Exhibit 99.1

DANCO ACQUISITION CORPORATION

FINANCIAL STATEMENTS

FOR
THE YEARS ENDED

DECEMBER 31, 2013 AND 2012

(unaudited)



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DANCO ACQUISITION CORPORATION

CONTENTS

December 31,
2013 and 2012



|                                    |  |      |        | 
|----------------------------------- |  | ---- | ------ | 
|                                    |  | Page |       
|                                    | 
|CONSOLIDATED FINANCIAL STATEMENTS   |  |      |        | 
|                                    | 
|Balance sheets                      |  |      | 1      | 
|                                    | 
|Statements of operations            |  |      | 2      | 
|                                    | 
|Statements of stockholders deficit |  |      | 3      | 
|                                    | 
|Statements of cash flows            |  |      | 4      | 
|                                    | 
|Notes to financial statements       |  |      | 5 - 19 | 



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DANCO ACQUISITION CORPORATION

CONSOLIDATED BALANCE SHEETS

December 31, 2013 and 2012

(unaudited)



|                                                                                              |  |      |           |  |      |   |           | 
|--------------------------------------------------------------------------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                                                                                              |  | 2013 |           |  | 2012 |  
|ASSETS                                                                                        | 
|Current assets                                                                                |  |      |           |  |      |   |           | 
|Cash and cash equivalents                                                                     |  | $    | 169,505   |  |      | $ | 193,205   | 
|Accounts receivable less allowance for doubtful accounts of $14,507 and $14,061, respectively |  |      | 1,921,695 |  |      |   | 1,748,314 | 
|Inventory, less reserve of $1,252,111 and $1,475,973, respectively                            |  |      | 2,010,681 |  |      |   | 2,089,171 | 
|Prepaid expenses                                                                              |  |      | 85,164    |  |      |   | 94,679    | 
|                                                                                              |  |      |           |  |      |   |           | 
|Total current assets                                                                          |  |      | 4,187,045 |  |      |   | 4,125,369 | 
|Property and equipment, net                                                                   |  |      | 2,127,753 |  |      |   | 2,475,429 | 
|Debt issuance costs, net                                                                      |  |      |          |  |      |   | 148,722   | 
|Intangible assets, net                                                                        |  |      | 253,535   |  |      |   | 573,790   | 
|Other assets                                                                                  |  |      | 35,148    |  |      |   | 35,148    | 
|                                                                                              |  |      |           |  |      |   |           | 
|Total assets                                                                                  |  | $    | 6,603,481 |  |      | $ | 7,358,458 | 
|                                                                                              |  |      |           |  |      |   |           | 

The accompanying notes are an integral part of these financial statements.



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DANCO ACQUISITION CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2013 and 2012

(unaudited)



|                                                                                                                                                      |  |      |             |   |      |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                                                                                      |  | 2013 |             |   | 2012 |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                                                                                                        | 
|Current liabilities                                                                                                                                   |  |      |             |   |      |   |             |  
|Accounts payable                                                                                                                                      |  | $    | 897,039     |   |      | $ | 549,437     |  
|Accrued liabilities                                                                                                                                   |  |      | 1,458,726   |   |      |   | 1,258,258   |  
|Current portioncapital leases                                                                                                                        |  |      | 162,916     |   |      |   | 139,093     |  
|                                                                                                                                                      |  |      |             |   |      |   |             |  
|Total current liabilities                                                                                                                             |  |      | 2,518,681   |   |      |   | 1,946,788   |  
|Line of credit                                                                                                                                        |  |      | 3,150,000   |   |      |   | 2,250,000   |  
|Capital leases, net of current portion                                                                                                                |  |      | 179,195     |   |      |   | 266,076     |  
|Long-term debt                                                                                                                                        |  |      | 14,520,514  |   |      |   | 14,520,514  |  
|                                                                                                                                                      |  |      |             |   |      |   |             |  
|Total liabilities                                                                                                                                     |  |      | 20,368,390  |   |      |   | 18,983,378  |  
|                                                                                                                                                      |  |      |             |   |      |   |             |  
|Commitments and Contingencies (Note 14)                                                                                                               |  |      |             |   |      |   |             |  
|Stockholders deficit                                                                                                                                 |  |      |             |   |      |   |             |  
|Preferred stock, $0.0001 par value; 2,000 shares authorized, 42 shares issued and outstanding as of December 31, 2013 and
2012                        |  |      | 3,791,735   |   |      |   | 3,791,735   |  
|Common stock, $0.0001 par value; 10,000 shares authorized, 1,241 and 580 shares issued and outstanding as of December 31, 2013 and
2012, respectively |  |      | 9,549       |   |      |   | 8,300       |  
|Accumulated deficit                                                                                                                                   |  |      | (17,566,193 | ) |      |   | (15,424,955 | )
|                                                                                                                                                      |  |      |             |   |      |   |             |  
|Total stockholders deficit                                                                                                                           |  |      | (13,764,909 | ) |      |   | (11,624,920 | )
|                                                                                                                                                      |  |      |             |   |      |   |             |  
|Total liabilities and stockholders deficit                                                                                                           |  | $    | 6,603,481   |   |      | $ | 7,358,458   |  
|                                                                                                                                                      |  |      |             |   |      |   |             |  

The accompanying notes are an integral part of these financial statements.



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DANCO ACQUISITION CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2013 and 2012

(unaudited)



|                                          |  |      |            |   |      |   |             |  
|----------------------------------------- |  | ---- | ---------- | - | ---- | - | ----------- | -
|                                          |  | 2013 |            |   | 2012 |  
|Sales                                     |  | $    | 13,152,961 |   |      | $ | 11,550,385  |  
|Cost of sales                             |  |      | 11,393,283 |   |      |   | 10,440,689  |  
|                                          |  |      |            |   |      |   |             |  
|Gross profit                              |  |      | 1,759,678  |   |      |   | 1,109,696   |  
|General and administrative expenses       |  |      | 3,062,554  |   |      |   | 2,608,245   |  
|Goodwill impairment                       |  |      |           |   |      |   | 11,006,573  |  
|                                          |  |      |            |   |      |   |             |  
|Operating loss                            |  |      | (1,302,876 | ) |      |   | (12,505,122 | )
|                                          |  |      |            |   |      |   |             |  
|Other income (expense)                    |  |      |            |   |      |   |             |  
|Interest expense                          |  |      | (846,692   | ) |      |   | (1,728,071  | )
|Other income, net                         |  |      | 9,930      |   |      |   | 97,948      |  
|                                          |  |      |            |   |      |   |             |  
|                                          |  |      | (836,762   | ) |      |   | (1,630,127  | )
|                                          |  |      |            |   |      |   |             |  
|Net loss before income taxes              |  |      | (2,139,638 | ) |      |   | (14,135,249 | )
|(Provision for) benefit from income taxes |  |      | (1,600     | ) |      |   | 869,274     |  
|                                          |  |      |            |   |      |   |             |  
|Net loss                                  |  | $    | (2,141,238 | ) |      | $ | (13,265,975 | )
|                                          |  |      |            |   |      |   |             |  

The accompanying notes are an integral part of these financial statements.



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DANCO ACQUISITION CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)

For the Years Ended December 31, 2013 and 2012

(unaudited)



|                                                              |  |                 |    |  |              |   |           |             |  |  |                     |   |  |         |       |   |         |   |             |   |  |   |             |  
|------------------------------------------------------------- |  | --------------- | -- |  | ------------ | - | --------- | ----------- |  |  | ------------------- | - |  | ------- | ----- | - | ------- | - | ----------- | - |  | - | ----------- | -
|                                                              |  | Preferred Stock |    |  | Common Stock |   |           | Accumulated |  |  | Total
Stockholders |  
|                                                              |  | Shares          |    |  | Amount       |   |           | Shares      |  |  | Amount              |   |  | Deficit |       |   | Deficit |  
|Balance as of December 31, 2011                               |  |                 | 42 |  |              | $ | 3,791,735 |             |  |  | 580                 |   |  | $       | 8,300 |   |         | $ | (2,158,980  | ) |  | $ | 1,641,055   |  
|Net loss                                                      |  |                 |   |  |              |   |          |             |  |  |                    |   |  |         |      |   |         |   | (13,265,975 | ) |  |   | (13,265,975 | )
|                                                              |  |                 |    |  |              |   |           |             |  |  |                     |   |  |         |       |   |         |   |             |   |  |   |             |  
|Balance as of December 31, 2012                               |  |                 | 42 |  |              |   | 3,791,735 |             |  |  | 580                 |   |  |         | 8,300 |   |         |   | (15,424,955 | ) |  |   | (11,624,920 | )
|Repurchase of Class A common stock at $1.00 per share         |  |                 |   |  |              |   |          |             |  |  | (580                | ) |  |         | (580  | ) |         |   |            |   |  |   | (580        | )
|Exercise of warrants and conversion into Class A common stock |  |                 |   |  |              |   |          |             |  |  | 1,241               |   |  |         | 1,829 |   |         |   |            |   |  |   | 1,829       |  
|Net loss                                                      |  |                 |   |  |              |   |          |             |  |  |                    |   |  |         |      |   |         |   | (2,141,238  | ) |  |   | (2,141,238  | )
|                                                              |  |                 |    |  |              |   |           |             |  |  |                     |   |  |         |       |   |         |   |             |   |  |   |             |  
|Balance as of December 31, 2013                               |  |                 | 42 |  |              | $ | 3,791,735 |             |  |  | 1,241               |   |  | $       | 9,549 |   |         | $ | (17,566,193 | ) |  | $ | (13,764,909 | )
|                                                              |  |                 |    |  |              |   |           |             |  |  |                     |   |  |         |       |   |         |   |             |   |  |   |             |  

The accompanying notes are an integral part of these financial statements.



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DANCO ACQUISITION CORPORATION

CONSOLIDATED BALANCE SHEETS

For the Years Ended December 31, 2013 and 2012

(unaudited)



|                                                                        |  |      |            |   |      |   |             |  
|----------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ----------- | -
|                                                                        |  | 2013 |            |   | 2012 |  
|Cash flows from operating activities                                    |  |      |            |   |      |   |             |  
|Net loss                                                                |  | $    | (2,141,238 | ) |      | $ | (13,265,975 | )
|Adjustments to reconcile net loss to net cash from operating activities |  |      |            |   |      |   |             |  
|Depreciation expense                                                    |  |      | 537,970    |   |      |   | 595,996     |  
|Amortization expense                                                    |  |      | 320,255    |   |      |   | 399,421     |  
|Amortization of debt issuance costs                                     |  |      | 148,722    |   |      |   | 191,435     |  
|Deferred income taxes                                                   |  |      |           |   |      |   | (870,836    | )
|Allowance for doubtful accounts                                         |  |      | 539        |   |      |   | (2,249      | )
|Inventory reserve                                                       |  |      | (223,863   | ) |      |   | 129,695     |  
|Gain on disposal of fixed assets                                        |  |      |           |   |      |   | (84,828     | )
|Goodwill impairment                                                     |  |      |           |   |      |   | 11,006,573  |  
|Changes in operating assets and liabilities:                            |  |      |            |   |      |   |             |  
|Accounts receivable                                                     |  |      | (173,920   | ) |      |   | (295,135    | )
|Inventory                                                               |  |      | 302,353    |   |      |   | (366,347    | )
|Prepaid expenses and other assets                                       |  |      | 9,515      |   |      |   | 34,421      |  
|Accounts payable and accrued liabilities                                |  |      | 548,070    |   |      |   | 746,104     |  
|                                                                        |  |      |            |   |      |   |             |  
|                                                                        |  |      | 1,469,640  |   |      |   | 11,484,250  |  
|                                                                        |  |      |            |   |      |   |             |  
|Net cash used in operating activities                                   |  |      | (671,597   | ) |      |   | (1,781,725  | )
|                                                                        |  |      |            |   |      |   |             |  
|Cash flows from investing activities                                    |  |      |            |   |      |   |             |  
|Payments for the purchase of fixed assets                               |  |      | (86,600    | ) |      |   | (97,398     | )
|Proceeds from sale of fixed assets on disposal                          |  |      |           |   |      |   | 87,100      |  
|                                                                        |  |      |            |   |      |   |             |  
|Net cash used in investing activities                                   |  |      | (86,600    | ) |      |   | (10,298     | )
|                                                                        |  |      |            |   |      |   |             |  
|Cash flows from financing activities                                    |  |      |            |   |      |   |             |  
|Principal payments on note payable                                      |  |      | (81,659    | ) |      |   | (95,956     | )
|Proceeds for notes payable                                              |  |      |           |   |      |   | 1,150,000   |  
|Net proceeds from line of credit                                        |  |      | 981,659    |   |      |   | 750,000     |  
|Payments on capital leases                                              |  |      | (166,752   | ) |      |   | (139,091    | )
|Proceeds from exercise of warrants                                      |  |      | 1,829      |   |      |   |            |  
|Repurchase of common stock                                              |  |      | (580       | ) |      |   |            |  
|                                                                        |  |      |            |   |      |   |             |  
|Net cash provided by financing activities                               |  |      | 734,497    |   |      |   | 1,664,953   |  
|                                                                        |  |      |            |   |      |   |             |  
|Net decrease in cash and cash equivalents                               |  |      | (23,700    | ) |      |   | (127,070    | )
|Cash and cash equivalents, beginning of year                            |  |      | 193,205    |   |      |   | 320,275     |  
|                                                                        |  |      |            |   |      |   |             |  
|Cash and cash equivalents, end of year                                  |  | $    | 169,505    |   |      | $ | 193,205     |  
|                                                                        |  |      |            |   |      |   |             |  
|Supplemental disclosures of cash flow information                       |  |      |            |   |      |   |             |  
|Interest expense paid                                                   |  | $    | 629,664    |   |      | $ | 1,400,389   |  
|Income taxes paid                                                       |  | $    | 1,600      |   |      | $ | 1,509       |  
|Income taxes refunds received                                           |  | $    |           |   |      | $ | 144,958     |  
|Non-cash investing and financing activities                             |  |      |            |   |      |   |             |  
|Property and equipment purchased under capital lease                    |  | $    | 103,694    |   |      | $ |            |  

The accompanying notes are an integral part of these financial statements.



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DANCO ACQUISITION CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2013 and 2012

(unaudited)

NOTE 1SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

DPMS, Inc. dba Danco Machine DPMS (the Company or Danco) was founded in 1979 to meet the challenge of providing competitively priced,
quality prototype machining services to the emerging high-tech industries of the Silicon Valley.

On October 17, 2007, the Company was acquired by
Danco Acquisition Corporation, an entity created by a group of private equity firms to facilitate their acquisition of the Company. The transaction was effected so that Danco would have the necessary financial and managerial resources available to
continue to strategically grow. These financial statements contain the consolidated results of Danco Acquisition Corporation and its wholly-owned subsidiary DPMS, Inc.

Liquidity and Managements Plans

The Company
experienced operating losses and operating cash flow deficiencies during 2013 and 2012. Management has plans to return the Company to profitability and positive cash flows. Management is closely monitoring its demand, and if demand does not increase
as expected, management may implement cost-cutting measures. If strategies to improve margins and reduce operating costs are not successful, and the Company is not able to meet its debt obligations, then the Company will need to further reduce
expenses or raise additional capital through other sources.

The Company also has $14,520,514 of notes payable and a line of credit balance of $3,150,000
that mature in 2015 and 2016. These balances are payable to a lender who is an affiliated entity of the majority stockholder of the Company. This stockholder has demonstrated continued support for its investment in the Company. Subsequent to
year-end the lender (affiliated entity of the majority stockholder) increased the line of credit facility size from $3,150,000 to $4,150,000. If the Company is unable to improve the cash flow from operations, the Company will need to seek additional
capital from the stockholders or other sources. However, there is no assurance that the stockholders will continue to provide capital to the Company or that the Company will be able to obtain additional capital from other sources.

The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets
or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

Cash and Cash
Equivalents

The Company considers all highly liquid investments purchased with original maturity of three months or less to be cash equivalents.

Revenue Recognition and Allowance for Doubtful Accounts

The Company recognizes revenue when (i) delivery of product has occurred, (ii) there is persuasive evidence of a sale arrangement, (iii) selling
prices are fixed or determinable, and (iv) collectability from the customers is reasonably assured. Revenue is recorded when the risk and rewards of ownership are transferred to the Companys customers, which generally occurs upon shipment
of the product. Accounts receivable is stated at an amount that management believes to be collectible. Historically, bad debts have been within managements expectations.



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DANCO ACQUISITION CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2013 and 2012

(unaudited)



NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Inventory

Inventory is stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or market. The Company evaluates the
valuation of all inventory, including raw materials, work-in-process, finished goods and spare parts on a periodic basis. Obsolete inventory or inventory in excess of managements estimated usage is written-down to its estimated market value
less costs to sell, if less than its cost. Inherent in the estimates of market value are managements estimates related to economic trends, future demand for products and technological obsolescence of the Companys products.

Property and Equipment

Property and equipment are
recorded at cost and include improvements that significantly add to productive capacity or extend useful life. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from three to fifteen
years. Repair and maintenance costs that do not increase the useful lives and/or enhance the value of the assets are charged to operations as incurred. Leasehold improvements are stated at cost and amortized over the lesser of the terms of the
respective leases or the assets useful lives.

The Company evaluates their long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets consist primarily of property and equipment. Recoverability of assets is measured by a comparison of the carrying amount of an asset group to
future net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment charge is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair value, less cost to sell. The Company did not recognize any impairment charges associated with long-lived assets for the years ended December 31, 2013 and 2012.

Goodwill and Other Intangible Assets

Goodwill and other
intangible assets are accounted for in accordance with ASC 350, Goodwill and Other Intangible Assets. Goodwill represents the excess of cost over the estimated fair value of net assets acquired by the Company. Other intangible assets are amortized
on a straight-line basis over the period of expected benefit with a weighted-average useful life of approximately 5.4 years with no calculated residual value. The estimated useful lives of identifiable intangible assets are as follows:



|                         |  |        |         | 
|------------------------ |  | ------ | ------- | 
|Description              |  | Period |        
|Covenants not to compete |  |        | 5 years | 
|Customer lists           |  |        | 7 years | 

The Company assesses the impairment of goodwill on an annual basis on December 31. Goodwill is also tested for impairment
whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable.



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DANCO ACQUISITION CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2013 and 2012

(unaudited)



NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Goodwill and Other Intangible Assets (Continued)



Due to the Companys losses from operations over the past years, in 2012 the Company concluded that the
goodwill balance was likely fully impaired. As such, the Company recorded an impairment loss of $11,006,573 in its statement of operations during the year ended December 31, 2012.

Debt Issuance Costs

The Company amortizes debt issuance
costs using the effective interest method over the term of the related notes payable.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the
year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation
allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.

Significant judgment is required in
determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, the Company considers all available evidence, including past operating results, estimates of future taxable income and the
feasibility of tax planning strategies. In the event that the Company changes its determination as to the amount of deferred tax assets that is more likely than not to be realized, the Company will adjust its valuation allowance with a corresponding
impact to the provision for income taxes in the period in which such determination is made.

The Company follows the authoritative guidance regarding
uncertain tax positions. This guidance requires that realization of an uncertain income tax position must be more likely than not (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in the financial statements. The
guidance further prescribes the benefit to be realized assumes a review by tax authorities having all relevant information and applying current conventions. The Company recognizes potential accrued interest and penalties related to unrecognized tax
benefits as income tax expense.

Shipping and Handling

Shipping and handling charges billed to customers are included in sales. The costs of shipping to customers are included in cost of sales in the Companys
consolidated statement of operations.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.



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DANCO ACQUISITION CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2013 and 2012

(unaudited)



NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Use of Estimates (Continued)



The Companys most significant estimates relate to accounts receivable allowances and inventory
reserves.

Concentration of Credit Risk

The Company
has a concentration of credit risk with respect to its trade receivables. The Company provides unsecured and interest-free credit, in the normal course of business, to its customers, and receivables are considered past due based on payment terms
with customers. Management performs ongoing credit evaluations of its customers and monitors the receivable balances on a regular basis. An allowance for doubtful accounts is recorded based on managements evaluation of outstanding receivables.
Receivables are written off when all methods of collection have been exhausted and have been within the range of managements expectations. Management believes its credit acceptance, billing and collection policies are adequate to minimize
potential credit risk.

The Company has a concentration of credit risk with respect to the volume of business transacted with certain customers. Two
customers accounted for approximately 54%, and 71% of the Companys sales for the years ended December 31, 2013 and 2012, respectively. Four customers represented approximately 75% and three customers represented approximately 79% of the
Companys accounts receivable as of December 31, 2013 and 2012, respectively.

Fair Value of Financial Instruments

FASB ASC Topic 820 Fair Value Measurements and Disclosures defines fair value, establishes a consistent framework for measuring fair value and
expands disclosure requirements about fair-value measurements. The statement, among other things, requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. This includes
applying the fair value concept to (i) non-financial assets and liabilities initially measured at fair value in business combinations, (ii) reporting units or non-financial assets and liabilities measured at fair value in conjunction with
goodwill impairment testing, (iii) other non-financial assets and liabilities measured at fair value in conjunction with impairment assessments and (iv) asset retirement obligations initially measured at fair value.

The statement established a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring fair value. This
framework defined three levels of inputs to the fair value measurement process and requires that each fair value measurement be assigned to a level corresponding to the lowest level input that is significant to the fair value measurement in its
entirety. The three broad levels of inputs defined by the hierarchy are as follows:



| |  |  | Level 1 Inputs  quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2 Inputs  inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term,
a Level 2 input must be observable for substantially the full-term of the asset or liability and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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DANCO ACQUISITION CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2013 and 2012

(unaudited)



NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Fair Value of Financial Instruments (Continued)



| |  |  | Level 3 Inputs  unobservable inputs for the asset or liability. These unobservable inputs reflect the entitys own assumptions about the assumptions that market participants would use in pricing the asset or
liability and are developed based on the best information available in the circumstances (which might include the reporting entitys own data).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Financial instruments for which disclosure only of fair value is required consist of the following:



| |  |  | Cash and cash equivalentscarrying value approximates fair value due to the short time to maturity.
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | Notes payablecarrying value approximates fair value based upon current market rates.
| | - |  | -------------------------------------------------------------------------------------

Subsequent
Events

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued or are
available to be issued. The Company recognizes in the consolidated financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the consolidated balance sheet, including the
estimates inherent in the process of preparing the consolidated financial statements. The Companys consolidated financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of
the consolidated balance sheet but arose after the consolidated balance sheet date and before the consolidated financial statements are issued or are available to be issued.

The Company has evaluated subsequent events through May 12, 2014 which is the date the consolidated financial statements were available to be issued.

NOTE 2  INVENTORY

Inventory consists of the
following as of December 31, 2013 and 2012:



|                                   |  |      |            |   |      |   |            |  
|---------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                   |  | 2013 |            |   | 2012 |  
|Raw materials and work in progress |  | $    | 1,256,000  |   |      | $ | 1,267,386  |  
|Finished goods                     |  |      | 2,006,792  |   |      |   | 2,297,758  |  
|                                   |  |      |            |   |      |   |            |  
|                                   |  |      | 3,262,792  |   |      |   | 3,565,144  |  
|Less inventory reserve             |  |      | (1,252,111 | ) |      |   | (1,475,973 | )
|                                   |  |      |            |   |      |   |            |  
|Total inventory                    |  | $    | 2,010,681  |   |      | $ | 2,089,171  |  
|                                   |  |      |            |   |      |   |            |  



---

DANCO ACQUISITION CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2013 and 2012

(unaudited)



NOTE 3PROPERTY AND EQUIPMENT

Property and equipment consists of the following as of December 31, 2013 and 2012:



|                              |  |      |            |   |      |   |            |  
|----------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                              |  | 2013 |            |   | 2012 |  
|Machinery and equipment       |  | $    | 4,808,770  |   |      | $ | 4,666,529  |  
|Software                      |  |      | 190,531    |   |      |   | 161,215    |  
|Office equipment              |  |      | 77,346     |   |      |   | 58,609     |  
|Leasehold improvements        |  |      | 18,857     |   |      |   | 18,857     |  
|Automobile                    |  |      | 13,701     |   |      |   | 13,701     |  
|                              |  |      |            |   |      |   |            |  
|                              |  |      | 5,109,205  |   |      |   | 4,918,911  |  
|Less accumulated depreciation |  |      | (2,981,451 | ) |      |   | (2,443,482 | )
|                              |  |      |            |   |      |   |            |  
|Total property and equipment  |  | $    | 2,127,754  |   |      | $ | 2,475,429  |  
|                              |  |      |            |   |      |   |            |  

The Company recorded $537,969 and $595,996 in total depreciation expense for the years ended December 31, 2013 and 2012,
respectively. Of these amounts, depreciation expense related to assets acquired under capital leases was $177,585 and $179,003 for the years ended December 31, 2013 and 2012, respectively. Accumulated depreciation related to assets acquired
under capital leases was $451,799 and $320,120 as of December 31, 2013 and 2012, respectively.

NOTE 4INTANGIBLE ASSETS

Intangible assets consist of the following as of December 31, 2013 and 2012:



|                              |  |      |            |   |      |   |            |  
|----------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                              |  | 2013 |            |   | 2012 |  
|Customer relationships        |  | $    | 2,241,784  |   |      | $ | 2,241,784  |  
|Covenant not to compete       |  |      | 500,000    |   |      |   | 500,000    |  
|                              |  |      |            |   |      |   |            |  
|Gross intangible assets       |  |      | 2,741,784  |   |      |   | 2,741,784  |  
|Less accumulated amortization |  |      | (2,488,249 | ) |      |   | (2,167,994 | )
|                              |  |      |            |   |      |   |            |  
|Total intangible assets       |  | $    | 253,535    |   |      | $ | 573,790    |  
|                              |  |      |            |   |      |   |            |  

The aggregate amortization expense for the years ended December 31, 2013 and 2012 was $320,255 and $399,421,
respectively. The estimated aggregate amortization expense for the succeeding year is as follows:



|                                   |  |   |         | 
|---------------------------------- |  | - | ------- | 
|Year Ending December 31,           |  |   |        
|2014                               |  |   | 253,535 | 
|                                   |  |   |         | 
|Total future amortization expenses |  | $ | 253,535 | 



---

DANCO ACQUISITION CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2013 and 2012

(unaudited)



NOTE 5DEBT ISSUANCE COSTS

Debt issuance costs are capitalized on the balance sheet resulting from entering into financing arrangements as part of the acquisition of the Company by Danco
Acquisition Corporation on October 17, 2007. The aggregate amortization expense for the years ended December 31, 2013 and 2012 was $148,722 and $191,435, respectively.

NOTE 6NOTES PAYABLE

Notes payable consist of the
following as of December 31, 2013 and 2012:



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |      |           |  |      |   |           | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | 2013 |           |  | 2012 |  
|Note ANote payable to affiliated entity of a majority equity holder in the Company, secured by substantially all assets of the
Company. In March 2013, the note was modified to allow the Company to request interest on the note to be calculated at 4% instead of the stated interest rate of the greater of 10% or the libor rate plus 4%, payable monthly (actual rate was 4% and
10% as of December 31, 2013 and 2012, respectively). This note is subject to certain financial performance related covenants, which were waived subsequent to the year ended December 31, 2013. The notes maturity date is August
2015.         |  | $    | 2,575,000 |  |      | $ | 2,575,000 | 
|Note BNote payable to affiliated entity of a majority equity holder in the Company, secured by substantially all assets of the
Company. In March 2013, the note was modified to allow the Company to request interest on the note to be calculated at 4% instead of the stated interest rate of the greater of 6.25% or the libor rate plus 3.125%, payable monthly (actual rate was 4%
and 6.25% as of December 31, 2013 and 2012, respectively). This note is subject to certain financial performance related covenants, which were waived subsequent to the year ended December 31, 2013. The notes maturity date is August
2015. |  |      | 8,795,514 |  |      |   | 8,795,514 | 



---

DANCO ACQUISITION CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2013 and 2012

(unaudited)



NOTE 6NOTES PAYABLE (Continued)





|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |      |            |  |      |  |            | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- |  | ---- |  | ---------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 2013 |            |  | 2012 | 
|Note CNote payable to affiliated entity of a majority equity holder in the Company, secured by substantially all assets of the
Company. In March 2013, the note was modified to allow the Company to request interest on the note to be calculated at 5% instead of the stated interest rate of the greater of 5% or the libor rate plus 4.75%, payable monthly (actual rate was 5% as
of December 31, 2013 and 2012). This note is subject to certain financial performance related covenants, which were waived subsequent to the year ended December 31, 2013. Interest is due and payable monthly, in arrears, commencing on
September 1, 2012. The notes maturity date is August 2015.                             |  |      | 1,150,000  |  |      |  | 1,150,000  | 
|Note payable to former stockholder, subordinated to all other debt held by the Company. Bears interest at 7.0%, compounded
semi-annually and payable quarterly. The note was previously amended to suspend interest payments until the Company meets certain financial measurements. At December 31, 2013 and 2012, accrued interest related to this note was $769,184 and
$584,092, respectively. Principal payments are equal to the amount that annual earnings before interest, taxes, depreciation, and amortization (EBITDA) exceeds $4,500,000, which require the approval of the senior debt holders for
payment. The note matures the later of February 2016 or six months after maturity of the senior notes. |  |      | 2,000,000  |  |      |  | 2,000,000  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |      |            |  |      |  |            | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |      | 14,520,514 |  |      |  | 14,520,514 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |      |            |  |      |  |            | 

Interest expense on related party loans for the year ended December 31 2013, and 2012 was $630,099 and $1,338,520,
respectively. $54,117 and $93,795 remained payable at December 31, 2013 and 2012, respectively.

Minimum annual payments are as follows:



|                              |  |   |            | 
|----------------------------- |  | - | ---------- | 
|Year Ending December 31,      |  |   |           
|2014                          |  | $ |           | 
|2015                          |  |   | 12,520,514 | 
|2016                          |  |   | 2,000,000  | 
|                              |  |   |            | 
|Total minimum annual payments |  | $ | 14,520,514 | 



---

DANCO ACQUISITION CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2013 and 2012

(unaudited)



NOTE 6NOTES PAYABLE (Continued)



As part of the March 2013 amendment to the Notes A, B and C discussed above and the line of credit discussed
in Note 7, Exit Fees were added, summarized as follows:



| |  |  | For Note A and the line of credit, the Exit Fee is equal to the sum of the Differential Amounts on each interest payment date from the date of amendment through the date of a Change of Control, with the Differential
Amount being the difference between the maximum interest rate and the minimum interest rate. The Exit Fee is payable upon occurrence of a Change of Control.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | For Note B, the Exit Fee is equal to the sum of a) for the period from October 16, 2007 through and including June, 30 2012, 2.50% per annum on the greater of (i) the outstanding principal amount of the
Note (Original Note and the Prior Note) and (ii) 75% of the original principal amount of the Original Note, plus b) for the period from July 1, 2012 through and including the Maturity Date, 8.75% per annum on the greater of
(i) 75% of the original principal amount of the Note and (ii) 75% of the original principal amount of the Original Note, plus c) the sum of the Differential Amounts on each Interest Payment Date from the date of amendment through the date
of a Change of Control, with the Differential Amount being the difference between the maximum interest rate and the minimum interest rate. The Exit Fee is payable upon occurrence of a Change of Control.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | For Note C, the Exit Fee is equal to the amount accrued at a rate of 20% per annum on the outstanding principal of the Original Notes, from the date of issuance thereof upon earlier of a) a Change of Control or b)
the repayment of Obligations (other than Exit Fee) and no obligation to advance. Obligations includes the Term A, B, and Revolving Note exit fees as defined in the Note Purchase Agreement. The Exit Fee is payable upon the earlier of an occurrence of
a Change of Control or repayment of Obligations.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As the exit fees for Note A, B and line of credit are contingent upon a Change of Control
and for Note C contingent upon either a Change of Control or repayment of all Obligations (including the exit fees of the other Notes), they are considered contingent interest payments. As they are contingent, the Company has assessed the
probability of payment of the exit fees and has determined it is not likely. A change of control is uncertain and, as a result, no amounts have been accrued for the exit fees. As of December 31, 2013, the contingent interest payment liabilities
related to these exit fees are as follows:



|               |  |   |           | 
|-------------- |  | - | --------- | 
|Note A         |  | $ | 117,251   | 
|Note B         |  |   | 2,341,233 | 
|Note C         |  |   | 311,315   | 
|Line of credit |  |   | 143,433   | 
|               |  |   |           | 
|Total          |  | $ | 2,913,232 | 



---

DANCO ACQUISITION CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2013 and 2012

(unaudited)



NOTE 7LINE OF CREDIT

The Company has an outstanding line of credit with an affiliated entity of a majority equity holder. The line of credit bears interest at the greater of 10.0%
or libor rate plus 4.0% or the Company may request the interest to be calculated at 4.0%, per year.

During the year ended December 31, 2012,
the line of credit agreement with an affiliated entity of a majority equity holder was amended. The amendment to the Companys outstanding line of credit increased the line of credit to $2,250,000 from $1,500,000. In March 2013, in conjunction
with the amendments to the Companys notes payable amendments as discussed in Note 6, the line of credit was amended and restated to increase the facility size to $3,150,000 and to extend the maturity date to August 1, 2015. In February
2014, the facility size was further increased to $4,150,000.

At December 31, 2013 and 2012, the Company had outstanding borrowings under this
agreement of $3,150,000 and $2,250,000, respectively. The Company drew down $981,659 and $750,000 on this line during the years ended December 31, 2013 and 2012, respectively. The interest rate at December 31, 2013 and 2012 was 4% and 10%,
respectively. Interest payments are due monthly, and all amounts outstanding on the line are due as of the lines maturity date of August 1, 2015. The line is secured by substantially all assets of the Company.

NOTE 8SERIES A PREFERRED STOCK

As part of the
acquisition of the Company on October 17, 2007, the Company issued 42 shares of Series A preferred stock for total consideration of $4,200,000. These shares entitle the holder to cumulative annual dividends at a rate of 8% accrued through
February 26, 2013. On February 26, 2013, the Company modified its articles of incorporation related to the preferences of the Companys preferred stock, whereby the preferred stock no longer accrue dividends effective
February 26, 2013. As of December 31, 2013 and 2012, no dividends were declared by the Companys Board of Directors or payable by the Company. At December 31, 2013 and 2012, the Series A preferred stock had a total liquidation
preference of $6,121,689 and $6,065,689, respectively, in the event of a liquidity event.

For so long as any shares of Series A Preferred Stock shall be
outstanding, no dividend or distribution shall be paid or declared on any junior Security. Additionally, in the event of liquidation, dissolution or winding down, no payment shall be made on any Junior Security unless, in each case, all outstanding
shares of Series A Preferred Stock shall be redeemed and paid in full. Dividends payable in additional shares of Junior Securities on any series of Junior Securities shall be permitted.

NOTE 9COMMON STOCK WARRANTS

The Company issued a
fully vested common stock warrant pursuant to the Companys acquisition agreement dated October 17, 2007. The holder of this common stock warrant has the right to purchase 420 shares of the Companys common stock for a total exercise
price of $1. In conjunction with the $700,000 notes payable issued in September 2012 (Note 6), the Company modified the warrant to increase the number of common stock available to be purchased to 920 shares. The value of the common stock warrant was
not significant at the date of modification.



---

DANCO ACQUISITION CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2013 and 2012

(unaudited)



NOTE 9COMMON STOCK WARRANTS (Continued)



In conjunction with the issuance of the $350,000 and $100,000 notes payable issued during the year ended
December 31, 2012 (Note 6), the Company issued warrants which allow the holder to the right to purchase 250 and 71.43 common shares, respectively, for an exercise price of $0.50 and $0.14, respectively. The value of the common stock warrants
was not significant at the date of issuance.

On February 26, 2013, all warrants were exercised for total proceeds of $1,829. Also on
February 26, 2013, a stockholder sold His or Her common equity to the Company at $1.00 per share for total proceeds of $580. These shares were then retired by the Company.

NOTE 10RESTRICTED STOCK GRANT

During the year
ended December 31, 2008, the Company issued 61.5 restricted stock grants of the Companys Series A common stock. These stock grants vest accordingly: (1) 50% of these grants will vest over a five year period, cliff vesting 20% each
year from the anniversary of the grant date, and (2) 50% of these options will vest if certain performance targets for shareholder return are met upon a change in control or liquidation event. The Company has determined that the fair value of
these stock grants and the related stock compensation expense is not significant.

During 2013, the Company issued 7.02 restricted stock grants of the
Companys Series A common stock. These grants have the same vesting terms at the 2008 grants. The Company has determined that the fair value of these stock grants and the related stock compensation expense is not significant. During 2013, 17.29
restricted stock grants were forfeited and reverted to the Company. The number of restricted stock grants outstanding for the years ended December 31, 2013 and 2012 was 51.23 and 61.5, respectively.

NOTE 11MANAGEMENT SERVICES AGREEMENT

On
February 27, 2013, the Company entered into an agreement with Galaxy Technologies, Inc., whereby Galaxy Technologies, Inc., shall provide management services to the Company. Under the agreement the Company grants the exclusive rights for Galaxy
Technologies, Inc., to acquire the Company. The option is exercisable between February 27, 2015, and February 27, 2018. Further, Galaxy Technologies holds a right of first refusal in the event of the sale of the Company, which expires on
February 27, 2023. However, on December 19, 2013, the Company terminated the agreement with Galaxy Technologies, Inc.

NOTE 12EMPLOYEE
BENEFIT PLANS

The Company maintains a qualified deferred compensation plan under Section 401(k) of the Internal Revenue Code. Under the plan,
domestic employees may elect to defer up to 25% of their salaries subject to the Internal Revenue Service limits. The Company did not make any discretionary matching contributions to the plan during the years ended December 31, 2013 and 2012.



---

DANCO ACQUISITION CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2013 and 2012

(unaudited)



NOTE 13INCOME TAXES

The federal and state income tax provision is summarized as follows:



|                            |  |      |       |  |      |   |          |  
|--------------------------- |  | ---- | ----- |  | ---- | - | -------- | -
|                            |  | 2013 |       |  | 2012 |  
|Current                     |  |      |       |  |      |   |          |  
|Federal                     |  | $    |      |  |      | $ |         |  
|State                       |  |      | 1,600 |  |      |   | 1,561    |  
|                            |  |      |       |  |      |   |          |  
|Total current tax expense   |  |      | 1,600 |  |      |   | 1,561    |  
|                            |  |      |       |  |      |   |          |  
|Deferred                    |  |      |       |  |      |   |          |  
|Federal                     |  |      |      |  |      |   | (709,594 | )
|State                       |  |      |      |  |      |   | (161,241 | )
|                            |  |      |       |  |      |   |          |  
|Total deferred tax expense  |  |      |      |  |      |   | (870,835 | )
|                            |  |      |       |  |      |   |          |  
|Total tax (benefit) expense |  | $    | 1,600 |  |      | $ | (870,835 | )
|                            |  |      |       |  |      |   |          |  

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carry forwards.

The tax effects of significant items comprising the Companys deferred taxes as of December 31, 2013 and 2012 are as follows:



|                               |  |      |            |   |      |   |            |  
|------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                               |  | 2013 |            |   | 2012 |  
|Deferred tax assets:           |  |      |            |   |      |   |            |  
|Net operating losses           |  | $    | 4,066,276  |   |      | $ | 3,005,509  |  
|Inventory reserve              |  |      | 498,771    |   |      |   | 587,945    |  
|Intangibles                    |  |      | 538,478    |   |      |   | 439,899    |  
|General business credits       |  |      | 242,287    |   |      |   | 212,881    |  
|Accruals                       |  |      | 116,006    |   |      |   | 138,798    |  
|Unicap inventory               |  |      | 25,621     |   |      |   | 27,996     |  
|State tax accrual difference   |  |      | 544        |   |      |   | 544        |  
|Goodwill                       |  |      | 2,572,705  |   |      |   | 2,860,743  |  
|                               |  |      |            |   |      |   |            |  
|Total deferred tax assets      |  |      | 8,060,688  |   |      |   | 7,274,315  |  
|                               |  |      |            |   |      |   |            |  
|Deferred tax liabilities:      |  |      |            |   |      |   |            |  
|Prepaids                       |  |      | (33,924    | ) |      |   | (37,433    | )
|Fixed assets                   |  |      | (665,591   | ) |      |   | (731,641   | )
|Total deferred tax liabilities |  |      | (699,515   | ) |      |   | (769,074   | )
|                               |  |      |            |   |      |   |            |  
|Valuation allowance            |  |      | (7,361,174 | ) |      |   | (6,505,241 | )
|Net deferred taxes             |  | $    |           |   |      | $ |           |  
|                               |  |      |            |   |      |   |            |  



---

DANCO ACQUISITION CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2013 and 2012

(unaudited)



NOTE 13INCOME TAXES (Continued)



ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards
be recorded as an asset to the extent that management assesses that realization is more likely than not. Realization of the future tax benefits is dependent on the Companys ability to generate sufficient taxable income within the
carryforward period. Because of the Companys recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and,
accordingly, has provided a valuation allowance. The valuation allowance increased by $855,934 and $4,719,472 during the years ended December 31, 2013 and 2012, respectively.

Net operating losses and tax credit carryforwards as of December 31, 2012 are as follows:



|                              |  |        |            |  |                 |  |               | 
|----------------------------- |  | ------ | ---------- |  | --------------- |  | ------------- | 
|                              |  | Amount |            |  | ExpirationYears | 
|Net operating losses, Federal |  |        | 10,061,310 |  |                 |  | 2029-2033     | 
|Net operating losses, State   |  |        | 11,062,505 |  |                 |  | 2018-2033     | 
|Federal Tax credits,          |  |        | 172,107    |  |                 |  | 2027-2033     | 
|State Tax credits,            |  |        | 106,333    |  |                 |  | no expiration | 

The effective tax rate of the Companys provision for income taxes differs from the federal statutory rate for
December 31, 2013 and 2012 principally due to increases in the valuation allowance.

Utilization of the NOL and tax credit carryforwards may be
subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by the Internal Revenue Code (the Code), as amended, as well as similar state
provisions. In general, an ownership change as defined by the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock
of a company by certain stockholders or public groups. Since the Companys formation, the Company has raised capital through the issuance of capital stock on several occasions which, combined with the purchasing stockholders subsequent
disposition of those shares, may have resulted in such an ownership change, or could result in an ownership change in the future upon subsequent disposition. The annual limitation may result in the expiration of NOL and tax credit carryforwards
before utilization.

The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple
ownership changes since the Companys formation due to the complexity and costs associated with such a study and the fact that there may be additional ownership changes in the future. If the Company has experienced an ownership change at any
time since its formation, utilization of the NOL or tax credit carryforwards to offset future taxable income and taxes, respectively, would be subject to an annual limitation under the Code, which is determined by first multiplying the value of the
Companys stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of all or a portion of the NOL
carryforwards before utilization.



---

DANCO ACQUISITION CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2013 and 2012

(unaudited)



NOTE 13INCOME TAXES (Continued)



The Company maintains a full valuation allowance for deferred tax assets due to its historical losses and
uncertainties surrounding its ability to generate future taxable income to realize these assets.

Due to the existence of the valuation allowance, future
changes in the Companys unrecognized tax benefits and recognizable deferred tax benefits after the completion of an ownership change analysis is not expected to impact its effective tax rate.

NOTE 14COMMITMENTS AND CONTINGENCIES

The Company
has agreements under noncancelable leases for office, production and warehouse facilities owned by a former stockholder through April 2015 with escalating rent payments. The Company also leases certain equipment under capital leases. The leases are
collateralized by the underlying assets. At December 31, 2013 and 2012, property and equipment with a cost of $788,743 and $886,567, respectively, were subject to such financing arrangements. The minimum annual rental commitments and future
minimum payments under capital lease and equipment financing arrangements are as follows:



|                                               |  |               |         |   |                 |   |         | 
|---------------------------------------------- |  | ------------- | ------- | - | --------------- | - | ------- | 
|Year Ending December 31,                       |  | CapitalLeases |         |   | OperatingLeases |  
|2014                                           |  | $             | 162,916 |   |                 | $ | 296,986 | 
|2015                                           |  |               | 110,016 |   |                 |   | 99,318  | 
|2016                                           |  |               | 64,617  |   |                 |   |        | 
|2017                                           |  |               | 23,824  |   |                 |   |        | 
|                                               |  |               |         |   |                 |   |         | 
|Total minimum future lease payments            |  |               | 361,373 |   |                 | $ | 396,304 | 
|                                               |  |               |         |   |                 |   |         | 
|Less: amount representing interest             |  |               | (19,263 | ) |                 |   |         | 
|                                               |  |               |         |   |                 |   |         | 
|Present value of minimum future lease payments |  | $             | 342,110 |   |                 |   |         | 
|                                               |  |               |         |   |                 |   |         | 

Rental expense under these agreements for the years ended December 31, 2013 and 2012 amounted to $290,578 and $258,247,
respectively. At December 31, 2013 and 2012, deferred rent was $214 and $865, respectively.

NOTE 15SUBSEQUENT EVENTS

In February 2014, the Companys lender (which is an affiliate of the majority stockholder of the Company) increased the Companys line of credit from
$3,150,000 to $4,150,000. Advances against the increased line in excess of $3,650,000 require the approval of the Investment Committee of the majority stockholder.

In March 2014, the majority stockholder of the Company exchanged 1237.43 shares of Class A voting common stock for an equal number of shares of the
Companys Class B non-voting common stock. In addition, members of the Companys management team entered into subscription agreements for the purchase of 46 shares of the Companys Class A voting common stock at a price of
$1 per share.