JAG, INC.

(A Wisconsin Corporation)

FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2015

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Jag, Inc.

Algoma, Wisconsin

We have audited the accompanying balance sheet of Jag, Inc. (the "Company") as of December 31, 2015, and the related statements of operations and stockholders' deficit, and cash flows for the year then ended. 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 an 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 audits 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 Jag, Inc. as of December 31, 2015 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

December 19, 2016

 

 

 

Balance Sheet
December 31, 2015
ASSETS
Current Assets:
Cash		$	40,876
Accounts receivable, net			86,450
Prepaid expense			43,673
Total Current Assets			170,999
Property and Equipment:
Structures and displays			1,270,912
Land,building and improvements			14,950
Vehicles and equipment			539,741
Accumulated depreciation			(1,625,747	)
Total Property and Equipment, net			199,856
Total Assets		$	370,855
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses		$	42,692
Deferred compensation payable			317,756
Deferred revenue			50,433
Note payable, related party			70,000
Current portion of long-term debt, including related party debt of $24,200			94,650
Total Current Liabilities			575,531
Long-term debt, including related party debt of $78,602			285,627
Total Liabilities			861,158
Stockholders' Deficit:
Common stock, no par value, 17,000 shares authorized, 6,220 shares issued and outstanding			18,056
Treasury stock			(232,412	)
Accumulated deficit			(275,947	)
Total Stockholders' Deficit			(490,303	)
Total Liabilities and Stockholders' Deficit		$	370,855

 

 

 

Statement of Operations
For the Year Ended December 31, 2015
Revenues:
Billboard rentals		$	1,518,693
Service income			152,995
Total Revenues			1,671,688
Costs and Expenses:
Cost of revenues (exclusive of depreciation)			617,252
Salaries, taxes, and benefits			731,276
General and administrative			195,575
Rent, related party			66,000
Depreciation			64,098
Bad debt expense			1,588
Total Costs and Expenses			1,675,789
Net Loss from Operations			(4,101	)
Other Income (Expense):
Interest income			586
Interest expense			(16,751	)
Net Loss		$	(20,266	)

 

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

 

Statement of Changes in Stockholders' Deficit
		No. of shares
		Common Stock				Treasury Stock				Common Stock				Treasury Stock				Accumulated Deficit				Total
Balance,
January 1, 2015			6,220				3,880			$	18,056			$	(232,412	)		$	(247,594	)		$	(461,950	)
Net loss			-				-				-				-				(20,266	)			(20,266	)
Dividends paid			-				-				-				-				(8,087	)			(8,087	)
Balance,
December 31, 2015			6,220				3,880			$	18,056			$	(232,412	)		$	(275,947	)		$	(490,303	)

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

 

Statement of Cash Flows
For the Year Ended December 31, 2015
Cash Flows from Operating Activities:
Net Loss		$	(20,266	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation			64,098
Bad debts			1,588
Changes in operating assets and liabilities:
Accounts receivable			(35,314	)
Prepaid expense			(10,274	)
Accounts payable and accrued expenses			(60,979	)
Deferred compensation payable			41,571
Deferred revenue			(3,902	)
Net Cash Used in Operating Activities			(23,478	)
Cash Flows From Investing Activities:
Purchases of structures and displays			(45,211	)
Leasehold improvements			(999	)
Purchases of vehicles and equipment			(2,266	)
Net Cash Used in Investing Activities			(48,476	)
Cash Flows from Financing Activities:
Proceeds from notes payable			318,180
Payments on notes payable			(274,695	)
Payments on note payable, related party			(23,340	)
Dividends paid			(8,087	)
Net Cash Provided in Financing Activities			12,058
Net Decrease in Cash			(59,896	)
Cash, Beginning of Year			100,772
Cash, End of Year		$	40,876
Interest Paid in Cash		$	16,751
Income Taxes Paid in Cash		$	-

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

 

 

The accompanying financial statements have been prepared in connection with Jag, Inc.'s sale of outdoor advertising assets to Link Media Wisconsin ("LMW"), a wholly-owned subsidiary of Boston Omaha Corporation, and to comply with the rules and regulations of the Securities and Exchange Commission ("SEC") for inclusion by Boston Omaha Corporation in its current report on Form 8-K/A.

Jag, Inc. was organized on June 12, 1959.  The Company's operations include the ownership and leasing of billboards and directional signs in multiple counties in Wisconsin.

Concentrations

All of the Company's operations are located in Wisconsin.

For the year ended December 31, 2015, 57% of the Company's loans were from one bank.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount, net of advertising agency commissions, sales discounts, and allowances for doubtful accounts.  The Company evaluates the collectability of its accounts receivable based on its knowledge of its customers and historical experience of bad debts.  In circumstances where the Company is aware of a specific customer's inability to meet its financial obligations, it records a specific allowance to reduce the amounts recorded to what it believes will be collected.  For all other customers, the Company recognizes reserves for bad debt based upon historical experience of bad debts as a percentage of revenue, adjusted for relative improvement or deterioration in its agings and changes in current economic conditions.  As of December 31, 2015, the allowance for doubtful accounts was zero.

Property and Equipment

Property and equipment are carried at cost.  Depreciation and amortization are provided principally on the straight-line method over the estimated useful lives of the assets, which range from five to fifteen years as follows:

 

Building and leasehold improvements	7 to 15 years
Billboard structures and displays	5 to 15 years
Equipment	5 to 7 years
Vehicles	5 years

Maintenance and repair costs are charged against income as incurred.  Significant improvements or betterments are capitalized and depreciated over the estimated life of the asset.

Land Leases

Most of the advertising structures are located on leased land.  Land leases related to the structures are typically paid in advance for periods ranging from one to twelve months.  The lease contracts include those with fixed payments and those with escalating payments.  Some of the lease contracts contain a base rent payment plus an additional amount up to a particular percentage of net revenue.  In months in which the net revenue does not support a percentage payment, a stated minimum monthly payment is required.  Prepaid land leases are recorded as assets and expensed ratably over the related term and rent payments in arrears are recorded as an accrued liability.

Use of Estimates

The preparation of financial statements in conformity with 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.

The more significant areas requiring the use of management estimates relate to useful lives for depreciation.  Accordingly, actual results could differ from those estimates.

Revenue Recognition

The Company generates revenue from outdoor advertising through the leasing of billboards and directional signs.  The terms of the operating leases range from less than one month to one year and are generally billed monthly.  Revenue for advertising space rental is recognized ratably over the term of the contract.  Advertising revenue is reported net of agency commissions.  Agency commissions are calculated based on a stated percentage applied to gross billing revenue for operations.  Payments received in advance of being earned are recorded as deferred income.

There were no advertising agency commissions for the year ended December 31, 2015.

Income Taxes

The Company elected Subchapter S status on July 7, 1959.  Taxable income or losses of the Company are passed through to the Company's stockholders, in accordance with each stockholder's percentage of ownership, for inclusion in each individual stockholder's income tax return.

The Company has no tax positions at December 31, 2015 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Tax years 2013 through 2015 are open to examination by the Internal Revenue Service.

As of December 31, 2015, note payable, related party consists of a note in the principal amount of $70,000 payable to an entity related to the controlling stockholder.  The note is non-interest bearing, unsecured, and due on demand.

For the year ended December 31, 2015, long-term debt consists of the following:
Installment note payable, due in monthly installments
of $565 including interest, due January, 2016;
secured by a vehicle with a carrying value of  $607.		$	348
Installment note payable to a bank, due in monthly
installments of $530, bearing interest at 4.40% per annum,
due November, 2017; secured by a vehicle with a carrying
value of $11,385.			11,677
Installment note payable to a bank, due in monthly
installments of $262, bearing interest at 6.74% per annum,
due during 2018; secured by a vehicle with a carrying value
of $10,231.			8,193
Note payable to a former stockholder, due in monthly
installments of $2,263, bearing interest at 3.25% per annum,
due December, 2019; unsecured.			102,802
Line of credit payable to a bank, bearing interest
at 4.99% per annum and secured by all of Company's assets,
assignment of rents from the sign locations,
and guaranteed by an  entiity related to the Company.			24,969
Installment note payable to a bank, due in monthly
installments of $6,000, bearing interest at 4.99% per annum,
due July, 2019; secured by all of the Company's assets,
assignment of rents from the sign locations,
and guaranteed by an  entiity related to the Company.			232,288
			380,277
Less current portion			(94,650	)
Total		$	285,627

 

 

Maturities of long-term debt are as follows:
2016		$	94,650
2017			123,550
2018			96,677
2019			65,400
		$	380,277

 

NOTE 5. COMMON STOCK

The Company is authorized to issue 17,000 shares of common stock, of which 2,000 shares are voting shares.  As of December 31, 2015, 6,220 shares of the Company's common stock were issued and outstanding.

The Company has leases for three hundred, twenty billboard locations.  The leases are non-cancelable operating leases having remaining terms ranging from month-to-month to two hundred ninety-six months.  Ground rents for the year ended December 31, 2015 were $326,172.  No contingent rents were included in ground rents for the year ended December 31, 2015.

Future minimum rents are as follows:

 

2016		$	319,215
2017			205,229
2018			172,277
2019			148,359
2020			129,693
Thereafter			504,942
		$	1,479,715

 

The Company's financial instruments consist of cash, trade receivables and payables, a note payable and long-term debt, including the current portion.  The carrying values of cash, trade receivables and payables, and the short-term note approximate their fair values.

The carrying value of notes payable approximates their fair values based on the current rates offered by financial institutions for notes of the same remaining maturity.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable parties who are willing and able to transact for an asset or liability at the measurement date.

At December 31, 2015, the Company was indebted on notes payable in the aggregate amount of $172,802, to entities related to the controlling stockholder.  During 2015 $23,340 in principal and $3,816 in interest was paid to the related parties.  (See Notes 3 and 4.)

As of December 31, 2015, the Company paid $8,067 in dividends.

Additionally, the Company leases office space for $5,500 per month, from an entity related to its controlling stockholder.  Rent paid by the Company was $66,000 for the year ended December 31, 2015.

As of December 31, 2015, the Company has an accumulated deficit of approximately $276,000.  The controlling stockholder has advanced funds to the Company in the form of deferred compensation in the cumulative amount of $317,756 to fund operations.  The controlling stockholder has the ability and intent to fund the Company's operations and debt service, as needed.  Additionally, management believes that billboard revenues will increase in the coming year.

On February 16, 2016, the Company sold substantially all of its assets for a gross sales price of $6,954,246. (See Note 11.)

The Company is a guarantor on three notes payable by entities related to the controlling stockholder of the Company.  All of the notes are payable to one bank.  The debts were incurred between September, 2014 and June, 2015.  The original amount of the debts was $556,590.  The notes mature between December, 2016 and June, 2020.  The notes are secured by all of the Company's assets, including the contract rights of payments from the sign locations.  The notes are not recorded on the Company's books and were not in default as of December 31, 2015.  The notes were paid in full on February 17, 2016.

On February 16, 2016, the Company sold 422 billboard displays, directional signs, equipment, and related assets to Link Media Wisconsin ("LMW") for a gross sales price of $6,954,246 of which $687,500 was escrowed.  The sales price is subject to certain post-closing adjustments.

On February 16, 2016 LMW executed a twelve month lease agreement for office space from the entity related to the seller. (See Note 8.)

On February 17, 2016, the Company's notes payable to a financial institution, whose principal amounts totaled $265,632, were paid in full.  On the same date, notes totaling $515,002 on which the Company was a guarantor, were also paid in full.