UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 17, 2014
FORCEFIELD ENERGY INC.
(Exact name of registrant as specified in its charter)
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Nevada
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001-36133
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20-8584329
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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245 Park Avenue, 39th Floor
New York, New York
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10167
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant's telephone number, including area code: (212) 672-1786
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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o
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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o
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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o
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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o
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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This Form 8-K/A, Amendment No. 1, is being filed for the purpose of filing the financial statements and pro forma financial information required by Item 9.01 with respect to the Current Report on Form 8-K filed by the registrant on October 22, 2014 regarding the acquisition of ESCO Energy Services Company.
Item 9.01 Financial Statements and Exhibits.
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(a)
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Financial Statements of ESCO
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The audited balance sheets, statements of operations, changes in stockholder’s equity and cash flows for the years ended December 31, 2013 and 2012, and the related notes to the financial statements, together with the independent auditor's report, are filed as Exhibit 99.1 to this Form 8-K/A and incorporated by reference in this Form 8-K/A.
The unaudited balance sheets as of September 30, 2014 and the unaudited statements of operations and cash flows for the nine months ended September 30, 2014 and September 30, 2013 are filed as Exhibit 99.2 to this Form 8-K/A and incorporated by reference in this Form 8-K/A.
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(b)
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Pro Forma Financial Information
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The unaudited pro forma consolidated balance sheet of the Registrant at September 30, 2014, and the unaudited pro forma consolidated statements of operations and comprehensive income for the nine months ended September 30, 2014 and the year ended December 31, 2014, are filed as Exhibit 99.3 to this Form 8-K/A and incorporated by reference in this Form 8-K/A.
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Exhibit No.
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Description
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99.1
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Audited Financial Statements of ESCO Energy Services Company for the years ended December 31, 2013 and 2012.
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99.2
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Unaudited Financial Statements of ESCO Energy Services Company at September 30, 2014, and for the nine months ended September 30, 2014 and 2013.
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99.3
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Unaudited Pro Forma Consolidated Balance Sheet of the Registrant at September 30, 2014, and the Unaudited Pro Forma Consolidated Statements of Operations and Comprehensive Income for the nine months ended September 30, 2014 and year ended December 31, 2013.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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FORCEFIELD ENERGY INC.
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January 2, 2015
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By:
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/s/ David Natan
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David Natan
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Chief Executive Officer
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3
Exhibit 99.1
ESCO ENERGY SERVICES COMPANY
FINANCIAL STATEMENTS
YEARS ENDED
December 31, 2013 and 2012
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ESCO Energy Services Company
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Page
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Index to Financial Statements Contents Page(s)
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Report of Independent Registered Public Accounting Firm
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3
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Balance Sheets as of December 31, 2013 and 2012
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4
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Statements of Operations for the Years Ended December 31, 2013 and 2012
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5
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Statements of Changes in Stockholder’s Equity (Deficit) for the Years Ended December 31, 2013 and 2012
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6
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Statements of Cash Flows for the Years Ended December 31, 2013 and 2012
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7
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Notes to Financial Statements
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8
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholder
Esco Energy Services Company
Lennox, MA
We have audited the accompanying balance sheets of Esco Energy Services Company (the “Company”) as of December 31, 2013 and 2012 and the related statements of operations, changes in stockholder’s equity and cash flows for each of the years then ended. 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 audits.
We conducted our audits 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 misstatements. 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 consolidated 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 Esco Energy Services Company as of December 31, 2013 and 2012 and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
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/s/ MaloneBailey, LLP
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www.malone-bailey.com
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Houston, Texas
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January 2, 2015
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ESCO ENERGY SERVICES COMPANY
Balance Sheets
December 31, 2013 and 2012
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2013
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2012
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ASSETS
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Current assets:
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Cash and cash equivalents
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$ |
221,023 |
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$ |
131,134 |
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Contracts receivable
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2,209,413 |
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1,080,169 |
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Costs and estimated earnings in excess of billings on uncompleted contracts
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691,255 |
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378,966 |
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Materials and supplies
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50,972 |
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15,590 |
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Prepaid expenses and other current assets
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16,087 |
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17,478 |
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Total current assets
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3,188,750 |
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1,623,337 |
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Non-current portion of contracts receivable
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234,000 |
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- |
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Property and equipment, net
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179,690 |
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95,165 |
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Deposits
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5,182 |
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2,762 |
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Total assets
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$ |
3,607,622 |
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$ |
1,721,264 |
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LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
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Current liabilities:
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Accounts payable and accrued liabilities
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$ |
1,852,861 |
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$ |
705,169 |
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Billings in excess of costs and estimated earnings on uncompleted contracts
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546,946 |
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151,212 |
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Deferred contract revenue
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20,659 |
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- |
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Line of credit
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900,805 |
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715,805 |
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Current portion of long-term debt
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41,708 |
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8,037 |
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Due to stockholder
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- |
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275,000 |
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Income taxes payable
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6,559 |
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2,356 |
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Total current liabilities
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3,369,538 |
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1,857,579 |
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Long-term debt, net of current portion
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22,975 |
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18,026 |
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Total liabilities
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3,392,513 |
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1,875,605 |
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Commitments and contingencies
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- |
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- |
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Stockholder's equity (deficit):
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Common stock, $0.00 par value. 200,000 shares authorized; 199 and 199 shares
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issued and outstanding as of December 31, 2013 and 2012, respectively
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1,000 |
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1,000 |
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Additional paid-in capital
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3,094,898 |
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2,819,898 |
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Accumulated deficit
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(2,880,789 |
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(2,975,239 |
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Total stockholder's equity (deficit)
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215,109 |
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(154,341 |
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Total liabilities and stockholder's equity (deficit)
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$ |
3,607,622 |
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$ |
1,721,264 |
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The accompanying notes are an integral part of the financial statements.
ESCO ENERGY SERVICES COMPANY
Statements of Operations
For the Years Ended December 31, 2013 and 2012
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2013
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2012
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Revenue
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$ |
6,630,893 |
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$ |
3,440,393 |
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Cost of revenue
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4,527,750 |
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2,447,587 |
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Gross margin
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2,103,143 |
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992,806 |
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Operating expenses:
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Depreciation and amortization
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18,515 |
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17,308 |
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Selling and marketing
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32,671 |
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14,796 |
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General and administrative
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1,664,416 |
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1,647,360 |
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Professional fees
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112,031 |
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208,652 |
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Total operating expenses
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1,827,633 |
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1,888,116 |
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Income (loss) from operations
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275,510 |
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(895,310 |
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Other income (expense)
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Interest expense, net
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(35,736 |
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(33,189 |
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Total other income (expense)
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(35,736 |
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(33,189 |
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Income (loss) before income taxes
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239,774 |
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(928,499 |
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Provision for income taxes (benefit)
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(1,587 |
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9,824 |
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Net income (loss)
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$ |
241,361 |
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$ |
(938,323 |
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Basic and diluted earnings (loss) per common share
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$ |
1,213 |
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$ |
(4,715 |
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Weighted-average number of common shares outstanding:
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Basic and diluted
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199 |
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199 |
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The accompanying notes are an integral part of the financial statements.
ESCO ENERGY SERVICES COMPANY
Statements of Changes in Stockholder’s Equity (Deficit)
For the Years Ended December 31, 2013 and 2012
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Additional
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Total
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Common Stock
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Paid-in
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Accumulated
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Stockholder's
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Shares
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Value
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Capital
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Deficit
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Equity (Deficit)
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Balance, December 31, 2011
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199 |
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$ |
1,000 |
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$ |
2,669,898 |
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$ |
(1,911,815 |
) |
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$ |
759,083 |
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Contributions from stockholder
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- |
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- |
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150,000 |
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- |
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150,000 |
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Distributions to stockholder
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- |
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- |
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- |
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(125,101 |
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(125,101 |
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Net loss
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- |
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- |
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- |
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(938,323 |
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(938,323 |
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Balance, December 31, 2012
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199 |
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1,000 |
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2,819,898 |
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(2,975,239 |
) |
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(154,341 |
) |
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Write off of loan from stockholder
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- |
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- |
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275,000 |
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- |
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275,000 |
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| |
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Distributions to stockholder
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- |
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- |
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- |
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(146,911 |
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(146,911 |
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Net income
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- |
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- |
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- |
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241,361 |
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|
241,361 |
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| |
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Balance, December 31, 2013
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|
|
199 |
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$ |
1,000 |
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$ |
3,094,898 |
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$ |
(2,880,789 |
) |
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$ |
215,109 |
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The accompanying notes are an integral part of the financial statements.
ESCO ENERGY SERVICES COMPANY
Statements of Cash Flows
For the Years Ended December 31, 2013 and 2012
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2013
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2012
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Cash flows from operating activities of continuing operations:
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Net income (loss)
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$ |
241,361 |
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$ |
(938,323 |
) |
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Adjustments to reconcile net income (loss) to cash provided by operating activities:
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Depreciation and amortization
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18,515 |
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17,308 |
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Bad debt expense
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1,474 |
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- |
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Changes in operating assets and liabilities:
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Contracts receivable
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(1,364,718 |
) |
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450,523 |
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Costs and estimated earnings in excess of billings on uncompleted contracts
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(312,289 |
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1,059,608 |
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Materials and supplies
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(35,382 |
) |
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(15,590 |
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Prepaid expenses and other current assets
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1,391 |
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(13,911 |
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Deposits
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(2,420 |
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|
187 |
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Accounts payable and accrued liabilities
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1,147,692 |
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(500,019 |
) |
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Billings in excess of costs and estimated earnings on uncompleted contracts
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395,734 |
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|
151,212 |
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Deferred revenue
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20,659 |
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|
- |
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Income taxes payable
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4,203 |
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(12,482 |
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Net cash provided by operating activities
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116,220 |
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198,513 |
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Cash flows from investing activities:
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Capital expenditures
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(55,983 |
) |
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(29,210 |
) |
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Net cash used in investing activities
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(55,983 |
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(29,210 |
) |
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Cash flows from financing activities:
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Proceeds from line of credit
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855,000 |
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330,000 |
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Proceeds from stockholder contribution
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|
- |
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150,000 |
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Distributions made to stockholder
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(146,911 |
) |
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(125,101 |
) |
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Repayments of line of credit
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(670,000 |
) |
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(650,000 |
) |
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Repayments of long-term debt
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(8,437 |
) |
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(11,199 |
) |
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Net cash provided by (used in) financing activities
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29,652 |
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(306,300 |
) |
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Net increase (decrease) in cash and cash equivalents
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89,889 |
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(136,997 |
) |
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Cash and cash equivalents at beginning of period
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|
131,134 |
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|
268,131 |
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Cash and cash equivalents at end of period
|
|
$ |
221,023 |
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$ |
131,134 |
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| |
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Supplemental disclosure of cash flow information:
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Cash paid for interest
|
|
$ |
35,849 |
|
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$ |
33,212 |
|
|
Cash paid for income taxes
|
|
$ |
926 |
|
|
$ |
- |
|
| |
|
|
|
|
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|
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Supplemental disclosure of non-cash investing and financing activities:
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|
|
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|
|
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|
Property and equipment acquired through financing
|
|
$ |
47,057 |
|
|
$ |
32,626 |
|
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Write off of loan payable to stockholder
|
|
$ |
275,000 |
|
|
$ |
- |
|
The accompanying notes are an integral part of the financial statements.
ESCO ENERGY SERVICES COMPANY
Notes to Financial Statements
December 31, 2013 and 2012
ESCO Energy Services Company (“we”, “our”, the "Company") was incorporated in the State of Massachusetts in 1993. The Company is a construction contractor engaged in commercial lighting efficiency projects located primarily in the northeastern United States.
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis of Presentation
The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.
Use of estimates
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 and disclosures. Accordingly, actual results could differ from those estimates.
Operating cycle
The length of the Company's contracts varies, but is typically less than one year. Assets and liabilities relating to long-term contracts are included in current assets and current liabilities in the accompanying balance sheet as they will be liquidated in the normal course of contract completion, although this may require more than one year.
Cash and cash equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents.
Revenue and cost recognition
Construction revenue is recognized on the "percentage-of-completion" method, measured by the percentage of total costs incurred to date to estimated total costs for each contract. This method is utilized because management considers the cost-to-cost method the best available measure of progress on these contracts.
Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Profit incentives are included in revenue when their realization is reasonably assured. An amount equal to contract costs attributable to claims is included in revenue when realization is probable and the amount can be reliably estimated.
The asset, "Costs and estimated earnings in excess of billings on uncompleted contracts," represents revenue recognized in excess of amounts billed. The liability, "Billings in excess of costs and estimated earnings on uncompleted contracts," represents billings in excess of revenue recognized.
Contracts receivable
Contracts receivable from performing construction work are based on contracted terms. The Company may provide an allowance for doubtful collections, which would be based upon a review of outstanding receivables, historical collection information and existing economic conditions.
Contracts receivable are due 30 days after the issuance of the invoice. Contract retentions are due 30 days after completion of the project and acceptance by the owner. Delinquent receivables are written-off based on individual credit evaluation and specific circumstances of the customer.
The Company has an agreement to sell certain contracts receivable at a discount on a non- recourse basis.
Credit risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and contract and retainage receivables.
The Company maintains its cash balances with high-credit quality financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation. At times, such amounts may exceed federally insured limits. At December 31, 2013, the Company had no cash balances in excess of federally insured limits.
Contract and retainage receivables are due from customers located primarily in the northeastern United States. The Company does not require collateral in most cases, but may file claims against the construction projects if a default in payment occurs.
Customer concentrations
The Company obtains its contract work primarily through a competitive bid process. This may result in the Company earning a substantial portion of its revenue from relatively few customers in any given period. During the year ended December 31, 2013, the Company earned approximately 60% of its revenue from two customers. At December 31, 2013, approximately 88%, of billed contracts receivable balances were due from three customers. During the year ended December 31, 2012, the Company earned approximately 49% of its revenue from two customers. At December 31, 2012, approximately 53%, of billed contracts receivable balances were due from three customers.
Materials and supplies
Materials and supplies consist of miscellaneous supplies and materials to be used on future contracts recorded at the lower of cost or market.
Deferred construction revenue
The Company has billed owners on contracts which are in the mobilization stage. These billings have been deferred by the Company and are included in the balance sheet under the caption "Deferred contract revenue".
Property and equipment and leasehold improvements
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation has been provided using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the term of the related lease or the estimated useful lives of the assets. Expenditures for maintenance and repairs are charged to operations in the period incurred. The Company provides for depreciation using the straight-line method over the estimated useful lives of the assets as follows:
|
Office equipment
|
3 – 7 years
|
|
Furniture and fixtures
|
7 – 10 years
|
|
Transportation equipment
|
5 years
|
|
Leasehold improvements
|
Lesser of economic life or lease term
|
Impairment of long-lived assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing a review for impairment, the Company compares the carrying value of the assets with their estimated future undiscounted cash flows. If it is determined that an impairment has occurred, the loss would be recognized during that period. The impairment loss is calculated as the difference between the asset carrying values and the present value of estimated net cash flows or comparable market values, giving consideration to recent operating performance and pricing trends. The Company does not believe any material impairment currently exists related to the long-lived assets.
Income taxes
The Company accounts for income taxes pursuant to the asset and liability method which requires deferred tax assets and liabilities be computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income, if applicable. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.
The stockholder of the Company has elected to be taxed as an "S" Corporation under the provisions of the Internal Revenue Code (the "IRC"). The Company has not elected "S" status for all of the states it does business in. The income for Federal and state tax purposes, in those states where the Company has elected "S" status, is passed through to the stockholder and ultimately is taxed at the individual level. As a result, no provisions are made for Federal corporate or state franchise taxes, except for state tax on "S" Corporations, when applicable and in those states where the Company has not elected "S" status.
Construction contracts are reported under the accrual method for income tax purposes and under the percentage-of-completion method for financial statement purposes. Accelerated depreciation may be used for tax reporting, and the straight-line method is used for financial statement reporting.
The Company has no unrecognized tax benefits at December 31, 2013 and 2012. The Company's Federal and state income tax returns prior to fiscal year 2010 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.
The Company recognizes interest and penalties associated with tax matters as part of the income tax provision and includes accrued interest and penalties with the related tax liability in the balance sheets.
Fair value measurements
The carrying amounts reported in the balance sheets for accounts receivable and payables are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and, if applicable, the stated rate of interest is equivalent to rates currently available.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a three-level valuation hierarchy for disclosures of fair value measurements, defined as follows:
Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets
Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
Level 3: inputs to the valuation methodology are unobservable and significant to the fair value
The Company does not have any assets or liabilities that are required to be measured and recorded at fair value on a recurring basis.
Sales taxes
The Company collects sales tax form certain customers and remits the entire amount to the applicable taxing authority. The Company's accounting policy is to exclude the tax collected and remitted to the tax authority from revenue and costs.
Advertising
Advertising costs, which are include in general and administrative expenses, are expensed as incurred. Advertising costs charged to operations for the years ended December 31, 2013 and 2012 amount to approximately $32,000 and $7,000, respectively.
Recent accounting pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Contracts receivable at December 31, 2013 and 2012 consisted of the following:
| |
|
December 31,
2013
|
|
|
December 31,
2012
|
|
| |
|
|
|
|
|
|
|
Billed:
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
$
|
2,012,203
|
|
|
$
|
824,747
|
|
|
Retainage
|
|
|
322,903
|
|
|
|
55,800
|
|
|
Subtotal
|
|
|
2,335,106
|
|
|
|
880,547
|
|
|
Unbilled
|
|
|
108,307
|
|
|
|
199,622
|
|
|
Total contracts receivable
|
|
|
2,443,413
|
|
|
|
1,080,169
|
|
|
Less: Current portion of contracts receivable
|
|
|
(2,209,413
|
)
|
|
|
(1,080,169
|
)
|
|
Non-current portion of contracts receivable
|
|
$
|
234,000
|
|
|
$
|
—
|
|
At December 31, 2013, approximately $234,000 of retainage receivable is not expected to be collected within one year. All amounts were expected to be collected within one year as of December 31, 2012.
|
4.
|
COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
|
Costs and estimated earnings on uncompleted contracts at December 31, 2013 and 2012 consisted of the following:
| |
|
December 31,
2013
|
|
|
December 31,
2012
|
|
| |
|
|
|
|
|
|
|
Costs incurred on uncompleted contracts
|
|
$
|
3,403,675
|
|
|
$
|
683,355
|
|
|
Estimated earnings
|
|
|
1,135,325
|
|
|
|
251,610
|
|
|
Subtotal
|
|
|
4,539,000
|
|
|
|
934,965
|
|
|
Less: Billings to date
|
|
|
(4,394,691
|
)
|
|
|
(707,211
|
)
|
|
Total costs and estimated earnings on uncompleted contracts
|
|
$
|
144,309
|
|
|
$
|
227,754
|
|
The above amounts are included in the accompanying balance sheets under the following captions at December 31, 2013 and 2012:
| |
|
December 31,
2013
|
|
|
December 31,
2012
|
|
| |
|
|
|
|
|
|
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
$
|
691,255
|
|
|
$
|
378,966
|
|
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
(546,946
|
)
|
|
|
(151,212
|
) |
|
Total
|
|
$
|
144,309
|
|
|
$
|
227,754
|
|
Revisions in the estimated gross profit on contracts and contract amounts are made in the period in which the circumstances requiring the revisions become known. During the years ended December 31, 2013 and 2012, the effect of any such revisions in estimated contract profits were immaterial from that which would have been reported had the revised estimates been used as the basis of recognition of contract profit in prior years.
Although management believes it has established adequate procedures for estimating costs to complete on open contracts, it is at least reasonably possible that additional significant costs could occur on contracts prior to completion.
|
5.
|
PROPERTY AND EQUIPMENT
|
Property and equipment at December 31, 2013 and 2012 consisted of the following:
| |
|
December 31,
2013
|
|
|
December 31,
2012
|
|
| |
|
|
|
|
|
|
|
Office equipment
|
|
$
|
287,780
|
|
|
$
|
257,135
|
|
|
Furniture and fixtures
|
|
|
67,372
|
|
|
|
67,372
|
|
|
Transportation equipment
|
|
|
133,083
|
|
|
|
60,688
|
|
|
Leasehold improvements
|
|
|
28,605
|
|
|
|
28,605
|
|
|
Total property and equipment, gross
|
|
|
516,840
|
|
|
|
413,800
|
|
|
Less: Accumulated depreciation
|
|
|
(337,150
|
)
|
|
|
(318,635
|
)
|
|
Total property and equipment, net
|
|
$
|
179,690
|
|
|
$
|
95,165
|
|
Depreciation expense was $18,515 and $17,308 for the years ended December 31, 2013 and 2012, respectively.
The Company has a $1,500,000 line of credit with a bank which is due on demand. Interest on outstanding borrowings is payable at the bank's prime rate plus 1% (4.25% at December 31, 2013). At December 31, 2013 and 2012, the balance outstanding on the line of credit totaled $900,805 and $715,805, respectively. The borrowings were collateralized by substantially all of the Company's assets and personally guaranteed by the stockholder.
The line of credit requires the Company to comply with certain financial and compliance covenants, including, without limitation, a minimum debt service ratio of 1.25, a current ratio of 1.5:1, a minimum net equity requirement of $1.0 million and annual reporting requirements. As of December 31, 2013 and 2012, the Company was not in compliance with its financial covenant as it relates to the required minimum net equity of $1 million but was able to obtain a waiver from the bank.
Long-term debt at December 31, 2013 and 2012 consisted of the following:
| |
|
December 31,
2013
|
|
|
December 31,
2012
|
|
| |
|
|
|
|
|
|
|
Notes payable
|
|
$
|
64,683
|
|
|
$
|
26,063
|
|
|
Less: Current portion of notes payable
|
|
|
(41,708
|
)
|
|
|
(8,037
|
)
|
|
Non-current portion of notes payable
|
|
$
|
22,975
|
|
|
$
|
18,026
|
|
The notes payable, made by several financial institutions, are due in aggregate monthly installments of $1,950 (including interest ranging from 1.90% through 4.00%) and collateralized by transportation equipment
Principal payment requirements due on the above obligations in each of the five years subsequent to December 31, 2013 are as follows:
|
Year Ending December 31,
|
|
Amount
|
|
| |
|
|
|
|
2014
|
|
$ |
41,708 |
|
|
2015
|
|
|
12,751 |
|
|
2016
|
|
|
5,919 |
|
|
2017
|
|
|
4,305 |
|
|
2018
|
|
|
— |
|
| |
|
|
|
|
|
Total
|
|
$ |
64,683 |
|
Common stock
The Company is authorized to issue 200,000 shares of common stock with no stated par value. At December 31, 2013 and 2012, the Company had 199 shares of common stock issued and outstanding.
Stockholder contributions
On September 4, 2012, the Company received an equity contribution in the amount of $150,000 from its stockholder. Additionally, at December 31, 2013, the Company’s stockholder surrendered all rights to $275,000 in loan principal by writing off the obligations as equity contributions.
Stockholder distributions
During the years ended December 31, 2013 and 2012, the Company made distributions to its sole stockholder of $146,911 and $125,101, respectively.
|
9.
|
RELATED PARTY TRANSACTIONS
|
The Company rents office space from 309 Pittsfield Road Realty, LLC, an entity affiliated by common ownership. Rent and related charges for the years ended December 31, 2013 and 2012 amounted to approximately $31,000 and $31,000, respectively.
The Company and its stockholder are contingently liable as guarantors for a mortgage obligation held by this related party. The terms of the mortgage call for monthly payments in the amount of $2,595 including interest at a minimum of 4.50%. The amount of the mortgage outstanding as of December 31, 2013 and 2012 was approximately $374,000 and $388,000, respectively. The mortgage payments were current as of December 31, 2013.
On April 2 and September 29, 2011, the Company received loan proceeds in the amount of $175,000 and $100,000, respectively, from its stockholder. The loans were for an undefined term and on an interest free basis. These principal amounts were written off to equity as of December 31, 2013.
On November 3, 2014, the Company was released from its guarantee of the mortgage obligation held by 309 Pittsfield Road Realty, LLC.
|
10.
|
COMMITMENTS AND CONTINGENCIES
|
Guarantee of indebtedness
The Company has guaranteed approximately $374,000 (see Note 9 – Related Party Transactions) of 309 Pittsfield Road Realty, LLC's outstanding debt as of December 31, 2013. The terms of the mortgage call for monthly payments of $2,595 and interest at a minimum of 4.50%. The Company would be obligated to perform under this guarantee if 309 Pittsfield Road Realty, LLC failed to pay the principal and interest payments to the lender when due. The maximum potential amount of future undiscounted payments under the guarantee (including interest) would be approximately $543,000. As of December 31, 2013, 309 Pittsfield Road Realty, LLC was current on its debt payments.
Leases
The Company leases office spaces and vehicles under non-cancelable operating leases expiring through December 2017. Lease expense for the years ended December 31, 2013 and 2012 was approximately $92,000 and $106,000, respectively.
Future minimum rental payments in each of the five years subsequent to December 31, 2013 are as follows:
|
Year Ending December 31,
|
|
Amount
|
|
| |
|
|
|
|
2014
|
|
$ |
93,715 |
|
|
2015
|
|
|
64,073 |
|
|
2016
|
|
|
34,260 |
|
|
2017
|
|
|
36,000 |
|
|
2018
|
|
|
— |
|
| |
|
|
|
|
|
Total
|
|
$ |
228,048 |
|
Litigation
The Company, from time to time, may be involved with lawsuits arising in the ordinary course of business. In the opinion of the Company's management, any liability resulting from such litigation would not be material in relation to the Company's financial position, results of operations and cash flows.
Performance bonds
The Company is contingently liable to a surety under a general indemnity agreement. The Company agrees to indemnify the surety for any payments made on contracts of suretyship, guaranty or indemnity. The Company believes that all contingent liabilities will be satisfied by its performance on the specific bonded contracts.
|
11.
|
401(K) — PROFIT SHARING PLAN
|
The Company sponsors a 401(k)/profit-sharing plan, which covers substantially all nonunion employees meeting the length of service requirement of the plan. Matching contributions are not permitted in the plan. However, the Company may make discretionary contributions to the plan. All contributions are subject to the maximum allowable amount under Federal law.
Subsequent events are events or transactions that occur after the balance sheet date but before the financial statements are available to be issued. The Company recognizes in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing the financial statements. The Company's financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before the financial statements are available to be issued.
On October 17, 2014 (the “Closing”), the Company and Mitchell Barack (the “Seller”), the holder of all of the Company’s outstanding common stock, entered into a Stock Purchase Agreement (the “Purchase Agreement”) with ForceField Energy, Inc, a Nevada corporation. Pursuant to the Purchase Agreement, ForceField acquired (the “Acquisition”) all of the Company’s outstanding equity from the Seller for an aggregate purchase price of $7.5 million consisting of the following:
|
●
|
A cash payment of $1,000,000 to the Seller;
|
|
●
|
The issuance of 366,845 shares (the “Share Consideration”), of ForceField’s restricted common stock (the “Common Stock”) to the Seller and 87,700 restricted shares of Common Stock to certain employees of the Company (the “Employee Shares”) valued at $2.5 million;
|
|
●
|
The issuance to the Seller of two secured promissory notes from ForceField (the “Seller Notes”) consisting of: a $2.075 million note bearing interest at 6.02% per annum due in April 2016, and a $1.075 million note due on November 16, 2014. In addition, as part of the transaction, ForceField agreed to pay the Company’s employees that received Employee Shares an aggregate amount of $850,000 (of which $425,000 is payable upon the maturity of the $2.075 million note, and the remaining $425,000 is payable upon the maturity of the $1.075 million note).
|
The $2.075 million note is secured by 687,500 shares of restricted Common Stock, pursuant to a Stock Pledge Agreement between ForceField and the Seller (the “Pledge Agreement”), and the $1.075 million note is secured by all of the assets of the Company. All of the Sellers Notes and payments due to the ESCO employees may be paid prior to maturity without any prepayment penalty. Concurrent with the Closing, ForceField paid approximately $1.5 million in cash to retire all of the bank debt on the Company’s balance sheet.
On November 3, 2014, the Company was released from its guarantee of the mortgage obligation held by 309 Pittsfield Road Realty, LLC.
The Company has evaluated subsequent events through January 2, 2015, which is the date the financial statements were issued, and concluded that there were no other events or transactions that needed to be disclosed.
16
Exhibit 99.2
ESCO ENERGY SERVICES COMPANY
UNAUDITED FINANCIAL STATEMENTS
September 30, 2014
|
ESCO Energy Services Company
|
|
Page
|
|
|
|
|
|
|
|
Index to Financial Statements Contents Page(s)
|
|
|
|
| |
|
|
|
|
Balance Sheets as of September 30, 2014 and December 31, 2013 (Unaudited)
|
|
3
|
|
| |
|
|
|
|
Statements of Operations for the Nine Months Ended September 30, 2014 and 2013 (Unaudited)
|
|
4
|
|
| |
|
|
|
|
Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013 (Unaudited)
|
|
5
|
|
| |
|
|
|
|
Notes to Unaudited Financial Statements
|
|
6
|
|
|
ESCO ENERGY SERVICES COMPANY
|
|
Balance Sheets
|
|
September 30, 2014 and December 31, 2013
|
|
(Unaudited)
|
| |
|
|
|
|
|
|
| |
|
2014
|
|
|
2013
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
183,461 |
|
|
$ |
221,023 |
|
|
Contracts receivable
|
|
|
2,428,593 |
|
|
|
2,209,413 |
|
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
|
1,021,021 |
|
|
|
691,255 |
|
|
Materials and supplies
|
|
|
- |
|
|
|
50,972 |
|
|
Prepaid expenses and other current assets
|
|
|
48,023 |
|
|
|
16,087 |
|
|
Total current assets
|
|
|
3,681,098 |
|
|
|
3,188,750 |
|
|
Non-current portion of contracts receivable
|
|
|
- |
|
|
|
234,000 |
|
|
Property and equipment, net
|
|
|
145,045 |
|
|
|
179,690 |
|
|
Deposits
|
|
|
5,182 |
|
|
|
5,182 |
|
|
Total assets
|
|
$ |
3,831,325 |
|
|
$ |
3,607,622 |
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDER'S EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$ |
1,090,977 |
|
|
$ |
1,852,861 |
|
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
133,248 |
|
|
|
546,946 |
|
|
Deferred contract revenue
|
|
|
- |
|
|
|
20,659 |
|
|
Line of credit
|
|
|
1,470,805 |
|
|
|
900,805 |
|
|
Current portion of long-term debt
|
|
|
12,653 |
|
|
|
41,708 |
|
|
Due to stockholder
|
|
|
475,000 |
|
|
|
- |
|
|
Income taxes payable
|
|
|
3,781 |
|
|
|
6,559 |
|
|
Total current liabilities
|
|
|
3,186,464 |
|
|
|
3,369,538 |
|
|
Long-term debt, net of current portion
|
|
|
13,494 |
|
|
|
22,975 |
|
|
Total liabilities
|
|
|
3,199,958 |
|
|
|
3,392,513 |
|
| |
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
Stockholder's equity:
|
|
|
|
|
|
|
|
|
Common stock, $0.00 par value. 200,000 shares authorized; 199 and 199 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively
|
|
|
1,000 |
|
|
|
1,000 |
|
|
Additional paid-in capital
|
|
|
3,094,898 |
|
|
|
3,094,898 |
|
|
Accumulated deficit
|
|
|
(2,464,531 |
) |
|
|
(2,880,789 |
) |
|
Total stockholder's equity
|
|
|
631,367 |
|
|
|
215,109 |
|
|
Total liabilities and stockholder's equity
|
|
$ |
3,831,325 |
|
|
$ |
3,607,622 |
|
The accompanying notes are an integral part of the unaudited financial statements.
|
ESCO ENERGY SERVICES COMPANY
|
|
Statement of Operations
|
|
For the Nine Months Ended September 30, 2014 and 2013
|
|
(Unaudited)
|
| |
|
2014
|
|
|
2013
|
|
| |
|
|
|
|
|
|
|
Revenue
|
|
$ |
7,707,459 |
|
|
$ |
2,960,162 |
|
|
Cost of revenue
|
|
|
5,147,780 |
|
|
|
2,030,035 |
|
|
Gross margin
|
|
|
2,559,679 |
|
|
|
930,127 |
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
22,252 |
|
|
|
22,729 |
|
|
Selling and marketing
|
|
|
32,693 |
|
|
|
68,200 |
|
|
General and administrative
|
|
|
1,696,796 |
|
|
|
1,183,096 |
|
|
Professional fees
|
|
|
114,954 |
|
|
|
64,551 |
|
|
Total operating expenses
|
|
|
1,866,695 |
|
|
|
1,338,576 |
|
|
Income (loss) from operations
|
|
|
692,984 |
|
|
|
(408,449 |
) |
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(40,771 |
) |
|
|
(28,946 |
) |
|
Total other income (expense)
|
|
|
(40,771 |
) |
|
|
(28,946 |
) |
|
Income (loss) before income taxes
|
|
|
652,213 |
|
|
|
(437,395 |
) |
|
Provision for income taxes (benefit)
|
|
|
116 |
|
|
|
(2,935 |
) |
|
Net income (loss)
|
|
$ |
652,097 |
|
|
$ |
(434,460 |
) |
| |
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per common share
|
|
$ |
3,277 |
|
|
$ |
(2,183 |
) |
| |
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
199 |
|
|
|
199 |
|
The accompanying notes are an integral part of the unaudited financial statements.
|
ESCO ENERGY SERVICES COMPANY
|
|
Statements of Cash Flows
|
|
For the Nine Months Ended September 30, 2014 and 2013
|
|
(Unaudited)
|
| |
|
2014
|
|
|
2013
|
|
|
Cash flows from operating activities of continuing operations:
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
652,097 |
|
|
$ |
(434,460 |
) |
|
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
22,252 |
|
|
|
22,729 |
|
|
Loss on disposal of asset
|
|
|
4,096 |
|
|
|
- |
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Contracts receivable
|
|
|
14,820 |
|
|
|
125,212 |
|
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
|
(329,766 |
) |
|
|
179,545 |
|
|
Materials and supplies
|
|
|
50,972 |
|
|
|
(22,037 |
) |
|
Prepaid expenses and other current assets
|
|
|
(31,936 |
) |
|
|
(11,255 |
) |
|
Accounts payable and accrued liabilities
|
|
|
(761,884 |
) |
|
|
(227,143 |
) |
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
(413,698 |
) |
|
|
569,959 |
|
|
Deferred revenue
|
|
|
(20,659 |
) |
|
|
- |
|
|
Income taxes payable
|
|
|
(2,778 |
) |
|
|
4,655 |
|
|
Net cash provided by (used in) operating activities
|
|
|
(816,484 |
) |
|
|
207,205 |
|
| |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(17,046 |
) |
|
|
(19,799 |
) |
|
Net cash used in investing activities
|
|
|
(17,046 |
) |
|
|
(19,799 |
) |
| |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from line of credit
|
|
|
570,000 |
|
|
|
355,000 |
|
|
Proceeds from related party loan
|
|
|
475,000 |
|
|
|
- |
|
|
Distributions made to stockholder
|
|
|
(235,839 |
) |
|
|
- |
|
|
Repayments on line of credit
|
|
|
- |
|
|
|
(420,000 |
) |
|
Repayments of long-term debt
|
|
|
(13,193 |
) |
|
|
(6,012 |
) |
|
Net cash provided by financing activities
|
|
|
795,968 |
|
|
|
(71,012 |
) |
| |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(37,562 |
) |
|
|
116,394 |
|
|
Cash and cash equivalents at beginning of period
|
|
|
221,023 |
|
|
|
131,134 |
|
|
Cash and cash equivalents at end of period
|
|
$ |
183,461 |
|
|
$ |
247,528 |
|
| |
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$ |
40,771 |
|
|
$ |
28,946 |
|
|
Cash paid for income taxes
|
|
$ |
- |
|
|
$ |
- |
|
The accompanying notes are an integral part of the unaudited financial statements.
ESCO ENERGY SERVICES COMPANY
Notes to Unaudited Financial Statements
September 30, 2014
ESCO Energy Services Company (“we”, “our”, the "Company") was incorporated in the State of Massachusetts in 1993. The Company is a construction contractor engaged in commercial lighting efficiency projects located primarily in the northeastern United States.
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis of Presentation
The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.
Use of estimates
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 and disclosures. Accordingly, actual results could differ from those estimates.
Operating cycle
The length of the Company's contracts varies, but is typically less than one year. Assets and liabilities relating to long-term contracts are included in current assets and current liabilities in the accompanying balance sheet as they will be liquidated in the normal course of contract completion, although this may require more than one year.
Cash and cash equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents.
Revenue and cost recognition
Construction revenue is recognized on the "percentage-of-completion" method, measured by the percentage of total costs incurred to date to estimated total costs for each contract. This method is utilized because management considers the cost-to-cost method the best available measure of progress on these contracts.
Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Profit incentives are included in revenue when their realization is reasonably assured. An amount equal to contract costs attributable to claims is included in revenue when realization is probable and the amount can be reliably estimated.
The asset, "Costs and estimated earnings in excess of billings on uncompleted contracts," represents revenue recognized in excess of amounts billed. The liability, "Billings in excess of costs and estimated earnings on uncompleted contracts," represents billings in excess of revenue recognized.
Contracts receivable
Contracts receivable from performing construction work are based on contracted terms. The Company may provide an allowance for doubtful collections, which would be based upon a review of outstanding receivables, historical collection information and existing economic conditions.
Contracts receivable are due 30 days after the issuance of the invoice. Contract retentions are due 30 days after completion of the project and acceptance by the owner. Delinquent receivables are written-off based on individual credit evaluation and specific circumstances of the customer.
The Company has an agreement to sell certain contracts receivable at a discount on a non- recourse basis.
Credit risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and contract and retainage receivables.
The Company maintains its cash balances with high-credit quality financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation. At times, such amounts may exceed federally insured limits. At September 30, 2014, the Company had no cash balances in excess of federally insured limits.
Contract and retainage receivables are due from customers located primarily in the northeastern United States. The Company does not require collateral in most cases, but may file claims against the construction projects if a default in payment occurs.
Customer concentrations
The Company obtains its contract work primarily through a competitive bid process. This may result in the Company earning a substantial portion of its revenue from relatively few customers in any given period. During the nine months ended September 30, 2014, the Company earned approximately 80% of its revenue from three customers. During the nine months ended September 30, 2013, the Company earned approximately 58% of its revenue from three customers.
At September 30, 2014, approximately 81%, of billed contracts receivable balances were due from three customers. At December 31, 2013, approximately 88%, of billed contracts receivable balances were due from three customers.
Materials and supplies
Materials and supplies consist of miscellaneous supplies and materials to be used on future contracts recorded at the lower of cost or market.
Deferred construction revenue
The Company has billed owners on contracts which are in the mobilization stage. These billings have been deferred by the Company and are included in the balance sheet under the caption "Deferred contract revenue".
Property and equipment and leasehold improvements
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation has been provided using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the term of the related lease or the estimated useful lives of the assets. Expenditures for maintenance and repairs are charged to operations in the period incurred. The Company provides for depreciation using the straight-line method over the estimated useful lives of the assets as follows:
|
Office equipment
|
3 – 7 years
|
|
Furniture and fixtures
|
7 – 10 years
|
|
Transportation equipment
|
5 years
|
|
Leasehold improvements
|
Lesser of economic life or lease term
|
Impairment of long-lived assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing a review for impairment, the Company compares the carrying value of the assets with their estimated future undiscounted cash flows. If it is determined that an impairment has occurred, the loss would be recognized during that period. The impairment loss is calculated as the difference between the asset carrying values and the present value of estimated net cash flows or comparable market values, giving consideration to recent operating performance and pricing trends. The Company does not believe any material impairment currently exists related to the long-lived assets.
Income taxes
The Company accounts for income taxes pursuant to the asset and liability method which requires deferred tax assets and liabilities be computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income, if applicable. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.
The stockholder of the Company has elected to be taxed as an "S" Corporation under the provisions of the Internal Revenue Code (the "IRC"). The Company has not elected "S" status for all of the states it does business in. The income for Federal and state tax purposes, in those states where the Company has elected "S" status, is passed through to the stockholder and ultimately is taxed at the individual level. As a result, no provisions are made for Federal corporate or state franchise taxes, except for state tax on "S" Corporations, when applicable and in those states where the Company has not elected "S" status.
Construction contracts are reported under the accrual method for income tax purposes and under the percentage-of-completion method for financial statement purposes. Accelerated depreciation may be used for tax reporting, and the straight-line method is used for financial statement reporting.
The Company has no unrecognized tax benefits at September 30, 2014 and December 31, 2013. The Company's Federal and state income tax returns prior to fiscal year 2010 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.
The Company recognizes interest and penalties associated with tax matters as part of the income tax provision and includes accrued interest and penalties with the related tax liability in the balance sheet.
Fair value measurements
The carrying amounts reported in the balance sheets for accounts receivable and payables are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and, if applicable, the stated rate of interest is equivalent to rates currently available.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a three-level valuation hierarchy for disclosures of fair value measurements, defined as follows:
Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets
Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
Level 3: inputs to the valuation methodology are unobservable and significant to the fair value
The Company does not have any assets or liabilities that are required to be measured and recorded at fair value on a recurring basis.
Sales taxes
The Company collects sales tax form certain customers and remits the entire amount to the applicable taxing authority. The Company's accounting policy is to exclude the tax collected and remitted to the tax authority from revenue and costs.
Advertising
Advertising costs, which are include in general and administrative expenses, are expensed as incurred. Advertising costs charged to operations for the nine months ended September 30, 2014 and 2013 amount to $25,425 and $22,745, respectively.
Recent accounting pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Contracts receivable at September 30, 2014 and December 31, 2013 consisted of the following:
| |
|
September 30,
2014
|
|
|
December 31,
2013
|
|
| |
|
|
|
|
|
|
|
Billed:
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
$
|
1,649,720
|
|
|
$
|
2,012,203
|
|
|
Retainage
|
|
|
778,873
|
|
|
|
322,903
|
|
|
Subtotal
|
|
|
2,428,593
|
|
|
|
2,335,106
|
|
|
Unbilled
|
|
|
—
|
|
|
|
108,307
|
|
|
Total contracts receivable
|
|
|
2,428,593
|
|
|
|
2,443,413
|
|
|
Less: Current portion of contracts receivable
|
|
|
(2,428,593
|
)
|
|
|
(2,209,413
|
)
|
|
Non-current portion of contracts receivable
|
|
$
|
—
|
|
|
$
|
234,000
|
|
At September 30, 2014, all of retainage receivable is expected to be collected within one year. At December 31, 2013, approximately $234,000 of retainage receivable is not expected to be collected within one year.
|
4.
|
COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
|
Costs and estimated earnings on uncompleted contracts at September 30, 2014 and December 31, 2013 consisted of the following:
| |
|
September 30,
2014
|
|
|
December 31,
2013
|
|
| |
|
|
|
|
|
|
|
Costs incurred on uncompleted contracts
|
|
$
|
6,304,628
|
|
|
$
|
3,403,675
|
|
|
Estimated earnings
|
|
|
3,188,318
|
|
|
|
1,135,325
|
|
|
Subtotal
|
|
|
9,492,946
|
|
|
|
4,539,000
|
|
|
Less: Billings to date
|
|
|
(8,605,173
|
)
|
|
|
(4,394,691
|
)
|
|
Total costs and estimated earnings on uncompleted contracts
|
|
$
|
887,773
|
|
|
$
|
144,309
|
|
The above amounts are included in the accompanying balance sheets under the following captions at September 30, 2014 and December 31, 2013:
| |
|
September 30,
2014
|
|
|
December 31,
2013
|
|
| |
|
|
|
|
|
|
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
$
|
1,021,021
|
|
|
$
|
691,255
|
|
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
(133,248
|
)
|
|
|
(546,946
|
)
|
|
Total
|
|
$
|
887,773
|
|
|
$
|
144,309
|
|
Revisions in the estimated gross profit on contracts and contract amounts are made in the period in which the circumstances requiring the revisions become known. During the nine months ended September 30, 2014 and 2013, the effect of any such revisions in estimated contract profits were immaterial from that which would have been reported had the revised estimates been used as the basis of recognition of contract profit in prior years.
Although management believes it has established adequate procedures for estimating costs to complete on open contracts, it is at least reasonably possible that additional significant costs could occur on contracts prior to completion.
|
5.
|
PROPERTY AND EQUIPMENT
|
Property and equipment at September 30, 2014 and December 31, 2013 consisted of the following:
| |
|
September 30,
2014
|
|
|
December 31,
2013
|
|
| |
|
|
|
|
|
|
|
Office equipment
|
|
$
|
304,826
|
|
|
$
|
287,780
|
|
|
Furniture and fixtures
|
|
|
67,372
|
|
|
|
67,372
|
|
|
Transportation equipment
|
|
|
99,409
|
|
|
|
133,083
|
|
|
Leasehold improvements
|
|
|
28,605
|
|
|
|
28,605
|
|
|
Total property and equipment, gross
|
|
|
500,212
|
|
|
|
516,840
|
|
|
Less: Accumulated depreciation
|
|
|
(355,167
|
)
|
|
|
(337,150
|
)
|
|
Total property and equipment, net
|
|
$
|
145,045
|
|
|
$
|
179,690
|
|
Depreciation expense was $22,252 and $22,729 for the nine months ended September 30, 2014 and 2013.
The Company has a $1,500,000 line of credit with a bank which is due on demand. Interest on outstanding borrowings is payable at the bank's prime rate plus 1% (4.25% at December 31, 2013). At September 30, 2014 and December 31, 2013, the balance outstanding on the line of credit totaled $1,470,805 and $900,805, respectively. The borrowings were collateralized by substantially all of the Company's assets and personally guaranteed by the stockholder.
The line of credit requires the Company to comply with certain financial and compliance covenants, including, without limitation, a minimum debt service ratio of 1.25, a current ratio of 1.5:1, a minimum net equity of $1.0 million and annual reporting requirements. As of December 31, 2013, the Company was not in compliance with its financial covenant as it relates to the required minimum net equity of $1.0 million but was able to obtain a waiver from the bank.
Long-term debt at September 30, 2014 and December 31, 2013 consisted of the following:
| |
|
September 30,
2014
|
|
|
December 31,
2013
|
|
| |
|
|
|
|
|
|
|
Notes payable
|
|
$
|
26,147
|
|
|
$
|
64,683
|
|
|
Less: Current portion of notes payable
|
|
|
(12,653
|
)
|
|
|
(41,708
|
)
|
|
Non-current portion of notes payable
|
|
$
|
13,494
|
|
|
$
|
22,975
|
|
The notes payable, made by several financial institutions, are due in aggregate monthly installments of $1,950 (including interest ranging from 1.90% through 4.00%) and collateralized by transportation equipment
Common stock
The Company is authorized to issue 200,000 shares of common stock with no stated par value. At September 30, 2014 and December 31, 2013, the Company had 199 shares of common stock issued and outstanding.
Stockholder contributions
At December 31, 2013, the Company’s stockholder surrendered all rights to $275,000 in loan principal by writing off the obligations as equity contributions.
Stockholder distributions
During the nine months ended September 30, 2014, the Company made distributions to its sole stockholder of $235,839.
|
9.
|
RELATED PARTY TRANSACTIONS
|
The Company rents office space from 309 Pittsfield Road Realty, LLC, an entity affiliated by common ownership. Rent and related charges for the nine months ended September 30, 2014 and 2013 amounted to approximately $23,000 and $23,000, respectively.
The Company and its stockholder are contingently liable as guarantors for a mortgage obligation held by this related party. The terms of the mortgage call for monthly payments in the amount of $2,595 including interest at a minimum of 4.50%. The amount of the mortgage outstanding as of September 30, 2014 and December 31, 2013 was approximately $363,000 and $374,000, respectively. The mortgage payments were current as of September 30, 2014.
On April 2 and September 29, 2011, the Company received loan proceeds in the amount of $175,000 and $100,000, respectively, from its stockholder. The loans were for an undefined term and on an interest free basis. These principal amounts were written off to equity as of December 31, 2013.
On various dates in 2014, the Company received loan proceeds in the amount of $475,000 from its stockholder. The loans were for an undefined term and on an interest free basis.
On November 3, 2014, the Company was released from its guarantee of the mortgage obligation held by 309 Pittsfield Road Realty, LLC.
|
10.
|
COMMITMENTS AND CONTINGENCIES
|
Guarantee of indebtedness
The Company has guaranteed approximately $363,000 (see Note 9 – Related Party Transactions) of 309 Pittsfield Road Realty, LLC's outstanding debt as of September 30, 2014. The terms of the mortgage call for monthly payments of $2,595 and interest at a minimum of 4.50%. The Company would be obligated to perform under this guarantee if 309 Pittsfield Road Realty, LLC failed to pay the principal and interest payments to the lender when due. The maximum potential amount of future undiscounted payments under the guarantee (including interest) would be approximately $519,000. As of September 30, 2014 and December 31, 2013, 309 Pittsfield Road Realty, LLC was current on its debt payments.
Leases
The Company leases office spaces and vehicles under non-cancelable operating leases expiring through December 2017. Lease expense for the nine months ended September 30, 2014 and 2013 was approximately $89,000 and $56,000, respectively.
Litigation
The Company, from time to time, may be involved with lawsuits arising in the ordinary course of business. In the opinion of the Company's management, any liability resulting from such litigation would not be material in relation to the Company's financial position, results of operations and cash flows.
Performance bonds
The Company is contingently liable to a surety under a general indemnity agreement. The Company agrees to indemnify the surety for any payments made on contracts of suretyship, guaranty or indemnity. The Company believes that all contingent liabilities will be satisfied by its performance on the specific bonded contracts.
|
11.
|
401(K) — PROFIT SHARING PLAN
|
The Company sponsors a 401(k)/profit-sharing plan, which covers substantially all nonunion employees meeting the length of service requirement of the plan. Matching contributions are not permitted in the plan. However, the Company may make discretionary contributions to the plan. All contributions are subject to the maximum allowable amount under Federal law.
Subsequent events are events or transactions that occur after the balance sheet date but before the financial statements are available to be issued. The Company recognizes in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing the financial statements. The Company's financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before the financial statements are available to be issued.
On October 17, 2014 (the “Closing”), the Company and Mitchell Barack (the “Seller”), the holder of all of the Company’s outstanding common stock, entered into a Stock Purchase Agreement (the “Purchase Agreement”) with ForceField Energy, Inc, a Nevada corporation. Pursuant to the Purchase Agreement, ForceField acquired (the “Acquisition”) all of the Company’s outstanding equity from the Seller for an aggregate purchase price of $7.5 million consisting of the following:
|
●
|
A cash payment of $1,000,000 to the Seller;
|
|
●
|
The issuance of 366,845 shares (the “Share Consideration”), of ForceField’s restricted common stock (the “Common Stock”) to the Seller and 87,700 restricted shares of Common Stock to certain employees of the Company (the “Employee Shares”) valued at $2.5 million;
|
|
●
|
The issuance to the Seller of two secured promissory notes from ForceField (the “Seller Notes”) consisting of: a $2.075 million note bearing interest at 6.02% per annum due in April 2016, and a $1.075 million note due on November 16, 2014. In addition, as part of the transaction, ForceField agreed to pay the Company’s employees that received Employee Shares an aggregate amount of $850,000 (of which $425,000 is payable upon the maturity of the $2.075 million note, and the remaining $425,000 is payable upon the maturity of the $1.075 million note).
|
The $2.075 million note is secured by 687,500 shares of restricted Common Stock, pursuant to a Stock Pledge Agreement between ForceField and the Seller (the “Pledge Agreement”), and the $1.075 million note is secured by all of the assets of the Company. All of the Sellers Notes and payments due to the Company’s employees may be paid prior to maturity without any prepayment penalty. Concurrent with the Closing, ForceField paid approximately $1.5 million in cash to retire all of the bank debt on the Company’s balance sheets.
On November 3, 2014, the Company was released from its guarantee of the mortgage obligation held by 309 Pittsfield Road Realty, LLC.
The Company has evaluated subsequent events through January 2, 2015, which is the date the financial statements were issued, and concluded that there were no other events or transactions that needed to be disclosed.
13
Exhibit 99.3
FORCEFIELD ENERGY INC AND ESCO ENERGY SERVICES COMPANY
Unaudited Pro Forma Consolidated Balance Sheets
September 30, 2014
| |
|
ForceField
|
|
|
ESCO Energy
|
|
|
|
|
|
|
|
| |
|
Energy
|
|
|
Services Co.
|
|
|
Adjustment(s)
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
511,156 |
|
|
$ |
183,461 |
|
|
$ |
(135,805 |
) (a)(f) |
|
$ |
558,812 |
|
|
Accounts and contracts receivable, net
|
|
|
2,202,461 |
|
|
|
2,428,593 |
|
|
|
- |
|
|
|
4,631,054 |
|
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
|
- |
|
|
|
1,021,021 |
|
|
|
- |
|
|
|
1,021,021 |
|
|
Inventory, net
|
|
|
627,914 |
|
|
|
- |
|
|
|
- |
|
|
|
627,914 |
|
|
Deferred tax assets, net
|
|
|
13,804 |
|
|
|
- |
|
|
|
- |
|
|
|
13,804 |
|
|
Prepaid expenses and other current assets
|
|
|
624,847 |
|
|
|
48,023 |
|
|
|
- |
|
|
|
672,870 |
|
|
Total current assets
|
|
|
3,980,182 |
|
|
|
3,681,098 |
|
|
|
(135,805 |
) |
|
|
7,525,475 |
|
|
Property and equipment, net
|
|
|
34,637 |
|
|
|
145,045 |
|
|
|
- |
|
|
|
179,682 |
|
|
Goodwill
|
|
|
3,860,054 |
|
|
|
- |
|
|
|
12,245,903 |
(a)(b)(e) |
|
|
16,105,957 |
|
|
Intangible assets, net
|
|
|
3,483,825 |
|
|
|
- |
|
|
|
- |
|
|
|
3,483,825 |
|
|
Other assets
|
|
|
110,964 |
|
|
|
5,182 |
|
|
|
- |
|
|
|
116,146 |
|
|
Total assets
|
|
$ |
11,469,662 |
|
|
$ |
3,831,325 |
|
|
$ |
12,110,098 |
|
|
$ |
27,411,085 |
|
|
LIABILITIES AND EQUITY
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$ |
1,643,982 |
|
|
$ |
1,090,977 |
|
|
$ |
425,000 |
(a) |
|
$ |
3,159,959 |
|
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
- |
|
|
|
133,248 |
|
|
|
- |
|
|
|
133,248 |
|
|
Line of credit
|
|
|
- |
|
|
|
1,470,805 |
|
|
|
(1,470,805 |
) (c) |
|
|
- |
|
|
Loans payable, current portion
|
|
|
130,000 |
|
|
|
12,653 |
|
|
|
- |
|
|
|
142,653 |
|
|
Convertible debentures, current portion
|
|
|
100,000 |
|
|
|
- |
|
|
|
- |
|
|
|
100,000 |
|
|
Purchase consideration payable -- working capital adjustment
|
|
|
240,684 |
|
|
|
- |
|
|
|
- |
|
|
|
240,684 |
|
|
Senior, secured promissory notes, current portion net of loan discounts
|
|
|
979,594 |
|
|
|
- |
|
|
|
2,075,000 |
(a)(f) |
|
|
3,054,594 |
|
|
Related party payable
|
|
|
- |
|
|
|
475,000 |
|
|
|
- |
|
|
|
475,000 |
|
|
Income taxes payable
|
|
|
28,887 |
|
|
|
3,781 |
|
|
|
- |
|
|
|
32,668 |
|
|
Total current liabilities
|
|
|
3,123,147 |
|
|
|
3,186,464 |
|
|
|
1,029,195 |
|
|
|
7,338,806 |
|
|
Loans payable
|
|
|
- |
|
|
|
13,494 |
|
|
|
- |
|
|
|
13,494 |
|
|
Convertible debentures, net of loan discounts
|
|
|
2,501,557 |
|
|
|
- |
|
|
|
- |
|
|
|
2,501,557 |
|
|
Earnout liability
|
|
|
1,186,000 |
|
|
|
- |
|
|
|
5,000,000 |
(b) |
|
|
6,186,000 |
|
|
Senior, secured promissory notes, net of loan discounts
|
|
|
- |
|
|
|
- |
|
|
|
2,075,000 |
(a) |
|
|
2,075,000 |
|
|
Deferred tax liabilities, net
|
|
|
377,334 |
|
|
|
- |
|
|
|
- |
|
|
|
377,334 |
|
|
Other noncurrent liabilities
|
|
|
45,355 |
|
|
|
- |
|
|
|
425,000 |
(a) |
|
|
470,355 |
|
|
Total liabilities
|
|
|
7,233,393 |
|
|
|
3,199,958 |
|
|
|
8,529,195 |
|
|
|
18,962,546 |
|
|
Commitments and contingencies
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ForceField Energy Inc. stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
18,013 |
|
|
|
1,000 |
|
|
|
(246 |
) (a)(d)(f) |
|
|
18,767 |
|
|
Common stock held in treasury, at cost
|
|
|
(1,166,071 |
) |
|
|
- |
|
|
|
- |
|
|
|
(1,166,071 |
) |
|
Additional paid-in capital
|
|
|
21,545,551 |
|
|
|
3,094,898 |
|
|
|
1,116,618 |
(a)(d)(f) |
|
|
25,757,067 |
|
|
Accumulated deficit
|
|
|
(16,230,032 |
) |
|
|
(2,464,531 |
) |
|
|
2,464,531 |
(d) |
|
|
(16,230,032 |
) |
|
Accumulated other comprehensive income
|
|
|
17,932 |
|
|
|
- |
|
|
|
- |
|
|
|
17,932 |
|
|
Total ForceField Energy Inc. stockholders' equity
|
|
|
4,185,393 |
|
|
|
631,367 |
|
|
|
3,580,903 |
|
|
|
8,397,663 |
|
|
Noncontrolling interests
|
|
|
50,876 |
|
|
|
- |
|
|
|
- |
|
|
|
50,876 |
|
|
Total equity
|
|
|
4,236,269 |
|
|
|
631,367 |
|
|
|
3,580,903 |
|
|
|
8,448,539 |
|
|
Total liabilities and equity
|
|
$ |
11,469,662 |
|
|
$ |
3,831,325 |
|
|
$ |
12,110,098 |
|
|
$ |
27,411,085 |
|
|
(a) To record the purchase of ESCO Energy Service Company ("ESCO"). As consideration, ForceField Energy Inc. ("Company") agreed to (i) pay $1,000,000 in cash; (ii) issue 454,545 unregistered shares of the Company's common stock (at a per share price of a $6.33); (iii) issue two secured promissory notes for an aggregate of $3,150,000 in senior, secured promissory notes delivered to the former stockholder of ESCO, and (iv) pay the Company’s employees that received Employee Shares an aggregate amount of $850,000 (of which $425,000 is payable upon the maturity of the $2.075 million note, and the remaining $425,000 is payable upon the maturity of the $1.075 million note).
|
|
(b) To record a liability for the full effect of contingent additional purchase consideration, as defined in the Share Exchange Agreement dated October 17, 2014. The determination of
|
|
the earnout liability is preliminary and subject to change upon completion of an independent valuation study.
|
|
(c) To record repayment of ESCO's line of credit as agreed at the time of the transaction's closing.
|
|
(d) To adjust the pre-acquisition equity of ESCO.
|
|
(e) The determination of goodwill is preliminary and subject to change in accordance with FASB ASC Topic 850, Business Combinations upon completion of an independent valuation study. Separately identifiable intangible assets may be determined to exist that may require amortization expense to be recognized in future periods.
|
|
(f) To record debt and equity financing obtained to effectuate the transaction. ForceField issued a $1,000,000 unsecured promissory note and received gross proceeds of $1,335,000 from the sale of 137,000 shares of common stock and exercise of 162,500 common stock purchase warrants.
|
FORCEFIELD ENERGY INC AND ESCO ENERGY SERVICES COMPANY
Unaudited Pro Forma Consolidated Statements of Operations and Comprehensive Loss
For the Nine Months Ended September 30, 2014
| |
|
ForceField
|
|
|
ESCO Energy
|
|
|
|
|
|
|
|
| |
|
Energy (a)
|
|
|
Services Co.
|
|
|
Adjustment(s)
|
|
|
Consolidated
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
4,563,015 |
|
|
$ |
7,707,459 |
|
|
$ |
- |
|
|
$ |
12,270,474 |
|
|
Cost of revenue
|
|
|
3,258,014 |
|
|
|
5,147,780 |
|
|
|
- |
|
|
|
8,405,794 |
|
|
Gross margin
|
|
|
1,305,001 |
|
|
|
2,559,679 |
|
|
|
- |
|
|
|
3,864,680 |
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
255,990 |
|
|
|
22,252 |
|
|
|
- |
|
|
|
278,242 |
|
|
Selling and marketing
|
|
|
535,882 |
|
|
|
32,693 |
|
|
|
- |
|
|
|
568,575 |
|
|
General and administrative
|
|
|
2,150,527 |
|
|
|
1,696,796 |
|
|
|
- |
|
|
|
3,847,323 |
|
|
Professional fees
|
|
|
585,658 |
|
|
|
114,954 |
|
|
|
- |
|
|
|
700,612 |
|
|
Total operating expenses
|
|
|
3,528,057 |
|
|
|
1,866,695 |
|
|
|
- |
|
|
|
5,394,752 |
|
|
Income (loss) from operations
|
|
|
(2,223,056 |
) |
|
|
692,984 |
|
|
|
- |
|
|
|
(1,530,072 |
) |
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(174,878 |
) |
|
|
(40,771 |
) |
|
|
(157,436 |
) (b)(c) |
|
|
(373,085 |
) |
|
Total other income (expense)
|
|
|
(174,878 |
) |
|
|
(40,771 |
) |
|
|
(157,436 |
) |
|
|
(373,085 |
) |
|
Income (loss) before income taxes
|
|
|
(2,397,934 |
) |
|
|
652,213 |
|
|
|
(157,436 |
) |
|
|
(1,903,157 |
) |
|
Provision for income taxes (benefit)
|
|
|
(3,771 |
) |
|
|
116 |
|
|
|
- |
|
|
|
(3,655 |
) |
|
Net income (loss)
|
|
|
(2,394,163 |
) |
|
|
652,097 |
|
|
|
(157,436 |
) |
|
|
(1,899,502 |
) |
|
Less: Accretion of preferred stock
|
|
|
31,054 |
|
|
|
- |
|
|
|
- |
|
|
|
31,054 |
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
|
(47,136 |
) |
|
|
- |
|
|
|
- |
|
|
|
(47,136 |
) |
|
Net income (loss) attributable to ForceField Energy Inc. stockholders
|
|
$ |
(2,378,081 |
) |
|
$ |
652,097 |
|
|
$ |
(157,436 |
) |
|
$ |
(1,883,420 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per common share attributable to ForceField Energy Inc. stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ForceField Energy Inc. stockholders
|
|
$ |
(0.15 |
) |
|
|
|
|
|
|
|
|
|
$ |
(0.11 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
16,201,792 |
|
|
|
|
|
|
|
754,045 |
|
|
|
16,955,837 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(2,394,163 |
) |
|
$ |
652,097 |
|
|
$ |
(157,436 |
) |
|
$ |
(1,899,502 |
) |
|
Foreign curreny translation adjustment
|
|
|
(2,366 |
) |
|
|
- |
|
|
|
- |
|
|
|
(2,366 |
) |
|
Comprehensive income (loss)
|
|
|
(2,396,529 |
) |
|
|
652,097 |
|
|
|
(157,436 |
) |
|
|
(1,901,868 |
) |
|
Comprehensive income (loss) attributable to noncontrolling interests
|
|
|
(47,136 |
) |
|
|
- |
|
|
|
- |
|
|
|
(47,136 |
) |
|
Comprehensive income (loss) attributable to ForceField Energy Inc. stockholders
|
|
$ |
(2,349,393 |
) |
|
$ |
652,097 |
|
|
$ |
(157,436 |
) |
|
$ |
(1,854,732 |
) |
|
(a) Represents the combined total of the Registrant's sucessor (January 1 through April 25, 2014) and predecessor (April 26, 2014 through September 30, 2014) periods for the nine months ended September 30, 2014.
|
|
(b) To record interest expense related to the aggregate $3,150,000 in senior, secured promissory notes issued to the former stockholder of ESCO Energy Services Company.
|
|
(c) To record interest expense related to the $1,000,000 unsecured promissory notes issued to to raise proceeds towards the transaction's closing.
|
FORCEFIELD ENERGY INC AND ESCO ENERGY SERVICES COMPANY
Unaudited Pro Forma Consolidated Statements of Operations and Comprehensive Income
For the Year Ended December 31, 2013
| |
|
ForceField
|
|
|
ESCO Energy
|
|
|
|
|
|
|
|
| |
|
Energy (a)
|
|
|
Services Co.
|
|
|
Adjustment(s)
|
|
|
Consolidated
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
7,123,458 |
|
|
$ |
6,630,893 |
|
|
$ |
- |
|
|
$ |
13,754,351 |
|
|
Cost of revenue
|
|
|
4,197,958 |
|
|
|
4,527,750 |
|
|
|
- |
|
|
|
8,725,708 |
|
|
Gross margin
|
|
|
2,925,500 |
|
|
|
2,103,143 |
|
|
|
- |
|
|
|
5,028,643 |
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
10,207 |
|
|
|
18,515 |
|
|
|
- |
|
|
|
28,722 |
|
|
Selling and marketing
|
|
|
735,071 |
|
|
|
32,671 |
|
|
|
- |
|
|
|
767,742 |
|
|
General and administrative
|
|
|
1,590,610 |
|
|
|
1,664,416 |
|
|
|
- |
|
|
|
3,255,026 |
|
|
Professional fees
|
|
|
26,365 |
|
|
|
112,031 |
|
|
|
- |
|
|
|
138,396 |
|
|
Total operating expenses
|
|
|
2,362,253 |
|
|
|
1,827,633 |
|
|
|
- |
|
|
|
4,189,886 |
|
|
Income (loss) from continuing operations before other income (expense) and income taxes
|
|
|
563,247 |
|
|
|
275,510 |
|
|
|
- |
|
|
|
838,757 |
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
10,893 |
|
|
|
(35,736 |
) |
|
|
(209,915 |
) (b)(c) |
|
|
(234,758 |
) |
|
Total other income (expense)
|
|
|
10,893 |
|
|
|
(35,736 |
) |
|
|
(209,915 |
) |
|
|
(234,758 |
) |
|
Income (loss) from continuing operations before income taxes
|
|
|
574,140 |
|
|
|
239,774 |
|
|
|
(209,915 |
) |
|
|
603,999 |
|
|
Provision for income taxes (benefit)
|
|
|
237,134 |
|
|
|
(1,587 |
) |
|
|
- |
|
|
|
235,547 |
|
|
Net income (loss)
|
|
|
337,006 |
|
|
|
241,361 |
|
|
|
(209,915 |
) |
|
|
368,452 |
|
|
Less: Accretion of preferred stock
|
|
|
139,436 |
|
|
|
- |
|
|
|
- |
|
|
|
139,436 |
|
|
Net income (loss) attributable to ForceField Energy Inc. stockholders
|
|
$ |
197,570 |
|
|
$ |
241,361 |
|
|
$ |
(209,915 |
) |
|
$ |
229,016 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share attributable to ForceField Energy Inc. stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to ForceField Energy Inc. stockholders
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
$ |
0.01 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share attributable to ForceField Energy Inc. stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to ForceField Energy Inc. stockholders
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
$ |
0.01 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
16,291,566 |
|
|
|
|
|
|
|
754,045 |
|
|
|
17,045,611 |
|
|
Diluted
|
|
|
16,913,665 |
|
|
|
|
|
|
|
754,045 |
|
|
|
17,667,710 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
337,006 |
|
|
$ |
241,361 |
|
|
$ |
(209,915 |
) |
|
$ |
368,452 |
|
|
Foreign curreny translation adjustment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Comprehensive income (loss)
|
|
|
337,006 |
|
|
|
241,361 |
|
|
|
(209,915 |
) |
|
|
368,452 |
|
|
Comprehensive income (loss) attributable to ForceField Energy Inc. stockholders
|
|
$ |
337,006 |
|
|
$ |
241,361 |
|
|
$ |
(209,915 |
) |
|
$ |
368,452 |
|
|
(a) Represents the Registrant's predecessor (January 1 through December 31, 2014) period for the year ended December 31, 2013.
|
|
(b) To record interest expense related to the aggregate $3,150,000 in senior, secured promissory notes issued to the former stockholder of ESCO Energy Services Company.
|
|
(c) To record interest expense related to the $1,000,000 unsecured promissory notes issued to to raise proceeds towards the transaction's closing.
|
ForceField Energy (CE) (USOTC:FNRG)
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