EXHIBIT 99.2
BTND, LLC AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 29, 2015 AND DECEMBER 28, 2014
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BTND, LLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 29, 2015 AND DECEMBER 28, 2014
March 29, | December 28, | |||||||
2015 | 2014 | |||||||
ASSETS | (Unaudited) | |||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 220,688 | $ | 259,989 | ||||
Receivables | 28,381 | 21,457 | ||||||
Employee receivable | 3,200 | 4,100 | ||||||
Inventory | 45,925 | 49,414 | ||||||
Prepaid insurance | 9,973 | 1,788 | ||||||
Total current assets | 308,167 | 336,748 | ||||||
PROPERTY AND EQUIPMENT, net | 872,043 | 882,699 | ||||||
Total assets | $ | 1,180,210 | $ | 1,219,447 | ||||
LIABILITIES AND MEMBERS' EQUITY (DEFICIT) | ||||||||
CURRENT LIABILITIES | ||||||||
Current maturities of long-term debt | $ | 164,800 | $ | 161,314 | ||||
Accounts payable | 205,594 | 133,767 | ||||||
Accrued expenses | 136,305 | 189,196 | ||||||
Accrued distributions | 54,000 | 40,000 | ||||||
Total current liabilities | 560,699 | 524,277 | ||||||
LONG-TERM DEBT, less current maturities | 649,098 | 692,032 | ||||||
Total liabilities | 1,209,797 | 1,216,309 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
MEMBERS' EQUITY (DEFICIT) | (29,587 | ) | 3,138 | |||||
Total liabilities and members' equity (deficit) | $ | 1,180,210 | $ | 1,219,447 | ||||
See Condensed Notes to Consolidated Financial Statements
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BTND, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 29, 2015 AND MARCH 30, 2014
(UNAUDITED)
2015 | 2014 | |||||||
SALES | $ | 1,257,178 | $ | 1,063,016 | ||||
COSTS AND EXPENSES | ||||||||
Restaurant operating expenses | ||||||||
Food and paper costs | 523,664 | 419,529 | ||||||
Labor costs | 384,552 | 347,918 | ||||||
Occupancy costs | 68,366 | 68,324 | ||||||
Other operating expenses | 85,793 | 85,578 | ||||||
Depreciation | 10,656 | 25,111 | ||||||
General and administrative | 113,218 | 79,701 | ||||||
Total costs and expenses | 1,186,249 | 1,026,161 | ||||||
Income from operations | 70,929 | 36,855 | ||||||
INTEREST EXPENSE | (12,702 | ) | (14,771 | ) | ||||
NET INCOME | $ | 58,227 | $ | 22,084 | ||||
EARNINGS PER SHARE (NOTE 6) | ||||||||
Net income | $ | 58,227 | $ | 22,084 | ||||
Shares outstanding, basic and diluted | 11,000,000 | 11,000,000 | ||||||
Earnings per share | $ | 0.005 | $ | 0.002 | ||||
See Condensed Notes to Consolidated Financial Statements
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BTND, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 29, 2015 AND MARCH 30, 2014
(UNAUDITED)
2015 | 2014 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 58,227 | $ | 22,084 | ||||
Adjustments to reconcile net income to net | ||||||||
cash provided by operating activities | ||||||||
Depreciation | 10,656 | 25,111 | ||||||
Changes in operating assets and liabilities | ||||||||
Receivables | (6,924 | ) | - | |||||
Employee receivable | 900 | 200 | ||||||
Inventory | 3,489 | (4,472 | ) | |||||
Prepaid expenses | (8,185 | ) | (12,101 | ) | ||||
Accounts payable | 71,827 | 26,604 | ||||||
Accrued expenses | (52,891 | ) | (22,028 | ) | ||||
Net cash provided by operating activities | 77,099 | 35,398 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of property and equipment | - | (12,801 | ) | |||||
Net cash used in investing activities | - | (12,801 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Principal payments on long-term debt | (39,448 | ) | (37,379 | ) | ||||
Distributions to members | (76,952 | ) | (10,658 | ) | ||||
Net cash used in financing activities | (116,400 | ) | (48,037 | ) | ||||
CHANGE IN CASH AND CASH EQUIVALENTS | (39,301 | ) | (25,440 | ) | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 259,989 | 186,972 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 220,688 | $ | 161,532 | ||||
SUPPLEMENTAL DISCLOSURE OF | ||||||||
CASH FLOW INFORMATION | ||||||||
Cash paid for interest | $ | 12,702 | $ | 14,771 | ||||
See Condensed Notes to Consolidated Financial Statements
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BTND, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 29, 2015 AND MARCH 30, 2014
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION
The consolidated financial statements of the BTND, LLC and its subsidiary (the “Company”) for the three-month periods ended March 29, 2015 and March 30, 2014 are unaudited and reflect all adjustments consisting of normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim period. The condensed financial statements should be read in conjunction with the financial statements and notes thereto, contained in the Company’s Report on Form 8-K (filed under Pretoria Resources Two, Inc. on April 21, 2015) for the fiscal year ended December 28, 2014. The results of operations for the three-month period ended March 29, 2015, are not necessarily indicative of the results for the entire fiscal year ending December 27, 2015.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
BTND, LLC and its subsidiary (the “Company”) develop and operate company owned fast-food burger restaurants, with locations in Minnesota, North Dakota, and South Dakota. The Company owned and operated eight restaurants in 2015 and 2014.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of BTND, LLC and its 99% owned subsidiary BTND West, LLC. Significant intercompany accounts and transactions have been eliminated in consolidation. The 1% minority ownership of BTND, LLC is not material and the Company has not presented the corresponding noncontrolling interest within the consolidated financial statements.
Income Taxes
The Company is treated as a limited liability company for federal and state income tax laws which provide that, in lieu of corporation income taxes, the members separately account for their prorata shares of the Company’s items of income, deductions, losses and credits. Therefore, these statements do not include any provisions for income taxes related to the Company. With few exceptions, the Company is no longer subject to U.S. federal, Minnesota or North Dakota income tax examinations by tax authorities for years before 2011.
Reportable Segments
The Company has eight similar restaurants under the same trade name and geographical area. Because these restaurants have similar economic characteristics, the Company evaluates operating performance on an overall basis. Therefore, the Company’s restaurants are classified as one reportable segment.
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BTND, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 29, 2015 AND MARCH 30, 2014
(UNAUDITED)
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at:
| March 29, | December 28, | |||||||
2015 | 2014 | |||||||
Land | $ | 266,285 | $ | 266,285 | ||||
Equipment | 1,468,403 | 1,468,403 | ||||||
Building | 527,224 | 527,224 | ||||||
Vehicles | 52,855 | 52,855 | ||||||
| 2,314,767 | 2,314,767 | |||||||
Accumulated depreciation | (1,442,724 | ) | (1,432,068 | ) | ||||
| $ | 872,043 | $ | 882,699 | |||||
Depreciation expense for the three months ended March 29, 2015 and March 30, 2014 was $10,656 and $25,111, respectively.
NOTE 4 – LONG-TERM DEBT
The Company had the following long-term debt obligations:
March 29, | December 28, | |||||||
2015 | 2014 | |||||||
Note payable, with variable interest at prime plus 1.75% (minimum 5.00%), currently at 5.00%, payable in variable monthly installments, including interest through November 8, 2018, secured by all Company assets and the personal guaranty of a member. | $ | 206,025 | $ | 218,765 | ||||
Unsecured note payable to related party with interest at 6.25%, payable in monthly installments of $7,808, including interest through June 1, 2020. | 607,873 | 634,581 | ||||||
813,898 | 853,346 | |||||||
Current maturities | (164,800 | ) | (161,314 | ) | ||||
Total | $ | 649,098 | $ | 692,032 | ||||
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BTND, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 29, 2015 AND MARCH 30, 2014
(UNAUDITED)
Long-term debt is expected to mature as follows:
| 2015/2016 | $ | 164,800 | ||
| 2016/2017 | 174,488 | |||
| 2017/2018 | 185,025 | |||
| 2018/2019 | 166,960 | |||
| 2019/2020 | 97,481 | |||
| Thereafter | 25,144 | |||
| $ | 813,898 |
NOTE 5 – CONTINGENCIES
The Company acquired its properties as a result of an asset purchase agreement in May 2007. By reason of drafting oversight, the agreement originally executed was with a seller subsidiary that did not own the assets being sold at that time. In April 2015, the seller and the Company entered into an amendment to the original agreement to correct this drafting oversight. As part of the transaction, general warranty deeds were issued to the Company at the time of closing with the understanding the seller would not record them until such time consent was given by the seller’s lender to transfer the properties. To date, the properties acquired under the purchase agreement have not been recorded in the real property records of the counties in which the properties are located and approval of the seller’s lender to transfer the properties has not been completed. Since the lender had not been notified of the sale, the lender may require outstanding amounts to be immediately due and payable resulting in early payment penalties and other fees. Since the properties’ seller does not appear to have the financial resources to satisfy any amounts that may be owed, the Company could be liable for such amounts. As a result, the Company has estimated it will owe up to $67,514 for this matter and has recorded a liability for this amount. In addition, if the obligations to the lender are not satisfied, the lender could foreclose upon and sell the properties.
NOTE 6 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events through May 14, 2015, the date which the statements were available to be issued.
On April 6, 2015 the Company entered into an Agreement and Plan of Merger (Agreement) with Pretoria Resources, Inc. (a public shell company), BTND Merger Sub LLC, a wholly-owned subsidiary of Pretoria Resources, Inc., the Company, and Titan Asset Advisors LLC, (as to certain limited provisions), BTND Merger Sub, LLC merged with and into the Company, with the Company remaining as the surviving entity and becoming a wholly-owned operating subsidiary of Pretoria Resources, Inc.
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BTND, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 29, 2015 AND MARCH 30, 2014
(UNAUDITED)
At the effective time of the merger, the legal existence of BTND Merger Sub LLC ceased and all of the outstanding membership interests in the Company immediately prior to the effective time of merger were cancelled, and a membership interest in the Company was issue to Pretoria Resources, Inc. Simultaneously, Pretoria Resources, Inc. issued to the former members of the Company, in consideration of the cancellation of their membership interests, an aggregate of 9,911,000 restricted shares of Pretoria Resource, Inc.’s common stock, par value $0.0001 per share, equal to 90.1% of the total number of shares of common stock outstanding after giving effect to the merger.
Under the Agreement, the merger may be unwound and the merger agreement terminated and cancelled in the event that the Company has not received gross proceeds from an offering of its securities equal to at least $2 million by a date that is 90 days after the closing of the merger, upon the determination of the members of the Company.
Because the Company owners as a group retained or received the larger portion of the voting rights in the consolidated entity and the Company’s management represents a majority of the management of the consolidated entity, the Company is considered the acquirer for accounting purposes and will account for the transaction as a reverse acquisition. The acquisition will be accounted for as a recapitalization, since at the time of the transaction, Pretoria Resources, Inc. was a company with no or nominal operations, assets and liabilities. Consequently, the assets and liabilities and the historical operations that will be reflected in future consolidated financial statements will be those of the Company at its historical cost basis.
The effect of the merger on earnings per share as presented on the consolidated income statement is based on the conversion rate of common stock for the membership interests of the Company and additional shares issued, retrospectively adjusted for presentation purposes, for the periods ended March 29, 2015 and March 30, 2014.
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