Exhibit 99.2
WHE AGENCY, INC.
June 30, 2021
CONTENTS
Page | ||
Independent Auditor’s Report | ||
Financial Statements | ||
Balance Sheets (Unaudited) | 1 | |
Statements of Operations (Unaudited) | 2 | |
Statement of Changes in Shareholders’ Equity (Unaudited) | 3 | |
Statements of Cash Flows (Unaudited) | 5 | |
Notes to Financial Statements | 6 |
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WHE AGENCY, INC.
June 30, 2021 | December 31, 2020 | |||||||
Assets | (Unaudited) | |||||||
Current Assets | ||||||||
Cash | $18,946 | $3,508 | ||||||
Accounts receivable | 533,860 | 599,596 | ||||||
Total Current Assets | 552,806 | 603,104 | ||||||
Total Assets | $ | 552,806 | $ | 603,104 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 427,088 | $ | 483,512 | ||||
Total Current Liabilities | 427,088 | 483,512 | ||||||
Total Liabilities | 427,088 | 483,512 | ||||||
Shareholders’ Equity | ||||||||
Preferred stock, $0.001 par value,1,000,000 shares authorized, 0 shares issued and outstanding | - | - | ||||||
Common stock no par value: 4,000,000 shares authorized, 2,033,000 and 2,000,000 shares issued and outstanding, respectively | - | - | ||||||
Additional paid in capital | 45,525 | 37,250 | ||||||
Retained earnings | 80,193 | 82,342 | ||||||
125,718 | 119,592 | |||||||
Total Liabilities and Shareholders’ Equity | $ | 552,806 | $ | 603,104 |
The accompanying notes are an integral part of these financial statements.
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WHE AGENCY, INC.
STATEMENT OF OPERATIONS (Unaudited)
For the Three Months Ended | For the Three Months Ended | For the Six Months Ended | For the Period from March 5, 2020 (inception) through | |||||||||||||
June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||||||
Net revenue | $ | 229,638 | $ | 72,825 | $ | 464,396 | $ | 72,825 | ||||||||
Operating expenses | ||||||||||||||||
General and administrative | 284,378 | 61,375 | 466,545 | 61,745 | ||||||||||||
Total operating expenses | 284,378 | 61,375 | 466,545 | 61,745 | ||||||||||||
Income (Loss) from operations | (54,740 | ) | 11,450 | (2,149 | ) | 11,080 | ||||||||||
Net Income (Loss) | $ | (54,740 | ) | $ | 11,450 | $ | (2,149 | ) | $ | 11,080 |
The accompanying notes are an integral part of these financial statements.
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STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
FOR THE PERIOD FROM MARCH 5, 2020 (INCEPTION) THROUGH JUNE 30, 2020
Preferred Stock | Common Shares | Paid In | Retained | Shareholders' | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||||||||
At inception | - | $ | - | 2,000,000 | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
Contributions | - | - | - | - | 25,000 | - | 25,000 | |||||||||||||||||||||
RSA's issued for services | - | - | - | - | 3,838 | - | 3,838 | |||||||||||||||||||||
Net income | - | - | - | - | - | 11,080 | 11,080 | |||||||||||||||||||||
Balance as of June 30, 2020 | - | $ | - | 2,000,000 | $ | - | $ | 28,838 | $ | 11,080 | $ | 39,918 |
WHE AGENCY, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2021
Preferred Stock | Common Shares | Paid In | Retained | Shareholders' | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||||||||
Balance as of December 31, 2020 | - | $ | - | 2,000,000 | $ | - | $ | 37,250 | $ | 82,342 | $ | 119,592 | ||||||||||||||||
RSA's issued for services | - | - | 33,000 | - | 8,275 | - | 8,275 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (2,149 | ) | (2,149 | ) | |||||||||||||||||||
Balance as of June 30, 2021 | - | $ | - | 2,033,000 | $ | - | $ | 45,525 | $ | 80,193 | $ | 125,718 |
The accompanying notes are an integral part of these financial statements.
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WHE AGENCY, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30, 2020
Preferred Stock | Common Shares | Paid In | Retained | Shareholders' | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||||||||
Balance as of April 1, 2020 | - | $ | - | 2,000,000 | $ | - | $ | - | $ | (370 | ) | $ | (370 | ) | ||||||||||||||
Contributions | - | - | - | - | 25,000 | - | 25,000 | |||||||||||||||||||||
RSA's issued for services | - | - | - | - | 3,838 | - | 3,838 | |||||||||||||||||||||
Net income | - | - | - | - | - | 11,450 | 11,450 | |||||||||||||||||||||
Balance as of June 30, 2020 | - | $ | - | 2,000,000 | $ | - | $ | 28,838 | $ | 11,080 | $ | 39,918 |
WHE AGENCY, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30, 2021
Preferred Stock | Common Shares | Paid In | Retained | Shareholders' | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||||||||
Balance as of April 1, 20201 | - | $ | - | 2,000,000 | $ | - | $ | 41,365 | $ | 134,933 | $ | 176,298 | ||||||||||||||||
RSA's issued for services | - | - | 33,000 | - | 4,160 | - | 4,160 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (54,740 | ) | (54,740 | ) | |||||||||||||||||||
Balance as of June 30, 2021 | - | $ | - | 2,033,000 | $ | - | $ | 45,525 | $ | 80,193 | $ | 125,718 |
The accompanying notes are an integral part of these financial statements.
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WHE AGENCY, INC.
STATEMENTS OF CASH FLOWS (Unaudited)
For the Six Months Ended | For the Period from March 5, 2020 (inception) through | |||||||
June 30, 2021 | June 30, 2020 | |||||||
(Unaudited) | (Unaudited) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Income (Loss) | $ | (2,149 | ) | 11,080 | ||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Share-based compensation | 8,274 | 3,839 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 65,736 | (173,270 | ) | |||||
Accounts payable | (56,423 | ) | 138,616 | |||||
Net Cash Provided By (Used In) Operating Activities | 15,438 | (19,735 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Capital contribution | - | 25,000 | ||||||
Net Cash Provided By Financing Activities | - | 25,000 | ||||||
Net Change in Cash | 15,438 | 5,265 | ||||||
Cash - Beginning of period | 3,508 | - | ||||||
Cash - End of period | $ | 18,946 | $ | 5,265 | ||||
SUPPLEMENTARY CASH FLOW INFORMATION: | ||||||||
Cash Paid During the period for: | ||||||||
Income taxes | $ | - | $ | - | ||||
Interest | $ | - | $ | - |
The accompanying notes are an integral part of these financial statements.
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WHE AGENCY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
WHE Agency, Inc. (“we,” “us,” the “Company,” or “WHE”), is a talent management and public relations agency dedicated to the representation and management of family- and lifestyle-focused influencers and digital creators. WHE currently represents 55+ family- and lifestyle-focused creators that reach a combined audience of over 50 million followers and growing. The Company was initially incorporated under the laws of the State of Delaware on March 5, 2020.
Basis of Presentation
The financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). These unaudited financial statements should be read in conjunction with the Company’s audited financial statements and the notes for the year ended December 31, 2020.
On July 20, 2021, the Company effected a 2,000-for-1 reverse stock split. As a result, all share information in the accompanying financial statements has been adjusted as if the reverse stock split happened on the earliest date presented.
Use of Estimates
The preparation of 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 those estimates.
Cash
The Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents. There were no cash equivalents as of December 31, 2020.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments and assets subjecting the Company to concentration of credit risk consist primarily of cash and trade accounts receivable. The Company’s cash is maintained at major U.S. financial institutions. Deposits in these institutions may exceed the amount of insurance provided on such deposits.
The Company’s customers are concentrated in the United States.
The Company provides credit in the ordinary course of business. The Company performs ongoing credit evaluations of its customers and monitors for allowances for doubtful accounts on factors surrounding the credit risk of specific customers, historical trends, and other information.
Accounts Receivable
The Company sells its services to customers on an open credit basis. Accounts receivables are uncollateralized, non-interest-bearing customer obligations. Accounts receivables are typically due within 45 days. Provisions for estimated uncollectible accounts receivable are made for individual accounts based upon specific facts and circumstances, including criteria such as their age, amount, and customer standing. In the opinion of management, substantially all account receivables are considered to be realizable at the amounts stated in the accompanying balance sheet, and no allowance for doubtful accounts is deemed to be necessary as of June 30, 2021.
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Revenue Recognition
Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:
● | identification of the contract, or contracts, with a customer; |
● | identification of the performance obligations in the contract; |
● | determination of the transaction price; |
● | allocation of the transaction price to the performance obligations in the contract; and |
● | recognition of revenue when, or as, we satisfy a performance obligation. |
Personal Management Services
The Company provides Talent with personal management services, including publicity and public relations, image consulting, special event promotions, and digital development. The Company is also responsible for securing and negotiating brand opportunities on behalf of Talent. Upon request, the Company also provides management and consulting services in network and channel negotiations and helps Talent secure and develop signature collections/collaborations with marque labels. The Company has focused on long-term career opportunities, emphasizing securing projects that share the Talent’s vision. The Talent maintains all rights and privileges to approve or disapprove opportunities presented by Company to Talent. As compensation for the Management Services, the Company is entitled to receive 20% of gross earnings received by the Talent for services rendered. The Company, viewed as an Agent, recognizes revenue net of the payments received by the Talent. Contract amounts for Personal Management Services range from approximately $500-$25,000, with the Company’s net revenue ranging from $100-$5,000 per contract. During the three and six months ended June 30, 2021, the Company recorded Personal Management Services revenue of $229,638 and $464,396, respectively. The Personal Management Service revenue is transferred at a point in time when the services have been completed.
Advertising Costs
The Company expenses the costs associated with advertising as they are incurred. The Company incurred $4,776 and $14,163 for advertising costs during the three and six months ended June 30, 2021, respectively.
Stock Based Compensation
The Company follows the requirements of FASB ASC 718-10-10, Share Based Payments with regards to stock-based compensation issued to employees and non-employees. Restricted stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods. The fair value of a stock award is equal to the fair market value of a share of Company stock on the grant date. The Company utilized Internal Revenue Code (“IRC”) Section 409Avaluation to determine grant date fair value of shares of its common stock.
Income Taxes
The Company files its income taxes on the accrual basis as Sub-chapter S Corporation for Federal income tax purposes, and thus no income tax expense has been recorded in the statements. Income from the corporation is taxed to the shareholders in their individual returns on their share of the Company’s earnings. The Company’s net income or loss is allocated among the shareholders in accordance with the By-Laws of the Company.
The Company does not have any uncertain tax positions which must be considered for disclosure.
The Federal income tax returns of the Company for 2020 are subject to examination by the IRS, generally for a period of three years from the date they are filed. There are no examinations currently in process.
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NOTE 2 – SHAREHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue up to 1,000,000 shares of preferred stock, par value $0.001 per share. The rights and features of the preferred stock are to be determined by the Board prior to the issuance of preferred shares. As of the date of this filing, those rights and features have yet to be determined by the Board. As of December 31, 2020, the Company had 0 shares of preferred stock issued and outstanding.
Common Stock
The Company is authorized to issue up 4,000,000 shares of common stock at no par value. On March 5, 2020, the Company issued 2,000,000 shares of common stock to its founders. As of December 31, 2020, the Company had 2,000,000 shares issued and outstanding.
On July 20, 2021, the Company effectuated a two thousand-for-one (2,000:1) reverse stock split of its common stock. This became effective on July 20, 2021. No fractional shares were issued in connection with the Reverse Stock Split as all fractional shares were “rounded up” to the next whole share. As a result, all share information in the accompanying financial statements has been adjusted as if the reverse stock split happened on the earliest date presented.
Restricted Stock Awards
From March 5, 2020 (inception) through December 31, 2020, the Company granted 630,000 restricted stock awards “RSA’s. The RSU’s had a grant date fair value of $83,475. During the six months ended June 30, 2021, the Company recognized stock-based compensation expense of $8,274. As of June 30, 2021, there was $62,951 of unrecognized compensation related to non-vested restricted stock.
A summary of the activity related to RSAs for the six months ended June 30, 2021, is presented below:
Total | Weighted average | Weighted average | ||||||||||
Restricted stock awards (RSA’s) | shares | fair value | years | |||||||||
RSA’s non-vested at December 31, 2020 | 630,000 | $ | 0.13 | 3.74 | ||||||||
RSA’s granted | - | - | - | |||||||||
RSA’s vested | (33,000 | ) | 0.13 | - | ||||||||
RSA’s forfeited | - | - | - | |||||||||
RSA’s non-vested June 30, 2021 | 607,000 | $ | 0.13 | 3.26 |
NOTE 3 – RISKS AND UNCERTAINTIES
COVID 19
The COVID-19 pandemic has created significant worldwide uncertainty, volatility, and economic disruption. The extent to which COVID-19 will adversely impact our business, financial condition, and operations results depends on numerous factors, which are highly uncertain, rapidly changing, and uncontrollable. These factors include, but are not limited to: (i) the duration and scope of the pandemic; (ii) governmental, business, and individual actions that have been and continue to be taken in response to the pandemic, including travel restrictions, quarantines, social distancing, work-from-home, shelter-in-place orders, and shut-downs; (iii) the impact on U.S. and global economies and the timing and rate of economic recovery; (iv) potential adverse effects on the financial markets and access to capital; (v) potential goodwill or other impairment charges; (vi) increased cybersecurity risks as a result of pervasive remote working conditions; and (vii) our ability to effectively carry out our operations due to any adverse impacts on the health and safety of our employees and their families.
The extent to which COVID-19 impacts the Company’s operations or those of its third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. Any such disruptions or losses we incur could have a material adverse effect on the Company’s financial results and our ability to conduct business as expected.
NOTE 4 – SUBSEQUENT EVENTS
On July 20, 2021, Creatd, Inc. entered into a stock purchase agreement to purchase 44% ownership and 55% of voting power of the issued and outstanding shares of WHE Agency, Inc. The aggregate closing consideration was $935,000, which consists of a combination of $144,750 in cash and $790,250 in the form of 224,503 shares of the Company’s restricted common stock at a price of $3.52 per share. Based on the purchase price of $935,000 for 44% ownership.
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