JAR GOODS LLC. A New Jersey Limited Liability Company. Financial Statements (Unaudited) and Independent Accountants' Review Report

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Rodger Green
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1 A New Jersey Limited Liability Company Financial Statements (Unaudited) and Independent Accountants' Review Report December 31, 2017 and 2016

2 Table of Contents Independent Accountants' Review Report 1 Reviewed Financial Statements: Balance Sheets 2 Statements of Operations and Changes in Members' Equity 3 Statements of Cash Flows 4 Notes to Financial Statements 5

INDEPENDENT ACCOUNTANTS REVIEW REPORT To Management of Jar Goods LLC Hoboken, New Jersey Members of: WSCPA AICPA PCPS 802 North Washington PO Box 2163 Spokane, Washington 99210-2163 P 509-624-9223 TF

3 INDEPENDENT ACCOUNTANTS REVIEW REPORT To Management of Jar Goods LLC Hoboken, New Jersey Members of: WSCPA AICPA PCPS 802 North Washington PO Box 2163 Spokane, Washington P TF mail@fruci.com We have reviewed the accompanying financial statements of Jar Goods LLC ( the Company ), which comprise the balance sheets as of December 31, 2017 and 2016 and the related statements of operations and changes in members equity, and cash flows for the years then ended and the related notes to the financial statements. A review includes primarily applying analytical procedures to management s financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion. 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. Accountant s Responsibility Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion. Accountant s Conclusion Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America. As disclosed in Note 3 of the financial statements, the Company relies on outside sources to fund operations, and has incurred significant losses. Accordingly, substantial doubt is raised about the Company s ability to continue as a going concern. Fruci and Associates II, PLLC Spokane, WA June 13, 2018

4 Balance Sheets December 31, 2017 and 2016 ASSETS Current assets Cash $ 3,466 $ 6,456 Accounts receivable, net 77,063 20,729 Inventory, net 13,096 28,000 Total current assets 93,625 55,185 Total assets $ 93,625 $ 55,185 LIABILITIES AND MEMBERS' EQUITY Current liabilities Accounts payable and accrued liabilities $ 91,585 $ 42,733 Short term loans 58,904 6,570 Advances from members 25,672 Convertible notes payable, net 145,000 Total current liabilities 321,161 49,303 Total liabilities 321,161 49,303 Commitments and contingencies Total members' equity (227,536) 5,882 Total liabilities and members' equity $ 93,625 $ 55,185 2 See independent accountants' review report The accompanying notes are an integral part of these financial statements

5 Statements of Operations and Changes in Members' Equity Revenue Sales, net $ 279,872 $ 180,664 Cost of goods sold (189,499) (115,732) Gross profit 90,373 64,932 Operating expenses Sales and marketing 214,630 32,307 General and administrative 61,783 41,325 Compensation and benefits 17,503 12,429 Rent 19,570 Total operating expenses 293, ,631 Net loss from operations (203,543) (40,699) Other income (expense) Grant income 14,530 14,519 Interest expense (44,405) (5,573) Total other income (expense) (29,875) 8,946 Net loss $ (233,418) $ (31,753) Changes in members' equity Beginning members' equity $ 5,882 $ 37,635 Capital contributions Distributions to members Net loss (233,418) (31,753) Ending members' equity $ (227,536) $ 5,882 3 See independent accountants' review report The accompanying notes are an integral part of these financial statements

6 Statements of Cash Flows Cash flows from operating activities Net loss $ (233,418) $ (31,753) Change in assets and liabilities Accounts receivable (56,334) (3,224) Inventory 14,904 5,399 Accounts payable and accrued expenses 48,852 22,814 Net cash used by operating activities (225,996) (6,764) Cash flows from financing activities Proceeds from member advances 25,672 5,297 Proceeds from convertible notes 145,000 Net proceeds from short term loans 52,334 Net cash provided by financing activities 223,006 5,297 Net decrease in cash (2,990) (1,467) Cash at beginning of period 6,456 7,923 Cash at end of period $ 3,466 $ 6,456 Supplemental cash flow information: Cash paid during the period for: Interest $ 31,169 $ 5,573 4 See independent accountants' review report The accompanying notes are an integral part of these financial statements

7 NOTES TO THE FINANCIAL STATEMENTS NOTE 1 NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Business Jar Goods LLC ( the Company ) is a limited liability company organized March 8, 2013 under the laws of the State of New Jersey, and headquartered in Hoboken, New Jersey. The Company produces and sells a variety of sauces, ranging from classic tomato to beet and basil pesto. Basis of Presentation The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ( GAAP ). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are normal and recurring in nature. The Company s fiscal year end is December 31. 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 disclosures 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. Advertising costs The Company s advertising costs are expensed as incurred. During the years ended December 31, 2017 and 2016, the Company recognized $95,580 and $13,037 in advertising costs, respectively. Revenue Recognition The Company recognizes revenue only when all of the following criteria have been met: Persuasive evidence of an arrangement exists; Delivery has occurred or services have been rendered; The fee for the arrangement is fixed or determinable; and Collectability is reasonably assured. Returns are recognized on the date the returned inventory is received by the Company. 5

8 Fair Value of Financial Instruments JAR GOODS LLC NOTES TO THE FINANCIAL STATEMENTS Financial Accounting Standards Board ( FASB ) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange traded instruments and listed equities. Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active). Level 3 Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable. The carrying amounts reported in the balance sheets approximate their fair value. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. At December 31, 2017 and 2016, the Company had no items, other than bank deposits, that would be considered cash equivalents. The Company maintains its cash in bank deposit accounts, that may at times, may be in excess of federally insured limits. No losses have been recognized as a result of these excess amounts. Accounts Receivable The Company recognizes an allowance on accounts receivable deemed to be uncollectible. The Company assesses its receivables based on historical loss patterns, aging of the receivables, and assessments of specific identifiable customer accounts considered at risk or uncollectible. The Company also considers any changes to the financial condition of its customers and any other external market factors that could impact the collectability of the receivables in the determination of the allowance for doubtful accounts. The Company has determined that an allowance against its accounts receivable balances was not necessary at either December 31, 2017 or

9 NOTES TO THE FINANCIAL STATEMENTS Inventory Inventory is stated at the lower of cost or market and is accounted for using the first in first out ( FIFO ) method. The Company analyzes inventory for any potential obsolescence, and records impairment and obsolescence reserve against inventory as deemed necessary. At December 31, 2017 and 2016, no such impairment charge was deemed necessary. Income Taxes The Company is a limited liability company treated as a partnership for federal and state income tax purposes. The Company's taxable income or loss is allocated to its members in accordance with their respective percentage ownership. Therefore, no provision or liability for income taxes has been included in the accompanying financial statements. The Company files income tax returns in the U.S. federal jurisdiction and the New Jersey state jurisdiction, as applicable. Recent Accounting Pronouncements No recently issued accounting pronouncements are expected to have a significant impact on the Company's financial statements. Subsequent Events Management has evaluated events through June 13, 2018, the date these financial statements were available to be issued. During 2018, the Company entered into a short term financing agreement for $64,188 subject to provisions similar to those disclosed in Note 5. During 2018, the Company issued five convertible notes for proceeds of $77,500. These notes are subject to the same provisions outlined in Note 4. NOTE 2 RELATED PARTY TRANSACTIONS During 2017, members advanced funds to the Company to be used in operations. These advances had no specific terms and are payable upon demand. At December 31, 2017 and 2016, unpaid advances totaled $25,672 and $0, respectively. During 2017, the Company issued five convertible notes to members of the Company, totaling $65,000. The provisions of these notes are discussed in Note 4. At December 31, 2017, the total principal outstanding was $65,000. There were no notes issued to related parties at December 31,

10 NOTES TO THE FINANCIAL STATEMENTS NOTE 3 GOING CONCERN The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses from inception of $283,369 which, among other factors, raises substantial doubt about the Company's ability to continue as a going concern for the twelve month period from the report date. The ability of the Company to continue as a going concern is dependent upon management's plans to raise additional capital from the issuance of debt or the sale of stock, its ability to commence profitable sales of its flagship product, and its ability to generate positive operational cash flow. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern. NOTE 4 CONVERTIBLE NOTES PAYABLE During 2017, the Company issued fourteen convertible notes totaling $145,000. The convertible notes payable bear interest at 5% and matures June 30, No principal or interest payments are due prior to maturity. Outstanding principal and interest may be converted upon the following: 1. Upon the Company receiving cash of no less than $2,500,000 for the sale of the Company s membership units ( Qualified Financing ), outstanding principal and accrued interest will be automatically converted into ownership units of the Company at a price of the lower of 80% of the price paid for the units as part of the Qualified Financing, or the quotient of the valuation cap and the fully diluted capitalization of the Company, as defined in the individual agreements. 2. Upon maturity, outstanding principal and interest will be automatically converted into membership units of the Company at a price equal to the quotient of the valuation cap and the fully diluted capitalization of the Company, as defined by the individual agreements. As of December 31, 2017 and 2016, no principal or accrued interest has been converted into membership units of the Company. For the years ended December 31, 2017 and 2016, the Company recognized interest expense on outstanding convertible notes of $3,568 and $0, respectively. At December 31, 2017 and 2016, accrued interest on outstanding convertible notes totaled $3,568 and $0, respectively. 8

11 NOTES TO THE FINANCIAL STATEMENTS NOTE 5 SHORT TERM LOANS In January 2017, the Company entered into a financing agreement for $25,000. Total interest under the loan is $9,249 and is to be repaid, along with principal, in 252 equal installments of $136 until full principal and interest is repaid. Given the short term nature of the financing agreement, origination fee of $625 was recognized as interest expense upon execution. At December 31, 2017, the outstanding principal of this financing agreement is $5,985. In June 2017, the Company entered into a financing agreement for $35,000. There was no maturity date or interest rate. The Company is to remit daily payments of $794, until the principal plus interest of $6,265 is fully paid. Given the short term nature of the financing agreement, origination fee of $875 was recognized as interest expense upon execution. At December 31, 2017, the outstanding principal of this financing agreement is $19,045. This financing agreement is secured by $41,265 of accounts receivable. In July 2017, the Company entered into a financing agreement for $34,650. The loan carries 29.9% interest and is to be repaid in 390 equal installments of $111 until full principal and interest is repaid. Given the short term nature of the financing agreement, origination fee of $350 was recognized as interest expense upon execution. At December 31, 2017, the outstanding principal of this financing agreement is $30,306. For the years ended December 31, 2017 and 2016, the Company recognized interest expense on short term financing agreements of $40,837 and $5,573. NOTE 6 GRANT REVENUE During 2017 and 2016, the Company received grant revenue of $14,530 and $14,519 for its participation in the Chobani Food Incubator program. These grants included no provisions that would restrict, or otherwise require additional action on behalf of the Company. 9

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