EX-99.3 33 f8kex99iii_pioneer.htm PRO FORMA FINANCIAL STATEMENTS f8kex99iii_pioneer.htm
 
 
Exhibit 99.3

 
Pioneer Power Solutions, Inc.
 
Pro Forma Consolidated Financial Statements
(Unaudited)
(Expressed in U.S. Funds)

 
 
 
 
 
 
 
 
 
 
 

 
Pioneer Power Solutions, Inc.
 
Pro Forma Consolidated Financial Statements
(Unaudited)
(Expressed in U.S. Funds)
 
 
 
 
 
Contents
 
Pro Forma Consolidated Balance Sheet
1
   
Pro Forma Consolidated Statement of Earnings for the Nine-Month Period Ended September 30, 2009
2
   
Pro Forma Consolidated Statement of Earnings for the Year Ended December 31, 2008
3
   
Notes to Pro Forma Consolidated Financial Statements
4-5
 
 
 
 
 
Pioneer Power Solutions, Inc.
 
 
Pro Forma Consolidated Balance Sheet
As At September 30, 2009
(Unaudited)
(Expressed in U.S. Funds)
 
   
Pioneer
Transformers Ltd.
    
Pioneer
Power Solutions, Inc.
          
Pro Forma
Adjustments
    
Pro Forma
Consolidated
Balance Sheet
  
                               
Assets
                              
Current
                              
Cash
     200,650     $ 14,519       e )   $ (14,519 )     200,650  
Accounts receivable
     6,850,016       -               -       6,850,016  
Inventories
     7,056,852       -               -       7,056,852  
Prepaid expenses
     417,206       -               -       417,206  
      14,524,724       14,519               (14,519 )     14,524,724  
Property and Equipment
     802,313       -               -       802,313  
    $ 15,327,037     $ 14,519             $ (14,519 )   $ 15,327,037  
                                         
Liabilities
                                        
                                         
Current
                                        
Bank indebtedness
     4,218,545     $ -       a )   $ 2,000,000       1,428,545  
                      c )     210,000          
                      d )     (5,000,000 )        
Accounts payable and accrued liabilities
     3,869,954       50,624       e )     (50,624 )     3,869,954  
Current maturity of long-term debt
     135,806       -               -       135,806  
Income taxes payable
     984,819                               984,819  
      9,209,124       50,624               (2,840,624 )     6,419,124  
Pension Deficit
     297,656       -               -       297,656  
Deferred Income Tax Liabilities
     69,487       -               -       69,487  
Long-Term Debt
     23,858       -               -       23,858  
Advances From Ultimate Shareholders
     150,000       -               -       150,000  
                                         
Shareholders' Equity
                                  
                                   
Capital Stock
     590,133       8,400       b )     (567,333 )     29,000  
                      c )     5,000          
                      e )     (7,200 )        
Additional Paid in capital
     -       9,600       b )     567,333       5,351,133  
                      c )     (210,000 )        
                      d )     4,995,000          
                      e )     (10,800 )        
Other Comprehensive Loss
     (559,828 )     -               -       (559,828 )
Retained Earnings
     5,546,607       (54,105 )     a )     (2,000,000 )     3,546,607  
                      e )     54,105          
      5,576,912       (36,105 )             2,826,105       8,366,912  
      15,327,037     $ 14,519             $ (14,519 )     15,327,037  
 
See accompanying notes
 
-1-
 
Pioneer Power Solutions, Inc.
 
Pro Forma Consolidated Statement of Earnings
For the Nine-Month Period Ended September 30, 2009
(Unaudited)
(Expressed in U.S. Funds)
 
 
   
Pioneer
Transformers Ltd.
    
Pioneer
Power Solutions, Inc.
    
Pro Forma
Adjustments
    
Pro Forma
Consolidated
Statement of Earnings
  
                                 
Net Sales
   $ 30,398,312     $ -     $ -     $ 30,398,312  
                                 
Cost of Goods Sold (including depreciation of $98,838)
     22,063,240       -       -       22,063,240  
Gross Margin
     8,335,072       -       -       8,335,072  
                                 
Expenses
                                
  Selling, general and administrative
     2,714,972       47,855       -       2,762,827  
  Depreciation
     122,228       -       -       122,228  
  Foreign exchange
     280,790       -       -       280,790  
      3,117,990       47,855       -       3,165,845  
                                 
Operating Income
     5,217,082       (47,855 )     -       5,169,227  
                                 
Interest and factoring fees
     282,335       -       -       282,335  
Earnings Before Income Taxes
     4,934,747       (47,855 )     -       4,886,892  
                                 
Income Taxes
                                
  Current income taxes
     1,455,169       -       -       1,455,169  
  Deferred income taxes
     59,831       -       -       59,831  
      1,515,000       -       -       1,515,000  
                                 
Net Earnings
   $ 3,419,747     $ (47,855 )   $ -     $ 3,371,892  
                                 
Weighted Average Number of Shares Outstanding
                             29,000,000  
                                 
Basic and Diluted Earnings Per Common Share
                           $ 0.12  
                                 
 
See accompanying notes
 
-2-
 
Pioneer Power Solutions, Inc.
 
Pro Forma Consolidated Statement of Earnings
For the Year Ended December 31, 2008
(Unaudited)
(Expressed in U.S. Funds)
 
   
Pioneer
Transformers Ltd.
    
Pioneer
Power Solutions, Inc.
    
Pro Forma
Adjustments
     Pro Forma
Consolidated
Statement of Earnings
  
                                 
Sales
   $ 43,884,261     $ -     $ -     $ 43,884,261  
                                 
Cost of Goods Sold (including depreciation of $117,566)
     34,895,796       -       -       34,895,796  
Gross Margin
     8,988,465       -       -       8,988,465  
                                 
Expenses
                                
  Selling, general and administrative
     4,205,135       6,250       -       4,211,385  
  Depreciation
     174,043       -       -       174,043  
  Foreign exchange
     (98,428 )     -       -       (98,428 )
      4,280,750       6,250       -       4,287,000  
                                 
Operating Income
     4,707,715       -6,250       -       4,701,405  
                                 
  Interest and factoring fees
     512,421       -       -       512,421  
  Write-down of advances to companies controlled by shareholders
     700,335       -       -       700,335  
Earnings (Loss) Before Income Taxes
     3,494,959       (6,250 )     -       3,488,709  
                                 
Income Taxes
                                
  Current income taxes
     1,265,000       -       -       1,265,000  
  Future income taxes
     92,000       -       -       92,000  
      1,357,000       -       -       1,357,000  
Net Earnings
   $ 2,137,959     $ (6,250 )   $ -     $ 2,131,709  
                                 
Weighted Average Number of  Shares Outstanding
                             29,000,000  
                                 
Basic and Diluted Earnings Per Common Share
                           $ 0.07  
                                 
 
See accompanying notes
 
-3-

Pioneer Power Solutions, Inc.
 
Notes to Pro Forma Consolidated Financial Statements
For the Nine-Month Period Ended September 30, 2009 and For the Year Ended December 31, 2008
(Unaudited)
(Expressed in U.S. Funds)
 
 
1.
Basis of Presentation
 
Effective November 30, 2009, Sierra Concepts, Inc. changed its name to Pioneer Power Solutions, Inc. and on December 2, 2009 completed the acquisition of 100% of the outstanding shares of common stock of Pioneer Transformers Ltd. in a transaction that has been accounted for as a recapitalization of Pioneer Transformers Ltd.
 
All of Pioneer Transformers Ltd.’s shares are exchanged for 22,800,000 newly issued shares of common stock of Pioneer Power Solutions, Inc. and a five-year warrant to purchase up to 1,000,000 shares of common stock of Pioneer Power Solutions, Inc. at an exercise price of $3.25 per share.  In connection with the closing of the share exchange, Pioneer Power Solutions, Inc. sold 5,000,000 shares of its common stock at a purchase price of $1 per share in a private placement, resulting in aggregate gross proceeds of $5,000,000.  In addition, at the close of the share exchange, Pioneer Power Solutions, Inc. sold five-year warrants to purchase an aggregate of 1,000,000 shares of its common stock at an exercise price of $2 per share to certain investors for aggregate gross proceeds of $10,000.  Following the closing of the share exchange and the private placement, Pioneer Power Solutions, Inc. transferred all of its pre-share exchange assets and liabilities to a wholly owned subsidiary, Sierra Concepts Holdings, Inc., and immediately thereafter, transferred all of the outstanding common stock of Sierra Concepts Holdings, Inc., in exchange for certain indemnifications, waivers and releases, along with the cancellation of an aggregate of 7,200,000 shares of Pioneer Power Solutions, Inc.’s common stock.
 
In the pro forma unaudited consolidated financial statements, pro forma adjustments are made to reflect the financial position and results of operations of Pioneer Transformers Ltd. as the independent public operating entity.
 
The pro forma unaudited consolidated financial information may not be indicative of the financial position and results of operations that would have occurred if the recapitalization had been in effect on the date indicated or of the financial position and operating results which may be obtained in the future.
 
The pro forma unaudited consolidated balance sheet of Pioneer Power Solutions, Inc. as at September 30, 2009 and the related pro forma unaudited consolidated statement of earnings for the nine-month period ended September 30, 2009 and for the year ended December 31, 2008 have been derived from the unaudited interim and the year-end audited consolidated financial statements of Pioneer Transformers Ltd. as at September 30, 2009 and December 31, 2008, and from the year-end audited and unaudited interim financial statements of Pioneer Power Solutions, Inc. as at September 30, 2009 and December 31, 2008 with the assumptions and adjustments outlined in note 2.
 
The Pioneer Power Solutions, Inc.’s audited financial statements have been audited by Maddox Ungar Silberstein, PLLC, while Pioneer Transformers Ltd.’s audited consolidated financial statements have been audited by RSM Richter, LLP.
 
 
-4-
 
Pioneer Power Solutions, Inc.
 
Notes to Pro Forma Consolidated Financial Statements
For the Nine-Month Period Ended September 30, 2009 and For the Year Ended December 31, 2008
(Unaudited)
(Expressed in U.S. Funds)
 
 
2.
Pro Forma Assumptions and Adjustments
 
The accompanying pro forma unaudited consolidated financial statements of Pioneer Power Solutions, Inc. have been prepared to reflect the following assumptions and adjustments:
 
a)  
Prior to the share exchange, Pioneer Transformers Ltd. declares and pays a dividend amounting to $2,000,000.
 
b)  
All of Pioneer Transformers Ltd.’s shares are exchanged for 22,800,000 shares of common stock of Pioneer Power Solutions, Inc. and a five-year warrant to purchase up to 1,000,000 shares of common stock of Pioneer Power Solutions, Inc. at an exercise price of $3.25 per share.  The five year warrant has a fair value of $167,500 which was determined using the Black-Scholes option pricing model.
 
c)  
Pioneer Power Solutions, Inc. issues a five-year warrant to purchase an aggregate of 1,000,000 shares of its common stock at an exercise price of $2 per share in exchange for aggregate gross proceeds of $10,000 and consulting services received.  The five-year warrant has a fair value of $275,600 which was determined using the Black-Scholes option pricing model. In addition, Pioneer Power Solutions Inc. incurs professional fees amounting to $220,000, for total transaction fees of $485,600 relating to the share exchange transaction.
 
 
d)
Pioneer Power Solutions, Inc. issues 5,000,000 shares of its common stock at a purchase price of $1 per share in a private placement, resulting in aggregate gross proceeds of $5,000,000.  The proceeds are used to pay down bank indebtedness.  The interest expense has not been adjusted since the ultimate usage of funds is not factually supportable.
 
 
e)
Pioneer Power Solutions, Inc. transfers all of its pre-share exchange assets and liabilities to a newly incorporated wholly owned subsidiary, and immediately thereafter, transfers all of the outstanding common stock of the subsidiary to a person who was a stockholder of Pioneer Power Solutions, Inc. prior to the share exchange, in exchange for certain indemnifications, waivers and releases, along with the cancellation of an aggregate of 7,200,000 shares of Pioneer Power Solutions, Inc.’s common stock leaving 1,200,000 shares of common stock outstanding held by persons who were stockholders of the Company prior to the share exchange.
 
 
 
-5-