Exhibit 99.2

 

Unaudited Financial Statements

 

KESTLER FINANCIAL GROUP, INC.

 

Leesburg, Virginia

 

June 30, 2018

 

 

Kestler Financial Group, Inc.

 

TABLE OF CONTENTS

 

 

UNAUDITED FINANCIAL STATEMENTS
	Balance Sheets	1-2
	Statements of Income	3
	Statement of Stockholder’s Equity	4
	Statements of Cash Flows	5
	Notes to Financial Statements	6-8

 

 

Kestler Financial Group, Inc.

 

BALANCE SHEETS- ASSETS

 

 

		June 30,				December 31,
		2018				2017
		(Unaudited)				(Audited)
CURRENT ASSET
Cash		$	441,518			$	658,115
Other receivables			34,282				15,792
Prepaid expenses			78,819				126,951
			554,619				800,858
PROPERTY AND EQUIPMENT
Buildout			294,795				229,931
Furniture and fixtures			8,049				0
Computers and equipment			75,446				71,926
Vehicles			28,121				28,121
Computer software			13,673				13,673
			420,084				343,651
Less: accumulated depreciation			(62,283	)			(38,296	)
			357,801				305,355
OTHER ASSETS
Investment			0				50,000
Security deposits			28,112				11,709
Note receivable			4,665				4,665
			32,777				66,374
		$	945,197			$	1,172,587

 

 

Kestler Financial Group, Inc.

 

BALANCE SHEETS - LIABILITIES AND STOCKHOLDER’S EQUITY 

 

 

		June 30,				December 31,
		2018				2017
		(Unaudited)				Audited
CURRENT LIABILITIES
Accounts payable		$	168,995			$	57,522
Commissions and fees payable			70,144				13,068
Deferred Income			0				15,000
Accrued compensation			43,012				32,199
Deferred rent			400,956				271,271
			683,107				389,060
STOCKHOLDER.S EQUITY
Common stock, $1 par value, 15,000 shares authorized, 1,500 shares issued and outstanding			1,000				1,000
Additional paid-in-capital			272,250				272,250
Retained earnings			(11,160	)			510,277
			262,090				783,527
		$	945,197			$	1,172,587

 

 

Kestler Financial Group, Inc.

 

STATEMENTS OF INCOME

for Six Months Ended June 30

 

 

		2018				2017
REVENUE
Commissions		$	9,825,481			$	9,238,925
Service fees			15,000				0
Other income			391,902				376,048
Interest and dividends			1,123				2,839
			10,233,506				9,617,812
EXPENSES OF OPERATIONS
Advertising			19,442				3,303
Commissions and fees			6,846,685				6,271,871
Communications			21,629				40,281
Compensation			1,714,931				1,576,799
Firm insurance			50,262				32,489
Travel / Entertainment			151,802				75,716
Subscriptions			756				4,719
Office expense			1,020,423				610,093
Professional services			50,494				56,284
Rent and occupancy			146,425				67,133
Depreciation and amortization			23,987				12,527
Interest expense			2,460				760
Other expenses			13,705				26,434
TOTAL EXPENSES			10,063,001				8,778,409
Net income		$	170,505			$	839,403

 

 

Kestler Financial Group, Inc.

 

STATEMENT OF STOCKHOLDER’S EQUITY

for Six Months Ended June 30

 

 

						Additional								Total
		Common				Paid-In				Retained				Stockholders’
		Stock				Capital				Earnings				Equity
BALANCE, DECEMBER 31, 2017			1,000				272,250				510,277				783,527
Net income for 6 months ended June 30, 2018			0				0				170,505				170,505
Stockholder distribution			0				0				(691,942	)			(691,942	)
BALANCE, JUNE 30, 2018		$	1,000			$	272,250			$	(11,160	)		$	262,090

 

 

Kestler Financial Group, Inc.

 

STATEMENTS OF CASH FLOWS

for Six Months Ended June 30

 

 

		2018				2017
CASH FLOWS FROM OPERATING ACTIVITIES		$	170,505			$	839,402
Net income
Charges to net income not affecting cash:			23,987				12,527
Depreciation and amortization expense
Adjustments to reconcile net income to net cash provided (used by) operating activities:
Other receivables			(18,490	)			11,227
Prepaid expenses			48,132				(2,899	)
Security deposit			(16,403	)			0
Accounts payable			111,473				(115,899	)
Commissions and fees payable			57,076				36,404
Deferred income			(15,000	)			0
Accrued compensation			10,813				27,986
Deferred rent			129,685				(17,272	)
NET CASH PROVIDED BY OPERATING ACTIVITIES			501,778				791,476
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment			(76,433	)			(107,212	)
NET CASH USED BY INVESTING ACTIVITIES			(76,433	)			(107,212	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments received (Advances on) notes receivable			0				315,854
Stockholder distributions			(641,942	)			(590,153	)
NET CASH USED BY FINANCING ACTIVITIES			(641,942	)			(274,299	)
NET CHANGE IN CASH			(216,597	)			409,965
Cash, beginning of the period			658,115				139,303
CASH, END OF PERIOD		$	441,518			$	549,268

 

 

Kestler Financial Group, Inc.

 

NOTES TO FINANCIAL STATEMENTS

June 30, 2018

 

 

NOTE A - ORGANIZATION

 

Kestler Financial Group, Inc. (the Corporation) was incorporated in the Commonwealth of Virginia on January 4, 1993 and is engaged in the insurance sales business. The Corporation transacts business throughout the continental United States and is headquartered in Leesburg, Virginia.

 

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting

 

The Corporation maintains their financial statements on the accrual basis of accounting, recognizing income when earned and expenses when incurred.

 

Basis of Presentation

 

The financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. In the opinion of management, the interim data includes all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the periods presented. Because of the nature of the Company’s business, interim period results may not be indicative of full year or future results.

 

The unaudited financial statements do not include all information and notes required in annual audited financial statements in conformity with GAAP. The statement of financial condition at December 31, 2017 has been derived from the audited financial statement at that date, but does not include all of the information and notes required by GAAP for complete financial statement presentation. Please refer to the notes to the audited consolidated financial statements for the year ended December 31, 2017 for additional disclosures and description of accounting policies.

 

New Accounting Standards Adopted

 

On January 1, 2018, the Corporation adopted ASU 2014-09 and all related amendments (ASC 606) and applied its provisions to all uncompleted contracts using the modified retrospective method. Prior to the adoption of ASC 606, commissions on insurance policies were recognized on a net basis based on how the commissions were received from the insurance carrier. With the adoption of ASC 606, we report all insurance commission revenue on a gross basis, regardless of the method of payment by the carrier. The comparative information for prior periods has not been adjusted and continues to be reported under the accounting standards in effect for those periods.

 

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, 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. Actual results could differ from those estimates.

 

 

Kestler Financial Group, Inc.

 

NOTES TO FINANCIAL STATEMENTS

June 30, 2018 

 

 

NOTE C – NOTES RECEIVABLE

 

Notes receivable are stated at unpaid principal balances, less allowance for losses. No allowance for losses were recorded at June 30, 2018 and December 31, 2017.

 

On November 18, 2016 the Corporation loaned an employee $59,329 on a 0% interest bearing note to be repaid in 6 installments. The note had a remaining balance of $4,665 and $4,665 as of June 30, 2018 and December 31, 2017, respectively.

 

NOTE D - RELATED PARTY TRANSACTIONS

 

The Corporation has entered into contracts with a related party. During 2018 and 2017, the Corporation received payments related to the contracts of $376,954 and $376,048, respectively. $34,282 and $15,792 were due from the related party and are included in other receivables on the balance sheets as of June 30, 2018 and December 31, 2017, respectively. The Corporation paid commissions on these contracts to the related party of $28,643 and $56,728.

 

NOTE E - OPERATING LEASES

 

The Corporation leased office space in Leesburg, VA commencing on November 9, 2012 with an expiration date of April 9, 2019. However, this lease was amended effective May 19, 2017 to relocate the office space to a different location. This amendment also extended the expiration date of the lease to May 19, 2025.

 

Rent is payable with a base amount from January - June 2018 and 2017 of $0 and $76,753, respectively.

 

Rent expense for the six months ended June 30, 2018 and 2017 totaled $140,487 and $59,481, respectively.

 

Future minimum payments required under the operating lease agreement are as follows:

 

For Year Ending June 30,
2019		$	202,500
2020			235,790
2021			270,750
2022			365,814
Thereafter			1,216,115
		$	2,290,969

 

 

Kestler Financial Group, Inc.

 

NOTES TO FINANCIAL STATEMENTS

June 30, 2018

 

 

NOTE F - 401(k) RETIREMENT PLAN AND PROFIT SHARING PLAN

 

The Corporation has a defined contribution profit sharing plan and a 401(k) retirement plan covering all eligible employees. The defined contribution profit sharing plan is a qualified plan under the Internal Revenue Code. The Corporation matches employee contributions to its 401(k) plan up to 4% of their salary. Management was unable to provide matching contributions for June 30, 2018. The matching contributions for December 31, 2017 was $60,056.

 

NOTE G - CONCENTRATIONS OF CREDIT RISK

 

Financial instruments, which potentially subject the Corporation to concentrations of credit risk, consist primarily of cash, short-term investments, and trade accounts receivable.

 

The Corporation maintains its cash in several commercial institutions. Cash balances are insured by the Federal Deposit Insurance Corporation. At June 30, 2018 and December 31, 2017, the cash balances exceeded federally insured limits. Management does not believe this results in any significant credit risk.

 

The Corporation is engaged primarily in the sale of annuities and life insurance products to customers, all of which are located in the United States. The Corporation performs ongoing credit evaluations of its customers’ financial condition, and, generally, requires no collateral from its customers.

 

NOTE H - CASH FLOW INFORMATION

 

Cash payments for interest and state income taxes for the six months ended June 30, 2018 and 2017 totaled $0 and $760, respectively. Non-cash financing activities include a $50,000 corporate investment distributed to the stockholder.

 

NOTE I - SUBSEQUENT EVENTS

 

On August 31, 2018, the Corporation and its shareholder entered into an Asset Purchase Agreement that sold substantially all of the assets of the Corporation to Ladenburg Thalmann Financial Services Inc. a publicly traded company registered with the Securities and Exchange Commission.

 

The Corporation has evaluated events and transactions for potential recognition or disclosure through October 30, 2018 which is the date that financial statements were available to be issued.