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MiMedx Group: Report Of Independent Auditor

The following excerpt is from the company's SEC filing.

The Board of Directors of Stability Inc.

Nashville, Tennessee

Report on the Financial Statements

We have audited the accompanying financial statements of Stability Inc. which comprise the balance sheets as of December 31, 2015 and 2014, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years 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 accounti ng 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 our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Stability Inc. as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Cherry Bekaert LLP

Atlanta, Georgia

STABILITY INC.

BALANCE SHEETS

ASSETS

Current assets:

Cash and cash equivalents

98,584

Accounts receivable

2,106,288

4,485,739

Federal and state taxes receivable

27,712

123,039

Inventory, net

8,652,298

7,088,520

Deferred taxes

31,565

20,166

Prepaid expenses and other current assets

96,898

148,423

Total current assets

10,914,861

11,964,471

Property and equipment, net

1,214,097

1,031,559

148,985

Other assets

17,868

19,108

Total assets

12,295,811

13,015,138

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued expenses

11,221,468

12,374,650

Notes payable - stock repurchase

95,000

210,000

Line of credit

437,000

Current portion of long -term obligations

194,086

185,052

Total current liabilities

11,947,554

12,769,702

Long - term debt, due after one year

560,063

754,149

188,259

Total liabilities

12,507,617

13,712,110

Stockholders’ equity (deficit):

Common stock (no par value) 1,500,000 shares authorized, 516,231 issued and 471,231 outstanding at December 31, 2015 and 378,000 issued and 288,000 outstanding at December 31, 2014

Treasury stock at cost: 45,000 shares at December 31,2015 and 90,000 shares at December 31, 2014

(300,000

(900,000

Additional paid - in capital

1,382,975

160,000

Retained earnings (accumulated deficit)

(1,294,781

43,028

Total stockholders’ equity (deficit)

(211,806

(696,972

Total liabilities and stockholders' equity (deficit)

The accompanying notes to the financial statements are an integral part of these statements.

STABILITY INC

STATEMENTS OF OPERATIONS

Year Ended December 31,

Revenues:

Product revenue, net

19,121,396

19,203,579

Commission revenue

541,667

2,378,861

Other revenue

160,226

224,247

Total revenues

19,823,289

21,806,687

Cost of revenues

8,874,949

9,722,302

Gross Profit

10,948,340

12,084,385

General Operating and administrative expenses:

Distributor commissions

5,077,421

6,036,160

Compensation expenses

4,325,153

3,749,668

Other operating expenses

2,593,352

2,233,396

Total general operating and administrative expenses

11,995,926

12,019,224

Income (loss) from operations

(1,047,586

65,161

Interest expense

(38,866

(71,456

Loss before income tax

(1,086,452

(6,295

Income tax expense (benefit)

(348,643

92,690

Net Loss

(737,809

(98,985

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

YEARS ENDED DECEMBER 31, 2015 AND 2014

Common Stock

Shares

Amount

Treasury Stock

Additional Paid - in Capital

Retained Earnings (Accumulated Deficit)

Balance, January 1, 2014

270,000

40,000

142,013

(717,987

Conversion of debt to equity

18,000

120,000

Net loss

Balance, December 31, 2014

Issuance of common stock

60,003

400,020

Stock based compensation

123,228

822,955

Retirement of treasury stock

600,000

(600,000

Balance, December 31, 2015

STABILITY INC.

STATEMENTS OF CASH FLOWS

Cash flows from operating activities:

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

Depreciation

171,578

83,893

168,093

Gain on disposal of property and equipment

(4,000

Increase (decrease) in cash resulting from changes in:

2,379,451

(500,206

(1,563,778

(5,489,231

95,327

(90,767

52,765

(26,400

(1,448,059

8,042,883

Accrued expenses

294,877

(607,413

Net cash flows from operating activities

(285,336

1,481,867

Cash flows from investing activities:

Proceeds on sale of property and equipment

Purchases of property and equipment

(354,116

(1,012,573

Net cash flows from investing activities

(350,116

Cash flows from financing activities:

Net borrowings (payments) on line of credit

(1,150,000

Principal payments on debt

(185,052

(60,799

Issuance of common stock

Borrowing proceeds of long term debt

1,000,000

Payments on note payable - related party

(80,000

Payments on note payable - stock repurchase

(115,000

(90,000

Net cash flows from financing activities

536,968

(380,799

Net change in cash and cash equivalents

(98,484

88,495

Cash and cash equivalents, beginning of year

10,089

Cash and cash equivalents, end of year

Supplemental disclosure of cash flow information:

Cash paid for interest

Conversion of related party...


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