Attached files
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| EX-99.4 - EXHIBIT 99.4 - LendingTree, Inc. | exhibit994.htm |
| EX-99.3 - EXHIBIT 99.3 - LendingTree, Inc. | ex993.htm |
| EX-23.1 - EXHIBIT 23.1 - LendingTree, Inc. | exhibit231.htm |
| 8-K/A - 8-K/A - LendingTree, Inc. | ihh8-ka.htm |
Iron Horse Holdings, LLC
Report on Financial Statements
For the year ended December 31, 2015
Iron Horse Holdings, LLC
Contents
Page
Independent Auditor’s Report ............................................................................................................................. 1 - 2
Financial Statements
Balance Sheet ....................................................................................................................................................... 3
Statement of Operations and Members’ Deficit ................................................................................................. 4
Statement of Cash Flows ..................................................................................................................................... 5
Notes to Financial Statements ...................................................................................................................... 6 - 10
Independent Auditor’s Report
To the Members
Iron Horse Holdings, LLC
Charleston, South Carolina
We have audited the accompanying financial statements of Iron Horse Holdings, LLC (the “Company”) which
comprise the balance sheet as of December 31, 2015, and the related statements of operations and members’
deficit, and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these 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 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 financial statements based on our audit. We conducted our
audit 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 financial
statements are free from material misstatement.
An audit involves performing procedures to obtain evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of risks of
material misstatement of the 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 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 financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
2
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of Iron Horse Holdings 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.
Richmond, Virginia
November 11, 2016
See Notes to Financial Statements
3
Iron Horse Holdings, LLC
Balance Sheet
As of December 31, 2015
2015
Assets
Current assets
Cash 72,059$
Accounts receivable 6,286,720
Note receivable -
Total current assets 6,358,779
Property and equipment, net 42,825
Other assets
Investment 23,484
Intangible assets, net 14,408
Total other assets 37,892
Total assets 6,439,496$
Liabilities And Members' Deficit
Current liabilities
Accounts payable 7,733,142$
Payroll liabilities 63,565
Credit cards payable 889,071
Lines of credit 2,925,000
Note payable 2,500,000
Total current liabilities 14,110,778
Members' deficit (7,671,282)
Total liabilities and members' deficit 6,439,496$
See Notes to Financial Statements
4
Iron Horse Holdings, LLC
Statement of Operations and Members' Deficit
For the year ended December 31, 2015
2015
Sales 54,430,789$
Selling and marketing expenses 53,482,651
Operating expenses
Salaries 1,019,011
Professional fees 907,635
Commissions 131,701
Rent 86,130
Payroll taxes 85,834
Website maintenance and related costs 45,366
Office supplies and postage 31,210
Employee benefits and insurance 25,758
Charitable contributions and scholarship 28,482
Travel 28,392
Dues and subscriptions 26,901
Miscellaneous 19,645
Depreciation and amortization 7,001
State license and filing fees 4,856
Storage 4,519
Utilities 4,172
Entertainment and meals 1,673
Automobile 339
Profit sharing 9,790
Total operating expenses 2,468,415
Operating income (loss) (1,520,277)
Other income (expense)
Guaranteed payments (260,000)
Interest expense (105,878)
Other income, net 31,441
Total other income (expense) (334,437)
Net income (loss) (1,854,714)
Beginning members' equity (deficit) (1,701,881)
Member distributions (4,114,687)
Ending members' deficit (7,671,282)$
See Notes to Financial Statements
5
Iron Horse Holdings, LLC
Statement of Cash Flows
For the year ended December 31, 2015
2015
Operating activities
Net income (loss) (1,854,714)$
Adjustments to reconcile net income (loss) to net cash
used for operating activities:
Depreciation and amortization 7,001
Loss on investment 6,181
Changes in operating assets and liabiltiies:
Accounts receivable (1,376,607)
Accounts payable 2,375,948
Payroll liabilities (189,739)
Credit cards payable 321,389
Net cash used for operating activities (710,541)
Investing activities
Purchases of equipment (21,268)
Payment from (issuance of) note receivable 232,502
Net cash provided by investing activities 211,234
Financing activities
Borrowings on lines of credit 2,500,000
Repayments on lines of credit (565,000)
Proceeds from note payable 2,500,000
Member distributions (4,114,687)
Net cash provided by financing activities 320,313
Net decrease in cash (178,994)
Cash, at beginning of year 251,053
Cash, at end of year 72,059$
Cash paid for interest 105,878$
Iron Horse Holdings, LLC
Notes to Financial Statements
December 31, 2015
6
Note 1. Summary of Significant Accounting Policies
Business activity:
Iron Horse Holdings, LLC (the “Company”), a Delaware limited liability company, was formed on February 28,
2011. The Company operates a website (comparecards.com) to help people make smarter, more informed,
healthier financial decisions based on a deeper knowledge of financial offers. The Company provides easy-to-
use, objective tools and educational resources that help consumers do everything from making side-by-side
credit card comparisons and managing their credit health to helping children in primary, middle, and high school
learn how to make wise financial decisions.
Basis of accounting and presentation:
These financial statements are prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”). The financial statements reflect all adjustments that are necessary for
presentation of the financial position, results of operations, and cash flows for the year presented.
Use of estimates:
The preparation of financial statements in conformity with GAAP 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 sales and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and cash equivalents:
The Company considers all highly liquid investments with an initial maturity of three months or less to be cash
equivalents. There were no cash equivalents as of December 31, 2015. The Company’s cash balances are
maintained with high quality financial institutions. At times, deposits may exceed Federal Deposit Insurance
Corporation insurance limits.
Accounts receivable and allowance for doubtful accounts:
Accounts receivable are carried at their estimated collectible amounts and are periodically evaluated for
collectability based on management’s assessment of the status of each account. An allowance for doubtful
accounts is established as losses are estimated to have occurred through recognition of bad debt expense. When
management confirms an account receivable is not collectible, such amount is charged off against the allowance
for doubtful accounts. As of December 31, 2015, the Company does not have an allowance for doubtful accounts.
Revenue recognition:
The Company derives sales from commissions which are earned upon approval of credit card applications from
consumers which were referred to the financial institutions through the Company’s websites. The Company
recognizes sales when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or
determinable and collectability is reasonably assured. Delivery is deemed to have occurred at the time that the
financial institution generates the consumer’s credit card approval.
Iron Horse Holdings, LLC
Notes to Financial Statements
December 31, 2015
7
Note 1. Summary of Significant Accounting Policies, Continued
Property and equipment:
Property and equipment are stated at original cost less accumulated depreciation. Major renewals and
betterments are capitalized while routine maintenance and repair costs which do not extend the original useful
lives of the assets are charged to expense as incurred. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets. The estimated useful lives are generally as follows:
Computers 5 years
Furniture and fixtures 5 to 10 years
Investment:
The Company accounts for its 30% investment in DVDs.com, LLC using the equity method. The Company’s initial
interest is recognized at cost, adjusted for the Company’s proportionate share of undistributed earnings or losses.
Intangible assets:
Intangible assets are comprised of expenses paid for the Company’s domain name. The domain name is
amortized over a period of 15 years. Amortization expense for the year ending December 31, 2015 was $1,731.
Advertising:
The Company expenses advertising costs as they are incurred, and reports them as selling and marketing
expenses. The Company had advertising costs of $53,482,651 for the year ended December 31, 2015.
Income taxes:
The Company is a limited liability company and with the consent of its members has elected to be taxed as a
partnership for federal and state income tax purposes. Accordingly, no provision for income taxes has been
made in the accompanying financial statements because the respective members are taxed on their
proportionate share of the Company’s taxable income.
Management evaluates the Company’s tax positions on a periodic basis and has concluded that the Company
has taken no uncertain tax positions that require adjustment to the financial statements. When incurred,
interest and penalties associated with unresolved income tax positions are included in other income and
expense. With few exceptions, the Company is no longer subject to income tax examinations by the U.S. federal,
state, or local tax authorities for all years prior to 2012.
Concentrations and credit risk:
For the year ended December 31, 2015, four financial institutions individually accounted for approximately 43%,
20%, 16% and 14% of total sales, respectively.
Iron Horse Holdings, LLC
Notes to Financial Statements
December 31, 2015
8
Note 1. Summary of Significant Accounting Policies, Continued
Concentrations and credit risk, continued:
Substantially all of the sales from these financial institutions pass through three clearing houses. Given the
timeliness of past payments and the absence of historical problems, management believes that accounts
receivable from these clearing houses are fully collectible in the normal course of business.
Substantially all of the Company’s selling and marketing expenses consist of pay-per-click advertising costs
incurred with three parties who are leaders in web search industry. Management believes that the Company’s
relationship with these parties is good and that the availability of their services will continue in the normal
course of business.
Note 2. Property and Equipment, net
Property and equipment consists of the following as of December 31:
2015
Computers $ 20,485
Furniture and fixtures 37,057
57,542
Less accumulated depreciation 14,717
$ 42,825
Depreciation expense totaled $5,270 for the year ended December 31, 2015.
Note 3. Intangible Assets, net
Intangible assets consist of the following as of December 31:
2015
Domain name $ 29,705
Less accumulated amortization 15,297
$ 14,408
Amortization expense totaled $1,731 for the year ended December 31, 2015.
Note 4. Debt
Note payable:
On October 14, 2015, the Company entered into a $2,500,000 term loan agreement with a financial institution.
The loan carries interest at the U.S. Prime Rate (3.25% as of December 31, 2015). The loan is payable in three
consecutive monthly principal installments of $625,000, beginning on January 14, 2016, with a final payment of
principal and interest due at maturity on April 14, 2016. As of December 31, 2015, the outstanding balance is
$2,500,000. The loan is secured by certain assets of the Company.
Iron Horse Holdings, LLC
Notes to Financial Statements
December 31, 2015
9
Note 4. Debt, Continued
Lines of credit:
On September 29, 2014, the Company opened a line of credit with a financial institution. The maximum amount
the Company can draw on this line of credit is $1,000,000. The line of credit matured on September 29, 2015
and was renewed on November 17, 2015, with an extended maturity date of November 16, 2016. The line of
credit incurs interest at an annual rate of 3.25%. The balance on the line of credit was $925,000 as of December
31, 2015. The line of credit is guaranteed by a member of the Company.
On February 27, 2015, the Company opened an additional line of credit with a different financial institution. The
maximum amount the Company can draw is $2,000,000. This line of credit matures on February 27, 2016 and
incurs interest at the U.S. Prime Rate (3.25% as of December 31, 2015). As of December 31, 2015, the
outstanding balance was $2,000,000. This line of credit is secured by certain assets of the Company.
Note 5. Leases
The Company leases office space in Illinois under an operating lease that expires on November 30, 2016 and
office space in Charleston under an operating lease that expires on March 31, 2017. Rent expense totaled
$86,130 for the year ended December 31, 2015.
Future minimum lease payments under operating leases as of December 31, 2015 are as follows:
2016 $ 78,052
2017 12,731
Total minimum lease payments $ 90,783
Note 6. Related Parties
Beginning January 1, 2013, the Company had a consulting agreement which provided the consultant with a
12.5% return on the taxable income of the Company (corresponding to a 12.5% membership interest in the
Company), as further defined in the respective consulting agreement. Distributions paid to the consultant
relating to the year ended December 31, 2015 are included in guaranteed payments as taxable income was not
sufficient to generate a return on the membership interests. The relationship with the consultant ceased in
2016 and remaining obligations were paid in a settlement in October 2016, the details of which are subject to a
confidentiality agreement. Such payments, however, had no significant impact on the overall financial position
of the Company.
As of December 31, 2014, the Company had an outstanding note receivable of $232,502 from a limited liability
company that is partially owned by a member of the Company. This note was paid in full during 2015.
The Company subleases space in its Charleston office on a month-to-month basis to a limited liability company
that is partially owned by a member of the Company. Rental income related to this lease totaled $15,000 for the
year ended December 31, 2015.
Iron Horse Holdings, LLC
Notes to Financial Statements
December 31, 2015
10
Note 7. Profit Sharing Plan
The Company has a profit sharing plan that covers substantially all employees, with the exception of union,
nonresident aliens, and leased employees, who meet certain age and length of service requirements. Eligible
employees may make salary deferral contributions to the plan. The Company's contribution was equal to up to
three percent of the participants' eligible compensation for the plan year ended December 31, 2015. The
Company may also make discretionary profit sharing contributions. The Company’s contribution expense totaled
approximately $9,790 for the year ended December 31, 2015.
Note 8. Subsequent Events
Management has evaluated events and transactions for potential recognition and/or disclosure through
November 11, 2016, which is the date these financial statements were available to be issued.
All outstanding lines of credit and the note payable outstanding at of December 31, 2015 were paid in full in
2016. In March 2016, the Company entered into a new promissory note with a principal amount of $3,775,000,
bearing interest at an annual interest rate of 4.5%. The new promissory note was scheduled to mature in March
2020, but was paid in full in October 2016.
The Company has received a letter of intent in connection with the potential sale of all of the business.
Assuming approval by all parties, the sale is scheduled to occur by the end of 2016.