Attached files
| file | filename |
|---|---|
| 8-K - SUPER 8K - MONKEY ROCK GROUP, INC. | cmca_8k.htm |
| EX-2.1 - SHARE EXCHANGE AGREEMENT - MONKEY ROCK GROUP, INC. | cmca_ex21.htm |
Exhibit 99.1
Monkey
Rock USA, LLC
Financial
Statements
November
30, 2009
CONTENTS
| Page(s) | ||||
| Report of Independent Registered Public Accounting Firm | F-1 | |||
| Balance Sheet – As of November 30, 2009 | F-2 | |||
| Statement of Operations – | ||||
| For the Period from June 5, 2009 (Inception) to November 30, 2009 | F-3 | |||
| Statement of Changes in Members’ Deficit – | ||||
| For the Period from June 5, 2009 (Inception) to November 30, 2009 | F-4 | |||
| Statement of Cash Flows – | ||||
| For the Period from June 5, 2009 (Inception) to November 30, 2009 | F-5 | |||
| Notes to Financial Statements | F-6-F-12 | |||
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of:
Monkey
Rock USA, LLC
We
have audited the accompanying balance sheet of Monkey Rock USA, LLC as of
November 30, 2009, and the related statements of operations, changes in members’
deficit and cash flows for the period from June 5, 2009 (inception) to November
30, 2009. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no
such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provide a reasonable basis
for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Monkey Rock USA, LLC as of November
30, 2009, and the results of its operations and its cash flows for the period
from June 5, 2009 (inception) to November 30, 2009, in conformity with
accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has a net loss of $412,148 and net cash used in
operations of $377,823 for the period from June 5, 2009 (inception) through
November 30, 2009; the Company also has a working capital deficit of $877,967
and a members’ deficit of $411,148 at November 30, 2009. These factors raise
substantial doubt about the Company’s ability to continue as a going concern.
Management’s plan in regards to these matters is also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Berman
& Company, P.A.
Boca
Raton, Florida
February
22, 2010
F-1
|
Balance
Sheet
|
||||
|
November 30, 2009
|
||||
|
|
||||
| Assets | ||||
|
Current
Assets
|
||||
|
Cash
|
$ | 25,813 | ||
|
Inventory
|
21,278 | |||
|
Prepaid
expenses
|
44,691 | |||
|
Total
Current Assets
|
91,782 | |||
|
Property
& Equipment
|
101,819 | |||
|
Liquor
License
|
365,000 | |||
|
Total
Assets
|
$ | 558,601 | ||
|
Liabilities and Members'
Deficit
|
||||
|
Current
Liabilities
|
||||
|
Accounts
payable
|
$ | 74,284 | ||
|
Accrued
interest payable - related party
|
17,110 | |||
|
Accrued
interest payable
|
1,339 | |||
|
Notes
payable - related party
|
827,016 | |||
|
Note
payable
|
50,000 | |||
|
Total
Current Liabilities
|
969,749 | |||
|
Total
Members' Deficit
|
(411,148 | ) | ||
|
Total
Liabilities and Members' Deficit
|
$ | 558,601 | ||
F-2
|
Monkey
Rock USA, LLC
|
||||
|
Statement
of Operations
|
||||
|
For the Period from June 5, 2009 (Inception) to
November 30, 2009
|
||||
|
Revenue
|
$ | 386,294 | ||
|
Cost
of revenue
|
295,608 | |||
|
Gross
profit
|
90,686 | |||
|
General
and administrative
|
502,834 | |||
|
Net
loss
|
$ | (412,148 | ) | |
F-3
|
Monkey
Rock USA, LLC
|
||||
|
Statement
of Changes in Members' Equity
|
||||
|
For the Period from June 5, 2009 (Inception) to
November 30, 2009
|
||||
|
Total
|
||||
|
Members'
|
||||
|
Deficit
|
||||
|
Issuance
of 1,000 member units for cash ($1/unit)
|
$ | 1,000 | ||
|
Net
loss for the period from June 5, 2009 (Inception) to November 30,
2009
|
(412,148 | ) | ||
|
Balance
- November 30, 2009
|
$ | (411,148 | ) | |
|
.
|
||||
F-4
|
Monkey
Rock USA, LLC
|
||||
|
Statement
of Cash Flows
|
||||
|
For the Period from June 5, 2009 (Inception) to
November 30, 2009
|
||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||
|
Net
loss
|
$ | (412,148 | ) | |
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||
|
Depreciation
|
7,561 | |||
|
Changes
in operating assets and liabilities:
|
||||
|
Increase/(Decrease)
in:
|
||||
|
Inventory
|
(21,278 | ) | ||
|
Prepaid
expenses
|
(44,691 | ) | ||
|
Accounts
payable
|
74,284 | |||
|
Accrued
interest payable - related party
|
17,110 | |||
|
Accrued
interest payable
|
1,339 | |||
|
Net
Cash Used In Operating Activities
|
(377,823 | ) | ||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||
|
Purchase
of property & equipment
|
(109,380 | ) | ||
|
Purchase
of liquor license
|
(315,000 | ) | ||
|
Net
Cash Used in Investing Activities
|
(424,380 | ) | ||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||
|
Proceeds
from notes payable - related party
|
927,314 | |||
|
Repayments
of notes payable - related party
|
(100,298 | ) | ||
|
Proceeds
from the issuance of member units
|
1,000 | |||
|
Net
Cash Provided By Financing Activities
|
828,016 | |||
|
Net
Increase in Cash
|
25,813 | |||
|
Cash
- Beginning of Period
|
- | |||
|
Cash
- End of Period
|
$ | 25,813 | ||
|
SUPPLEMENTARY
CASH FLOW INFORMATION:
|
||||
|
Cash
paid during the period for:
|
||||
|
Income
taxes
|
$ | - | ||
|
Interest
|
$ | 667 | ||
|
SUPPLEMENTARY DISCLOSURE OF
NON-CASH FINANCING ACTIVITIES:
|
||||
|
Note
issued in connection with financing of liquor license
purchase
|
$ | 50,000 | ||
F-5
Monkey
Rock USA, LLC
Notes
to Financial Statements
November 30,
2009
Nature
of Operations
Monkey
Rock USA, LLC (the “Company”), is a limited liability company organized in the
State of South Dakota on June 5, 2009.
The
Company is involved in food, beverage and entertainment venues within the
greater North American motorcycle rally industry.
The
Company’s management is searching to acquire assets at or below market rates and
expand through acquisition and organic growth.
Risks
and Uncertainties
The
Company operates in an industry that is subject to rapid change. The Company's
operations will be subject to significant risk and uncertainties including
financial, operational, technological, regulatory and other risks, including the
potential risk of business failure.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles 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
the reported amounts of revenues and expenses during the reporting
period.
Such
estimates for the period ended November 30, 2009, and assumptions affect, among
others, the following:
● estimated useful lives for
property and equipment; and
● potential obsolescence and
impairment of inventory, property and equipment and liquor license
Making
estimates requires management to exercise significant judgment. It is at least
reasonably possible that the estimate of the effect of a condition, situation or
set of circumstances that existed at the date of the financial statements, which
management considered in formulating its estimate could change in the near term
due to one or more future confirming events. Accordingly, the actual results
could differ significantly from estimates.
F-6
Monkey
Rock USA, LLC
Notes
to Financial Statements
November 30,
2009
|
Cash
and Cash Equivalents
|
The
Company considers all highly liquid instruments purchased with a maturity of
three months or less and money market accounts to be cash equivalents. The
Company had no cash equivalents at November 30, 2009.
The
Company minimizes its credit risk associated with cash by periodically
evaluating the credit quality of its primary financial institution. The balance
at times may exceed federally insured limits. At November 30, 2009,
there were no balances that exceeded the federally insured limit.
Inventory
Inventory
consists of finished goods, principally consisting of beverages and
t-shirts.
Inventory is stated at the lower of cost or market, determined by the first-in, first-out (FIFO) method. Market is determined based on the net realizable value, with appropriate consideration given to obsolescence, excessive levels, deterioration, and other factors.
These
factors include, but are not limited to, technological changes in its markets,
competitive pressures in products and services and related prices. The Company
regularly evaluates its ability to realize the value of its inventory based on a
combination of factors, including historical usage rates, forecasted sales,
product life cycles, and market acceptance of new products and services. When
inventory that is obsolete or in excess of anticipated usage is identified, it
is written down to realizable value or an inventory valuation reserve is
established. For the period ended November 30, 2009, the Company did not record
any write-downs to net realizable value for obsolescence.
Property
and Equipment
Property
and equipment is stated at cost, less accumulated depreciation on a
straight-line basis over the estimated useful lives. Maintenance and repairs are
charged to operations when incurred. Betterments and renewals are
capitalized when deemed material. When property and equipment are
sold or otherwise disposed of, the asset account and related accumulated
depreciation account are relieved, and any gain or loss is included in
operations.
Intangible
Assets
Valuation
of intangible assets include significant estimates and assumptions such as
estimating future cash flows from product sales, developing appropriate discount
rates, estimating probability rates for the successful completion of projects,
continuation of customer relationships and renewal of customer contracts, and
approximating the useful lives of the intangible assets acquired.
Long
Lived Assets
The
Company reviews the recoverability of the carrying value of identified
intangibles and other long-lived assets, including fixed assets, whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of these assets is determined based upon the
forecasted undiscounted future net cash flows expected to result from the use of
such asset and its eventual disposition. The Company’s estimate of future cash
flows is based upon, among other things, certain assumptions about expected
future operating performance, growth rates and other factors. The actual cash
flows realized from these assets may vary significantly from its estimates due
to increased competition, changes in technology, fluctuations in demand,
consolidation of its customers and reductions in average selling prices. If the
carrying value of an asset is determined not to be recoverable from future
operating cash flows, the asset is deemed impaired and an impairment loss is
recognized to the extent the carrying value exceeds the estimated fair market
value of the asset. There were no impairment charges taken during the period
from June 5, 2009 (inception) to November 30, 2009.
F-7
Monkey
Rock USA, LLC
Notes
to Financial Statements
November 30,
2009
Revenue
Recognition
The
Company followed the guidance of the Securities and Exchange Commission’s Staff
Accounting Bulletin No. 104 for revenue recognition. The Company records
revenue when all of the following have occurred; (1) persuasive evidence of an
arrangement exists, (2) product delivery has occurred, (3) the sales price to
the customer is fixed or determinable, and (4) collectability is reasonably
assured.
Revenue
is recognized at point of sale, with no further obligation for the
following:
● food and beverage
products
● vendor booth space
● sponsorships
● t-shirts
The
Company reports revenue net of sales and use taxes collected from customers and
are remitted to governmental taxing authorities.
Advertising
Costs
incurred for advertising is charged to operations as incurred. For the period
from June 5, 2009 (inception) to November 30, 2009, the Company expensed
approximately $89,000.
Income
Taxes
The
Company elected to be taxed as a pass-through entity (LLC) under the Internal
Revenue Code and was not subject to federal and state income taxes; accordingly,
no provision had been made. The financial statements reflect the LLC’s
transactions without adjustment, if any, required for income tax
purposes.
Accounting
guidance now codified as FASB ASC Topic 740-20, “Income Taxes – Intraperiod Tax
Allocation,” clarifies the accounting for uncertainties in income taxes
recognized in accordance with FASB ASC Topic 740-20 by prescribing guidance for
the recognition, de-recognition and measurement in financial statements of
income tax positions taken in previously filed tax returns or tax positions
expected to be taken in tax returns, including a decision whether to file or not
to file in a particular jurisdiction. FASB ASC Topic 740-20 requires that any
liability created for unrecognized tax benefits is disclosed. The application of
FASB ASC Topic 740-20 may also affect the tax bases of assets and liabilities
and therefore may change or create deferred tax liabilities or assets. The
Company recognizes interest and penalties related to unrecognized tax benefits
in income tax expense. At November 30, 2009, the Company did not record any
liabilities for uncertain tax positions.
F-8
Monkey
Rock USA, LLC
Notes
to Financial Statements
November 30,
2009
Segment
Information
During
fiscal year-end 2009, the Company only operated in one segment; therefore,
segment information has not been presented.
Recent
Accounting Pronouncements
In
April 2009, the FASB issued guidance now codified as FASB ASC Topic 820,
“Fair Value Measurements and
Disclosures,” which amends previous guidance to require disclosures about
fair value of financial instruments in interim as well as annual financial
statements in the current economic environment. This pronouncement was effective
for periods ending after June 15, 2009. The adoption of this pronouncement
did not have a material impact on the Company’s business, financial condition or
results of operations; however, these provisions of FASB ASC Topic 820 resulted
in additional disclosures with respect to the fair value of the Company’s
financial instruments.
In
May 2009, the FASB issued guidance now codified as FASB ASC Topic 855,
“Subsequent Events,”
which establishes general standards of accounting for, and disclosures of,
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. This pronouncement was effective for
interim or fiscal periods ending after June 15, 2009. The adoption of this
pronouncement did not have a material impact on the Company’s business, results
of operations or financial position; however, the provisions of FASB ASC Topic
855 resulted in additional disclosures with respect to subsequent
events.
In
June 2009, the Financial Accounting Standards Board (FASB) issued guidance
now codified as FASB Accounting Standards Codification (ASC) Topic 105, “Generally Accepted Accounting
Principles,” as the single source of authoritative non-governmental U.S.
GAAP. FASB ASC Topic 105 does not change current U.S. GAAP, but is intended to
simplify user access to all authoritative U.S. GAAP by providing all
authoritative literature related to a particular topic in one place. All
existing accounting standard documents will be superseded and all other
accounting literature not included in the FASB Codification will be considered
non-authoritative. These provisions of FASB ASC Topic 105 were effective for
interim and annual periods ending after September 15, 2009 and,
accordingly, were effective for the Company for the current fiscal reporting
period. The adoption of this pronouncement did not have an impact on the
Company’s business, financial condition or results of operations, but will
impact the Company’s financial reporting process by eliminating all references
to pre-codification standards. On the effective date of FASB ASC Topic 105, the
Codification superseded all then-existing non-SEC accounting and reporting
standards, and all other non-grandfathered non-SEC accounting literature not
included in the Codification became non-authoritative.
F-9
Monkey
Rock USA, LLC
Notes
to Financial Statements
November 30,
2009
In
January 2010, the Financial Accounting Standards Board ("FASB") issued updated
guidance to amend the disclosure requirements related to recurring and
nonrecurring fair value measurements. This update requires new disclosures on
significant transfers of assets and liabilities between Level 1 and
Level 2 of the fair value hierarchy (including the reasons for these
transfers) and the reasons for any transfers in or out of Level 3. This
update also requires a reconciliation of recurring Level 3 measurements
about purchases, sales, issuances and settlements on a gross basis. In addition
to these new disclosure requirements, this update clarifies certain existing
disclosure requirements. For example, this update clarifies that reporting
entities are required to provide fair value measurement disclosures for each
class of assets and liabilities rather than each major category of assets and
liabilities. This update also clarifies the requirement for entities to disclose
information about both the valuation techniques and inputs used in estimating
Level 2 and Level 3 fair value measurements. This update will become
effective for the Company with the interim and annual reporting period beginning
January 1, 2010, except for the requirement to provide the Level 3
activity of purchases, sales, issuances, and settlements on a gross basis, which
will become effective for the Company with the interim and annual reporting
period beginning January 1, 2011. The Company will not be required to
provide the amended disclosures for any previous periods presented for
comparative purposes. Other than requiring additional disclosures, adoption of
this update will not have a material effect on the Company's consolidated
financial statements.
Note 2 Going
Concern
As
reflected in the accompanying financial statements, the Company has a net loss
of $412,148 and net cash used in operations of $377,823 for the period from June
5, 2009 (inception) through November 30, 2009; the Company also has a working
capital deficit of $877,967 and a members’ deficit of $411,148 at November 30,
2009.
The
ability of the Company to continue as a going concern is dependent on
Management's plans, which include potential asset acquisitions, mergers or
business combinations with other entities, further implementation of its
business plan and continuing to raise funds through debt or equity raises. The
Company will likely continue to rely upon related party debt or equity financing
in order to ensure the continuing existence of the business. The
Company currently has a due on demand note with its Chief Executive Officer who
has informally agreed not to demand payment until the Company has become
self-sustaining.
The
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. These financial statements do not
include any adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.
In
response to these problems, management has taken the following
actions:
● seeking
additional third party debt and/or equity financing,
● continue
with the implementation of the business plan,
● generate new sales from
additional venues; and
● allocate
sufficient resources to continue with advertising and marketing
efforts
Note 3 Fair
Value
The fair
value of the Company's financial assets and liabilities reflects the Company's
estimate of amounts that it would have received in connection with the sale of
the assets or paid in connection with the transfer of the liabilities in an
orderly transaction between market participants at the measurement date. In
connection with measuring the fair value of its assets and liabilities, the
Company seeks to maximize the use of observable inputs (market data obtained
from sources independent from the Company) and to minimize the use of
unobservable inputs (the Company's assumptions about how market participants
would price assets and liabilities). The following fair value hierarchy is used
to classify assets and liabilities based on the observable inputs and
unobservable inputs used in order to value the assets and
liabilities:
F-10
Monkey
Rock USA, LLC
Notes
to Financial Statements
November 30,
2009
|
Level 1:
|
Quoted
prices in active markets for identical assets or liabilities. An active
market for an asset or liability is a market in which transactions for the
asset or liability occur with sufficient frequency and volume to provide
pricing information on an ongoing basis.
|
|
|
Level 2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs
include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are
not active.
|
|
|
Level 3:
|
Unobservable
inputs based on the Company's assessment of the assumptions that market
participants would use in pricing the asset or
liability.
|
The
Company's investment strategy is focused on capital preservation. The Company
intends to invest in instruments that meet credit quality
standards. The current expectation is to maintain cash and cash
equivalents, once these resources are available.
At
November 30, 2009, the Company has no instruments that require additional
disclosure.
Note 4 Property and
Equipment
Property
and equipment consists of the following:
|
November
30, 2009
|
Estimated
Useful Life
|
|||||||
|
Computer
Equipment
|
$ | 1,544 | 5 | |||||
|
Furniture
and Fixtures
|
5,992 | 5 | ||||||
|
Machinery
and Equipment
|
3,784 | 5 | ||||||
|
Staging
and Seating
|
74,260 | 5 | ||||||
|
Vehicles
|
23,800 | 5 | ||||||
| 109,380 | ||||||||
|
Less:
Accumulated Depreciation
|
(7,561 | ) | ||||||
|
Property
and Equipment, Net
|
$ | 101,819 | ||||||
Note 5 Notes
Payable
|
(A)
|
Related
Party
|
During
the period from June 5, 2009 (inception) to November 30, 2009, the Company
received advances from its Chief Executive Officer totaling $927,314, and repaid
$100,298. The balance of the note at November 30, 2009 is $827,016, the note
bears interest at 7%, is unsecured and due on demand.
|
(B)
|
Other
|
On June
2, 2009, the Company executed a promissory note with the seller of the liquor
license for $50,000. This loan bears interest at 8%, is unsecured and
is due June 2, 2010.
F-11
Monkey
Rock USA, LLC
Notes
to Financial Statements
November 30,
2009
Note 6
Commitments and Contingencies
|
(A)
|
Contingencies
|
From time
to time, the Company may become involved in various lawsuits and legal
proceedings, which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may harm its business. The Company is
currently not aware of any such legal proceedings or claims that they believe
will have, individually or in the aggregate, a material adverse affect on its
business, financial condition or operating results.
|
(B)
|
Operating
Lease
|
The
Company has an operating lease for office space. This lease expires
on May 1, 2014 and has an option to extend the term of lease for fifteen
additional terms of one year each. Total rent due during the
five-year term will total $925,000.
Future
minimum lease payments under this non-cancellable lease at November 30, 2009 are
as follows:
|
2010
|
$ | 175,000 | ||
|
2011
|
200,000 | |||
|
2012
|
200,000 | |||
|
2013
|
200,000 | |||
|
Total
minimum lease payments
|
$ | 775,000 | ||
Rent
expense for the period from June 5, 2009 (inception) to November 30, 2009 was
$107,917.
Note 7 Subsequent
Events
The
Company has evaluated for subsequent events between the balance sheet date of
November 30, 2009 and February 22, 2010, the date the financial statements were
issued, and concluded that events or transactions occurring during that period
requiring recognition or disclosure have been made.
F-12