Key Medical, Inc.

and Subsidiary Financial Statements

Balance Sheet
For the Period Ended December 31, 2012

2012

2011

$5,156,708
3,320,065
661,343
131,937

$3,860,543
2,646,661
936,688
154,433

9,270,053

7,598,325

Property and Equipment, net

377,687

273,117

Land

133,680

90,294

66,222

2,832,356

341,074

236,589

13,045,144

8,174,253

$1,177,105
117,571
123,835

$234,898
114,531
565,680

1,418,511

915,109

233,213

67,526

1,000,000
400,000
9,993,420

1,000,000
400,000
5,791,618

11,393,420

7,191,618

13,045,144

8,174,253

ASSETS
Current Assets
Cash and cash equivalents
Accounts receivable, net
Inventory
Other current assets
Total current assets

Goodwill
Note Receivable
Other noncurrent assets
Total Assets

LIABILITIES AND STOCKHOLDER'S EQUITY

Current Liabilities
Accounts payable
Accrued liabilities
Other current liabilities
Total current liabilities
Other noncurrent liabilities
Stockholder's Equity
Common Stock
Additional Paid in Capital
Accumulated Deficit
Total stockholder's equity
Total Liabilities and Stockholder's Equity

Key Medical, Inc. and Subsidiary Financial Statements

Income Statement
For the Period Ended December 31, 2012

2012
Revenue, net of allowances
Cost of Sales
Gross Margin
Operating Expenses
Depreciation
Total Operating Expenses
Operating Income
Other Income (Expense)
Net Income Before Income Taxes
Income Taxes
Net Income

$11,548,693
877,558
$10,671,135
6,485,542
92,456
6,577,998
$4,093,137
(16,412)
$4,076,725
(125,077)
$4,201,802

Nature of Operations - Key Medical Group, Inc. and Subsidiary (the "Company"), a North Carolina corporation, is in
the business of manufacturing medical equipment and developing medical software used in hospitals and doctor
offices. The company currently has a manufacturing plant in Raleigh, North Carolina and has sales branches in West
Virginia. Each sales branch provides sale support, inventory, and technical expertise to direct customers as well as the
distributor network.
Basis of Presentation - The financial statements are prepared in conformity with accounting principles generally
accepted in the United States of America.
Fiscal Year - The Company's fiscal year ends on December 31. The years ended December 31, 2012 and 2011 are
referred to herin as 2012 and 2011, respectively.

Inventories - Inventories are valued at the lower of cost, as determined using the average cost method, or market.
Fair Value of Financial Instruments - The Company's cash and cash equivalents, accounts receivable, accounts
payable and certain other accrued liabilities are all short-term in nature and the carrying amounts approximate fair
value.
Property, Plant, and Equipment - Property, plant, and equipment are stated at cost. Depreciation and amortization is
calculated using the straight-line method over the estimated useful lives of the assets.
The estimated useful lives of assets are as follows:
Plant Equipment
Office Furniture and Fixtures
Computer Equipment

7 years
5 years
3 years

Property, plant, and equipment at December 31 consists of the following:

Land
Plant equipment
Computer equipment, office furniture, and fixtures
Construction-in-progress

Accumulated depreciation and amortization

Total property, plant, and equipment

2012
133,680
1,056,293
137,735
389,220

1,133,635
137,735
-

1,716,928

1,271,370

(1,055,561)
661,367

2011

(998,253)
273,117

Revenue Recognition - The Company recognizes revenue upon shipment of its products to customers. Discounts
taken by customers for early payments are reported as interest expense in the statements of income.

Income Taxes - The provision for income taxes for the years ended December 31 consists of the following:

Federal
State

2012
(159,210)
34,133

2011
158,553
7,771

(125,077)

166,324

The components of the Company's net deferred tax asset at December 31 are as follows:
2012

2011

Deferred tax assets:

Current portion for reserves and accruals not currently deductible
Long term portion

125,000
191,074

150,000
236,589

Total deferred tax assets

316,074

386,589

Deferred tax liabilities:

Current portion for depreciation and amortization
Long term portion

(123,835)
(218,461)

(117,735)
(70,205)

Total deferred tax liabilities

(342,296)

(187,940)

(26,222)

198,649

Net deferred tax asset