NUTRIBAND : Financial Statements and Exhibits (form 8-K/A)
14 min readItem 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Page No.
Report of Independent Registered Public Accounting Firm 2
Combined Balance Sheets at December 31, 2019 and 2018 3
Combined Statements of Operations for the years ended
2019 and 2018
Combined Statement of Member’s Equity for the year ended
2018 and 2019
Combined Statements of Cash Flows for the years ended
2019 and 2018
Notes to Combined Financial Statements 7
Combined Balance Sheets as of
31, 2019
13
Combined Statements of Operations for the six months ended
2020
14
Combined Statements of Members’ Equity for the six months ended
30, 2019
15
Combined Statements of Cash Flows for the six months ended
2020
16 Notes to Unaudited Combined Financial Statements 17
Pro Forma Combined Balance Sheets as of
2020
25
Pro Forma Combined Operations as of
2019
26
Notes to Unaudited Pro Forma Combined Financial Statements 28
1
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Owners of
Opinion on the Financial Statements
We have audited the accompanying combined balance sheets of
Products, LLC
members’ equity, and cash flows for each of the years in the two-year period
ended
“financial statements”). In our opinion, the financial statements referred to
above present fairly, in all material respects, the financial position of the
Company as of
its cash flows for each of the years in the two-year period ended
2019
States of America
Basis for Opinion
These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with
the
required to be independent with respect to the Company in accordance with the
We conducted our audits in accordance with the standards of the PCAOB and in
accordance with auditing standards generally accepted in
America
reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audit, we are required to obtain an
understanding of internal control over financial reporting, but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included
examining on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that
our audits provide a reasonable basis for our opinion.
/s/
We have served as the Company’s auditor since 2020.
Salt Lake City, UT January 11, 2021 [[Image Removed]] 2 POCONO COATED PRODUCTS LLC AND ACTIVE INTELLIGENCE LLC COMBINED BALANCE SHEETS December 31, 2019 2018 ASSETS CURRENT ASSETS: Cash and cash equivalents$ 266,202 $ 83,173 Accounts receivable-net 66,646 98,670 Prepaid expenses - 1,750 Inventory 51,794 26,865 Total Current Assets 384,642 210,458 PROPERTY & EQUIPMENT-net 263,335 90,479 TOTAL ASSETS$ 647,977 $ 300,937
LIABILITIES AND MEMBERS’ DEFICIENCY
CURRENT LIABILITIES: Accounts payable and accrued expenses$ 215,527 $ 106,233 Deferred revenue 263,964 344,188 Due to member - 20,489 Line of credit 12,000 35,000 Current portion of notes payable 71,169 24,906
Current portion of financing lease liabilities 16,722 10,452
Total Current Liabilities
579,382 541,268 Notes payable, net of current 131,861 168,122
Financing lease liabilities, net of current 39,271 28,884
Total Liabilities
750,514 738,274 Commitments and Contingencies - - Members' Deficiency (102,537 ) (437,337 )
TOTAL LIABILITIES AND MEMBERS’ DEFICIENCY
See notes to combined financial statements
3
POCONO COATED PRODUCTS LLC ANG ACTIVE INTELLIGENCE LLC
COMBINED STATEMENTS OF OPERATIONS
Years Ended
December 31,
2019 2018
Revenue $ 2,883,168 $ 1,689,570
Costs and expenses:
Cost of revenues 1,709,611 1,267,665
Selling, general and administrative expenses 765,165 379,429
Total Costs and Expenses 2,474,776 1,647,094
Income from operations 408,392 42,476
Other income (expense):
Interest expense (8,358 ) (30,075 )
(8,358 ) (30,075 )
Income from operations before provision for income taxes 400,034 12,401
Provision for income taxes - -
Net income $ 400,034 $ 12,401
See notes to combined financial statements
4
POCONO COATED PRODUCTS LLC AND ACTIVE INTELLIGENCE LLC
COMBINED STATEMENT OF MEMBERS' EQUITY
Total
Balance, January 1, 2018 $ (436,438 )
Cash withdrawals (13,300 )
Net income for the year ended
Balance,December 31, 2018 (437,337 ) Cash withdrawals (65,234 )
Net Income for the year ended
Balance, December 31, 2019$ (102,537 ) See notes to combined financial statements 5 POCONO COATED PRODUCTS LLC AND ACTIVE INTELLIGENCE LLC COMBINED STATEMENTS OF CASH FLOWS Years Ended December 31, 2019 2018 Cash flows from operating activities: Net loss$ 400,034 $ 12,401
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization
74,105 19,794 Changes in operating assets and liabilities: Accounts receivable 32,024 (57,784 ) Prepaid expenses 1,750 1,199 Inventory (24,929 ) 391 Deferred revenue (80,224 ) 227,092 Accounts payable and accrued expenses 109,292 (75,963 ) Net Cash Provided by Operating Activities 512,052 127,130 Cash flows from investing activities: Purchase of equipment (216,058 ) (110,544 ) Net Cash Used in Investing Activities (216,058 ) (110,544 ) Cash flows from financing activities: Proceeds from notes payable 41,987 99,016 Payments on notes payable (31,985 ) (4,556 ) Payments on line of credit, net (23,000 ) (57,484 ) Payments on amount due to member (14,246 ) - Payments on finance leases - (17,563 ) Proceeds from member advances - 4,324 Distributions to members (65,234 ) (13,300 ) Net Cash Provided by (Used in) Financing Activities (92,478 ) 10,437 Net change in cash 203,516 27,023 Cash and cash equivalents - Beginning of period 83,173 56,150 Cash and cash equivalents - End of period$ 286,689 $ 83,173 Supplementary information: Cash paid for: Interest$ 16,223 $ 30,075 Income taxes $ - $ -
Supplemental disclosure of non-cash investing and financing
activities
Purchase of equipment with lease financing$ 30,903 $ - See notes to combined financial statements 6 POCONO COATED PRODUCTS LLC AND ACTIVE INTELLIGENCE LLC NOTES TO COMBINED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
formed on
that takes advantage of its unique process capabilities and experience. Pocono
helps its customers with product design and development along with toll
manufacturing to bring new products to market with minimal capital investment.
Pocono’s competitive edge is a low-cost manufacturing base: a result of our
unique processes and state of the art material technology.
Carolina
activated kinesiology tape. The tape has transdermal and topical properties.
This tape is used same as traditional kinesiology tape.
Significant Accounting Policies
Principles of Combination
The combined financial statements of the Company include the
Products LLC
transactions have been eliminated.
Use of Estimates
The preparation of the combined financial statements in conformity with
accounting principles generally accepted in
requires the Company to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. On an ongoing basis, the Company evaluates
its estimates including, but not limited to, those related to such items as
income tax exposures, accruals, depreciable/useful lives, allowance for doubtful
accounts and valuation allowances. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash equivalents include short-term investments in money-market funds and
certificate of deposits with an original maturity of three months or less when
purchased. As of
exceeded the
Revenue Recognition
In
Customers (Topic 606) (“ASU 2014-09”), which amends the accounting standards for
revenue recognition. ASU 2014-09 is based on principles that govern the
recognition of revenue at an amount an entity expects to be entitled when
products are transferred to a customer. The Company adopted the guidance under
the new revenue standards using the modified retrospective method effective
earnings was necessary upon adoption. Topic 606 requires the Company to
recognize revenues when control of the promised goods or services and receipt of
payment is probable. The Company recognizes revenue based on the five criteria
for revenue recognition established under Topic 606: 1) identify the contract,
2) identify separate performance obligations, 3) determine the transaction
price, 4) allocate the transaction price among the performance obligations, and
5) recognize revenue as the performance obligations are satisfied.
7
Revenue Service Types
The following is a description of the Company’s revenue service types, which
include manufacturing revenue from sale of goods:
? Sales revenues are derived from the sale of the Company’s consumer products.
Upon the reception of a purchase order, we have the order filled and shipped.
Contracts with Customers
A contract with a customer exists when (i) the Company enters into an
enforceable contract with a customer that defines each party’s rights regarding
the goods or services to be transferred and identifies the payment terms related
to these goods or services, (ii) the contract has commercial substance and,
(iii) we determine that collection of substantially all consideration for
services that are transferred is probable based on the customer’s intent and
ability to pay the promised consideration.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good
or service to the customer and is the unit of account in the new revenue
standard. The contract transaction price is allocated to each distinct
performance obligation and recognized as revenue when, or as, the performance
obligation is satisfied. For the Company’s different revenue service types, the
performance obligation is satisfied at different times. The Company’s
performance obligations include providing products and professional services in
the area of research. The Company recognizes product revenue performance
obligations in most cases when the product has shipped to the customer. When we
perform professional service work, we recognize revenue when we have the right
to invoice the customer for the work completed, which typically occurs on a
monthly basis for the work performed during that month.
All revenue recognized in the income statement is considered to be revenue from
contracts with customers.
Deferred revenue
Deferred revenue is a liability related to a revenue producing activity for
which revenue has not been recognized. The Company records deferred revenue when
it receives consideration from a contract before achieving certain criteria that
must be met for revenue to be recognized in conformity with GAAP.
Accounts receivable
Trade accounts receivable are recorded at the net invoice value and are not
interest bearing. The Company maintains allowances for doubtful accounts for
estimated losses from the inability of its customers to make required payments.
The Company determines its allowances by both specific identification of
customer accounts where appropriate and the application of historical loss to
non-specific accounts. For the years ended
Company recorded no bad debt expense and no allowance for doubtful accounts
related to accounts receivable.
Inventories
Inventories are valued at the lower of cost and realizable value determined
using the first-in, first-out (FIFO) method. Net realizable value is the
estimated selling price in the ordinary course of business, less applicable
variable selling expenses. The cost of finished goods and work in progress is
comprised of material costs, direct labor costs and other direct costs and
related production overheads (based on normal operating capacity). As of
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Property, Plant and Equipment
Property and equipment represent an important component of the Company’s assets.
The Company depreciates its plant and equipment on a straight-line basis over
the estimated useful life of the assets. Property, plant and equipment is stated
at historical cost. Expenditures for minor repairs, maintenance and replacement
parts which do not increase the useful lives of the assets are charged to
expense as incurred. All major additions and improvements are capitalized.
Depreciation is computed using the straight-line method. The lives over which
the fixed assets are depreciated range from 3 to 5 years as follows:
Machinery and equipment 5 years
Furniture, fixtures and leasehold 3 years
Long-lived Assets
Management reviews long-lived assets for potential impairment whenever
significant events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. An impairment exists when the carrying
amount of the long-lived asset is not recoverable and exceeds its fair
value. The carrying amount of a long-lived asset is not recoverable if it
exceeds the sum of the estimated undiscounted cash flows expected to result from
the use and eventual disposition of the asset. If an impairment exists, the
resulting write-down would be the difference between fair market value of the
long-lived asset and the related net book value.
Research and Development
Research and developments costs are expensed as incurred.
Income Taxes
The Company is a limited liability entity, and any income or losses are passed
directly to the members who assume their own tax liabilities.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash.
The Company’s cash and cash equivalents are concentrated primarily in banks. At
times, such deposits could be in excess of insured limits. Management believes
that the financial institutions that hold the Company’s financial instruments
are financially sound and, accordingly, minimal credit risk is believed to exist
with respect to these financial instruments.
Fair Value Measurements
FASB ASC 820, “Fair Value Measurements and Disclosure” (“ASC 820”), defines fair
value as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between participants
on the measurement date. ASC 820 also establishes a fair value hierarchy which
requires an entity to maximize the use of observable inputs and minimize the use
of unobservable inputs when measuring fair value. ASC 820 describes three levels
of inputs that may be to measure fair value.
The Company utilizes the accounting guidance for fair value measurements and
disclosures for all financial assets and liabilities and nonfinancial assets and
liabilities that are recognized or disclosed at fair value in the consolidated
financial statements on a recurring basis during the reporting period. The fair
value is an exit price, representing the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants based upon the best use of the asset or liability at the
measurement date. The Company utilizes market data or assumptions that market
participants would use in pricing the asset or liability. ASC 820 establishes a
three-tier value hierarchy, which prioritizes the inputs used in measuring fair
value. These tiers are defined as follows:
Level 1 -Observable inputs such as quoted market prices in active markets.
Level 2 -Inputs other than quoted prices in active markets that are either
directly or indirectly observable.
Level 3 -Unobservable inputs about which little or no market data exists,
therefore requiring an entity to develop its own assumptions.
9
The carrying value of the Company’s financial instruments including cash and
cash equivalents, accounts receivable, prepaid expenses, and accrued expenses
approximate their fair value due to the short maturities of these financial
instruments.
As of
that required disclosure.
Recent Accounting Standards
In
(Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which
simplifies the accounting for nonemployee share-based payment transactions by
expanding the scope of ASC Topic 718, Compensation – Stock Compensation, to
include share-based payment transactions for acquiring goods and services from
nonemployees. Under the new standard, most of the guidance on stock compensation
payments to nonemployees would be aligned with the requirements for share-based
payments granted to employees. This standard became effective for us on
1, 2019
combined financial statements.
In
the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies
the fair value measurements disclosures with the primary focus to improve
effectiveness of disclosures in the notes to the financial statements that is
most important to the users. The new guidance modifies the required disclosures
related to the valuation techniques and inputs used, uncertainty in measurement,
and changes in measurements applied. ASU 2018-13 will be effective for the
Company for its fiscal year beginning after
period thereafter. Early adoption is permitted. The Company is currently
assessing the impact this new guidance may have on the Company’s combined
financial statements and footnote disclosures.
In
Simplifying the Accounting for Income Taxes, which is intended to simplify
various aspects related to accounting for income taxes. This ASU removes certain
exceptions to the general principles in Topic 740 and also clarifies and amends
existing guidance to improve consistent application. This ASU is effective for
fiscal years, and interim periods within those fiscal years, beginning after
impact of this standard on our combined financial statements.
In
Impairment,” which removes Step 2 from the goodwill impairment test and replaces
the qualitative assessment. Impairment will be measured using the difference
between the carrying amount and the fair value of the reporting unit. Under this
revised guidance, failing Step 1 will always result in a goodwill impairment.
The amendments in this update should be applied prospectively for annual and
interim periods in fiscal years beginning after
early adopted ASU 2018-07 on
2018-07 has had no impact on its combined financial statements or disclosures.
In
805): Clarifying the Definition of a Business. ASU No. 2017-01 clarifies the
definition of a business with the objective of adding guidance to assist
entities with evaluating whether transactions should be accounted for as
acquisitions (or disposals) of a business or as acquisitions (or disposals) of
assets. ASU No. 2017-01 is effective for annual periods beginning after
15, 2018
amendments of ASU No. 2017-01 were adopted by the Company effective
2019
position or results of operations.
The Company has reviewed all other FASB-issued ASU accounting pronouncements and
interpretations thereof that have effective dates during the period reported and
in future periods. The Company has carefully considered the new pronouncements
that alter previous GAAP and does not believe that any new or modified
principles will have a material impact on the company’s reported financial
position or operations in the near term. The applicability of any standard is
subject to the formal review of the Company’s financial management and certain
standards are under consideration.
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2. PROPERTY AND EQUIPMENT
December 31,
2019 2018
Machinery and equipment $ 631,234 $ 453,618
Furniture and fixtures 5,295 5,295
Leasehold improvements 69,345 -
705,874 458,913
Less: Accumulated depreciation (442,539 ) (368,434 )
Net Property and Equipment
Depreciation expense amounted to
3. INCOME TAXES
The Company adopted the provisions of ASC 740, “Income Taxes, (“ASC 740”). As a
result of the implementation of ASC 740, the Company recognized no adjustment in
the net liability for unrecognized income tax benefits. The Company believes
there are no potential uncertain tax positions, and all tax returns are correct
as filed. Should the Company recognize a liability for uncertain tax positions,
the Company will separately recognize the liability for uncertain tax positions
on its balance sheet. Included in any liability or uncertain tax positions, the
. . .
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