Attached files
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8-K - DAM HOLDINGS 8K, 10.19.11 - Premier Beverage Group Corp | damh8k101911.htm |
EX-10.1 - DAM HOLDINGS 8K, AGREEMENT AND PLAN OF MERGER - Premier Beverage Group Corp | damhexh10_1.htm |
Exhibit 99.1
Independent Auditors' Report
To the Members'
OSO USA LLC and Subsidiary
We have audited the accompanying consolidated balance sheets of OSO USA LLC and Subsidiary as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in members’ deficit and cash flows for the year then ended and the period April 28, 2009 (inception) through December 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. 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 audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of OSO USA LLC and Subsidiary as of December 31, 2010 and 2009, and the results of their statements of operations and cash flows for the year then ended and the period April 28, 2009 (inception) through December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The supplementary information on pages 7-8 is presented for purposes of additional analysis and is not a required part of the basic consolidated financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.
/s/ Liebman Goldberg & Hymowitz, LLP
Liebman Goldberg & Hymowitz, LLP
Garden City, New York
August 31, 2011
1
OSO USA LLC AND SUBSIDIARY
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CONSOLIDATED BALANCE SHEETS
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December 31, | |||||||||
2010
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2009
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Assets | |||||||||
Current Assets:
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|||||||||
Cash
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$ | 2,521 | $ | 8,486 | |||||
Accounts receivable - net
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29,226 | 30,338 | |||||||
Inventory
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12,747 | 11,905 | |||||||
Prepaid expenses and other current assets
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7,182 | 16,872 | |||||||
Total current assets
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51,676 | 67,601 | |||||||
Total assets
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$ | 51,676 | $ | 67,601 | |||||
Liabilities and Members' (Deficit)
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|||||||||
Current Liabilities:
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Notes payable
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$ | 55,866 | 90,192 | ||||||
Accounts payable
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33,647 | 6,944 | |||||||
Accrued expenses and sundry liabilities
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67,749 | 27,052 | |||||||
Total current liabilities
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157,262 | 124,188 | |||||||
Commitments and contingencies
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|||||||||
Members' (deficit)
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(105,586 | ) | (56,587 | ) | |||||
Total Members' (deficit)
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(105,586 | ) | (56,587 | ) | |||||
Total liabilities and members' deficit
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$ | 51,676 | $ | 67,601 |
See independent auditors' report and accompanying notes.
2
OSO USA LLC AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF OPERATIONS
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For the years ended December 31, | ||||||||
April 28 (Inception),
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2010
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2009
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Sales - net
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$ | 173,093 | $ | 124,238 | ||||
Cost of goods sold
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57,224 | 78,002 | ||||||
Gross profit
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115,869 | 46,236 | ||||||
Operating expenses:
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Selling
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49,086 | 15,931 | ||||||
Warehouse and shipping
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3,386 | 5,705 | ||||||
General and administrative
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112,396 | 81,465 | ||||||
Total operating expenses
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164,868 | 103,101 | ||||||
(Loss) from operations
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(48,999 | ) | (56,865 | ) | ||||
Other income
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- | 278 | ||||||
Net (loss)
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(48,999 | ) | (56,587 | ) | ||||
Members' deficit - beginning of year
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(56,587 | ) | - | |||||
Members' deficit - end of year
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$ | (105,586 | ) | $ | (56,587 | ) |
See independent auditors' report and accompanying notes.
3
OSO USA LLC AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the years ended December 31, | ||||||||
April 28 (Inception),
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2010
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2009
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Cash Flows from Operating Activities:
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Net (loss)
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$ | (48,999 | ) | $ | (56,587 | ) | ||
Adjustments to Reconcile Net (Loss) to Net Cash
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Provided by (used in) Operating Activities:
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Depreciation and amortization
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24,901 | 18,750 | ||||||
Inventory in exchange for note
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54,299 | - | ||||||
Decrease in allowance for doubtful accounts
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(662 | ) | 5,400 | |||||
Change in Assets and Liabilities:
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Accounts receivable
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1,774 | (7,738 | ) | |||||
Inventory
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(842 | ) | (11,905 | ) | ||||
Prepaid expenses and other current assets
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2,990 | 4,573 | ||||||
Accounts payable
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26,703 | 6,944 | ||||||
Accrued expenses and sundry liabilities
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40,697 | 27,052 | ||||||
Net cash provided by (used in) operating activities
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100,861 | (13,511 | ) | |||||
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Cash Flows from Financing Activities:
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Proceeds from notes
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- | 93,250 | ||||||
Principal repayments on debt
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(106,826 | ) | (71,253 | ) | ||||
Net cash (used in) provided by financing activities
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(106,826 | ) | 21,997 | |||||
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Net (decrease) increase in cash
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(5,965 | ) | 8,486 | |||||
Cash - beginning of year
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8,486 | - | ||||||
Cash - end of year
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$ | 2,521 | $ | 8,486 |
See independent auditors' report and accompanying notes.
4
OSO USA LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
Note 1 – The Company:
OSO USA LLC ("OSO") and its subsidiary, Fury Distribution Holdings, LLC ("Fury") (collectively the “Company”) market and distribute functional beverages, which are sold principally to clubs and restaurants on premise and select retail accounts located in the NYC Metropolitan area.
Note 2 – Summary of Significant Accounting Policies:
Principals of Consolidation:
The consolidated financial statements include the accounts of OSO and its wholly-owned subsidiary. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asses and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash:
The Company places its cash with financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000.
Accounts Receivable:
Accounts receivable from trade customers are generally due within thirty days. The Company controls credit risks through its credit evaluation process, credit limits and monitoring procedures. Allowance for doubtful accounts amounted to $4,738 in 2010.
Inventory:
Inventory consisting solely of finished goods is stated at the lower of cost (first-in, first-out method) or market.
Income Taxes:
OSO and Fury are limited liability companies. As such, they are not subject to federal or state income taxes. They may be subject to New York City unincorporated business tax. These financial statements contain no income tax provisions.
Advertising:
The Company expenses the costs of advertising as incurred advertising expense for the year ended December 31, 2010 was $2,700. For the period April 28, 2009 (Inception) through December 31, 2009 the Company had incurred advertising costs of $21,445.
5
OSO USA LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
Note 3 – Notes Payable:
In May 2009, the Company entered into a one year senior secured promissory note (the "Secured Note") with a private lender to provide funds for production of its products. The Secured Note does not bear interest so long as no default is in occurrence. The face value of the Secured Note was originally $100,000. As of December 31, 2010, the note has been entirely paid. The Secured Note is subject to a mandatory monthly cash flow recapture provision whereby payments are made against the Secured Note pursuant to a formula. In accordance with the original issuance discount of the Secured Note, amortization expense of $18,750 has been charged.
In March of 2010 the Company entered into a $72,500 note for the purchase of inventory. This note is secured by the Company's accounts receivable and inventory and precludes the issuance of any other indebtedness pari passo or senior to it. This note is subject to a mandatory monthly cash flow recapture provision whereby payments are made against this note pursuant to a formula. In accordance with the original issuance discount of the secured note, amortization expense of $13,651 has been recorded.
Notes payable - current
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2010
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2009
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Fury Distribution Inc.
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$ | 24,843 | $ | 30,873 | ||||
Sterling International Mercantile
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31,023 | - | ||||||
Rubric Consultants
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- | 54,319 | ||||||
Core Equity Group
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- | 5,000 | ||||||
$ | 55,866 | $ | 90,192 |
Note 4 – Commitments and Contingencies:
The Company rents its principal facilities on a month-to-month basis. Rental expense of $500 per month commenced in August 2010. Rental expense for the year ended December 31, 2010 was $2,500.
Note 5 – Subsequent Events:
On August 22, 2011, the Company entered into an agreement and plan of merger with International Development and Environmental Holdings ("IDEH"). Pursuant to the agreement, the Company will become a wholly-owned subsidiary of IDEH. As consideration for the merger the members will receive 500,000 newly-issued common shares of IDEH for each 1% of membership interest held.
Subsequent to August 22, 2011, and effective September 14, 2011, OSO had terminated the agreement and plan of merger with IDEH.
6
OSO USA LLC AND SUBSIDIARY
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Consolidated Condensed Balance Sheet
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As of June 30, 2011
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Account
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6/30/11
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12/31/10
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UNAUDITED | AUDITED | |||||||
Assets
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Cash
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5,206 | 2,521 | ||||||
Accounts Receivable (Net)
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27,595 | 29,226 | ||||||
Inventory
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34,263 | 12,747 | ||||||
Prepaid Expenses and Other Assets
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16,535 | 7,182 | ||||||
Total Assets
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83,599 | 51,676 | ||||||
Liabilities and Equity
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Notes Payable
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86,495 | 55,866 | ||||||
Accounts Payable
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42,147 | 33,647 | ||||||
Accrued Expenses and Sundry
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81,670 | 67,749 | ||||||
Total Liabilities
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210,312 | 157,262 | ||||||
Members Equity
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(126,713 | ) | (105,586 | ) | ||||
Total Liabilities and Member's Equity
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83,599 | 51,676 |
See accompanying notes to financial statements.
7
OSO USA LLC AND SUBSIDIARY
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Consolidated Condensed Income Statement
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UNAUDITED | ||||||||||||||||
Quarter Ended
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Three Months Ended
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Six Months Ended
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6/30/11
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6/30/10
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6/30/11
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6/30/10
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Sales
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25,323 | 62,900 | 54,094 | 98,982 | ||||||||||||
Allowances
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(2,139 | ) | (4,337 | ) | (4,011 | ) | (7,830 | ) | ||||||||
Net Sales
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23,184 | 58,562 | 50,083 | 91,152 | ||||||||||||
Cost of Goods Sold
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11,035 | 22,233 | 18,487 | 28,846 | ||||||||||||
Gross Profit
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12,149 | 36,330 | 31,596 | 62,306 | ||||||||||||
Operating Expenses
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Warehouse and Shipping
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- | - | - | 3,383 | ||||||||||||
Selling Expense
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18,376 | 8,880 | 29,156 | 18,421 | ||||||||||||
General and Administrative
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9,256 | 32,539 | 23,567 | 47,982 | ||||||||||||
Total Operating Expenses
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27,632 | 41,419 | 52,723 | 69,786 | ||||||||||||
Operating Income
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(15,483 | ) | (5,089 | ) | (21,127 | ) | (7,480 | ) | ||||||||
Other Income/Expense
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- | - | - | - | ||||||||||||
Provision for Taxes
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- | - | - | - | ||||||||||||
Net Income
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(15,483 | ) | (5,089 | ) | (21,127 | ) | (7,480 | ) |
See accompanying notes to financial statements.
8
OSO USA LLC AND SUBSIDIARY
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Consolidated Cash Flow Statement
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UNAUDITED
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Year to Date Ended
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6/30/11
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6/30/10
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Cash Flows From Operating Activities
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Net (loss)
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(21,127 | ) | (7,480 | ) | ||||
Adjustments to Reconcile Net (Loss) to Net Cash
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Provided by (Used in) Operating Activities
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Depreciation and Amortization
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6,800 | 2,401 | ||||||
Change in Assets and Liabilities
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Accounts Receivable
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1,631 | (16,111 | ) | |||||
Inventory
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(21,516 | ) | (28,860 | ) | ||||
Prepaid Expense and Other Current Assets
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(16,153 | ) | 198 | |||||
Accounts Payable
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8,500 | 14,491 | ||||||
Accrued Expenses and Sundry Liabilities
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13,921 | 1,904 | ||||||
Net Cash Provided by (Used in) Operating Activities
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(27,944 | ) | (33,457 | ) | ||||
Cash Flows Provided by Financing Activities
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Proceeds from (Repayments of) Notes
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30,629 | 31,581 | ||||||
Net Cash (Used in) Provided by Financing Activities
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30,629 | 31,581 | ||||||
Net (Decrease) Increase in Cash
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2,685 | (1,876 | ) | |||||
Cash - Beginning of Period
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2,521 | 8,486 | ||||||
Cash - Ending of Period
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5,206 | 6,610 |
See accompanying notes to financial statements.
9
OSO USA LLC AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 2011
Note 1 – The Company:
OSO USA LLC ("OSO”) and its subsidiary, Fury Distribution Holdings LLC (“Fury”) (collectively, the “Company”) market and distribute functional beverages, which are sold principally to clubs, restaurants, on premise and select retail accounts located in the NYC Metropolitan area.
All significant intercompany accounts and transactions have been eliminated in the combined financial statements.
Note 2 – Summary of Significant Accounting Policies:
Use of Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash:
The Company places its cash with financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000.
Accounts Receivable:
Accounts receivable from trade customers are generally due within thirty days. The Company controls credit risks through its credit evaluation process, credit limits and monitoring procedures. Allowance for doubtful accounts amounted to $4,738 as of June 30, 2011.
Inventory:
Inventory consisting solely of finished goods is stated at the lower of cost (first-in, first-out method) or market.
Income Taxes:
OSO and Fury are limited liability companies. As such, they are not subject to federal or state income taxes. They may be subject to New York City unincorporated business tax. These financial statements contain no income tax provisions.
10
OSO USA LLC AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 2011
Note 3 – Notes Payable:
In March 2010, the Company entered into a $72,500 note for the purchase of inventory. This note is secured by the Company's accounts receivable and inventory and precludes the issuance of any other indebtedness pari passu or senior to it. This note is subject to a mandatory monthly cash flow recapture provision whereby payments are made against this note pursuant to a formula. In accordance with the original issuance discount of the secured note, amortization expense of $4,550 has been recorded for the six month period ended June 30, 2011, representing full amortization of the discount.
In May 2011, the Company entered into a $53,500 note for the purchase of inventory. This note is secured by the Company's accounts receivable and inventory and precludes the issuance of any other indebtedness pari passu or senior to it. This note is subject to a mandatory monthly cash flow recapture provision whereby payments are made against this note pursuant to a formula. In accordance with the original issuance discount of the secured note, amortization expense of $3,374 has been recorded for the six month period ended June 30, 2011.
June 30 | Dec 31 | |||||||
Notes payable - current
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2011
|
2010
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Fury Distribution Inc.
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25,823 | 24,843 | ||||||
Sterling International Mercantile
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60,672 | 31,023 | ||||||
86,495 | 55,866 |
Note 4 – Commitments and Contingencies:
The Company rents its principal facilities on a month-to-month basis. Rental expense of $500 per month commenced in August 2010. Rent expense for the first six months of 2011 was $3,000.
Effective August 15, 2011, rental expense increased to $2,500 per month.
Note 5 – Subsequent Events:
On October 19, 2011, the Company closed an agreement and plan of merger transaction with DAM Holdings, Inc. (“DAMH”). Pursuant to the agreement, the Company become a wholly-owned subsidiary of DAMH. As consideration for the merger the members will receive 500,000 newly-issued common shares of DAMH for each 1% of membership interest held.
11