Exhibit 99.4
KII, Inc. and Kuchera Industries, LLC
Financial Statements
September 30, 2009 and 2008
Unaudited
Kuchera II, Inc. and Kuchera Industries, LLC
Table of Contents
September 30, 2009 and 2008
| | |
Financial Statements (Unaudited) | | |
| |
Balance Sheets | | 1 |
| |
Statements of Operations | | 2 |
| |
Statements of Cash Flows | | 3 |
| |
Notes to Financial Statements | | 4 |
Kuchera Industries, Inc.
Balance Sheets
September 30, 2009 and December 31, 2008
| | | | | | |
| | | Unaudited
2009 | | Audited
2008 |
Assets | | | | | | |
| | |
Current assets | | | | | | |
Cash | | $ | 1,979,947 | | $ | 1,207,137 |
Accounts receivable, net of allowance for doubtful accounts of $884,163 and $126,416 at September 30, 2009 and December 31, 2008, respectively | | | 2,668,628 | | | 1,797,450 |
Due from related parties | | | — | | | 281,326 |
Inventory | | | 5,613,533 | | | 4,615,168 |
Prepaid expenses | | | 68,081 | | | 35,289 |
Loans to related parties | | | 1,108,285 | | | 8,174 |
Other current assets | | | 45,022 | | | 43,458 |
| | | | | | |
Total current assets | | | 11,483,495 | | | 7,988,002 |
| | |
Property and equipment, net | | | 3,050,757 | | | 3,302,377 |
| | | | | | |
| | | 14,534,252 | | $ | 11,290,379 |
| | | | | | |
Liabilities and Stockholders' Equity | | | | | | |
| | |
Current liabilities | | | | | | |
Accounts payable | | $ | 744,578 | | $ | 247,052 |
Line of Credit | | | 499,819 | | | — |
Accrued expenses | | | 292,470 | | | 138,923 |
Due to related parties | | | 1,349,827 | | | 27,329 |
Current maturities of capital leases | | | 217,339 | | | 215,961 |
| | | | | | |
Total current liabilities | | | 3,104,033 | | | 629,265 |
| | |
Capital leases, net of current maturities | | | 977,434 | | | 1,091,849 |
| | |
Loan from related party | | | 139,292 | | | 139,292 |
| | |
Stockholders’ equity | | | | | | |
Class A voting common stock, no par value; authorized 20,000 | | | | | | |
shares; 10,000 shares issued and outstanding in 2008 | | | 55 | | | 55 |
shares; 100,000 shares issued and outstanding in 2008 | | | 545 | | | 545 |
Retained earnings | | | 10,312,893 | | | 9,429,373 |
| | | | | | |
Total stockholders’ equity | | | 10,313,493 | | | 9,429,973 |
| | | | | | |
| | $ | 14,534,252 | | $ | 11,290,379 |
| | | | | | |
1
Kuchera Industries, Inc.
Statements of Operations
For the Nine Months Ended September 30, 2009 and 2008
| | | | | | | | |
| | | 2009 | | | 2008 | |
Sales, net | | $ | 15,023,242 | | | $ | 15,393,979 | |
| | |
Cost of sales | | | 9,805,676 | | | | 10,017,160 | |
| | | | | | | | |
Gross profit | | | 5,217,566 | | | | 5,376,819 | |
| | |
Operating expenses | | | 2,856,695 | | | | 2,777,249 | |
| | | | | | | | |
Income from operations | | | 2,360,871 | | | | 2,599,570 | |
| | |
Other income (expense) | | | | | | | | |
Interest income | | | (32,187 | ) | | | (16,757 | ) |
Interest expense | | | 94,988 | | | | 40,743 | |
Other income | | | (23,177 | ) | | | (2,777 | ) |
Other expense | | | 170 | | | | (2,343 | ) |
| | | | | | | | |
| | | 39,795 | | | | 18,866 | |
| | | | | | | | |
Net income | | $ | 2,321,077 | | | $ | 2,580,704 | |
| | | | | | | | |
2
Kuchera Industries, Inc.
Statement of Cash Flows
For the Nine Months Ended September 30, 2009 and 2008
| | | | | | | | |
| | | 2009 | | | 2008 | |
Cash flows from operating activities | | | | | | | | |
Net income | | $ | 2,321,077 | | | $ | 2,580,704 | |
Adjustments to reconcile net income to net cash provided by operating activities | | | | | | | | |
Depreciation | | | 354,118 | | | | 296,416 | |
Gain on sale of equipment | | | (20,776 | ) | | | (54 | ) |
Bad debt expense | | | 158,599 | | | | 126,416 | |
Changes in operating assets and liabilities | | | | | | | | |
Accounts receivable | | | (1,029,777 | ) | | | (1,686,915 | ) |
Due from related parties | | | (818,785 | ) | | | 1,362,956 | |
Inventory | | | (998,365 | ) | | | (1,220,023 | ) |
Prepaid expenses | | | (32,792 | ) | | | (26,558 | ) |
Other current assets | | | (1,564 | ) | | | 37,097 | |
Accounts payable | | | 497,524 | | | | 880,401 | |
Accrued expenses | | | 153,547 | | | | 105,436 | |
Due to related parties | | | 1,322,498 | | | | (16,819 | ) |
| | | | | | | | |
Net cash provided by operating activities | | | 1,905,303 | | | | 2,439,058 | |
| | |
Cash flows from investing activities | | | | | | | | |
Purchase of property and equipment, net | | | (102,498 | ) | | | (75,097 | ) |
Proceeds from sale of equipment | | | 20,776 | | | | 1,300 | |
| | | | | | | | |
Net cash used by investing activities | | | (81,722 | ) | | | (73,797 | ) |
| | |
Cash flows from financing activities | | | | | | | | |
Repayment of obligations under capital lease | | | (113,037 | ) | | | (119,593 | ) |
Line of Credit | | | 499,819 | | | | — | |
Members’ Contribution | | | 20,200 | | | | — | |
Distributions to stockholders | | | (1,457,754 | ) | | | (1,294,775 | ) |
| | | | | | | | |
Net cash used by financing activities | | | (1,050,772 | ) | | | (1,414,368 | ) |
| | | | | | | | |
Net increase in cash | | | 772,810 | | | | 950,892 | |
| | |
Cash | | | | | | | | |
Beginning of year | | | 1,207,137 | | | | 432,570 | |
| | | | | | | | |
As of September 30, 2009 | | $ | 1,979,947 | | | $ | 1,383,462 | |
| | | | | | | | |
3
Notes to Financial Statements
KII, Inc. (the “Company”), founded in 1985 is a predecessor of Kuchera Industries, LLC formed on January 1, 2009 and is headquartered in Windber, Pennsylvania, is an ISO certified electronic manufacturing service company, offering a full range of capabilities from prototyping to high volume production. The Company specializes in high speed surface mount circuit card assembly. The Company’s customers include both military and commercial organizations located throughout the United States. The Company is dedicated to serving the commercial electronic contract manufacturing industry at the highest possible level. The Company changed its name from Kuchera Industries, Inc. to KII, Inc. in May 2008.
Certain information and footnote disclosures required in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. Statements are subject to possible adjustments in connection with the annual audit of the Company’s accounts. In the opinion of the Company’s management, the accompanying unaudited condensed financial statements contain all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary for the fair presentation of the Company’s financial position as of September 30, 2009 and the results of its operations and cash flows for the nine month period ended September 30, 2009 and 2008. Results for the interim period are not necessarily indicative of results that may be expected for the entire year or for any other interim periods. The unaudited condensed financial statements should be read in conjunction with the audited financial statements of the Company and the notes thereto as of and for the fiscal year ended December 30, 2008 included in the Company’s Form 8-K/A filed with the Commission on March 2, 2010.
The Company has evaluated subsequent events occurring after the balance sheet date through the date of March 2, 2010, which is the date the financial statements were available to be issued.
On January 20, 2010 three newly formed subsidiaries, API Systems, Inc. (“API Systems”), API Defense, Inc. (“API Defense”) and API Defense USA, Inc. (“API USA” and collectively with API Systems and API Defense, the “API Subsidiaries”) entered into an asset purchase agreement (the “Agreement”) with Kuchera Defense Systems, Inc. (“KDS”), KII, Inc. (“KII”) and Kuchera Industries, LLC (“K Industries” and collectively with KDS and KII, the “Kuchera Companies”) dated January 20, 2010 pursuant to which API and the API Subsidiaries purchased substantially all of the assets of the Kuchera Companies.
4
