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FINANCIAL STATEMENTS
NEOFORCE GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
| Report of Independent Registered Public Accounting Firm |
| Consolidated Balance Sheets |
| Consolidated Statements of Operations Consolidated Statements of Shareholder s/Members Deficit |
| Consolidated Statements of Cash Flows |
| Notes to Consolidated Financial Statements |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
We have audited the accompanying consolidated balance sheets of NeoForce Group, Inc. and affiliate (the Company ) as of
December 31, 2014 and 2013, and the related consolidated statements of operations, shareholder s/members deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the
Company s management. Our responsibility is to express an opinion on these financial statements based on our audits.
our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing 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 over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
NeoForce Group, Inc. and affiliate, as of December 31, 2014 and 2013, and the results of their operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
NEOFORCE GROUP INC. AND AFFILIATE
CONSOLIDATED BALANCE SHEETS
| December 31, 2014 | December 31, 2013 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | 39,192 | $ | 59,434 | ||||
| Accounts receivable | 126,974 | 112,945 | ||||||
| Inventory | 60,071 | 59,743 | ||||||
| Total current assets | 226,237 | 232,122 | ||||||
| Long-term assets | ||||||||
| Property and equipment, net | 58,708 | 87,797 | ||||||
| Security Deposit | 4,000 | 4,000 | ||||||
| Total assets | $ | 288,945 | $ | 323,919 | ||||
| Liabilities and shareholder s/members deficit | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 18,912 | $ | 905 | ||||
| Accrued liabilities | 80,531 | 82,944 | ||||||
| Loan payable | 236,000 | 236,000 | ||||||
| Shareholder loan | 34,305 | |||||||
| Total current liabilities | 335,443 | 354,154 | ||||||
| Shareholder s/Members Deficit | ||||||||
| Common stock, no par value, 100 shares authorized and outstanding | 100 | 100 | ||||||
| Retained earnings | 492,530 | 460,293 | ||||||
| Controlling interest in NeoForce Innovations | (269,564 | ) | (245,314 | ) | ||||
| Total controlling shareholder s equity (deficit) | 222,966 | 214,979 | ||||||
| Non-controlling interest in NeoForce Innovations | (269,564 | ) | (245,314 | ) | ||||
| Total accumulated deficit | (46,598 | ) | (30,335 | ) | ||||
| Total shareholder s/members deficit | (46,498 | ) | (30,235 | ) | ||||
| Total liabilities and shareholder s/members deficit | $ | 288,945 | $ | 323,919 |
See accompanying notes to consolidated financial statements
NEOFORCE GROUP INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF OPERATIONS
| Fiscal Year Ended December 31, | ||||||||
| 2014 | 2013 | |||||||
| Revenue | $ | 987,853 | $ | 1,219,859 | ||||
| Cost of goods sold | 484,784 | 604,433 | ||||||
| Gross profit | 503,069 | 615,426 | ||||||
| Operating expenses | 500,453 | 514,387 | ||||||
| Operating income | 2,616 | 101,039 | ||||||
| Interest expense | (18,879 | ) | (21,279 | ) | ||||
| Net income (loss) | (16,263 | ) | 79,760 | |||||
| Net loss attributable to non-controlling interest | (24,250 | ) | (26,023 | ) | ||||
| Net income attributable to controlling interest | $ | 7,987 | $ | 105,783 |
See accompanying notes to consolidated financial statements.
NEOFORCE GROUP, INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF SHAREHOLDER S/MEMBERS DEFICIT
| NeoForce Innovations, LLC. | ||||||||||||||||||||||||
| Common Stock | Retained | Controlling | Non-controlling | Total | ||||||||||||||||||||
| Shares | Amount | Earnings | Interest | Interest | Deficit | |||||||||||||||||||
| Balance - January 1, 2013 | 100 | $ | 100 | $ | 328,487 | ($ | 219,291 | ) | ($ | 219,292 | ) | ($ | 109,995 | ) | ||||||||||
| Net income (loss) | 131,806 | (26,023 | ) | (26,023 | ) | 79,760 | ||||||||||||||||||
| Balance - December 31, 2013 | 100 | 100 | 460,293 | (245,314 | ) | (245,314 | ) | (30,235 | ) | |||||||||||||||
| Net income (loss) | 32,237 | (24,250 | ) | (24,250 | ) | (16,263 | ) | |||||||||||||||||
| Balance -December 31, 2014 | 100 | $ | 100 | $ | 492,530 | ($ | 269,564 | ) | ($ | 269,564 | ) | ($ | 46,498 | ) |
See accompanying notes to consolidated financial statements
NEOFORCE GROUP, INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Fiscal Year Ended December 31, | ||||||||
| 2014 | 2013 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | (16,263 | ) | $ | 79,760 | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation | 29,089 | 29,089 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | (14,029 | ) | (25,529 | ) | ||||
| Inventory | (328 | ) | 6,912 | |||||
| Accounts payable | 18,007 | (10,598 | ) | |||||
| Accrued liabilities | (2,413 | ) | (7,787 | ) | ||||
| Net cash provided by operating activities | 14,063 | 71,847 | ||||||
| Cash flows from financing activities: | ||||||||
| Repayment of shareholder loan | (34,305 | ) | (10,000 | ) | ||||
| Repayment of long term debt | (100,000 | ) | ||||||
| Net cash used in financing activities | (34,305 | ) | (110,000 | ) | ||||
| Net decrease in cash | (20,242 | ) | (38,153 | ) | ||||
| Cash, beginning of period | 59,434 | 97,587 | ||||||
| Cash, end of period | $ | 39,192 | $ | 59,434 | ||||
| Cash paid during the years for: | ||||||||
| Interest | $ | 22,499 | $ | 29,900 |
See accompanying notes to consolidated financial statements.
Neoforce Group, Inc.
December 31, 2014 and 2013
Notes to Consolidated Financial Statements
Note 1. Description of Business
Group, Inc. ( NeoForce ) was incorporated in the State of Delaware on August 1, 2005, and is located in Ivyland, Pennsylvania. NeoForce develops and distributes innovative pulmonary resuscitation solutions for neonates and leverages
its technology platform to expand into the broader pediatric and adult markets. NeoForce s products include the NeoPIP Infant T-Piece Resuscitator and the CPRNome Resuscitation Timer. NeoForce made
a valid election to be taxed as an S-corporation.
NeoForce Innovations, LLC ( Innovations ) was incorporated in the State of
Delaware on November 19, 2007, and is located in Ivyland, Pennsylvania. NeoForce initially owned a 50% member interest, and an unrelated third party owned the remaining 50%. NeoForce transferred its 50% member interest to its one shareholder in
2012. Innovations is treated as a partnership for tax purposes. Innovations was established to design and patent a device ( Ispira ) leveraging NeoForce s neonatal resuscitation product platform to provide
effective rescue breaths to pediatric and adult patients in conjunction with integrated cardiac defibrillators
Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America ( GAAP ).
Principles of Consolidation
The consolidated financial statements have been prepared in accordance with GAAP and include the accounts of NeoForce and its affiliate
Innovations, collectively the Company. (See Note 3) All intercompany transactions have been eliminated in consolidation.
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of expenses in the consolidated financial statements and accompanying notes. Actual results could differ from those
estimates. Key estimates included in the consolidated financial statements include the allowances for accounts receivable and inventory.
instruments that potentially subject the Company to a concentration of credit risk consist of cash at two commercial banks that management believes are of high credit quality. Cash deposited with these commercial banks did not exceed the Federal
Deposit Insurance Corporation insurable limit at December 31, 2014 and 2013.
For the year ended December 31, 2013, two customers
contributed 48% of the Company s total revenue. These two customers accounted for 38% of the accounts receivable balance as of December 31, 2013. For the year ended December 31, 2014, no one customer accounted for greater than 10% of the
Company s total revenue.
Accounts receivable as of December 31, 2014 and December 31, 2013 consist of balances due from customers in the normal course of
business. The Company did not record an allowance for doubtful accounts as this balance was deemed fully collectible.
Inventory as of December 31, 2014 and December 31, 2013 consists of finished goods. Inventory is stated at the lower of cost or
market determined under the first-in, first-out ( FIFO ) method.
Property and Equipment, Net
Property and equipment are stated at cost net of accumulated depreciation and depreciated using the straight-line method over the estimated
useful lives of the assets, generally between three and five years. Leasehold improvements are amortized on a straight-line basis over the lesser of their useful life or the term of the lease. Maintenance and repairs are charged to expense as
incurred, and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in operations in the period realized.
Company recognizes revenue when all of the following criteria are met:
For a majority of sales, where the Company delivers its
product to hospitals or medical facilities, the Company recognizes revenue upon delivery, which represents satisfaction of the required revenue recognition criteria. The Company does not offer rights of return or price protection and it has no
post-delivery obligations. The Company provides a limited one-year warranty to most customers. Estimated warranty obligations are recorded at the time of sale and to date, warranty costs have been insignificant
NeoForce has elected
S corporation status for federal and state income tax purposes. NeoForce and Innovations are pass-through entities which file income tax returns as an S-corporation and a partnership, respectively. Consequently, taxable income flows through and is
taxed to the shareholders/members on their personal income tax returns. Accordingly, no provision for federal or state income taxes is included in the consolidated financial statements.
In accordance with the Financial Accounting Standards Board ( FASB ) guidance on Accounting for Uncertainty in Income Taxes,
NeoForce utilizes a two-step approach to recognizing and measuring uncertain tax positions by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of
related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. For the years ended December 31, 2014 and 2013,
there were no liabilities recorded for unrecognized tax benefits related to tax positions taken in the current period. NeoForce considers many factors when evaluating and estimating its tax position and tax benefits, which may require periodic
adjustments and which may not accurately forecast actual outcomes.
In accordance with the FASB guidance, NeoForce has elected to include
interest and penalties related to its tax contingencies in income tax expense. There were no accruals for interest and penalties related to uncertain tax positions for the years ended December 31, 2014 and 2013.
NeoForce files U.S. federal tax returns and Pennsylvania state tax returns. The tax years of 2011 through 2014 remain open and subject to
examination by the appropriate governmental agencies in the United States and Pennsylvania.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB, and adopted by the Company as of the specified effective date. Unless
otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company s consolidated financial position or results of operations upon adoption.
Note 3. Variable Interest Entity
The Company follows FASB Accounting Standards Codification ( ASC ) 810, Consolidation, relating to consolidation of
certain variable interest entities ( VIEs ).
The Company consolidates a VIE in which it is deemed to have a controlling
financial interest as a result of having the power to direct the activities that most significantly impact the VIE s economic performance, and the obligation to absorb losses or the right to receive benefits that could potentially be
significant to the VIE. If the Company has a controlling financial interest in a VIE, the assets, liabilities, and results of operations of the VIE are included in the Company s consolidated financial statements.
One of Innovation s two equity members is the sole shareholder of NeoForce and owns 50% of innovations. Further, NeoForce is the
guarantor of Innovation s long term debt with a financial institution.
The Company s consolidated financial statements include
the accounts and operations of Innovations although it has less than a majority ownership. The Company determined it is the primary beneficiary of Innovations since the Company has the power to direct or cause the direction of activities that most
significantly impact the entity on a day-to-day basis. The carrying amounts of the assets and liabilities of Innovations included in the accompanying consolidated financial statements are $34,598 and $573,727, respectively, at December 31, 2014
and $51,897 and $542,525, respectively, at December 31, 2013. The assets and liabilities consist primarily of property and balances due to Neoforce (which are eliminated in consolidation), and long term debt with a financial institution. The
Company believes its maximum exposure to risk represents the obligations under the loan payable that has an outstanding balance of $236,000 as of December 31, 2014 and is guaranteed by NeoForce.
Note 4. Fair Value of Financial Instruments
The carrying value of the Company s cash, accounts receivable, and accounts payable, approximate fair value due to the short-term nature