StormGeo, Inc. and Subsidiary Consolidated Financial Statements December 31, 2012
StormGeo, Inc. and Subsidiary December 31, 2012 Table of Contents Page Independent Auditors Report... 1-2 Consolidated Balance Sheet... 3 Consolidated Statement of Operations and Comprehensive Loss... 4 Consolidated Statement of Changes in Shareholder s Equity... 5 Consolidated Statement of Cash Flows... 6 Notes to Consolidated Financial Statements... 7-12
INDEPENDENT AUDITORS REPORT Name of component: StormGeo, Inc. and Subsidiary Year-end: December 31, 2012 Currency: NOK To: Jorund Haga Indrehus Partner, Ernst & Young AS As requested in your instructions dated December 31, 2012, we have audited, for the purpose of your audit of the group financial statements of StormGeo Holding AS, the consolidated balance sheet of StormGeo, Inc. and Subsidiary, a subsidiary of StormGeo Holding AS as of December 31, 2012 and the related consolidated statements of operations and comprehensive loss, shareholder s equity, and cash flows for the year then ended. Management s Responsibility for the Financial Statements Management is responsible for the preparation and presentation of these financial statements in accordance with policies and instructions issued by StormGeo Holding AS s management. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and presentation of the specified forms that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. The financial statements have been prepared for the sole purpose of consolidation into the StormGeo Holding AS group financial statements. Auditors Responsibility Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. International Standards on Auditing require that we comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the financial statements are free of material misstatement and to obtain audit evidence about the amount and disclosures in the financial statements. The procedures selected depend on our 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, we considered internal control relevant to the component s preparation and 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 component s internal control. An audit also includes the evaluation of the appropriateness of accounting policies used and the reasonableness of accounting estimates, if any, made by management, as well as evaluating the overall presentation of the financial statements. As requested by you, we planned and performed our audit using the component materiality specified in your instructions of 573,000 NOK, which is different from the materiality level we would have used had we been designing the audit to express an opinion on the financial statements of the component alone. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. The conclusions reached in forming our opinion are based on the component materiality specified by you in the context of the audit of the group financial statements.
Opinion In our opinion, the financial statements of StormGeo, Inc. and Subsidiary as of December 31, 2012 and for the year then ended have been prepared, in all material respects, in accordance with Norway generally accepted accounting principles. Restriction on Use and Distribution The financial statements have been prepared for purposes of providing information to StormGeo Holding AS to enable it to prepare the group financial statements. As a result, the financial statements are not a complete set of financial statements of StormGeo Holding AS in accordance with Norway generally accepted accounting principles and are not intended to present fairly, in all material respects the financial position of StormGeo, Inc. and Subsidiary as of December 31, 2012 and of its financial performance, and its cash flow for the year then ended in accordance with Norway generally accepted accounting principles. The financial statements may, therefore, not be suitable for another purpose. This report is intended solely for your information and use in conjunction with the audit of the group financial statements of StormGeo Holding AS and should not be used by anyone for any other purpose. If you have any questions on this report, please contact Angelo Mira or me. Marty Lindle Director PKF of Texas Houston, TX USA February 21, 2013
StormGeo, Inc. and Subsidiary Consolidated Balance Sheet December 31, 2012 Assets (in NOK) Current assets Cash 1,130,895 Accounts receivable - trade, net 5,799,163 Accrued accounts receivable - trade 827,989 Prepaid expenses 547,603 Deferred tax asset 1,185,503 Total current assets 9,491,153 Property and equipment Furniture and fixtures 155,690 Automobiles and trucks 1,551,145 1,706,835 Less accumulated depreciation (611,495) Property and equipment, net 1,095,340 Intangibles Customer relationships 40,255,335 Goodwill 17,249,894 57,505,229 Less accumulated amortization (3,730,437) Intangibles, net 53,774,792 Other assets 553,437 Deferred tax asset 625,328 Total assets 65,540,050 See notes to consolidated financial statements.
3 Liabilities and Shareholder s Equity (in NOK) Current liabilities Accounts payable trade 252,150 Accounts payable related party 3,521,038 Accrued expenses 2,677,446 Accrued expenses related party 842,275 Deferred revenue 8,283,595 Note payable to related party 39,021,326 Total current liabilities 54,597,830 Total liabilities 54,597,830 Commitments and contingencies - Shareholder s equity Common stock US $0.01 par value, 100 shares authorized, issued and outstanding 6 Additional paid-in capital 15,017,505 Retained deficit (3,482,063) Accumulated other comprehensive loss (593,228) Total shareholder s equity 10,942,220 Total liabilities and shareholder s equity 65,540,050
StormGeo, Inc. and Subsidiary 4 Consolidated Statement of Operations and Comprehensive Loss For the Year Ended December 31, 2012 (in NOK) Sales Recurring revenue 34,779,353 Non-recurring revenue 453,712 Other ordinary income 29,764 Total sales 35,262,829 Cost of sales 1,815,594 Gross profit on sales 33,447,235 Operating expenses Salaries and wages 21,442,464 Depreciation 537,820 Amortization 3,886,879 Other operating expenses 7,538,570 Total operating expenses 33,405,733 Income from operations 41,502 Other income (expense) Interest expense related party (2,096,920) Loss before provision for taxes (2,055,418) Income tax expense (benefit) Current tax expense 144,944 Deferred tax benefit (823,788) Total income tax benefit, net (678,844) Net loss (1,376,574) Other comprehensive loss, net of tax Foreign currency translation adjustments (403,334) Comprehensive loss (1,779,908) See notes to consolidated financial statements.
5 StormGeo, Inc. and Subsidiary Consolidated Statement of Changes in Shareholder s Equity For the Year Ended December 31, 2012 (in NOK) Common Stock Additional Paid-in Capital Retained Deficit Accumulated Other Comprehensive Loss Total Shareholder s Equity Balance, December 31, 2011 6 - (2,105,489) (189,894) (2,295,377) Contribution from StormGeo AS - 15,017,505 - - 15,017,505 Comprehensive loss - - (1,376,574) (403,334) (1,779,908) Balance, December 31, 2012 6 15,017,505 (3,482,063) (593,228) 10,942,220 See notes to consolidated financial statements.
StormGeo, Inc. and Subsidiary 6 Consolidated Statement of Cash Flows For the Year Ended December 31, 2012 (in NOK) Cash flows from operating activities Net loss (1,376,574) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 4,424,699 Provision for bad debt 25,987 Deferred taxes (823,788) Changes in operating assets and liabilities Accounts receivable trade 1,765,116 Accrued accounts receivable trade (296,201) Prepaid expenses 228,586 Other assets (553,437) Accounts payable (166,548) Accounts payable related party 3,521,038 Accrued expenses 1,610,839 Accrued expenses related party 842,275 Deferred revenue (2,436,020) Net cash provided by operating activities 6,765,972 Cash flows from investing activities Acquisition of ImpactWeather, Inc. (58,322,000) Purchase of property and equipment (304,798) Net cash used in investing activities (58,626,798) Cash flows from financing activities Borrowings on notes payable related party 43,053,500 Payments on notes payable related party (5,303,365) Contribution from parent 15,017,505 Net cash provided by financing activities 52,767,640 Effect of currency exchange rate (99,169) Net increase in cash 807,645 Cash at beginning of year 323,250 Cash at end of year 1,130,895 Supplemental cash flow information: Cash paid for interest 1,212,327 See notes to consolidated financial statements.
StormGeo, Inc. and Subsidiary 7 Notes to Consolidated Financial Statements December 31, 2012 Note 1 - Summary of Significant Accounting Policies Nature of business StormGeo, Inc. ( StormGeo ), organized on September 7, 2010, is a Delaware-registered company and is a wholly-owned subsidiary of StormGeo AS ( Parent ), a Norwegian corporation. StormGeo and ImpactWeather, Inc., its wholly-owned subsidiary (collectively, the Company ), is in the information services industry operating as a full service weather department. It helps organizations worldwide more effectively fulfill their safety, security, operational and risk management missions. The Company serves a diverse group of leading organizations in a wide range of industries such as oil and gas, petrochemical, electric utilities, hospitality, healthcare, financial services, manufacturing, retail, and many others. Acquisition On May 14, 2012, StormGeo acquired all the assets and liabilities of ImpactWeather, Inc. ( ImpactWeather ), a Delaware-registered company located in Houston, Texas, pursuant to a stock purchase agreement. The acquisition has been accounted for as a business combination in accordance with Norwegian Accounting Standard ( NAS ) 17 Business Acquisitions and Consolidated. The purchase price was allocated to the assets acquired and liabilities assumed based on management s estimate of their fair value on the date of acquisition. A summary reconciliation of the purchase price is as follows (in approximate amounts): (in NOK) Current assets 9,382,000 Property, plant, and equipment 1,369,000 Customer relationships 42,182,000 Goodwill 18,076,000 Current liabilities (12,687,000) Net 58,322,000 Customer Relationships represents the value of ImpactWeather s existing relationship with its customer base calculated using the present value of estimated future cash flows which considers factors such as the expected growth rate and average duration of customer relationships. Customer Relationships is amortized over eight years at 5,243,000 NOK per year and is recorded in accordance with NAS 19 Intangible Assets. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. Goodwill is accounted for in accordance with NAS 17 which requires amortization using an amortization method that reasonably reflects the expected pattern of future earnings over a certain period. The Company elected to amortize goodwill over 20 years at 899,000 NOK per year which is based among others, on the uniqueness of ImpactWeather within the U.S. market where it operates and its potential capacity to expand into new industries, and the low turnover of personnel whose competence have built-up over many years. Goodwill will be reviewed as least annually for impairment. Recoverability is periodically assessed based on expected future profitability and undiscounted future cash flows and contribution to the overall operations of the Company.
StormGeo, Inc. and Subsidiary 8 Notes to Consolidated Financial Statements December 31, 2012 Note 1 - Summary of Significant Accounting Policies (Continued) Principles of consolidation The consolidated financial statements includes StormGeo and the accounts of ImpactWeather representing results of operations from the date of purchase (May 14, 2012) through December 31, 2012. All significant intercompany accounts and transactions have been eliminated in consolidation. Foreign currency translation Assets and liabilities are translated into Norwegian Kroner at the exchange rate in effect at the balance sheet date. Income and expense items and cash flows are translated at the average exchange rate throughout the year. Translation adjustments are charged or credited to other comprehensive income (loss) recorded within the consolidated statement of operations and comprehensive loss. Revenue recognition Revenue is recognized as services are provided. At time of sale, the revenue is recorded to deferred revenue and as the services are provided to the customer, the revenue is then recognized when earned. Cash and cash equivalents The cash flow statement is prepared using the indirect method. The Company considers all highly-liquid investments with original maturities of three months or less to be cash equivalents. Accounts receivable and allowance for uncollectable accounts The Company records accounts receivable at net realizable value. This value includes an allowance for estimated uncollectable accounts to reflect any loss anticipated on the accounts receivable balances and charged to the provision for doubtful accounts. As of December 31, 2012, there was no allowance required to be recorded. Property and equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation and amortization is computed using the straight-line method over the estimated useful lives. Estimated remaining useful lives are as follows: Years Furniture and fixtures 3 Automobiles and trucks 1
StormGeo, Inc. and Subsidiary 9 Notes to Consolidated Financial Statements December 31, 2012 Note 1 - Summary of Significant Accounting Policies (Continued) Property and equipment (continued) Expenditures for major acquisitions and improvements are capitalized while expenditures for maintenance and repairs are charged to operations as incurred. The cost of assets sold or retired and the related accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is included in net income. Impairment of long-lived assets Long-lived tangible and intangible assets are reviewed for impairment when events indicate that the carrying value may not be recoverable. If the sum of expected future undiscounted cash flows is less than the carrying amount, an impairment loss is recognized based on the fair value of the related assets. As of December 31, 2012, management believes all long-lived assets are fully realizable, thus no impairment is required. Income taxes The Company provides for United States federal and state ( Texas Margin tax ) income taxes. Deferred income taxes are recognized for the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Texas Margin tax is a 1% income tax that is levied on taxable margin. Taxable margin is defined as total revenue less deductions for cost of goods sold or compensation and benefits in which the total calculated taxable margin cannot exceed 70% of total revenue. Accordingly, a provision for taxes has been recorded for the year ended December 31, 2012 in the consolidated statement of operations and comprehensive loss. Financial instruments and credit risk Financial instruments which potentially subject the Company to credit risk include cash and accounts receivable. The Company maintains its cash accounts in federally-insured domestic institutions. From time to time, the balances exceed insured limits. The terms of the cash deposits are on demand to minimize risk. The Company has not incurred losses related to any of its deposits. Trade accounts receivable consist of uncollateralized receivables from customers in various industries located throughout the United States and other countries. Financial instruments, including cash, accounts receivable and accounts payable, are carried at cost, which management believes approximates fair value because of the short-term maturity of these instruments. The Company s debt instruments approximate fair value as the underlying interest rates are commensurate with debt instruments carrying similar credit risk.
StormGeo, Inc. and Subsidiary 10 Notes to Consolidated Financial Statements December 31, 2012 Note 1 - Summary of Significant Accounting Policies (Continued) Research and development Development costs are capitalized in the balance sheet to the extent a future economic benefit can be identified related to the development of an identifiable intangible asset, and the costs can be reliably measured. Where that is not the case, such costs are expensed as incurred. Development costs are amortized on a linear (straight-line) basis to expense over their estimated economic lifetime. Research costs are recognized as expense in the current period. Estimates Note 2 - Debt The preparation of financial statements in conformity with Norway 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. On January 1, 2012, the Company entered into a note agreement with the Parent in the amount of approximately 4,131,000 NOK for business development. The interest rate on the note is fixed at 5% with principal and interest payable in full upon its maturity on December 31, 2013. On May 14, 2012, the Company entered into a note agreement with the Parent in the amount of approximately 39,078,000 NOK to finance the acquisition of ImpactWeather. Payments on the note are due in monthly increments of interest only at the fixed rate of 8%. All remaining unpaid principal and accrued interest are due on demand or May 14, 2017. As of December 31, 2012, the outstanding balance on the note is approximately 34,890,000 NOK. Note 3 - Operating Leases The Company leases office space in Houston, Texas under an operating lease agreement that expires August 31, 2015. Total rent expense incurred during 2012 amounted to approximately 998,000 NOK for all leases. Total future minimum lease payments as of December 31, 2012 are as follows: Year Ending December 31, (in NOK) 2013 1,476,000 2014 1,476,000 2015 984,000 3,936,000
StormGeo, Inc. and Subsidiary 11 Notes to Consolidated Financial Statements December 31, 2012 Note 4 - Profit Sharing Plan The Company has a 401(k) plan with Insperity, its payroll service provider, which is a defined contribution plan under Internal Revenue Code Section 401(k) for all eligible employees who have attained the age of 21 years and have completed three months of service with the Company. Employees can contribute up to 80% of their annual salary, subject to annual limitations. The Company provides for a safe harbor non-elective contribution of 100% of the first 6% of an employee s contribution to the Plan. For the year ended December 31, 2012, the Company contributions totaled approximately 534,000. Note 5 - Income Taxes The Company s income tax expense (benefit) consists of the following as of December 31, 2012: (in NOK) Current tax expense State 77,396 Foreign 67,548 144,944 Deferred tax benefit Federal (823,788) Total income tax benefit, net (678,844) Significant components of the Company s deferred tax asset consist of the following at December 31, 2012: (in NOK) Current Reserve for bad debts 10,819 Accrued expenses 152,545 Federal net operating loss carry forward 1,022,139 Total current deferred tax asset 1,185,503 Non-current Property and equipment depreciation 117,326 Goodwill amortization 508,002 Total non-current deferred tax asset 625,328 Total deferred tax asset 1,810,831
StormGeo, Inc. and Subsidiary 12 Notes to Consolidated Financial Statements December 31, 2012 Note 6 - Commitments and Contingencies In the normal course of business, the Company is subjected to various claims, legal actions, contract negotiations, and disputes. The Company provides for losses, if any, in the year in which they can be reasonably estimated. In management s opinion, there are currently no such matters outstanding that would have a material effect on the accompanying consolidated financial statements. Note 7 - Related Party Transactions In connection with the acquisition of ImpactWeather, the Parent incurred acquisition costs of 2,247,877 NOK on behalf of StormGeo which is included as part of the purchase price in accordance with NAS 17 (see Note 1). The full amount is unpaid as of December 31, 2012 and is included in accounts payable related party in the consolidated balance sheet. In June 2012, the Parent entered into a Master Services Agreement with the Company to provide various services, as defined, for a monthly fee of USD $75,439. The agreement provides for an initial term of one year and will automatically renew for successive terms of one year thereafter. The Company incurred approximately 3,072,000 NOK of related fees which is included in other operating expenses in the consolidated statement of operations and comprehensive loss. As of December 31, 2012, the unpaid portion of 842,275 NOK is recorded as accrued expenses related party in the consolidated balance sheet. The Company has a note payable to the Parent totaling 39,021,326 NOK at December 31, 2012 (see Note 2). Related interest expense during the year was approximately 2,097,000 NOK of which 893,000 NOK is included in accounts payable related party in the consolidated balance sheet as of December 31, 2012. Note 8 - Subsequent Events Management has evaluated subsequent events through February 21, 2013, which was the date the consolidated financial statements were available to be issued, and has determined that there are no subsequent events to be disclosed.
StormGeo, Inc. and Subsidiary Consolidated Financial Statements December 31, 2013
StormGeo, Inc. and Subsidiary December 31, 2013 Table of Contents Page (s) Independent Auditors Report.....1-2 Consolidated Balance Sheets... 3 Consolidated Statements of Operations and Comprehensive Loss... 4 Consolidated Statement of Changes in Shareholder s Equity... 5 Consolidated Statements of Cash Flows... 6 Notes to Consolidated Financial Statements... 7-13
AUDITORS REPORT TO THE GROUP AUDITOR ON THE AUDIT OF FINANCIAL INFORMATION FOR GROUP AUDIT PURPOSES Name of component: StormGeo, Inc. and Subsidiary Year-end: December 31, 2013 Currency: NOK To: Jorund Haga Indrehus Partner, Ernst & Young AS As requested in your instructions dated December 31, 2013, we have audited, for the purpose of your audit of the group financial statements of StormGeo Holding AS, the accompanying consolidated balance sheets of StormGeo, Inc. and Subsidiary, a subsidiary of StormGeo Holding AS as of December 31, 2013 and 2012 and the related consolidated statements of operations and comprehensive loss, changes in shareholder s equity, and cash flows for the years then ended. This special purpose financial information has been prepared solely to enable StormGeo Holding AS to prepare its group financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and presentation of these financial statements in accordance with policies and instructions contained in StormGeo Holding AS s accounting manual dated November 2013 and for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with International Standards on Auditing. International Standards on Auditing require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. As requested by you, we planned and performed our audits using the component materiality specified in your instructions of 1,403,000 NOK and 573,000 NOK for 2013 and 2012, respectively, which is different from the materiality level that we would have used, had we been designing the audits to express an opinion on the financial statements of the component alone. An audit involves performing procedures to obtain audit evidence about the amount and disclosures in the financial statements. The procedures selected depend on our 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, we consider internal control relevant to the component s preparation and 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 component s internal control. An audit also includes the evaluation of the appropriateness of accounting policies used and the reasonableness of 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 opinion. The conclusions reached in forming our opinion are based on the component materiality specified by you in the context of the audit of the group financial statements. Opinion In our opinion, the accompanying financial statements of StormGeo, Inc. and Subsidiary as of December 31, 2013 and 2012 and for the years then ended have been prepared, in all material respects, in accordance with the policies and instructions contained in StormGeo Holding AS accounting manual. Restriction on Use and Distribution The financial statements have been prepared for purposes of providing information to StormGeo Holding AS to enable it to prepare it s group financial statements. As a result, the financial statements are not a complete set of financial statements of StormGeo Holding AS in accordance with Norway generally accepted accounting principles and are not intended to present fairly, in all material respects the financial position of StormGeo, Inc. and Subsidiary as of December 31, 2013 and 2012 and of its financial performance, and its cash flow for the years then ended in accordance with Norway generally accepted accounting principles. The financial statements may, therefore, not be suitable for another purpose. This report is intended solely for the information and use of Ernst & Young in conjunction with the audit of the group financial statements of StormGeo Holding AS and should not be used by anyone for any other purpose. If you have any questions on this report, please contact Angelo Mira or me. Marty Lindle Director PKF of Texas Houston, TX USA February 10, 2014
StormGeo, Inc. and Subsidiary Consolidated Balance Sheet December 31, 2013 2012 (in NOK) Assets Current assets Cash 807,750 1,130,895 Accounts receivable - trade, net 8,232,800 5,799,163 Accrued accounts receivable - trade 6,235,440 827,989 Prepaid expenses 906,440 547,603 Deferred tax asset 191,500 1,185,503 Total current assets 16,373,930 9,491,153 Property and equipment Leasehold improvements 16,370 - Furniture and fixtures 170,640 155,690 Data processing equipment 2,580,730 1,551,145 2,767,740 1,706,835 Less accumulated depreciation (1,291,660) (611,495) Property and equipment, net 1,476,080 1,095,340 Intangibles Customer relationships 44,120,140 40,255,335 Goodwill 18,906,010 17,249,894 63,026,150 57,505,229 Less accumulated amortization (10,549,050) (3,730,437) Intangibles, net 52,477,100 53,774,792 Other assets 1,926,690 553,437 Deferred tax asset 2,493,230 625,328 Total assets 74,747,030 65,540,050 See notes to consolidated financial statements.
3 December 31, 2013 2012 (in NOK) Liabilities and Shareholder s Equity Current liabilities Accounts payable trade 326,570 252,150 Accounts payable related party 4,311,210 3,521,038 Accrued expenses 2,580,060 2,677,446 Accrued expenses related party 1,075,870 842,275 Deferred revenue 13,229,970 8,283,595 Notes payable to related party 42,617,300 39,021,326 Total current liabilities 64,140,980 54,597,830 Total liabilities 64,140,980 54,597,830 Commitments and contingencies - - Shareholder s equity Common stock US $0.01 par value, 100 shares authorized, issued and outstanding 6 6 Additional paid-in capital 15,017,505 15,017,505 Retained deficit (4,821,643) (3,482,063) Accumulated other comprehensive loss 410,182 (593,228) Total shareholder s equity 10,606,050 10,942,220 Total liabilities and shareholder s equity 74,747,030 65,540,050
StormGeo, Inc. and Subsidiary 4 Consolidated Statements of Operations and Comprehensive Loss Year Ended December 31, 2013 2012 (in NOK) Sales Recurring revenue 52,846,720 34,779,353 Non-recurring revenue 1,976,390 453,712 Other ordinary income 376,050 29,764 Total sales 55,199,160 35,262,829 Cost of sales 1,117,100 1,815,594 Gross profit on sales 54,082,060 33,447,235 Operating expenses Salaries and wages 28,617,090 21,442,464 Depreciation 600,350 537,820 Amortization 6,358,080 3,886,879 Other operating expenses 16,909,260 7,538,570 Total operating expenses 52,484,780 33,405,733 Income from operations 1,597,280 41,502 Other income (expense) Interest expense related party (3,185,020) (2,096,920) Loss before provision for taxes (1,587,740) (2,055,418) Income tax expense (benefit) Current tax expense 428,090 144,944 Deferred tax benefit (676,250) (823,788) Total income tax benefit, net (248,160) (678,844) Net loss (1,339,580) (1,376,574) Other comprehensive income (loss), net of tax Foreign currency translation adjustments 1,003,410 (403,334) Comprehensive loss (336,170) (1,779,908) See notes to consolidated financial statements.
5 StormGeo, Inc. and Subsidiary Consolidated Statements of Changes in Shareholder s Equity For the Years Ended December 2013 and 2012 (in NOK) Common Stock Additional Paid-in Capital Retained Deficit Accumulated Other Comprehensive Income (Loss) Total Shareholder s Equity Balance, December 31, 2011 6 - (2,105,489) (189,894) (2,295,377) Contribution from StormGeo AS - 15,017,505 - - 15,017,505 Comprehensive loss - - (1,376,574) (403,334) (1,779,908) Balance, December 31, 2012 6 15,017,505 (3,482,063) (593,228) 10,942,220 Comprehensive income (loss) - - (1,339,580) 1,003,410 (336,170) Balance, December 31, 2013 6 15,017,505 (4,821,643) 410,182 10,606,050 See notes to consolidated financial statements.
StormGeo, Inc. and Subsidiary 6 Consolidated Statements of Cash Flows Year Ended December 31, 2013 2012 (in NOK) Cash flows from operating activities Net loss (1,339,580) (1,376,574) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 6,958,430 4,424,699 Provision for bad debt 8,529 25,987 Deferred taxes (676,250) (823,788) Changes in operating assets and liabilities Accounts receivable trade (2,442,166) 1,765,116 Accrued accounts receivable trade (5,407,451) (296,201) Prepaid expenses (358,837) 228,586 Accounts payable 74,420 (166,548) Accounts payable related party 790,172 3,521,038 Accrued expenses (97,386) 1,610,839 Accrued expenses related party 233,595 842,275 Deferred revenue 4,946,375 (2,436,020) Net cash provided by operating activities 2,689,851 7,319,409 Cash flows from investing activities Acquisition of ImpactWeather, Inc. - (58,322,000) Purchase of property and equipment (1,060,905) (304,798) Other assets (1,490,543) (553,437) Net cash used in investing activities (2,551,448) (59,180,235) Cash flows from financing activities Borrowings on notes payable related party 2,141,150 43,053,500 Payments on notes payable related party (3,885,220) (5,303,365) Contribution from parent - 15,017,505 Net cash provided by (used in) financing activities (1,744,070) 52,767,640 Effect of currency exchange rate on cash 1,282,522 (99,169) Net increase (decrease) in cash (323,145) 807,645 Cash at beginning of year 1,130,895 323,250 Cash at end of year 807,750 1,130,895 Supplemental cash flow information: Cash paid for interest 2,748,253 1,212,327 See notes to consolidated financial statements.
StormGeo, Inc. and Subsidiary 7 Notes to Consolidated Financial Statements December 31, 2013 and 2012 Note 1 - Summary of Significant Accounting Policies Nature of business StormGeo, Inc. ( StormGeo ), organized on September 7, 2010, is a Delaware-registered company and is a wholly-owned subsidiary of StormGeo Holding AS ( Parent ), a Norwegian corporation. StormGeo and ImpactWeather, Inc., its wholly-owned subsidiary (collectively, the Company ), is in the information services industry operating as a full service weather department. It helps organizations worldwide more effectively fulfill their safety, security, operational and risk management missions. The Company serves a diverse group of leading organizations in a wide range of industries such as oil and gas, petrochemical, electric utilities, hospitality, healthcare, financial services, manufacturing, retail and many others. Acquisition On May 14, 2012, StormGeo acquired all the assets and liabilities of ImpactWeather, Inc. ( ImpactWeather ), a Delaware-registered company located in Houston, Texas, pursuant to a stock purchase agreement. The acquisition has been accounted for as a business combination in accordance with Norwegian Accounting Standard ( NAS ) 17 Business Acquisitions and Consolidation. The purchase price was allocated to the assets acquired and liabilities assumed based on management s estimate of their fair value on the date of acquisition. A summary reconciliation of the purchase price is as follows (in approximate amounts): (in NOK) Current assets 9,382,000 Property, plant, and equipment 1,369,000 Customer relationships 42,182,000 Goodwill 18,076,000 Current liabilities (12,687,000) Net 58,322,000 Customer Relationships represents the value of ImpactWeather s existing relationship with its customer base calculated using the present value of estimated future cash flows which considers factors such as the expected growth rate and average duration of customer relationships. Customer Relationships are amortized over eight years at 5,515,000 NOK per year and are recorded in accordance with NAS 19 Intangible Assets. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. Goodwill is accounted for in accordance with NAS 17 which requires amortization using an amortization method that reasonably reflects the expected pattern of future earnings over a certain period. The Company elected to amortize goodwill over 20 years at 945,000 NOK per year which is based among others, on the uniqueness of ImpactWeather within the U.S. market where it operates and its potential capacity to expand into new industries, and the low turnover of personnel whose competence have built-up over many years. Goodwill is reviewed as least annually for impairment. Recoverability is periodically assessed based on expected future profitability and undiscounted future cash flows and contribution to the overall operations of the Company.
StormGeo, Inc. and Subsidiary 8 Notes to Consolidated Financial Statements December 31, 2013 and 2012 Note 1 - Summary of Significant Accounting Policies (Continued) Principles of consolidation The consolidated financial statements includes StormGeo and the accounts of ImpactWeather representing results of operations from the date of purchase (May 14, 2012) through December 31, 2013. All significant intercompany accounts and transactions have been eliminated in consolidation. Foreign currency translation Assets and liabilities are translated into Norwegian Kroner at the exchange rate in effect at the balance sheet date. Income and expense items and cash flows are translated at the average exchange rate throughout the year. Translation adjustments are charged or credited to other comprehensive income (loss) recorded within the consolidated statement of operations and comprehensive loss. Revenue recognition Revenue is recognized as services are provided. At time of sale, the revenue is recorded to deferred revenue and as the services are provided to the customer, the revenue is then recognized when earned. Cash and cash equivalents The cash flow statement is prepared using the indirect method. The Company considers all highly-liquid investments with original maturities of three months or less to be cash equivalents. Accounts receivable and allowance for uncollectable accounts The Company records accounts receivable at net realizable value. This value includes an allowance for estimated uncollectable accounts to reflect any loss anticipated on the accounts receivable balances and charged to the provision for doubtful accounts. Property and equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation and amortization is computed using the straight-line method over the estimated useful lives. Estimated remaining useful lives are as follows: Years Leasehold improvements 5 Furniture and fixtures 3 Data processing equipment 5
StormGeo, Inc. and Subsidiary 9 Notes to Consolidated Financial Statements December 31, 2013 and 2012 Note 1 - Summary of Significant Accounting Policies (Continued) Property and equipment (continued) Expenditures for major acquisitions and improvements are capitalized while expenditures for maintenance and repairs are charged to operations as incurred. The cost of assets sold or retired and the related accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is included in net income (loss). Impairment of long-lived assets Long-lived tangible and intangible assets are reviewed for impairment when events indicate that the carrying value may not be recoverable. If the sum of expected future undiscounted cash flows is less than the carrying amount, an impairment loss is recognized based on the fair value of the related assets. As of December 31, 2013 and 2012, management believes all longlived assets are fully realizable, thus no impairment is required. Income taxes The Company provides for United States federal and state ( Texas Margin tax ) income taxes. Deferred income taxes are recognized for the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Texas Margin tax is a 1% income tax that is levied on taxable margin. Taxable margin is defined as total revenue less deductions for cost of goods sold or compensation and benefits in which the total calculated taxable margin cannot exceed 70% of total revenue. Accordingly, a provision for taxes has been recorded for the years ended December 31, 2013 and 2012 in the consolidated statements of operations and comprehensive loss. Financial instruments and credit risk Financial instruments which potentially subject the Company to credit risk include cash and accounts receivable. The Company maintains its cash accounts in federally-insured domestic institutions. From time to time, the balances exceed insured limits. The terms of the cash deposits are on demand to minimize risk. The Company has not incurred losses related to any of its deposits. Trade accounts receivable consist of uncollateralized receivables from customers in various industries located throughout the United States and other countries. Financial instruments, including cash, accounts receivable and accounts payable, are carried at cost, which management believes approximates fair value because of the short-term maturity of these instruments. The Company s debt instruments approximate fair value as the underlying interest rates are commensurate with debt instruments carrying similar credit risk.
StormGeo, Inc. and Subsidiary 10 Notes to Consolidated Financial Statements December 31, 2013 and 2012 Note 1 - Summary of Significant Accounting Policies (Continued) Research and development Development costs are capitalized in the balance sheet to the extent a future economic benefit can be identified related to the development of an identifiable intangible asset, and the costs can be reliably measured. Where that is not the case, such costs are expensed as incurred. Development costs are amortized on a linear (straight-line) basis to expense over their estimated economic lifetime. Research costs are recognized as expense as incurred. Estimates Note 2 - Debt The preparation of financial statements in conformity with Norway 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. Reclassifications Certain reclassifications have been made to the 2012 financial statements to confirm with 2012 financial statements presentation. Such reclassifications had no effect on previously reported net loss or equity. On January 1, 2012, the Company entered into a loan agreement with the Parent in the amount of approximately 4,131,000 NOK for business development. The interest rate on the loan is fixed at 5% with principal and interest payable in full upon its maturity which as of the report date, has not been finalized. The Company made principal payments during 2013 and as of December 31, 2013 and 2012, the outstanding balance on the loan is approximately 1,407,000 and 4,131,000 NOK, respectively. Related interest expense during 2013 and 2012 was approximately 189,000 and 219,000 NOK, respectively, of which 233,000 and 104,000 NOK is included in accounts payable related party in the consolidated balance sheets as of December 31, 2013 and 2012, respectively. On May 14, 2012, the Company entered into a loan agreement with the Parent in the amount of approximately 39,078,000 NOK to finance the acquisition of ImpactWeather. Payments on the loan are due in monthly increments of interest only at the fixed rate of 8%. All remaining unpaid principal and accrued interest are due on demand or May 14, 2017. As of December 31, 2013 and 2012, the outstanding balance on the loan is approximately 39,831,000 and 34,890,000 NOK, respectively. Related interest expense during 2013 and 2012 was approximately 2,996,000 and 1,877,000 NOK, respectively, of which 979,000 and 589,000 NOK is included in accounts payable related party in the consolidated balance sheets as of December 31, 2013 and 2012, respectively. During 2013, the Company entered into a short-term loan agreement with the Parent in the amount of approximately 2,141,000 NOK for operating expenses. Payments on the note are at the discretion of management and is not subject to interest. As of December 31, 2013, the outstanding balance on the note is approximately 1,379,000 NOK.
StormGeo, Inc. and Subsidiary 11 Notes to Consolidated Financial Statements December 31, 2013 and 2012 Note 3 - Operating Leases The Company leases office space in Houston, Texas under an operating lease agreement that expires August 31, 2015. Total rent expense incurred during 2013 and 2012 amounted to approximately 1,591,000 and 998,000 NOK for all leases, respectively. Total future minimum lease payments as of December 31, 2013 are as follows: Year Ending December 31, (in NOK) Note 4 - Profit Sharing Plan 2014 1,552,330 2015 1,034,887 2,587,217 The Company has a 401(k) plan with Insperity, its payroll service provider, which is a defined contribution plan under Internal Revenue Code Section 401(k) for all eligible employees who have attained the age of 21 years and have completed three months of service with the Company. Employees can contribute up to 80% of their annual salary, subject to annual limitations. The Company provides for a safe harbor non-elective contribution of 100% of the first 6% of an employee s contribution to the Plan. For the years ended December 31, 2013 and 2012, the Company s contributions totaled approximately 1,416,000 and 534,000 NOK, respectively. Note 5 - Income Taxes The Company s income tax expense (benefit) consists of the following as of December 31: 2013 2012 (in NOK) Current tax expense State 365,780 77,396 Foreign 62,310 67,548 428,090 144,944 Deferred tax benefit Federal (676,250) (823,788) Total income tax benefit, net (248,160) (678,844)
StormGeo, Inc. and Subsidiary 12 Notes to Consolidated Financial Statements December 31, 2013 and 2012 Note 5 - Income Taxes (Continued) Significant components of the Company s deferred tax asset consist of the following at December 31: 2013 2012 (in NOK) Current Reserve for bad debts 12,840 10,819 Accrued expenses 178,660 152,545 Federal net operating loss carry forward - 1,022,139 Total current deferred tax asset 191,500 1,185,503 Non-current Property and equipment depreciation (77,290) 117,326 Goodwill amortization 1,324,720 508,002 Research and development (615,200) - Federal net operating loss carry forward 1,861,000 - Total non-current deferred tax asset 2,493,230 625,328 Total deferred tax asset 2,684,730 1,810,831 Note 6 - Commitments and Contingencies In the normal course of business, the Company is subjected to various claims, legal actions, contract negotiations, and disputes. The Company provides for losses, if any, in the year in which they can be reasonably estimated. In management s opinion, there are currently no such matters outstanding that would have a material effect on the accompanying consolidated financial statements. On October 22, 2013, the Company signed a letter of intent to acquire Applied Weather Technology Inc., an entity registered in the state of California, in order to expand the Company s weather services. As of the report date, negotiations are still ongoing. Note 7 - Related Party Transactions In connection with the acquisition of ImpactWeather, the Parent incurred acquisition costs of approximately 2,464,000 NOK on behalf of StormGeo which is included as part of the purchase price consideration in accordance with NAS 17 (see Note 1). The full amount is unpaid as of December 31, 2013 and 2012 and is included in accounts payable related party in the consolidated balance sheets.
StormGeo, Inc. and Subsidiary 13 Notes to Consolidated Financial Statements December 31, 2013 and 2012 Note 7 - Related Party Transactions (Continued) In June 2012, the Parent entered into a Master Services Agreement with the Company to provide various services, as defined, for a monthly fee of USD $75,439 increased to USD $82,247 effective January 1, 2013. The agreement provides for an initial term of one year and automatically renews for successive terms of one year thereafter. The Company incurred approximately 5,833,000 and 3,072,000 NOK, respectively, of related fees during 2013 and 2012 which is included in other operating expenses in the consolidated statements of operations and comprehensive loss. As of December 31, 2013 and 2012, the unpaid portion of approximately 1,076,000 and 842,000 NOK is recorded as accrued expenses related party in the consolidated balance sheets, respectively. During 2012, the Company incurred miscellaneous expenses advanced by the Parent in the amount of approximately 635,000 NOK and remained unpaid as of December 31, 2013 and 2012 and is included in accounts payable related party in the consolidated balance sheets. As of December 31, 2013, the Company has trade receivables from the Parent in the amount of approximately 3,978,000 NOK and is included in accrued accounts receivable trade in the consolidated balance sheets. Note 8 - Subsequent Events Management has evaluated subsequent events through February 10, 2014, which was the date the consolidated financial statements were available to be issued, and has determined that there are no subsequent events to be disclosed.
Applied Weather Technology, Inc. AWT (Consolidated) Consolidated Balance Sheet December 31,2013 Financial Row AWT US AWT Europe AWT Hong Kong AWT Japan AWT Korea AWT Singapore Elimination Total Amount Amount Amount Amount Amount Amount Amount Amount ASSETS Current Assets Cash $3 310 329 $761 688 $546 540 $30 807 $262 251 $146 361 $0 $5 057 976 Accounts Receivable 1201 - Accounts Receivable 6 234 258 0 0 0 0 0 0 6 234 258 1250 - Reserve for Bad Debts -573 302-13 193 0 0 0 0 0-586 495 Accounts Receivable, Net 5 660 956-13 193 0 0 0 0 0 5 647 763 Other Current Assets 1302 - Accrued Revenue Receivable 379 934 0 0 0 0 0 0 379 934 1303 - California R&D Refunds 31 685 0 0 0 0 0 0 31 685 1311 - Other Receivables 0 8 204 0 0 0 0 0 8 204 1312 - Receivable from AWT Korea 1 101 0 0 0 0 0-1 101 0 1315 - Receivable from AWT Japan 403 940 0 0 0 0 0-403 940 0 1316 - Receivable from AWT U.S. 0 2 705 042 3 088 594 578 433 1 076 796 1 406 570-8 855 435-0 1320 - Refundable Deposit 2 200 0 30 659 6 310 43 733 15 494 0 98 396 1325 - Prepaid Expenses 214 946 16 434 21 038 0 0 860 0 253 278 1327 - Prepaid Tax 0 0 0 2 048 177 0 0 2 225 1335 - Payroll Suspense 750 0 0 0 0 0 0 750 1337 - Travel Advances 0 0 0 765 0 0 0 765 1340 - Undeposited Funds -31 786 0 0 0-3 378 0 0-35 164 Total Other Current Asset 1 002 771 2 729 681 3 140 291 587 555 1 117 328 1 422 924-9 260 477 740 073 Total Current Assets 9 974 055 3 478 176 3 686 831 618 362 1 379 579 1 569 285-9 260 477 11 445 811 Fixed Assets 1400 - FIXED ASSETS AT COST 1410 - Computer Equipment 807 413 65 273 31 149 0 0 1 459 0 905 294 1420 - Software/Licenses 80 382 0 0 0 0 0 0 80 382 1430 - Furniture/Fixtures 156 185 15 582 74 142 0 12 217 3 677 0 261 803 1435 - Office Equipment 0 7 750 13 545 0 0 2 724 0 24 019 1436 - Exhibition Equipment 0 2 660 0 0 0 0 0 2 660 1450 - Leasehold Improvements 54 224 0 0 0 0 12 296 0 66 519 1460 - Building & Improvements 1 688 336 0 0 0 0 0 0 1 688 336
1470 - Land 1 693 907 0 0 0 0 0 0 1 693 907 Total - 1400 - FIXED ASSETS AT COST 4 480 447 91 265 118 836 0 12 217 20 155 0 4 722 921 1500 - ACCUMULATED DEPRECIATION 1510 - Accum Dep- Computer -602 776-58 035-26 529 0 0-574 0-687 914 1520 - Accum Dep Software/Lic -57 993 0 0 0 0 0 0-57 993 1530 - Accum Dep- Furniture -117 615-13 849-40 186 0-9 914-735 0-182 300 1535 - Accum Dep - Office Equipment 0-7 675-12 550 0 0-370 0-20 594 1536 - Accum Dep - Exhibition Equipment 0-2 300 0 0 0 0 0-2 300 1555 - Accum Dep - Leasehold Improve -19 229 0 0 0 0-3 586 0-22 816 1560 - Accum Dep - Building & Improve. -331 698 0 0 0 0 0 0-331 698 Total - 1500 - ACCUMULATED DEPRECIATION -1 129 311-81 860-79 265 0-9 914-5 265 0-1 305 615 Net Fixed Assets 3 351 136 9 406 39 571 0 2 304 14 890 0 3 417 306 Other Assets 1600 - OTHER ASSETS 1610 - Organization Cost 915 0 0 0 0 0 0 915 1620 - Acc. Amortization- Organi -915 0 0 0 0 0 0-915 1630 - Intangible Asset - KWC Clients 1 300 000 0 0 0 0 0 0 1 300 000 1635 - Acc Amortization - KWC Clients -1 300 000 0 0 0 0 0 0-1 300 000 1655 - Building Loan Fees 22 029 0 0 0 0 0 0 22 029 1656 - Acc Amortization-Bldg Loan Fees -7 894 0 0 0 0 0 0-7 894 Total - 1600 - OTHER ASSETS 14 135 0 0 0 0 0 0 14 135 1700 - INVESTMENT IN SUBSIDIARIES 1710 - Investment in AWT Korea 1 061 500 0 0 0 0 0-1 061 500 0 1720 - Investment in AWT Europe 2 115 000 0 0 0 0 0-2 115 000 0 1730 - Investment in AWT Japan 57 917 0 0 0 0 0-57 917 0 1740 - Investment in AWT Hong Kong 667 000 0 0 0 0 0-667 000 0 Total - 1700 - INVESTMENT IN SUBSIDIARIES 3 901 417 0 0 0 0 0-3 901 417 0 Total Other Assets 3 915 552 0 0 0 0 0-3 901 417 14 135 Total ASSETS $17 240 744 $3 487 581 $3 726 402 $618 362 $1 381 883 $1 584 175 ($13 161 894) $14 877 253 LIABILITIES & EQUITY Current Liabilities Accounts Payable $171 470 $5 668 $3 759 $3 569 $3 424 $675 $0 $188 566 Credit Card $0 $9 054 $0 $0 $0 $0 $0 $9 054 Other Current Liabilities 2105 - Payroll Liability 181 300 0 0 0 18 006 0 0 199 306 2110 - Payroll Tax Liability 0 51 449 0 11 580 0 0 0 63 030 2120-401K Employee Contributions 46 289 0 0 0 0 0 0 46 289 2125-401k Loan Repayments 517 0 0 0 0 0 0 517 2130-401k Employer Match Provision 71 989 0 0 0 0 0 0 71 989 2135 - Accrued Bonus Pay 457 453 0 0 0 0 0 0 457 453 2140 - Accrued PTO 466 696 0 0 0 0 0 0 466 696 2145 - Accrued Employee Commissions 43 000 0 0 0 0 0 0 43 000 2200 - Federal Tax Liability 709 710 146 250 107 220 0 0 1 701 0 964 881
2210 - State Tax Liability 24 018 0 0 0 0 0 0 24 018 2220 - Sales Tax Payable 0 0 0 0-624 0 0-624 2220.1 - Use Tax Payable-UK 0-38 728 0 0 0 0 0-38 728 2220.2 - VAT Tax Payable - UK 0 34 212 0 0 0 0 0 34 212 2220.3 - Deferred Tax - UK 0 318 0 0 0 0 0 318 2305 - Payable to AWT U.S. 0 622 817 2 068 477 984 470 1 091 768 1 161 209-5 928 742 0 2310 - Payable to AWT Europe 1 869 108 0 0 0 0 0-1 869 108 0 2320 - Payable to AWT Hong Kong 1 036 432 0 0 0 0 167 069-1 203 501 0 2323 - Payable to AWT Singapore 243 006 0 0 0 0 0-243 006 0 2325 - Payable to AWT Korea 36 049 0 0 0 0 0-36 049 0 2328 - Payable to AWT Japan -126 777 0 0 0 0 0 126 777 0 2330 - Payable to QuWeather 29 867 0 0 0 0 0-29 867 0 2333 - HK Payable to Singapore 0 0-167 395 0 0 0 167 395-0 2410 - Other Miscellaneous Liabilities 120 860 0 0 0 0 0 0 120 860 2450 - Building Loan, ST portion - BBCN 45 803 0 0 0 0 0 0 45 803 2490 - DEFERRED REVENUE 245 319 0 0 0 0 0 0 245 319 Total Other Current Liabilities 5 500 637 816 319 2 008 302 996 050 1 109 150 1 329 979-9 016 100 2 744 338 Total Current Liabilities 5 672 108 831 041 2 012 062 999 620 1 112 574 1 330 654-9 016 100 2 941 958 Long Term Liabilities 2505 - Building Loan, LT portion BBCN 1 824 404 0 0 0 0 0 0 1 824 404 Total Long Term Liabilities 1 824 404 0 0 0 0 0 0 1 824 404 Equity 3000 - Opening Bal Equity $57 496 $0 $0 $0 $0 $0 $0 $57 496 3020 - Common Stock $1 488 $0 $0 $0 $169 280 $0 ($169 280) $1 488 3030 - Additional Paid in Capital $0 $155 $13 $63 525 $0 $0 ($63 693) ($0) 3040 - Dividend Distributions ($19 500 000) ($2 720 726) ($1 657 936) $0 $0 $0 $4 378 662 ($19 500 000) Retained Earnings $26 024 800 $4 313 979 $3 128 748 ($457 894) $114 140 ($1 928) ($2 036 498) $31 085 348 Net Income $3 160 449 $827 238 $241 205 ($85 676) ($52 459) $257 261 ($1 687 087) $2 660 930 Cumulative Translation Adjustment $0 $235 895 $2 310 $98 787 $38 348 ($1 812) ($4 567 898) ($4 194 370) Total Equity 9 744 232 2 656 540 1 714 340-381 258 269 309 253 521-4 145 794 10 110 890 Total LIABILITIES & EQUITY $17 240 744 $3 487 581 $3 726 402 $618 362 $1 381 883 $1 584 175 ($13 161 894) $14 877 253
Applied Weather Technology, Inc. AWT US (Consolidated) Income Statement From Jan 2013 to Dec 2013 4000 - REVENUE 4100 - Route Advisory Services 19 957 980 4300 - Products & Systems 7 041 853 Total - 4000 - REVENUE 26 999 833 Cost Of Sales (863) Gross Profit 27 000 695 Expense 6000 - OCCUPANCY EXPENSES 624 728 6100 - COMMUNICATIONS 920 704 6200 - PAYROLL & BURDEN 15 424 615 6300 - LEGAL & PROFESSIONAL FEES 296 564 6350 - TECHNICAL CONSULTING 120 000 6400 - MARKETING & TRAVEL 925 766 6500 - DEPRECIATION / AMORTIZATION 581 438 6600 - OTHER OPERATING EXPENSES 391 051 7000 - GENERAL & ADMINISTRATIVE 534 188 Total - Expense 19 819 054 Net Ordinary Income 7 181 641 Other Income and Expenses Other Income 7300 - OTHER INCOME 7301 - Interest Income 25 114 7310 - Gain (Loss) from Sale of Assets 2 760 7326 - Foreign Exchange Gain (Loss) (19 777) 7330 - Misc. Income 90 Total - Other Income 8 187 Other Expense 7500 - OTHER EXPENSE 7502 - Interest Expense, Building Loan 118 299 7530 - Other Non Operating Expenses 10 Total - Other Expense 118 309 Net Other Income (Expense) (110 122) Net Income Before Tax 7 071 519 8000 - CORPORATE INCOME TAX 2 361 895 Net Income 4 709 624
Applied Weather Technology, Inc. AWT US (Consolidated) Consolidated Balance Sheet December 31 2012 AWT US AWT Europe AWT Hong Kong AWT Japan AWT Korea Elimination Total ASSETS Current Assets Cash $1 585 298 $1 737 119 $1 272 920 $16 821 $44 979 $0 $4 657 137 Accounts Receivable 1201 - Accounts Receivable 6 362 055 0 0 0 0 0 6 362 055 1250 - Reserve for Bad Debts -539 460-49 015 0 0 0 0-588 475 Accounts Receivable, Net 5 822 595-49 015 0 0 0 0 5 773 579 Other Current Assets 1302 - Accrued Revenue Receivable 45 000 0 0 0 0 0 45 000 1303 - California R&D Refunds 171 089 0 0 0 0 0 171 089 1304 - Corporate Tax Overpayments 94 491 0 0 0 0 0 94 491 1311 - Other Receivables 0 7 193 0 0 0 0 7 193 1312 - Receivable from AWT Korea 12 927 0 0 0 0-12 927 0 1315 - Receivable from AWT Japan 403 940 0 0 0 0-403 940 0 1316 - Receivable from AWT U.S. 0 2 304 074 1 318 136 344 211 148 224-4 114 645-0 1320 - Refundable Deposit 2 200 0 35 445 7 730 187 617 0 232 992 1325 - Prepaid Expenses 0 21 777 8 286 0 0 0 30 063 1326 - Prepaid Expenses (historic) 264 914 0 0 0 0 0 264 914 1327 - Prepaid Tax 0 0 0 2 177 0 0 2 177 1332 - Employee Receivables 1 223 0 0 0 0 0 1 223 1335 - Payroll Suspense 0 0 0 0 0 0 0 1337 - Travel Advances 0 0 0 909 0 0 909 1340 - Undeposited Funds -15 893 0 0 0 12 362 0-3 530 Total Other Current Asset 979 892 2 333 044 1 361 868 355 027 348 203-4 531 512 846 521 Total Current Assets 8 387 784 4 021 148 2 634 788 371 848 393 182-4 531 512 11 277 237 Fixed Assets 1400 - FIXED ASSETS AT COST 1410 - Computer Equipment 661 337 55 067 34 144 0 0 0 750 549 1420 - Software/Licenses 78 944 0 0 0 0 0 78 944 1430 - Furniture/Fixtures 156 635 13 580 70 521 0 11 420 0 252 155 1435 - Office Equipment 0 7 540 13 550 0 0 0 21 090 1436 - Exhibition Equipment 0 2 667 0 0 0 0 2 667 1450 - Leasehold Improvements 37 184 0 0 0 0 0 37 184 1460 - Building & Improvements 1 599 189 0 0 0 0 0 1 599 189 1470 - Land 1 693 907 0 0 0 0 0 1 693 907
Total - 1400 - FIXED ASSETS AT COST 4 227 196 78 853 118 215 0 11 420 0 4 435 684 1500 - ACCUMULATED DEPRECIATION 1510 - Accum Dep- Computer -501 578-52 290-27 510 0 0 0-581 378 1520 - Accum Dep Software/Lic -46 101 0 0 0 0 0-46 101 1530 - Accum Dep- Furniture -101 169-12 575-30 660 0-8 144 0-152 547 1535 - Accum Dep - Office Equipment 0-7 065-11 433 0 0 0-18 498 1536 - Accum Dep - Exhibition Equipment 0-2 006 0 0 0 0-2 006 1555 - Accum Dep - Leasehold Improve -6 988 0 0 0 0 0-6 988 1560 - Accum Dep - Building & Improve. -224 978 0 0 0 0 0-224 978 Total - 1500 - ACCUMULATED DEPRECIATION -880 814-73 936-69 603 0-8 144 0-1 032 496 Net Fixed Assets 3 346 382 4 917 48 612 0 3 276 0 3 403 188 Other Assets 1600 - OTHER ASSETS 1610 - Organization Cost 915 0 0 0 0 0 915 1620 - Acc. Amortization- Organi -915 0 0 0 0 0-915 1630 - Intangible Asset - KWC Clients 1 300 000 0 0 0 0 0 1 300 000 1635 - Acc Amortization - KWC Clients -1 040 000 0 0 0 0 0-1 040 000 1655 - Building Loan Fees 22 029 0 0 0 0 0 22 029 1656 - Acc Amortization-Bldg Loan Fees -5 507 0 0 0 0 0-5 507 Total - 1600 - OTHER ASSETS 276 522 0 0 0 0 0 276 522 1700 - INVESTMENT IN SUBSIDIARIES 1710 - Investment in AWT Korea 1 061 500 0 0 0 0-1 061 500 0 1720 - Investment in AWT Europe 2 115 000 0 0 0 0-2 115 000 0 1730 - Investment in AWT Japan 57 917 0 0 0 0-57 917 0 1740 - Investment in AWT Hong Kong 667 000 0 0 0 0-667 000 0 Total - 1700 - INVESTMENT IN SUBSIDIARIES 3 901 417 0 0 0 0-3 901 417 0 Total Other Assets 4 177 939 0 0 0 0-3 901 417 276 522 Total ASSETS $15 912 105 $4 026 065 $2 683 401 $371 848 $396 457 ($8 432 930) $14 956 947 LIABILITIES & EQUITY Current Liabilities Accounts Payable $245 538 $16 795 $2 559 $6 546 $7 628 $0 $279 067 Credit Card $0 $7 831 $0 $0 $0 $0 $7 831 Other Current Liabilities 2105 - Payroll Liability 168 000 0 0 0 19 354 0 187 354 2110 - Payroll Tax Liability 0 47 362 0 6 540 0 0 53 901 2120-401K Employee Contributions 22 608 0 0 0 0 0 22 608 2125-401k Loan Repayments 517 0 0 0 0 0 517 2130-401k Employer Match Provision 60 734 0 0 0 0 0 60 734 2135 - Accrued Bonus Pay 254 036 0 0 0 0 0 254 036 2140 - Accrued PTO 424 444 0 0 0 0 0 424 444 2145 - Accrued Employee Commissions 42 500 0 0 0 0 0 42 500 2200 - Federal Tax Liability 446 735 129 182 112 288 0 0 0 688 206 2210 - State Tax Liability 295 468 0 0 0 0 0 295 468
2220 - Sales Tax Payable 0 0 0 0 536 0 536 2220.1 - Use Tax Payable-UK 0-26 464 0 0 0 0-26 464 2220.2 - VAT Tax Payable - UK 0 22 066 0 0 0 0 22 066 2220.3 - Deferred Tax - UK 0 218 0 0 0 0 218 2305 - Payable to AWT U.S. 0 0 257 272 697 817 0-955 089-0 2310 - Payable to AWT Europe 2 202 453 0 0 0 0-2 202 453 0 2320 - Payable to AWT Hong Kong 1 068 406 0 0 0 0-1 068 406 0 2325 - Payable to AWT Korea 180 161 0 0 0 0-180 161 0 2328 - Payable to AWT Japan 8 767 0 0 0 0-8 767 0 2410 - Other Miscellaneous Liabilities 99 050 0 0 0 0 0 99 050 2450 - Building Loan, ST portion - BBCN 44 295 0 0 0 0 0 44 295 2490 - DEFERRED REVENUE 164 653 0 0 0 0 0 164 653 Total Other Current Liabilities 5 482 827 172 364 369 560 704 357 19 891-4 414 876 2 334 122 Total Current Liabilities 5 728 365 196 990 372 119 710 903 27 518-4 414 876 2 621 020 Long Term Liabilities 2505 - Building Loan, LT portion BBCN 1 867 314 0 0 0 0 0 1 867 314 Total Long Term Liabilities 1 867 314 0 0 0 0 0 1 867 314 Equity 3000 - Opening Bal Equity $57 496 $0 $0 $0 $0 $0 $57 496 3020 - Common Stock $1 488 $0 $0 $0 $169 280 ($169 280) $1 488 3030 - Additional Paid in Capital $0 $155 $13 $63 525 $0 ($63 693) ($0) 3040 - Dividend Distributions ($14 500 000) $0 ($658 793) $0 $0 $658 793 ($14 500 000) Retained Earnings $21 147 152 $2 953 918 $2 616 358 ($355 989) $195 095 $0 $26 556 535 Net Income $1 610 290 $727 950 $350 480 ($76 071) ($34 739) ($10 269) $2 567 642 Cumulative Translation Adjustment $0 $147 053 $3 224 $29 480 $39 303 ($4 433 606) ($4 214 547) Total Equity 8 316 426 3 829 075 2 311 282-339 055 368 939-4 018 054 10 468 613 Total LIABILITIES & EQUITY $15 912 105 $4 026 065 $2 683 401 $371 848 $396 457 ($8 432 930) $14 956 947
Applied Weather Technology, Inc. AWT US (Consolidated) Income Statement From Jan 2012 to Dec 2012 4000 - REVENUE 4100 - Route Advisory Services 16 939 325 4200 - Routing + BVS 2 002 905 4300 - Products & Systems 6 060 336 Total - 4000 - REVENUE 25 002 566 Cost Of Sales 3 404 Gross Profit 24 999 162 Expense 6000 - OCCUPANCY EXPENSES 618 886 6100 - COMMUNICATIONS 874 934 6200 - PAYROLL & BURDEN 14 328 782 6300 - LEGAL & PROFESSIONAL FEES 402 163 6400 - MARKETING & TRAVEL 788 029 6500 - DEPRECIATION / AMORTIZATION 574 793 6600 - OTHER OPERATING EXPENSES 360 643 7000 - GENERAL & ADMINISTRATIVE 265 146 Total - Expense 18 213 376 Net Ordinary Income 6 785 786 Other Income and Expenses Other Income 7300 - OTHER INCOME 7301 - Interest Income 39 571 7310 - Gain (Loss) from Sale of Assets (1 594) 7326 - Foreign Exchange Gain (Loss) (588) 7330 - Misc. Income 4 540 Total - Other Income 41 929 Other Expense 7500 - OTHER EXPENSE 7502 - Interest Expense, Building Loan 70 946 7504 - Interest Expense 54 731 7315 - Late Fees 47 7530 - Other Non Operating Expenses 74 411 Total - Other Expense 200 134 Net Other Income (Expense) (158 205) Net Income Vefore Tax 6 627 582 8000 - CORPORATE INCOME TAX 2 347 476 Net Income 4 280 106
AWT Inc. financial statements 2012-2013 Consolidated statement of financial position (USD 1000) 31.12.2013 31.12.2012 Unaudited Unaudited ASSETS Non-current assets Property, plant and equipment 3 417 3 403 Goodwill 260 Other non-current assets 14 17 Total non-current assets 3 431 3 680 Current assets Accounts receivable 5 648 5 774 Other current assets 740 847 Cash and cash equivalents 5 058 4 657 Total current assets 11 446 11 277 TOTAL ASSETS 14 877 14 957 EQUITY AND LIABILITIES Equity Paid in capital Issued capital 1 1 Total paid in capital 1 1 Other equity Oher comprehensive income -4 194-4 215 Other equity 14 304 14 682 Total other equity 10 109 10 467 Total equity 10 111 10 469 Non-current liabilities Interest-bearing loans and 1 824 1 867 borrowings Total non-current liabilities 1 824 1 867 Current liabilities Short term financial liabilities Accounts payable 198 287 Other current liabilities & deferred revenue 1 374 1 025
Public duties 381 325 Liabilities for current tax 989 984 Total current liabilities 2 942 2 621 Total liabilities 4 766 4 488 TOTAL EQUITY AND LIABILITIES 14 877 14 957
Consolidated income statement (by nature of expense) 1 January - 31 December (USD 1000) FY 2013 FY 2012 Unaudited Unaudited Revenue Rendering of services 27 000 25 003 Total revenue 27 000 25 003 Salary and personell costs 15 425 14 329 Office expenses 625 619 Marketing & travel expenses 926 788 Other operating expenses 2 262 1 906 Depreciation, amortizations and 581 575 write downs Operating profit 7 182 6 786 Finance income 8 42 Finance costs 118 200 Profit before tax from operations 7 072 6 628 Income tax expense 2 362 2 347 Profit after tax from 4 710 4 280 operations Attributable to: Equity holders of the parent company 4 710 4 280