregate amount due and outstanding under such line does not exceed 80% of the amount of eligible accounts receivable outstanding, and securing such obligation, and (iii) the lenders under such line and Capital Royalty agree to a mutually acceptable intercreditor agreement. The New Term Loan contains restrictions that include, among others, restrictions that limit the Company’s ability to dispose of assets, enter into mergers or acquisitions, incur indebtedness, incur liens, pay dividends or make distributions on the Company’s capital stock, make investments or loans, and enter into certain affiliate transactions, in each case subject to customary exceptions for a credit facility of this size and type.

The New Term Loan contains customary events of default for a credit facility of this size and type. The occurrence of an event of default could result in an increase in the applicable interest rate in the amount of 4% points per year payable entirely in cash as well as an acceleration of all obligations under the Amendment.

We have recently announced a restructuring and there can be no assurance that it will achieve the goals that we have for its implementation.

In November 2013 we announced that we intended to implement an operating plan for 2014 that would significantly reduce our operating expenses and that we had implemented a reduction in work force as a step to achieve certain aspects of our goals in this regard. We will incur charges associated with our restructuring actions by the first quarter of 2014. While our goal in adopting the 2014 operating plan will be to make our operations more efficient, there can be no assurance that our goals will be achieved. Activities of this nature frequently prove to be disruptive to companies that implement them, and we may experience greater employee attrition, and disruptions in our operations, as a result of these measures. As a result, our sales processes could be less effective, our ability to generate new and improved products could be impaired and our operating results and financial condition could be adversely affected.