Attached files
| file | filename |
|---|---|
| EX-99.2 - ID SYSTEMS INC | ex99-2.htm |
| EX-23.1 - ID SYSTEMS INC | ex23-1.htm |
| 8-K/A - ID SYSTEMS INC | form8-ka.htm |
Exhibit 99.1
KEYTROLLER, LLC
FINANCIAL STATEMENTS
AS OF MARCH 31, 2017 AND 2016 AND THE
THREE-MONTH PERIODS ENDED mARCH 31, 2017 AND 2016
(UNAUDITED)
KEYTROLLER, LLC
TABLE OF CONTENTS
AS OF MARCH 31, 2017 AND 2016 AND THE
THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016
INDEPENDENT ACCOUNTANTS’ REVIEW REPORT
To the Members
Keytroller, LLC
Tampa, Florida
We have reviewed the accompanying interim financial statements of Keytroller, LLC (the “Company”), which comprise the balance sheets as of March 31, 2017 and 2016 and the related statements of operations, changes in members’ equity, and cash flows for the three-month periods then ended, and the related notes to the interim financial statements. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these interim financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of interim financial statements that are free from material misstatement whether due to fraud or error.
Accountants’ Responsibility
Our responsibility is to conduct the review engagements in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the interim financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion.
Accountants’ Conclusion
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America.
Tampa, Florida
October 3, 2017
| 1 |
KEYTROLLER, LLC
march 31, 2017 and 2016
| ASSETS | ||||||||
| 2017 | 2016 | |||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 537,052 | $ | 479,765 | ||||
| Trading securities | 340,315 | 322,750 | ||||||
| Accounts receivable | 665,808 | 719,795 | ||||||
| Inventories | 963,553 | 678,155 | ||||||
| Other current assets | 21,273 | 74,599 | ||||||
| Total current assets | 2,528,001 | 2,275,064 | ||||||
| PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION | 170,399 | 190,018 | ||||||
| $ | 2,698,400 | $ | 2,465,082 | |||||
| LIABILITIES AND MEMBERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 222,694 | $ | 240,081 | ||||
| Margin loan payable | 44,518 | 58,935 | ||||||
| Accrued payroll | 20,515 | 14,525 | ||||||
| Accrued expenses | 1,139 | 28,294 | ||||||
| Total current liabilities | 288,866 | 341,835 | ||||||
| MEMBERS' EQUITY | 2,409,534 | 2,123,247 | ||||||
| $ | 2,698,400 | $ | 2,465,082 | |||||
See accompanying notes and accountants’ review report.
| 2 |
KEYTROLLER, LLC
FOR THE THREE-MONTH periods ended MARCH 31, 2017 AND 2016
| 2017 | 2016 | |||||||
| REVENUES | $ | 1,598,797 | $ | 1,457,629 | ||||
| COST OF REVENUES | 716,050 | 728,788 | ||||||
| GROSS PROFIT | 882,747 | 728,841 | ||||||
| OPERATING EXPENSES | ||||||||
| Selling, general and administrative | 448,429 | 443,171 | ||||||
| Depreciation | 9,298 | 9,028 | ||||||
| Total operating expenses | 457,727 | 452,199 | ||||||
| INCOME FROM OPERATIONS | 425,020 | 276,642 | ||||||
| OTHER INCOME (LOSS) | 14,220 | (38,311 | ) | |||||
| NET INCOME | $ | 439,240 | $ | 238,331 | ||||
See accompanying notes and accountants’ review report.
| 3 |
KEYTROLLER, LLC
STATEMENTS OF CHANGES IN MEMBERS’ EQUITY
FOR the three-month periods ended march 31, 2017 and 2016
| BALANCE, JANUARY 1, 2016 | $ | 1,884,916 | ||
| Net income | 238,331 | |||
| BALANCE, MARCH 31, 2016 | $ | 2,123,247 | ||
| BALANCE, JANUARY 1, 2017 | $ | 1,970,294 | ||
| Net income | 439,240 | |||
| BALANCE, MARCH 31, 2017 | $ | 2,409,534 | ||
See accompanying notes and accountants’ review report.
| 4 |
KEYTROLLER, LLC
for the three-month periods ended march 31, 2017 and 2016
| 2017 | 2016 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | 439,240 | $ | 238,331 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | 9,298 | 9,028 | ||||||
| Loss on disposal of assets | (1,540 | ) | - | |||||
| (Increase) decrease in: | ||||||||
| Accounts receivable | 321,009 | 147,156 | ||||||
| Inventories | (235,344 | ) | (166,821 | ) | ||||
| Other assets | (8,499 | ) | (1,763 | ) | ||||
| Decrease in: | ||||||||
| Accounts payable | (313,029 | ) | (75,595 | ) | ||||
| Accrued expenses | (16,987 | ) | (61,474 | ) | ||||
| Total adjustments | (245,092 | ) | (149,469 | ) | ||||
| Net cash provided by operating activities | 194,148 | 88,862 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | - | (3,047 | ) | |||||
| Net cash used by investing activities | - | (3,047 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from margin loan to purchase trading securities | 34,582 | 111,024 | ||||||
| Payments on margin loan from the sale and purchase of trading securities | (53,868 | ) | (22,514 | ) | ||||
| Net cash (used) provided by financing activities | (19,286 | ) | 88,510 | |||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 174,862 | 174,325 | ||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 362,190 | 305,440 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 537,052 | $ | 479,765 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the year for interest | $ | 1,100 | $ | - | ||||
| NON-CASH INVESTING AND FINANCING TRANSACTIONS | ||||||||
| Net unrealized (gain)/losses on trading securities | $ | 12,270 | $ | (29,575 | ) | |||
See accompanying notes and accountants’ review report.
| 5 |
KEYTROLLER, LLC
NOTES TO THE FINANCIAL STATEMENTS
AS OF MARCH 31, 2017 AND 2016 AND THE THREE-MONTH PERIODS ENDED MARCH 31, 2012 AND 2016
| 1. | DESCRIPTION OF BUSINESS |
Keytroller, LLC (the “Company”) is a Florida limited liability company formed in 2006 by its parent company, Keytroller, Inc., which owns 95% of Keytroller, LLC. The Company is engaged in the business of designing and supplying a full line of electronic safety devices for forklifts, construction equipment, aerial lifts, personal carriers, boats, and hazardous transport trucks. The Company sells its products primarily throughout the United States. The Company is headquartered in Tampa, Florida.
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Accounting
The financial statements of the Company are prepared under the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).
Marketable Equity Securities
The Company classifies its marketable securities in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 320, Investments - Debt and Equity Securities (“ASC Topic 320”). These principles require the classification of debt and equity securities into one of three categories: held-to-maturity, available-for-sale, or trading. Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date.
The Company’s marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities. Trading securities are recorded at fair value on the balance sheet in current assets, with the change in fair value during the period included in earnings. Trading gains and losses for the three-month periods ended March 31, 2017 and 2016 were immaterial.
Use of Management Estimates
Management uses estimates and assumptions in preparing the financial statements in accordance with U.S. GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of March 31, 2017 and 2016. Actual results could vary from the estimates that were used.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.
Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits of $250,000. The Company’s deposits in excess of federally insured limits at March 31, 2017 and 2016 approximated $256,100 and $348,200, respectively.
| 6 |
KEYTROLLER, LLC
NOTES TO THE FINANCIAL STATEMENTS
AS OF MARCH 31, 2017 AND 2016 AND THE THREE-MONTH PERIODS ENDED MARCH 31, 2012 AND 2016
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED |
Accounts Receivable
Accounts receivable consist of receivables from the sales of goods. The Company records an allowance for doubtful accounts to allow for any amounts that may not be recoverable. This determination varies based upon the facts in each case. Based on management’s review of accounts receivable, no allowance for doubtful accounts is deemed necessary at March 31, 2017 and 2016. Receivables are determined to be past due based on the payment terms of original invoices.
Inventories
Inventories consist of equipment and parts and are stated at the lower of cost, determined by first-in, first-out method (FIFO), or market.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets, ranging generally from 3 to 39 years. Maintenance and repairs are charged to operations when incurred. As property and equipment are sold or retired, the applicable cost and accumulated depreciation are eliminated from the accounts and any gain or loss is recorded. For income tax purposes, the Company uses accelerated methods of depreciation for certain assets.
Long-Lived Assets
Long-lived assets that are subject to depreciation and amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. At March 31, 2017 and 2016, the Company determined that its long-lived assets were not impaired.
Income and Other Taxes
The Company is treated as a partnership and, accordingly, is not subject to federal income taxes. As a result, the Company’s members are personally taxed on their distributive share of the Company’s income, whether or not that income is actually distributed. Accordingly, the financial statements do not include any provision for income taxes for the three-month periods ended March 31, 2017 and 2016.
The Company follows ASC Topic 740, Income Taxes. This standard prescribes a recognition and measurement of tax positions to be taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. Based on management’s evaluation, there are no uncertain tax positions at March 31, 2017 and 2016.
Amounts collected on behalf of governmental authorities for sales taxes and other similar taxes are reported on a net basis.
| 7 |
KEYTROLLER, LLC
NOTES TO THE FINANCIAL STATEMENTS
AS OF MARCH 31, 2017 AND 2016 AND THE THREE-MONTH PERIODS ENDED MARCH 31, 2012 AND 2016
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED |
Revenue
The Company’s revenue is generated from the sale of goods. The Company recognizes revenue at the time products are shipped. The Company offers discounts to certain customers on its products. The costs of these discounts are recognized at the date at which the related sales revenue is recognized and recorded as a reduction in sales revenue.
Amounts billed to customers for shipping and handling costs are included in revenues. Costs incurred by the Company for shipping and handling are included in cost of revenues.
Advertising Costs
Advertising costs are charged to expense as incurred and amounted to approximately $20,000 and $42,000 for the three-month periods ended March 31, 2017 and 2016, respectively. Advertising costs are included in selling, general and administrative expenses in the accompanying statements of operations.
| 3. | PROPERTY AND EQUIPMENT |
Property and equipment at March 31, 2017 and 2016 consist of the following:
| 2017 | 2016 | |||||||
| Leasehold improvements | $ | 100,883 | $ | 100,883 | ||||
| Machinery and equipment | 44,296 | 44,296 | ||||||
| Vehicles | 268,772 | 268,772 | ||||||
| Office furniture and fixtures | 22,232 | 22,232 | ||||||
| Computers and equipment | 32,281 | 14,439 | ||||||
| 468,464 | 450,622 | |||||||
| Less accumulated depreciation | (298,065 | ) | (260,604 | ) | ||||
| $ | 170,399 | $ | 190,018 | |||||
Depreciation expense amounted to approximately $9,300 and $9,000 for the three-month periods ended March 31, 2017 and 2016, respectively.
| 8 |
KEYTROLLER, LLC
NOTES TO THE FINANCIAL STATEMENTS
AS OF MARCH 31, 2017 AND 2016 AND THE THREE-MONTH PERIODS ENDED MARCH 31, 2012 AND 2016
| 4. | MARGIN LOAN PAYABLE |
During 2016, the Company opened a margin account with a brokerage firm. The margin account was used to buy additional trading securities. The loan accrues interest at a base rate of 8%, less .075% for assets the Company has in its brokerage account. The amount outstanding on this loan was $44,518 and $58,935 as of March 31, 2017 and 2016, respectively. Interest expense for the three-month periods ended March 31, 2017 and 2016 was approximately $1,100 and $0, respectively. The margin loan payable is collateralized by the Company’s trading securities.
| 5. | RELATED PARTY TRANSACTIONS AND CONCENTRATIONS |
The Company leases office space from a related party requiring monthly payments of approximately $4,000. The lease is on a monthly basis as no lease agreement exists between the Company and the related party. Total rent expense for the office space amounted to approximately $12,000 for the three-month periods ended March 31, 2017 and 2016.
The Company purchases certain inventory items from a company that is owned by one of its minority members. The purchases for the three-month periods ended March 31, 2017 and 2016 totaled approximately $321,000 and $208,000, respectively, which represents 45% and 28% of total purchases for the periods, respectively. Accounts payable to this supplier at March 31, 2017 and 2016 amounted to 0% and 43% of total accounts payable, respectively.
The above terms and amounts are not necessarily indicative of the terms and amounts that would have been incurred had comparable transactions been entered into with independent parties.
| 6. | FAIR VALUE MEASUREMENTS |
Financial instruments measured at fair value are classified and disclosed in the following categories:
Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.
Level 2 – Valuations based on observable inputs, including quoted prices (other than Level 1) in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, such as interest rates, yield curves, volatilities, and default rates, and inputs that are derived principally from or corroborated by observable market data.
Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
| 9 |
KEYTROLLER, LLC
NOTES TO THE FINANCIAL STATEMENTS
AS OF MARCH 31, 2017 AND 2016 AND THE THREE-MONTH PERIODS ENDED MARCH 31, 2012 AND 2016
| 6. | FAIR VALUE MEASUREMENTS – CONTINUED |
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, a financial instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
The fair value of assets measured on a recurring basis at March 31, 2017 and 2016 is as follows:
| Fair
Value Measurements at the End of the Reporting Period Using | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| 2017 trading securities | $ | 340,315 | $ | 340,315 | $ | - | $ | - | ||||||||
| 2016 trading securities | $ | 322,750 | $ | 322,750 | $ | - | $ | - | ||||||||
| 7. | EMPLOYEE BENEFIT PLAN |
The Company has an employee savings plan (the “Plan”) pursuant to Section 401(k) of the Internal Revenue Code. The Plan covers substantially all employees of the Company. The Company’s match to the Plan is discretionary. During the three-month periods ended March 31, 2017 and 2016, the Company made no contributions to the Plan.
| 8. | SUBSEQUENT EVENTS |
During June 2017, the Company sold all of its trading securities resulting in a realized loss of approximately $30,000 in 2017. The Company also paid the remaining balance of the margin loan account upon selling its trading securities.
On July 31, 2017, the Company entered into an agreement to sell the Company to I.D. Systems, Inc., at which time, I.D. Systems, Inc. acquired substantially all of the assets of the Company.
The Company has evaluated events and transactions for potential recognition or disclosure in the financial statements through October 3, 2017, the date on which the financial statements were available to be issued.
| 10 |
KEYTROLLER, LLC
FINANCIAL STATEMENTS
DECEMBER 31, 2016
KEYTROLLER, LLC
TABLE OF CONTENTS
DECEMBER 31, 2016
| Independent AUDITORS’ Report | 1 | |
| FINANCIAL STATEMENTS | ||
| Balance Sheet | 2 | |
| Statement of Operations | 3 | |
| Statement of Changes in Members’ Equity | 4 | |
| Statement of Cash flows | 5 | |
| Notes to the Financial Statements | 6 | |
To the Members
Keytroller, LLC
Tampa, Florida
Report on the Financial Statements
We have audited the accompanying balance sheet of Keytroller, LLC as of December 31, 2016 and the related statements of operations, changes in members’ equity, and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Keytroller, LLC as of December 31, 2016 and the results of its operations and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Tampa, Florida
July 28, 2017
| 1 |
KEYTROLLER, LLC
DECEMBER 31, 2016
| ASSETS | ||||
| CURRENT ASSETS | ||||
| Cash and cash equivalents | $ | 362,190 | ||
| Trading securities | 352,585 | |||
| Accounts receivable | 986,817 | |||
| Inventories | 728,209 | |||
| Other current assets | 12,774 | |||
| Total current assets | 2,442,575 | |||
| PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION | 178,157 | |||
| $ | 2,620,732 |
| LIABILITIES AND MEMBERS' EQUITY | ||||
| CURRENT LIABILITIES | ||||
| Accounts payable | $ | 535,723 | ||
| Margin loan payable | 76,074 | |||
| Accrued payroll | 32,277 | |||
| Accrued expenses | 6,364 | |||
| Total current liabilities | 650,438 | |||
| MEMBERS' EQUITY | 1,970,294 | |||
| $ | 2,620,732 | |||
See notes to the financial statements.
| 2 |
KEYTROLLER, LLC
FOR THE YEAR ENDED DECEMBER 31, 2016
| 2016 | ||||
| REVENUES | $ | 6,624,465 | ||
| COST OF REVENUES | 2,923,300 | |||
| GROSS PROFIT | 3,701,165 | |||
| OPERATING EXPENSES | ||||
| Selling, general and administrative | 2,223,688 | |||
| Depreciation and amortization | 37,191 | |||
| Total operating expenses | 2,260,879 | |||
| INCOME FROM OPERATIONS | 1,440,286 | |||
| OTHER INCOME | 42,749 | |||
| NET INCOME | $ | 1,483,035 | ||
See notes to the financial statements.
| 3 |
KEYTROLLER, LLC
STATEMENT OF CHANGES IN MEMBERS’ EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2016
| BALANCE, JANUARY 1, 2016 | $ | 1,884,916 | ||
| Distributions to members | (1,397,657 | ) | ||
| Net income | 1,483,035 | |||
| BALANCE, DECEMBER 31, 2016 | $ | 1,970,294 |
See notes to the financial statements.
| 4 |
KEYTROLLER, LLC
FOR THE YEAR ENDED DECEMBER 31, 2016
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||
| Net income | $ | 1,483,035 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation | 37,191 | |||
| (Increase) decrease in: | ||||
| Accounts receivable | (119,866 | ) | ||
| Inventories | (216,875 | ) | ||
| Other assets | 60,062 | |||
| Increase (decrease) in: | ||||
| Accounts payable | 219,802 | |||
| Accrued payroll | (56,152 | ) | ||
| Accrued expenses | (9,500 | ) | ||
| Total adjustments | (85,338 | ) | ||
| Net cash provided by operating activities | 1,397,697 | |||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||
| Purchase of property and equipment | (19,349 | ) | ||
| Net cash used by investing activities | (19,349 | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||
| Proceeds from margin loan to purchase trading securities | 164,512 | |||
| Payments on margin loan from the sale of trading securities | (88,453 | ) | ||
| Distributions paid | (1,397,657 | ) | ||
| Net cash used by financing activities | (1,321,598 | ) | ||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 56,750 | |||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 305,440 | |||
| CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 362,190 | ||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||
| Cash paid during the year for interest | $ | 6,080 | ||
| NON-CASH INVESTING AND FINANCING TRANSACTIONS | ||||
| Net unrealized losses on trading securities | $ | (6,151 | ) | |
See notes to the financial statements.
| 5 |
KEYTROLLER, LLC
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
| 1. | DESCRIPTION OF BUSINESS |
Keytroller, LLC (the “Company”) is a Florida limited liability company formed in 2006 by the parent company, Keytroller, Inc., which owns 95% of Keytroller, LLC. The Company is engaged in the business of designing and supplying a full line of electronic safety devices for forklifts, construction equipment, aerial lifts, personal carriers, boats, and hazardous transport trucks. The Company sells its products primarily throughout the United States. The Company is headquartered in Tampa, Florida.
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Accounting
The financial statements of the Company are prepared under the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).
Marketable Equity Securities
The Company classifies its marketable securities in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 320, Investments - Debt and Equity Securities (“ASC Topic 320”). These principles require the classification of debt and equity securities into one of three categories: held-to-maturity, available-for-sale, or trading. Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date.
The Company’s marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities. Trading securities are recorded at fair value on the balance sheet in current assets, with the change in fair value during the period included in earnings. Trading gains and losses for the year ended December 31, 2016 were immaterial.
Use of Management Estimates
Management uses estimates and assumptions in preparing the financial statements in accordance with U.S. GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of December 31, 2016. Actual results could vary from the estimates that were used.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.
Cash is maintained at financial institutions and, at times, balances may exceed federally insured limits of $250,000. No amounts on deposit were in excess of federal insured limits as of December 31, 2016.
| 6 |
KEYTROLLER, LLC
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED |
Accounts Receivable
Accounts receivable consists of receivables from sales of goods. The Company records an allowance for doubtful accounts to allow for any amounts that may not be receivable. This determination varies based upon the facts in each case. Based on management’s review of accounts receivable, no allowance for doubtful accounts is deemed necessary at December 31, 2016. Receivables are determined to be past due based on the payment terms of original invoices.
Inventories
Inventories consist of equipment and parts and are stated at the lower of cost, determined by first-in, first-out method (FIFO), or market.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets, ranging generally from 3 to 39 years. Maintenance and repairs are charged to operations when incurred. As property and equipment are sold or retired, the applicable cost and accumulated depreciation are eliminated from the accounts and any gain or loss is recorded. For income tax purposes, the Company uses accelerated methods of depreciation for certain assets.
Long-Lived Assets
Long-lived assets that are subject to depreciation and amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. At December 31, 2016, the Company determined that its long-lived assets were not impaired.
Income and Other Taxes
The Company is treated as a partnership and, accordingly, is not subject to federal income taxes. As a result, the Company’s members are personally taxed on their distributive share of the Company’s income, whether or not that income is actually distributed. Accordingly, the financial statements do not include any provision for income taxes for the year ended December 31, 2016.
The Company follows ASC Topic 740, Income Taxes. This standard prescribes a recognition and measurement of tax positions to be taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. Based on management’s evaluation, there are no uncertain tax positions at December 31, 2016.
Amounts collected on behalf of governmental authorities for sales taxes and other similar taxes are reported on a net basis.
| 7 |
KEYTROLLER, LLC
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED |
Revenue
The Company’s revenue is generated from the sale of goods. The Company recognizes revenue at the time products are shipped. The Company offers discounts to certain customers on its products. The costs of these discounts are recognized at the date at which the related sales revenue is recognized and recorded as a reduction in sales revenue.
Amounts billed to customers for shipping and handling costs are included in revenues. Costs incurred by the Company for shipping and handling are included in cost of revenues.
Shipping and Handling Costs
The costs incurred by the Company to ship products to customers, which primarily includes payments to third-party shippers, net of recoveries from customers, is included in cost of sales in the accompanying statement of operations.
Advertising Costs
Advertising costs are charged to expense as incurred and amounted to approximately $140,000 for the year ended December 31, 2016. Advertising costs are included in selling, general and administrative expenses in the accompanying statement of operations.
| 3. | PROPERTY AND EQUIPMENT |
Property and equipment at December 31, 2016 consist of the following:
| Leasehold improvements | $ | 100,883 | ||
| Machinery and equipment | 44,296 | |||
| Vehicles | 268,772 | |||
| Office furniture and fixtures | 22,232 | |||
| Computers and equipment | 30,741 | |||
| 466,924 | ||||
| Less accumulated depreciation | (288,767 | ) | ||
| $ | 178,157 |
Depreciation expense amounted to approximately $37,000 for the year ended December 31, 2016.
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KEYTROLLER, LLC
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
| 4. | MARGIN LOAN PAYABLE |
During 2016, the Company opened a margin account with a brokerage firm. The margin account was used to buy additional trading securities. The loan accrues interest at a base rate of 8%, less .075% for assets the Company has in its brokerage account. The amount outstanding on this loan was $76,074 as of December 31, 2016. Interest expense for the year ended December 31, 2016 was $5,177. The margin loan payable is collateralized by the Company’s trading securities.
| 5. | RELATED PARTY TRANSACTIONS AND CONCENTRATIONS |
The Company leases office space from a related party requiring monthly payments of approximately $4,000. The lease is on a monthly basis as no lease agreement exists between the Company and the related party. Total rent expense for the office space amounted to approximately $48,000 for the year ended December 31, 2016.
The Company purchases certain inventory items from a company that is owned by one of its minority members. The purchases for the year ended December 31, 2016 totaled approximately $1,400,000, which represents 44% of total purchases for the year. Accounts payable to this supplier at December 31, 2016 amounted to 49% of total accounts payable.
The above terms and amounts are not necessarily indicative of the terms and amounts that would have been incurred had comparable transactions been entered into with independent parties.
| 6. | FAIR VALUE MEASUREMENTS |
Financial instruments measured at fair value are classified and disclosed in the following categories:
Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.
Level 2 – Valuations based on observable inputs, including quoted prices (other than Level 1) in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, such as interest rates, yield curves, volatilities, and default rates, and inputs that are derived principally from or corroborated by observable market data.
Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
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KEYTROLLER, LLC
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
| 6. | FAIR VALUE MEASUREMENTS – CONTINUED |
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, a financial instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
The fair value of assets measured on a recurring basis at December 31, 2016 is as follows:
| Fair
Value Measurements at the End of the Reporting Period Using | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Trading securities | $ | 352,585 | $ | 352,585 | $ | - | $ | - | ||||||||
| Total assets at fair value | $ | 352,585 | $ | 352,585 | $ | - | $ | - | ||||||||
| 7. | EMPLOYEE BENEFIT PLAN |
The Company has an employee savings plan (the “Plan”) pursuant to Section 401(k) of the Internal Revenue Code. The Plan covers substantially all of employees of the Company. The Company’s match to the Plan is discretionary. During the year ended December 31, 2016, the Company made no contributions to the Plan.
| 8. | SUBSEQUENT EVENTS |
During June 2017, the Company sold all of its trading securities resulting in a realized loss of approximately $30,000 in 2017. The Company also paid the remaining balance of the margin loan account upon selling its trading securities.
The Company has evaluated events and transactions for potential recognition or disclosure in the financial statements through July 28, 2017, the date on which the financial statements were available to be issued.
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