CORRECTION OF ERROR IN PREVIOUSLY REPORTED CONSOLIDATED FINANCIAL STATEMENTS |
18. |
CORRECTION OF ERROR IN PREVIOUSLY REPORTED CONSOLIDATED FINANCIAL STATEMENTS |
Revision
During
the fourth quarter of 2020, we identified amounts presented in our inventory and costs of sales reported in prior years that required
revision. The revised amounts resulted from an accumulation of errors related to rebates issued from vendors. We
determined these errors accumulated in 2019 and prior years. Retained earnings as of January 1, 2019, was also revised to reflect
the impact of the error on prior periods. The impact of the error for periods prior 2019 was $525,786.
Pursuant to the guidance of
Staff Accounting Bulletin No. 99, Materiality, we concluded that the errors were not material to any of our prior year consolidated
financial statements. The accompanying consolidated balance sheet and income statement as of December 31, 2019 includes a cumulative
revision relating to this error.
This revision did not have any material effect on income from
operations, net income, or cash flows. This revision had no effect on our cash balances.
The following table compares
previously reported balances, adjustments, and revised balances as of December 31, 2019.
The revised consolidated financial statements for the year ended
December 31, 2019 with the adjustment is detailed below.
|
|
December 31, 2019 |
|
|
|
As Previously Reported |
|
|
Adjustment |
|
|
Revised |
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
12,979,444 |
|
|
|
|
|
|
$ |
12,979,444 |
|
Accounts receivable, net |
|
|
2,953,921 |
|
|
|
|
|
|
|
2,953,921 |
|
Notes receivable, net |
|
|
1,037,541 |
|
|
|
|
|
|
|
1,037,541 |
|
Inventory |
|
|
22,659,357 |
|
|
|
(1,082,748 |
) |
|
|
21,576,609 |
|
Prepaids and other current assets |
|
|
2,549,559 |
|
|
|
|
|
|
|
2,549,559 |
|
Total current assets |
|
|
42,171,822 |
|
|
|
|
|
|
|
41,097,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
3,340,616 |
|
|
|
|
|
|
|
3,340,616 |
|
Operating leases right-of-use assets, net |
|
|
7,628,591 |
|
|
|
|
|
|
|
7,628,591 |
|
Notes receivable |
|
|
463,747 |
|
|
|
|
|
|
|
463,747 |
|
Intangible assets, net |
|
|
233,280 |
|
|
|
|
|
|
|
233,280 |
|
Goodwill |
|
|
17,798,932 |
|
|
|
|
|
|
|
17,798,932 |
|
Other assets |
|
|
377,364 |
|
|
|
|
|
|
|
377,364 |
|
TOTAL ASSETS |
|
$ |
72,022,352 |
|
|
|
|
|
|
$ |
70,939,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
6,024,750 |
|
|
|
|
|
|
|
6,024,750 |
|
Payroll and payroll tax liabilities |
|
|
1,072,142 |
|
|
|
|
|
|
|
1,072,142 |
|
Customer deposits |
|
|
2,503,785 |
|
|
|
|
|
|
|
2,503,785 |
|
Sales tax payable |
|
|
533,656 |
|
|
|
|
|
|
|
533,656 |
|
Current maturities of right-of-use assets |
|
|
1,836,700 |
|
|
|
|
|
|
|
1,836,700 |
|
Current portion of long-term debt |
|
|
110,231 |
|
|
|
|
|
|
|
110,231 |
|
Total current liabilities |
|
|
12,081,264 |
|
|
|
|
|
|
|
12,081,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases right-of-use assets, net of current maturities |
|
|
5,807,266 |
|
|
|
|
|
|
|
5,807,266 |
|
Long-term debt, net of current portion |
|
|
242,079 |
|
|
|
|
|
|
|
242,079 |
|
Total liabilities |
|
|
18,130,609 |
|
|
|
|
|
|
|
18,130,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock; $.001 par value; 100,000,000 shares 36,876,305 shares issued and outstanding as of December 31, 2019 |
|
|
36,876 |
|
|
|
|
|
|
|
36,876 |
|
Additional paid-in capital |
|
|
60,742,055 |
|
|
|
|
|
|
|
60,742,055 |
|
Accumulated deficit |
|
|
(6,887,188 |
) |
|
|
(1,082,748 |
) |
|
|
(7,969,936 |
) |
Total stockholders' equity |
|
|
53,891,743 |
|
|
|
|
|
|
|
52,808,995 |
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
|
$ |
72,022,352 |
|
|
|
|
|
|
$ |
70,939,604 |
|
|
|
Year Ended December 31, 2019 |
|
|
|
As Previously Reported |
|
|
Adjustment |
|
|
Revised |
|
Sales |
|
$ |
79,733,568 |
|
|
|
|
|
|
$ |
79,733,568 |
|
Cost of sales |
|
|
57,171,721 |
|
|
|
556,962 |
|
|
|
57,728,683 |
|
Gross profit |
|
|
22,561,847 |
|
|
|
|
|
|
|
22,004,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Store operations |
|
|
10,095,422 |
|
|
|
|
|
|
|
10,095,422 |
|
General and administrative |
|
|
3,172,019 |
|
|
|
|
|
|
|
3,172,019 |
|
Share based compensation |
|
|
2,490,535 |
|
|
|
|
|
|
|
2,490,535 |
|
Depreciation and amortization |
|
|
1,044,553 |
|
|
|
|
|
|
|
1,044,553 |
|
Salaries and related expenses |
|
|
3,619,197 |
|
|
|
|
|
|
|
3,619,197 |
|
Total operating expenses |
|
|
20,421,726 |
|
|
|
|
|
|
|
20,421,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from operations |
|
|
2,140,121 |
|
|
|
|
|
|
|
1,583,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous income (expense) |
|
|
(4,545 |
) |
|
|
|
|
|
|
(4,545 |
) |
Interest income |
|
|
144,725 |
|
|
|
|
|
|
|
144,725 |
|
Interest expense |
|
|
(401,497 |
) |
|
|
|
|
|
|
(401,497 |
) |
Total non-operating income (expense), net |
|
|
(261,317 |
) |
|
|
|
|
|
|
(261,317 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before taxes |
|
|
1,878,804 |
|
|
|
|
|
|
|
1,321,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,878,804 |
|
|
|
|
|
|
|
1,321,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share, basic |
|
$ |
0.06 |
|
|
|
|
|
|
$ |
0.04 |
|
Net income per share, diluted |
|
$ |
0.06 |
|
|
|
|
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic |
|
|
32,833,594 |
|
|
|
|
|
|
|
32,833,594 |
|
Weighted average shares outstanding, diluted |
|
|
33,910,154 |
|
|
|
|
|
|
|
33,910,154 |
|
|
|
For The Year Ended December 31, 2019 |
|
Cash Flows from Operating
Activities: |
|
As Previously Reported |
|
|
Adjustment |
|
|
Revised |
|
Net income |
|
$ |
1,878,804 |
|
|
|
(556,962 |
) |
|
$ |
1,321,842 |
|
Adjustments to reconcile net income to net cash used in operating Activities: |
|
|
|
|
|
|
|
|
|
|
- |
|
Depreciation and amortization |
|
|
1,044,553 |
|
|
|
|
|
|
|
1,044,553 |
|
Provision for doubtful accounts receivable |
|
|
172,135 |
|
|
|
|
|
|
|
172,135 |
|
Inventory valuation reserve |
|
|
429,126 |
|
|
|
|
|
|
|
429,126 |
|
Amortization of debt discount |
|
|
356,306 |
|
|
|
|
|
|
|
356,306 |
|
Stock based compensation |
|
|
2,490,535 |
|
|
|
|
|
|
|
2,490,535 |
|
Other |
|
|
(66,536 |
) |
|
|
|
|
|
|
(66,536 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
- |
|
(Increase) decrease in: |
|
|
|
|
|
|
|
|
|
|
- |
|
Accounts receivable |
|
|
(3,764,947 |
) |
|
|
|
|
|
|
(3,764,947 |
) |
Inventory |
|
|
(10,482,014 |
) |
|
|
556,962 |
|
|
|
(9,925,052 |
) |
Prepaid expenses and other assets |
|
|
(2,061,701 |
) |
|
|
|
|
|
|
(2,061,701 |
) |
Increase (decrease) in: |
|
|
|
|
|
|
|
|
|
|
- |
|
Accounts payable and accrued liabilities |
|
|
4,165,188 |
|
|
|
|
|
|
|
4,165,188 |
|
Operating leases |
|
|
15,375 |
|
|
|
|
|
|
|
15,375 |
|
Customer deposits |
|
|
1,987,747 |
|
|
|
|
|
|
|
1,987,747 |
|
Income taxes |
|
|
- |
|
|
|
|
|
|
|
- |
|
Payroll and payroll tax liabilities |
|
|
154,471 |
|
|
|
|
|
|
|
154,471 |
|
Sales taxes payable |
|
|
341,698 |
|
|
|
|
|
|
|
341,698 |
|
Net Cash and Cash Equivalents (Used In) Operating Activities |
|
|
(3,339,260 |
) |
|
|
|
|
|
|
(3,339,260 |
) |
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Assets acquired in business combinations |
|
|
(9,458,743 |
) |
|
|
|
|
|
|
(9,458,743 |
) |
Purchase of property and equipment |
|
|
(2,232,812 |
) |
|
|
|
|
|
|
(2,232,812 |
) |
Purchase of goodwill and other intangibles |
|
|
(119,125 |
) |
|
|
|
|
|
|
(119,125 |
) |
Net Cash and Cash Equivalents (Used In) Investing Activities |
|
|
(11,810,680 |
) |
|
|
|
|
|
|
(11,810,680 |
) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on long term debt |
|
|
(460,129 |
) |
|
|
|
|
|
|
(460,129 |
) |
Stock redemptions |
|
|
- |
|
|
|
|
|
|
|
- |
|
Proceeds from the sales of common stock and exercise of warrants and options, net of expenses |
|
|
13,949,532 |
|
|
|
|
|
|
|
13,949,532 |
|
Net Cash and Cash Equivalents Provided by Financing Activities |
|
|
13,489,403 |
|
|
|
|
|
|
|
13,489,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase(decrease) in Cash and Cash Equivalents |
|
|
(1,660,537 |
) |
|
|
|
|
|
|
(1,660,537 |
) |
Cash and Cash Equivalents at Beginning of year |
|
|
14,639,981 |
|
|
|
|
|
|
|
14,639,981 |
|
Cash and Cash Equivalents at End of year |
|
$ |
12,979,444 |
|
|
|
|
|
|
$ |
12,979,444 |
|