Attached files
Exhibit 99.2
Be Active Brands, Inc. unaudited financial statements for the three and nine months ended September 30, 2012 and 2011
Table of Contents
Page | |
Financial Statements (unaudited) | |
Balance Sheets | 1 |
Statement of Operations | 2 |
Statement of Changes in Shareholders’ Deficiency | 3 |
Statement of Cash Flows | 4 |
Notes to Financial Statements | 5 |
BE ACTIVE BRANDS, INC. | |||
BALANCE SHEETS | |||
(Unaudited) | |||
September 30, | |||
2012 | 2011 | ||
ASSETS | |||
Current assets | |||
Cash and cash equivalents | $ 131 | $ 377,712 | |
Accounts receivable | 91,621 | 180,927 | |
Inventory | 260,958 | 304,073 | |
Prepaid expenses and other assets | 300 | 46,938 | |
Property and equipment, net | 767 | 1,209 | |
Total current assets | $ 353,777 | $ 910,859 | |
LIABILITIES AND SHAREHOLDERS' DEFICIENCY (EQUITY) | |||
Current liabilities | |||
Notes payable, related parties | $ 198,001 | $ 187,079 | |
Convertible notes payable | 135,000 | - | |
Loans payable | 85,000 | - | |
Accounts payable | 308,073 | 316,175 | |
Accrued expenses and taxes | 7,548 | 23,775 | |
Due to officers | 347,597 | 347,597 | |
Total current liabilities | 1,081,219 | 874,626 | |
Shareholders' (deficiency) equity | |||
Common stock, $.0001 par value, 200,000,000 shares authorized, 29,502,750 shares and 28,730,902 shares issued and outstanding at September 30, 2012 and 2011 | 2,950 | 2,873 | |
Additional paid in capital | 1,497,320 | 1,327,397 | |
Accumulated deficit | (2,227,712) | (1,294,037) | |
Total shareholders' (deficiency) equity | (727,442) | 36,233 | |
Total liabilities and shareholders' (deficiency) equity | $ 353,777 | $ 910,859 |
See notes to financial statements
1 |
BE ACTIVE BRANDS, INC. | |||
STATEMENTS OF OPERATIONS | |||
(Unaudited) | |||
Nine Months Ended September 30, | |||
2012 | 2011 | ||
Net Sales | $ 950,135 | $ 1,169,123 | |
Cost of Goods Sold | 986,929 | 1,233,072 | |
Gross Loss | (36,794) | (63,949) | |
Operating Expenses | |||
Selling expenses | 233,500 | 558,369 | |
General and administrative | 379,344 | 372,237 | |
Depreciation and amortization expense | 231 | 231 | |
Loss from operations before other expenses | (649,869) | (994,786) | |
Other Expenses | |||
Interest expense, net | 8,730 | 5,519 | |
Miscellaneous expense | 104 | 2,217 | |
Loss before provision for taxes | (658,703) | (1,002,522) | |
Provision for income taxes | - | - | |
Net Loss | (658,703) | (1,002,522) | |
Net loss per share - basic and diluted | $ (0.02) | $ (0.04) | |
Weighted average number of common shares - basic and diluted | 29,330,219 | 28,263,253 |
See notes to financial statements
2 |
BE ACTIVE BRANDS, INC. | ||||||||||||||||||||
STATEMENT OF CHANGES IN SHAREHOLDERS' (DEFICIENCY) EQUITY | ||||||||||||||||||||
NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Common Stock | Accumulated | |||||||||||||||||||
Shares | Amount | APIC | Deficit | Total | ||||||||||||||||
Balance, December 31, 2009 | 22,701,408 | $ | 2,270 | — | $ | (112,978 | ) | $ | (110,708 | ) | ||||||||||
Issuance of Common Stock | 1,035,184 | 104 | 227,896 | — | 228,000 | |||||||||||||||
Net loss | — | — | — | (178,537 | ) | (178,537 | ) | |||||||||||||
Balance, December 31, 2010 | 23,736,592 | 2,374 | 227,896 | (291,515 | ) | (61,245 | ) | |||||||||||||
Issuance of Common Stock | 4,994,310 | 499 | 1,099,501 | — | 1,100,000 | |||||||||||||||
Net loss for the nine month period | — | — | — | (1,002,522 | ) | (1,002,522 | ) | |||||||||||||
Balance, September 30, 2011 | 28,730,902 | 2,873 | 1,327,397 | (1,294,037 | ) | 36,233 | ||||||||||||||
Net loss for the three month period | — | — | — | (274,972 | ) | (274,972 | ) | |||||||||||||
Balance, December 31, 2011 | 28,730,902 | 2,873 | 1,327,397 | (1,569,009 | ) | (238,739 | ) | |||||||||||||
Issuance of Common Stock | 771,848 | 77 | 169,923 | — | 170,000 | |||||||||||||||
Net loss for the nine month period | — | — | — | (658,703 | ) | (658,703 | ) | |||||||||||||
Balance, September 30, 2012 | 29,502,750 | $ | 2,950 | 1,497,320 | $ | (2,227,712 | ) | $ | (727,442 | ) |
See notes to financial statements
3 |
BE ACTIVE BRANDS, INC. | |||
STATEMENTS OF CASH FLOWS | |||
(Unaudited) | |||
Nine Months Ended September 30, | |||
2012 | 2011 | ||
Cash flows from operating activities | |||
Net loss | $ (658,703) | $ (1,002,522) | |
Adjustments to reconcile net loss to net cash | |||
(used in) operating activities: | |||
Depreciation and amortization | 365 | 231 | |
Changes in Assets and Liabilities: | |||
Accounts receivable | (2,828) | (83,472) | |
Inventory | 36,033 | (100,138) | |
Prepaid expenses | 10,039 | 10,064 | |
Accounts payable and accrued expenses | 155,572 | 239,026 | |
Net cash used in operating activities | (459,522) | (936,811) | |
Cash flows from investing activities | |||
Purchases of property and equipment | - | (668) | |
Cash flows from financing activities | |||
Proceeds from borrowings / credit line | 230,000 | 46,000 | |
Proceeds from private placement | 170,000 | 1,100,000 | |
Net cash provided by financing activities | 400,000 | 1,146,000 | |
Net increase (decrease) in cash | |||
and cash equivalents | (59,522) | 208,521 | |
Cash and cash equivalents, beginning of period | 59,653 | 169,191 | |
Cash and cash equivalents, end of period | $ 131 | $ 377,712 | |
Supplemental cash flow disclosures | |||
Interest paid | $ 4,147 | $ 6,247 | |
Income taxes paid | 1,308 | 3,493 |
See notes to financial statements
4 |
BE ACTIVE BRANDS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND OPERATIONS
Be Active Brands, Inc. (the “Company”) manufacturers frozen yogurt and fudge bars and offers ice creams in various flavors. The Company intends to expand its regional growth to a national level and global presence in sales of premium quality low-fact, low calorie, low-carbohydrate, vitamin and probiotic enriched frozen yogurt and products under the brand name of Jala.
The Company was incorporated March 10, 2009 in Delaware, is based in New York and provides its products through retail stores in New York, New Jersey, Connecticut, Massachusetts, Rhode Island, Maine, Pennsylvania, Ohio and Florida.
2. GOING CONCERN
The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. As shown in the accompanying financial statements for the period ended September 30, 2012, the Company incurred a significant net loss, had a working capital deficit and accumulated losses. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it become profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company through equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.
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BE ACTIVE BRANDS, INC.
NOTES TO FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial Instruments
The Company considers the carrying amounts of financial instruments, including cash, accounts receivable, accounts payable and accrued expenses and notes payable to approximate their fair values because of their relatively short maturities.
Accounts Receivable
Accounts receivable consist of amounts due from customers. The Company records a provision for doubtful receivables, if necessary, to allow for any amounts which may be unrecoverable, which is based upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of September 30, 2012 and 2011, there was no allowance for doubtful accounts.
Inventory
Inventory consists primarily of finished goods held for distribution. Inventory is valued at the lower of cost (first-in, first-out) or market. In evaluating whether inventory is stated at the lower of cost or market, management considered such factors as the amount of inventory on hand and the distribution channel, the estimated time to sell such inventory, remaining shelf life and the current expected market conditions. Adjustments to reduce inventory to its net realizable value are charged to cost of goods sold.
Shipping and Handling Costs
The Company classified shipping and handling costs as part of selling expense. Shipping and handling costs were $106,565 and $94,286 for the periods ended September 30, 2012 and 2011, respectively.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method.
Maintenance and repairs are charged to operating expenses as they are incurred. Improvements and betterments, which extend the lives of the assets, are capitalized. The cost and accumulated depreciation of assets retired or otherwise disposed of are relieved from the appropriate accounts and any profit or loss on the sale or disposition of such assets is credited or charged to income.
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BE ACTIVE BRANDS, INC.
NOTES TO FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
Revenue is recognized net of discounts, rebates, promotional adjustments, price adjustments and estimated returns and upon transfer of title and risk to the customer which occurs at shipping (F.O.B. terms). Upon shipment, the Company has no further performance obligations.
Income Taxes
The Company provides for income taxes under FASB ASC 740 – Income Taxes, which requires the use of an assets and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. A valuation allowance is provided when realization of deferred tax assets is not considered likely.
Tax returns for the years from 2009 to 2011 are subject to examination by tax authorities.
Advertising Costs
Advertising costs are expensed as incurred. Total advertising expenses amounted to $17,301 and $63,186 for the periods ended September 30, 2012 and 2011, respectively.
Net Loss per Common Share
The Company computes per share amounts in accordance with FASB ASC 260 – Earnings per Share, which requires the presentation of basic and diluted EPS. Basic EPS is computed by dividing the income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is based on the weighted average number of shares of common stock and common stock equivalents outstanding during the periods. Common stock equivalents are not included in the computation of diluted EPS when the Company reports a loss because to do so would be anti-dilutive.
As of September 30, 2012 and 2011, there were no common stock equivalents.
4. INVENTORY
For the periods ended September 30, 2012 and 2011 inventory consisted of the following:
2012 | 2011 | |
Materials | $ 95,826 | $ 125,244 |
Finished product | 165,132 | 178,829 |
$ 260,958 | $ 304,073 |
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BE ACTIVE BRANDS, INC.
NOTES TO FINANCIAL STATEMENTS
5. PROPERTY AND EQUIPMENT
For the periods ended September 30, 2012 and 2011, property and equipment consisted of the following:
2012 | 2011 | |
Furniture & Fixtures | $ 2,276 | $ 2,276 |
Less: Accumulated depreciation | (1,509) | (1,067) |
$ 767 | $ 1,209 |
6. NOTE PAYABLE, RELATED PARTIES
Note payable is a revolving credit facility at Signature Bank for $200,000, with interest at the prime rate (the prime rate of interest was 3.25% at September 30, 2012 and 2011) plus 1% per annum. The primary obligors on the facility are two Class A common shareholders of the Company, and the Company is a guarantor. Since all of the proceeds have been used by the Company, the outstanding balance is reflected as a note payable in these financial statements. Substantially all of the Company’s assets secure this note payable. Outstanding balances were $198,001 and $187,079 at September 30, 2012 and 2011, respectively.
7. CONVERTIBLE NOTES PAYABLE
In August 2012, the Company entered into a Securities Purchase Agreement to sell up to a maximum of $600,000 of the Company’s 10% Convertible Promissory Notes (“Notes”). The Notes mature one year from issuance and interest of 10%, per annum, is accrued on the unpaid principal amount of the Note and paid upon maturity, or earlier prepayment or conversion, as defined. Through September 30, 2012, $135,000 of the Notes were issued to investors.
Upon the closing of a merger, as defined, all outstanding principal and accrued, unpaid interest on the Notes shall automatically be converted into equity of the public entity. The number of conversion securities issuable upon conversion of the Notes shall be determined by dividing the outstanding principal amount of the Note and accrued interest on the conversion date by the conversion price in effect.
8. LOANS PAYABLE
At September 30, 2012, the Company owed two individuals a total of $85,000. The loans are without interest and are due on demand.
9. DUE TO OFFICERS
Due to officers consists of unsecured loans from two officers and a former officer of the Company, payable on demand without interest.
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BE ACTIVE BRANDS, INC.
NOTES TO FINANCIAL STATEMENTS
10. CAPITAL STOCK
Prior to the Agreement of Merger and Plan of Reorganization, dated January 9, 2012, common stock consisted of 1,000 Class A shares issued and outstanding at $.00001, par value, and 299.6 Class B shares issued and outstanding at $.00001, par value.
In connection with the Agreement of Merger and Plan of Reorganization, 1,000 shares of the Company’s Class A common stock and 299.6 shares of the Class B common stock were converted into 29,502,750 shares of the Company’s $.0001, par value, common stock. All share amounts presented in the accompanying unaudited financial statements as of September 30, 2012 and 2011 were retroactively restated to reflect the conversion.
11. INCOME TAXES
As of September 30, 2012, the Company has net operating loss carryforwards of approximately $2,259,000 to reduce future Federal and state taxable income through 2032. Realization of the Company’s deferred tax assets of $847,000, consisting principally of the net operating losses, was not considered more likely than not and, accordingly, a valuation allowance has been provided to fully offset the deferred tax assets.
12. CONCENTRATIONS
Credit is granted to most customers. The Company performs periodic credit evaluations of customers’ financial condition and generally does not require collateral.
Sales to one customer of the Company accounted for approximately 66% and 47% of sales for the periods ended September 30, 2012 and 2011, respectively. Amounts due from this customer represented approximately 53% and 73% of accounts receivable outstanding as of September 30, 2012 and 2011, respectively.
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BE ACTIVE BRANDS, INC.
NOTES TO FINANCIAL STATEMENTS
13. RECONCILIATIONS OF NET SALES
In accordance with FASB ASC 650-50 the Company classifies the following allowances as reductions of sales for the periods ended September 30, 2012 and 2011:
2012 | 2011 | |
Gross sales | $1,582,063 | $2,125,778 |
Less: | ||
Sales discounts | 29,421 | 34,021 |
Returns and allowances | 9 | 337 |
Trade spending | 567,398 | 752,297 |
Slotting fees | 35,100 | 170,000 |
Net sales | $950,135 | $1,169,123 |
14. RELATED PARTY TRANSACTIONS
An officer of the Company is a partner of a public accounting firm providing accounting services to the Company. For the periods ended September 30, 2012 and 2011, the Company incurred $41,000 and $39,000, respectively, to the accounting firm for accounting, consulting and tax services.
The Company rents space from a Company that is owned by Marc Wexler, Saverio Pugliese and David Wolfson. For the periods ended September 30, 2012 and 2011, rent paid was $0 and $10,500, respectively.
15. SUBSEQUENT EVENTS
On November 15, 2012, two of the Class A common shareholders of the Company advanced $200,000 to the Company and on the same date, the Company repaid $198,000 of the revolving credit facility at Signature Bank.
In November 2012, the Company issued $250,000 of the 10% Convertible Promissory Notes to investors.
Be Active Brands, Inc. (“Be Active”) was incorporated on March 10, 2009 in the state of Delaware.
On January 9, 2013, Be Active entered into an Agreement and Plan of Merger (the “Merger Agreement”) with (i) Be Active Holdings, Inc. (formerly Super Light, Inc.”) (“Parent”) and (ii) Be Active Acquisition Corp., Parent’s newly formed, wholly-owned Delaware subsidiary (“Acquisition Sub”). Upon closing of the transaction contemplated under the Merger Agreement (the “Merger”), Acquisition Sub merged with and into Be Active, and Be Active, as the surviving corporation, became a wholly-owned subsidiary of Parent. As a result of the Merger, Parent acquired the business and operations of Be Active consisting of the manufacturing and selling of low fat, low calorie, frozen dessert products. At the effective time of the Merger, all of the issued and outstanding shares of capital stock of Be Active immediately prior to the effective time of the Merger (including both Class A and Class B common stock) were cancelled and the shareholders of Be Active became entitled to the right to receive an aggregate of 29,502,750 shares of Parent’s common stock. Upon the closing of the Merger, Marc Wexler, Saverio Pugliese, David Wolfson and Joseph Rienzi were appointed as directors of Parent. In addition, Marc Wexler was appointed as Parent’s Chief Executive Officer and Chairman, Saverio Pugliese was appointed as Parent’s President, David Wolfson was appointed as Parent’s Chief Financial Officer and Joseph Rienzi was appointed as Parent’s Secretary.
On January 9, 2013, shareholders holding a majority of the voting power of Be Active’s outstanding voting capital stock voted in favor of the Merger.
Following the closing of the Merger, the Parent conducted a private placement of its securities. An aggregate of $385,000 of Be Active’s outstanding bridge notes were converted into units in the Parent’s private placement (“Units”) at a per Unit price of $0.19, with each Unit consisting of one (1) share of Parent’s common stock and a warrant to purchase an additional share of the Parent’s common stock at an exercise price of $0.30.
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