EXHIBIT 99.3





Auction 123 Inc.



Audited Financial Statements

As of and for the year ended May 31, 2016







Contents



Independent Auditor’s Report

To the Shareholders

Auction 123 Inc. 

We have audited the accompanying financial statements of Auction 123 Inc., which comprise the balance sheet as of May 31, 2016, and the related statements of income, shareholders’ equity and cash flows for the year then ended and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.  We conducted our audit in accordance with auditing standards generally accepted in the United States.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.  The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.  In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.  Accordingly, we express no such opinion.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Auction 123 Inc. as of May 31, 2016, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States.

 /s/ Wipfli LLP 

Minneapolis, MN

January 11, 2017











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Auction 123 Inc.

Notes to Financial Statements



Note 1 - Nature of business

Founded in 2001, Auction123, Inc. (the “Company”) is a leading provider of website development, inventory management, and online marketing solutions for dealerships of all categories including automotive, RV & camper, powersports, motorcycle, marine, commercial truck, and aircraft. The Company’s award winning web-based software offers tight and seamless integration between the Dealer Management System (DMS), the dealer's website(s), eBay Motors, Craigslist, Facebook, and nearly all third-party classified websites.

With over 9,000 registered customers, the Company continues to develop offerings consistent with the ever-changing landscape of Internet marketing and will maintain its mission to be the industry leader for providing the best online marketing tools available. The Company is headquartered in Weston, Florida.

Note 2 - Summary of the Company’s significant accounting policies

Variable Interest Entity: The Company has a leasing arrangement with Basha Holdings, LLC which calls for the Company to be responsible for property taxes, insurance and common area maintenance on the building, along with remitting a monthly lease payment in the amount of the mortgage payment to Basha Holdings, LLC. Basha Holdings, LLC is an entity controlled by the majority shareholder of the Company.  The only assets and liabilities of this entity are the office building that the Company operates in and the associated mortgage.  This mortgage is guaranteed by the Company and has a balance of approximately $826,000 as of May 31, 2016.

The Company determined that Basha Holdings, LLC is a variable interest entity in which the Company held a variable interest. The Company also determined that all criteria for electing the private company accounting alternative have been met and the Company does not consolidate the variable interest entity in its financial statements.

Revenue recognition: Revenue is derived primarily from dashboard and website subscriptions, fees for billing and collecting activities from third parties, and revenue received based on variable transaction fees.  Revenue for obligations to provide customers with future services are deferred and recognized either over the term of the respective agreements or, in the case of revenue associated with specific services, upon performance of the service.

The Company follows guidance provided in ASC 605-45, Principal Agent Considerations, which states that the determination of whether a company should recognize revenue based on the gross amount billed to a customer or the net amount retained is a matter of judgment that depends on the facts and circumstances of the arrangement and that certain factors should be considered in the evaluation. The Company recognizes monthly subscription fees net of applicable listing fees, which are assessed to the Company’s customers on some listed advertisements.  These fees are not controlled by the Company, which effectively acts as a clearing house collecting and remitting listing fees for certain customers on behalf of the listing services. All other revenue is reported on a gross basis, as the Company contracts directly with the end customer, assumes the risk of loss and has pricing flexibility.

Deferred revenue and work in process:  Deferred revenue represents the portion of collected or billed revenue for which the revenue recognition process is incomplete.  Work in process represents revenue earned for which invoices have not yet been generated as of the reporting date.

Accounting estimates and assumptions: The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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.

Accounts receivable: Trade receivables are carried at original invoice amount less an estimate for doubtful accounts based on a review of all outstanding amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering

a customer’s financial condition, credit history and current economic conditions. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received.



Leasehold improvements, automobiles, software and equipment: Leasehold improvements, automobiles, software and equipment are stated at cost. Depreciation is computed primarily using the straight-line method over useful lives ranging from 3 to 7 years.



Expenditures for maintenance and repairs are expensed when incurred.  Expenditures for betterments are capitalized.  When property is retired or sold, the cost and the related accumulated depreciation or amortization is removed from the accounts, and the resulting gain or loss is included in operations.



Concentration of credit risk: The Company maintains cash with a financial institution. Account balances were in excess of insured amounts during the fiscal year ended May 31, 2016.  The Company has experienced no losses as a result of the excess.



The Company’s largest two customers represent approximately 49% and 18% of accounts receivable as of May 31, 2016 respectively.  These same two customers represent 20% and 18% of revenue for the year ended May 31, 2016.



Subsequent events: The Company has evaluated subsequent events through January 11, 2017, which is the date the financial statements were available to be issued.



Note 3 – Rent commitments and related party transactions



    The Company leases its office premises on a month-to-month basis from Basha Holdings, LLC, an entity controlled by an officer-shareholder of the Company.  The monthly payment is approximately $10,000 plus normal maintenance, operating expenses and property taxes. 



Rent expense for the year ended May 31, 2016 totaled approximately $132,500, of which approximately $120,000 was paid to an officer-shareholder.



The Company has no future minimum payments required under operating leases as of May 31, 2016.



The Company also has a payable to Basha Holdings, LLC in the amount of $33,000.  This payable represents the closing costs and property taxes incurred upon the purchase of the office building. Interest was imputed at a rate of 6.1% per annum.  Total interest expense recorded for the year ended May 31, 2016 was approximately $2,000.  Interest and principal is due on demand.



Note 4 – Line of credit and debt



The Company has a $250,000 line of credit available with a bank, which bears interest at the Prime Rate minus 0.7% (2.8% at May 31, 2016). The line is secured by the assets of the Company. Borrowings of $0 were outstanding under the line on May 31, 2016.



The Company has a non-interest bearing loan that is secured by a Company automobile with a balance $20,907 of which $6,602 is payable in fiscal 2017.



Minimum principal payments due on the loan are as follows for the fiscal years ending:





Note 5 – Shareholder note receivable



The Company has a non-interest bearing demand note receivable from an officer-shareholder in the amount of $521,732.  Interest was imputed at a rate of 6.1% per annum.  Total interest income recorded for the year ended May 31, 2016 was approximately $4,000. Interest and principal is due on demand but is not expected to be demanded in the next 12 months.



Note 6 - Income Tax Status



The Company is a sub chapter S-corporation and with the consent of its stockholders, elected to be taxed under sections of the federal and state income tax laws which provide that, in lieu of corporate income taxes, the shareholders separately account for their pro rata shares of the Company’s items of income, deduction, losses and credits. Therefore, these statements do not include any provision for corporate income taxes.



The Company follows the accounting guidance for uncertainty in income taxes. Management has evaluated their material tax positions and determined no income tax effects with respect to the financial statements. The Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years prior to 2012. The Company has not been notified of any impending examinations by tax authorities, and no examinations are in process.



Note 7 – Subsequent Events



On November 1, 2016, the Company entered into an asset purchase agreement with ARI Network Services, Inc. (“ARI”) whereby the Company sold substantially all of its assets to ARI.



Auction 123 Inc.



Unaudited Financial Statements

August 31, 2016 and for the three month

periods ended August 31, 2016 and 2015







Contents















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Auction 123 Inc.



Notes to Financial Statements



Note 1 - Nature of business

Founded in 2001, Auction123, Inc. (the “Company”) is a leading provider of website development, inventory management, and online marketing solutions for dealerships of all categories including automotive, RV & camper, powersports, motorcycle, marine, commercial truck, and aircraft. The Company’s award winning web-based software offers tight and seamless integration between the Dealer Management System (DMS), the dealer's website(s), eBay Motors, Craigslist, Facebook, and nearly all third-party classified websites.

With over 9,000 registered customers, the Company continues to develop offerings consistent with the ever-changing landscape of Internet marketing and will maintain its mission to be the industry leader for providing the best online marketing tools available. The Company is headquartered in Weston, Florida.

Note 2 - Summary of the Company’s significant accounting policies

Variable Interest Entity: The Company has a leasing arrangement with Basha Holdings, LLC which calls for the Company to be responsible for property taxes, insurance and common area maintenance on the building, along with remitting a monthly lease payment in the amount of the mortgage payment to Basha Holdings, LLC. Basha Holdings, LLC is an entity controlled by the majority shareholder of the Company.  The only assets and liabilities of this entity are the office building that the Company operates in and the associated mortgage.  This mortgage is guaranteed by the Company and has a balance of approximately $810,000 as of August 31, 2016.

The Company determined that Basha Holdings, LLC is a variable interest entity in which the Company held a variable interest. The Company also determined that all criteria for electing the private company accounting alternative have been met and the Company does not consolidate the variable interest entity in its financial statements.

Revenue recognition: Revenue is derived primarily from dashboard and website subscriptions, fees for billing and collecting activities from third parties, and revenue received based on variable transaction fees.  Revenue for obligations to provide customers with future services are deferred and recognized either over the term of the respective agreements or, in the case of revenue associated with specific services, upon performance of the service.

The Company follows guidance provided in ASC 605-45, Principal Agent Considerations, which states that the determination of whether a company should recognize revenue based on the gross amount billed to a customer or the net amount retained is a matter of judgment that depends on the facts and circumstances of the arrangement and that certain factors should be considered in the evaluation. The Company recognizes monthly subscription fees net of applicable listing fees, which are assessed to the Company’s customers on some listed advertisements.  These fees are not controlled by the Company, which effectively acts as a clearing house collecting and remitting listing fees for certain customers on behalf of the listing services. All other revenue is reported on a gross basis, as the Company contracts directly with the end customer, assumes the risk of loss and has pricing flexibility.

Deferred revenue and work in process:  Deferred revenue represents the portion of collected or billed revenue for which the revenue recognition process is incomplete.  Work in process represents revenue earned for which invoices have not yet been generated as of the reporting date.

Accounting estimates and assumptions: The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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.

Accounts receivable: Trade receivables are carried at original invoice amount less an estimate for doubtful accounts based on a review of all outstanding amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received.

Leasehold improvements, automobiles, software and equipment: Leasehold improvements, automobiles, software and equipment are stated at cost. Depreciation is computed primarily using the straight-line method over useful lives ranging from 3 to 7 years.

Expenditures for maintenance and repairs are expensed when incurred.  Expenditures for betterments are capitalized.  When property is retired or sold, the cost and the related accumulated depreciation or amortization is removed from the accounts, and the resulting gain or loss is included in operations.

Concentration of credit risk: The Company maintains cash with a financial institution. Account balances were in excess of insured amounts during the quarters ended August 31, 2016 and 2015.  The Company has experienced no losses as a result of the excess.

The Company’s largest two customers represent approximately 37% and 26% of accounts receivable as of August 31, 2016.  These same two customers represent 15% and 22% of revenue for the three month period ended August 31, 2016 and 36% and 16% of revenue for the three month period ending August 31, 2015.

Note 3 – Rent commitments and related party transactions



The Company leases its office premises on a month-to-month basis from Basha Holdings, LLC, an entity controlled by an officer-shareholder of the Company.  The monthly payment is approximately $10,000 plus normal maintenance, operating expenses and property taxes. 

Rent expense for the periods ending August 31, 2016 and 2015 totaled $32,000 and $35,000 respectively, of which approximately $32,000 and $34,000 was paid to an officer-shareholder.

The Company has no future minimum payments required under operating leases as of August 31, 2016.

The Company also has a payable to Basha Holdings, LLC in the amount of $33,503.  This payable represents the closing costs and property taxes incurred upon the purchase of the office building. Interest was imputed at a rate of 6.1% per annum.  Interest and principal is due on demand.

Note 4 – Line of credit and debt

The Company has a $250,000 line of credit available with a bank, which bears interest at the Prime Rate minus 0.7% (2.8% at August 31, 2016). The line is secured by the assets of the Company. Borrowings of $0 were outstanding under the line on August 31, 2016.

The Company has a non-interest bearing loan that is secured by a Company automobile with a balance $19,257 of which $6,602 is payable in the next 12 months.

Minimum principal payments due on the loan are as follows for the fiscal years ending:



Note 5 – Shareholder note receivable

The Company has a non-interest bearing demand note receivable from an officer-shareholder in the amount of $529,729.  Interest was imputed at a rate of 6.1% per annum.  Interest and principal is due on demand but is not expected to be demanded in the next 12 months.

Note 6  -- Income Tax Status

The Company is a sub chapter S-corporation and with the consent of its stockholders, elected to be taxed under sections of the federal and state income tax laws which provide that, in lieu of corporate income taxes, the shareholders separately account for their pro rata shares of the Company’s items of income, deduction, losses and credits. Therefore, these statements do not include any provision for corporate income taxes.

The Company follows the accounting guidance for uncertainty in income taxes. Management has evaluated their material tax positions and determined no income tax effects with respect to the financial statements. The Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years prior to 2012. The Company has not been notified of any impending examinations by tax authorities, and no examinations are in process.

Note 7 – Subsequent Events



On November 1, 2016, the Company entered into an asset purchase agreement with ARI Network Services, Inc. (“ARI”) whereby the Company sold substantially all of its assets to ARI.