Corporate Finance

SPREAD THE JOY ORGANICS INC. Financial Statements Year Ended December 31, 20 X1 and 20X0 (Unaudited – See Notice to Reader ) SPREAD THE JOY ORGANICS INC. Index to Financial Statements Year Ended December 31, 20 X1 and 20X0 (Unaudited – See Notice to Reader ) Page NOTICE TO READER 1 FINANCIAL STATEMENTS Balance Sheet 2 Statement of Income 3 Statement of Retained Earnings 4 Statement of Cash Flows 5 Note s to Financial Statements 6 egsamin & apraiz C H A R T E R E D A C C O U N T A N T S 1212 – 45 LIABILITY LANE * ANYTOWN , USA * 12345 * PHONE: XXX.XXX.XXXX * FAX: XXX .XXX .XXXX NOTICE TO READER We have compiled the balance sheet of Spr ead the Joy Organics Inc. as at December 31, 20X 1 and 20X0 and the statement of income and retained earnings for the year then ended from information provided by management. We have not audited, reviewed or otherwise attempted to verify the accuracy or completeness of such infor mation. Readers are cautioned tha t these statements may not be appropriate for their purposes. Egsamin & Apraiz Egsamin & Apraiz Chartered Accountants Anytown , USA February 21 , 20 X2 SPREAD THE JOY ORGANICS INC. Page 2 Balance Sheet December 31, 20 X1 and 2 0X0 (Unau dited – See Not ice to Reader) 20X1 20X0 ASSETS CURRENT Cash $ 72 ,517 $ 9,146 Sales tax receivable 15,959 12,841 Inventory 796 ,513 644, 587 Accounts receivable 362,885 308,266 1,2 47,874 974 ,840 EQUI PMENT (No te 3) 692,554 704,744 $ 1,9 40,428 $ 1,679, 584 LIAB ILITIES CURRENT Accounts payable and accrued liabilities $ 324,554 $ 226,897 Bank line of credit 441,589 358,733 Salaries payable 13,955 12 ,650 78 0,098 598 ,280 DUE TO SHAREHOLDERS 914 ,412 914,412 1,694,510 1,512,692 SHAREHOLDERS’ EQUITY Share capital (Note 4) 100 100 Retained earnings 245 ,818 166,792 245,918 166,892 $ 1,940,428 $ 1, 679,584 SPREAD THE JOY ORGANICS INC. Page 3 Statement of Income Year s Ended December 31, 20 X1 and 20X0 (Unaudited – See Notice to Reader) 20X1 20X0 REVENUES $ 2,296,165 $ 2,050,877 COST OF SALES 1,554,917 1,334,651 GROSS MARGIN 741,248 716,226 EXPENSE S Adverti sing and p romotion 17,185 15,285 Bank char ges Business taxes, licenses and memberships 9,886 9,147 10 ,724 8,998 Courier and postage 6,238 4,775 Depreciation 94,722 98,255 Insurance 3,516 3,895 Interest 29,638 25,022 Office an d administratio n 5,286 5,157 Repairs and maintenance 9,214 10,916 Rent and occupancy 81,178 80,677 Salaries and wages 315,950 301,964 Software and computers 4,288 1,961 Telephone 958 854 Warehouse 56,255 64,266 643,461 632,749 NET INCOME BEFORE INC OME TAXES 97,7 87 83,477 INCOME TAXES 18,761 – – NET INCOME $ 79 ,026 $ 83,477 SPREAD THE JOY ORGANICS INC. Page 4 Statement of Retained Earnings Year s Ended December 31, 20 X1 and 20X0 (Unaudited – See Notice to Reader) 20X1 20X0 RETAINED E ARN INGS – BEGINNING OF YEAR $ 166,792 $ 83,315 NET INCOME FOR THE YEAR 79 ,026 83,477 245 ,818 166,792 DIVIDENDS – – RETAINED EARNINGS – END OF YEAR $ 245,818 $ 166,792 SPREAD THE JOY ORGANICS INC. Page 5 Statement of Cash Flows Ye ars Ended December 31, 20 X1 and 20X0 (Unaudited – See Notice to Reader) 20X 1 20X 0 OPERATING ACTIVITIES Net Income $ 79,026 $ 83,477 Items not involving cash Depreciation 94,7 22 98,255 Change in non -cash working capi tal items Sales tax rec eivable (3,118 ) (1,216 ) Inventory (151,926 ) (124,455 ) Accounts receivable (54,619 ) (12,841) Accounts payable 97,657 14,260 Salaries payable 1,305 5,855 63,047 63,335 INVESTIN G A CTIVITIES Purchase of property, plant and equipment (82,5 32) (148,540 ) FINANCING ACTIVITIES Shareholder advances – 44 ,416 Bank line of credit 82,856 41,590 82,856 86,006 Increase (Decrease) in cash 63,371 801 Cash – beginning of year 9,146 8,345 Cash – end of year $ 72 ,517 $ 9,146 SPREAD THE JOY ORGANICS INC. Page 6 Notes to the Financial Statements Year s Ended December 31, 2 0X1 and 20X0 (Unaudited – See Notic e to Reader) 1. NATURE OF OPERATIONS Spread the Joy Organics Inc. (the “Company”) is a food processing company that produces and sells natural, organic jam and j elly products. The company was incorporated under the laws of Anystate, USA and has been in e xistence for roughly 7 years . 2. SIG NIFICANT AC COUNT ING POLICIES (a) Use of estimates The preparation of the financial statements requires management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingen t asset s and liabi litie s at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include recognition of revenue, future warranty cos ts, the carrying amount of property and equipment, the carrying amount of other assets and the valuation allowances for accounts receivable. Actual results could differ from those estimates. (b) Financial instruments The Comp any’s financial instruments consist of cash, accoun ts receivable, accounts payable , and accrued liabilities. The fair values of these financial instruments approximate their carrying values, due to their short maturities. (c) Property and equipment Prop erty and equipment are recor ded at cost less a ccum ulated depreciation at the following rates: Food processing equipment 30% declining balance Vehicles 30% declining balance Computers 50% declining balance Furniture and fixtures 20% declining bal ance One half year’s depre ciation is recorded in the first year of acquisition. (d) Income taxes The Company uses the taxes payable basis of accounting for income taxes. There is no significant difference between the effective income tax rate and the statutory rate. (e) Revenue recogniti on The Comp any recognizes revenue when product is sold, delivered and invoiced , and collection of any resulting receivable is reasonably assured. SPREAD THE JOY ORGANICS INC. Page 7 Notes to the Financial Statements Year s Ended December 31, 2 0X1 and 20X0 (Unaudited – See Notice to R eader) 3. PROPERTY A ND E QUIPMENT Net Book Value Cost Accumulated Depreciation 20X1 20X0 Food processing equipment 65 8,964 102,255 556,709 552,454 Vehicles 125,240 22,936 102,304 112,961 Computers 26,885 18,412 8,473 10,818 Furn iture a nd fixtures 34,2 84 9,216 25,068 28,511 845 ,373 152 ,819 692,554 704,744 4. BANK LOANS 20X1 20X0 General operating line of credit : Bank P rime plus 2. 50% $441,589 $358,733 The company is exposed to interes t rate risk to the extent t hat pri me rat es fluctuate. Security is as follows: General charge over all assets and undertakings of the company 5. SHARE CAPITAL 20X1 20X0 Authorized: Unlimited voting common shares without par value Issued: 100 common shares $1 00 $1 00 6. DUE TO SHAREH OLDERS 20X1 20X0 Amounts due to shareholders are non -interest bearing with no specific repayment terms $914 ,412 $914,412 7. COMMITMENTS The company has lease commitments as follows: Premises Equipment 20X2 $76 ,000 $12 ,800 20X3 $72 ,500 $12,800 20X4 $70,000 $12,800 20X 5 $68 ,000 $ 9,200

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