Attached files
Exhibit 99.2
The Battery Operation of Perf-Go Green Holdings, Inc.
(A Development Stage Operation)
December 31, 2009
Index to the Financial Statements
| Contents | Page(s) |
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Report of Independent Registered Public Accounting Firm
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F-2
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Balance Sheet at December 31, 2009
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F-3
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Statement of Operations for the Period from July 11, 2009 (inception) through December 31, 2009
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F-4
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Statement of Stockholders’ Equity for the Period from July 11, 2009 (inception) through December 31, 2009
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F-5
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Statement of Cash Flows for the Period from July 11, 2009 (inception) through December 31, 2009
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F-6
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Notes to the Financial Statements
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F-7
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Perf-Go Green Holdings, Inc.
(A Development Stage Operation)
Orlando, Florida
We have audited the accompanying balance sheet of the Battery Operation of Perf-Go Green Holdings, Inc., a development stage operation, (the “Company”), as of December 31, 2009 and the related statements of operations, deficit and cash flows for the period from July 11, 2009 (inception) through December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and the results of its operations and its cash flows for the period from July 11, 2009 (inception) through December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.
Li & Company, PC
Skillman, New Jersey
July 12, 2012
F-2
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The Battery Operation of
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Perf-Go Green Holdings, Inc
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(A Development Stage Operation)
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Balance Sheet
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December 31, 2009
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Assets
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Assets:
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Cash
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$ | - | ||
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Total Current Assets
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- | |||
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Total Assets
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$ | - | ||
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Liabilities and Deficit
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Liabilities:
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Accounts payable
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$ | 96,702 | ||
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Total Current Liabilities
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96,702 | |||
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Total Liabilities
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96,702 | |||
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Deficit Accumulated during the Delopment Stage
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(96,702 | ) | ||
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Total Liabilities and Deficit
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$ | - | ||
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See accompanying notes to the financial statements.
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F-3
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The Battery Operation of
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Perf-Go Green Holdings, Inc.
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(A Development Stage Operation)
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Statement of Operations
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For the Period from
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July 11, 2009
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(inception) through
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December 31, 2009
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Net revenues
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$ | (68,668 | ) | |
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Cost of revenues
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20,952 | |||
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Gross profit
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(89,620 | ) | ||
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General and administrative expenses
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7,082 | |||
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Loss from operations
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(96,702 | ) | ||
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Net loss
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$ | (96,702 | ) | |
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See accompanying notes to the financial statements.
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F-4
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Perf-Go Green Holdings, Inc
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(A Development Stage Operation)
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Statement of Deficit
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For the Period from July 11, 2009 (inception) through December 31, 2009
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Balance July 11, 2009 (Inception)
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$ | - | ||
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Net loss
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(96,702 | ) | ||
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Balance, December 31, 2009
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$ | (96,702 | ) |
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See accompanying notes to the financial statements.
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F-5
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The Battery Operation of
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Perf-Go Green Holdings, Inc
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(A Development Stage Operation)
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Statement of Cash Flows
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For the Period from
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July 11, 2009
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(inception) through
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December 31, 2009
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss
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$ | (96,702 | ) | |
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Changes in operating assets and liabilities:
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Accounts payable
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96,702 | |||
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Net Cash Used in Operating Activities
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- | |||
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Net Change in Cash
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- | |||
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Cash - Beginning of Period
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- | |||
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Cash - End of Period
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$ | - | ||
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SUPPLEMENTARY CASH FLOW INFORMATION:
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Income tax paid
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$ | - | ||
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Interest paid
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$ | - | ||
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See accompanying notes to the financial statements.
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F-6
The Battery Operation of Perf-Go Green Holdings, Inc.
(A Development Stage Operation)
December 31, 2009
Notes to the Financial Statements
Note 1 – Organization and Operations
Perf-Go Green Holdings, Inc.
Perf-Go Green Holdings, Inc. (“Holdings”), formerly known as ESYS Holdings, Inc. (“ESYS”) and La Solucion, Inc., was incorporated in Delaware in April 2005. Its business was originally intended to provide assistance to the non-English speaking Hispanic population in building and maintaining a life in North Carolina but it did not establish operations in connection with its business plan.
Perf-Go Green, Inc.
On May 13, 2008, Holdings, a then public shell corporation, in a share exchange transaction with the stockholders of Perf-Go Green, Inc. (“Perf-Go Green”), a privately-owned Delaware corporation pursuant to which Holdings acquired all of the issued and outstanding shares of common stock of Perf-Go Green. Perf-Go Green was originally incorporated as a limited liability company on November 15, 2007 and converted to a “C” corporation on January 7, 2008. Upon the consummation of the transaction, Perf-Go Green became a wholly-owned subsidiary of Holdings.
Perf-Go Green became the surviving corporation, in a transaction treated as a reverse acquisition. Holdings did not have any operations and majority-voting control was transferred to the stockholders of Perf-Go Green. The transaction also required a recapitalization of Perf-Go Green.
The accompanying financial statements are that of the Battery Operation (the “Company”) of Perf-Go Green, which was created during the period from July 11, 2009 (inception) through December 31, 2009. The Company is currently in the development stage.
Holdings engages in the import and distribution of alkaline batteries.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Development Stage Operation
The Company is a development stage operation as defined by section 915-10-20 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification. The Company is devoting substantially all of its efforts on establishing the business and, therefore, qualifies as a development stage operation. All losses accumulated since inception have been considered as part of the Company’s development stage activities.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions 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 reporting amounts of revenues and expenses during the reporting period.
The Company’s significant estimates and assumptions include the fair value of financial instruments; inventory valuation and obsolescence; and risk free interest rate(s); income tax rate, income tax provision, deferred tax assets and valuation allowance of deferred tax assets; and the assumption that the Company will continue as a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
F-7
Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those estimates.
Fair Value of Certain Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of certain of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of certain of its financial instruments except for the effects of derivative financial instruments relating to its convertible debt, redeemable Series A convertible preferred stock, and related warrants. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
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Level 1
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Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
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Level 2
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Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
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Level 3
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Pricing inputs that are generally observable inputs and not corroborated by market data.
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Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as accounts payable, approximate their fair values because of the short maturity of these instruments.
Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
It is not, however, practical to determine the fair value of advances from stockholders, if any, due to their related party nature.
Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
Related Parties
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
F-8
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitments and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Revenue Recognition
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. The Company derives its revenues from sales contracts with customers with revenues being generated upon the shipment of goods.
Income Tax Provision
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income and Comprehensive Income in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty (50) percent likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
F-9
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the period from July 11, 2009 (inception) through December 31, 2009.
Cash Flows Reporting
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.
Subsequent Events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued.
Recently Issued Accounting Pronouncements
FASB Accounting Standards Update No. 2011-05
In June 2011, the FASB issued the FASB Accounting Standards Update No. 2011-05 “Comprehensive Income” (“ASU 2011-05”), which was the result of a joint project with the IASB and amends the guidance in ASC 220, Comprehensive Income, by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders’ equity. Instead, the new guidance now gives entities the option to present all non-owner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. Regardless of whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive statements, the amendments require entities to present all reclassification adjustments from OCI to net income on the face of the statement of comprehensive income.
The amendments in this Update should be applied retrospectively and are effective for public entity for fiscal years, and interim periods within those years, beginning after December 15, 2011.
FASB Accounting Standards Update No. 2011-08
In September 2011, the FASB issued the FASB Accounting Standards Update No. 2011-08 “Intangibles—Goodwill and Other: Testing Goodwill for Impairment” (“ASU 2011-08”). This Update is to simplify how public and nonpublic entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.
The guidance is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted.
FASB Accounting Standards Update No. 2011-10
In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-10 “Property, Plant and Equipment: Derecognition of in Substance Real Estate-a Scope Clarification” (“ASU 2011-09”). This Update is to resolve the diversity in practice as to how financial statements have been reflecting circumstances when parent company reporting entities cease to have controlling financial interests in subsidiaries that are in substance real estate, where the situation arises as a result of default on nonrecourse debt of the subsidiaries.
The amended guidance is effective for annual reporting periods ending after June 15, 2012 for public entities. Early adoption is permitted.
F-10
FASB Accounting Standards Update No. 2011-11
In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS.
The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.
FASB Accounting Standards Update No. 2011-12
In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-12 “Comprehensive Income: Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” (“ASU 2011-12”). This Update is a deferral of the effective date pertaining to reclassification adjustments out of accumulated other comprehensive income in ASU 2011-05. FASB is to going to reassess the costs and benefits of those provisions in ASU 2011-05 related to reclassifications out of accumulated other comprehensive income. Due to the time required to properly make such a reassessment and to evaluate alternative presentation formats, the FASB decided that it is necessary to reinstate the requirements for the presentation of reclassifications out of accumulated other comprehensive income that were in place before the issuance of Update 2011-05.
All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011.
Other Recently Issued, but not yet Effective Accounting Pronouncements
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
Note 3 – Related Party Transactions
Free Office Space from Majority Stockholder and Chief Executive Officer
The Company has been provided office space by its majority stockholder and Chief Executive Officer at no cost. The management determined that such cost is nominal and did not recognize the rent expense in its financial statements.
Note 4 – Income Tax Provision
Deferred Tax Assets
At December 31, 2009, the Company has available for federal income tax purposes net operating loss (“NOL”) carry-forwards of $96,702. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying financial statements since the Company believes that the realization of its net deferred tax asset of approximately $32,879 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by the full valuation allowance.
Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability. The valuation allowance increased approximately $32,879 for the period from July 11, 2009 (inception) through December 31, 2009.
F-11
Components of deferred tax assets as of December 31, 2009 are as follows:
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December 31, 2009
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Net deferred tax assets – Non-current:
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Expected income tax benefit from NOL carry-forwards
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32,879
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Less valuation allowance
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(32,879
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)
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Deferred tax assets, net of valuation allowance
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$
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-
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Income Tax Provision in the Statement of Operations
A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:
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For the Period from July 11, 2009 (inception) through
December 31, 2009
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Federal statutory income tax rate
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34.0
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%
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Change in valuation allowance on net operating loss carry-forwards
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(34.0
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)
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Effective income tax rate
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0.0
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%
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Note 5 – Subsequent Events
The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that there was certain reportable subsequent events to be disclosed as follows:
On January 12, 2010, the EcoReady Corporation closed on an operating agreement under which certain assets and liabilities of the battery operation of Perf-Go Green Holdings, Inc. were transferred to the Company in exchange for 1,400,000 shares of common stock, cash of $220,000, and a licensing agreement to use the PerfPower trademark for three (3) years. In addition, the Company purchased in excess of $200,000 in battery inventory held by customs at the port in New Jersey.
F-12