Attached files
file | filename |
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8-K/A - FORM 8-K/A - WESTERN CAPITAL RESOURCES, INC. | s101805_8-ka.htm |
EX-99.3 - EXHIBIT 99.3 - WESTERN CAPITAL RESOURCES, INC. | s101805_ex99-3.htm |
EX-99.2 - EXHIBIT 99.2 - WESTERN CAPITAL RESOURCES, INC. | s101805_ex99-2.htm |
Exhibit 99.1
J & P PARK ACQUISITIONS, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 27, 2014
AND DECEMBER 28, 2013
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 27, 2014
AND DECEMBER 28, 2013
Contents
|
10990 Wilshire Boulevard 16th Floor Los Angeles, CA 90024 |
310-873-1600 T 310-873-6600 F www.greenhassonjanks.com |
To the Board of Directors of
J & P Park Acquisitions, Inc. and Subsidiary
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of J & P Park Acquisitions, Inc. and Subsidiary (the Company), which comprise the consolidated balance sheets as of December 27, 2014 and December 28, 2013, and the related consolidated statements of income, net worth, and cash flows for the years then ended, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of J & P Park Acquisitions, Inc. and Subsidiary as of December 27, 2014 and December 28, 2013, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United Statements of America.
March 27, 2015
Los Angeles, California
An independent member of HLB International, a worldwide network of accounting firms and business advisors.
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
December 27, 2014 | December 28, 2013 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash | $ | 2,979,662 | $ | 1,919,262 | ||||
Accounts Receivable – Trade (Net of Allowance for Doubtful Accounts of $35,354 in 2014 and $56,232 in 2013) | 385,252 | 394,039 | ||||||
Inventory | 1,880,772 | 1,960,741 | ||||||
Prepaid Expenses and Other Current Assets | 1,038,571 | 1,397,819 | ||||||
TOTAL CURRENT ASSETS | 6,284,257 | 5,671,861 | ||||||
PROPERTY AND EQUIPMENT (Net) | 6,671,951 | 6,797,077 | ||||||
OTHER ASSETS: | ||||||||
Goodwill and Intangible Assets (Net) | 145,711 | 165,911 | ||||||
Deferred Income Taxes | — | 111,000 | ||||||
TOTAL OTHER ASSETS | 145,711 | 276,911 | ||||||
TOTAL ASSETS | $ | 13,101,919 | $ | 12,745,849 | ||||
LIABILITIES AND NET WORTH | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts Payable | $ | 2,222,486 | $ | 3,597,963 | ||||
Accrued Expenses and Other Current Liabilities | 891,657 | 622,250 | ||||||
Income Tax Payable | 416,000 | — | ||||||
Deferred Sales | 547,545 | 587,198 | ||||||
Merchandise Credits and Gift Card Liabilities | 464,020 | 399,639 | ||||||
Deferred Income Taxes | 53,000 | 151,000 | ||||||
Current Maturities of Long-Term Debt - Bank | 400,008 | 2,469,984 | ||||||
TOTAL CURRENT LIABILITIES | 4,994,716 | 7,828,034 | ||||||
OTHER LIABILITIES | ||||||||
Long-Term Debt – Related Party | — | 749,185 | ||||||
Deferred Income Taxes | 190,000 | — | ||||||
Long-Term Debt - Bank | 3,338,126 | — | ||||||
TOTAL OTHER LIABILITIES | 3,528,126 | 749,185 | ||||||
TOTAL LIABILITIES | 8,522,842 | 8,577,219 | ||||||
COMMITMENTS & CONTINGENCIES | ||||||||
NET WORTH: | ||||||||
Common Stock - $0.01 Par Value, 10,000 Shares Authorized; 4,536 Shares Issued and Outstanding | 45 | 45 | ||||||
Preferred Stock - $0.01 Par Value, 3,000 Shares Authorized; 3,061 Shares Issued and Outstanding | 31 | 31 | ||||||
Additional Paid-In Capital | 739,842 | 739,842 | ||||||
Retained Earnings | 2,100,658 | 951,133 | ||||||
Non-Controlling Interest | 1,738,501 | 2,477,579 | ||||||
TOTAL NET WORTH | 4,579,077 | 4,168,630 | ||||||
TOTAL LIABILITIES AND NET WORTH | $ | 13,101,919 | $ | 12,745,849 | ||||
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements
2 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended | ||||||||||||||||
December 27, 2014 | December 28, 2013 | |||||||||||||||
Amount | % of Net Sales | Amount | % of Net Sales | |||||||||||||
NET SALES | $ | 32,306,912 | 100.0 | $ | 32,820,580 | 100.0 | ||||||||||
COST OF SALES | 14,843,685 | 45.9 | 16,296,257 | 49.7 | ||||||||||||
GROSS PROFIT | 17,463,227 | 54.1 | 16,524,323 | 50.3 | ||||||||||||
OPERATING EXPENSES: | ||||||||||||||||
Selling | 8,317,780 | 25.7 | 8,393,757 | 25.6 | ||||||||||||
General and Administrative | 6,004,879 | 18.6 | 6,311,646 | 19.2 | ||||||||||||
TOTAL OPERATING EXPENSES | 14,322,659 | 44.3 | 14,705,403 | 44.8 | ||||||||||||
INCOME FROM OPERATIONS | 3,140,568 | 9.8 | 1,818,920 | 5.5 | ||||||||||||
OTHER EXPENSES: | ||||||||||||||||
Interest Expense | 255,365 | 0.8 | 411,567 | 1.2 | ||||||||||||
Amortization | 20,200 | 0.1 | 20,200 | 0.1 | ||||||||||||
Management Fees – Blackstreet | 353,953 | 1.1 | 337,063 | 1.0 | ||||||||||||
Board of Director Fees | 125,187 | 0.4 | 132,870 | 0.4 | ||||||||||||
One Time Costs | — | — | 647,010 | 2.0 | ||||||||||||
Other Expenses | 156,988 | 0.5 | 32,256 | 0.1 | ||||||||||||
TOTAL OTHER EXPENSES | 911,693 | 2.9 | 1,580,966 | 4.8 | ||||||||||||
INCOME BEFORE PROVISION FOR (BENEFIT FROM)INCOME TAXES | 2,228,875 | 6.9 | 237,954 | 0.7 | ||||||||||||
Provision for (Benefit from) Income Taxes | 568,000 | 1.8 | (92,000 | ) | (0.3 | ) | ||||||||||
NET INCOME | 1,660,875 | 5.1 | 329,954 | 1.0 | ||||||||||||
Net Income Attributable to Non-Controlling Interest | 511,350 | 1.6 | 468,758 | 1.4 | ||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO STOCKHOLDERS | $ | 1,149,525 | 3.5 | $ | (138,804 | ) | (0.4 | ) |
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements
3 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF NET WORTH
Years Ended December 27, 2014 and December 28, 2013
Common Stock | Preferred Stock | Additional | Total | Non-Controlling | ||||||||||||||||||||||||
Number of | Number of | Paid-In | Retained | Stockholders’ | Interest in | Total | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings | Equity | Subsidiary | Net Worth | ||||||||||||||||||||
Balance at December 29, 2013 | 5,000 | $ | 50 | 2,500 | $ | 25 | $ | 739,843 | $ | 1,089,937 | $ | 1,829,855 | $ | 1,973,884 | $ | 3,803,739 | ||||||||||||
Purchases: | ||||||||||||||||||||||||||||
Common Stock | (465 | ) | (5 | ) | — | — | (167,772 | ) | — | (167,777 | ) | (585 | ) | (168,362 | ) | |||||||||||||
Preferred Stock | — | — | (216 | ) | (2 | ) | (64,132 | ) | — | (64,134 | ) | (49,098 | ) | (113,232 | ) | |||||||||||||
Issuances: | ||||||||||||||||||||||||||||
Common Stock | 1 | — | — | — | 1,158 | — | 1,158 | 623 | 1,781 | |||||||||||||||||||
Preferred Stock | — | — | 777 | 8 | 230,745 | — | 230,753 | 123,997 | 354,750 | |||||||||||||||||||
Distributions | — | — | — | — | — | — | — | (40,000 | ) | (40,000 | ) | |||||||||||||||||
Net Income (Loss) | — | — | — | — | — | (138,804 | ) | (138,804 | ) | 468,758 | 329,954 | |||||||||||||||||
BALANCE AT DECEMBER 28, 2013 | 4,536 | 45 | 3,061 | 31 | 739,842 | 951,133 | 1,691,051 | 2,477,579 | 4,168,630 | |||||||||||||||||||
Distributions | — | — | — | — | — | — | — | (1,250,428 | ) | (1,250,428 | ) | |||||||||||||||||
Net Income | — | — | — | — | — | 1,149,525 | 1,149,525 | 511,350 | 1,660,875 | |||||||||||||||||||
BALANCE AT DECEMBER 27, 2014 | 4,536 | $ | 45 | 3,061 | $ | 31 | $ | 739,842 | $ | 2,100,658 | $ | 2,840,576 | $ | 1,738,501 | $ | 4,579,077 |
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements
4 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended | ||||||||
December 27, 2014 | December 28, 2013 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Income | $ | 1,660,875 | $ | 329,954 | ||||
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | ||||||||
Depreciation | 313,538 | 293,644 | ||||||
Amortization of Intangible Assets | 20,200 | 20,200 | ||||||
Bad Debt Provision (Reversal) | (20,878 | ) | 69,346 | |||||
Deferred Income Tax Expense | 203,000 | — | ||||||
Decrease in: | ||||||||
Accounts Receivable – Trade | 29,665 | 294,112 | ||||||
Inventory | 79,969 | 507,061 | ||||||
Prepaid Expenses and Other Current Assets | 359,248 | 882 | ||||||
Increase (Decrease) in: | ||||||||
Accounts Payable | (1,375,477 | ) | 194,403 | |||||
Accrued Expenses and Other Current Liabilities | 269,407 | 191,318 | ||||||
Income Tax Payable | 416,000 | — | ||||||
Deferred Sales | (39,653 | ) | 58,856 | |||||
Merchandise Credits and Gift Card Liabilities | 64,381 | 119,670 | ||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 1,980,275 | 2,079,446 | ||||||
CASH FLOWS USED IN INVESTING ACTIVITY: | ||||||||
Acquisition of Property and Equipment | (188,412 | ) | (297,723 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Principal Payments on Long-Term Debt | (261,866 | ) | (2,129,942 | ) | ||||
Proceeds from Long-Term Debt | 780,831 | — | ||||||
Purchase of Common and Preferred Stock | — | (281,594 | ) | |||||
Issuance of Common and Preferred Stock | — | 356,531 | ||||||
Distributions to Non-Controlling Interest in Subsidiary | (1,250,428 | ) | (40,000 | ) | ||||
NET CASH USED IN FINANCING ACTIVITIES | (731,463 | ) | (2,095,005 | ) | ||||
NET INCREASE (DECREASE) IN CASH | 1,060,400 | (313,282 | ) | |||||
Cash – Beginning of Year | 1,919,262 | 2,232,544 | ||||||
CASH – END OF YEAR | $ | 2,979,662 | $ | 1,919,262 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash Paid During the Year for: | ||||||||
Interest | $ | 255,365 | $ | 468,758 | ||||
Income Taxes | 225,000 | — | ||||||
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES | ||||||||
Refinancing of Long-Term Debt | $ | 3,219,169 | $ | — | ||||
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements
5 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 27, 2014 and December 28, 2013
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) | NATURE OF OPERATIONS |
The consolidated financial statements include the accounts of J & P Park Acquisitions, Inc. (JPPA) and J & P Real Estate, LLC (JPRE) (hereafter, collectively, the Company).
J & P Park Acquisitions, Inc. was incorporated in August of 2010 under the laws of the State of Delaware and is a majority-owned subsidiary of BCP II J&P, LLC (BCP). JPPA, headquartered in Greenwood, South Carolina, is an online and direct marketing distribution business operating in the retail market under Park Seed, Jackson & Perkins, and Wayside Gardens, and in the wholesale market under Park Wholesale. JPPA’s product offering includes seeds, live goods and garden accessories. JPPA’s distribution facility is located in Greenwood, South Carolina. In 2010, the stockholders of JPPA formed JPRE, to own the office and warehouse facility in Greenwood, South Carolina and to lease this facility to JPPA under a non-cancellable operating lease.
(b) | PRINCIPLES OF CONSOLIDATION |
Management determined JPRE to be a variable interest entity over which JPPA has a primary beneficial interest and therefore has consolidated JPRE under the guidance of Accounting Standards Codification (ASC) 810. JPPA retains no effective ownership in JPRE. JPPA is a guarantor on a credit facility with JPRE, and the economic substance of the relationship between JPPA and JPRE is that JPPA has a controlling financial interest in JPRE, even though it does not have an ownership interest. Accordingly, the accompanying financial statements present the consolidated financial results of JPPA and JPRE, with all significant balances and transactions between the two entities eliminated.
The lease between the entities was extended for a total of 5 years and expires in June 2019. JPPA has the option to extend the lease for up to 11 successive 1 year terms. The total rent paid to JPRE amounted to $967,173 and $943,234 for the years ended December 27, 2014 and December 28, 2013, respectively.
(c) | FISCAL YEAR |
The Company generally maintains its books using a 52-53 week year that ends on the last Saturday of December. The years ended December 27, 2014 and December 28, 2013 consisted of 52 weeks. All references to years relate to fiscal years rather than calendar years.
(d) | MANAGEMENT’S USE OF ESTIMATES |
The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to use certain estimates and assumptions. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses during the reporting period. Although management believes its estimates are appropriate, changes in assumptions utilized in preparing such estimates could cause these estimates to change sometime in the future.
6 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 27, 2014 and December 28, 2013
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(e) | CASH |
The Company maintains its cash in bank deposit accounts which, at times, may exceed federally-insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk regarding cash.
(f) | TRADE AND OTHER RECEIVABLES |
Receivables are recorded when billed or accrued and represent claims against third parties that will be settled in cash. The carrying value of receivables, net of the allowance for doubtful accounts, represents their estimated net realizable value. The allowance for doubtful accounts is estimated based on historical collection trends, type of customer, the age of outstanding receivables and existing economic conditions. If events or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectability of those balances and the allowance is adjusted accordingly. Past due receivable balances are written-off when internal collection efforts have been unsuccessful in collecting the amount due.
(g) | INVENTORY |
Inventory is valued at the lower of cost or market using the weighted average method of determining cost.
(h) | PROPERTY AND EQUIPMENT |
Property and equipment are carried at cost, net of accumulated depreciation. Depreciation has been provided by using the straight-line method over the estimated useful lives of the assets as follows:
Building | 39 Years | |||
Computer Equipment & Software | 3-10 Years | |||
Warehouse Improvements and Equipment | 3-15 Years |
The cost of maintenance and repairs is charged to operations as incurred while renewals and betterments are capitalized.
The Company capitalizes certain internal costs, including payroll costs, incurred in connection with the development of software for internal use. These costs are capitalized beginning when the Company has entered the application development stage and ceases when the software is substantially complete and ready for its intended use. Costs incurred for enhancements that are expected to result in additional features or functionality are capitalized and expensed over the estimated useful life of the enhancements.
7 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 27, 2014 and December 28, 2013
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) | GOODWILL AND INTANGIBLE ASSETS |
The excess of the purchase price over the fair market value of identifiable assets acquired, net of liabilities assumed, is recorded as goodwill.
Intangibles with finite useful lives are carried at estimated fair value at the date of the business combination, net of accumulated amortization. These assets are assessed for impairment upon the occurrence of a triggering event. Amortization has been provided by using the straight-line method over the estimated useful lives of the assets as follows:
Marketing Intangibles | 10 Years |
(j) | LONG-LIVED ASSETS |
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate the book value of an asset may not be recoverable. An impairment loss is recognized when the sum of the undiscounted future cash flows is less than the carrying amount of the assets, in which case a write-down is recorded to reduce the related asset to its estimated value. No such impairment losses have been recognized for the years ended December 27, 2014 and December 28, 2013.
(k) | DEFERRED SALES |
Sales billed or cash received in advance of actual delivery are deferred and recorded as income in the period in which the related deliveries are made.
(l) | MERCHANDISE CREDITS AND GIFT CARD LIABILITIES |
The Company maintains a liability for unredeemed gift cards, gift certificates and merchandise credits until the earlier of redemption, escheatment or a maximum of two years. The Company has concluded that the likelihood of these liabilities being redeemed beyond two years from the date of issuance is remote.
(m) | SHIPPING AND HANDLING COSTS |
The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs are expensed as incurred and included in cost of sales.
8 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 27, 2014 and December 28, 2013
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(n) | ADVERTISING |
The Company expenses advertising costs as they are incurred, except for direct-response advertising, which is capitalized and amortized over its expected period of future benefits. Direct-response advertising consists primarily of catalog book production, printing, and postage costs. They are capitalized and amortized over the expected life of the catalog, not to exceed six months. As of December 27, 2014 and December 28, 2013, capitalized direct-response costs totaling $622,123 and $1,083,990, respectively, are included in prepaid expenses and other current assets. Total advertising costs for the years ended December 27, 2014, and December 28, 2013 amounted to $5,724,578 and $5,778,926, respectively.
(o) | STOCK-BASED COMPENSATION |
The Company accounts for stock-based awards to employees using the fair value method using a Black-Scholes valuation model.
Determining the estimated fair value of share-based awards is subjective in nature and involves the use of significant estimates and assumptions, including the term of the share-based awards, risk-free interest rates over the vesting period, expected dividend rates, the price volatility of the company’s shares and forfeiture rates of the awards. The Company bases its fair value estimates on assumptions it believes to be reasonable but that are inherently uncertain. Stock-based compensation expense for the periods ended December 27, 2014 and December 28, 2013 was not material to the consolidated financial statements and, thus, was not recorded.
(p) | INCOME TAXES |
Income taxes are provided on income reported in the consolidated financial statements and adjusted for transactions that do not enter the computation of income tax payable.
Deferred income taxes are recognized for the tax consequences of “temporary differences” by applying currently enacted statutory tax rates applicable to future years’ differences between the consolidated financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred income taxes of a change in tax rates is recognized in the period that includes the enactment date.
A valuation allowance is provided against deferred income tax assets when their estimated realization is uncertain.
The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that has a greater than 50% likelihood of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
9 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 27, 2014 and December 28, 2013
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(p) | INCOME TAXES (continued) |
The Company is subject to U.S. federal and state income tax examinations by tax authorities for the period ended December 25, 2010, which represents the company’s first taxable year of operations, and for all subsequent operating years through December 27, 2014.
JPPA is a C corporation for federal and state income tax purposes.
JPRE is a limited liability company and has elected to be taxed as a partnership for income tax purposes. Accordingly, income is allocated and taxed to its members in their respective income tax returns.
(q) | VARIABLE INTEREST ENTITIES (VIEs) |
VIEs are primarily entities that lack sufficient equity to finance their activities without additional subordinated financial support from other parties or whose equity holders as a group lack certain power, obligations, or rights. Management analyzes the Company’s variable interests including loans, guarantees, and equity investments, to determine if the Company has any variable interests in variable interest entities. This analysis includes both qualitative and quantitative reviews. Qualitative analysis is based on an evaluation of the design of the entity, its organizational structure including decision making ability, and financial agreements. Quantitative analysis is based on the entity’s forecasted cash flows. Generally accepted accounting principles require a reporting entity to consolidate a variable interest entity when the reporting entity has a variable interest that provides it with a controlling financial interest in the variable interest entity. The entity that consolidates a variable interest entity is referred to as the primary beneficiary of that variable interest entity. The Company uses qualitative and quantitative analyses to determine if it is the primary beneficiary of variable interest entities.
Management has concluded that JPRE is a VIE and JPPA is the primary beneficiary of JPRE because (i) all of the equity owners of JPRE are considered related parties; (ii) the stockholders share power over the significant activities of JPRE; and (iii) JPPA’s activities are most closely associated with JPRE. Accordingly, the Company’s consolidated financial statements include the accounts of JPRE. The land and buildings included in property and equipment comprise substantially all of JPRE’s assets, and the long-term debt - bank comprises substantially all of its liabilities.
(r) | SUBSEQUENT EVENTS |
The Company has evaluated events and transactions occurring subsequent to the consolidated balance sheet date of December 27, 2014, for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through March 27, 2015, the date these consolidated financial statements were available to be issued. No such material events or transactions were noted to have occurred.
10 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 27, 2014 and December 28, 2013
NOTE 2 – PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
2014 | 2013 | |||||||
Building | $ | 4,800,000 | $ | 4,800,000 | ||||
Land | 1,200,000 | 1,200,000 | ||||||
Computer Equipment and Software | 1,430,121 | 1,314,418 | ||||||
Warehouse Improvements and Equipment | 317,795 | 245,086 | ||||||
TOTAL | 7,747,916 | 7,559,504 | ||||||
Less: Accumulated Depreciation | (1,075,965 | ) | (762,427 | ) | ||||
PROPERTY AND EQUPIMENT (NET) | $ | 6,671,951 | $ | 6,797,077 |
Depreciation expense charged to operations for the years ended December 27, 2014 and December 28, 2013 amounted to $313,538 and $293,644, respectively.
NOTE 3 – GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets consist of the following:
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
||||||||||
December 27, 2014: | ||||||||||||
Subject to Amortization: | ||||||||||||
Marketing Intangibles | $ | 202,000 | $ | (87,533 | ) | $ | 114,467 | |||||
Net Subject to Amortization: | ||||||||||||
Goodwill | 31,244 | — | 31,244 | |||||||||
TOTAL GOODWILL AND INTANGIBLE ASSETS | $ | 233,244 | $ | (87,533 | ) | $ | 145,711 | |||||
December 28, 2013: | ||||||||||||
Subject to Amortization: | ||||||||||||
Marketing Intangibles | $ | 202,000 | $ | (67,333 | ) | $ | 134,667 | |||||
Net Subject to Amortization: | ||||||||||||
Goodwill | 31,244 | — | 31,244 | |||||||||
TOTAL GOODWILL AND INTANGIBLE ASSETS | $ | 233,244 | $ | (67,333 | ) | $ | 165,911 |
Amortization expense charged to operations was $20,200 for the years ended December 27, 2014 and December 28, 2013. Estimated amortization expense for each of the ensuing five years is approximately $20,200. There were no other changes to goodwill and intangible assets during the years ended December 27, 2014 and December 28, 2013.
11 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 27, 2014 and December 28, 2013
NOTE 4 – INCOME TAXES
The provision for (benefit from) income taxes consists of the following:
2014 | 2013 | |||||||
Current – Federal | $ | 637,000 | $ | — | ||||
Current – State | 4,000 | — | ||||||
Prior Year Over-Provision | (276,000 | ) | (92,000 | ) | ||||
Deferred Income Tax Expense | 203,000 | — | ||||||
PROVISION FOR (BENEFIT FROM) INCOME TAXES | $ | 568,000 | $ | (92,000 | ) |
Deferred tax assets (liabilities) are comprised of the following:
December 27, 2014 | December 28, 2013 | |||||||
DEFERRED TAX ASSETS: | ||||||||
Inventory | $ | 160,000 | $ | 183,000 | ||||
Allowance for Doubtful Accounts | 14,000 | 22,000 | ||||||
Goodwill | 263,000 | 263,000 | ||||||
Other Deferred Tax Assets | 91,000 | 103,000 | ||||||
NOL Carryover | — | 253,000 | ||||||
State Taxes | 11,000 | — | ||||||
TOTAL DEFERRED TAX ASSETS | 539,000 | 824,000 | ||||||
DEFERRED TAX LIABILITIES: | ||||||||
Property and Equipment | (351,000 | ) | (288,000 | ) | ||||
Other Deferred Tax Liabilities | (109,000 | ) | (84,000 | ) | ||||
Prepaid Expenses | (322,000 | ) | (490,000 | ) | ||||
State Taxes | — | (2,000 | ) | |||||
TOTAL DEFERRED TAX LIABILITIES | (782,000 | ) | (864,000 | ) | ||||
NET DEFERRED INCOME TAX LIABILITIES | $ | (243,000 | ) | $ | (40,000 | ) | ||
DEFERRED INCOME TAXES: | ||||||||
Current | $ | (53,000 | ) | $ | (151,000 | ) | ||
Long-Term | (190,000 | ) | 111,000 | |||||
NET DEFERRED INCOME TAX LIABILITIES | $ | (243,000 | ) | $ | (40,000 | ) |
The difference between the provision for (benefit from) income taxes as a percentage of income before provision for (benefit from) income taxes and the federal statutory rate of 34% is due primarily to the prior year over year provision and state income taxes.
12 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 27, 2014 and December 28, 2013
NOTE 5 – LINE OF CREDIT
The Company has a revolving line of credit providing for maximum borrowings of $4,250,000. The line of credit is collateralized by substantially all the assets of the Company. Interest is payable monthly at LIBOR plus 2.75%. The line matures July 2016. There were no advances made from the line of credit at December 27, 2014 and December 28, 2013. Available financing subject to borrowing constraints under the line of credit at December 27, 2014 was $4,250,000. At December 27, 2014 the London Inter-Bank Offering Rate (LIBOR) was 0.25%.
The line of credit contains various covenants and restrictions including, but not limited to, maintenance of certain debt service and leverage ratios.
NOTE 6 – LONG-TERM DEBT – RELATED PARTIES
JPRE had subordinated secured promissory notes payable to minority stockholders of which $74,936 was repaid during the year ended December 28, 2013. JPRE had remaining subordinated secured promissory notes payable to BCP and other stockholders totaling $749, 185 as of December 28, 2013, which were repaid in full during t he year ended December 31, 2014.
JPRE was charged interest totaling $43,853 and $130,626 on these notes for the years ended December 27, 2014 and December 28, 2013, respectively.
NOTE 7 – LONG-TERM DEBT – BANK
Long-term debt – bank consists of the following:
2014 | 2013 | |||||||
Note Payable (JPRE) - Bank; Collateralized by Substantially All of the Assets of the Company; Payable in Monthly Principal Installments of $33,333 Beginning February 2012; Remaining Balance Due June 30, 2014; Interest Payable Monthly at the Bank’s Prime Rate plus 3.75%; Refinanced June 10, 2014 | $ | — | $ | 2,469,984 | ||||
Note Payable (JPRE) - Bank; Collateralized by Substantially All of the Assets of JPRE; Payable in Monthly Principal Installments of $33,334 Plus Annual Paydowns Equal to JPRE’s Net Cash Flow from Operations Due within 120 Days of the Company’s Year End. Remaining Balance Due June 5, 2019; Interest Payable Monthly at the LIBOR plus 3.5% | 3,738,134 | — | ||||||
TOTAL | 3,738,134 | 2,469,984 | ||||||
Less: Current Maturities | (400,008 | ) | (2,469,984 | ) | ||||
LONG-TERM DEBT - BANK | $ | 3,338,126 | $ | — |
13 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 27, 2014 and December 28, 2013
NOTE 8 – PREFERRED STOCK
The Company’s preferred stock is entitled to a preferred return equal to the original issue price of each preferred share prior to any dividends or other payments are payable to common stockholders. Preferred shareholders also have conversion rights that allow each preferred share to be converted into a common share.
NOTE 9 – RELATED PARTY TRANSACTIONS
JPPA paid Blackstreet Capital Management, LLC (Blackstreet), a company related to BCP with some minority common ownership, a management fee for consulting and management services provided under an agreement executed on August 25, 2010 and amended on April 1, 2012 (the Management and Advisory Agreement). The total expense incurred for these services for the years ended December 27, 2014 and December 28, 2013, totaled $353,916 and $337,063, respectively, and is included in other expenses.
In June 2014, JPRE paid Blackstreet a finance fee of $80,000 in connection with the refinancing of certain credit facilities.
On June 27, 2011, JPPA entered into an agreement with Scrubs AC, Inc. (Scrubs) a company related to BCP with some minority common ownership, to provide management services. Under the terms of this agreement, Scrubs provided JPPA with financial, managerial, strategic, and operational advice in addition to assistance in connection with its day-to-day operations. The total expenses incurred for these services for the years ended December 27, 2014 and December 28, 2013 were $101,230 and $188,486, respectively, and are included in general and administrative expenses. As of December 27, 2014 and December 28, 2013, there was $6,534 and $21,707 due to Scrubs included in accounts payable, respectively. This agreement was amended on April 1, 2013 and further amended on April 14, 2014 and terminates upon mutual consent of both parties.
On June 1, 2013, JPPA entered into an agreement with Restorers Acquisition Inc. (RAI), a BCP II company related to the majority shareholder by some common ownership through different funds, to provide management services including finance, marketing, accounting, human resources, administration, information technology services and use of office space. During the years ended December 27, 2014 and December 28, 2013, JPPA charged $831,728 and $647,044, respectively, for labor and operational support and $43,200 and $32,700, respectively, for the use of certain office space in JPPA’s facility. As of December 27, 2014 and December 28, 2013, there was $118,458 and $86,297 due from RAI and is included in prepaid expenses and other current assets. The agreement with RAI was amended on October 1, 2014 and is terminable upon mutual consent of both parties.
14 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 27, 2014 and December 28, 2013
NOTE 10 – 401(K) PLAN
JPPA has a contributory 401 (K) profit sharing plan that covers substantially all employees of the company. All employees meeting certain age and service requirements may contribute a portion of their compensation up to the maximum allowed under applicable tax laws. JPPA made no contributions to the plan during the years ended December 27, 2014 and December 28, 2013. JPPA may also elect to make a discretionary profit sharing contribution to the plan. For the years ended December 27, 2014 and December 28, 2013, JPPA did not elect to make a profit sharing contribution to the plan.
NOTE 11 – WARRANTS
As of December 27, 2014 and December 28, 2013, the Company had a warrant outstanding which enables the majority stockholder to purchase shares of common stock in an amount equal to 25%, of the issued and outstanding common share capital of JPPA on a fully diluted basis, at a per share price equal to $0.01 per share. This warrant expires in 2025.
NOTE 12 – STOCK OPTIONS
On September 1, 2010, JPPA adopted the 2010 stock option plan (the plan). The plan provides for the award of stock options to purchase common and preferred stock of JPPA. The aggregate amount of common and preferred stock available for issuance under this plan may not exceed 10,000 and 5,000 shares, respectively. Options awarded vest over ten years with no vesting in the first year. The options will also vest immediately upon a sale of JPPA, once vested, the options may be exercised at any point for seven years.
Common stock option activity for 2014 and 2013 was as follows:
Stock Options | Weighted- Average Exercise Price | Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
Outstanding at December 30, 2012 | 62.79 | $ | 0.75 | 9.5 | $ | 43 | ||||||||||
Granted | 46.05 | 1,940.00 | 11.0 | 14,998 | ||||||||||||
OUTSTANDING AT DECEMBER 28, 2013 | 108.84 | 821.24 | 9.13 | 15,041 | ||||||||||||
Granted, Exercised or Forfeited | — | — | — | — | ||||||||||||
OUTSTANDING AT DECEMBER 27, 2014 | 108.84 | $ | 821.24 | 9.13 | $ | 15,041 |
15 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 27, 2014 and December 28, 2013
NOTE 12 – STOCK OPTIONS (continued)
The following assumptions were used in the Black-Scholes model to value the common stock options at grant date during the year ended December 28, 2013:
Expected Life | 11 Years | |||
Risk-Free Interest Rate | 3.25 | % | ||
Dividend Yield | 0 | % | ||
Expected Volatility | 100 | % |
Preferred stock option activity for 2014 and 2013 was as follows:
Stock Options | Weighted- Average Exercise Price | Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
Outstanding at December 30, 2012 | 31.39 | $ | 296.86 | 9.5 | $ | 3,412 | ||||||||||
Granted | 31.04 | 296.86 | 11.0 | 3,374 | ||||||||||||
OUTSTANDING AT DECEMBER 28, 2013 | 62.43 | 296.86 | 9.2 | 6,786 | ||||||||||||
Granted, Exercised or Forfeited | — | — | — | |||||||||||||
OUTSTANDING AT DECEMBER 27, 2014 | 62.43 | $ | 296.86 | 8.2 | $ | 6,786 |
The following assumptions were used in the Black-Scholes model to value the preferred stock options at grant date during the year ended December 28, 2013:
Expected Life | 11 Years | |||
Risk-Free Interest Rate | 3.25 | % | ||
Dividend Yield | 8 | % | ||
Expected Volatility | 100 | % |
The compensation expense related to the common and preferred stock options for the years ended December 27, 2014 and December 28, 2013 was not material to the consolidated financial statements and, thus, was not recorded.
16 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 27, 2014 and December 28, 2013
NOTE 13 – COMMITMENTS AND CONTINGENCIES
(a) | RESEARCH AND DEVELOPMENT AGREEMENT |
During November 2011, JPPA entered into an agreement with Weeks Roses (Weeks), a third party wholesale grower of Bareroot roses, that is in effect until 2019. Weeks has agreed to perform research for JPPA and maintain JPPA’s research crop in exchange for a reduction in royalties to be paid to JPPA for growing JPPA’s patented roses. There is an option to renew the agreement for consecutive two year terms and the agreement calls for a 24 month notice prior to termination.
(b) | EMPLOYMENT CONTRACT |
The Company has an employment agreement with an employee which provides the employee with additional compensation. These include the achievement of specific financial results as well as certain liquidity events as defined in the agreement.
17 |
J & P PARK ACQUISITIONS, INC.
AND SUBSIDIARY
YEARS ENDED DECEMBER 27, 2014
AND DECEMBER 28, 2013
18 |
10990 Wilshire Boulevard 16th Floor Los Angeles, CA 90024 |
310-873-1600 T 310-873-6600 F www.greenhassonjanks.com |
ON SUPPLEMENTARY INFORMATION
To the Board of Directors of
J & P Park Acquisitions, Inc. and Subsidiary
We have audited the consolidated financial statements of J & P Park Acquisitions, Inc. and Subsidiary as of and for the years ended December 27, 2014 and December 28, 2013, and our report thereon dated March 27, 2015, which expressed an unmodified opinion on those consolidated financial statements, appears on Page 1. Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying consolidating balance sheets and capitalization tables at December 27, 2014 and December 28, 2013, and consolidating statements of income for the years then ended are presented for purposes of additional analysis and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole.
March 27, 2015
Los Angeles, California
An independent member of HLB International, a worldwide network of accounting firms and business advisors.
19 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
December 27, 2014 |
JPPA | JPRE | Eliminations | Consolidated | |||||||||||||
ASSETS | ||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||
Cash | $ | 2,979,647 | $ | 15 | $ | — | $ | 2,979,662 | ||||||||
Accounts Receivable Trade (Net) | 385,252 | — | — | 385,252 | ||||||||||||
Inventory | 1,880,772 | — | — | 1,880,772 | ||||||||||||
Prepaid Expenses and Other Current Assets | 992,783 | 45,788 | — | 1,038,571 | ||||||||||||
TOTAL CURRENT ASSETS | 6,238,454 | 45,803 | — | 6,284,257 | ||||||||||||
PROPERTY AND EQUIPMENT (Net) | 1,220,740 | 5,451,211 | — | 6,671,951 | ||||||||||||
OTHER ASSETS: | ||||||||||||||||
Goodwill and Intangible Assets (Net) | 145,711 | — | — | 145,711 | ||||||||||||
TOTAL ASSETS | $ | 7,604,905 | $ | 5,497,014 | $ | — | $ | 13,101,919 | ||||||||
LIABILITIES AND NET WORTH | ||||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||
Accounts Payable | $ | 2,222,486 | $ | — | $ | — | $ | 2,222,486 | ||||||||
Accrued Expenses and Other Current Liabilities | 871,278 | 20,379 | — | 891,657 | ||||||||||||
Income Tax Payable | 416,000 | — | — | 416,000 | ||||||||||||
Deferred Sales | 547,545 | — | — | 547,545 | ||||||||||||
Merchandise Credits and Gift Card Liabilities | 464,020 | — | — | 464,020 | ||||||||||||
Deferred Income Taxes | 53,000 | — | — | 53,000 | ||||||||||||
Current Maturities of Long-Term Debt - Bank | — | 400,008 | — | 400,008 | ||||||||||||
TOTAL CURRENT LIABILITIES | 4,574,329 | 420,387 | — | 4,994,716 | ||||||||||||
OTHER LIABILITIES: | ||||||||||||||||
Deferred Income Taxes | 190,000 | — | — | 190,000 | ||||||||||||
Long-Term Debt - Bank | — | 3,338,126 | — | 3,338,126 | ||||||||||||
TOTAL OTHER LIABILITIES | 190,000 | 3,338,126 | — | 3,528,126 | ||||||||||||
TOTAL LIABILITIES | 4,764,329 | 3,758,513 | — | 8,522,842 | ||||||||||||
NET WORTH: | ||||||||||||||||
Common Stock/Units | 45 | 6,339 | (6,339 | ) | 45 | |||||||||||
Preferred Stock/Units | 31 | 280,763 | (280,763 | ) | 31 | |||||||||||
Additional Paid-In Capital | 739,842 | — | — | 739,842 | ||||||||||||
Retained Earnings | 2,100,658 | 1,451,399 | (1,451,399 | ) | 2,100,658 | |||||||||||
Non-Controlling Interest | — | — | 1,738,501 | 1,738,501 | ||||||||||||
TOTAL NET WORTH | 2,840,576 | 1,738,501 | — | 4,579,077 | ||||||||||||
TOTAL LIABILITIES AND NET WORTH | $ | 7,604,905 | $ | 5,497,014 | $ | — | $ | 13,101,919 |
See Independent Auditor’s Report on Supplementary Information
20 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
CONSOLIDATING BALANCE SHEET December 28, 2013 |
JPPA | JPRE | Eliminations | Consolidated | |||||||||||||
ASSETS | ||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||
Cash | $ | 1,826,417 | $ | 92,845 | $ | — | $ | 1,919,262 | ||||||||
Accounts Receivable Trade (Net) | 394,039 | — | — | 394,039 | ||||||||||||
Inventory | 1,960,741 | — | — | 1,960,741 | ||||||||||||
Prepaid Expenses and Other Current Assets | 1,396,291 | 29,620 | (28,092 | ) | 1,397,819 | |||||||||||
TOTAL CURRENT ASSETS | 5,577,488 | 122,465 | (28,092 | ) | 5,671,861 | |||||||||||
PROPERTY AND EQUIPMENT (Net) | 1,222,794 | 5,574,283 | — | 6,797,077 | ||||||||||||
OTHER ASSETS: | ||||||||||||||||
Goodwill and Intangible Assets (Net) | 165,911 | — | — | 165,911 | ||||||||||||
Deferred Income Taxes | 111,000 | — | — | 111,000 | ||||||||||||
TOTAL OTHER ASSETS | 276,911 | — | — | 276,911 | ||||||||||||
TOTAL ASSETS | $ | 7,077,193 | $ | 5,696,748 | $ | (28,092 | ) | $ | 12,745,849 | |||||||
LIABILITIES AND NET WORTH | ||||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||
Accounts Payable | $ | 3,597,963 | $ | — | $ | — | $ | 3,597,963 | ||||||||
Accrued Expenses and Other Current Liabilities | 650,342 | — | (28,092 | ) | 622,250 | |||||||||||
Deferred Sales | 587,198 | — | — | 587,198 | ||||||||||||
Merchandise Credits and Gift Card Liabilities | 399,639 | — | — | 399,639 | ||||||||||||
Deferred Income Taxes | 151,000 | — | — | 151,000 | ||||||||||||
Current Maturities of Long-Term Debt - Bank | — | 2,469,984 | — | 2,469,984 | ||||||||||||
TOTAL CURRENT LIABILITIES | 5,386,142 | 2,469,984 | (28,092 | ) | 7,828,034 | |||||||||||
OTHER LIABILITIES: | ||||||||||||||||
Long-Term Debt – Related Party | — | 749,185 | — | 749,185 | ||||||||||||
TOTAL LIABILITIES | 5,386,142 | 3,219,169 | (28,092 | ) | 8,577,219 | |||||||||||
NET WORTH: | ||||||||||||||||
Common Stock/Units | 45 | 6,338 | (6,338 | ) | 45 | |||||||||||
Preferred Stock/Units | 31 | 1,263,990 | (1,263,990 | ) | 31 | |||||||||||
Additional Paid-In Capital | 739,842 | — | — | 739,842 | ||||||||||||
Retained Earnings | 951,133 | 1,207,251 | (1,207,251 | ) | 951,133 | |||||||||||
Non-Controlling Interest | — | — | 2,477,579 | 2,477,579 | ||||||||||||
TOTAL NET WORTH | 1,691,051 | 2,477,579 | — | 4,168,630 | ||||||||||||
TOTAL LIABILITIES AND NET WORTH | $ | 7,077,193 | $ | 5,696,748 | $ | (28,092 | ) | $ | 12,745,849 |
See Independent Auditor’s Report on Supplementary Information
21 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
CONSOLIDATING STATEMENT OF INCOME Year Ended December 27, 2014 |
JPPA | JPRE | Eliminations | Consolidated | |||||||||||||
NET REVENUE | $ | 32,306,912 | $ | 967,173 | $ | (967,173 | ) | $ | 32,306,912 | |||||||
COST OF SALES | 14,843,685 | — | — | 14,843,685 | ||||||||||||
GROSS PROFIT | 17,463,227 | 967,173 | (967,173 | ) | 17,463,227 | |||||||||||
OPERATING EXPENSES: | ||||||||||||||||
Selling | 8,317,780 | — | — | 8,317,780 | ||||||||||||
General and Administrative | 6,806,905 | 165,147 | (967,173 | ) | 6,004,879 | |||||||||||
TOTAL OPERATING EXPENSES | 15,124,685 | 165,147 | (967,173 | ) | 14,322,659 | |||||||||||
INCOME FROM OPERATIONS | 2,338,542 | 802,026 | — | 3,140,568 | ||||||||||||
OTHER EXPENSES: | ||||||||||||||||
Interest Expense | 52,264 | 203,101 | — | 255,365 | ||||||||||||
Amortization | 20,200 | — | — | 20,200 | ||||||||||||
Management Fees – Blackstreet | 353,953 | — | — | 353,953 | ||||||||||||
Board of Director Fees | 125,187 | — | — | 125,187 | ||||||||||||
Other Expenses | 69,413 | 87,575 | — | 156,988 | ||||||||||||
TOTAL OTHER EXPENSES | 621,017 | 290,676 | — | 911,693 | ||||||||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 1,717,525 | 511,350 | — | 2,228,875 | ||||||||||||
Provision for Income Taxes | 568,000 | — | — | 568,000 | ||||||||||||
NET INCOME | 1,149,525 | 511,350 | — | 1,660,875 | ||||||||||||
Net Income Attributable to Non-Controlling Interest | — | — | 511,350 | 511,350 | ||||||||||||
NET INCOME ATTRIBUTABLE TO STOCKHOLDERS | $ | 1,149,525 | $ | 511,350 | $ | (511,350 | ) | $ | 1,149,525 |
See Independent Auditor’s Report on Supplementary Information
22 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
CONSOLIDATING STATEMENT OF INCOME Year Ended December 28, 2013
| ||||||||||||||||
JPPA | JPRE | Eliminations | Consolidated | |||||||||||||
NET REVENUE | $ | 32,820,580 | $ | 943,234 | $ | (943,234 | ) | $ | 32,820,580 | |||||||
COST OF SALES | 16,296,257 | — | 16,296,257 | |||||||||||||
GROSS PROFIT | 16,524,323 | 943,234 | (943,234 | ) | 16,524,323 | |||||||||||
OPERATING EXPENSES: | ||||||||||||||||
Selling | 8,393,757 | — | — | 8,393,757 | ||||||||||||
General and Administrative | 7,123,339 | 131,541 | (943,234 | ) | 6,311,646 | |||||||||||
TOTAL OPERATING EXPENSES | 15,517,096 | 131,541 | (943,234 | ) | 14,705,403 | |||||||||||
INCOME FROM OPERATIONS | 1,007,227 | 811,693 | — | 1,818,920 | ||||||||||||
OTHER EXPENSES: | ||||||||||||||||
Interest Expense | 86,965 | 324,602 | — | 411,567 | ||||||||||||
Amortization | 20,200 | — | — | 20,200 | ||||||||||||
Management Fees – Blackstreet | 337,063 | — | — | 337,063 | ||||||||||||
Board of Director Fees | 132,870 | — | — | 132,870 | ||||||||||||
One Time Costs | 647,010 | — | — | 647,010 | ||||||||||||
Other Expenses | 13,923 | 18,333 | — | 32,256 | ||||||||||||
TOTAL OTHER EXPENSES | 1,238,031 | 342,935 | — | 1,580,966 | ||||||||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | (230,804 | ) | 468,758 | — | 237,954 | |||||||||||
Benefit from Income Taxes | (92,000 | ) | — | — | (92,000 | ) | ||||||||||
NET INCOME (LOSS) | (138,804 | ) | 468,758 | — | 329,954 | |||||||||||
Net Income Attributable to Non-Controlling Interest | — | — | 468,758 | 468,758 | ||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO STOCKHOLDERS | $ | (138,804 | ) | $ | 468,758 | $ | (468,758 | ) | $ | (138,804 | ) | |||||
See Independent Auditor’s Report on Supplementary Information
23 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
As of December 27, 2014
Revised | ||||||||||||||||||||||||||||||||||||||||
Own% | ||||||||||||||||||||||||||||||||||||||||
Shared Held | Equity Own % | Fully Diluted Own % | Original / Strike Price | Warrants for | Common | |||||||||||||||||||||||||||||||||||
Shareholder | Common | Preferred | Common | Preferred | Common | Preferred | Common | Preferred | Common (d) | w/Warrants | ||||||||||||||||||||||||||||||
BCP II J&P, LLC | 3,336.96 | 2,992.77 | 73.56 | % | 97.76 | % | 71.84 | % | 95.81 | % | $ | 0.75 | $ | 296.86 | 1,098.06 | 76.52 | % | |||||||||||||||||||||||
BCA II J&P, LLC | 1,095.39 | — | 24.15 | % | 0.00 | % | 23.58 | % | 0.00 | % | $ | 0.75 | $ | — | — | 18.90 | % | |||||||||||||||||||||||
Minority Shareholder (a) | — | — | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | $ | 0.75 | $ | 296.86 | — | 0.00 | % | |||||||||||||||||||||||
Minority Shareholder (b) | — | — | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | $ | 0.75 | $ | 296.86 | — | 0.00 | % | |||||||||||||||||||||||
Minority Shareholder (c) | — | — | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | $ | 1.939.71 | $ | 296.86 | — | 0.00 | % | |||||||||||||||||||||||
Minority Shareholder | 57.57 | 38.80 | 1.27 | % | 1.27 | % | 1.24 | % | 1.24 | % | $ | 0.75 | $ | 296.86 | 14.39 | 1.24 | % | |||||||||||||||||||||||
Minority Shareholder | 37.75 | 25.44 | 0.83 | % | 0.83 | % | 0.81 | % | 0.81 | % | $ | 0.75 | $ | 296.86 | 9.44 | 0.81 | % | |||||||||||||||||||||||
Minority Shareholder | 8.51 | 4.26 | 0.19 | % | 0.14 | % | 0.18 | % | 0.14 | % | $ | 0.75 | $ | 296.61 | 2.13 | 0.18 | % | |||||||||||||||||||||||
Subtotal Outstanding Shares | 4,536.18 | 3,061.27 | 100.00 | % | 100.00 | % | 97.66 | % | 98.00 | % | NA | $ | NA | 1,124.02 | 97.65 | % | ||||||||||||||||||||||||
Options and Warrants: | ||||||||||||||||||||||||||||||||||||||||
Minority Shareholder (a) | 50.23 | 25.11 | 1.08 | % | 0.80 | % | $ | 0.75 | $ | 296.86 | 12.56 | 1.08 | % | |||||||||||||||||||||||||||
Minority Shareholder (b) | 12.56 | 6.28 | 0.27 | % | 0.20 | % | $ | 0.75 | $ | 296.86 | 3.14 | 0.27 | % | |||||||||||||||||||||||||||
Minority Shareholder (c) | 46.05 | 31.04 | NA | NA | 0.99 | % | 0.99 | % | $ | 1.939.71 | $ | 296.86 | 11.51 | 0.99 | % | |||||||||||||||||||||||||
Subtotal Options and Warrants | 108.84 | 62.43 | NA | NA | 2.34 | % | 2.00 | % | NA | $ | NA | 27.21 | 2.35 | % | ||||||||||||||||||||||||||
Total Fully Diluted Shares | 4,645.02 | 3,123.70 | NA | NA | 100.00 | % | 100.00 | % | NA | NA | 1,151.23 | 100.00 | % |
(a) Minority shareholder was granted options on January 1, 2011 for both preferred and common shares with a strike price of each of $296.86 and $0.75, respectively. These options vest 10% per year over 5 years with the balance vesting upon a liquidity event. The warrants for common shares are not available for exercise until such time as the associated options are exercised.
(b) Minority shareholder was granted options on August 15, 2011 for both preferred and common shares with a strike price of each of $296.86 and $0.75, respectively. These options vest 10% per year over 5 years with the balance vesting upon a liquidity event. The warrants for common shares are not available for exercise until such time as the associated options are exercised.
(c) Minority shareholder was granted options on January 1, 2013 for both preferred and common shares with a strike price of each of $296.86 and $1,939.71, respectively. These options vest 10% per year over 5 years with the balance vesting upon a liquidity event. The warrants for common shares are not available for exercise until such time as the associated options are exercised.
(d) Warrants are only exercisable if BCP II J&P, LLC does not earn a 30% return.
See Independent Auditor’s Report on Supplementary Information
24 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
CAPITALIZATION TABLE
As of December 28, 2013
Revised | ||||||||||||||||||||||||||||||||||||||||
Own% | ||||||||||||||||||||||||||||||||||||||||
Shared Held | Equity Own % | Fully Diluted Own % | Original / Strike Price | Warrants for | Common | |||||||||||||||||||||||||||||||||||
Shareholder | Common | Preferred | Common | Preferred | Common | Preferred | Common | Preferred | Common (d) | w/Warrants | ||||||||||||||||||||||||||||||
BCP II J&P, LLC | 3,326.17 | 2,987.37 | 73.33 | % | 97.59 | % | 71.61 | % | 95.64 | % | $ | 0.75 | $ | 296.86 | 1,095.39 | 76.28 | % | |||||||||||||||||||||||
BCA II J&P, LLC | 1,095.39 | — | 24.15 | % | 0.00 | % | 23.58 | % | 0.00 | % | $ | 0.75 | $ | — | — | 18.90 | % | |||||||||||||||||||||||
Minority Shareholder (a) | — | — | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | $ | 0.75 | $ | 296.86 | — | 0.00 | % | |||||||||||||||||||||||
Minority Shareholder (b) | — | — | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | $ | 0.75 | $ | 296.86 | — | 0.00 | % | |||||||||||||||||||||||
Minority Shareholder (c) | — | — | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | $ | 1,939.71 | $ | 296.86 | — | 0.00 | % | |||||||||||||||||||||||
Minority Shareholder | 57.57 | 38.80 | 1.27 | % | 1.27 | % | 1.24 | % | 1.24 | % | $ | 0.75 | $ | 296.86 | 14.39 | 1.24 | % | |||||||||||||||||||||||
Minority Shareholder | 37.75 | 25.44 | 0.82 | % | 0.82 | % | 0.81 | % | 0.81 | % | $ | 0.75 | $ | 296.86 | 9.44 | 0.81 | % | |||||||||||||||||||||||
Minority Shareholder | — | — | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | $ | 0.75 | $ | 296.86 | — | 0.00 | % | |||||||||||||||||||||||
Minority Shareholder | 8.51 | 4.26 | 0.19 | % | 0.14 | % | 0.18 | % | 0.14 | % | $ | 0.75 | $ | 296.61 | 2.13 | 0.18 | % | |||||||||||||||||||||||
Minority Shareholder | 8.63 | 4.32 | 0.19 | % | 0.14 | % | 0.19 | % | 0.14 | % | $ | 0.75 | $ | 296.39 | 2.16 | 0.19 | % | |||||||||||||||||||||||
Minority Shareholder | 2.16 | 1.08 | 0.05 | % | 0.04 | % | 0.05 | % | 0.03 | % | $ | 0.75 | $ | 296.39 | 0.54 | 0.05 | % | |||||||||||||||||||||||
Subtotal Outstanding Shares | 4,536.18 | 3,061.27 | 100.00 | % | 100.00 | % | 97.66 | % | 98.00 | % | NA | NA | 1,124.05 | 97.65 | % | |||||||||||||||||||||||||
Options and Warrants: | ||||||||||||||||||||||||||||||||||||||||
Minority Shareholder (a) | 50.23 | 25.11 | 1.08 | % | 0.80 | % | $ | 0.75 | $ | 296.86 | 12.56 | 1.08 | % | |||||||||||||||||||||||||||
Minority Shareholder (b) | 12.56 | 6.28 | 0.27 | % | 0.20 | % | $ | 0.75 | $ | 296.86 | 3.14 | 0.27 | % | |||||||||||||||||||||||||||
Minority Shareholder (c) | 46.05 | 31.04 | NA | NA | 0.99 | % | 1.00 | % | $ | 1,939.71 | $ | 296.86 | 11.51 | 1.00 | % | |||||||||||||||||||||||||
Subtotal Options and Warrants | 108.84 | 62.43 | NA | NA | 2.34 | % | 2.00 | % | NA | NA | 27.21 | 2.35 | % | |||||||||||||||||||||||||||
Total Fully Diluted Shares | 4,645.02 | 3,123.70 | NA | NA | 100.00 | % | 100.00 | % | NA | NA | 1,151.26 | 100.00 | % |
(a) Minority shareholder was granted options on January 1, 2011 for both preferred and common shares with a strike price of each of $296.86 and $0.75, respectively. These options vest 10% per year over 5 years with the balance vesting upon a liquidity event. The warrants for common shares are not available for exercise until such time as the associated options are exercised.
(b) Minority shareholder was granted options on August 15, 2011 for both preferred and common shares with a strike price of each of $296.86 and $0.75, respectively. These options vest 10% per year over 5 years with the balance vesting upon a liquidity event. The warrants for common shares are not available for exercise until such time as the associated options are exercised.
(c) Minority shareholder was granted options on January 1, 2013 for both preferred and common shares with a strike price of each of $296.86 and $1,939.71, respectively. These options vest 10% per year over 5 years with the balance vesting upon a liquidity event. The warrants for common shares are not available for exercise until such time as the associated options are exercised.
(d) Warrants are only exercisable if BCP II J&P, LLC does not earn a 30% return.
See Independent Auditor’s Report on Supplementary Information
25 |
J & P PARK ACQUISITIONS, INC. AND SUBSIDIARY
CAPITALIZATION TABLES
As of December 31, 2014
Revised | ||||||||||||||||||||||||||||||||||||||
Own% | ||||||||||||||||||||||||||||||||||||||
Shared Held | Equity Own % | Fully Diluted Own % | Original / Strike Price | Warrants for | Common | |||||||||||||||||||||||||||||||||
Shareholder | Common | Preferred (b) | Common | Preferred | Common | Preferred | Common | Preferred (b) | Common (c) | w/Warrants | ||||||||||||||||||||||||||||
BCP II J&P, LLC | 3,341.22 | 2,463.54 | 73.59 | % | 97.75 | % | 73.59 | % | 97.75 | % | $ | 1.41 | $ | 505.56 | 1,099.51 | 78.37 | % | |||||||||||||||||||||
BCA II J&P, LLC | 1,096.81 | — | 24.15 | % | 0.00 | % | 24.15 | % | 0.00 | % | $ | 1.41 | $ | — | — | 19.36 | % | |||||||||||||||||||||
Minority Shareholder (a) | 56.97 | 31.65 | 1.25 | % | 1.26 | % | 1.25 | % | 1.26 | % | $ | 1.27 | $ | 505.56 | 14.24 | 1.26 | % | |||||||||||||||||||||
Minority Shareholder (a) | 37.36 | 20.75 | 0.82 | % | 0.82 | % | 0.82 | % | 0.82 | % | $ | 1.27 | $ | 505.56 | 9.34 | 0.82 | % | |||||||||||||||||||||
Minority Shareholder (a) | 8.51 | 4.26 | 0.19 | % | 0.17 | % | 0.19 | % | 0.17 | % | $ | 1.27 | $ | 505.56 | 2.13 | 0.19 | % | |||||||||||||||||||||
Subtotal Outstanding Shares | 4,540.87 | 2,520.20 | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | NA | NA | 1,125.22 | 100.00 | % | |||||||||||||||||||||||
Options and Warrants: | ||||||||||||||||||||||||||||||||||||||
None | — | — | NA | NA | 0.00 | % | 0.00 | % | $ | — | $ | — | — | 0.00 | % | |||||||||||||||||||||||
Subtotal Options and Warrants | — | — | NA | NA | 0.00 | % | 0.00 | % | NA | NA | — | 0.00 | % | |||||||||||||||||||||||||
Total Fully Diluted Shares | 4,540.87 | 2,520.20 | NA | NA | 100.00 | % | 100.00 | % | NA | NA | 1,125.22 | 100.00 | % |
(a) | Non-fund investors can only exercise their warrants for common if BCP II J&P, LLC exercises the warrants. |
(b) | Each preferred unit has a liquidation preference of $505.56. |
(c) | Warrants are only exercisable if BCP II J&P, LLC does not earn a 30% return. |
As of December 31, 2013
Revised | ||||||||||||||||||||||||||||||||||||||
Own% | ||||||||||||||||||||||||||||||||||||||
Shared Held | Equity Own % | Fully Diluted Own % | Original / Strike Price | Warrants for | Common | |||||||||||||||||||||||||||||||||
Shareholder | Common | Preferred (b) | Common | Preferred | Common | Preferred | Common | Preferred (b) | Common (c) | w/Warrants | ||||||||||||||||||||||||||||
BCP II J&P, LLC | 3,330.43 | 2,458.14 | 73.35 | % | 97.54 | % | 73.35 | % | 97.54 | % | $ | 1.41 | $ | 505.56 | 1,096.81 | 78.13 | % | |||||||||||||||||||||
BCA II J&P, LLC | 1,096.81 | — | 24.15 | % | 0.00 | % | 24.15 | % | 0.00 | % | $ | 1.41 | $ | — | — | 19.36 | % | |||||||||||||||||||||
Minority Shareholder (a) | 56.97 | 31.65 | 1.25 | % | 1.26 | % | 1.25 | % | 1.26 | % | $ | 1.27 | $ | 505.56 | 14.24 | 1.26 | % | |||||||||||||||||||||
Minority Shareholder (a) | 37.36 | 20.75 | 0.82 | % | 0.82 | % | 0.82 | % | 0.82 | % | $ | 1.27 | $ | 505.56 | 9.34 | 0.82 | % | |||||||||||||||||||||
Minority Shareholder (a) | 8.51 | 4.26 | 0.19 | % | 0.17 | % | 0.19 | % | 0.17 | % | $ | 1.27 | $ | 505.56 | 2.13 | 0.19 | % | |||||||||||||||||||||
Minority Shareholder (a) | 8.63 | 4.32 | 0.19 | % | 0.17 | % | 0.19 | % | 0.17 | % | $ | 1.27 | $ | 505.56 | 2.16 | 0.19 | % | |||||||||||||||||||||
Minority Shareholder (a) | 2.16 | 1.08 | 0.05 | % | 0.04 | % | 0.05 | % | 0.04 | % | $ | 1.27 | $ | 505.56 | 0.54 | 0.05 | % | |||||||||||||||||||||
Subtotal Outstanding Shares | 4,540.87 | 2,520.20 | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | NA | NA | 1,125.22 | 100.00 | % | |||||||||||||||||||||||
Options and Warrants: | ||||||||||||||||||||||||||||||||||||||
None | — | — | NA | NA | 0.00 | % | 0.00 | % | $ | — | $ | — | — | 0.00 | % | |||||||||||||||||||||||
Subtotal Options and Warrants | — | — | NA | NA | 0.00 | % | 0.00 | % | NA | NA | — | 0.00 | % | |||||||||||||||||||||||||
Total Fully Diluted Shares | 4,540.87 | 2,520.20 | NA | NA | 100.00 | % | 100.00 | % | NA | NA | 1,125.22 | 100.00 | % |
(a) | Non-fund investors can only exercise their warrants for common if BCP II J&P, LLC exercises the warrants. |
(b) | Each preferred unit has a liquidation preference of $505.56. |
(c) | Warrants are only exercisable if BCP II J&P, LLC does not earn a 30% return. |
See Independent Auditor’s Report on Supplementary Information
26 |