Exhibit 99.3
Booyah Technologies LLC
Financial Statements
December 31, 2020 and 2019
Table of Contents
Independent Auditors’ Report
To the Member
Booyah Technologies LLC
Huntingdon Valley, Pennsylvania
Opinion
We have audited the accompanying financial statements of Booyah Technologies LLC (a Pennsylvania limited liability company) (the “Company”), which comprise the balance sheets at December 31, 2020 and 2019, and the related statements of operations and deficiency in member’s equity, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019 and the results of its operations and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued.
Continued from previous page
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
| · | Exercise professional judgment and maintain professional skepticism throughout the audit. |
| · | Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. |
| · | Obtain an understanding of internal control relevant to the audit 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 Company’s internal control. Accordingly, no such opinion is expressed. |
| · | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. |
| · | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Fort Lauderdale, Florida
June 30, 2022
Booyah Technologies LLC
Balance sheets
December 31, 2020 and 2019
| | | 2020 | | | 2019 | |
| Assets | |
| Current assets: | | | | | | |
| Cash | | $ | 5,127 | | | $ | 14,477 | |
| Accounts receivable, net | | | 87,657 | | | | 42,285 | |
| Total current assets | | | 92,784 | | | | 56,762 | |
| | | | | | | | | |
| Property and equipment, net | | | 71,431 | | | | 65,621 | |
| | | | | | | | | |
| Total assets | | $ | 164,215 | | | $ | 122,383 | |
| | | | | | | | | |
| Liabilities and Deficiency in Member’s Equity | |
| | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 74,344 | | | $ | 53,928 | |
| Customer deposits | | | 56,000 | | | | 11,500 | |
| Payroll Protection program Loan payable | | | 28,750 | | | | – | |
| Current portion of long-term debt | | | 21,077 | | | | 15,711 | |
| Total current liabilities | | | 180,171 | | | | 81,139 | |
| | | | | | | | | |
| Long-term debt, net of current portion | | | 54,332 | | | | 51,679 | |
| | | | | | | | | |
| Total liabilities | | | 234,503 | | | | 132,818 | |
| | | | | | | | | |
| Deficiency in members’ equity | | | (70,288 | ) | | | (10,435 | ) |
| | | | | | | | | |
| Liabilities and deficiency in members’ equity | | $ | 164,215 | | | $ | 122,383 | |
The accompanying notes are an integral part of these financial statements.
Booyah Technologies LLC
Statements of Operations and Deficiency in Member's Equity
For the Years Ended December 31, 2020 and 2019
| | | 2020 | | | 2019 | |
| | | | | | | |
| Net sales | | $ | 1,101,409 | | | $ | 817,899 | |
| | | | | | | | | |
| Cost of sales | | | 760,325 | | | | 503,513 | |
| | | | | | | | | |
| Gross margin | | | 341,084 | | | | 314,386 | |
| | | | | | | | | |
| Operating expenses: | | | | | | | | |
| Selling expenses | | | 26,898 | | | | 51,270 | |
| Payroll and related expenses | | | 185,520 | | | | 138,234 | |
| Occupancy expenses | | | 34,954 | | | | 17,462 | |
| Depreciation | | | 19,439 | | | | 14,686 | |
| General and administrative | | | 89,555 | | | | 62,321 | |
| Total operating expenses | | | 356,366 | | | | 283,973 | |
| | | | | | | | | |
| (Loss) income from operations | | | (15,282 | ) | | | 30,413 | |
| | | | | | | | | |
| Other expense: | | | | | | | | |
| Interest expense | | | (6,920 | ) | | | (4,413 | ) |
| Total other expense | | | (6,920 | ) | | | (4,413 | ) |
| | | | | | | | | |
| Net (loss) income | | | (22,202 | ) | | | 26,000 | |
| | | | | | | | | |
| Deficiency in member's equity, beginning of the year | | | (10,435 | ) | | | (55,089 | ) |
| | | | | | | | | |
| Member contributions | | | – | | | | 26,782 | |
| | | | | | | | | |
| Member distributions | | | (37,650 | ) | | | (8,128 | ) |
| | | | | | | | | |
| Deficiency in member's equity, end of the year | | $ | (70,287 | ) | | $ | (10,435 | ) |
The accompanying notes are an integral part of these financial statements.
Booyah Technologies LLC
Statements of Cash Flow
For the Years Ended December 31, 2020 and 2019
| | | 2020 | | | 2019 | |
| | | | | | | |
| Cash flows from operating activities: | | | | | | | | |
| Net (loss) income | | $ | (22,202 | ) | | $ | 26,000 | |
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 19,439 | | | | 14,686 | |
| Allowance for doubtful accounts | | | 45,606 | | | | 19,925 | |
| Changes in assets and liabilities: | | | | | | | | |
| (Increase) in accounts receivable | | | (90,978 | ) | | | (26,026 | ) |
| Decrease in prepaid expenses and other current assets | | | – | | | | 21,371 | |
| Increase in accounts payable and accrued expenses | | | 21,641 | | | | 14,099 | |
| Increase (decrease) in customer deposits | | | 44,500 | | | | (54,449 | ) |
| Net cash provided by operating activities | | | 18,006 | | | | 15,606 | |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Purchase of property and equipment | | | – | | | | (6,750 | ) |
| Net cash used in investing activities: | | | – | | | | (6,750 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Proceeds from Payroll Protection Loan payable | | | 28,750 | | | | – | |
| Repayment of term loans | | | (18,456 | ) | | | (15,303 | ) |
| Member contributions | | | – | | | | 26,782 | |
| Member distributions | | | (37,650 | ) | | | (8,128 | ) |
| Net cash (used in) provided by financing activities: | | | (27,356 | ) | | | 3,351 | |
| | | | | | | | | |
| Net (decrease) increase in cash | | | (9,350 | ) | | | 12,207 | |
| | | | | | | | | |
| Cash, beginning of year | | | 14,477 | | | | 2,270 | |
| | | | | | | | | |
| Cash, end of year | | $ | 5,127 | | | $ | 14,477 | |
| | | | | | | | | |
| Cash paid for interest | | $ | 6,920 | | | $ | 4,413 | |
| Cash paid for taxes | | $ | – | | | $ | – | |
| | | | | | | | | |
| Equipment purchased via issuance of term loans | | $ | 26,475 | | | $ | 56,669 | |
The accompanying notes are an integral part of these financial statements.
Booyah Technologies LLC
Notes to the Financial Statements
Note 1 – Organization and Nature of Operations
Booyah Technologies LLC, (the “Company” or “Booyah"), was incorporated under the laws of the State of Pennsylvania on February 1, 2011. The Company provides equipment, technology and consulting services to the businesses and homeowners.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The Company’s financial statements have been prepared in accordance with Generally Accepted Accounting Principles ("GAAP") in the United States of America ("U.S.") as promulgated by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC").
Use of Estimates
The preparation of the financial statements in conformity with GAAP in the US 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 in the accompanying financial statements involved the valuation of depreciable lives of the fixed assets, valuation of long-lived assets and recoverability of accounts receivables.
Cash and Cash Equivalents
The Company considers all highly-liquid securities with original maturities of three (3) months or less when acquired, to be cash equivalents. The Company had no financial instruments that qualified as cash equivalents at December 31, 2020 and 2019.
Concentration of Credit Risk
The Company maintains its cash in bank deposit accounts, which may, at times, may exceed federally insured limits. The Company had no cash balances in excess of FDIC insured limits at December 31, 2020 or 2019.
Property and equipment
All property and equipment are recorded at cost and depreciated over their estimated useful lives, generally three (3) and five (5) years, using the straight-line method. Upon sale or retirement, the cost and related accumulated depreciation are eliminated from their respective accounts, and the resulting gain or loss is included in the results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred.
Impairment of Long-Lived Assets
A long-lived asset is tested for impairment whenever events or changes in circumstances indicate that its carrying value amount may not be recoverable. An impairment loss is recognized when the carrying amount of the asset exceeds the sum of the undiscounted cash flows resulting from its use and eventual disposition. The impairment loss is measured as the amount by which the carrying amount of the long-lived assets exceeds its fair value.
Booyah Technologies LLC
Notes to the Financial Statements
Note 2 – Summary of Significant Accounting Policies, continued
Risks and Uncertainties
In March 2020, the World Health Organization declared the outbreak of novel coronavirus disease (“COVID-19”) as a pandemic. Management is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might results from the outcome of this uncertainty.
On March 27, 2020, in response to the COVID-19 pandemic, the U.S. Congress enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which among other things, contains provisions for deferral of the employer portion of social security taxes incurred through the end of calendar 2020 and an employee retention credit, a refundable payroll credit for 50% of wages and health benefits paid to employees not providing services due to the COVID-19 pandemic.
On May 4, 2020, the Company entered into a Paycheck Protection Program Term Note (the “PPP Note”) with TD Bank, N.A. pursuant to the Paycheck Protection Program (the “Program”) of the CARES Act administered by the U.S. Small Business Administration. The Company received total proceeds of $28,750 from the PPP Note.
Revenue Recognition
The Company recognizes revenues under the framework prescribed in ASC 606 “Revenues from Contracts with Customers”. This revenue recognition standard has a five-step process: a) determine whether a contract exists; b) identify the performance obligations; c) determine the transaction price; d) allocate the transaction price; e) recognize revenue when (or as) performance obligations are satisfied. The Company’s principal operations are the delivery of equipment and technology and the installation of integrated systems in homes. As a result, Booyah has two (2) distinct performance obligations, the delivery of equipment and technology and the installations services.
Revenue will be recognized for the delivery of equipment and technology upon acceptance of the equipment by the customer by transferring control of the goods to the customer. Revenue will be recognized for the installation services ratably over the installation period. Contract balances primarily consist of receivables and customer deposits related to arrangements with customers. Customer deposits for the years ended December 31, 2020 and 2019 amounted to $56,000 and $11,500, respectively.
Income Taxes
As a limited liability company, the Company is taxed as a partnership. The Partnership is not a taxpaying entity for federal or state income tax purposes; accordingly, a provision for income taxes had not been recorded in the accompanying financial statements. Partnership income or losses for periods were reflected in the partner’s individual tax return.
As defined by FASB ASU Topic 740, Income Taxes, no provision or liability for materially uncertain tax positions was deemed necessary by management. Therefore, no provision or liability for uncertain tax positions has been included in these financial statements.
Recent Accounting Pronouncements
Certain FASB Accounting Standard Updates (“ASU”) that are not effective are not expected to have a significant effect on the Company’s financial position or results of operations.
Booyah Technologies LLC
Notes to the Financial Statements
Note 3 – Accounts Receivable
The Company adopted FASB ASU 2016-13 (Topic 326), Measurement of Credit Losses on Financial Instruments, at inception. This ASU requires the Company to report its trade receivables not held for sale net of an allowance for credit losses. Accounts receivable are reflected net of an allowance for credit losses in the amount of $62,411 and $17,925 at December 31, 2020 and 2019, respectively.
Note 4 – Property and Equipment
Property and equipment consisted of the following:
| | | December 31, | |
| | | 2020 | | | 2019 | |
| | | | | | | |
| Automobiles | | $ | 122,444 | | | $ | 97,195 | |
| Furniture | | | 22,322 | | | | 22,322 | |
| | | | 144,766 | | | | 119,517 | |
| Less: Accumulated depreciation | | | 73,335 | | | | 53,896 | |
| | | $ | 71,431 | | | $ | 65,621 | |
Depreciation expense for the years ended December 31, 2020 and 2019 was $ 19,439 and $14,686, respectively.
Note 5 – Notes Payable
On May 4, 2020, the Company entered into a loan with DT Bank as the lender (“Lender”) in an aggregate principal amount of $28,750 (the “Loan”) pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act. The Loan is evidenced by a promissory note (the “PPP Note”) dated May 4, 2020 and matures on May 4, 2022. The PPP Note bears interest at a rate of 1.000% per annum, with the first six months of payments deferred. Principal and interest are payable monthly commencing on November 4, 2020 and may be prepaid by the Company at any time prior to maturity with no prepayment penalties. In order to be entitled to forgiveness, funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent utilities, and interest on other debt obligations under the terms and conditions outlined by the PPP. The Company intends to use all or a significant majority of the Loan amount for the qualifying expenses.
The Company has entered into various installment loans for vehicles used in operations. The notes have due over a period ranging from five (5) to six (6) years and interest rates ranging from 4.05% to 8.85% and are collateralized by the related vehicles. Interest expense for the years ended December 31, 2020 and 2019 amounted to $6,920 and $4,413, respectively.
Booyah Technologies LLC
Notes to the Financial Statements
Note 5 – Notes Payable, continued
Current maturities of long-term debt are as follows:
| Years Ended December 31, | | 2020 | |
| | | | |
| 2021 | | $ | 21,077 | |
| 2022 | | | 18,770 | |
| 2023 | | | 13,617 | |
| 2024 | | | 11,346 | |
| 2035 | | | 9,303 | |
| There after | | | 1,297 | |
| | | | 75,410 | |
| Less: current portion | | | (21,077 | ) |
| Long-term debt | | $ | 54,333 | |
Note 6 – Commitments and Contingencies
Legal Matters
From time to time, the Company may be involved in asserted claims or litigation relating to claims arising out of operations in the normal course of business. Management is unaware of any pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s operations.
Note 7 – Subsequent Events
Subsequent to year end, the Company submitted a loan forgiveness application to the U.S. Small Business Administration and was approved for full forgiveness on August 9, 2021.
On May 31, 2021, 100% of the membership interest of Booyah was acquired by RC-1, Inc., resulting in the Company becoming a wholly-owned subsidiary of RC-1, Inc.
