EXHIBIT 99.2

 

BLACK OAK GALLERY

BALANCE SHEETS

 

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

(Unaudited)

 

 

(Audited)

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash

 

$163,566

 

 

$366,410

 

Deferred expenses

 

 

525,217

 

 

 

-

 

Inventory

 

 

103,664

 

 

 

65,299

 

Total current assets

 

 

792,447

 

 

 

431,709

 

Furniture and equipment, net

 

 

681,896

 

 

 

702,294

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$1,474,343

 

 

$1,134,003

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$177,228

 

 

$213,471

 

Accrued liabilities

 

 

2,076,810

 

 

 

1,584,220

 

Total current liabilities

 

 

2,254,038

 

 

 

1,797,691

 

Deferred tax liability

 

 

101,900

 

 

 

95,717

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

2,355,938

 

 

 

1,893,408

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, no par value; 100,000 shares authorized; 39,772.74 shares issued and outstanding at March 31, 2016; 10,000 shares issued and outstanding at December 31, 2015;

 

$10,100

 

 

$100

 

Accumulated deficit

 

 

(891,695)

 

 

(759,505)

Total shareholders' deficit

 

 

(881,595)

 

 

(759,405)

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

 

$1,474,343

 

 

$1,134,003

 

 

See accompanying notes to the financial statements.

 

 
1
 

 

BLACK OAK GALLERY

STATEMENTS OF OPERATIONS

UNAUDITED

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

Revenue

 

$3,372,474

 

 

$2,845,407

 

Cost of goods sold

 

 

2,912,104

 

 

 

2,451,667

 

GROSS PROFIT

 

 

460,370

 

 

 

393,740

 

Selling, general and administrative expenses

 

 

515,692

 

 

 

420,637

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

 

(55,322)

 

$(26,897)

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

76,868

 

 

 

102,441

 

NET LOSS

 

$(132,190)

 

$(129,338)

 

See accompanying notes to the financial statements.

 

 
2
 

 

BLACK OAK GALLERY

STATEMENTS OF CASH FLOWS

UNAUDITED

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

 

$(132,190)

 

$(129,338)

Adjustments to reconcile net loss to net cash from operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

48,111

 

 

 

40,309

 

Deferred expenses

 

 

(175,073)

 

 

(138,413)

Deferred rent

 

 

(28,484)

 

 

-

 

Deferred tax liability

 

 

6,183

 

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Inventory

 

 

(38,365)

 

 

(7,643)

Increase (decrease) in:

 

 

 

 

 

 

 

 

Accounts payable

 

 

(36,244)

 

 

70,605

 

Accrued liabilities

 

 

(169,215)

 

 

(33,969)

 

 

 

 

 

 

 

 

 

NET CASH USED IN OPERATING ACTIVITIES

 

 

(175,131)

 

 

78,377

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Equipment purchases

 

 

(27,713)

 

 

(173,845)

NET CASH USED IN INVESTING ACTIVITIES

 

 

(27,713)

 

 

(173,845)

 

 

 

 

 

 

 

 

 

Decrease in cash

 

 

(202,844)

 

 

(95,468)

CASH AT BEGINNING OF YEAR

 

 

366,410

 

 

 

591,585

 

CASH AT END OF YEAR

 

$163,566

 

 

$496,117

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Income taxes paid

 

$70,000

 

 

$220,998

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE FOR FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Common stock shares issued in settlement of liability

 

$10,000

 

 

$-

 

Accrual of business tax

$

688,289

$

553,652

 

See accompanying notes to the financial statements.

  

 
3
 

 

BLACK OAK GALLERY

Notes to the Financial Statements

For the three months ended March 31, 2016

Unaudited

 

Note 1. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC") for interim financial information. Accordingly, these financial statements do not include all of the information and footnotes required for complete financial statements and should be read in conjunction with the audited financial statements and accompanying notes.

 

In management's opinion, the unaudited financial statements reflect all adjustments necessary to present fairly the financial position as of March 31, 2016, results of operations, and cash flows for all periods presented. The interim results presented are not necessarily indicative of results that can be expected for a full year.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates are based on knowledge of current events and anticipated future events and accordingly, actual results may differ from those estimates.

 

Risks Related to Cash

 

The Company maintains cash in bank deposit accounts, which at times may exceed federally insured limits. At March 31, 2016, and December 31, 2015, the Company did not have any amounts in deposit accounts in excess of federal insurance limits. The Company also maintains cash in its cash vaults. The Company has not experienced any losses in such accounts.

 

Cash Equivalents

 

The Company considers only highly liquid investments such as money market funds and commercial paper with maturities of 90 days or less at the date of their acquisition as cash equivalents. At March 31, 2016, and December 31, 2015, the Company did not hold any such investments.

 

Note 2. Equity

 

The Company is authorized to issue 100,000 shares of its common stock without value. At March 31, 2016, and December 31, 2015, the total number of shares of the Company's common stock that were issued and outstanding was 39,772.74 and 10,000, respectively.

 

 
4
 

 

BLACK OAK GALLERY

Notes to the Financial Statements

For the three months ended March 31, 2016

Unaudited

 

Common Stock

 

On September 28, 2012, the date of the Company's inception, the Company issued an aggregate of 10,000 shares of its common stock, 8,750 shares to Salwa Ibrahim and 1,250 shares to Derek Peterson, in consideration of $100.

 

October 1, 2012, the Company entered into a one year option agreement (the "Boss Option Agreement") with Boss Investments, Inc. ("Boss"), pursuant to which Boss was granted the right (the "Option") to purchase 50,000 shares (the "Option Shares") at an exercise price of $0.20 per share (the "Option Exercise Price"), which Option Shares were intended to represent a 50% ownership interest in the Company. The Company determined the fair value of the Boss Option Agreement at time of grant to be insignificant. Additionally, the Company determined that the Boss Option Agreement did not contain any non-standard, anti-dilutive features nor did it contain other terms causing it to be classified as a liability. During the year ended December 31, 2013, Boss paid the Option Exercise Price, but the Company did not issue the underlying shares.

 

Additionally, during the year ended December 31, 2013, the Company agreed to exchange shares for certain services from Derek Peterson and Martin Kaufman, related parties. The Company determined the value of these services to be de minimis.

 

On March 31, 2016, in connection with documentation required for the closing of the Merger, the Company determined that it had not issued the exercised or earned shares as noted above. As a result, the Company certificated 29,772.74 shares of the Company's common stock as follows: i) 19,886.37 shares to the equity holders of Boss, which shares represented a 50% ownership interest in the Company immediately prior to the closing of the Merger; ii) 3,522.73 shares to Derek Peterson, and iii) 6,363.64 shares to Martin Kaufman. Consequently, immediately prior to the closing of the Merger, the number of issued and outstanding shares of the Company's common stock was 39,772.74.

 

Note 3. Accrued Liabilities

 

Accrued liabilities at March 31, 2016, and December 31, 2015, are comprised of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

Sales tax payable

 

$869,149

 

 

$290,072

 

Income tax payable

 

 

869,930

 

 

 

869,245

 

Consignment payable

 

 

271,022

 

 

 

327,416

 

Deferred rent

 

 

-

 

 

 

28,484

 

Payroll liabilities

 

 

48,282

 

 

 

35,712

 

Other

 

 

18,427

 

 

 

33,291

 

 

 

 

 

 

 

 

 

 

Total accrued liabilities

 

$2,076,810

 

 

$1,584,220

 

 

 
5
 

 

BLACK OAK GALLERY

Notes to the Financial Statements

For the three months ended March 31, 2016

Unaudited

 

Note 4. Commitments And Contingencies

 

The Company's executive offices are located in Oakland, California, at 578 W. Grand Ave., Oakland, California. The parcel on which the Blüm Campus is located is comprised of five buildings on an approximate 35,000 square foot lot, with approximately 17,000 square feet of rental space.

 

On March 29, 2016, the Company entered into a new Sub-Lease Agreement, which commences on April 1, 2016, for the property located at 578 W. Grand Ave., Oakland, California (the "2016 Lease") which new lease now covers the entire Blüm Campus, which lease term is six years, with an option to extend for one additional four year-term, has base rent of $28,000, and annual 3% rent increases.

 

Set forth below is a summary of current obligations as of March 31, 2016, comprised exclusively of the rental lease obligation to make future payments due by the period indicated below:

 

 

Minimum

 

 

Monthly 

 

The Blüm Campus 2016 Lease

 

Payments

 

Base Rent

2016

 

$252,000

 

 

$28,000

 

2017

 

$343,560

 

 

$28,840

 

2018

 

$353,867

 

 

$29,705

 

2019

 

$364,483

 

 

$30,596

 

2020

 

$375,163

 

 

$31,486

 

2021

 

$386,337

 

 

$32,431

 

2022

 

$97,293

 

 

$33,403

 

  

 

6