Professional Documents
Culture Documents
159045/2012
NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/11/2015
EXHIBIT WW
Madison Avenue Diamonds LLC
Financial Statements
December 31 2012
EXHIBIT
CONFIDENTIAL MAD001269
MADISON AVENUE DIAMONDS LLC
Table of Contents
Page
Statement of Income 4
of Cash Flows 5
Statement
CONFIDENTIAL MAD001270
STETZ BELGIOVINE MANWARREN WALLIS P.C.
CERTIFIED PUBLIC ACCOUNTANTS
155 POMPTON AVENUE SUITE 204
VERONA NJ 07044
www.sbcpas.com
To the Members
We have audited the accompanying financial statements of Madison Avenue Diamonds LLC A Limited Liability
which comprise balance of December 31 2012 and the related statements of income and cash
Company the sheet as
flows for the year then ended and the related notes to the financial statements
for the and fair presentation of these financial statements in accordance with
Management is responsible preparation
generally accepted in the United States of America this includes the design implementation
accounting principles
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit
in accordance with auditing standards generally accepted in the United States of America. Those standards require
and audit to obtain reasonable assurance about whether the financial statements
that we plan perform the
statements. The procedures selected on the auditors judgment including the assessment of the risks of
depend
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 entitys preparation and fair presentation of the financial
the effectiveness of the entitys internal control. Accordingly we express no such opinion.
expressing an opinion on
An audit also includes the appropriateness of accounting policies used and the reasonableness of
evaluating
significant accounting estimates made by management as well as evaluating the overall presentation of the financial
We believe that our audit evidence we have obtained is sufficient and appropriate to provide a basis for
statements
In the financial statements referred to above present fairly in all material respects the financial position of
our opinion
Madison Avenue Diamonds LLC as of December 31 2012 and the results of its operations and its cash flows for the year
Verona
May 172013
New Jersey
ark
CONFIDENTIAL MAD001271
MADISON AVENUE DIAMONDS LLC
BALANCE SHEET
DECEMBER 31 2012
ASSETS
Current Assets
Cash $ 157097
Inventory 5152110
Improvements 528411
Equipment 49561
Other Assets
CONFIDENTIAL MAD001272
MADISON AVENUE DIAMONDS LLC
BALANCE SHEET
DECEMBER 31 2012
LIABILITIES AND MEMBERS CAPITAL
Current Liabilities
Members Capital
CONFIDENTIAL MAD001273
MADISON AVENUE DIAMONDS LLC
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31 2012
Sales $ 5460643
CONFIDENTIAL MAD001274
MADISON AVENUE DIAMONDS LLC
STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31 20X2
Inventory 444526
Deferred Rent 45 l 54
CONFIDENTIAL MAD001275
MADISON AVENUE DIAMONDS LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31 2012
Note 1 Business
Madison Avenue Diamonds LLC the Company located in New York City
maintains its cash with a high-credit quality financial institution. At times such
exceed limits.
amounts may federally insured
conditions and may accordingly the Companys overall credit risk. The
impact
policy for determining the past due status of receivables is based on how recently
Use of estimates
estimates and assumptions that affect certain reported amounts and disclosures.
Revenue recognition
Sales are recognized when revenue is realized or becomes realizable and has been
earned. In general revenue is recognized at the point of sale in the retail store and
Company defers revenue and their related product cost for shipments that are in
transit to the customer and recognizes revenue at the time the customer receives
the product.
The Company accounts for taxes collected from retail customers on a net basis
CONFIDENTIAL MAD001276
MADISON AVENUE DIAMONDS LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31 2012
Inventory
is stated at the lower of cost weighted average or market and consists
Inventory
of finished goods.
Intangible assets
Income taxes
Advertising costs
Deferred rent
Deferred rent represents the excess of recognized rent expense over scheduled
lease payments resulting from the application of straight line lease accounting.
Subsequent events
The Company has evaluated subsequent events through May 17 2013 which is
CONFIDENTIAL MAD001277
MADISON AVENUE DIAMONDS LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31 2012
$384000 that expires in October 2013 with automatic one year renewals for the
benefit of the landlord of its storefront. Cash in the amount of $384000 was
basis.
In March 2012 the Company deposited $36000 into a certificate of deposit with
one of its banks as a pledge on the Companys credit card. This balance matures
The Company entered into a trademark and use of name agreement with an
connection with the use of this royalty and trademark based on the fair value of
the membership contribution issued at the execution of this agreement see Note
6. On June 29 2011 a new license agreement was entered into restating the
terms of the original agreement. The restated license agreement has an initial term
of five years with automatic renewals for successive periods of one year. Under
are granted and has a liquidation preference of the unpaid investment amount and
CONFIDENTIAL MAD001278
MADISON AVENUE DIAMONDS LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31 2012
Estimated aggregate amortization expense for each of the next three fiscal years is
Note 7 Commitments
Leases
The Company is
obligated under non-cancelable operating leases for its storefront
and office space through November 2016. See Note 10 regarding assignment of
2013 $500662
2014 515683
2015 531145
2016 360163
Total $1907653
Customers
For the ended December 31 2012 no one customer accounted for more than
year
Sulliers
For the year ended December 31 2012 one vendor accounted for approximately
75% of the Companys purchases. This vendor accounted for approximately 15%
of accounts payable at December 31 2012.
CONFIDENTIAL MAD001279
MADISON AVENUE DIAMONDS LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31 2012
Note 9 Litigation
On June 28 2012 the Company entered into a settlement agreement with one of
its
major suppliers. The Company initially agreed to settle its
outstanding
the vendor. The complaint asserts claims that the vendor was in
complaint against
material breach of its obligations under the settlement agreement and as a result of
this breach the Company is relieved of its performance obligations. The vendor
filed a complaint alleging they complied with the settlement obligations and are
entitled to the amounts due in the agreement. The Company intends to pursue its
actions against the vendor and defend the complaint filed against it. The amount
due to the vendor pursuant to the settlement agreement of $2375000 has been
In February 2013 the Company separated its retail and wholesale operations. A
entity was formed for the retail operations. The operating lease for the
separate
storefront location was assigned to the new entity and notification was made to the
landlord. The collateral for the Letter of Credit for the benefit of the landlord of
the storefront mentioned in Note 3 has been transferred to an account in the name
of the new entity. The obligation under this lease is included in minimum future
rental in Note 7. The 2013 financial statements will include the
payments
combined operations of the Company and this new entity.
losses have been funded to date through capital contributions from its members.
10
CONFIDENTIAL MAD001280