EXHIBIT 99.1
Keegan’s Seafood Grille, Inc.
Notes to Financial Statements
For the Year Ended December 31, 2021
INDEPENDENT AUDITOR’S REPORT
To the Shareholder and Officers
of Keegan’s Seafood Grille, Inc.
Indian Rocks Beach, Florida
We were engaged to audit the accompanying financial statements of Keegan’s Seafood Grille, Inc (a Florida corporation), which comprise the balance sheet as of December 31, 2021 and the related statements of income, retained earnings, and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on conducting the audit in accordance with auditing standards generally accepted in the United States of America. Because of the matter described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.
Basis for Disclaimer of Opinion
We were unable to confirm bank balances nor obtain bank statements for a material amount of the cash showing in the financial statements. We were also unable to substantiate sales tax liabilities paid nor verify certain credit card statements, because management was unable to provide. We were unable to obtain sufficient appropriate audit evidence about those noted items by other auditing procedures.
Because we were not engaged as auditors until after the end of the year, we were not present to observe the taking of physical inventories at December 31, 2021 (stated at $24,399), and we were unable to satisfy ourselves concerning inventory quantities on hand at those dates by other auditing procedures.
Detailed property records have not been maintained and certain prior-year records and supporting data were not available for our audit. Therefore, we were not able to obtain sufficient appropriate audit evidence about the amounts at which other assets, machinery and equipment, and related accumulated depreciation are recorded in the accompanying balance sheet at December 31, 2021.
Disclaimer of Opinion
Because of the significance of the matter(s) described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements referred to in the first paragraph.
John F. Coggin, CPA
Irving, Tx. 75039
March 31, 2022
1 |
Keegan’s Seafood Grille, Inc.
Balance Sheet
December 31, 2021
|
| December 31, 2021 |
| |
ASSETS |
|
|
| |
Current Assets |
|
|
| |
Cash in Banks |
| $ | 325,643 |
|
Employee Loan |
|
| 875 |
|
Inventory |
|
| 24,399 |
|
Total Current Assets |
|
| 350,917 |
|
|
|
|
|
|
Fixed Assets |
|
|
|
|
Leasehold Improvements |
|
| 8,559 |
|
Furniture and Equipment |
|
| 86,355 |
|
Accumulated Depreciation |
|
| (93,126 | ) |
Total Fixed Assets |
|
| 1,788 |
|
|
|
|
|
|
Other Assets |
|
|
|
|
Non-Compete Agreement |
|
| 16,210 |
|
Goodwill |
|
| 309,439 |
|
Security Deposit |
|
| 6,125 |
|
Accumulated Amortization |
|
| (269,565 | ) |
Total Other Assets |
|
| 62,209 |
|
TOTAL ASSETS |
|
| 414,914 |
|
|
|
|
|
|
LIABILITIES & EQUITY |
|
|
|
|
Current Liabilities |
|
|
|
|
Accounts Payable |
|
| 11,582 |
|
Employee Cash Payback |
|
| 1,711 |
|
Child Support Garnishments |
|
| 598 |
|
Gift Certificate |
|
| 17,853 |
|
Sales Tax Payable |
|
| 42,412 |
|
Payroll Liabilities |
|
| 10,271 |
|
Total Current Liabilities |
|
| 84,427 |
|
|
|
|
|
|
TOTAL LIABILITIES |
|
| 84,427 |
|
|
|
|
|
|
Shareholder’s Equity |
|
|
|
|
Capital Stock ($1.00 par, $1,000 shares authorized, |
|
| 1,000 |
|
issued and outstanding) |
|
|
|
|
Retained Earnings |
|
| 329,487 |
|
Total Equity |
|
| 330,487 |
|
|
|
|
|
|
TOTAL LIABILITIES & SHAREHOLDER’S EQUITY |
| $ | 414,914 |
|
2 |
Keegan’s Seafood Grille, Inc.
Statement of Income and Retained Earnings
For the Year Ended December 31, 2021
|
| 2021 |
| |
Income |
|
|
| |
Sales |
| $ | 3,370,740 |
|
Total Revenue |
|
| 3,370,740 |
|
|
|
|
|
|
Cost of Goods Sold |
|
|
|
|
Cost of Goods Sold |
|
| 1,632,956 |
|
Total Cost of Goods Sold |
|
| 1,632,956 |
|
|
|
|
|
|
Gross Profit |
|
| 1,737,784 |
|
|
|
|
|
|
Expenses |
|
|
|
|
Overdraft Charges |
|
| 75 |
|
Cash Over/Short |
|
| 1,239 |
|
Advertising Expense |
|
| 50,808 |
|
Aquarium Expense |
|
| 4,035 |
|
Automobile Expense |
|
| 2,247 |
|
Bank Service Charges |
|
| 558 |
|
Business Licenses & Permits |
|
| 642 |
|
Cash Drawer Payouts |
|
| 3,000 |
|
Charitable Contribution |
|
| 2,820 |
|
Computer and Internet Expense |
|
| 314 |
|
Continuing Education |
|
| 120 |
|
Due and Subscription |
|
| 377 |
|
Equipment Rental |
|
| 2,262 |
|
Insurance Expense |
|
| 23,330 |
|
Linen Expense |
|
| 16,064 |
|
Office Supplies |
|
| 4,598 |
|
Payroll Expenses |
|
| 1,059,757 |
|
Postage and Delivery |
|
| 350 |
|
Printing and Reproduction |
|
| 1,049 |
|
Professional Fees |
|
| 6,005 |
|
Reconciliation Discrepancies |
|
| (34,183 | ) |
Rent Expense |
|
| 56,386 |
|
Repairs and Maintenance |
|
| 30,260 |
|
Security Expense |
|
| 255 |
|
Supplies |
|
| 45,722 |
|
Utilities |
|
| 92,358 |
|
Total Expense |
|
| 1,370,448 |
|
|
|
|
|
|
Net Ordinary Income |
|
| 367,336 |
|
|
| 2021 |
| |
|
|
|
| |
Other Income/Expense: |
|
|
| |
PPP Loan Forgiven |
|
| 533,310 |
|
Sales Tax Allowances |
|
| (30 | ) |
3% CC Tips |
|
| 15,864 |
|
Administrative Fees |
|
| 250 |
|
Total Other Income/Expense |
|
| 549,394 |
|
|
|
|
|
|
Net Income |
|
| 916,730 |
|
Beginning Retained Earnings |
|
| (587,243 | ) |
Ending Retained Earnings |
| $ | 329,487 |
|
3 |
Keegan’s Seafood Grille, Inc.
Statement of Cash Flows
For the Years Ended December 31, 2021
|
| 2021 |
| |
OPERATING ACTIVITIES |
|
|
| |
|
|
|
| |
Net Income |
| $ | 916,730 |
|
Adjustments to reconcile Net Income |
|
|
|
|
to net cash provided by operations: |
|
|
|
|
Employee Loans |
|
| (875 | ) |
Food Inventory |
|
| 5,055 |
|
Accounts Payable |
|
| (438 | ) |
Employee Cash Payback |
|
| 1,711 |
|
Child Support Garnishments |
|
| 598 |
|
Gift Certificate |
|
| 641 |
|
Payroll Liabilities |
|
| 10,861 |
|
Sales Tax Payable |
|
| 32,606 |
|
Net cash provided by Operating Activities |
|
| 966,889 |
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
Furniture and Equipment |
|
| (1,786 | ) |
Net cash provided by Investing Activities |
|
| (1,786 | ) |
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
PPP Loan |
|
| (211,300 | ) |
Shareholder Distributions |
|
| (570,000 | ) |
Net cash provided by Financing Activities |
|
| (781,300 | ) |
|
|
|
|
|
Net cash increase for period |
|
| 183,803 |
|
Cash at beginning of period |
|
| 141,840 |
|
Cash at end of period |
| $ | 325,643 |
|
4 |
Notes to Financial Statements
For the Year Ended December 31, 2021
NOTE 1. NATURE OF ORGANIZATION
Keegan’s Seafood Grille, Inc. (The “Company”), located in Indian Rocks Beach, serves for over 35 years American cuisine with a focus on fresh, local seafood. The restaurant offers takeout service in addition to its full-service dining room. The Company prides itself on its excellent customer service and has been featured on the Food Network channel.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
The Company maintains it books and records, and corresponding financial statements, on the accrual method of accounting in compliance with generally accepted accounting principles recognized in the United States of America.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America 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 reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Management periodically evaluates estimates used in the preparation of the financial statements for continued reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. It is reasonably possible that changes may occur in the near term, within one year, that would affect management’s estimates with respect to the percentage of completion method, allowance for doubtful accounts, accrued expenses and percentage of completion of jobs in process.
Balance Sheet Classifications
A one-year time period is used as classifying all other current assets and liabilities.
Cash and Cash Equivalents
Cash equivalents are short term, interest bearing, highly liquid investments with original maturities of three months or less, unless the investments are held for meeting restrictions of a capital nature. Also, certificates of deposit are considered a current asset as they can be converted immediately into cash despite a penalty for early withdrawal.
Revenue recognition
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expect to receive in exchange for those products or services. Given the nature of the Company’s business, revenue is generally recognized at the point of sale.
5 |
Notes to Financial Statements
For the Year Ended December 31, 2021
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Property and equipment
Property and equipment are stated at cost. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful life of the improvement or the lease term. Expenditures for repairs and maintenance are charged to expense as incurred.
For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period.
Impairment of long-lived assets
The Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying value of such assets may not be fully recoverable. impairment is present when the sum of undiscounted estimated future cash Flows expected to result from use of the assets is less than carrying value. If impairment is present, the carrying value of the impaired asset is reduced to its fair value. During the years ended December 31, 2021, there was no impairment losses recognized for long-lived assets.
Advertising Costs
Advertising costs are expensed as incurred. Total advertising cost for the years ended December 31, 2021 was $50,808.
Income Taxes
Provisions for income taxes are not reflected in the financial statements. The Company has elected to be taxed as a Subchapter S Corporation with the Internal Revenue Service. Accordingly, the company is a “pass thru” entity and all income and/or losses are passed directly to the shareholder. The Company is subject to Florida franchise tax, there was no liability as of the financial statements.
If it is probable that an uncertain tax position will result in a material liability and the amount of the liability can be estimated, the estimated liability is accrued. If the Company were to incur any income tax liability in the future, interest on any income tax liability would be reported as interest expense, and penalties on any income tax would be reported as income taxes. As of December 31, 2021, there were no uncertain tax positions.
Concentration Risks
There are concentrations on revenue for the Company. The Company is located in a single location in Indian Rocks Beach, Florida and is accordingly impacted by the Indian Rocks Beach and Florida economic environment which in turn is significantly impacted by tourism activity.
Subsequent Events and Date of Management Review
These financial statements have been updated for subsequent events occurring through March 31, 2022 which is the date these financial statements were available to be issued.
NOTE 3. INCOME TAXES
The Federal IRS filed returns remain open to potential examination by the IRS for a period of three years after the returns are filed. The current open are for years after 2018.
NOTE 4. RELATED PARTY TRANSACTIONS
The Company has no related party transaction.
NOTE 5. LEASE
The Company has various operating leases. The following is a schedule of future minimum rental payment:
Year |
| Location |
| Amount |
2021 |
| Indian Rocks Beach | $165/month | |
2021 | Indian Rocks Beach | $4,589/month |
Total lease for year ended December 31, 2021 was $56,386.
6 |
Notes to Financial Statements
For the Year Ended December 31, 2021
NOTE 6. FAIR VALUE MEASUREMENTS
The Company records financial assets and financial liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date (exit price). The Company incorporates assumptions that market participants would use in pricing the asset or liability and utilizes market data to the maximum extent possible. These fair value measurements incorporate nonperformance risk (i.e., the risk that an obligation will not be fulfilled). In measuring fair value, the Company reflects the impact of credit risk on liabilities, as well as any collateral. The Company also considers the credit standing of counterparties in measuring the fair value of assets.
The Company generally applies fair value techniques on a non-recurring basis associated with valuing potential impairment loss related to long-lived assets.
The inputs used in applying valuation techniques include assumptions that market participants would use in pricing the asset or liability (i.e., assumptions about risk). Inputs may be observable or unobservable. The Company uses observable inputs in the Company’s valuation techniques and classifies those inputs in accordance with the fair value hierarchy established by applicable accounting guidance, which prioritizes those inputs. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
NOTE 6. FAIR VALUE MEASUREMENTS, Continued
The three levels are defined as follows:
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company is subject to various claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. Management believes that any liability that may ultimately result from the resolution on these type matters will not have a material effect on the financial condition or results of operations of the Company. Presently management is of the opinion that all pending legal or claim matters will be vigorously contested with any settlement of any opens matter to be covered by insurance and/or to be immaterial to the financial condition of the Company. The Company has no purchase commitments with vendors other than short term purchase orders for ongoing construction. There are no future annual minimum purchase agreements.
NOTE 8. NOTES PAYABLE
The Company had no Notes Payable as of December 31, 2021.
7 |
Notes to Financial Statements
For the Year Ended December 31, 2021
NOTE 9. FIXED ASSETS
Components of fixed assets and accumulated depreciation will be recorded at cost and depreciated over their estimated useful lives.
|
| 2021 |
|
| |
Leasehold Improvements |
| $ | 8,559 |
|
|
Furnitures and Equipment |
|
| 86,355 |
|
|
Accumulated Depreciation |
|
| (93,126 | ) | Based on SL, 25-40 year life |
Net Fixed Assets |
| $ | 1,788 |
|
|
Depreciation expense for the year end December 31, 2021 was $-0-.
NOTE 10. NEW PRONOUNCEMENT
Leases
In February 2016, the FASB issued ASU 2016-02, Leases. This updated requires lessees to recognize at the lease commencement date a lease liability which is the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right of use assets, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. In June 2020, the FASB issued ASU 2020-05, which allowed The Company has concluded to defer application by one additional year, making these changes effective for the Company for annual reporting periods beginning after December 15, 2021. The Company elected to defer application and is currently evaluating the impact of the adoption of this standard on its financial statements.
8 |