UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date
of earliest event reported): April 2, 2014
ATRM
Holdings, Inc. |
(Exact Name of Registrant
as Specified in Its Charter) |
Minnesota |
|
0-22166 |
|
41-1439182 |
(State or other Jurisdiction
of Incorporation) |
|
(Commission
File Number) |
|
(IRS Employer
Identification No.) |
2350
Helen Street, North St. Paul, Minnesota |
|
55109 |
(Address of Principal
Executive Offices) |
|
(Zip Code) |
Registrant’s
telephone number, including area code: (651) 770-2000
N/A |
(Former
name or former address if changed since last report) |
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the follow provisions:
[ ] Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Explanatory
Notes
On
April 4, 2014, ATRM Holdings, Inc. (f/k/a Aetrium Incorporated) (“ATRM” or the “Company”) filed a Current
Report on Form 8-K (the “Initial Form 8-K”) to report that the Company and KBS Builders, Inc. a wholly-owned subsidiary
of the Company (“Acquisition Sub”) had entered into an Asset Purchase Agreement with KBS Building Systems, Inc. and
certain related entities (“KBS”) and the owner of KBS. Pursuant to the Asset Purchase Agreement, on April 2, 2014,
Acquisition Sub purchased substantially all of KBS’s assets and assumed substantially all of its liabilities related to
its business of manufacturing, selling and distributing modular housing units for residential and commercial use.
This
Amendment No. 1 to the Initial Form 8-K amends and supplements Item 9.01 of the Initial Form 8-K to provide the required financial
statements and pro forma financial information under Item 9.01(a) and (b).
Item
9.01. Financial Statements and Exhibits.
(a) |
Financial Statements
of Business Acquired. |
The
audited consolidated financial statements of KBS Building Systems, Inc. and Affiliates as of and for the years ended March 29,
2014 and March 30, 2013 are attached as Exhibit 99.1.
(b) |
Pro Forma Financial
Information. |
The
unaudited pro forma condensed combined consolidated Statement of Operations for the year ended December 31, 2013 and the Balance
Sheet and Statement of Operations as of and for the three months ended March 31, 2014 are attached as Exhibit 99.2.
Exhibit
No. |
|
Description |
|
|
|
23.1 |
|
Consent of Boulay
PLLP. |
|
|
|
99.1 |
|
Audited
consolidated financial statements of KBS Building Systems, Inc. and Affiliates as of and for the fiscal years ended March
29, 2014 and March 30, 2013. |
|
|
|
99.2 |
|
Unaudited
pro forma condensed combined consolidated financial statements of ATRM Holdings, Inc. and KBS Building Systems, Inc. and Affiliates
for the year ended December 31, 2013 and as of and for the three months ended March 31, 2014. |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
|
ATRM
HOLDINGS, INC. |
|
|
Dated:
April 9, 2015 |
By: |
/s/
Paul H. Askegaard |
|
Name: |
Paul H. Askegaard |
|
Title: |
Chief Financial
Officer |
Exhibit
23.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
consent to the incorporation by reference in the Registration Statement on Form S-8 (No 333-111748) of ATRM Holdings, Inc. of
our report dated February 6, 2015 relating to the combined and consolidated financial statements that appears in this 8-K/A for
the acquisition of KBS Building Systems, Inc. and Affiliates.
/s/ BOULAY PLLP |
|
Minneapolis, Minnesota |
|
April 9, 2015 |
|
Exhibit
99.1
ITEM
9.01 (a) - AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Independent
Auditor’s Report
To the Board
of Directors and
Shareholders
of ATRM Holdings, Inc.
We
have audited the accompanying combined and consolidated financial statements of KBS Building Systems, Inc. (a Maine corporation)
and Affiliates, which comprise the combined and consolidated balance sheets as of March 29, 2014 and March 30, 2013 and the related
combined and consolidated statements of operations, changes in shareholder’s equity and cash flows for the years then ended,
and the related notes to the combined and consolidated financial statements.
Management’s
Responsibility for the Financial Statements
Management
is responsible for the preparation and fair presentation of these combined and consolidated financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance
of internal control relevant to the preparation and fair presentation of combined and consolidated 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 combined and consolidated financial statements based on our audits. We conducted
our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the combined and consolidated financial statements
are free from material misstatement.
An
audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined and consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the combined and consolidated 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 combined
and consolidated 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 combined and consolidated 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 combined and consolidated financial statements referred to above present fairly, in all material respects, the
financial position of KBS Building Systems, Inc. and Affiliates as of March 29, 2014 and March 30, 2013, and the results of its
operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United
States of America.
/s/
BOULAY PLLP |
|
|
|
Minneapolis, Minnesota |
|
February 6, 2015 |
|
KBS
BUILDING SYSTEMS, INC. AND AFFILIATES
COMBINED
AND CONSOLIDATED BALANCE SHEETS
ASSETS | |
| | |
| |
| |
March 29, 2014 | | |
March 30, 2013 | |
Current assets: | |
| | | |
| | |
Cash | |
$ | 213,731 | | |
$ | 358,975 | |
Accounts receivable, net of allowance for doubtful accounts | |
| 4,268,394 | | |
| 4,568,206 | |
Costs and estimated profit in excess of billings | |
| 363,976 | | |
| 148,994 | |
Inventories ($207,253 and $188,482 during 2014 and 2013 related to
All-Set, LLC and generally not available to KBS) | |
| 1,999,842 | | |
| 2,920,320 | |
Due from related parties | |
| 91,164 | | |
| 70,324 | |
Deferred income taxes | |
| 3,392,000 | | |
| 184,000 | |
Other current assets | |
| 91,193 | | |
| 224,315 | |
Total current assets | |
| 10,420,300 | | |
| 8,475,134 | |
| |
| | | |
| | |
Property, plant, and equipment: | |
| | | |
| | |
Land | |
| 2,636,784 | | |
| 2,636,784 | |
Buildings and improvements | |
| 3,804,836 | | |
| 3,804,836 | |
Equipment ($1,101,892 and $983,242 during 2014 and
2013 related to Maine Modular Haulers, LLC and generally not available to KBS) | |
| 3,691,592 | | |
| 3,493,967 | |
| |
| 10,133,212 | | |
| 9,935,587 | |
Less accumulated depreciation and amortization ($885,650
and $799,825 during 2014 and 2013 related to Maine Modular Haulers, LLC and generally not available to KBS) | |
| (4,287,885 | ) | |
| (3,977,040 | ) |
Property and equipment, net | |
| 5,845,327 | | |
| 5,958,547 | |
| |
| | | |
| | |
Deferred income taxes | |
| - | | |
| 1,210,000 | |
| |
| | | |
| | |
Total assets | |
$ | 16,265,627 | | |
$ | 15,643,681 | |
KBS
BUILDING SYSTEMS, INC. AND AFFILIATES
COMBINED
AND CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDER’S EQUITY | |
| | |
| |
Current liabilities: | |
| | | |
| | |
Note payable to bank | |
$ | 900,000 | | |
$ | — | |
Current portion of long-term debt | |
| 47,416 | | |
| 67,091 | |
Due to related parties | |
| 5,863,511 | | |
| 5,282,836 | |
Trade accounts payable | |
| 6,283,384 | | |
| 3,966,461 | |
Billings in excess of costs and estimated profit | |
| 394,699 | | |
| 164,807 | |
Other accrued liabilities | |
| 1,062,166 | | |
| 975,114 | |
Total current liabilities | |
| 14,551,176 | | |
| 10,456,309 | |
| |
| | | |
| | |
Long-term debt, less current portion | |
| 74,563 | | |
| 70,835 | |
Deferred income taxes | |
| 4,000 | | |
| - | |
Commitments and contingencies | |
| | | |
| | |
| |
| | | |
| | |
Shareholder’s equity: | |
| | | |
| | |
Common stock, no par value; 2,000 shares authorized; 100 shares issued and
outstanding | |
| 1,000 | | |
| 1,000 | |
Additional paid-in capital | |
| 3,094,806 | | |
| 3,094,806 | |
Accumulated deficit | |
| (5,658,776 | ) | |
| (2,465,216 | ) |
Equity attributable to Paris Holdings, LLC | |
| 6,377,298 | | |
| 6,269,580 | |
Total equity attributable to KBS Building Systems, Inc, and Paris Holdings,
LLC | |
| 3,814,328 | | |
| 6,900,173 | |
| |
| | | |
| | |
Noncontrolling interest – Maine Modular Haulers,
LLC and All-Set, LLC | |
| (2,178,440 | ) | |
| (1,783,633 | ) |
Total shareholder’s equity | |
| 1,635,888 | | |
| 5,116,537 | |
Total liabilities and shareholder’s equity | |
$ | 16,265,627 | | |
$ | 15,643,681 | |
The
accompanying notes are an integral part of the combined and consolidated financial statements.
KBS
BUILDING SYSTEMS, INC. AND AFFILIATES
COMBINED
AND CONSOLIDATED STATEMENTS OF OPERATIONS
| |
Year ended | |
| |
March 29, 2014 | | |
March 30, 2013 | |
| |
| | |
| |
Net sales | |
$ | 37,220,048 | | |
$ | 33,984,238 | |
Costs and expenses: | |
| | | |
| | |
Cost of sales | |
| 39,098,349 | | |
| 34,397,929 | |
Selling, general and administrative expenses | |
| 3,471,882 | | |
| 2,967,935 | |
Total costs and expenses | |
| 42,570,231 | | |
| 37,365,864 | |
| |
| | | |
| | |
Operating loss | |
| (5,350,183 | ) | |
| (3,381,626 | ) |
Interest expense | |
| (153,450 | ) | |
| (182,673 | ) |
Loss before income taxes | |
| (5,503,633 | ) | |
| (3,564,299 | ) |
Income tax benefit | |
| 1,994,984 | | |
| 975,225 | |
Net loss | |
| (3,508,649 | ) | |
| (2,589,074 | ) |
Less net loss attributable to noncontrolling interests – Maine Modular
Haulers, LLC, All-Set, LLC | |
| (394,807 | ) | |
| (1,022,833 | ) |
Net loss attributable to KBS Building Systems, Inc. and Paris Holdings,
LLC | |
$ | (3,113,842 | ) | |
$ | (1,566,241 | ) |
The
accompanying notes are an integral part of the combined and consolidated financial statements.
KBS
BUILDING SYSTEMS, INC. AND AFFILIATES
COMBINED
AND CONSOLIDATED STATEMENTS
OF
CHANGES IN SHAREHOLDER’S EQUITY
| |
Common Stock | | |
Additional
Paid-in | | |
Accumulated | | |
KBS Building Systems, Inc. | | |
Equity of Paris Holdings, LLC (Combined | | |
Noncontrolling Interest – Maine Moduler Haulers LLC
and All-Set | | |
Total
Shareholder’s | |
| |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Total | | |
Entity) | | |
LLC | | |
Equity | |
Balance, March 31, 2012 | |
| 100 | | |
$ | 1,000 | | |
$ | 592,751 | | |
$ | (832,945 | ) | |
$ | (239,194 | ) | |
$ | 6,280,550 | | |
$ | (760,800 | ) | |
$ | 5,280,556 | |
Conversion of shareholder note payable and accrued interest to capital contribution | |
| — | | |
| — | | |
| 2,502,055 | | |
| — | | |
| 2,502,055 | | |
| — | | |
| — | | |
| 2,502,055 | |
Distributions to shareholder | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (77,000 | ) | |
| — | | |
| (77,000 | ) |
Net income (loss) | |
| — | | |
| — | | |
| — | | |
| (1,632,271 | ) | |
| (1,632,271 | ) | |
| 66,030 | | |
| (1,022,833 | ) | |
| (2,589,074 | ) |
Balance, March 30, 2013 | |
| 100 | | |
| 1,000 | | |
| 3,094,806 | | |
| (2,465,216 | ) | |
| 630,590 | | |
| 6,269,580 | | |
| (1,783,633 | ) | |
| 5,116,537 | |
Capital contribution by shareholder | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 28,000 | | |
| — | | |
| 28,000 | |
Net income (loss) | |
| — | | |
| — | | |
| — | | |
| (3,193,560 | ) | |
| (3,193,560 | ) | |
| 79,718 | | |
| (394,807 | ) | |
| (3,508,649 | ) |
Balance, March 29, 2014 | |
| 100 | | |
$ | 1,000 | | |
$ | 3,094,806 | | |
$ | (5,658,776 | ) | |
$ | (2,562,970 | ) | |
$ | 6,377,298 | | |
$ | (2,178,440 | ) | |
$ | 1,635,888 | |
The
accompanying notes are an integral part of the combined and consolidated financial statements.
KBS
BUILDING SYSTEMS, INC. AND AFFILIATES
COMBINED
AND CONSOLIDATED STATEMENTS OF CASH FLOWS
| |
Year ended | |
| |
March 29, 2014 | | |
March 30, 2013 | |
Cash flows from operating activities: | |
| | | |
| | |
Net loss | |
$ | (3,508,649 | ) | |
$ | (2,589,074 | ) |
Adjustments to reconcile net loss to net cash generated by (used in) operating
activities: | |
| | | |
| | |
Depreciation expense | |
| 310,845 | | |
| 327,490 | |
Provision for bad debts and notes receivable | |
| 978,619 | | |
| 153,683 | |
Deferred income taxes | |
| (1,994,000 | ) | |
| (972,000 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (555,831 | ) | |
| 979,481 | |
Costs and estimated profit in excess of billings | |
| (214,982 | ) | |
| 1,342,316 | |
Inventories | |
| 920,478 | | |
| (908,846 | ) |
Due from related parties | |
| 1,666 | | |
| (1,478 | ) |
Other current assets | |
| 10,146 | | |
| 8,003 | |
Due to related parties | |
| 8,236 | | |
| — | |
Trade accounts payable | |
| 2,316,923 | | |
| 2,469,584 | |
Billings in excess of costs and estimated profit | |
| 229,892 | | |
| (134,782 | ) |
Other accrued liabilities | |
| 87,052 | | |
| (237,037 | ) |
Net cash generated by (used in) operating activities | |
| (1,409,605 | ) | |
| 437,340 | |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Purchase of property, plant, and equipment | |
| (197,625 | ) | |
| (127,958 | ) |
Collections of notes receivable | |
| - | | |
| 200,000 | |
Advances on notes receivable | |
| (22,506 | ) | |
| (28,580 | ) |
Net cash from (used in) investing activities | |
| (220,131 | ) | |
| 43,462 | |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Proceeds from issuance of debt | |
| 956,438 | | |
| — | |
Principal payments on long-term debt | |
| (72,385 | ) | |
| (1,025,894 | ) |
Capital contribution from shareholder | |
| 28,000 | | |
| — | |
Principal payments on shareholder debt | |
| (177,561 | ) | |
| (149,325 | ) |
Proceeds from issuance of shareholder debt | |
| 750,000 | | |
| — | |
Distributions to shareholder | |
| — | | |
| (77,000 | ) |
Net cash generated (used by) financing activities | |
| 1,484,492 | | |
| (1,252,219 | ) |
| |
| | | |
| | |
Net decrease in cash | |
| (145,244 | ) | |
| (771,417 | ) |
| |
| | | |
| | |
Cash at beginning of period | |
| 358,975 | | |
| 1,130,392 | |
| |
| | | |
| | |
Cash at end of period | |
$ | 213,731 | | |
$ | 358,975 | |
| |
| | | |
| | |
Supplemental disclosure of non-cash investing and financing activities: | |
| | | |
| | |
Property, plant, and equipment in accounts payable | |
$ | — | | |
$ | 39,640 | |
| |
| | | |
| | |
Supplemental cash flow information: | |
| | | |
| | |
Note payable to shareholder converted to capital contribution | |
$ | — | | |
$ | 2,502,055 | |
Cash paid for interest expense | |
| 157,151 | | |
| 160,524 | |
Cash paid for income taxes | |
| 1,873 | | |
| 1,515 | |
The
accompanying notes are an integral part of the combined and consolidated financial statements.
KBS
BUILDING SYSTEMS, INC. AND AFFILIATES
NOTES
TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
1. |
BUSINESS DESCRIPTION
AND BASIS OF PRESENTATION |
The
combined and consolidated financial statements include the accounts of KBS Building Systems, Inc. (a Maine Corporation) (“KBS”),
and its affiliates Maine Modular Haulers, LLC (“MMH”), All-Set, LLC (“All-Set”) and Paris Holdings, LLC
(“Paris”), all of which are 100%-owned by a single individual (“Shareholder”). Following variable interest
entity consolidation accounting guidance, MMH and All-Set are required to be consolidated in the financial statements of KBS.
Management has elected to include the affiliate entity, Paris, in the financial statements.
KBS
manufactures modular housing units for commercial and residential applications. MMH provides transportation and delivery services
of modular units. All-Set is a retail seller of modular residential homes. Paris owns and leases real property to KBS. References
in the Notes to Combined and consolidated Financial Statements to “the company,” “we” or “our,”
unless the context otherwise requires, refer to KBS Building Systems, Inc. and the entities named above. All inter-entity accounts
and transactions have been eliminated in the combination and consolidation. Company operations are conducted in two facilities
located in South Paris and Waterford, Maine.
On
April 2, 2014, KBS and its affiliates were acquired by ATRM Holdings, Inc. See Note 17 for a discussion of this transaction.
2. |
SIGNIFICANT
ACCOUNTING POLICIES |
Fiscal
Year: KBS operates on a 52/53 week fiscal year which ends on the Saturday nearest to March 31. MMH, All-Set and Paris operate
on a calendar year. KBS conducts the principal business activities. Accordingly, the combined and consolidated financial statements
included herein were prepared to present the financial position of KBS and its affiliates as of March 29, 2014 and March 30, 2013
and the results of operations and cash flows for the fiscal years then ended.
Classified
Balance Sheet: The company has adopted the classified combined and consolidated balance sheet format. Although certain contracts
may extend beyond one year and may have realization and liquidation periods that extend beyond one year, the current assets and
liabilities have realization and liquidation periods within one year.
Use
of Estimates: The preparation of the combined and consolidated 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 amounts
reported in our financial statements and accompanying notes. Significant estimates include those related to revenue recognition
(including estimates of costs and profit under the percentage of completion method of accounting), allowance for doubtful accounts,
valuation of inventories, the assessment of impairment of long-lived assets, asset lives used in computing depreciation, health
insurance expense accruals, warranty expense accruals and income taxes. Such estimates require significant judgment. At the time
they are made, such estimates are believed to be reasonable when considered in conjunction with the combined and consolidated
financial position and results of operations taken as a whole. However, actual results could differ from those estimates and such
differences may be material to the combined and consolidated financial statements.
Fair
Value of Financial Instruments: The company’s accounting for fair value measurements of assets and liabilities that
are recognized or disclosed at fair value in the combined and consolidated financial statements on a recurring or nonrecurring
basis adhere to the Financial Accounting Standards Board (FASB) fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable
inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
|
● |
Level
1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the company has the ability
to access at the measurement date. |
|
|
|
|
● |
Level
2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly, for substantially the full term of the asset or liability. |
|
|
|
|
● |
Level
3 inputs are unobservable inputs for the asset or liability. |
The
level in the fair value hierarchy within which a fair measurement in its entirety falls is based on the lowest level input that
is significant to the fair value measurement in its entirety. The company does not have any assets or liabilities measured at
fair value on a recurring or nonrecurring basis at March 29, 2014 or March 30, 2013.
The
carrying value of accounts receivable, other current assets, trade accounts payable, and other working capital items approximate
fair value at March 29, 2014 and March 30, 2013 due to the short maturities of these instruments.
Cash:
The company maintains its cash in bank deposit accounts at high credit quality financial institutions. At times, bank balances
may exceed the insurance limits of the Federal Deposit Insurance Corporation.
Accounts
Receivable and Allowance for Doubtful Accounts: The company’s customers include home builders, general
contractors and commercial real estate developers. The company generally grants credit without collateral to qualified customers
and retains lien rights if deemed appropriate. Trade accounts receivable are recorded at the invoiced amount and do not bear interest.
The allowance for doubtful accounts reflects the company’s best estimate of losses that may result from uncollectable accounts
receivable. The allowance is determined based on an analysis of individual accounts and an evaluation of the collectability of
accounts receivable in the aggregate based on factors such as the aging of receivable amounts, customer concentrations, historical
experience, and current economic trends and conditions. Account balances are charged off against the allowance when it is determined
that the receivable will not likely be recovered. Accounts receivable includes amounts billed to customers that are subject to
construction contract retainage provisions. See Note 3.
Inventories:
Inventories are valued at the lower of cost or market, with cost determined on a first-in, first-out basis.
Customer
Rebate Program: The company has a rebate program for certain builders based on sales volume. Rebates are recorded as a reduction
of net sales in the combined and consolidated statements of operations. The rebate liability is included in other accrued liabilities
in the combined and consolidated balance sheet. Earned rebates amounted to $168,262 and $134,041 in fiscal years 2014 and 2013,
respectively.
Property,
Plant, and Equipment: Property, plant and equipment are recorded at cost. Depreciation is computed using straight line and
accelerated methods over the estimated useful lives of the assets. Estimated useful lives are as follows: buildings and improvements
- 39 years; machinery and equipment - 3 to 7 years. When assets are sold or retired, the cost and related accumulated depreciation
are removed from the accounts and the resulting gain or loss is recorded. Depreciation expense amounted to $310,845 and $327,490
in fiscal years 2014 and 2013, respectively. Maintenance and repairs are expensed as incurred and major improvements are capitalized.
Impairment
of Long-Lived Assets: The company reviews its long-lived assets for impairment whenever an event or change in circumstances
indicates that the carrying value of an asset may not be recoverable. If such an event or change in circumstances occurs and potential
impairment is indicated because the carrying values exceed the estimated future undiscounted cash flows, we would measure the
impairment loss as the amount by which the carrying value of the asset exceeds its fair value. There were no impairment charges
recorded in the fiscal years 2014 or 2013.
Revenue
Recognition: Commercial projects, which include multi-unit residential buildings such as apartment buildings, condominiums,
townhouses, and dormitories as well as commercial structures such as hospitals and office buildings are manufactured to customer
specifications and may take up to several months to complete. Some commercial contracts provide that we perform services at the
customer’s site to complete a project, including electrical, plumbing, heating and air conditioning services (“site
work”) and some contracts provide that we only manufacture, deliver and set the modular units on the foundation, in which
cases the site work is performed by others. Except for a small number of homes we sell directly, contracts for single family homes
do not include site work, which is performed by independent builders, and the homes are generally delivered and set on the foundation
within a few days after being manufactured.
We
recognize revenue for modular units and site work using the percentage of completion method. Percentage of completion is determined
using a units-of-production methodology based on modules delivered in accordance with the terms of the contract for the modular
units and cost-to-cost method with cost determined based on work completed as approved by the project owner for site work. Sales
tax billed to customers is excluded from revenue. Transportation and freight billed to customers is recorded as revenue and the
related costs are included in cost of sales. The current asset “Costs and estimated profit in excess of billings”
represents revenues recognized in excess of amounts billed and the current liability “Billings in excess of costs and estimated
profit” represents billings in excess of revenues recognized.
Application
of the cost-to-cost percentage of completion method of accounting requires the use of estimates of costs to be incurred in completing
our performance under a contract. The cost estimating process is based on the knowledge and experience of management and involves
making significant judgments. Changes in contract performance, change orders, estimated profitability, final contract settlements
and other factors may result in changes to estimated and actual costs and profit. The effects of such changes are recognized in
the period in which the revisions are determined.
Self-Insurance
Costs: The company maintains a self-insurance program for a portion of its employee health care costs. Self-insurance costs
are accrued based on actual reported claims plus an estimate of claims incurred but not yet reported. The portion of the accrual
related to unreported claims is estimated based on an analysis of historical claims experience and other assumptions. Accruals
for such costs could be significantly impacted if future events and claims differ from these assumptions.
Warranty
Costs: The company provides a one year limited warranty on the sale of single family homes which covers defects in materials
and workmanship. Estimated warranty costs are accrued in the period that the related revenue is recognized.
Income
Taxes: Income taxes are provided for the tax effects of transactions reported in the combined and consolidated financial statements
and consist of taxes currently due plus deferred taxes related primarily to differences between the bases of accounts receivable,
inventories, property and equipment, and certain accrued liabilities for financial and income tax reporting. Deferred taxes also
are recognized for any operating losses that are available to offset future taxable income and tax credits that are available
to offset future income taxes payable.
Each
of MMH, All-Set, and Paris, with the consent of its sole shareholder, has elected under the Internal Revenue Code and comparable
state laws, to be taxed as an S corporation. Since shareholders of an S corporation are taxed on their proportionate share of
a company’s taxable income, an S corporation is generally not subject to either federal or state income taxes at the corporate
level. Therefore, no provision or liability for federal or state income taxes has been included in these combined and consolidated
financial statements for these entities.
The
income allocable to the shareholder is subject to examination by federal and state taxing authorities. In the event of an examination
of the income tax returns, the tax liability of the shareholder could be changed if an adjustment in the income is ultimately
determined by the taxing authorities.
KBS
follows accounting for income taxes relating to the recognition of income tax benefits and liabilities. The guidance provides
a two-step approach to recognizing and measuring tax benefits and liabilities when realization of the tax position is uncertain.
The first step is to determine whether the tax positions meet the more-likely-than-not condition for recognition and the second
step is to determine the amount to be recognized based on the cumulative probability that exceeds 50%.
The
company does not anticipate that the total unrecognized tax benefits will significantly change prior to March 28, 2015.
Certain
transactions of the company may be subject to accounting methods for federal income tax purposes which differ significantly from
the accounting methods used in preparing the financial statements in accordance with generally accepted accounting principles.
Accordingly, the net income or loss of the company reported for federal income tax purposes may differ from net income or loss
in these combined and consolidated financial statements.
The
company files income tax returns in the U.S. federal jurisdiction and in various states. The company is no longer subject to U.S.
federal income tax examinations for years before fiscal year 2011 and, with few exceptions, is no longer subject to state and
local income tax examinations by tax authorities for years before fiscal year 2011. KBS’s policy is to recognize interest
and penalties related to uncertain tax benefits in income tax expense. The company has no significant accrued interest or penalties
related to uncertain tax positions as of March 29, 2014 and March 30, 2013 and such uncertain tax positions as of each date are
insignificant.
Subsequent
Events: The company has evaluated subsequent events through February 6, 2015, the date at which the combined and consolidated
financial statements were available to be issued.
Accounts
receivable consisted of the following:
| |
March 29, 2014 | | |
March 30, 2013 | |
Contract billings | |
$ | 3,952,472 | | |
$ | 4,105,241 | |
Retainage | |
| 886,922 | | |
| 616,965 | |
| |
| 4,839,394 | | |
| 4,722,206 | |
Allowance for doubtful accounts | |
| (571,000 | ) | |
| (154,000 | ) |
Total accounts receivable | |
$ | 4,268,394 | | |
$ | 4,568,206 | |
Retainage
balances are expected to be collected within the next twelve months.
Inventories
are comprised of the following:
| |
March 29, 2014 | | |
March 30, 2013 | |
Raw materials | |
$ | 1,792,589 | | |
$ | 2,731,838 | |
Finished goods (display models) | |
| 207,253 | | |
| 188,482 | |
Total inventories | |
$ | 1,999,842 | | |
$ | 2,920,320 | |
5. |
UNCOMPLETED
CONSTRUCTION CONTRACTS |
The
status of uncompleted construction contracts is as follows:
| |
March 29, 2014 | | |
March 30, 2013 | |
Costs incurred on uncompleted contracts | |
$ | 4,899,638 | | |
$ | 2,068,352 | |
Inventory purchased for specific contracts | |
| 1,225,024 | | |
| 2,729,356 | |
Estimated profit | |
| 988,215 | | |
| 13,597 | |
| |
| 7,112,877 | | |
| 4,811,305 | |
Less billings to date | |
| (7,143,600 | ) | |
| (4,827,118 | ) |
Total | |
$ | (30,723 | ) | |
$ | (15,813 | ) |
| |
| | | |
| | |
Included in the following balance sheet captions: | |
| | | |
| | |
Costs and estimated profit in excess of billings | |
$ | 363,976 | | |
$ | 148,994 | |
Billings in excess of costs and estimated profit | |
| (394,699 | ) | |
| (164,807 | ) |
Total | |
$ | (30,723 | ) | |
$ | (15,813 | ) |
6. |
ACCOUNTS PAYABLE
RETAINAGE |
Accounts
payable includes retainage amounts due to subcontractors totaling $107,622 and $0 at March 29, 2014 and March 30, 2013, respectively.
7. |
OTHER ACCRUED
LIABILITIES |
Other
accrued liabilities are comprised of the following:
| |
March 29, 2014 | | |
March 30, 2013 | |
| |
| | |
| |
Accrued sales taxes | |
$ | 501,289 | | |
$ | 213,474 | |
Accrued payroll | |
| 205,479 | | |
| 214,922 | |
Accrued health insurance costs | |
| 147,540 | | |
| 234,140 | |
Accrued loss on long-term contracts | |
| - | | |
| 60,931 | |
Accrued warranty costs | |
| 46,970 | | |
| 49,753 | |
Other | |
| 160,888 | | |
| 201,894 | |
Total other accrued liabilities | |
$ | 1,062,166 | | |
$ | 975,114 | |
The
following table summarizes product warranty expense accruals and settlements for the fiscal years ended March 29, 2014 and March
30, 2013:
Year ended | |
Accrual
balance at
beginning of
year | | |
Accruals for
warranties | | |
Settlements
made | | |
Accrual
balance at
end of
year | |
March
29, 2014 | |
$ | 49,753 | | |
$ | 108,382 | | |
$ | (111,165 | ) | |
$ | 46,970 | |
March 30, 2013 | |
| 48,435 | | |
| 92,552 | | |
| (91,234 | ) | |
| 49,753 | |
8. |
RELATED PARTY
TRANSACTIONS |
Amounts
due from related parties include the following:
| |
March 29, 2014 | | |
March 30, 2013 | |
Note receivable from employee (a) | |
$ | 91,164 | | |
$ | 68,658 | |
Other | |
| — | | |
| 1,666 | |
Total | |
$ | 91,164 | | |
$ | 70,324 | |
| (a) | The
note has no stated maturity and bears interest of 4.5%. The note was collected in August
2014. |
The
Shareholder periodically provides funds to the company for working capital and other financing needs, including through informal
debt advances and equity transactions. Debt amounts owed to related parties include the following:
| |
March 29, 2014 | | |
March 30, 2013 | |
Due to Shareholder (a) | |
$ | 750,000 | | |
$ | — | |
Demand note payable to entity owned by Shareholder (b) | |
| 4,510,092 | | |
| 4,655,872 | |
Demand note payable to Shareholder (c) | |
| 518,213 | | |
| 549,994 | |
Demand note payable to Shareholder (d) | |
| 49,470 | | |
| 49,470 | |
Due to management employee (e) | |
| 27,500 | | |
| 27,500 | |
Due to employee | |
| 8,236 | | |
| — | |
Total | |
$ | 5,863,511 | | |
$ | 5,282,836 | |
|
(a) | No
stated maturity or interest terms. |
|
| |
|
(b) | The
note bears interest at 2.5% and is payable in monthly installments of $21,000 including
principal and interest. The note is collateralized by certain assets of the company and
is subordinated to the bank line of credit described in Note 9. |
|
| |
|
(c) | The
note is payable on demand, provides for monthly installments of $1,912, bears interest
of 4.25% and is subordinated to the note described in (b) above and the bank line of
credit described in Note 9. |
|
| |
|
(d) | No
stated maturity or interest terms. |
|
| |
|
(e) | No
stated maturity or terms. The note was repaid in October 2014. |
Equity
transactions with the Shareholder are summarized below:
Fiscal
year ended March 29, 2014:
|
● |
Shareholder
contributed capital of $28,000 to Paris, which amount was credited to Additional Paid-in Capital. |
Fiscal
year ended March 30, 2013:
|
● |
Shareholder
converted $2,502,055 of subordinated debt and accrued interest to equity which amount was credited to Additional Paid-in Capital
for KBS. |
|
|
|
|
● |
Shareholder
received distributions totaling $77,000 from the company. |
During
fiscal years 2014 and 2013, the company sold modular housing units to a commercial real estate development company owned by the
Shareholder. Sales to this related party, which were executed at below-market prices, amounted to approximately $2,618,000 and
$6,562,000 in the fiscal years ended March 29, 2014 and March 30, 2013, respectively.
The
company has a revolving credit line agreement with a bank that provides for borrowings up to $1.0 million and bears interest at
the prime rate (3.25 % at March 29, 2014 and March 30, 2013). Borrowings under the agreement amounted to $900,000 at March 29,
2014 and $0 at March 30, 2013. The agreement is collateralized by substantially all of the company’s assets, is personally
guaranteed by the Shareholder and provides for certain financial covenants. As of March 29, 2014, the company was not in compliance
with certain covenants within the credit line agreement.
Long-term
debt includes the following:
| |
March 29, 2014 | | |
March 30, 2013 | |
Note payable – financing company, bearing interest of 9.50%, payable in monthly
installments of $1,185, collateralized by a security interest in certain equipment, final maturity March 2018 | |
$ | 51,144 | | |
$ | — | |
Note payable – financing company, bearing interest of 6.75%, payable in monthly installments
of $833, collateralized by a security interest in a vehicle, final maturity December 2015 | |
| 18,579 | | |
| 26,525 | |
Note payable – financing company, bearing interest of 6.59%, payable in monthly installments
of $646, collateralized by a security interest in a vehicle, final maturity August 2016 | |
| 17,834 | | |
| 23,644 | |
Note payable – financing company, bearing interest of 6.59%, payable in monthly installments
of $646, collateralized by a security interest in a vehicle, final maturity August 2016 | |
| 17,834 | | |
| 23,644 | |
Note payable – financing company, bearing interest of 4.99%, payable in monthly installments
of $1,239, collateralized by a security interest in certain equipment, final maturity June 2015 | |
| 16,588 | | |
| 31,579 | |
Note payable bearing interest of 5.0%, payable in monthly installments
of $3,774, collateralized by a security interest in certain equipment, final maturity December 2013 | |
| — | | |
| 32,534 | |
Total long-term debt | |
| 121,979 | | |
| 137,926 | |
Current portion | |
| (47,416 | ) | |
| (67,091 | ) |
Noncurrent portion | |
$ | 74,563 | | |
$ | 70,835 | |
As
of March 29, 2014, long-term debt matures as follows:
Year Ended | |
Amount | |
| |
| |
March 28, 2015 | |
$ | 47,416 | |
April 2, 2016 | |
| 36,468 | |
April 1, 2017 | |
| 19,312 | |
March 31, 2018 | |
| 12,995 | |
March 30, 2019 | |
| 5,788 | |
Total | |
$ | 121,979 | |
Rent
expense under operating leases is summarized in the table below:
| |
Year ended | |
| |
March 29, 2014 | | |
March 30, 2013 | |
| |
| | |
| |
Land rent (a) | |
$ | 202,175 | | |
$ | 175,000 | |
Other | |
| 21,208 | | |
| 13,147 | |
Total costs and expenses | |
$ | 223,383 | | |
$ | 188,147 | |
|
(a) | During
the fiscal years ended March 29, 2014 and March 30, 2013, the company rented certain
land that was used for temporary storage of modular units. The rents were paid pursuant
to an informal arrangement that was discontinued in April 2014. Rent expense is included
in selling, general and administrative expenses in the combined and consolidated statements
of operations. |
12. |
EMPLOYEE SAVINGS
401(k) PLAN |
The
company maintains a 401(k) employee savings plan. Eligible employees may elect to contribute amounts up to the federal limit.
The company did not contribute to the plan in fiscal years 2014 or 2013.
The
income tax benefit consists of the following components:
| |
March 29, 2014 | | |
March 30, 2013 | |
Current | |
$ | 984 | | |
$ | 3,225 | |
Deferred | |
| 325,000 | | |
| 56,000 | |
Tax benefit of net operating loss | |
| 1,669,000 | | |
| 916,000 | |
Total tax benefit | |
$ | 1,994,984 | | |
$ | 975,225 | |
Deferred
tax assets (liabilities) consist of the following components:
| |
March 29, 2014 | | |
March 30, 2013 | |
Accrued vacation | |
$ | 5,000 | | |
$ | 69,000 | |
Accrued warranty | |
| 19,000 | | |
| 20,000 | |
Accrued loss on long-term contracts | |
| - | | |
| 25,000 | |
Accounts receivable reserve | |
| 520,000 | | |
| 132,000 | |
Net operating loss carryforwards | |
| 2,899,000 | | |
| 1,230,000 | |
Accrued health insurance | |
| 20,000 | | |
| 20,000 | |
Deferred tax assets | |
$ | 3,463,000 | | |
$ | 1,496,000 | |
| |
| | | |
| | |
Inventory | |
$ | (72,000 | ) | |
$ | (39,000 | ) |
Property and equipment | |
| (3,000 | ) | |
| (19,000 | ) |
Installment sale interest | |
| — | | |
| (44,000 | ) |
Deferred tax liabilities | |
$ | (75,000 | ) | |
$ | (102,000 | ) |
| |
| | | |
| | |
Net deferred tax assets | |
$ | 3,388,000 | | |
$ | 1,394,000 | |
Deferred
income taxes are presented in the combined and consolidated balance sheets under the following captions:
| |
March 29, 2014 | | |
March 30, 2013 | |
Current | |
$ | 3,392,000 | | |
$ | 184,000 | |
Long-term | |
| (4,000 | ) | |
| 1,210,000 | |
Net deferred tax assets (liabilities) | |
$ | 3,388,000 | | |
$ | 1,394,000 | |
At
March 29, 2014 and 2013, KBS had federal net operating loss carryforwards of $7,635,190 and $3,261,527, respectively and state
operating loss carryforwards of $4,468,554 and $1,717,970 at March 29, 2014 and March 30, 2013. The loss carryforwards will expire
from 2026 to 2034 if not used.
14. |
SIGNIFICANT
CUSTOMER AND CONCENTRATION OF CREDIT RISK DATA |
Sales
to customers comprising more than 10% of total net sales and corresponding accounts receivable concentration information for such
customers is summarized below:
| |
Percent of total net
sales for year ended | | |
Percent of total
accounts receivable as of: | |
| |
March 29, 2014 | | |
March 30, 2013 | | |
March 29, 2014 | | |
March 30, 2013 | |
Customer A | |
| 11 | % | |
| * | | |
| 27 | % | |
| * | |
Customer B | |
| 22 | % | |
| * | | |
| * | | |
| * | |
Customer C | |
| * | | |
| 20 | % | |
| * | | |
| * | |
Customer D | |
| * | | |
| 10 | % | |
| * | | |
| * | |
Customer E | |
| * | | |
| * | | |
| 14 | % | |
| * | |
Customer F | |
| * | | |
| * | | |
| 15 | % | |
| * | |
Customer G | |
| * | | |
| * | | |
| * | | |
| 44 | % |
*
Percent was less than 10% of the total.
Backlog,
representing the amount of revenue the company expects to realize from work to be performed on uncompleted contracts in progress
at March 29, 2014 and from contractual agreements on which work has not yet begun is summarized below:
Contract revenues on uncompleted contracts at March 29, 2014 | |
$ | 9,026,510 | |
Contract revenues on new contracts | |
| 15,532,278 | |
Total backlog at March 29, 2014 | |
$ | 24,558,788 | |
16. |
CONSOLIDATED
VARIABLE INTEREST ENTITIES |
Under
generally accepted accounting principles, an entity is required to consolidate a variable interest entity (VIE) in which it holds
a variable interest and is the primary beneficiary of the entity. In general, a VIE is a legal entity that either (1) has an insufficient
amount of equity to carry out its principal activities without additional subordinated financial support, (2) has a group of equity
owners that are unable to make significant decisions about its activities, or (3) has a group of equity owners that do not have
the obligation to absorb losses or the right to receive returns generated by its operations. An entity is the primary beneficiary
of a VIE, which is the party that would be required to consolidate the VIE, if it has (1) the power to direct the activities that
most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses of the VIE or the right
to receive benefits from the VIE that could be significant to the VIE. If it is a related party group that holds these characteristics
rather than a single party, then it is the party within the related party group that is most closely associated with the VIE that
is the primary beneficiary.
In
determining whether it is the primary beneficiary of a variable interest entity, KBS considers qualitative and quantitative factors
and judgments, including which activities most significantly impact the VIE’s economic performance and which party controls
such activities; the amount and characteristics of KBS’s interests in and other involvements with the VIE; the obligation
and likelihood for KBS or other investors to provide financial support to the VIE; and the similarity with and significance of
the business activities of the VIE to KBS and other parties or investors involved. MMH and All-Set have been determined to be
variable interest entities and KBS has been determined to be the primary beneficiary of MMH and All-Set primarily due to KBS’s
ability to influence the operations of both MMH and All-Set.
Due
to the determination that MMH and All-Set are VIE’s, they have been consolidated into the combined and consolidated financial
statements under generally accepted accounting principles, which requires the equity of MMH and All-Set to be presented as noncontrolling
interests. KBS evaluated their relationship with Paris, and determined Paris was not a VIE. Due to Paris being included in the
transaction described in Note 17, the assets, liabilities, and operations of Paris have been combined in the combined and consolidated
financial statements.
The
condensed balance sheets of MMH as of March 29, 2014 and March 30, 2013 are as follows:
| |
March 29, 2014 | | |
March 30, 2013 | |
Total assets | |
$ | 223,902 | | |
$ | 193,851 | |
Total liabilities (includes $1,886,862 and $1,241,663 due to KBS, All-Set,
and Paris at March 29, 2014 and March 30, 2013, respectively) | |
| 2,028,114 | | |
| 1,399,173 | |
Total deficit | |
$ | (1,804,212 | ) | |
$ | (1,205,322 | ) |
The
condensed balance sheets of All-Set as of March 29, 2014 and March 30, 2013 are as follows:
| |
March 29, 2014 | | |
March 30, 2013 | |
Total assets | |
$ | 589,548 | | |
$ | 497,386 | |
Total liabilities (includes $867,511 and $971,216 due to KBS and MMH March
29, 2014 and March 30, 2013, respectively) | |
| 963,776 | | |
| 1,075,697 | |
Total deficit | |
$ | (374,228 | ) | |
$ | (578,311 | ) |
On
April 2, 2014, the company and the Shareholder entered into an Asset Purchase Agreement with ATRM Holdings, Inc. (“ATRM”)
and KBS Builders, Inc., a wholly-owned subsidiary of ATRM (“KBS Builders”), pursuant to which KBS Builders purchased
substantially all of the company’s assets and assumed most of its liabilities related to its business of manufacturing,
selling, and distributing modular housing units. Consideration received for the sale included $5.0 million in cash and an unsecured
promissory note payable to the company by KBS Builders in the principal amount of $5.5 million, bearing interest at 4.0% per annum.
In addition, KBS Builders assumed and paid approximately $1.4 million of the company’s debt and assumed certain other liabilities
of the company related to the purchased assets.
Exhibit
99.2
ITEM
9.01 (b) UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On
April 2, 2014, ATRM Holdings, Inc. (“the Company”) , through its wholly-owned subsidiary KBS Builders, Inc., purchased
substantially all of the assets and assumed most of the liabilities of KBS Building Systems, Inc. and Affiliates (“KBS”)
related to KBS’s business of manufacturing, selling, and distributing modular housing units for both residential and commercial
use.
The
following unaudited pro forma condensed combined consolidated financial information is based on and derived from the separate
historical financial statements of the Company and KBS to illustrate the effect of the acquisition of KBS and gives effect to
the assumptions and pro forma adjustments described below and in the accompanying notes to the unaudited pro forma condensed combined
consolidated financial statements. The unaudited pro forma condensed consolidated combined balance sheet represents the combined
balance sheets of the Company as of March 31, 2014 and KBS as of March 29, 2014, which are the historical reporting periods for
each company, and gives effect to the acquisition as if it had occurred on March 31, 2014. The pro forma condensed combined consolidated
statements of operations represent the combined results as if the acquisition had occurred on January 1, 2013. The Company has
historically presented the statement of operations for the twelve month period January 1 through December 31. KBS operated on
a 52/53 week fiscal year which ends on the Saturday nearest to March 31. Accordingly, the historical consolidated statements of
operations presented for the Company are for the twelve month period ended December 31, 2014 and three month period ended March
31, 2014. The historical consolidated statements of operations presented for KBS are for the twelve month period beginning March
31, 2013 through March 29, 2014 and the three month period beginning December 29, 2013 through March 29, 2014.
The
Company prepared the unaudited pro forma condensed combined consolidated financial statements using the acquisition method of
accounting. In accordance with the acquisition method of accounting, the acquisition consideration has been allocated to the acquired
assets and assumed liabilities of KBS based on their estimated fair values as of the acquisition date. Any excess of the consideration
over the fair value of assets acquired and liabilities assumed is allocated to goodwill. The Company estimated the fair value
of KBS’s assets and liabilities based on appraisals and market data of assets and liabilities.
The
unaudited pro forma condensed combined consolidated statements of operations are presented for informational and illustrative
purposes in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), and
are not necessarily indicative of the operating results or financial position that would have occurred if the acquisition had
occurred as of the date or during the periods presented nor is it necessarily indicative of the future operating results or financial
position of the combined company. The unaudited pro forma condensed combined consolidated statements of operations and the accompanying
notes should be read in conjunction with the historical audited consolidated financial statements and notes of the Company for
the year ended December 31, 2013 included on Form 10-K, filed with the SEC on March 26, 2014, and KBS’s historical audited
financial statements for the year ended March 29, 2014, which are included as Exhibit 99.1 to the Current Report in this Form
8-K/A.
The
historical consolidated financial information has been combined and adjusted to give effect to the pro forma events that are directly
attributable to the acquisition of KBS, expected to have a continuing impact on the combined results and are factually supportable
in order to reflect, on a pro forma basis, the impact of the transaction on the historical financial information. The pro forma
adjustments principally give effect to:
|
● |
The
payment of $5,000,000 in cash to KBS, issuance of the $5,500,000 promissory note to KBS, the assumption and payoff of $1,401,206
in debt of KBS, the assumption of other assets and liabilities of KBS, estimated at their fair value. |
|
|
|
|
● |
Recognition
of $8,018,922 of intangible assets and associated amortization expense as a result of acquisition accounting adjustments in
the purchase of KBS. |
|
|
|
|
● |
Issuance
of $6,500,000 in promissory notes to LSVI (as defined below) related to the acquisition of the assets of KBS and the recognition
of additional interest expense associated with the debt. |
|
|
|
|
● |
Decrease
in selling, general and administrative expenses for non-recurring transaction-related expenses of $136,633. |
|
|
|
|
● |
Change
in depreciation expense for the revaluation of fixed assets to fair value. |
ATRM
Holdings, Inc.
Pro
Forma Condensed Combined Consolidated Balance Sheet
March
31, 2014
(Unaudited)
| |
As Historically
Reported | | |
| |
| |
| |
| |
ATRM
(Note 2 (a)) | | |
KBS
(Note 2 (a)) | | |
Pro
Forma
Adjustments | |
| |
Pro
Forma
Combined | |
ASSETS | |
| | |
| | |
( Note 2 ) | |
| |
| |
Current assets: | |
| | | |
| | | |
| | |
| |
| | |
Cash and cash equivalents | |
$ | 1,886,415 | | |
$ | 213,731 | | |
$ | 98,794 | |
(b)
| |
$ | 2,198,940 | |
Accounts receivable, net | |
| 486,978 | | |
| 4,268,394 | | |
| — | |
| |
| 4,755,372 | |
Inventories | |
| 1,196,649 | | |
| 1,999,842 | | |
| — | |
| |
| 3,196,491 | |
Costs and estimated profit in excess
of billings | |
| — | | |
| 363,976 | | |
| — | |
| |
| 363,976 | |
Due from related parties | |
| — | | |
| 91,164 | | |
| — | |
| |
| 91,164 | |
Deferred income tax, current | |
| — | | |
| 3,392,000 | | |
| (3,392,000 | ) |
(c) | |
| — | |
Fair value of contingent earn-outs, current | |
| 400,000 | | |
| — | | |
| — | |
| |
| 400,000 | |
Other current
assets | |
| 591,445 | | |
| 91,193 | | |
| — | |
| |
| 682,638 | |
Total current
assets | |
| 4,561,487 | | |
| 10,420,300 | | |
| (3,293,206 | ) |
| |
| 11,688,581 | |
| |
| | | |
| | | |
| | |
| |
| | |
Property and equipment, net | |
| 72,711 | | |
| 5,845,327 | | |
| (1,096,748 | ) |
(d) | |
| 4,821,290 | |
| |
| | | |
| | | |
| | |
| |
| | |
Intangible and other assets: | |
| | | |
| | | |
| | |
| |
| | |
Goodwill | |
| — | | |
| — | | |
| 5,318,922 | |
(e),(f) | |
| 5,318,922 | |
Tradename | |
| — | | |
| — | | |
| 290,000 | |
(e) | |
| 290,000 | |
Customer relationships, net | |
| — | | |
| — | | |
| 1,420,000 | |
(e) | |
| 1,420,000 | |
Purchased backlog, net | |
| — | | |
| — | | |
| 990,000 | |
(e) | |
| 990,000 | |
Other assets | |
| 4,667 | | |
| — | | |
| — | |
| |
| 4,667 | |
Total intangible
and other assets | |
| 4,667 | | |
| — | | |
| 8,018,922 | |
| |
| 8,023,589 | |
Total assets | |
$ | 4,638,865 | | |
$ | 16,265,627 | | |
$ | 3,628,968 | |
| |
$ | 24,533,460 | |
See
accompanying notes to the pro forma condensed combined consolidated financial statements (unaudited)
ATRM
Holdings, Inc.
Pro
Forma Condensed Combined Consolidated Balance Sheet
March
31, 2014
(Unaudited)
| |
As
Historically Reported | | |
| | |
| |
| |
ATRM
(Note 2 (a)) | | |
KBS
(Note 2 (a)) | | |
Pro
Forma
Adjustments | | |
Pro
Forma
Combined | |
| |
| | |
| | |
(
Note 2 ) | | |
| |
LIABILITIES
AND SHAREHOLDERS’ EQUITY | |
| | | |
| | | |
| | | |
| | |
Current
liabilities: | |
| | | |
| | | |
| | | |
| | |
Capitalized
lease obligation-current | |
$ | 27,099 | | |
$ | — | | |
$ | — | | |
$ | 27,099 | |
Current
portion of long term debt | |
| — | | |
| 47,416 | | |
| — | | |
| 47,416 | |
Note
Payable-KBS | |
| — | | |
| — | | |
| 5,500,000 | | (g) |
| 5,500,000 | |
Note
payable to bank | |
| — | | |
| 900,000 | | |
| (900,000 | ) | (h) |
| — | |
Trade
accounts payable | |
| 529,834 | | |
| 6,283,384 | | |
| — | | |
| 6,813,218 | |
Due
to related parties | |
| — | | |
| 5,863,511 | | |
| (5,810,768 | ) | (h) |
| 52,743 | |
Billings
in excess of costs and estimated profits | |
| — | | |
| 394,699 | | |
| — | | |
| 394,699 | |
Accrued
compensation | |
| 93,804 | | |
| 217,328 | | |
| — | | |
| 311,132 | |
Accrued
taxes, other than income | |
| 31,482 | | |
| 501,289 | | |
| — | | |
| 532,771 | |
Accrued
warranty | |
| 23,000 | | |
| 47,000 | | |
| — | | |
| 70,000 | |
Accrued
other expenses | |
| 274,057 | | |
| 296,549 | | |
| (20,376 | ) | (i) |
| 550,230 | |
Total
current liabilities | |
| 979,276 | | |
| 14,551,176 | | |
| (1,231,144 | ) | |
| 14,299,308 | |
| |
| | | |
| | | |
| | | |
| | |
Long
term liabilities: | |
| | | |
| | | |
| | | |
| | |
Long
term debt, less current portion | |
| — | | |
| 74,563 | | |
| — | | |
| 74,563 | |
Deferred
income taxes | |
| — | | |
| 4,000 | | |
| (4,000 | ) | (c) |
| — | |
Note
Payable-LSVI | |
| — | | |
| — | | |
| 6,000,000 | | (g) |
| 6,000,000 | |
Note
Payable-Convertible-LSVI | |
| — | | |
| — | | |
| 500,000 | | (g) |
| 500,000 | |
Total
long term liabilities | |
| — | | |
| 78,563 | | |
| 6,496,000 | | |
| 6,574,563 | |
| |
| | | |
| | | |
| | | |
| | |
Shareholders’
equity: | |
| | | |
| | | |
| | | |
| | |
Common
Stock | |
| 1,079 | | |
| 1,000 | | |
| (1,000 | ) | (j) |
| 1,079 | |
Additional
paid-in capital | |
| 65,834,599 | | |
| 3,094,806 | | |
| (3,094,806 | ) | (j) |
| 65,834,599 | |
Accumulated
deficit | |
| (62,176,089 | ) | |
| (5,658,776 | ) | |
| 5,658,776 | | (j) |
| (62,176,089 | ) |
Equity
attributable to Paris Holdings, LLC | |
| — | | |
| 6,377,298 | | |
| (6,377,298 | ) | (j) |
| — | |
Non-controlling
interest-Maine Modular Haulers and All-Set | |
| — | | |
| (2,178,440 | ) | |
| 2,178,440 | | (k) |
| — | |
Total
shareholders’ equity | |
| 3,659,589 | | |
| 1,635,888 | | |
| (1,635,888 | ) | |
| 3,659,589 | |
Total
liabilities and shareholders’ equity | |
$ | 4,638,865 | | |
$ | 16,265,627 | | |
$ | 3,628,968 | | |
$ | 24,533,460 | |
See
accompanying notes to the pro forma condensed combined consolidated financial statements (unaudited)
ATRM
Holdings, Inc.
Pro
Forma Condensed Combined Consolidated Statement of Operations
For
the Year Ended December 31, 2013
(Unaudited)
| |
As
Historically Reported | | |
| | |
| |
| |
ATRM
(Note 2 (l)) | | |
KBS
(Note 2 (l)) | | |
Pro
Forma
Adjustments | | |
Pro
Forma
Combined | |
| |
| | |
| | |
(
Note 2) | | |
| |
| |
| | |
| | |
| | |
| |
Net
sales | |
$ | 2,653,242 | | |
$ | 37,220,048 | | |
| — | | |
$ | 39,873,290 | |
Cost
of goods sold | |
| 2,725,958 | | |
| 39,098,349 | | |
| (50,512 | ) | (m) |
| 41,773,795 | |
Gross
profit (loss) | |
| (72,716 | ) | |
| (1,878,301 | ) | |
| 50,512 | | |
| (1,900,505 | ) |
| |
| | | |
| | | |
| | | |
| | |
Operating
expenses: | |
| | | |
| | | |
| | | |
| | |
Selling,
general, and administrative | |
| 3,473,617 | | |
| 3,471,882 | | |
| 1,192,369 | | (m),(n) |
| 8,137,868 | |
Research
and development | |
| 488,461 | | |
| — | | |
| — | | |
| 488,461 | |
Total
operating expenses | |
| 3,962,078 | | |
| 3,471,882 | | |
| 1,192,369 | | |
| 8,626,329 | |
Loss
from continuing operations | |
| (4,034,794 | ) | |
| (5,350,183 | ) | |
| (1,141,857 | ) | |
| (10,526,834 | ) |
| |
| | | |
| | | |
| | | |
| | |
Change
in fair value of contingent receivable | |
| 325,000 | | |
| — | | |
| — | | |
| 325,000 | |
Interest
expense, net | |
| (2,948 | ) | |
| (153,450 | ) | |
| (701,447 | ) | (o) |
| (857,845 | ) |
Loss
from continuing operations before income taxes | |
| (3,712,742 | ) | |
| (5,503,633 | ) | |
| (1,843,304 | ) | |
| (11,059,679 | ) |
| |
| | | |
| | | |
| | | |
| | |
Benefit
for income taxes | |
| 279,000 | | |
| 1,994,984 | | |
| (2,273,984 | ) | (p),(q) |
| — | |
Net
loss before discontinued operations and non-controlling interest | |
| (3,433,742 | ) | |
| (3,508,649 | ) | |
| (4,117,288 | ) | |
| (11,059,679 | ) |
| |
| | | |
| | | |
| | | |
| | |
Discontinued
operations: | |
| | | |
| | | |
| | | |
| | |
Income
from discontinued operations | |
| 518,297 | | |
| — | | |
| (518,297 | ) | (q) |
| — | |
Net
loss before non-controlling interest | |
| (2,915,445 | ) | |
| (3,508,649 | ) | |
| (4,635,585 | ) | |
| (11,059,679 | ) |
| |
| | | |
| | | |
| | | |
| | |
Less
net loss attributable to non-controlling interest | |
| — | | |
| (394,807 | ) | |
| 394,807 | | (r) |
| — | |
Net
loss | |
$ | (2,915,445 | ) | |
$ | (3,113,842 | ) | |
$ | (4,512,095 | ) | |
$ | (11,059,679 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net
loss per share-basic and diluted | |
$ | (2.70 | ) | |
| | | |
| | | |
$ | (10.26 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted shares
outstanding-basic and diluted | |
| 1,078,249 | | |
| | | |
| | | |
| 1,078,249 | |
See
accompanying notes to the pro forma condensed combined consolidated financial statements (unaudited)
ATRM
Holdings, Inc.
Pro
Forma Condensed Combined Consolidated Statement of Operations
For
the Three Months Ended March 31, 2014
(Unaudited)
| |
As
Historically Reported | | |
| | |
| |
| |
ATRM
(Note 2 (l)) | | |
KBS
(Note 2 (l)) | | |
Pro
Forma
Adjustments | | |
Pro
Forma
Combined | |
| |
| | |
| | |
(
Note 2) | | |
| |
Net
sales | |
$ | 2,158,199 | | |
$ | 9,843,802 | | |
| — | | |
$ | 12,002,001 | |
Cost
of goods sold | |
| 1,289,868 | | |
| 10,340,567 | | |
| (12,628 | ) | (m) |
| 11,617,807 | |
Gross
profit (loss) | |
| 868,331 | | |
| (496,765 | ) | |
| 12,628 | | |
| 384,194 | |
| |
| | | |
| | | |
| | | |
| | |
Operating
expenses: | |
| | | |
| | | |
| | | |
| | |
Selling,
general, and administrative | |
| 1,011,341 | | |
| 867,971 | | |
| 503,959 | | (m),(n),(s) |
| 2,383,271 | |
Research
and development | |
| 127,400 | | |
| — | | |
| — | | |
| 127,400 | |
Total
operating expenses | |
| 1,138,741 | | |
| 867,971 | | |
| 503,959 | | |
| 2,510,671 | |
Loss
from continuing operations | |
| (270,410 | ) | |
| (1,364,736 | ) | |
| (491,331 | ) | |
| (2,126,477 | ) |
| |
| | | |
| | | |
| | | |
| | |
Change
in fair value of earnout | |
| 75,000 | | |
| — | | |
| — | | |
| 75,000 | |
Interest
expense, net | |
| (515 | ) | |
| (38,362 | ) | |
| (174,075 | ) | (o) |
| (212,952 | ) |
Loss
from continuing operations before income taxes | |
| (195,925 | ) | |
| (1,403,098 | ) | |
| (665,406 | ) | |
| (2,264,429 | ) |
| |
| | | |
| | | |
| | | |
| | |
Benefit
for income taxes | |
| — | | |
| 508,602 | | |
| (508,602 | ) | (p) |
| — | |
Net
loss from continuing operations before non-controlling interest | |
| (195,925 | ) | |
| (894,496 | ) | |
| (1,174,008 | ) | |
| (2,264,429 | ) |
| |
| | | |
| | | |
| | | |
| | |
Less
net loss attributable to non-controlling interest | |
| — | | |
| (100,652 | ) | |
| 100,652 | | (r) |
| — | |
Net
loss | |
$ | (195,925 | ) | |
$ | (793,844 | ) | |
$ | (1,274,660 | ) | |
$ | (2,264,429 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net
loss per share-basic and diluted | |
$ | (0.18 | ) | |
| | | |
| | | |
$ | (2.10 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted shares
outstanding-basic and diluted | |
| 1,079,176 | | |
| | | |
| | | |
| 1,079,176 | |
See
accompanying notes to the pro forma condensed combined consolidated financial statements (unaudited)
ATRM
Holdings, Inc.
Notes
to Pro Forma Combined Condensed Consolidated Financial Statements
(Unaudited)
On
April 2, 2014, the Company, through its wholly-owned subsidiary KBS Builders, Inc., purchased substantially all of the assets
and assumed most of the liabilities of KBS related to its business of manufacturing, selling, and distributing modular housing
units for both residential and commercial use. Consideration for the acquisition included (i) $5.0 million in cash, (ii) an unsecured
promissory note issued to KBS in the principal amount of $5.5 million, bearing interest at 4.0% per annum with all principal and
interest due on October 2, 2014 (the “KBS Note”), (iii) the assumption and payoff of approximately $1.4 million of
debt and (iv) the assumption of certain other liabilities of KBS related to the purchased assets. Acquisition-related expenses
of $136,633 were incurred through March 31, 2014 and are included in the historical financial statements of the Company for the
three months ended March 31, 2014.
The
Company financed the acquisition of KBS by entering into a Securities Purchase Agreement (the “LSVI Financing Agreement”)
with Lone Star Value Investors, LP (“LSVI”) effective April 1, 2014. As of April 1, 2014, LSVI owned 60,588 shares
of the Company’s common stock, or approximately 5.6% of the shares outstanding of the Company. Jeffrey E. Eberwein, the
Company’s Chairman of the Board, is the founder and Chief Executive Officer of Lone Star Value Management, LLC, the investment
manager of LSVI, and is the manager of Lone Star Value Investors GP, LLC, the general partner of LSVI. Pursuant to the LSVI Financing
Agreement, LSVI purchased (i) for $6.0 million in cash, an unsecured promissory note made by the Company in the principal amount
of $6.0 million (the “LSVI Promissory Note”), bearing interest at 10.0% per annum, with interest payable semiannually
and any unpaid principal and interest due on April 1, 2019, and (ii) for $0.5 million in cash, an unsecured convertible promissory
note made by the Company in the principal amount of $0.5 million (the “LSVI Convertible Promissory Note”, and together
with the “LSVI Promissory Note”, the “LSVI Notes”), bearing interest at 5.0% per annum, with interest
payable semiannually and any unpaid principal and interest due on April 1, 2019. At any time after July 30, 2014, at LSVI’s
option, the unpaid principal amount of the LSVI Convertible Promissory Note could be converted into shares of the Company’s
common stock at $4.66 per share. The Company may prepay the LSVI Notes at any time after a specified amount of advance notice
to LSVI.
The
Company accounts for business combinations in accordance with Accounting Standards Codification ASC 805, Business Combinations,
using the acquisition method of accounting. Under these accounting standards, the acquisition consideration is allocated to the
acquired tangible and intangible assets and assumed liabilities based on their estimated fair value as of the acquisition date.
The fair value measurements are based on key assumptions and estimates. Any excess of the acquisition consideration over the fair
value of assets acquired and liabilities assumed is allocated to goodwill. The acquisition consideration and the Company’s
allocation of the acquisition consideration to the acquired assets and assumed liabilities are as follows:
Acquisition consideration: | |
| | |
Cash paid at closing | |
$ | 5,000,000 | |
Promissory note to KBS | |
| 5,500,000 | |
Total acquisition consideration | |
$ | 10,500,000 | |
| |
| | |
Allocation of acquisition consideration: | |
| | |
Cash | |
$ | 432,431 | |
Accounts receivable | |
| 4,062,164 | |
Costs in excess of billings and estimated profits | |
| 544,542 | |
Inventory | |
| 1,766,218 | |
Other current assets | |
| 34,316 | |
Property, plant, equipment | |
| 4,748,579 | |
Non-current assets | |
| 101,164 | |
Customer lists | |
| 1,420,000 | |
Tradename | |
| 290,000 | |
Purchased backlog | |
| 990,000 | |
Accounts payable | |
| (6,313,867 | ) |
Billings in excess of costs and estimated profits | |
| (312,285 | ) |
Accrued expenses | |
| (1,177,961 | ) |
Debt | |
| (1,523,083 | ) |
Net assets acquired at estimated fair value | |
| 5,062,218 | |
Goodwill | |
| 5,437,782 | |
Total acquisition consideration | |
$ | 10,500,000 | |
Unaudited
Pro Forma Combined Condensed Consolidated Balance Sheet
|
(a) |
The
balance sheet represents the historical financial position of the Company as of March 31, 2014 and KBS as of March 29, 2014. |
|
|
|
|
(b) |
Reflects
debt proceeds of $6,500,000 to fund the acquisition, less $5,000,000 in cash paid to KBS and $1,401,206 of KBS debt paid at
the date of acquisition. |
|
|
|
|
(c) |
Reflects
the elimination of KBS’s current deferred income tax asset of $3,392,000 that was not acquired and $4,000 of deferred
income tax liability that was not assumed in the acquisition. |
|
|
|
|
(d) |
Reflects
the elimination of $1,874,500 in land not purchased in the acquisition offset by an increase for an adjustment to fair value
of $777,752. |
|
|
|
|
(e) |
Represents
the allocation of the purchase price to intangible assets as follows: |
Goodwill | |
$ | 5,437,782 | |
Tradename | |
| 290,000 | |
Customer Relationships | |
| 1,420,000 | |
Purchased Backlog | |
| 990,000 | |
Total Intangible Assets | |
$ | 8,137,782 | |
|
(f) |
Reflects
a decrease to goodwill of $118,860 for the change in net assets values as of March 31, 2014. Goodwill was originally calculated
based on the net asset values of KBS as of April 2, 2014. |
|
|
|
|
(g) |
Recognition
of $5,500,000 note issued to KBS for acquiring the net assets of KBS, and $6,000,000 note and $500,000 convertible note issued
to LSVI for financing the acquisition of KBS. |
|
|
|
|
(h) |
Reflects
the $1,401,206 of notes payable to banks that were paid at the time of the acquisition and the elimination of $5,309,562 of
related party debt that was not assumed in the acquisition. |
|
|
|
|
(i) |
Reflects
the elimination of accrued interest on related party debt that was not assumed. |
|
|
|
|
(j) |
Reflects
the elimination of the historical shareholders’ equity of KBS. |
|
|
|
|
(k) |
Reflects
the elimination of the historical net loss from the non-controlling interest of $2,178,440 that was acquired in the net asset
purchase of KBS. |
Unaudited
Pro Forma Combined Condensed Consolidated Statements of Operations
|
(l) |
The
statement of operations for the period ended December 31, 2013, represents the historical financial results of the Company
for the twelve month period beginning January 1, 2013 through December 31, 2013 and the historical 12 month period for KBS
beginning March 31, 2013 through March 29, 2014. The statement of operations for the three month period ended March 31, 2014,
represents the historical financial results of the Company for the period beginning January 1, 2014 through March 31, 2014
and the historical three month period for KBS beginning December 29, 2013 through March 29, 2014. |
|
|
|
|
(m) |
Reflects
a decrease in depreciation expense based on an adjustment to fair value for the fixed assets acquired. The effect to the condensed
combined consolidated statements of operations is as follows: |
For the twelve and three month periods ended: | |
| | |
| |
| |
| | |
| |
| |
December 31, 2013 | | |
March 31, 2014 | |
Cost of Sales | |
$ | (50,512 | ) | |
$ | (12,628 | ) |
Selling, general and administrative | |
| (488 | ) | |
| (122 | ) |
Net decrease in depreciation expense | |
$ | (51,000 | ) | |
$ | (12,750 | ) |
| (n) | Reflects
amortization expense on intangible assets. The amortization expense associated with the
intangible assets in footnote (g) on the unaudited pro forma condensed combined consolidated
balance sheet is recognized over the estimated life of the intangible asset. Goodwill
and tradename have an indefinite life and will be evaluated for impairment at each reporting
period. In addition, they will be tested on an interim basis if an event occurs or circumstances
change between annual tests that would more likely than not reduce their fair value below
carrying value. If an impairment exists during a reporting period, expense will be recognized.
Amortization expense will be recognized on customer relationships over a seven year life
and purchased backlog as the associated revenue is recognized. For pro forma purposes,
management has assumed that the revenue associated with the backlog will be recognized
over a 270 day period. The effect to selling, general and administrative expense for
the recognition of amortization expense for customer relationships and purchased backlog
in the pro forma results is as follows: |
For the twelve and three month periods ended: | |
| | |
| |
| |
| | |
| |
| |
December 31, 2013 | | |
March 31, 2014 | |
Customer Relationships | |
$ | 202,857 | | |
$ | 50,714 | |
Purchased Backlog | |
| 990,000 | | |
| 590,000 | |
Total Amortization Expense | |
$ | 1,192,857 | | |
$ | 640,714 | |
| (o) | Reflects
additional interest expense from the issuance of acquisition-related debt and the reduction
of interest expense on debt paid at the time of the acquisition. The effect to the condensed
combined consolidated statements of operations is as follows: |
For the twelve and three month periods ended: | |
| | |
| |
| |
| | |
| |
| |
| December 31, 2013 | | |
| March 31, 2014 | |
Additional interest expense | |
$ | 701,447 | | |
$ | 174,075 | |
| (p) | Reflects
the recognition of a valuation allowance for KBS’s benefit for income taxes. The
effect to the condensed combined consolidated statements of operations is a decrease
in the benefit for income taxes as follows: |
For the twelve and three month periods ended: | |
| | |
| |
| |
| | |
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December 31, 2013 | | |
March 31, 2014 | |
Decrease in Benefit for income taxes | |
$ | 1,994,984 | | |
$ | 508,602 | |
| (q) | Reflects
of the elimination of income from discontinued operations of $518,297 and associated
benefit for income taxes of $279,000 for the twelve months ended December 31, 2013. |
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| (r) | Reflects
the elimination of the loss from the non-controlling interest that was acquired in the
net asset purchase of KBS. The effect to the condensed combined consolidated statements
of operations is a decrease to the net loss from continuing operations as follows: |
For the twelve and three month periods ended: | |
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December 31, 2013 | | |
March 31, 2014 | |
Decrease in net loss from continuing operations | |
$ | 394,807 | | |
$ | 100,652 | |
| (s) | Reflects
the elimination of non-recurring acquisition related expenses that have been recorded
in the historical results of the Company for the three months ended March 31, 2014 of
$136,633. No non-recurring acquisition related expenses were incurred by the Company
for the twelve months ended December 31, 2013 or by KBS for the twelve or three months
ended March 29, 2014. |