EXHIBIT 99.1

 

 

 

 

 

 

 

Precision Metal Fab Racing

Financial Statements

As of March 31, 2012, December 31, 2011 and 2010

 

 

 

 

 

 

PRECISION METAL FAB RACING

 

INDEX TO FINANCIAL STATEMENTS

 

	PAGE
Independent Auditor’s Report	2
Balance Sheets – March 31, 2012, December 31, 2011 and 2010	3
Statements of Operations – For the Three Months Ended March 31, 2012 and for the Years Ended
December 31, 2011 and 2010	4
Statements of Owner’s Capital – For the Three Months Ended March 31, 2012 and
For the Years Ended December 31, 2011 and 2010	5
Statements of Cash Flows – For the Three Months Ended March 31, 2012 and
For the Years Ended December 31, 2011 and 2010	6
Notes to Financial Statements	7

 

 

INDEPENDENT AUDITOR’S REPORT

 

 

 

Owners

Precision Metal Fab Racing

Minneapolis, Minnesota

 

 

We were engaged to audit the accompanying balance sheets of Precision Metal Fab Racing as of December 31, 2011 and 2010, and the related statements of operations, owner’s capital, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management.

 

The Company did not take a physical inventory of merchandise at December 31, 2011 or 2010, which is stated at $144,000 and $188,000, respectively, in the accompanying financial statements. The Company’s records do not permit the application of other auditing procedures to inventories.

 

Also, the Company’s inventories and cost of goods sold are accounted for on a cash basis, which should be recorded on an accrual basis in order to conform with accounting principles generally accepted in the United States of America.

 

Since the Company did not take a physical inventory and we were unable to apply other auditing procedures to satisfy ourselves as to inventory quantities, and the Company did not properly account for inventories and costs of goods sold, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on these financial statements.

 

We were also engaged to review the March 31, 2012 financial statements, but the scope of our work was not sufficient to complete the review for the same reasons as listed above.

 

  

 

/s/ Hein & Associates LLP

 

Denver, Colorado

August 13, 2012

 

 

 

PRECISION METAL FAB RACING

 

BALANCE SHEETS

 

 

		March 31,				December 31,
		2012				2011				2010
ASSETS
Current Assets:
Cash and cash equivalents		$	95,840			$	60,123			$	29,803
Accounts receivable			7,610				7,610				6,862
Inventories			149,380				144,000				188,000
Total current assets			252,830				211,733				224,665
Property and Equipment, net			44,435				49,815				61,091
Total Assets		$	297,265			$	261,548			$	285,756
LIABILITIES AND OWNER’S CAPITAL
Current Liabilities:
Accounts payable		$	2,654			$	7,134			$	9,250
Accrued expenses			121				801				1,776
Total current liabilities			2,775				7,935				11,026
Owner’s Capital			294,490				253,613				274,730
Total Liabilities and Owner’s Capital		$	297,265			$	261,548			$	285,756

 

See accompanying notes to these financial statements.

 

 

 

PRECISION METAL FAB RACING

 

STATEMENTS OF OPERATIONS

 

		For the Three Months Ended March 31,				December 31,
		2012				2011				2010
Net Sales		$	195,978			$	667,098			$	584,337
Costs and Expenses:
Cost of products sold			138,650				569,580				497,842
Selling, general and administrative			9,233				50,512				51,761
Depreciation and amortization			5,380				21,518				21,841
Total costs and expenses			153,263				641,610				571,444
Net Income (Loss)		$	42,715			$	25,488			$	12,893

 

See accompanying notes to these financial statements.

 

 

 

PRECISION METAL FAB RACING

 

STATEMENTS OF OWNER’S CAPITAL

 

FOR THE THREE MONTHS ENDED MARCH 31, 2012
AND FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

 

Balance at January 1, 2010		$	308,636
Net income			12,893
Distributions			(46,799	)
Balance at December 31, 2010			274,730
Net income			25,488
Distributions			(46,605	)
Balance at December 31, 2011			253,613
Net income			42,715
Distributions			(1,838	)
Balance at March 31, 2012		$	294,490

 

 

See accompanying notes to these financial statements.

 

 

 

PRECISION METAL FAB RACING

 

STATEMENTS OF CASH FLOWS

 

		For the Three Months Ended March 31,				December 31,
		2012				2011				2010
Cash Flows from Operating Activities:
Net income		$	42,715			$	25,488			$	12,893
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization			5,380				21,518				21,841
Changes in operating assets and liabilities:
Accounts receivable			0				(748	)			14,422
Inventories			(5,380	)			44,000				4,500
Accounts payable			(4,480	)			(2,116	)			2,014
Accrued liabilities			(680	)			(975	)			572
Net cash provided by (used in) operating activities			37,555				87,167				56,242
Cash Flows from Investing Activities:
Purchases of property and equipment, net			0				(10,242	)			(7,027	)
Net cash provided by (used in) investing activities			0				(10,242	)			(7,027	)
Cash Flows from Financing Activities:
Distributions paid			(1,838	)			(46,605	)			(46,799	)
Net cash provided by (used in) financing activities			(1,838	)			(46,605	)			(46,799	)
Increase (Decrease) in Cash and Cash Equivalents			35,717				30,320				2,416
Cash and Cash Equivalents, beginning of year			60,123				29,803				27,387
Cash and Cash Equivalents, end of year		$	95,840			$	60,123			$	29,803

 

 

See accompanying notes to these financial statements.

 

 

 

1.

Organization and Significant Accounting Policies

 

Organization and Business – Precision Metal Fab Racing (the “Company” or PMFR) (a business-owned by a sole proprietor) is an experienced manufacturer and marketer of high performance racing and custom motorcycle components and accessories. The Company was started in 1978, and is based in Shakopee, Minnesota and markets its products directly through its proprietary catalogs, website and certain distributors.

 

Basis of Presentation – 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 relating to the reporting of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Despite management’s best effort to establish good faith estimates and assumptions; actual results may differ from these estimates.

 

The balance sheet as of March 31, 2012, the statement of operations, owner’s capital, and cash flows for the months ended March 31, 2012 have been prepared by the Company without audit. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position, as of March 31, 2012 and results of operations, owner’s capital, and cash flows for the three months ended March 31, 2012 have been made.

 

Revenue Recognition – Revenue is recognized when risk and title on products passes to the customer. Generally, both risk and title pass to the customers at date of shipment via common carrier. There is no right of return for customers, other than for defective products.

 

Revenue includes shipping and handling fees of $11,150 for the three months ended March 31, 2012 and $40,420 and $33,365 for the years ended 2011 and 2010, respectively.

 

Cash and Cash Equivalents – The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company periodically maintains cash balances at commercial banks in excess of insured limits.

 

Accounts Receivable and Allowance for Doubtful Accounts – The Company’s headquarters are located in Minnesota and its customers are geographically disbursed throughout the United States. All amounts are due in 30 days and no interest is charged on account balances. The Company reviews all receivable balances for risk of loss, and as of March 31, 2012 and December 31, 2011 and 2010, there were no allowance for doubtful accounts.

 

Inventories –Inventories, consisting of raw materials and finished products, are stated at the lower of cost (first-in, first-out method) or market and are recorded under the cash basis method. Cost of finished products includes materials and contracted conversion costs. The Company records provisions for slow-moving inventory to the extent the cost of inventory exceeds estimated net realizable value.

 

 

Property and Equipment – Property and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the assets ranging from three to seven years using an accelerated method of depreciation. The cost of normal maintenance and repairs is charged to operating expenses as incurred. Material expenditures which increase the life of an asset are capitalized and depreciated over the estimated remaining useful life of the asset. Upon disposing of assets, the related cost and accumulated depreciation are removed from the books and the resulting gain or loss, if any, is recognized in the year of the disposition.

 

Income Taxes – The Company files its tax returns in the United States and Minnesota. As a sole proprietor, the Company will not be required to pay federal income taxes applicable to federal taxable income. Income and losses after that date will be included in the personal income tax returns of the stockholders and taxed depending on their personal tax strategies.

 

The Company has not recorded any liabilities as of December 31, 2011 related to its assessment of uncertain tax positions. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2011, the Company made no provision for interest or penalties related to uncertain tax returns in the U.S. federal jurisdiction and various states. There are currently no federal or state income tax examinations underway for these jurisdictions.

 

Impairment of Long-Lived Assets – Impairment losses are recorded on long-lived assets used in operations when impairment indicators are present and the undiscounted cash flows estimated to be generated by those assets are less than the asset’s carrying amount. When impairment is indicated, a loss is recognized for the excess of the carrying values over the fair values. The Company has not recorded any impairment or long-lived assets.

 

Fair Value of Financial Instruments – The carrying value of cash and cash equivalents, trade accounts receivable and payable, and accrued liabilities and expenses are considered to approximate fair value due to the short-term nature of these instruments.

 

2.

INVENTORIES

 

Inventories consist of the following:

 

			March 31,				December 31,
			2012				2011				2010
Raw materials		$	0			$	0			$	0
Finished goods			149,380				144,000				188,000
		$	149,380			$	144,000			$	188,000

 

 

 

 

3.

PROPERTY AND EQUIPMENT

 

Property and equipment are recorded at cost and are comprised of the following:

 

		March 31,				December 31,
		2012				2011				2010
Shop office equipment		$	466,589			$	466,589			$	456,349
Equipment			24,422				24,422				24,422
			491,011				491,011				480,771
Less accumulated depreciation			(446,576	)			(441,196	)			(419,680	)
		$	44,435			$	49,815			$	61,091

 

Depreciation and amortization expense for the years ended December 31, 2011 and 2010 was $21,518 and $21,841, respectively, and $5,380 for the period ended March 31, 2012.

 

4.

CONTINGENCIES AND COMMITMENTS

 

Operating Leases – The Company has a warehouse lease. The lease expired on April 30, 2012. The current rent payment is based on a monthly rental fee.

 

Rent expense was $33,000 for the years ended December 31, 2011 and 2010, respectively, and $8,250 for the period ended March 31, 2012.

 

Concentrations of Credit Risk – Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted. Concentrations of credit risk, whether on or off balance sheet, that arise from financial instruments, exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.

 

5.

SUBSEQUENT EVENTS

 

On April 24, 2012 the Company sold all its assets to PMFR Inc., a wholly owned subsidiary of Viper Powersports Inc. (VPWI) for $640,000 in cash. The Company will continue to be based at its current facility and the former owner has agreed to remain with PMFR, Inc. and remain in charge of product marketing and operations. VPWI issued approximately $48,000 of its shares as a condition of an employment contract.

 

Subsequent events have been evaluated through August 13, 2012, the date the financial statements were available to be issued.