Exhibit 99.1
PROVEL S.r.l. | ||||
UNAUDITED BALANCE SHEET | ||||
SEPTEMBER 30, 2010 | ||||
September 30, | ||||
Amounts in Thousands of Euros | 2010 | |||
ASSETS | ||||
CURRENT ASSETS: | ||||
Cash (note 3) | 1,305 | |||
Accounts receivable,net (note 4) | 1,692 | |||
Inventories (note 5) | 80 | |||
Loan to parent company (note 6) | 6,000 | |||
Taxes receivable (note 7) | 1 | |||
Other currents assets (note 8) | 419 | |||
TOTAL CURRENT ASSETS | 9,497 | |||
Property,plant and equipment,net (note 9) | 1,671 | |||
TOTAL ASSETS | 11,168 | |||
LIABILITIES AND QUOTAHOLDERS' EQUITY | ||||
CURRENT LIABILITIES: | ||||
Accounts payables (note 10) | 537 | |||
Other current liabilities (note 11) | 299 | |||
TOTAL CURRENT LIABILITIES | 836 | |||
Bank loan payable (note 12) | 278 | |||
Profit sharing debt (note 13) | 1,546 | |||
Deferred tax liabilities | 26 | |||
Provision for contingencies and charges (note 16) | 20 | |||
Other liabilities (note 14) | 487 | |||
TOTAL LIABILITIES | 3,193 | |||
QUOTAHOLDERS' EQUITY: | ||||
Quota capital | 10 | |||
Reserves, retained earnings and profit for the year | 7,965 | |||
TOTAL QUOTAHOLDERS' EQUITY | 7,975 | |||
TOTAL LIABILITIES AND QUOTAHOLDERS' EQUITY | 11,168 | |||
The accompanying notes are an integral part of these financial statements |
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PROVEL S.r.l | ||||
UNAUDITED STATEMENT OF OPERATIONS | ||||
NINE MONTHS ENDED SEPTEMBER 30, 2010 | ||||
September 30, | ||||
Amounts in Thousands of Euros | 2010 | |||
Revenue | 2,990 | |||
Sales | 2,990 | |||
Cost of product sold | 1,926 | |||
Gross Profit | 1,064 | |||
Selling, general and administrative expense | 242 | |||
Other operating expenses | 158 | |||
Total operating expenses | 400 | |||
Operating income | 664 | |||
Interest income (note 18) | 4 | |||
Interest expenses (note 18) | (23 | ) | ||
Income before income Taxes | 645 | |||
Income taxes (note 17) | (255 | ) | ||
Net income for the period | 390 | |||
The accompanying notes are an integral part of these financial statements |
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PROVEL S.r.l.
UNAUDITED STATEMENT OF QUOTAHOLDERS’ EQUITY
FOR THE PERIOD ENDED SEPTEMBER 30, 2010
Quotaholders’ equity consisted of the following:
Amounts in Thousands of Euros | Quota capital | Retained earnings and reserves | Result | Total | ||||||||||||
Balance as December 31, 2009 | 10 | 7,245 | 330 | 7,585 | ||||||||||||
Increase or retained earnings | 330 | (330 | ) | |||||||||||||
Result September 30, 2010 | 390 | 390 | ||||||||||||||
Balance as September 30, 2010 | 10 | 7,575 | 390 | 7,975 | ||||||||||||
The accompanying notes are an integral part of these financial statements |
The quotaholders’ capital amounting to € 10 is owned 98% by Glas s.s. and 2% by Mr. Francesco Buson.
As of September 30, 2010 the retained earnings and reserves include the following amounts:
- | statutory legal reserve of €134. |
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PROVEL S.r.l. | ||||
UNAUDITED STATEMENT OF CASH FLOWS AS OF SEPTEMBER 30, 2010 | ||||
NINE MONTHS ENDED SEPTEMBER 30, 2010 | ||||
September 30, | ||||
Amounts in Thousands of Euros | 2010 | |||
CASH FLOWS FROM OPERATING ACTIVITIES (A) | ||||
Net income for the year | 390 | |||
Depreciation expense | 177 | |||
Bad debt expense | 90 | |||
Changes in assets and liabilities: | ||||
Decrease (increase) in inventories | (10 | ) | ||
Decrease (increase) in accounts receivable | 142 | |||
Decrease (increase) in other assets | 203 | |||
Increase (decrease) in accounts payable | (394 | ) | ||
Increase (decrease) in other liabilities | 154 | |||
Net cash provided by operating activities | 752 | |||
CASH FLOWS FROM INVESTING ACTIVITIES (B) | ||||
Investments in property, plants and equipments | (2 | ) | ||
Net cash used in investing activities | (2 | ) | ||
CASH FLOWS FROM FINANCING ACTIVITIES (C) | ||||
(Decrease) in bank loan payable and financial interests | (173 | ) | ||
Net cash used in financing activities | (173 | ) | ||
INCREASE IN CASH (A+B+C) | 577 | |||
Cash beginning of year | 728 | |||
Increase in cash (A+B+C) | 577 | |||
CASH END OF THE YEAR | 1,305 | |||
The accompanying notes are an integral part of these financial statements |
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Provel S.r.l.
Financial Statements
As of For the Period Ended September 30, 2010
NOTE 1—FORM AND CONTENT OF THE FINANCIAL STATEMENTS
The unaudited interim financial statements of Provel S.r.l. (or the “Company”) are prepared in accordance with current statutory legislation.
The accounting policies are consistent with the Italian Civil Code related to financial statements interpreted and integrated by the accounting principles established or adopted by the Italian Accounting Profession (collectively, “Italian Accounting Principles”), and in particular with reference to OIC 30 on preparation of unaudited interim financial statements.
Italian Accounting Principles differ in certain material respects from the U.S. generally accepted accounting principles (“U.S. GAAP”). The Company's accounting policies for financial reporting in accordance with Italian Accounting Principles do not differ materially from US GAAP.
The unaudited interim financial statements and related notes are presented in a reclassified format, which differs from Provel’s financial statements and disclosures which are prepared in accordance with Italian legal requirements. The format presented does not result in any modification of the portions attributable to Provel quota holders’ equity and net income as reported on an Italian Accounting Principles basis. All amounts are in thousands of Euro (or “€”), unless otherwise specified.
The quotas of Provel are owned by Glas s.s. (98% of quota capital) and by Francesco Buson (2% of quota capital).
The Company prepared its unaudited interim financial statements in accordance with the general principles of prudence and accruals-based accounting on a going concern basis.
NOTE 2—ACCOUNTING POLICIES
The principal accounting policies applied by Provel according to Italian Accounting Principles, consistently with prior years, are as follows:
CASH
Cash is stated at nominal value.
ACCOUNTS RECEIVABLE AND PAYABLE
Receivables are stated at estimated realizable value through the specific provision for bad debts. Identified individual risks are accounted for through appropriate individual valuation adjustments, and general credit risks through general valuation adjustments of receivables. The Company generally does not require collateral for receivables subject to credit risk. Low-interest and non-interest bearing items with more than one year to maturity are not discounted. Payables are stated at nominal value.
FOREIGN CURRENCY TRANSACTIONS
Monetary assets and liabilities denominated in foreign currencies have been recorded at the exchange rate in effect at the date of the transaction; profit and losses on exchange rates are booked in the statement of operations on the day of collection or payment; assets and liabilities denominated in foreign currencies still outstanding at year-end are remeasured at the prevailing rate at the balance sheet date, and any resulting unrealized gains and losses are recorded in the statement of operations as interest income or expense, as appropriate.
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INVENTORIES
Inventories are stated at the lower of cost or net realizable market value, with cost being determined on a basis which approximates a first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment are entered at purchase or construction cost, including any directly attributable charges. No voluntary re-valuations were performed and no interest expenses have been capitalized on the Property, Plant and Equipment.
Depreciation reflects the estimated useful life of the asset. The depreciation rates, which are the same as for the prior financial year, are as follow:
Rates | ||||
Property: | ||||
Light construction | 10 | % | ||
Industrial building | 3 | % | ||
Plant and machinery | 12 | % | ||
Specific plant | 12 | % | ||
Equipment: | ||||
General equipment | 40 | % | ||
Furniture and fittings | 12 | % | ||
Electronic office machines and computers | 20 | % | ||
Cars | 25 | % | ||
Motor vehicles and similar | 20 | % | ||
Mobile radio communication system | 25 | % |
Depreciation was calculated for assets entering into service during the financial year on the basis of the effective date the assets have been placed into use. Construction in progress is not depreciated.
The maintenance and repair costs are capitalized on the Property, Plant and Equipment only if they generate an effective increase in the useful life or operating functionality of the assets; otherwise they are expensed to the statement of operations as incurred.
EMPLOYEE TERMINATION INDEMNITY
Employee termination indemnity is determined in accordance with the relevant current laws. The amount of employee termination indemnity shown in other liabilities within the balance sheets reflects the total amount of the indemnity, net of any advances taken, that each employee of Provel would be entitled to receive if termination were to occur as of the respective balance sheet dates.
PROVISIONS FOR CONTIGENCIES AND CHARGES
Provisions for risks and charges are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefit will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made.
RECOGNITION OF REVENUES AND EXPENSES
Revenues and expenses are recorded on the accrual basis.
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Revenues are recorded in the statement of operations when title of ownership passes to the customer, which is generally at the point of shipment for foreign customers and at the time the goods are delivered for Italian customers. Expenses are also recognized on an accrual basis, with amounts recognized in the statement of operations based on when the goods and or services are received, regardless of payment terms in advance or after the receipt of the goods or services.
INCOME TAXES
Current income taxes are computed on the basis of the estimated income tax charge according to the tax laws in force in Italy; the related income tax payable is shown net of payments on account, withholding taxes and tax credits in “Other current liabilities”. Any net receivable position is shown in “Taxes receivable”.
The Company recognizes deferred income tax assets and liabilities that are determined under the liability method. Deferred income taxes represent the tax effect of temporary differences between the tax and financial reporting bases of assets and liabilities, using enacted tax rates, and the expected future benefit of net operating loss carry-forward. The tax benefit of tax loss carry-forwards is recorded only when there is a reasonable certainty of realization.
Deferred tax assets and deferred tax liabilities are offset whenever allowed by local Italian tax laws.
USE OF ESTIMATES
The preparation of financial statements in accordance with Italian Accounting Principles requires the Company to make estimates and assumptions that affect the reported carrying amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses recognized during the reporting periods. Actual results could differ from those estimated.
NOTE 3 – CASH
Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Bank accounts | 1,304 | |||
Cash on hand | 1 | |||
1,305 |
The company has two Italian banks: Unicredit and Banca Popolare di Novara.
NOTE 4 – ACCOUNTS RECEIVABLE
Trade accounts receivables from customers are detailed as follows:
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Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Trade receivables-third parties | 1,692 | |||
1,692 |
Trade receivables entirely relate to trade transactions.
The accounts receivable related to customers who constitute more than 10% of the total accounts receivable balance was € 483and the number of customers was 1 at September 30, 2010.
The Company’s provision for bad debts was € 90 at September 30, 2010.
NOTE 5 – INVENTORIES
Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Raw materials and supplies | 80 | |||
80 |
Provel has only a minimum stock of raw materials, because the finished products are sent to the customer as soon as the production is completed.
For the same reason the company doesn’t calculate an obsolescence reserve.
NOTE 6 – LOAN TO PARENT COMPANY
Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Loan to parent company | 6,000 | |||
6,000 |
No additional loans were made in 2010.
Interest has not been imputed on this loan, as the Company has determined the interest amount to be immaterial.
NOTE 7 – TAXES RECEIVABLE
Taxes receivable include the following at September 30, 2010:
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Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Other taxes receivable | 1 | |||
1 |
At the end of 2008 the tax credit for IRES and IRAP, the two Italian income taxes, amounted to € 526. It was partially used in 2009 and it was extinguished in 2010.
NOTE 8 – OTHER CURRENT ASSETS
Other current assets include the following at September 30, 2010:
Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Chief executive insurance | 368 | |||
Prepayments and accrued income | 39 | |||
Other receivables | 12 | |||
419 |
Every year the Company pays an insurance premium as provision to indemnities for Mr Francesco Buson (Owner) and Mr Marco Maio (Chief Executive). These indemnities will be paid when they will finish their activity in Provel.
Prepayments and accrued income relate to income and charges pertaining to periods before or after the related accounting entry and/or document date. They relate to more than one year and are accrued or deferred over time, regardless of when the amount is collected or paid.
NOTE 9 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are summarized as follows:
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Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Land | 228 | |||
Building | 1,328 | |||
Plant and machinery | 2,660 | |||
Fixtures, fittings and tools | 57 | |||
Trucks and vehicles | 79 | |||
Other tangible assets | 29 | |||
4,381 | ||||
Less accumulated depreciation | (2,710 | ) | ||
1,671 |
Total depreciation expenses were equal to € 177 in 2010.
NOTE 10 – ACCOUNTS PAYABLE
Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Accounts payable | 514 | |||
Invoices to be received | 23 | |||
537 |
Mr Francesco Buson appears among the suppliers as agent. The debt of Provel against Buson was € 12 in 2010.
NOTE 11 – OTHER CURRENT LIABILITIES
Other current liabilities include the following at September 30, 2010:
Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Wages and salary accruals | 25 | |||
INPS | 12 | |||
IRPEF | 17 | |||
VAT | 30 | |||
IRES | 148 | |||
IRAP | 33 | |||
Other accruals | 34 | |||
299 |
IRES and IRAP are the current taxes period.
NOTE 12 – BANK LOAN PAYABLE
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Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Bank loan payable | 278 | |||
278 |
In 2003 Unicredit distributed a loan of € 1.350 to Provel. The debt was extinguished at October 2010.
NOTE 13 – PROFIT SHARING DEBT
Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Profit-sharing debt | 1,546 | |||
1,546 |
In 2008 and 2009 Mr Buson signed a profit-sharing agreement with Provel by which, assuming the risk of the losses up to €2,000, he was granted a sum equal to 50% of profit before tax. In 2010 the agreement has been not renewed.
NOTE 14 – OTHER LIABILITIES
Other liabilities are summarized as follows:
Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Chief executive indemnity | 368 | |||
Employees termination indemnity | 119 | |||
487 |
The Chief executive indemnity is the debt against Mr Buson and Mr Maio (see note 8).
NOTE 15 - EMPLOYEE TERMINATION INDEMNITY
Under Italian labour laws and regulations all employees are entitled to an indemnity upon termination of their employment relationship for any reason. The provision is calculated on a pro-rata basis during the employment period and is based on the individuals’ salary. The vested benefit payable accrues interest, and employees can receive advances thereof in certain specified situations, as defined in the applicable labour contract regulations. Termination indemnities reflect the total amount of the indemnities, net of any advances taken, that each employee would be entitled to receive if termination were to occur as of the balance sheet date.
This caption underwent the following variations during the year:
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Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Balance at the beginning of the period | 142 | |||
Drawing for termination of employment and advances | (45 | ) | ||
Provisions set aside for the period | 22 | |||
Balance at the end of the period | 119 |
NOTE 16 – PROVISION FOR CONTIGENCIES AND CHARGES
Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Provisions for contingencies and charges | 20 | |||
20 |
The Company was exposed a risk due to an action for revocation made by the editor bankruptcy of Modarte, a customer of Provel. A provision of €20 has been allocated at September 30, 2010.
NOTE 17 – INCOME TAXES
The provision for income taxes consisted of the following for the period ended September 30, 2010:
Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Current tax expense | (255 | ) | ||
Deferred tax expense | - | |||
Total income taxes | (255 | ) |
In Italy there are two income taxes:
- | IRES : Income tax of the company’s operating income, tax rate at 27,5%. |
- | IRAP: Regional tax on productive activities, tax rate at 3,9% charged on a specific taxable income named “net value of production” which is determined by the gross turnover, plus the increase in stock, less production expenses (depreciation included). As important feature of this tax, the interest costs and the payroll costs are not deductible. |
To calculate taxable profit for IRES purposes, the most significant positive timing and permanent differences considered are roughly € 94 at September 30, 2010 mainly due to non-deductible costs related to provision for bad debts and Company’s cars.
To calculate taxable profit for IRAP purposes, the most significant positive timing and permanent differences considered are roughly € 839 at September 30, 2010 mainly due to non-deductible costs related to management fees
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and labor costs, while the negative differences amount to total approximately € 149 at September 30, 2010 mainly due to labor costs.
NOTE 18 – INTEREST AND INCOME EXPENSES
Interest income and expenses are detailed as follows:
Amounts in Thousands of Euros | September 30, | |||
2010 | ||||
Interest income on bank accounts | 4 | |||
Interest expense on bank accounts | (23 | ) | ||
(19 | ) |
NOTE 19 – OTHER INFORMATION
a) | Related party transactions |
The Company enters into transactions with parent company and Francesco Buson. Mr Buson is also owner for Provel’s parent company. All transactions occurred at market conditions.
The following related party transactions are reflected in the statements of operations for the period ended September 30, 2010:
Amounts in Thousands of Euros | 2010 | |||||||||||
Receivables | Payables | Nature of transactions | ||||||||||
Related party | ||||||||||||
Glas ss | 6,000 | A | ||||||||||
Francesco Buson | 12 | B | ||||||||||
Francesco Buson | 1,546 | C | ||||||||||
6,000 | 1,558 | |||||||||||
A - Loan | ||||||||||||
B - Trading and provision of services | ||||||||||||
C - Profit sharing debt |
The following related party transactions are reflected in the assets and in the liabilities as of September 30, 2010:
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Amounts in Thousands of Euros | 2010 | Nature of | ||||||||||
Sales | Expenses | transactions | ||||||||||
Related party | ||||||||||||
Francesco Buson | - | 48 | A | |||||||||
Francesco Buson | - | 116 | B | |||||||||
Francesco Buson | - | - | C | |||||||||
- | 164 | |||||||||||
A - Rental property | ||||||||||||
B - Commisions to agent | ||||||||||||
C - Profit sharing agreeement |
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