Exhibit 99.1
INTEGRAL ANALYTICS, INC.
Cincinnati, Ohio
TABLE OF CONTENTS
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Financial Statements: | |
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Balance Sheet | 2 |
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Statement of Income and Retained Earnings | 3 |
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Statement of Shareholders’ Equity | 4 |
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Statement Cash Flow | 5 |
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Notes to Financial Statements | 6- 8 |
INTEGRAL ANALYTICS, INC.
BALANCE SHEET
As of March 31, 2017 and 2016
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ASSETS |
| | As of March 31, 2017 | | As of March 31, 2016 |
Current Assets: | | | | | | |
Cash and cash equivalents | | $ | 540,287 | | $ | 1,706,400 |
Accounts receivable, net of allowance of $74,694 as of March 31, 2017 and 2016 | | | 853,194 | | | 381,615 |
Prepaid expenses | | | 57,021 | | | 40,562 |
Total current assets | | | 1,450,502 | | | 2,128,577 |
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Property and Equipment: | | | | | | |
Furniture and equipment | | | 51,276 | | | 51,276 |
Computer equipment | | | 26,171 | | | 26,171 |
Software | | | 10,000 | | | 10,000 |
Total property and equipment | | | 87,447 | | | 87,447 |
Less accumulated depreciation | | | 79,849 | | | 72,524 |
Net property and equipment | | | 7,598 | | | 14,923 |
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Other Assets: | | | | | | |
Deposits | | | 2,271 | | | 2,271 |
Intangible assets, less accumulated amortization of $33,930 and $24,330 as of March 31, 2017 and 2016, respectively | | | 179,049 | | | 145,191 |
Total other assets | | | 181,320 | | | 147,462 |
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Total Assets | | $ | 1,639,420 | | $ | 2,290,962 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current Liabilities: | | | | | | |
Account payable | | $ | 308,285 | | $ | 54,821 |
Accrued expenses | | | 57,768 | | | 39,853 |
Accrued shareholders’ distributions | | | 130,276 | | | 130,276 |
Deferred revenue | | | 768,965 | | | 515,820 |
Total current liabilities | | | 1,265,294 | | | 740,770 |
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Long term liabilities: | | | | | | |
Shareholder notes payable | | | 188,600 | | | 188,600 |
Total Liabilities | | | 1,453,894 | | | 929,370 |
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Shareholders’ Equity: | | | | | | |
Common stock; no par value; 9,000 shares authorized | | | | | | |
5,057 shares issued; 4,542 and 4,465 outstanding as of March 31, 2017 and 2016, respectively | | | 202,393 | | | 202,255 |
Treasury stock; 515 shares, at cost | | | (52,232) | | | (52,232) |
Retained earnings | | | 35,365 | | | 1,211,569 |
Total shareholders’ equity | | | 185,526 | | | 1,361,592 |
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Total liabilities and shareholders’ equity | | $ | 1,639,420 | | $ | 2,290,962 |
The accompanying notes are an integral part of these statements.
INTEGRAL ANALYTICS, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
For the three months ended March 31, 2017 and 2016
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| | Three Months Ended
March 31, 2017 | | Three Months Ended
March 31, 2016 | |
Revenues: | | | | | | | |
Software licenses | | $ | 263,392 | | $ | 471,836 | |
Consulting and other revenue | | | 664,831 | | | 419,911 | |
Total revenues | | | 928,223 | | | 891,747 | |
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Cost of revenues: | | | | | | | |
Software licenses | | | 87,964 | | | 151,376 | |
Consulting and other revenue | | | 474,608 | | | 65,486 | |
Total cost of revenues | | | 562,572 | | | 216,862 | |
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Gross profit | | | 365,651 | | | 674,885 | |
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Operating expenses: | | | | | | | |
Product development | | | 368,139 | | | 250,346 | |
Operations | | | 79,102 | | | 69,480 | |
Sales and marketing | | | 122,788 | | | 94,191 | |
General and administrative | | | 328,286 | | | 268,508 | |
Total operating expenses | | | 898,315 | | | 682,525 | |
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Loss from operations | | | (532,664) | | | (7,640) | |
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Other expense: | | | | | | | |
Interest expense | | | 3,624 | | | 3,657 | |
Bad debt expense | | | — | | | 74,694 | |
| | | 3,624 | | | 78,351 | |
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Net loss | | $ | (536,288) | | $ | (85,991) | |
The accompanying notes are an integral part of these statements.
INTEGRAL ANALYTICS, INC.
STATEMENT OF SHAREHOLDERS’ EQUITY
For the three months ended March 31, 2017 and 2016
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| | Common Stock | | Treasury | | | | |
| | Shares | | Amount | | Stock | | Retained Earnings | | Total |
Balance at December 31, 2015 | | 4,465 | | $ | 202,255 | | $ | (52,232) | | $ | 1,297,560 | | $ | 1,447,583 |
Net loss | | — | | | — | | | — | | | (85,991) | | | (85,911) |
Balance at March 31, 2016 | | 4,465 | | $ | 202,255 | | $ | (52,232) | | $ | 1,211,569 | | $ | 1,361,592 |
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Balance at December 31, 2016 | | 4,542 | | $ | 202,393 | | $ | (52,232) | | $ | 571,653 | | $ | 721,814 |
Net loss | | — | | | — | | | — | | | (536,288) | | | (536,288) |
Balance at March 31, 2017 | | 4,542 | | $ | 202,393 | | $ | (52,232) | | $ | 35,365 | | $ | 185,526 |
The accompanying notes are an integral part of these statements.
INTEGRAL ANALYTICS, INC.
STATEMENT OF CASH FLOW
For the three months ended March 31, 2017 and 2016
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| | Three Months Ended
March 31, 2017 | | Three Months Ended
March 31, 2016 | |
Cash flows from operating activities | | | | | | | |
Net loss | | $ | (536,288) | | $ | (85,991) | |
Adjustments to reconcile net loss to net cash provided (used) by operations: | | | | | | | |
Depreciation | | | 1,831 | | | 1,831 | |
Amortization | | | 2,400 | | | 2,400 | |
Bad debt expense | | | — | | | 74,694 | |
Effects of change in operating assets and liabilities: | | | | | | | |
Accounts receivable | | | 84,969 | | | 21,371 | |
Other receivables | | | — | | | 80,768 | |
Prepaid expenses and other assets | | | 17,850 | | | 63,187 | |
Accounts payable | | | (164,750) | | | 15,634 | |
Accrued expenses | | | (1,086) | | | (36,696) | |
Deferred revenue | | | 121,508 | | | (134,923) | |
Net cash provided (used) by operating activities | | | (473,566) | | | 2,275 | |
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Cash flows from investing activities | | | | | | | |
Capitalized patent costs | | | (8,673) | | | (662) | |
Net cash used in investing activities | | | (8,673) | | | (662) | |
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Net decrease in cash and cash equivalents | | | (482,239) | | | 1,613 | |
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Cash and cash equivalents – January 1 | | | 1,022,526 | | | 1,704,787 | |
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Cash and cash equivalents – March 31 | | $ | 540,287 | | $ | 1,706,400 | |
The accompanying notes are an integral part of these statements.
INTEGRAL ANALYTICS, INC.
Cincinnati, Ohio
NOTES TO FINANCIAL STATEMENTS
Note 1 — Summary of Significant Accounting Policies
Integral Analytics, Inc. (the “Company”) is a utility software provider which conducts business throughout the United States of America. The Company’s primary products are advanced analytical software for use by utility companies in the energy, power generation, transmission and delivery industries for evaluating and for costing demand and capacity, and to meet regulatory requirements. In connection with the licensing of its software, the Company also provides consulting and support services, and contracts to install hardware systems for its software products. The following is a summary of the significant accounting policies followed in the preparation of the financial statements.
Cash and cash equivalents
The Company maintains cash in bank deposit accounts at financial institutions where the balances, at times, exceed the federally insured limits. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant credit risks on its cash balances.
Accounts receivable
The Company carries its accounts receivable at the original invoice amount less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based on a history of past write-offs and collections and current credit conditions. The Company has recorded an allowance for doubtful accounts of $74,694 as of March 31, 2017 and March 31, 2016.
Advertising expense
Advertising expenses are charged to income during the year in which they are incurred. The Company recognized $5,000 in advertising expenses in the quarter ended March 31, 2017 and no advertising expenses in the quarter ended March 31, 2016.
Income taxes
The Company is treated as an S-Corporation for federal income tax purposes. Shareholders are taxed individually on their share of the Company’s earnings. Accordingly, no liabilities or income tax provisions for federal or state income taxes are recorded in the accompanying financial statements.
Property and depreciation
Property is recorded at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the respective assets, generally 3 - 7 years for office furniture and fixtures, computer equipment, and software.
Intangible assets
Intangible assets consist of the following at March 31:
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| | 2017 | | 2016 |
Patents | | $ | 212,979 | | $ | 169,521 |
Less accumulated amortization | | | (33,930) | | | (24,330) |
| | $ | 179,049 | | $ | 145,191 |
INTEGRAL ANALYTICS, INC.
Cincinnati, Ohio
NOTES TO FINANCIAL STATEMENTS
Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Patent costs are accumulated until a patent is either issued, denied, or the Company abandons the patent process. Patent lives are typical 20 years from the first filing date, and the Company amortizes patent costs from the date of issuance until the patent period expires.
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2017 | | $ | 7,199 |
2018 | | | 9,599 |
2019 | | | 9,599 |
2020 | | | 9,599 |
2021 | | | 9,599 |
Thereafter | | | 133,454 |
| | $ | 179,049 |
Intangible assets are reviewed annually for impairment or when events or circumstances indicate their carrying amount may not be recoverable. Management has determined that no impairment is necessary at March 31, 2017.
Revenue recognition
Revenues from software license agreements and maintenance contracts are recognized ratably over the life of the agreements. Payments for the Company’s license and maintenance agreements are collected in advance and recognized ratably over the contractual period, typically one year. Deferred revenue represents the unrecognized portion to be recognized in future periods. The Company recognizes consulting revenue as services are rendered based on agreed upon consulting rates. The Company’s systems design contracts are recognized on a milestone basis in accordance with its contracts with customers.
Software costs
Costs associated with the maintenance and support of the Company’s software product are expensed as incurred in accordance with the Costs of Computer Software to be Sold, Leased or Otherwise Marketed topic of the FASB Accounting Standards Codification.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Subsequent events
The Company evaluates events and transactions occurring subsequent to the date of the financial statements for matters requiring recognition or disclosure in the financial statements. The accompanying financial statements consider events through October 6, 2017, the date on which the financial statements were available to be issued.
Note 2 — Concentration of Credit Risk
Revenue from two customers represented approximately 58% and 68% of total Integral Analytics, Inc. revenue for the quarters ended March 31, 2017 and March 31, 2016, respectively. Accounts receivable from two customers represented approximately 70% and 80% of total Integral Analytics, Inc. receivables as of March 31, 2017 and 2016, respectively.
INTEGRAL ANALYTICS, INC.
Cincinnati, Ohio
NOTES TO FINANCIAL STATEMENTS
Note 3 — Operating Lease Commitments
The Company leases its Cincinnati office and other office locations under operating leases, on a month to month basis. Lease expense under these leases range from $557 a month to $2,912 per month, with $14,668 and $13,606 of expense for the quarters ended March 31, 2017 and 2016, respectively.
Note 4 — Retirement Plan
The Company has a 401(k) plan which covers all employees who meet the eligibility requirements. The Company matches 100% of employee contributions up to 6% of qualifying compensation. Company contributions to this plan were $31,444 and $27,477 during the quarters ended March 31, 2017 and 2016, respectively.
Note 5 — Shareholder Notes Payable
The Company has notes payable to shareholders with interest payable annually at 8% per annum. The notes can be called by the shareholders with 180 days notice. The outstanding balance at March 31, 2017 and 2016 was $188,600. The notes are shown as long-term as the shareholders do not intend to call them in the immediate future.
Note 6 — Research and Development Costs
The Company expenses product development costs as they are incurred. Product development expense incurred for the quarters ended March 31, 2017 and 2016 was $368,139 and $250,346, respectively.
Note 7 — Subsequent Event
On July 28, 2017 the shareholders sold all of the Company’s stock to a publically traded entity. In connection with the sale, all assets and business operations were transferred and certain liabilities were assumed by the new parent company. Shareholder notes payable were settled as part of the stock purchase agreement.
