Exhibit 99.2
PistolStar, Inc.
BALANCE SHEET
(Unaudited)
| | | March 31, 2020 | |
ASSETS | | | | |
Cash and cash equivalents | | $ | 513,214 | |
Accounts receivable, net | | | 196,138 | |
Prepaid expenses and other | | | 10,383 | |
Total current assets | | | 719,735 | |
Equipment and leasehold improvements, net | | | 41,785 | |
Deposits and other assets | | | 194,326 | |
Total non-current assets | | | 236,111 | |
TOTAL ASSETS | | $ | 955,846 | |
| | | | | |
LIABILITIES | | | | |
Accounts payable | | $ | 1,452 | |
Accrued liabilities | | | 2,070 | |
Contract liability | | | 807,225 | |
Total current liabilities | | | 810,747 | |
TOTAL LIABILITIES | | | 810,747 | |
| | | | | |
STOCKHOLDER’S EQUITY | | | | |
Common stock - 1,000,000 shares authorized; issued 950,000 shares; and outstanding 325,000 shares; no par value | | | 4,000 | |
| Treasury stock - 625,000 shares at cost | | | (2,500 | ) |
| Additional paid in capital | | | 27,276 | |
Retained earnings | | | 116,323 | |
TOTAL STOCKHOLDER’S EQUITY | | | 145,099 | |
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY | | $ | 955,846 | |
PistolStar, Inc.
STATEMENT OF INCOME AND RETAINED EARNINGS
(Unaudited)
| | | Three months ended March 31, | |
| | | 2020 | |
| | | | | |
Revenues | | | | |
License fees | | $ | 405,919 | |
Costs and other expenses | | | | |
Cost of license fees | | | 299,983 | |
Gross Profit | | | 105,936 | |
| | | | | |
Operating Expenses | | | | |
Selling, general and administrative | | | 87,386 | |
Operating income | | | 18,550 | |
Other income | | | | |
Interest income | | | 590 | |
Total Other Income | | | 590 | |
Net income before Provision for Taxes | | | 19,140 | |
State taxes | | | 1,733 | |
Net income | | | 17,407 | |
Retained earnings, beginning of period | | | 98,916 | |
Retained earnings, end of period | | $ | 116,323 | |
STATEMENT OF STOCKHOLDER’S EQUITY
(Unaudited)
| | | Common Stock | | | Treasury Stock | | | Additional Paid-in | | | Retained | | | | | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Earnings | | | Total | |
Balance as of January 1, 2020 | | | 325,000 | | | $ | 4,000 | | | | 625,000 | | | $ | (2,500 | ) | | $ | - | | | $ | 98,916 | | | $ | 100,416 | |
Stockholder contribution | | | - | | | | - | | | | - | | | | - | | | | 27,276 | | | | - | | | | 27,276 | |
Net income | | | - | | | | - | | | | - | | | | - | | | | - | | | | 17,407 | | | | 17,407 | |
Balance as of March 31, 2020 | | | 325,000 | | | $ | 4,000 | | | | 625,000 | | | $ | (2,500 | ) | | $ | 27,276 | | | $ | 116,323 | | | $ | 145,099 | |
PISTOLSTAR, INC. |
Statement of Cash Flows |
| | | Three months ended | |
| | | March 31, | |
| | | 2020 | |
CASH FLOW FROM OPERATING ACTIVITIES: | | | | |
Net income | | $ | 17,407 | |
Adjustments to reconcile net income to net cash used by operating activities: | | | | |
Depreciation and Amortization | | | 1,758 | |
Change in assets and liabilities: | | | | |
Accounts receivable | | | (138,411 | ) |
Prepaid expenses | | | 4 | |
Prepaid taxes | | | 823 | |
Accounts Payable | | | (3,515 | ) |
Credit card payable | | | (2,964 | ) |
Accrued commission | | | 2,000 | |
Contract liability | | | 80,733 | |
Net cash used by operating activities | | | (42,165 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | |
Stockholder contribution | | | 27,276 | |
Net cash provided by financing activities | | | 27,276 | |
NET DECREASE IN CASH AND CASH EQUIVALENTS | | | (14,889 | ) |
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | | | 528,103 | |
CASH AND CASH EQUIVALENTS, END OF PERIOD | | $ | 513,214 | |
PISTOLSTAR, INC.
Notes to the Financial Statements
For The Three Months Ended March 31, 2020
Organization and Operations
PistolStar, Inc., (the “Company”), is a New Hampshire Corporation, founded on January 11, 1999, and located in Bedford, New Hampshire. The Company is in the business of providing innovative authentication solutions while delivering high-quality, enterprise-ready authentication. The Company operates principally in the Northeast United States.
NOTE 1 – Summary of Significant Accounting Policies:
This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management who is responsible for the integrity and objectivity of the financial statements. The accompanying financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as codified by the Financial Accounting Standards Board and those principles have been consistently applied in the preparation of the financial statements.
Basis of Presentation
The Company uses the accrual basis of accounting. Revenue is recognized when it is earned and expenses are recognized when incurred, without regard to the time of receipt or payment.
Use of Estimates in Preparation of Financial Statements
Management used estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Accordingly, actual results may differ.
New Accounting Pronouncements
Topic 606
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of ASU 2014-09 is to recognize revenue when the promised goods or services due are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. This standard allows for early adoption and is effective for the Company for the year beginning January 1, 2018. See Note 2.
Topic 842
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases, (Topic 842). This new standard amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and a corresponding lease liability. This standard is effective for the company for the year beginning January 1, 2021. Management will be evaluating the potential impact the pronouncement will have on the financial statements, if any.
PISTOLSTAR, INC.
Notes to the Financial Statements
For The Three Months Ended March 31, 2020
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all liquid deposits with maturity of three months or less to be cash and/or cash equivalents. At March 31, 2020, the Company had no cash equivalents.
Accounts Receivable and Bad Debt
Accounts receivable are reported at net realizable value. Net realizable value is equal to the gross amount of accounts receivable less an estimated allowance for accounts unlikely to be collected. Historically, the Company has not experienced material write-offs and, therefore, has not established an allowance account.
Advertising Costs
The Company expenses marketing costs, consisting of tradeshows, promotional mailers and other media expenditures as they are incurred. Total amount expensed for the three months ended March 31, 2020 was $28,812.
Revenue Recognition
Revenue is realized or realizable and earned when persuasive evidence of a performance obligation has been satisfied. The Company records revenue from contract sales, and recognizes this revenue over the term of the contract with the consumer, beginning at commencement of the contract.
Intangible Assets
The cost associated with obtaining computer domains have been capitalized and amortized over the useful life of 5 years, on a straight line basis.
Fixed Assets
Property and equipment are stated on the basis of cost. Repairs are charged to expense as they are incurred. For financial reporting purposes, depreciation is computed on the straight line basis. For tax reporting purposes, depreciation is computed by the modified accelerated cost recovery system as required by the Internal Revenue Code. The useful lives of the assets are as follows:
Asset | Years |
Equipment | 5 – 7 years |
Leasehold Improvements | 39 years |
PISTOLSTAR, INC.
Notes to the Financial Statement
For The Three Months Ended March 31, 2020
NOTE 2 – Contract Liability:
During the three months ending March 31, 2020, the Company has a fee agreement to provide support services and authentication services to consumers for one year contracts. In connection with this agreement, the Company has a contract liability, which is being amortized on a straight-line basis over the twelve month term of the contract. As of March 31, 2020, the balance of the liability was $807,225.
NOTE 3 – Retirement Plan:
The Company established a qualified 401 (k) retirement plan, effective January 1, 2016, for employee’s that meet the Company vesting period, that allow salary deferrals, safe harbor contributions, employer matching contributions up to 4% of employee compensation, and profit share contributions. Total contributions for the three months ending March 31, 2020 was $2,916.
NOTE 4 - Concentrations:
Cash
The Company maintains its bank accounts with one commercial bank. Cash in these accounts at times exceeded the insured limit set by the Federal Deposit Insurance Corporation (“FDIC”). The Company’s management believes this risk is minimal.
Accounts Receivable
Customer accounts receivable balances as a percentage of the total accounts receivable that are greater than 10% amount to a concentration of credit risk for the three months ended March 31, 2020 was 32%.
NOTE 5 - Income Tax Matters:
PistolStar, Inc. is an S-Corp and as such not a taxpaying entity for federal income tax purposes. Therefore, no provision or liability for federal income taxes has been included in the financial statements for the three months ended March 31, 2020. The Company, however, is still liable for state taxes.
The Company’s tax returns are subject to possible examination by the taxing authorities. For federal and state purposes the tax returns essentially remain open for possible examination for a period of three years after the respective filing deadlines of those returns.
NOTE 6 – Compensated Absences:
The Company allows compensated absences that will accrue evenly throughout the calendar year beginning January 1 of each year. Employees must take the time in the year it was earned and forfeit accrued unused time at the end of each year. Management has chosen not to record through March 31, 2020.
PISTOLSTAR, INC.
Notes to the Financial Statement
For The Three Months Ended March 31, 2020
NOTE 7 – Operating Lease:
The Company leases its office space under a 10-year operating lease requiring minimum of $4,345. The Company is also responsible for prorated share of operating expenses. The lease expired on January 31, 2019, and was extended for an additional three years, commencing on February 1, 2019 and ending on January 31, 2022. Rent expense for the three months ended March 31, 2020 was $13,126.
The following is a schedule by years of future minimum rentals under the leases at March 31, 2020:
Years Ending December 31, | | Facilities &
Residences | |
| | | | | |
| 2020 (remaining months) | | | 39,107 | |
| 2021 | | | 52,142 | |
| 2022 | | | 4,345 | |
| Total | | $ | 95,594 | |
NOTE 8 – Subsequent Events:
The Corona Virus (COVID-19) pandemic created unforeseen circumstances, including, closing interaction in trade shows and safety precautions that amounted to total business disruption. The United States Government, in conjunction with Small Business Administration, created a loan program to supplement income to support keeping employees on payroll. While PistolStar, Inc. accepted the loan, the amounts were paid back as of May 13, 2020.
During May, 2020, the Company’s stockholder agreed to sell the assets and intangibles of the Company to a publicly traded company in excess of book value. A Letter of Intent has been filed with the SEC in regards to such a purchase.
