Exhibit 99.2
MODEL MEALS, LLC.
Index to Condensed Unaudited Financial Statements
MODEL MEALS, LLC.
CONDENSED BALANCE SHEETS
| | | March 31, 2021 | | | December 31,
2020 | |
| | | (Unaudited) | | | | |
| ASSETS | | | | | | |
| | | | | | | |
| CURRENT ASSETS: | | | | | | | | |
| Cash | | $ | 92,221 | | | $ | 31,166 | |
| Accounts receivable | | | 1,611 | | | | - | |
| Inventory | | | 2,954 | | | | 3,832 | |
| Other current assets | | | 25,634 | | | | 39,995 | |
| | | | | | | | | |
| Total Current Assets | | | 122,420 | | | | 74,993 | |
| | | | | | | | | |
| OTHER ASSETS: | | | | | | | | |
| Right-of-use assets, net | | | 112,687 | | | | 148,408 | |
| Intangible assets, net | | | 71,291 | | | | 76,383 | |
| | | | | | | | | |
| Total Assets | | $ | 306,398 | | | $ | 299,784 | |
| | | | | | | | | |
| LIABILITIES AND MEMBERS’ DEFICIT | | | | | | | | |
| | | | | | | | | |
| CURRENT LIABILITIES: | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 130,019 | | | $ | 128,768 | |
| Deferred revenue | | | 31,798 | | | | 41,412 | |
| Unredeemed gift cards | | | 76,120 | | | | 81,303 | |
| Operating lease liability | | | 118,832 | | | | 148,780 | |
| Advances payable | | | 27,672 | | | | 68,284 | |
| Notes payable | | | 168,043 | | | | 150,557 | |
| | | | | | | | | |
| Total Current Liabilities | | | 552,484 | | | | 619,104 | |
| | | | | | | | | |
| LONG-TERM LIABILITIES: | | | | | | | | |
| Notes payable, less current portion | | | 300,234 | | | | 189,898 | |
| Total Liabilities | | | 852,718 | | | | 809,002 | |
| | | | | | | | | |
| Commitments and contingency (Note 8): | | | | | | | | |
| | | | | | | | | |
| MEMBERS’ DEFICIT: | | | | | | | | |
| Members’ deficit | | | (546,320 | ) | | | (509,218 | ) |
| | | | | | | | | |
| Total Members’ Deficit | | | (546,320 | ) | | | (509,218 | ) |
| | | | | | | | | |
| Total Liabilities and Members’ Deficit | | $ | 306,398 | | | $ | 299,784 | |
The accompanying unaudited notes are an integral part of these condensed unaudited financial statements.
MODEL MEALS, LLC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| | | For the
Three Months Ended | |
| | | March 31, | |
| | | 2021 | | | 2020 | |
| | | | | | | |
| Revenue, net | | $ | 628,839 | | | $ | 668,425 | |
| | | | | | | | | |
| Cost of revenue | | | 326,637 | | | | 343,358 | |
| | | | | | | | | |
| Gross profit | | | 302,202 | | | | 325,067 | |
| | | | | | | | | |
| Operating Expenses: | | | | | | | | |
| Compensation and related expenses | | | 175,959 | | | | 186,922 | |
| Professional and consulting expenses | | | 20,122 | | | | 9,663 | |
| Selling and marketing expenses | | | 43,473 | | | | 25,356 | |
| General and administrative expenses | | | 92,821 | | | | 83,039 | |
| | | | | | | | | |
| Total Operating Expenses | | | 332,375 | | | | 304,980 | |
| | | | | | | | | |
| Income (Loss) from Operations | | | (30,173 | ) | | | 20,087 | |
| | | | | | | | | |
| Other Expense: | | | | | | | | |
| Interest expense | | | (6,929 | ) | | | (11,416 | ) |
| | | | | | | | | |
| Total Other Expense, net | | | (6,929 | ) | | | (11,416 | ) |
| | | | | | | | | |
| Net Income (Loss) | | $ | (37,102 | ) | | $ | 8,671 | |
The accompanying unaudited notes are an integral part of these condensed unaudited financial statements.
MODEL MEALS, LLC.
CONDENSED STATEMENTS OF CHANGES IN MEMBERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(UNAUDITED)
| | | Total Members’ | |
| | | Deficit | |
| | | | |
| Balance at December 31, 2020 | | $ | (509,218 | ) |
| | | | | |
| Net loss | | | (37,102 | ) |
| | | | | |
| Balance at March 31, 2021 | | $ | (546,320 | ) |
| | | Total Members’ | |
| | | Deficit | |
| | | | |
| Balance at December 31, 2019 | | $ | (301,948 | ) |
| | | | | |
| Net income | | | 8,671 | |
| | | | | |
| Balance at March 31, 2020 | | $ | (293,277 | ) |
The accompanying unaudited notes are an integral part of these condensed unaudited financial statements.
MODEL MEALS, LLC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | For the
Three Months Ended | |
| | | March 31, | |
| | | 2021 | | | 2020 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | |
| Net income (loss) | | $ | (37,102 | ) | | $ | 8,671 | |
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | | | | | | | | |
| Amortization | | | 5,092 | | | | 5,092 | |
| Non-cash lease expense | | | 5,773 | | | | 6,383 | |
| Change in operating assets and liabilities: | | | | | | | | |
| Account receivable | | | (1,611 | ) | | | 2,289 | |
| Inventory | | | 878 | | | | (851 | ) |
| Other current assets | | | 14,361 | | | | 4,730 | |
| Accounts payable and accrued expenses | | | 1,251 | | | | 60,599 | |
| Deferred revenue | | | (9,614 | ) | | | - | |
| Unredeemed gift cards | | | (5,183 | ) | | | (62,535 | ) |
| | | | | | | | | |
| Net cash used in operating activities | | | (26,155 | ) | | | 24,378 | |
| | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
| Proceeds from notes payable | | | 140,322 | | | | - | |
| Repayment of notes payable | | | (12,500 | ) | | | (37,500 | ) |
| Repayments of advances payable | | | (40,612 | ) | | | (38,272 | ) |
| | | | | | | | | |
| Net cash provided by (used in) financing activities | | | 87,210 | | | | (75,772 | ) |
| | | | | | | | | |
| Net change in cash | | | 61,055 | | | | (51,394 | ) |
| | | | | | | | | |
| Cash - beginning of period | | | 31,166 | | | | 81,279 | |
| | | | | | | | | |
| Cash - end of period | | $ | 92,221 | | | $ | 29,885 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid during the period for: | | | | | | | | |
| Interest | | $ | 3,375 | | | $ | 10,125 | |
The accompanying unaudited notes are an integral part of these condensed unaudited financial statements.
MODEL MEALS, LLC.
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2021
NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS
Model Meals, LLC (the “Company”) is a California limited liability corporation formed on May 1, 2015. The Company provides prepackaged and prepared meals as a solution for time-constrained but discerning consumers focused on satisfying every member of the family by offering a broad array of the highest quality meal planning, delivery, and preparation services. Products are customized meal solutions, delivered fresh directly to the home. The Company utilizes third-party food delivery services to fulfill customers’ orders.
The ongoing COVID-19 global and national health emergency has caused significant disruption in the international and United States economies and financial markets. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and financial market instability. The COVID-19 pandemic has the potential to significantly impact the Company’s supply chain, food manufacturers, distribution centers, or logistics and other service providers. Additionally, the Company’s service providers and their operations may be disrupted, temporarily closed or experience worker or meat or other food shortages, which could result in additional disruptions or delays in shipments of products. To date, the Company has been able to avoid layoffs and furloughs of employees. The Company is not able to estimate the duration of the pandemic and potential impact on the business if disruptions or delays in shipments of product occur. To date, the Company is not aware of any such disruptions. In addition, a severe prolonged economic downturn could result in a variety of risks to the business, including weakened demand for product and a decreased ability to raise additional capital when needed on acceptable terms, if at all. As the situation continues to evolve, the Company will continue to closely monitor market conditions and respond accordingly. The Company has applied for and received certain financial assistance under the Coronavirus, Aid, Relief, and Economic Security Act (“CARES Act”) enacted in March 2020 by the U.S. Government in response to COVID-19 (see Note 7).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Management acknowledges its responsibility for the preparation of the accompanying condensed unaudited financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its financial position and the results of its operations for the periods presented. The accompanying condensed unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”) for interim financial information and with the instructions Article 8-03 of Regulation S-X. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. Certain information and note disclosure normally included in financial statements prepared in accordance with U.S. GAAP has been condensed or omitted from these statements pursuant to such accounting principles and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements. These unaudited condensed unaudited financial statements should be read in conjunction with the summary of significant accounting policies and notes to the financial statements for the year ended December 31, 2020 of the Company which are included in the Company’s current report on Form 8-K as filed with the Securities and Exchange Commission and attached herein.
Going Concern
The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed unaudited financial statements, for the three months ended March 31, 2021, the Company had a net loss and cash used in operations of $37,102 and $26,155, respectively. At March 31, 2021, the Company had a members’ deficit and working capital deficit of $546,320 and $427,617, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. The Company’s primary source of operating funds in 2021 and 2020 was primarily from product sales, third-party advances and federal funding through the Paycheck Protection Program (the “PPP”) of the CARES Act, administered by the U.S. Small Business Administration (“SBA”).
Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive or obtain additional financing. Management believes that the Company’s capital resources are not currently adequate to continue operating and maintaining its business strategy for a period of twelve months from the issuance date of this report. If the Company is unable to secure additional lending in the near future, management expects that the Company will need to curtail or cease operations. These financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
MODEL MEALS, LLC.
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2021
Use of Estimates
The preparation of the financial statements in conformity with U.S. 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 revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates during the three months ended March 31, 2021 include the allowance for obsolete inventory, useful life and valuation of intangible assets, unredeemed gift card liability and valuation of right-of-use (“ROU”) assets and operating lease liabilities.
Fair Value Measurements
The carrying amounts reported in the balance sheet for cash, inventory, accounts receivable and other current assets, accounts payable and accrued expense, deferred revenue, advances payable, and unredeemed gift cards approximate their fair market value based on the short-term maturity of these instruments.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents. At March 31, 2021 and December 31, 2020, the Company did not have any cash equivalents.
The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. There were no balances in excess of FDIC insured levels as of March 31, 2021 and December 31, 2020. The Company has not experienced any losses in such accounts through March 31, 2021.
Inventory
Inventory consists of non-perishable food items distributed by the Company and are stated at the lower of cost and net realizable value utilizing the first-in first-out (FIFO) method. A reserve is established when management determines that certain inventories may not be saleable. If inventory costs exceed expected net realizable value due to obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference between the cost and the net realizable value. These reserves are recorded based on estimates and included in cost of sales. As of March 31, 2021 and December 31, 2020, the inventory balances were insignificant and the Company determined that there was no allowance needed.
Internal Use Software
The Company’s intangible asset consists of software developed for internal-use to assist with managing the Company’s order and delivery process. The Company capitalized expenses in accordance with GAAP ASC 350-40 Intangible Assets and Goodwill: Internal-Use Software (“ASC 350-40”). Internal use software has both of the following characteristics: (1) the software is acquired, internally developed, or modified solely to meet the entity’s internal needs and (2) during the software’s development or modification, no substantive plan exists or is being developed to market the software externally. Capitalization of internal-use development costs begin in the applicable development stage and cease once the software is ready for use, at which time amortization of the capitalized costs begin on a straight-line basis based on the internal-use software’s estimated useful life. The costs of developing routine enhancements are expensed as research and development costs as incurred because the enhancements do not add functionality to the product. The Company completed the development of the internal-use software in October 2019 at which time amortization of the internal-use development costs began over an estimated useful life of five years.
Product Sales
The Company adopted and implemented on January 1, 2018, ASU Topic 606 - Revenue from Contracts with Customers (“ASU 606”). ASU 606 did not have a material impact on its financial statements.
Upon implementation of ASU 606, the Company recognizes revenue in accordance with that core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
MODEL MEALS, LLC.
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2021
The Company recognizes product sales when the product is delivered to the customer and title has transferred, it is at this point in time that the Company’s performance obligations have been completed. Product sales are recorded net of any discounts or allowances and include shipping charges.
Customers can purchase gift cards online through the Company’s e-commerce website. Gift card purchases are initially recorded as unredeemed gift card liabilities and are recognized as product sales upon redemption. The Company does not charge administrative fees on unused gift cards, and its gift cards do not have an expiration date.
Cost of Sales
The Company’s policy is to recognize product related cost of sales in conjunction with revenue recognition, when the product costs are incurred which is upon delivery of product. Cost of sales includes the food and processing costs directly attributable to fulfillment and the delivery of the product to customers including both inbound and outbound shipping costs.
Shipping and handling costs incurred for product shipped to customers are included in cost of sales and amounted to $87,048 and $80,631 for the three months ended March 31, 2021 and 2020, respectively. Shipping and handling costs charged to customers are included in revenue, net.
Advertising Costs
The Company participates in various advertising programs. All costs related to advertising of the Company’s products are expensed in the period incurred. Advertising costs charged to operations were $43,473 and $25,356, for the three months ended March 31, 2021 and 2020, respectively, and are included in selling and marketing expenses on the accompanying condensed unaudited statements of operations.
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the updated guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue guidance in ASC 606. The updated guidance is effective for interim and annual periods beginning after December 15, 2018.
On January 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases and (ii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assessed whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected not to recognize right-of-use (“ROU”) assets and lease liabilities for short-term leases that have a term of 12 months or less.
Operating lease ROU assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the statements of operations.
Recently Adopted Accounting Pronouncements
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on its financial statements.
MODEL MEALS, LLC.
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2021
NOTE 3 - INTANGIBLE ASSETS
Intangible assets consist of a full service, prepackaged mid-market software developed to track and record all aspects of the Company’s accounting, order entry, sales, marketing, delivery, production and customer service needs used internally. The intangible asset is being amortized over five years using the straight-line method.
Intangible assets, net consisted of the following:
| | | March 31,
2021 | |
| Internal use software | | $ | 101,844 | |
| Less: accumulated amortization | | | (30,553 | ) |
| Intangible assets | | $ | 71,291 | |
Amortization of intangible assets amounted to approximately $5,092 for the three months ended March 31, 2021 and 2020, respectively, and is included in general and administrative expenses on the statement of operations.
NOTE 4 – UNREDEEMED GIFT CARDS
Unredeemed gift cards activities for the three months ended March 31, 2021 are summarized as follows:
| | | March 31,
2021 | |
| Beginning balance | | $ | 81,303 | |
| Sale of gift cards | | | 21,660 | |
| Gift card redemptions | | | (26,843 | ) |
| Ending balance | | $ | 76,120 | |
NOTE 5 – OPERATING LEASE RIGHT-OF-USE (“ROU”) ASSETS AND OPERATING LEASE LIABILITIES
On September 13, 2018, the Company entered into a lease agreement for its facility in Santa Ana, California. The lease is for a period of 36 months commencing in January 2019 and expiring in December 2021. Pursuant to the lease agreement, the lease requires the Company to pay a monthly base rent of; (i) $13,737 in the first year; (ii) $13,935 in the second year and; (iii) $14,140 in the third year.
For the three months ended March 31, 2021 and 2020, rent expense amounted to $46,985 and $44,720, respectively, which is included in general and administrative expenses on the accompanying condensed unaudited statements of operations.
The significant assumption used to determine the present value of the lease liability was a discount rate of 10% which was based on the Company’s estimated incremental borrowing rate.
Right-of-use asset (“ROU”) is summarized below:
| | | March 31,
2021 | |
| Operating lease | | $ | 396,094 | |
| Less accumulated reduction | | | (283,407 | ) |
| Balance of ROU asset, net | | $ | 112,687 | |
MODEL MEALS, LLC.
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2021
Operating lease liability related to the ROU asset is summarized below:
| | | March 31,
2021 | |
| Operating lease | | $ | 396,094 | |
| Total lease liabilities | | | 396,094 | |
| Reduction of lease liability | | | (277,262 | ) |
| Total | | $ | 118,832 | |
Future base lease payments under the non-cancelable operating lease at March 31, 2021 are as follows:
| | | Amount | |
| Year ending December 31, 2021 | | $ | 123,723 | |
| Total minimum non-cancelable operating lease payments | | | 123,723 | |
| Less: discount to fair value | | | (4,891 | ) |
| Total operating lease liability at March 31, 2021 | | $ | 118,832 | |
NOTE 6 – ADVANCES PAYABLE
On November 23, 2020, the Company entered into a capital advance agreement (the “Advance Agreement”) with their e-commerce platform provider. Under the terms of the Advance Agreement, the Company received $76,000 and will repay $80,868 by remitting 30% of the total customer payments processed daily by the e-commerce platform provider until the advance is repaid in full. As of March 31, 2021 and December 31, 2020, the advance had an outstanding balance of $27,672 and $68,284, respectively.
NOTE 7 – NOTES PAYABLE
Loan Agreement
On November 27, 2019, the Company entered into a business loan agreement with a third-party (“Loan Agreement”). Pursuant to the terms provided for in the Loan Agreement, the Company issued to the investor a Note and the Company received proceeds in the amount of $150,000. The Note bears an interest of 32.25% per annum and matures on November 27, 2020. The Company may prepay all or any portion of the interest and the unpaid principal balance of this Note at any time, or from time to time, without penalty or premium. As of March 31, 2021 and December 31, 2020, the loan had an outstanding principal balance of $0 and $12,500, respectively, as reflected in the accompanying condensed unaudited balance sheets as Notes payable.
Paycheck Protection Program Loan
On April 30, 2020, the Company received federal funding in the amount of $178,055 through the Paycheck Protection Program (the “PPP”) of the CARES Act, administered by the U.S. Small Business Administration (“SBA”). The PPP note bore an interest rate of 1% per annum on the unpaid principal balance computed on the basis of the actual number of days elapsed in a year of 360 days. Commencing six months after the effective date of the PPP note, the Company was required to pay the lender equal monthly payments of principal and interest in total amount of $10,020 as required to fully amortize any unforgiven principal balance of the loan by the two-year anniversary of the effective date of the PPP note (the “Maturity Date”). The Maturity Date can be extended to five years if mutually agreed upon by both the lender and the Company. The PPP note contained customary events of default relating to, among other things, payment defaults, making materially false or misleading representations to the SBA or the lender, or breaching the terms of the PPP note. The occurrence of an event of default may result in the repayment of all amounts outstanding under the PPP note, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. As of December 31, 2020, the PPP note had outstanding balance of $178,055 of which $138,057 is reflected in the accompanying condensed unaudited balance sheets as Notes payable and $39,998 as long-term notes payable. As of March 31, 2021, the PPP note had outstanding balance of $178,055 of which $168,043 is reflected in the accompanying condensed unaudited balance sheets as Notes payable and $10,012 included in long-term notes payable.
MODEL MEALS, LLC.
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2021
On February 26, 2021, the Company received additional federal funding in the amount of $140,322 through the Paycheck Protection Program (the “PPP 2”) of the CARES Act, administered by the U.S. Small Business Administration (“SBA”). The PPP 2 note bears an interest rate of 1% per annum and accrues on the unpaid principal balance computed on the basis of the actual number of days elapsed in a year of 360 days. Commencing the seventeenth month after the disbursement of the PPP 2 note, the Company is required to pay the lender equal monthly payments of principal and interest in total amount of $3,267 as required to fully amortize any unforgiven principal balance of the loan by the five-year anniversary of the effective date of the PPP 2 note (the “Maturity Date”). The PPP 2 note contains customary events of default relating to, among other things, payment defaults, making materially false or misleading representations to the SBA or the lender, or breaching the terms of the PPP 2 note. The occurrence of an event of default may result in the repayment of all amounts outstanding under the PPP 2 note, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company. Under the terms of the CARES Act, PPP 2 loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP 2. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. As of March 31, 2021, the PPP 2 note had outstanding balance of $140,322 which is reflected in the accompanying condensed unaudited balance sheets as long-term notes payable.
Economic Injury Disaster Loan
On May 20, 2020, the Company entered into a Loan Authorization and Agreement (“SBA Loan Agreement”) with the SBA, under the SBA’s Economic Injury Disaster Loan assistance program in light of the impact of the COVID-19 pandemic. Pursuant to the SBA Loan Agreement, the Company received an advanced of $149,900, net of $100 processing fee, to be used for working capital purposes only. Pursuant to the SBA Loan Agreement, the Company executed; (i) a note for the benefit of the SBA (“SBA Note”), which contains customary events of default; and (ii) a Security Agreement, granting the SBA a security interest in all tangible and intangible personal property of the Company, which also contains customary events of default. The SBA Note bears an interest rate of 3.75% per annum which accrue from the date of the advance. Installment payments in the amount of $731, including principal and interest, are due monthly beginning May 20, 2021 (twelve months from the date of the SBA Note). The balance of principal and interest is payable thirty years from the date of the SBA Note. As of March 31, 2021 and December 31, 2020, the SBA Note had an outstanding principal balance of $149,900 as reflected in the accompanying condensed unaudited balance sheets. as long-term notes payable.
Notes payable is summarized below:
| | | March 31,
2021 | |
| Principal amount | | $ | 468,277 | |
| Less: current portion | | | 168,043 | |
| Notes payable - long term portion | | $ | 300,234 | |
Minimum principal payments under the notes payable are as follows:
| Remaining in December 31, 2021 | | $ | 138,057 | |
| Year ended December 31, 2022 | | | 64,030 | |
| Year ended December 31, 2023 | | | 41,628 | |
| Year ended December 31, 2024 | | | 42,051 | |
| Year ended December 31, 2025 | | | 42,481 | |
| Thereafter | | | 140,030 | |
| Total principal payments | | $ | 468,277 | |
MODEL MEALS, LLC.
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2021
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Legal
In February of 2020, former employee (“Plaintiff”) filed a complaint against the Company asserting claims of, among other things, (i) sexual harassment, (ii) unlawful termination, (iii) unlawful retaliation, and (iv) Labor Code violations, including missed statutory meal periods. The Company denied these allegations, disputed all claims and contended that Company acted lawfully in all respects regarding Plaintiff and his employment. Both parties wish to avoid the time, cost and expenditure of resources of further proceedings and desire to resolve any and all claims alleged, or that could be alleged, arising out of or in connection with Plaintiff’s employment with the Company, and/or the cessation thereof. In August 2020, the Company entered into a Settlement and General Release Agreement with the Plaintiff pursuant to which the Company agreed to pay the Plaintiff an amount of $12,000 in cash as settlement payment which was recorded as loss on legal settlement as reflected in the accompanying condensed unaudited statements of operations. The Company satisfied its obligations under the settlement agreement and was released of all and any claims in connection with the complaint.
Lease
In September 2018, the Company entered into a lease agreement for its facility in Santa Ana, California. The lease is for a period of 36 months commencing in January 2019 and expiring in December 2021 (see Note 5).
NOTE 9 - SUBSEQUENT EVENTS
The Company has performed an evaluation of subsequent events through July 16, 2021 which is the date these financial statements were available to be issued. Subsequent to March 31, 2021, the following events occurred:
On May 18, 2021, the Company received a loan forgiveness approval of the outstanding balance of its PPP Note in the amount of $178,055 dated April 30, 2020 (see Note 7).
On June 14, 2021, the Company received a loan forgiveness approval of the outstanding balance of its PPP 2 Note in the amount of $140,322 dated February 26, 2021 (see Note 7).
Merger with Home Bistro, Inc
On July 7, 2021, Home Bistro, Inc. (“Home Bistro”) entered into an Agreement and Plan of Merger (“Agreement”) with the Company pursuant to which its members sold 100% of their interest to Home Bistro in exchange for $60,000 in cash and 2,008,310 shares of restricted common stock of Home Bistro. These shares are subject to a 24-month Lockup and Leak-Out Agreement and were issued pursuant to Section 4(a)(2) of the Securities Act. Upon the close of the Agreement, the Company became a wholly owned subsidiary of Home Bistro.
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