Exhibit 99.2
On-Site Services, Inc.
Unaudited Balance Sheet
| March 31, | | 2010 | |
| | | | |
| Assets | | | |
| | | | |
| Current Assets | | | |
| Accounts receivable | | $ | 1,085,611 | |
| Prepaid expenses and other assets | | | 13,152 | |
| | | | | |
| Total Current Assets | | | 1,098,763 | |
| | | | | |
| Intangible Assets, net | | | 234,672 | |
| | | | | |
| Goodwill | | | 206,702 | |
| | | | | |
| Total Assets | | $ | 1,540,137 | |
| | | | | |
| Liabilities and Stockholder’s Equity | | | | |
| | | | | |
| Current Liabilities | | | | |
| Bank overdraft | | $ | 21,302 | |
| Accounts payable | | | 17,692 | |
| Accrued expenses | | | 662,867 | |
| Accrued workers' compensation | | | 207,171 | |
| Due to WTS | | | 49,438 | |
| Related party notes payable | | | 183,504 | |
| | | | | |
| Total Current Liabilities | | | 1,141,974 | |
| | | | | |
| Stockholder’s Equity | | | | |
| Common stock, $0.10 par value, 10,000 shares authorized, issued and outstanding | | | 1,000 | |
| Additional paid in capital | | | 446,900 | |
| Accumulated deficit | | | (49,737 | ) |
| | | | | |
| Total Stockholder's Equity | | | 398,163 | |
| | | | | |
| Total Liabilities and Stockholder's Equity | | $ | 1,540,137 | |
See accompanying notes to financial statements.
On-Site Services, Inc.
Unaudited Statements of Operations
| Quarter ended March 31, | | 2010 | | | 2009 | |
| | | | | | | |
| Revenue | | $ | 2,601,156 | | | $ | 3,062,562 | |
| | | | | | | | | |
| Cost of Revenue | | | 2,385,894 | | | | 2,847,883 | |
| | | | | | | | | |
| Gross profit | | | 215,262 | | | | 214,679 | |
| | | | | | | | | |
| Operating Expenses | | | | | | | | |
| Selling, general and administrative | | | 143,606 | | | | 114,363 | |
| | | | | | | | | |
| Operating Income (Loss) | | | 71,656 | | | | 100,316 | |
| | | | | | | | | |
| Other Expense | | | | | | | | |
| Interest expense | | | 1,554 | | | | 2,231 | |
| | | | | | | | | |
| Total Other Expense | | | 1,554 | | | | 2,231 | |
| | | | | | | | | |
| Net Income (Loss) | | $ | 70,102 | | | $ | 98,085 | |
See accompanying notes to financial statements.
On-Site Services, Inc.
Unaudited Statements of Stockholder’s Equity
| | | Common | | | Retained | | | Additional Paid | | | Stockholder's | |
| | | Stock | | | Earnings | | | in Capital | | | Equity | |
| | | | | | | | | | | | | |
Balance, at December 31, 2009 | | $ | 1,000 | | | $ | (119,839 | ) | | $ | 446,900 | | | $ | 328,061 | |
| | | | | | | | | | | | | | | | | |
| Net Income | | | - | | | | 70,102 | | | | - | | | | 70,102 | |
| | | | | | | | | | | | | | | | | |
Balance, at March 31, 2010 | | $ | 1,000 | | | $ | (49,737 | ) | | $ | 446,900 | | | $ | 398,163 | |
See accompanying notes to financial statements.
On-Site Services, Inc.
Unaudited Statements of Cash Flows
| Quarter ended March 31, | | 2010 | | | 2009 | |
| | | | | | | |
| Cash Flows From Operating Activities | | | | | | |
| Net Income | | $ | 70,102 | | | $ | 98,085 | |
| Adjustments to reconcile net income to net cash used in operating activities | | | | | | | | |
| Amortization of intangible assets | | | 26,681 | | | | 33,012 | |
| Accrued interest on note payable | | | 2,792 | | | | 2,231 | |
| Changes in assets and liabilities | | | | | | | | |
| Increase in accounts receivable | | | (170,514 | ) | | | (397,321 | ) |
| Decrease (increase) in prepaids | | | 4,221 | | | | (1,741 | ) |
| Decrease in accounts payable | | | (1,678 | ) | | | (2,448 | ) |
| Decrease in accrued expenses | | | (23,882 | ) | | | (28,153 | ) |
| (Increase) decrease in accrued workers' compensation | | | (9,459 | ) | | | 92,320 | |
| | | | | | | | | |
| Net cash used in operating activities | | | (101,737 | ) | | | (204,015 | ) |
| | | | | | | | | |
| Cash Flows From Financing Activities | | | | | | | | |
| Increase in bank overdraft | | | 21,302 | | | | - | |
| Increase in due to WTS | | | - | | | | 183,000 | |
| | | | | | | | | |
| Net cash provided by financing activities | | | 21,302 | | | | 183,000 | |
| | | | | | | | | |
| Net Decrease in Cash and Cash Equivalents | | | (80,435 | ) | | | (21,015 | ) |
| | | | | | | | | |
Cash and Cash Equivalents, beginning of period | | | 80,435 | | | | 197,528 | |
| | | | | | | | | |
Cash and Cash Equivalents, end of period | | $ | - | | | $ | 176,513 | |
See accompanying notes to financial statements.
On-Site Services, Inc.
Notes to Consolidated Financial Statements
As of March 31, 2010 and the Three Months Ended
March 31, 2010 and 2009
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2010 and 2009 are not necessarily indicative of the results that may be expected for the fiscal year ended December 31, 2010.
Intangible Assets, net
Intangible assets and accumulated amortization as of March 31, 2010 are as follows:
| March 31, | | | | | | | | | 2010 | |
| | Amortization Period | | Gross Carrying Amount | | | Accumulated Amortization | | | Net Carrying Amount | |
| | | | | | | | | | | |
| Customer relationships | 4 years | | $ | 280,700 | | | $ | 130,553 | | | $ | 150,147 | |
| Non-compete agreement | 5 years | | | 112,700 | | | | 28,175 | | | | 84,525 | |
| | | | | | | | | | | | | | |
| Total | | | $ | 393,400 | | | $ | 158,728 | | | $ | 234,672 | |
Workers’ Compensation Insurance
The Company maintains an insurance policy with respect to workers’ compensation coverage for its worksite employees with Thrive HR. The Company has accrued as the estimated liability for the unsettled workers’ compensation claims of $207,000 at March 31, 2010. The estimated liability for unsettled workers’ compensation claims represents management’s best estimate which includes, in part, an evaluation of information provided by the Company’s third-party administrators for workers’ compensation claims to estimate the total future costs of all claims, including potential future adverse loss development. These estimates are continually reviewed and adjustments to liabilities are reflected in current operating results as they become known. The Company believes that the difference between amou nts recorded for its estimated liabilities and the possible range of costs to settle related claims is not material to its results of operations; nevertheless, it is reasonably possible that adjustments required in future periods may be material to the results of operations.
Related Party Transactions
O2HR, LLC
The Company entered into a service agreement with O2HR, LLC (O2HR) in January 2006. As a result of the sale of the Company to WTS in January 2009, 02HR is now affiliated with the Company through common ownership. In accordance with this agreement, 02HR serves as the Company’s professional employer organization (“PEO”), providing both assistance with payroll and securing workers’ compensation insurance on behalf of the Company. In exchange for these services, 02HR receives a fee. In addition, all workers’ compensation insurance claim deductibles are paid directly to 02HR. The Company incurred $23,000 in service fees under its contract with O2HR, LLC for the three months ended March 31, 2009. In addition, the Company incurred $213,000 for workers’ compensation premiums and deductibles for the three mo nths ended March 31, 2009. $715,000 and $853,000 due to O2HR is included in accrued expenses or accrued workers’ compensation as of March 31, 2010 and 2009, respectively.
On-Site Services, Inc.
Notes to Consolidated Financial Statements
As of March 31, 2010 and the Three Months Ended
March 31, 2010 and 2009
In January 2010, O2HR, LLC transferred its existing business to Thrive HR, an affiliated entity. The Company incurred $40,000 in service fees under its contract with Thrive HR for the three months ended March 31, 2010. In addition, the Company incurred $85,000 for workers compensation premiums. $155,000 due to Thrive HR is included in accrued expenses as of March 31, 2010.
Note Payable
During 2009, the Company entered into a $183,000 demand note payable, bearing interest at 5% per annum, with a related party, Alexander & Alexander. Interest incurred during 2009 and 2010 included in the note payable balance as of March 31, 2010 was $10,500. During 2010, the Company settled the balance by paying the full amount due under the note to an affiliate of Alexander & Alexander.
Due to WTS
For the year ended December 31, 2009, the Company was charged insurance premiums by WTS, its parent, for general liability insurance carried by WTS on behalf of the Company. The total insurance expense incurred for these premiums as of March 31, 2010 was $9,600. At March 31, 2010, $49,000 is recorded as due to WTS for these insurance premiums.
