Exhibit 99.2

  

 Sandland Acquisition Corp. and Subsidiary

Consolidated Financial Statements and Independent Accountant’s Review Report

March 31, 2014 and 2013

 

 
 

Table of Contents  
   
   PAGE
   
Independent Accountant’s Review Report 1
   
Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013 2
   
Consolidated Statements of Operations for the Three Months Ended March 31, 2014 and 2013 3
   
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013 4
   
Notes to Financial Statements 5-11

 

 
 

 

 INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

 

To the Board of Directors

Sandland Acquisition Corp. and Subsidiary

 

We have reviewed the accompanying consolidated balance sheets of Sandland Acquisition Corp., Inc. and Subsidiary (the “Company”) as of March 31, 2014 and 2013, and the related consolidated statements of operations and consolidated cash flows for the three months then ended. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the consolidated financial statements as a whole. Accordingly, we do not express such an opinion.

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the consolidated financial statements.

 

Our responsibility is to conduct the review in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. Those standards require us to perform procedures to obtain limited assurance that there are no material modifications that should be made to the consolidated financial statements. We believe that the results of our procedures provide a reasonable basis for our report.

 

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3, the Company has incurred significant recurring losses from operations other than their most recent fiscal year and has at March 31, 2014 working capital of $94,581. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ John Scrudato CPA

Califon, New Jersey

August 15, 2014

1
 

SANDLAND ACQUISITION CORP., INC.

CONSOLIDATED BALANCE SHEETS

As of March 31, 2014 and December 31, 2013 

 

  2014   2013 
Assets        
Current assets:        
Cash and cash equivalents  $77,089   $57,447 
Accounts receivable, net   104,219    98,619 
Other current assets   2,660    2,660 
           
Total current assets   183,968    158,726 
           
Property and equipment, net   613,560    638,740 
Other assets:          
Intangible assets, net   49,947    54,488 
Secured letter of credit   324,950    324,950 
Deposits   8,750    8,750 
           
Total other assets   383,647    388,188 
           
Total assets  $1,181,175   $1,185,654 
           
Liabilities and Stockholder's Equity (Deficit)          
Current liabilities:          
Accounts payable and accrued expenses  $36,214   $32,615 
Due to related party - accrued interest   53,173    50,836 
           
Total current liabilities   89,387    83,451 
           
Long-term liabilities:          
Environmental remediation obligation   424,596    424,596 
Loan from shareholder   881,612    938,118 
           
Total liabilities  $1,395,595   $1,446,165 
           
Commitments and Contingencies (see note 6)          
           
Stockholders' deficit:          
Common stock, $1.00 par value; 2,000 authorized, 500 and 500 shares issued and outstanding at December 31, 2013 and 2012, respectively  $500   $500 
Additional paid-in capital   45,354    45,354 
Accumulated deficit   (223,874)   (269,965)
Less: Treasury stock   (36,400)   (36,400)
           
Total stockholders' deficit   (214,420)   (260,511)
           
Total liabilities and stockholders' deficit  $1,181,175   $1,185,654 

 

See Independent Accountants Review Report and the Notes to the Financial Statements

 

2
 

 

SANDLAND ACQUISITION CORP., INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 

 

   2014   2013 
         
Revenues  $394,336   $287,881 
           
Cost of revenues   240,720    144,540 
           
Gross profit   153,616    143,341 
           
Selling, general and administrative expenses   105,188    70,186 
           
Income from operations   48,428    73,155 
           
Other income (expenses):          
Interest expense   (2,337)   (2,290)
           
Total other income (expenses)   (2,337)   (2,290)
           
Net income  $46,091   $70,865 

 

See Independent Accountants Review Report and the Notes to the Financial Statements

 

3
 

 

SANDLAND ACQUISITION CORP., INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

 

   2014   2013 
Cash flow from operating activities:        
Net income  $46,091   $70,865 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization expenses   29,721    13,745 
Bad debt expense   342    - 
Non cash interest expense   2,337    2,290 
(Increase) decrease in assets:          
Accounts receivable, net of allowances   (5,940)   (22,844)
(Decrease) increase in liabilities:          
Accounts payable and accrued expenses   3,597    (1,606)
 Net cash provided by operating activities   76,148    62,450 
           
Cash flows from investing activities:          
Purchases of property and equipment   -    (23,000)
           
Net cash used in investing activities   -    (23,000)
           
Cash flows from financing activities:          
Advances on loan from shareholder   8,100    - 
Payments on loan from shareholder   (64,606)   - 
           
      Net cash used in financing activities   (56,506)   - 
           
Net increase (decrease) in cash   19,642    39,450 
           
Cash, beginning of year   57,447    60,485 
           
Cash, end of year  $77,089   $99,935 
           
Supplemental disclosure of cash flow information:          
Cash paid during the year for interest  $-   $- 
           
Supplemental disclosure of non-cash activities:          
Assets contributed from shareholder in lieu of          
increasing the Shareholder Note Payable  $-   $109,630 

 

See Independent Accountants Review Report and the Notes to the Financial Statements

 

4
 

 

SANDLAND ACQUISITION CORP., INC.

NOTES TO FINANCIAL STATEMENTS 

 

 

Note 1 – Business Organization

 

Sandland Acquisition Corp., Inc. was formed in May 2014 and merged with Sand/Land of Florida Enterprises, Inc., collectively referred to as “Sand/Land” or the “Company”. Sandland Acquisition Corp., Inc.’s sole purpose was to initiate a merger with a public company as disclosed in the subsequent event footnote. The operations of Sand/Land of Florida Enterprises, Inc. are the operations of the consolidated Company. Sand/land of Florida was formed in August of 1986 in the state of Florida. The Company is currently operating as a licensed Construction & Demolition landfill.

 

Note 2 – Significant Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

 

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. Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

For certain financial instruments, including accounts receivable, accounts payable, accrued expenses, interest payable, advances payable and notes payable, the carrying amounts approximate fair value due to their relatively short maturities.

 

The Company adopted ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

 

Level 1 inputs to the valuation methodology are quoted prices 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.

 

The Company did not identify any non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value in accordance with ASC 815.

 

 

See Independent Accountant’s Review Report

 

5
 

 

SANDLAND ACQUISITION CORP., INC.

NOTES TO FINANCIAL STATEMENTS

 

Note 2 – Significant Accounting Policies (Continued)

 

Fair Value of Financial Instruments (Continued)

 

In February 2007, the FASB issued ASC 825-10 “Financial Instruments.” ASC 825-10 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. ASC 825-10 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007.

 

The carrying amounts of cash and current liabilities approximate fair value due to the short maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. The Company does not hold or issue financial instruments for trading purposes, nor does it utilize derivative instruments in the management of foreign exchange, commodity price, or interest rate market risks.

 

Revenue and Cost Recognition

 

The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the sales price is fixed or determinable, (iii) collectability is reasonably assured and (iv) goods have been shipped and/or services rendered.

 

Cash and Cash Equivalents

 

For purposes of reporting cash flows, the Company considers cash and cash equivalents to be all highly liquid deposits with maturities of three months or less. Cash equivalents are carried at cost, which approximates market value.

 

The Company maintains its cash and cash equivalents at various financial institutions where they are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The balances of these accounts from time to time exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

 

Accounts Receivable, Bad Debts and Allowance for Doubtful Accounts

 

An allowance for doubtful accounts is provided for as a percentage of trade accounts receivable based on historical loss experience. At March 31, 2014 and December 31, 2013, the allowance for doubtful accounts was approximately $112,000 and $112,000, respectively. Bad debt expense recognized for the three months ended March 31, 2014 and 2013 was $342 and $0, respectively.

  

See Independent Accountant’s Review Report

 

6
 

 

SANDLAND ACQUISITION CORP., INC.

NOTES TO FINANCIAL STATEMENTS

  

Note 2 – Significant Accounting Policies (Continued)

 

Property, Plant and Equipment

 

Property, plant and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and improvements are capitalized. As property and equipment are sold or retired, the applicable cost and accumulated depreciation are removed from the accounts and any resulting gain or loss thereon is recognized as operating expenses.

 

Depreciation is calculated using the straight-line method over the estimated useful lives or, in the case of leasehold improvements, the term of the related lease, including renewal periods, if shorter. Estimated useful lives are as follows:

 

Transportation equipment 5 years
Office and machinery equipment 5 years
Roll off containers 5-7 years
Airspace 39.5 years

 

The Company reviews property, plant and equipment and all amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Recoverability is based on estimated undiscounted cash flows. Measurement of the impairment loss, if any, is based on the difference between the carrying value and fair value.

 

Impairment of Long-Lived Assets and Amortizable Intangible Assets

 

The Company follows ASC 360-10, “Property, Plant, and Equipment,” which established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. Through March 31, 2013, the Company had not experienced impairment losses on its long-lived assets.

 

Intangible Assets – Customer List

 

A Customer list was bought from a related party in 2011. It is being amortized over five years.

 

Advertising Costs

 

The Company expenses all advertising costs as incurred. Total advertising expenses included in the statement of operations for the three months ended March 31, 2014 and 2013 was $1,149 and $1,302, respectively.

 

See Independent Accountant’s Review Report

 

7
 

  

SANDLAND ACQUISITION CORP., INC.

NOTES TO FINANCIAL STATEMENTS

 

Note 2 – Significant Accounting Policies (Continued)

 

Income Taxes

 

The Company has elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. As a result, the taxable income of the company is reported by the stockholders on their individual income tax returns. Accordingly, no provision or benefit for federal or state income taxes has been included in the accompanying financial statements.

 

The Company files income tax returns in the United States and Florida, which are subject to examination by the tax authorities in these jurisdictions, generally for three years after the filing date.

 

Management has evaluated tax positions in accordance with FASB ASC 740, Income Taxes, and has not identified any tax positions, other than those discussed above, that require disclosure.

 

Environmental Remediation Liability

 

The Company accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable.

 

Reclassifications

 

Certain reclassifications have been made in prior year balances to conform to the current year presentation. Such reclassifications had no effect on net income as previously reported.

 

Note 3 – Going Concern

 

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. Although the Company has been operating since August of 1986, the Company has suffered consecutive negative cash flows from operations and has limited working capital. The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital, and ultimately, the achievement of significant operating revenues over operating expenses. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities.

 

Reclassifications

 

Certain reclassifications have been made in prior year balances to conform to the current year presentation. Such reclassifications had no effect on net income as previously reported. 

 

See Independent Accountant’s Review Report

 

8
 

 

SANDLAND ACQUISITION CORP., INC.

NOTES TO FINANCIAL STATEMENTS

 

Note 4 – Property, Plant and Equipment

 

Property, plant and equipment and related accumulated depreciation consist of the following:

 

   2014   2013 
Machinery and equipment   1,884,566    1,884,566 
Airspace   865,076    865,076 
Transportation  equipment   561,240    561,240 
Improvements   306,372    306,372 
Office furniture and equipment   2,117    2,117 
Land Fill Area   72,098    72,098 
Total Property, plant and equipment   3,691,469    3,691,469 
Less: accumulated depreciation   (3,077,909)   (3,052,729)
Property, plant and equipment, net   613,560    638,740 

 

Depreciation expense for the three months ended March 31, 2014, and 2013 was $19,635 and $9,205, respectively.

 

Note 5 – Amortizable Intangible Assets

 

Intangible assets consist of the following as of March 31, 2014 and December 31, 2013:

 

               
             Amortization 
     2014   2013   Period 
  Customer list  $90,813   $90,813    5 years 
  Less accumulated amortization   (40,866)   (36,325)     
  Intangible assets, net  $49,947   $54,488      

 

  The estimated aggregate amortization expense for each of the next five years is as follows: 
        
  Year Ending     
  2014   $18,163 
   2015    18,163 
   2016    13,621 
   2017    - 
   2018    - 
       $49,947 

 

Amortization expense for the three months ended March 31, 2014 and 2013 was $4,541 and $4,540, respectively.

 

See Independent Accountant’s Review Report

 

9
 

 

SANDLAND ACQUISITION CORP., INC.

NOTES TO FINANCIAL STATEMENTS

 

Note 6 – Commitments and Contingencies

 

During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with FASB ASC 450, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines than an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. Certain insurance policies held by the Company may reduce the cash outflows with respect to an adverse outcome of certain of these litigation matters.

 

The Company currently operates a fully licensed landfill under approval by the Florida Department of Environmental Protection. As such the company has set up a reserve allowance of $424,596 against estimated future closing cost. As of March 31, 2014 the Florida Department of Environmental Protection has approved the secured letter of credit cash reserve of $324,950 set aside by the Company at March 31, 2014 and December 31, 2013, respectively, in order to be in compliance with the financial assurance requirements for long term care cost of the facility. It is reasonably possible that the recorded estimate of the obligation may change in the near term.

 

Related Party Concentrations

 

As discussed in note 7 to the financial statements, as of March 31, 2014 and 2013, approximately 41% and 2% of the Company’s revenues were generated from a related party, respectively and approximately 60% and 5% of net accounts receivable were due from a related party as of March 31, 2014 and 2013, respectively.

 

Note 7 – Related Party Transactions

 

Related Party Sales and Accounts Receivable

 

The Company generates a significant portion of their revenue from a related party, a Company owned by the majority shareholder of the Company. Total revenue generated from the related party during the three months ended March 31, 2014 and 2013 was $162,420 and $5,200 or 41% and 2% of total revenue, respectively. Total related party accounts receivable as of March31, 2014 and 2013 related to these sales was approximately $62,000 and $3,000, or 60% and 5% of total net accounts receivable, respectively.

 

Related Party Shareholder Loan

 

The Company has a note with the sole shareholder of the Company. This note is unsecured, matures on December 31, 2016 and carries a 1% interest rate. This note is due during 2016, though the Company makes periodic payments on the Note when excess cash is available.

 

The balance of the note at March 31, 2014 and December 31, 2013 was $881,612 and $938,118, respectively. The balance of the related accrued interest at March 31, 2014 and December 31, 2013 was $53,173 and $50,836, respectively. Related party interest expense for the three months ended March 31, 2014 and 2013 was $2,337 and $2,290, respectively.

See Independent Accountant’s Review Report

 

10
 

 

SANDLAND ACQUISITION CORP., INC.

NOTES TO FINANCIAL STATEMENTS

 

 Note 7 – Related Party Transactions (Continued)

 

Related Party Sales and Accounts Receivable (Continued)

 

The aggregate annual maturities of the related party long-term debt are as follows:

 

Year Ending     
 2014   $- 
 2015    - 
 2016    881,612 
 2017    - 
 2018    - 
     $881,612 

 

Related Party Assets Contributed

 

During the three months ended March 31, 2013, the Company’s sole shareholder contributed approximately $110,000 of assets to the Company. The assets increased the note payable due the shareholder by approximately $110,000.

 

Note 8 – Subsequent Events

 

Management has evaluated events through August 15, 2014, the date on which the financial statements were available to be issued.

 

Merger Agreement

 

Subsequent to year end, on June 16, 2014, the Company entered into and closed a Plan of Merger Agreement with a company incorporated under the Securities Exchange Act of 1934 (the “Purchaser”) in exchange for 9,490,000 common shares, representing approximately 47.5% of the Company’s aggregate issued and outstanding common stock following the closing of the Merger Agreement.

 

See Independent Accountant’s Review Report

 

11