0001654954-19-000436.txt : 20190114 0001654954-19-000436.hdr.sgml : 20190114 20190114160821 ACCESSION NUMBER: 0001654954-19-000436 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 20181025 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190114 DATE AS OF CHANGE: 20190114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RumbleON, Inc. CENTRAL INDEX KEY: 0001596961 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 463951329 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-38248 FILM NUMBER: 19525159 BUSINESS ADDRESS: STREET 1: 1350 LAKESHORE DRIVE STREET 2: SUITE 160 CITY: COPPELL STATE: TX ZIP: 75019 BUSINESS PHONE: 469-250-1185 MAIL ADDRESS: STREET 1: 1350 LAKESHORE DRIVE STREET 2: SUITE 160 CITY: COPPELL STATE: TX ZIP: 75019 FORMER COMPANY: FORMER CONFORMED NAME: Smart Server, Inc DATE OF NAME CHANGE: 20140114 8-K/A 1 rmbl_8ka.htm AMENDED CURRENT REPORT Blueprint
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K/A
(Amendment No. 1)
 
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
Date of Report (Date of earliest event reported): January 14, 2019 (October 25, 2018)
 
 
RumbleOn, Inc.
(Exact name of registrant as specified in its charter)
 
Nevada
(State or Other Jurisdiction
of Incorporation)
 
001-38248
 
46-3951329
(Commission
File Number)
 
 
(I.R.S. Employer
Identification No.)
 
1350 Lakeshore Drive
 Suite 160
Coppell, Texas
 
75019
(Address of Principal Executive Offices)
 
(Zip Code)
 
(469) 250-1185
(Registrant’s Telephone Number, Including Area Code)
 
(Former Name or Former Address, If Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2 (b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
 
Emerging growth company ☒
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
 


 
 
Explanatory Note
 
This Current Report on Form 8-K/A (Amendment No. 1) amends the Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) by RumbleOn, Inc. (the “Company”) on October 31, 2018 (the “Original 8-K”) announcing the completion of (i) the merger (the “Wholesale Merger”) of Wholesale Holdings, Inc., a Tennessee corporation (“Holdings”), with and into the Company’s newly-formed acquisition subsidiary RMBL Tennessee, LLC, a Delaware limited liability company (“Merger Sub”), with Merger Sub surviving the Wholesale Merger as a wholly-owned subsidiary of the Company, and Wholesale, LLC, a Tennessee limited liability company and previously a wholly-owned subsidiary of Holdings (“Wholesale”), becoming a wholly-owned subsidiary of Merger Sub, pursuant to an Agreement and Plan of Merger (as amended, the “Merger Agreement”), dated October 25, 2018, by and among the Company, Merger Sub, Holdings, Wholesale, Steven Brewster and Janelle Brewster (each a “Stockholder”, and together the “Stockholders”), Steven Brewster, a Tennessee resident, as the representative of each Stockholder, and, for the limited purposes of Section 5.8, Marshall Chesrown and Steven R. Berrard, and (ii) the acquisition of all of the membership interests in Wholesale Express, LLC, a Tennessee limited liability company (“Wholesale Express”), pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”), dated October 25, 2018, by and among the Company, Mr. Brewster and Justin Becker (together the “Express Sellers”), and Mr. Brewster as representative of the Express Sellers (the “Express Acquisition,” and together with the Wholesale Merger, the “Acquisitions”). Following the Wholesale Merger, Wholesale was converted from a limited liability company to a corporation under the name Wholesale, Inc.
 
In the Original 8-K, the Company indicated that it would file the historical and pro forma financial information required under Item 9.01 with respect to the Acquisitions within 71 days of the due date of the Original 8-K, as permitted by the SEC rules.  The Company is now filing this Amendment No. 1 to include the required financial statements and pro forma financial information as a result of the completion of the Acquisitions. Except as indicated above and below, all other information in the Original 8-K remains unchanged.
 
Item 9.01.    
Financial Statements and Exhibits.
 
(a) Financial Statements of Businesses Acquired.
 
The audited historical financial statements of Wholesale, Inc. for the years ended December 31, 2015, 2016 and 2017 and Wholesale Express for the years ended December 31, 2016 and 2017 are filed herewith as Exhibits 99.1 and 99.2, respectively, and the unaudited financial statements of Wholesale, Inc. and Wholesale Express for the nine months ended September 30, 2018 are filed herewith as Exhibits 99.3 and 99.4, respectively, and are incorporated herein by reference.
 
(b) Pro Forma Financial Information.
 
The unaudited pro forma financial information for the Company, after giving effect to the Acquisitions and adjustments described in such pro forma information, are attached hereto as Exhibit 99.5, and incorporated herein by reference.
 
(d) Exhibits
 
Exhibit No.
Description
Consent of Henderson, Hutcherson & McCullough, PLLC.
Consent of Henderson, Hutcherson & McCullough, PLLC.
The audited historical financial statements of Wholesale, Inc., for the years ended December 31, 2015, 2016 and 2017.
The audited historical financial statements of Wholesale Express, LLC, for the years ended December 31, 2016 and 2017.
The unaudited financial statements of Wholesale, Inc., for the nine months ended September 30, 2018.
The unaudited financial statements of Wholesale Express, LLC, for the nine months ended September 30, 2018.
The unaudited pro forma financial information for RumbleOn, Inc., after giving effect to the Acquisitions, and adjustments described in such pro forma information.
 
 
 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
RUMBLEON, INC.
 
 
 
 
Date: January 14, 2019
By:  
/s/  Steven R. Berrard 
 
 
Steven R. Berrard 
 
 
Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EX-23.1 2 rmbl_ex231.htm CONSENTS OF EXPERTS AND COUNSEL Untitled Document
  Exhibit 23.1
 
 
EX-23.2 3 rmbl_ex232.htm CONSENTS OF EXPERTS AND COUNSEL Untitled Document
  Exhibit 23.2
 
 
EX-99.1 4 rmbl_ex991.htm AUDITED HISTORICAL FINANCIAL STATEMENTS Blueprint
  Exhibit 99.1
 
WHOLESALE, INC.
 
COMBINED FINANCIAL STATEMENTS
 
DECEMBER 31, 2017, 2016, AND 2015
 
 
 
 
 
 
 
 
 
 
 
WHOLESALE, INC.
 
INDEX TO REPORT
 
DECEMBER 31, 2017, 2016 AND 2015
 
 
PAGE
INDEPENDENT AUDITOR’S REPORT
1-2
COMBINED BALANCE SHEETS
3
COMBINED STATEMENTS OF INCOME
4
COMBINED STATEMENTS OF STOCKHOLDER’S EQUITY
5
COMBINED STATEMENTS OF CASH FLOWS
6
NOTES TO THE COMBINED FINANCIAL STATEMENTS
7-16
 
 
 
 
 
 
 
 
 
 
 
 
 
INDEPENDENT AUDITOR’S REPORT
 
To the Stockholder
Wholesale, Inc.
 
Mt. Juliet, Tennessee
 
Report on the Combined Financial Statements
 
We have audited the accompanying combined financial statements of Wholesale, Inc. which comprise the combined balance sheets as of December 31, 2017, 2016, and 2015 and the related combined statements of income, stockholder’s equity, and cash flows for the years then ended, and the related notes to the combined financial statements.
 
Management’s Responsibility for the Combined Financial Statements
 
Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with accounting 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 combined 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 combined 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 combined financial statements are free from material misstatement.
 
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the combined 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 combined 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 combined financial statements.
 
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
 
1200 Market Street, Chattanooga, TN 37402 | T 423.756.7771 | F 423.265.8125
 
A N INDEPENDENT MEMBER O F THE B D O ALLIANCE USA
 
 
1
 

Opinion
 
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Wholesale, Inc. as of December 31, 2017, 2016, and 2015 and the results of its operations and its cash flows for the years then ended, in accordance with accounting principles generally accepted in the United States of America.
 
Chattanooga, Tennessee
 
 
October 22, 2018
 
 
 
 
 
 
 
 
 
 
 
 
2
 
 
WHOLESALE, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 2017, 2016, AND 2015
 
 ASSETS
 
 
 
2017
 
 
2016
 
 
2015
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
 $3,461,002 
 $2,971,534 
 $2,446,206 
Accounts Receivables
  2,162,214 
  896,297 
  1,654,483 
Vehicle Inventory, Net of Valuation Allowance.
  47,253,754 
  35,246,213 
  36,073,107 
Other Receivables
  535,091 
  6,782 
  - 
Prepaid Expenses
  214,578 
  36,391 
  138,024 
Restricted Investments
  711,221 
  4,036,345 
  3,142,033 
Other Investments
  261,925 
  30,336 
  22,871 
Total Current Assets
  54,599,785 
  43,223,898 
  43,476,724 
 
    
    
    
OTHER ASSETS
    
    
    
Property and Equipment, net
  2,886,693 
  1,435,822 
  1,129,077 
Other Intangible Assets, net
  - 
  - 
  1,520 
Due from Related Party
  - 
  70,000 
  - 
Due from Stockholder
  3,621,422 
  438,204 
  421,627 
Total Other Assets
  6,508,115 
  1,944,026 
  1,552,224 
TOTAL ASSETS
 $61,107,900 
 $45,167,924 
 $45,028,948 
 
LIABILITIES AND STOCKHOLDERS' EQUITY 
 
CURRENT LIABILITIES
    
    
    
Checks Drawn in Excess of Available Bank Balance
 $3,711,995 
 $2,083,506 
 $572,453 
Note Payable- Floorplan
  47,797,323 
  34,737,437 
  37,855,273 
Accounts Payable
  1,094,279 
  644,945 
  654,816 
Due to Related Party
  215,000 
  - 
  - 
Accrued Expenses and Liabilities
  3,137,376 
  2,590,887 
  2,235,759 
Deferred Revenue
  100,000 
  - 
  - 
Income Tax Payable
  230,831 
  57,291 
  8,000 
Total Current Liabilities
  56,286,804 
  40,114,066 
  41,326,301 
 
    
    
    
LONG-TERM LIABILITIES
    
    
    
Deferred Tax Liability
  18,000 
  74,000 
  2,500 
Total Long-Term Liabilities
  18,000 
  74,000 
  2,500 
TOTAL LIABILITIES
  56,304,804 
  40,188,066 
  41,328,801 
 
    
    
    
STOCKHOLDER'S EQUITY
    
    
    
Common Stock- $1 Par Value 1,000 Shares Authorized, Issued, and Outstanding
  1,000 
  1,000 
  1,000 
Retained Earnings
  4,802,096 
  4,978,858 
  3,699,147 
Total Stockholder's Equity
  4,803,096 
  4,979,858 
  3,700,147 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 $61,107,900 
 $45,167,924 
 $45,028,948 
 
 
The accompanying notes are an integral part of the combined financial statements

 
3
 
 
WHOLESALE, INC.
COMBINED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2017, 2016, AND 2015
 
 
 
2017
 
 
2016
 
 
2015
 
REVENUES
 
 
 
 
 
 
 
 
 
Wholesale Vehicles
 $503,860,499 
 $360,693,489 
 $258,030,116 
Retail Vehicles
  87,113,151 
  88,254,010 
  84,495,314 
Other Sales and Revenues
  10,101,992 
  11,216,182 
  11,314,076 
Total Revenues
  601,075,642 
  460,163,681 
  353,839,506 
 
    
    
    
EXPENSES
    
    
    
Cost of Sales
  580,244,867 
  442,253,508 
  336,010,862 
Selling, General, and Administrative
  17,357,156 
  14,837,403 
  14,839,594 
Depreciation and Amortization
  250,458 
  355,379 
  379,084 
Total Expenses
  597,852,481 
  457,446,290 
  351,229,540 
 
    
    
    
OPERATING INCOME
  3,223,161 
  2,717,391 
  2,609,966 
 
    
    
    
Interest Expense
  1,941,106 
  1,235,857 
  1,017,533 
Investment Income (loss)
  119,688 
  661,777 
  (326,790)
 
    
    
    
INCOME BEFORE TAXES
  1,401,743 
  2,143,311 
  1,265,643 
Provision for Income Taxes
  48,500 
  188,600 
  80,300 
NET INCOME
 $1,353,243 
 $1,954,711 
 $1,185,343 
 
The accompanying notes are an integral part of the combined financial statements. 
 
 
4
 
 
WHOLESALE, INC.
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 2017, 2016, AND 2015
 
 
 
Common Stock
 
 
Retained Earnings
 
 
Total
 
 
 
Shares
 
 
Amount
 
     
    
BALANCE - December 31, 2014
  1,000 
 $1,000 
 $4,253,804 
 $4,254,804 
Net Income
  - 
  - 
  1,185,343 
  1,185,343 
Stockholder distributions
  - 
  - 
  (1,740,000)
  (1,740,000)
BALANCE - December 31, 2015
  1,000 
  1,000 
  3,699,147 
  3,700,147 
Net Income
  - 
  - 
  1,954,711 
  1,954,711 
Stockholder distributions
  - 
  - 
  (675,000)
  (675,000)
BALANCE - December 31, 2016
  1,000 
  1,000 
  4,978,858 
  4,979,858 
Net Income
  - 
  - 
  1,353,243 
  1,353,243 
Stockholder distributions
  - 
  - 
  (1,560,005)
  (1,530,005)
BALANCE - December 31, 2017
  1,000 
 $1,000 
 $4,802,096 
 $4,803,096 
 
The accompanying notes are an integral part of the combined financial statements. 
 
 
5
 
 
WHOLESALE, INC.
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2017, 2016, AND 2015
 

 
2017
 
 
2016
 
 
2015
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
 
 
 
Net Income
 $1,353,243 
 $1,954,711 
 $1,185,343 
Adjustments to Reconcile Net Income to Net Cash from Operating Activities
    
    
    
Depreciation and Amortization
  250,458 
  355,384 
  379,084 
Realized and Unrealized Loss (gain) on Investments
  (89,312)
  (572,333)
  419,476 
Loss on Disposal of Property and Equipment
  227,928 
  - 
  89,972 
Provision for Deferred Income Taxes
  (56,000)
  71,500 
  (19,700)
Reinvested Interest and Dividend Income, net
  (30,158)
  (89,444)
  (85,951)
Changes in Assets and Liabilities:
    
    
    
Accounts Receivable
  (1,265,917)
  758,186 
  631,932 
Vehicle Inventory
  (12,007,541)
  826,894 
  (11,302,694)
Other Receivables
  (528,309)
  (6,782)
  - 
Prepaid Expenses
  (178,187)
  101,632 
  (127,847)
Note Payable - Floorplan
  13,059,886 
  (3,117,836)
  13,093,126 
Accounts Payable
  449,334 
  (9,871)
  149,390 
Accrued Expenses and Liabilities
  546,489 
  355,128 
  (142,134)
Deferred Revenue
  100,000 
  - 
  - 
Income Tax Payable
  173,540 
  49,291 
  - 
Net Cash From Operating Activities
  2,005,454 
  676,460 
  4,269,997 
 
    
    
    
CASH FLOWS FROM INVESTING ACTIVITIES
    
    
    
Due from Related Party
  285,000 
  (70,000)
  - 
Purchases of Property and Equipment
  (1,929,257)
  (660,608)
  (725,322)
Proceeds from Sale of Investments
  3,423,005 
  5,607,794 
  5,039,564 
Purchases of Investments
  (210,000)
  (5,847,794)
  (6,349,863)
Change in Due from Stockholder
  (3,183,218)
  (16,577)
  7,500 
Net Cash from Investing Activities
  (1,614,470)
  (987,185)
  (2,028,121)
 
    
    
    
CASH FLOWS FROM FINANCING ACTIVITIES
    
    
    
Checks Drawn in Excess of Bank Balance
  1,628,489 
  1,511,053 
  (728,130)
Stockholder Distributions
  (1,530,005)
  (675,000)
  (1,740,000)
Net Cash from Financing Activities
  98,484 
  836,053 
  (2,468,130)
 
    
    
    
NET CHANGE IN CASH AND CASH EQUIVALENTS
  489,468 
  525,328 
  (226,254)
 
    
    
    
Cash and Cash Equivalents- Beginning of Year
  2,971,534 
  2,446,206 
  2,672,460 
 
    
    
    
Cash and Cash Equivalents- End of Year
 $3,461,002 
 $2,971,534 
 $2,446,206 
 
    
    
    
SUPPLEMENTAL DISCLOSURES
    
    
    
Cash Paid for Interest
 $1,774,115 
 $1,179,632 
 $1,021,658 
Cash Paid for Income Taxes
 $104,500 
 $183,357 
 $481,000 
 
The accompanying notes are an integral part of the combined financial statements. 
 
 
6
 
 
WHOLESALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016, AND 2015
 
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
 
Organization
 
The Combined Financial Statements comprise those of Wholesale, Inc. and SRB Remarketing, LLC, collectively referred to as the “Company”.
 
Wholesale, Inc. was incorporated on April 24, 2003, in the state of Tennessee. SRB Remarketing, LLC was formed on May 4, 2016 as a Tennessee limited liability company.
 
Description of Business
 
The Company is engaged in the retail and wholesale sales of motor vehicles. The Company operates a retail location in Madison, Tennessee, and a combined retail and wholesale location in Mt. Juliet, Tennessee.
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Cash Equivalents and Contingent Risk Regarding Cash Balances
 
The Company considers cash in the bank and all highly liquid investments with an original maturity of three months or less to be cash. Under our cash management system, outstanding checks that are in excess of the cash balances at certain banks are included under current liabilities in the combined balance sheets and changes in these amounts are reflected in operating cash flows in the accompanying combined statements of cash flows. The Company considers contracts in transit to be cash equivalents as the contracts are normally purchased by a financial institution for face value within a few business days.
 
Accounts Receivable
 
Accounts receivable consist primarily of amounts due from customers, third-party finance companies and related parties. Management considers receivables outstanding for ninety days to be delinquent and believes it maintains an adequate allowance for any uncollectable amounts. Interest is not charged on accounts considered delinquent. In management’s opinion, an allowance for doubtful accounts was not considered necessary at December 31, 2017, 2016, and 2015.
 
Vehicle Inventory
 
Vehicle inventory consists of used vehicles, primarily acquired at auction. Direct and indirect vehicle reconditioning costs including parts and labor, inbound transportation costs and other incremental costs are capitalized as a component of inventory. Inventory is stated at the lower of cost or net realizable value. Vehicle inventory cost is determined by specific identification. Net realizable value is the estimated selling price less costs to complete, dispose and transport the vehicles. Selling prices are derived from historical data and trends, such as sales price and inventory turn times of similar vehicles, as well as independent, market resources. Each reporting period the Company recognizes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value through cost of sales in the accompanying combined income statements.
 
(Continued)

 
7
 
 
WHOLESALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016, AND 2015
 
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
Property and Equipment
 
Property and equipment consist of land, buildings and improvements, transportation fleet equipment, software and furniture, fixtures and equipment and is stated at cost less accumulated depreciation and amortization. Repairs and maintenance costs that extend the life or utility of an asset are also capitalized. Ordinary repairs and maintenance are charged to expense as incurred. Costs incurred during construction are capitalized as construction in progress and reclassified to the appropriate fixed asset categories when the project is completed.:
 
Depreciation and amortization are computed using the straight-line method over the lesser of the remaining lease term or the following estimated useful lives:
 
Furniture, fixtures, and equipment   3-7 years
Leasehold improvements                  5-15 years
Software                                           3 years
Vehicles                                            3 years
 
Shipping and Handling Costs
 
The Company is charged shipping costs on each vehicle delivered to the dealership. These costs are expensed in cost of sales.
 
Advertising and Promotion Costs
 
The Company expenses advertising costs in the period incurred. Advertising expense for continuous operations amounted to $561,842, $404,037, $974,011 for the years ended December 31, 2017, 2016, and 2015, respectively, and is classified as selling, general and administration expense in the accompanying combined statements of income.
 
Investments
 
The Company’s investments in marketable securities are classified as available for-sale. The Company has elected the fair value option. Thus, investments are recorded at fair value on the balance sheet as current assets, with the change in fair value during the period included in earnings.
 
(Continued)
 
 
8
 
 
WHOLESALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016, AND 2015
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
Income Taxes
 
Income taxes are reported in accordance with Financial Standards Accounting Board (FASB) Accounting Standards Codification (ASC) Topic 740, Income Taxes. This statement requires the establishment of deferred tax accounts for all temporary differences between the book and tax basis of assets and liabilities. In addition, deferred tax accounts must be adjusted to reflect new rates if enacted into law.
 
Effective January 1, 2010, the Company elected S corporation status. Earnings and losses after that date are included in the personal income tax returns of the stockholder and taxed at the individual level. Accordingly, the Company will not incur additional federal income tax obligations from current operations, and future financial statements will not include a provision for federal income taxes on current operations. The Company remains subject to State of Tennessee excise tax on profits at a rate of 6.5%.
 
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between depreciation and unrealized gains or losses for financial and income tax reporting. The deferred taxes represent the future tax return consequences of those differences, which will either be deductible or taxable when the assets and liabilities are recovered or settled.
 
Revenue Recognition
 
The Company records revenue when vehicles are delivered to customers. Conditions for completing a sale include having an agreement with the customer, including pricing, and the sales price must be reasonably expected to be collected.
 
The Company arranges financing for customers through various financial institutions and receives a commission from the financial institution either in a flat fee amount or in an amount equal to the difference between the interest rates charged to customers over the predetermined interest rates set by the financial institution.
 
The Company also receives commissions from the sale of various insurance contracts to customers. The Company may be assessed a chargeback fee in the event of early cancellation of a loan or insurance contract by the customer.
 
Interest Expense
 
The Company recognizes interest expense at the earlier of when incurred or when paid, with certain exceptions.
 
(Continued)
 
 
9
 
 
WHOLESALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016, AND 2015
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
Use of Estimates
 
The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
NOTE 3 – ACCOUNTS RECEIVABLE
 
Accounts receivable consists of the following as of December 31:
 
 
 
 
 
2017
 
 
2016
 
 
2015
 
Trade
 $1,588,800 
 $591,139 
 $1,383,733 
Finance
  234,690 
  202,547 
  155,775 
Employees
  338,724 
  102,611 
  114,975 
 
 $2,162,214 
 $896,297 
 $1,654,483 
 
NOTE 4 – INVENTORY
 
Inventory consists of the following at December 31:
 
 
 
 
 
 
 
 
2017
 
 
2016
 
 
2015
 
Used vehicles
 $48,446,419 
 $35,890,349 
 $36,718,941 
Parts and other
  44,335 
  5,865 
  4,166 
 
  48,490,754 
  35,896,213 
  36,723,107 
Used vehicle valuation allowance
  (1,237,000)
  (650,000)
  (650,000)
 
 $47,253,754 
 $35,246,213 
 $36,073,107 
 
NOTE 5 – PROPERTY AND EQUIPMENT, NET
 
Property and equipment consist of the following major classifications as of December 31:
 
 
 
2017
 
 
2016
 
 
2015
 
Furniture, fixtures, and equipment
 $876,010 
 $1,547,630 
 $1,315,256 
Leasehold improvements
  3,103,861 
  1,929,334 
  1,528,484 
Software
  209,852 
  - 
  - 
Vehicles
  57,362 
  54,326 
  54,326 
Accumulated depreciation
  (1,360,392)
  (2,095,468)
  (1,767,469)
 
 $2,886,693 
 $1,435,822 
 $1,130,597 
10
 
10
 
 
WHOLESALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016, AND 2015
 
 
NOTE 6 – NOTE PAYABLE – FLOORPLAN
 
The Company has a floor plan arrangement with a third party to finance its used vehicle inventory, which is secured by substantially all of its assets and is renewed on an annual basis. The note includes a personal guarantee of payment by the stockholder and another related party. The note had a maximum availability of $70,000,000 at December 31, 2017 and $55,000,000 at December 31, 2016 and $38,000,000 and December 31, 2015, and bears interest at a rate per annum equal to one-month LIBOR plus 3.25%
 
In accordance with terms of its floorplan agreement, the Company has pledged certain investments in marketable securities as collateral for the note. Investments pledged as collateral totaled $711,221, $4,036,345, and $3,142,033 at December 31, 2017, 2016, and 2015, respectively, and are classified as restricted investments on the accompanying combined balance sheet.
 
NOTE 7 – INVESTMENTS
 
Investments held by the Company include debt and equity securities and money market funds. In accordance with ASC Topic 320, Investments-Debt and Equity Securities, these securities are classified as available-for-sale and are reported at their fair values as determined by the market price listed by the appropriate trading exchange on the last day of the year.
 
Cost and fair value of investments at December 31, 2017, are as follows:
 
Restricted investments:
 
Fair Market Value
 
 
Cost
 
 
Unrealized Gain
 
 
Unrealized Loss
 
Money market funds
 $51,638 
 $51,638 
 $- 
 $- 
Corporate bonds
  453,282 
  466,491 
  - 
  (13,209)
Equities
  206,301 
  184,432 
  21,869 
  - 
Total
  711,221 
  702,561 
  21,869 
  (13,209)
Other investments:
    
    
    
    
Money market funds
  91,453 
  91,453 
  - 
  - 
Equities
  148,302 
  132,797 
  15,505 
  - 
Exchange traded funds
  22,170 
  19,943 
  2,227 
  - 
Total
  261,925 
  244,193 
  17,732 
  - 
 
 $973,146 
 $946,754 
 $39,601 
 $(13,209)
 
(Continued)
 
 
11
 
 
WHOLESALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016, AND 2015
 
NOTE 7 – INVESTMENTS (Continued)
 
Cost and fair value of investments at December 31, 2016, are as follows:
 
Restricted investments:
 
Fair Market Value
 
 
Cost
 
 
Unrealized Gain
 
 
Unrealized Loss
 
Money market funds
 $3,078,911 
 $3,078,911 
 $- 
 $- 
Corporate bonds
  537,180 
  565,291 
  - 
  (28,111)
Equities
  420,254 
  394,695 
  25,559 
  - 
Total
  4,036,345 
  4,038,897 
  25,559 
  (28,111)
Other investments:
    
    
    
    
Money market funds
  620 
  620 
  - 
  - 
Equities
  29,716 
  30,773 
  - 
  (1,057)
Total
  30,336 
  31,393 
  - 
  (1,057)
 
 $4,066,681 
 $4,070,290 
 $25,559 
 $(29,168)
 
Cost and fair value of investments at December 31, 2015, are as follows:
 
Restricted investments:
 
Fair Market Value
 
 
Cost
 
 
Unrealized Gain
 
 
Unrealized Loss
 
Money market funds
 $81,104 
 $81,104 
 $- 
 $- 
Corporate bonds
  858,081 
  1,029,256 
  - 
  (171,175)
Equities
  2,202,848 
  2,554,918 
  - 
  (352,070)
Total
  3,142,033 
  3,665,278 
  - 
  (523,245)
Other investments:
    
    
    
    
Money market funds
  878 
  878 
  - 
  - 
Equities
  21,993 
  29,849 
  - 
  (7,856)
Total
  22,871 
  30,727 
    
  (7,856)
 
 $3,164,904 
 $3,696,005 
 $- 
 $(531,101)
 
Contractual maturities of available-for-sale debt securities as of December 31:
 
 
 
2017
 
 
2016
 
 
2015
 
Due in one year or less
 $- 
 $- 
 $- 
Due in 1-2 years
  - 
  - 
  - 
Due in 2-5 years
  - 
  - 
  - 
Due after 5 years
  453,283 
  537,180 
  858,081 
Total investments in debt securities
 $453,283 
 $537,180 
 $858,081 
 
 
12
 
 
WHOLESALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016, AND 2015
 
NOTE 8 – FAIR VALUE MEASUREMENTS
 
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in an orderly transaction between unaffiliated market participants at the measurement date.
 
Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:
 
Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
 
Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.
 
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.
 
The carrying amounts reported for financial instruments approximate their fair values.
 
 
 

 
 
Fair Value
Measurements Using:
 
 
 
    2017  
 
 
    (Level 1)   
 
 
    (Level 2)  
 
Money market funds
 $143,091 
 $143,091 
 $- 
Corporate bonds
  453,282 
  - 
  453,282 
Equities
  354,603 
  354,603 
  - 
Exchange traded funds
  22,170 
  22,170 
  - 
Total investments
 $973,146 
 $519,864 
 $453,282 
 
 
 
2016
 
 
(Level 1)
 
 
(Level 2)
 
Money market funds
 $3,079,531 
 $3,079,531 
 $- 
Corporate bonds
  537,180 
  - 
  537,180 
Equities
  449,970 
  449,970 
  - 
Total investments
 $4,066,681 
 $3,529,501 
 $537,180 
 
(Continued)
    
    
    

 
13
 
 
WHOLESALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016, AND 2015
 
NOTE 8 – FAIR VALUE MEASUREMENTS (Continued)
 
 
 
2015
 
 
(Level 1)
 
 
(Level 2)
 
Money market funds
 $81,982 
 $81,982 
 $- 
Corporate bonds
  858,081 
  - 
  858,081 
Equities
  2,224,841 
  2,224,841 
  - 
Total investments
 $3,164,904 
 $2,306,823 
 $858,081 
 
NOTE 9 –INCOME TAXES
 
The state income tax provision consists of the following as of December 31:
 
 
 
2017
 
 
2016
 
 
2015
 
Current tax expense
 $104,500 
 $117,100 
 $100,000 
Deferred tax expense (benefit)
  (56,000)
  71,500 
  (19,700)
Total provision for income taxes
 $48,500 
 $188,600 
 $80,300 
 
Net deferred income taxes on the balance sheet include the following amounts of deferred income tax assets and liabilities as of December 31:
 
 
 
2017
 
 
2016
 
 
2015
 
Deferred tax assets
 $- 
 $- 
 $34,000 
Deferred tax liabilities
  (18,000)
  (74,000)
  (36,500)
Net
 $(18,000)
 $(74,000)
 $(2,500)
 
Deferred income taxes are provided for the temporary differences between the financial reporting basis and tax basis of the Company’s assets and liabilities. The deferred income tax liabilities result from the use of accelerated methods of depreciation of property and equipment for income tax purposes and from unrelated gains on marketable securities. The deferred income tax assets result primarily from unrealized losses on marketable securities.
 
NOTE 10 – UNCERTAIN TAX POSITIONS
 
The Company follows the guidance of FASB ASC Topic 740-10, Income Taxes, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In addition, it provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
 
(Continued)
 
 
14
 
 
WHOLESALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016, AND 2015
 
NOTE 10 – UNCERTAIN TAX POSITIONS (Continued)
 
Based on its evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. The Company’s evaluation was performed for the tax years ended December 31, 2014 through December 31, 2017, for U.S. federal income tax, and for the state of Tennessee, the years which remain subject to examination as of December 31, 2017.
 
NOTE 11 – RELATED PARTY TRANSACTIONS
 
The Company leases its administrative offices and retail facilities on a month-to-month basis from the sole stockholder of the Company for approximately $54,000 per month. Total rent paid to the stockholder was $648,000, $602,000, and $372,000, for the years ended December 31, 2017, 2016, and 2015, respectively.
 
These advances are included on the balance sheet at December 31, 2017 as due from stockholder. Amounts due from stockholder represent unreimbursed personal expenses paid by the Company on behalf of the stockholder. This receivable is due on demand and interest is not charged. The amount due from the stockholder totaled $3,621,422, $438,204, and $421,627 as of December 31, 2017, 2016, and 2015, respectively.
 
In the normal course of operations, the Company utilizes transportation services of Wholesale Express, LLC (“Express”), a related party through common ownership. Freight purchases from Express totaled $583,954 and $559,641 as of December 31, 2017 and 2016, respectively. In addition, in 2016, the Company made advances totaling $70,000 to Express, primarily to accommodate expansion and other financing needs of the related entity. As of December 31, 2017, the Company had a due to Express for $215,000.
 
NOTE 12 – RISKS AND UNCERTAINTIES
 
The Company has investments in various marketable securities. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and those changes could materially affect the fair market value of the marketable securities reported in the balance sheet.
 
NOTE 13 – CONCENTRATIONS
 
The Company is dependent on a third-party provider of wholesale auto auctions. The Company is dependent on their ability to provide services on a timely basis and at favorable pricing terms. The loss of this principal provider or a significant reduction in service availability could have a material adverse effect on the Company. The Company believes that its relationship with this provider is satisfactory.
 
 
15
 
 
WHOLESALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016, AND 2015
 
NOTE 14 – COMMITMENTS AND CONTINGENCIES
 
The Company is subject to various claims that arise in the normal course of business. Management believes that any liability it may incur would not have a material adverse effect on its financial condition or its results of operations.
 
NOTE 15 – RECLASSIFICATIONS
 
Certain prior year items have been reclassified in order to improve comparability with current year amounts. These reclassifications have no effect on previously reported net income.
 
NOTE 16 – SUBSEQUENT EVENTS
 
Management has evaluated events and transactions subsequent to December 31, 2017 through the date of the independent auditor’s report (the date the financial statements were available to be issued) for potential recognition or disclosure in the combined financial statements. Other than the matter identified below, management has not identified any items requiring recognition or disclosure.
 
In August 2018 management signed a letter of intent to sell the equity interest of the Company and is currently negotiating a final agreement.
 
 
 
 
 
 
 
 
 
 
 
16
EX-99.2 5 rmbl_ex992.htm AUDITED HISTORICAL FINANCIAL STATEMENTS Blueprint
 
 
Exhibit 99.2
 
 
 
WHOLESALE EXPRESS, LLC
 
FINANCIAL STATEMENTS
 
DECEMBER 31, 2017 AND 2016
 
 
 

 
 
WHOLESALE EXPRESS, LLC
 
INDEX TO REPORT
 
DECEMBER 31, 2017 AND 2016
 
 
PAGE
INDEPENDENT AUDITOR'S REPORT
1-2
BALANCE SHEETS
3
STATEMENTS OF INCOME AND MEMBER'S EQUITY
4
STATEMENTS OF CASH FLOWS
5
NOTES TO THE FINANCIAL STATEMENTS
6-10
 
 
 
 
 
 
 
 
INDEPENDENT AUDITOR’S REPORT
 
To the Member
Wholesale Express, LLC
Mount Juliet, Tennessee
 
Report on the Financial Statements
 
We have audited the accompanying financial statements of Wholesale Express, LLC, which comprise the balance sheets as of December 31, 2017 and 2016, and the related statements of income and member’s equity, 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 accounting 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 audits 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 that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
 
1200 Market Street, Chattanooga, TN 37402 | T 423.756.7771 | F 423.265.8125
A N INDEPENDENT MEMBER O F THE B D O ALLIANCE USA

 
1
 
 
Opinion
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wholesale Express, LLC as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
 
Chattanooga, Tennessee
 
 
October 23, 2018
 
 
 
 
2
 
 
WHOLESALE EXPRESS, LLC
BALANCE SHEETS
DECEMBER 31, 2017 AND 2016
 
ASSETS
 
 
 
2017
 
 
2016
 
CURRENT ASSETS
 
 
 
 
 
 
Accounts receivable, net of allowance
 $1,817,382 
 $967,313 
Accounts receivable - related party
  15,284 
  27,111 
Prepaid expenses
  79,729 
  33,640 
Total current assets
  1,912,395 
  1,028,064 
PROPERTY AND EQUIPMENT
    
    
Leasehold improvements
  24,396 
  - 
Accumulated depreciation
  (953)
  - 
Cost less accumulated amortization
  23,443 
  - 
OTHER ASSETS
    
    
Due from related party
  215,000 
  - 
TOTAL ASSETS
 $2,150,838 
 $1,028,064 
LIABILITIES AND MEMBER'S EQUITY
    
    
CURRENT LIABILITIES
    
    
Checks drawn in excess of available bank balance
 $105,828 
 $127,234 
Accounts payable
  577,075 
  308,984 
Due to related party
  - 
  70,000 
Accrued state taxes
 
  21,300 
  1,300 
Deferred tax
  79,000 
  34,000 
Total current liabilities
  783,203 
  541,518 
MEMBER'S EQUITY
  1,367,635 
  486,546 
TOTAL LIABILITIES AND MEMBER'S EQUITY
 $2,150,838 
 $1,028,064 
 
The accompanying notes are an integral part of these financial statements.
 
3
 
 
WHOLESALE EXPRESS, LLC
STATEMENTS OF INCOME AND MEMBER'S EQUITY
YEARS ENDED DECEMBER 31, 2017 AND 2016
 
 
 
 
2017
 
 
2016
 
REVENUES
 $19,153,124 
 $10,132,367 
COST OF REVENUES
  15,402,561 
  8,224,396 
Gross profit
  3,750,563 
  1,907,971 
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE
  2,807,901 
  1,376,781 
OPERATING INCOME
  942,662 
  531,190 
INCOME TAX EXPENSE
    
    
Current income taxes
  16,573 
  - 
Deferred tax expense
  45,000 
  34,000 
Total income tax expense
  61,573 
  34,000 
NET INCOME
  881,089 
  497,190 
Member's equity (deficit) - beginning of year
  486,546 
  (10,644)
Member's equity - end of year
 $1,367,635 
 $486,546 
 
The accompanying notes are an integral part of these financial statements.
 
 
4
 
 
WHOLESALE EXPRESS, LLC
 
STATEMENTS OF CASH FLOWS
 
YEAR ENDED DECEMBER 31, 2017 AND 2016
 
 
 
2017
 
 
2016
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Net income
 $881,089 
 $497,190 
Adjustments to reconcile net income to net cash from operating activities:
    
    
Depreciation
  953 
  - 
Provision for deferred income taxes
  45,000 
  34,000 
Changes in current assets and liabilities:
    
    
Accounts receivable
  (838,242)
  (994,424)
Prepaid expenses
  (46,089)
  (33,640)
Due from related party
  (215,000)
  - 
Due to related party
  (70,000)
  (30,000)
Accrued taxes
  20,000 
  1,300 
Accounts payable
  268,091 
  305,331 
Net cash from operating activities
  45,802 
  (220,243)
CASH FLOWS FROM INVESTING ACTIVITIES
    
    
Purchases of property and equipment
  (24,396)
  - 
Net cash from investing activities
  (24,396)
  - 
CASH FLOWS FROM FINANCING ACTIVITIES
    
    
Checks drawn in excess of bank balance
  (21,406)
  127,234 
Net cash from financing activities
  (21,406)
  127,234 
NET CHANGE IN CASH
  - 
  (93,009)
Cash - beginning of year
  - 
  93,009 
Cash - end of year
 $- 
 $- 
  
The accompanying notes are an integral part of these financial statements.
 
 
5
 
 
WHOLESALE EXPRESS, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
 
NOTE 1 – NATURE OF OPERATIONS
 
Wholesale Express, LLC, (the Company) is a Tennessee based limited liability company headquartered in Mt. Juliet, Tennessee. The Company is a nationwide high volume automotive transport company and is engaged in domestic freight brokerage.
 
The Company shares common ownership as their related company Wholesale Inc. Wholesale Inc. is a used car retailer and wholesaler based in Mt. Juliet, Tennessee.
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Accounting Principles
 
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Financial Accounting Standards Board has established the Accounting Standards Codification as the sole source of authoritative GAAP.
 
Cash
 
The Company considers cash in the bank and all highly liquid investments with an original maturity of three months or less to be cash. The Company maintains an account with a financial institution which may exceed federally insured amounts at times.
 
Accounts Receivable
 
Accounts receivable includes certain amounts due from customers and Wholesale Inc. Management believes the Company maintains an adequate allowance for uncollectible accounts. As of December 31, 2017 and 2016, the allowance for doubtful accounts was $64,000 and $35,000, respectively.
 
Management considers all trade receivables ninety days past due as delinquent. Interest is not charged on accounts considered delinquent.
 
Property and Equipment
 
Property and equipment consist of leasehold improvements that are stated at cost. Expenditures for repairs and maintenance are charged to expense as incurred. Upon sale or other retirement of depreciable property, the cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the depreciable assets. Depreciation expense totaled $953 for the year ended December 31, 2017. There were no assets placed into service before 2017 and therefore no accompanying depreciation expense. The estimated useful life of the leasehold improvements is 15 years.
 
 
6
 
 
WHOLESALE EXPRESS, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
Revenue Recognition
 
The Company is primarily a non-asset based carrier and as such owns no transportation assets. Revenue is derived from the purchase of transportation services from direct (asset-based) carriers and resale of those services to customers as an indirect carrier. Revenues related to shipments are recognized based on the terms in the contract of carriage, primarily when goods reach their destination.
 
Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
Income Taxes
 
The Company, with the consent of its member, has elected to be taxed as a pass through entity under the provisions of the Internal Revenue Code. The member is personally liable for their proportionate share of the Company’s federal taxable income. Therefore, no provision for federal income taxes is reflected in these financial statements. The Company is a taxable entity for state purposes.
 
Uncertain Tax Positions
 
The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the positions will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. As of December 31, 2017, the Company has not recognized liabilities for uncertain tax positions or associated interest and penalties. The Company’s evaluation was performed for the tax years ended December 31, 2016 through December 31, 2017, for U.S. federal income tax, and for the State of Tennessee, the years which remain subject to examination as of December 31, 2017.
 
Advertising
 
Advertising costs are charged to operations when incurred. Advertising expense totaled $12,665 and $2,918 for the years ended December 31, 2017 and 2016, respectively.
 
 
7
 
 
WHOLESALE EXPRESS, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
 
NOTE 3 – OPERATING LEASES
 
The Company leases facilities in Arizona and Michigan under noncancelable operating leases which expire at various dates through August 31, 2021. The leases generally require the Company to pay taxes, maintenance, and insurance. Management expects that in the normal course of business, leases that expire will be renewed or replaced by other leases. The Company also rents a facility in Tennessee from Wholesale Inc. on a month to month basis. Rent expense for the years ended December 31, 2017 and 2016 was $74,417 and $43,560. Future monthly rentals under the property leases are as follows:
 
Year Ending December 31,
 
Amount
 
2018
 $115,966 
2019
  127,595 
2020
  123,362 
2021
  34,800 
 
 $401,723 
 
NOTE 4 – RELATED PARTY TRANSACTIONS
 
 Transactions and outstanding balances with Wholesale Inc. which is under common control as of December 31:
 
 
 
2017    
 
 
   2016  
 
Due to
 $- 
 $70,000 
Due from
  215,000 
  - 
Accounts receivable
  15,284 
  27,112 
Accounts payable
  34,756 
  42,099 
Sales
  538,954 
  559,641 
Reimbursements
  97,263 
  110,410 
Expenses
  276,241 
  271,406 
 
 NOTE 5 – INCOME TAXES
 
 The state income tax provision for the year ended December 31, 2017, is as follows:
 
 
 
2017
 
 
2016
 
Current tax expense
 $16,573 
 $- 
Deferred tax expense
  45,000 
  34,000 
Total provision for income taxes
 $61,573 
 $34,000 
 
Net deferred income taxes on the balance sheet as of December 31, 2017, include the following amounts of deferred income tax assets and liabilities:
 
 
  
2017
 
 
 
2016
 
 Deferred tax assets
 $- 
 $13,000 
 Deferred tax liabilities
  (79,000)
  (47,000)
 Net
 $(79,000)
 $(34,000)

 
8
 
 
WHOLESALE EXPRESS, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
 
NOTE 5 – INCOME TAXES (Continued)
 
Deferred income taxes are provided for the temporary differences between the financial reporting basis and tax basis of the Company’s assets and liabilities. The deferred income tax assets and liabilities results from the use of accelerated methods of depreciation of property and equipment, the use of cash basis reporting for income tax purposes and net operating loss carryforwards.
 
NOTE 6 – COMMITMENTS AND CONTINGENCIES
 
During the normal course of its operations, the Company from time to time becomes involved in various legal actions. Management is of the opinion that as of December 31, 2017 and 2016, there were no existing or pending legal actions which will have a material effect on the financial condition of the Company.
 
NOTE 7 – CREATION OF WHOLESALE EXPRESS, LLC
 
The Company was previously a division of Wholesale Inc. As of January 1, 2016, a separate company was created and business operations began. The opening balance sheets are summarized as follows:
 
Cash
 $93,009 
Total current assets
  93,009 
Total assets
 $93,009 
 
    
Accounts payable
 $3,652 
Advance from Wholesale Inc.
  100,000 
Total current liabilities
  103,652 
Member’s deficit
  (10,643)
Total liabilities and members’ deficit
 $93,009 
 
NOTE 8 – NEW ACCOUNTING PRONOUNCEMENTS
 
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606), a new standard on revenue recognition. Further, the FASB has issued a number of additional ASU's regarding the new revenue recognition standard. The new standard, as amended, will supersede existing revenue recognition guidance and apply to all entities that enter into contracts to provide goods or services to customers. The guidance also addresses the measurement and recognition of gains and losses on the sale of certain nonfinancial assets, such as real estate, property, and equipment. The new standard will become effective for annual reporting periods beginning on or after December 15, 2018 and interim periods within that year. The standard can be adopted either retrospectively to each reporting period presented or as a cumulative effect adjustment as of the date of adoption. Early adoption of the standard is permitted, but not before annual reporting periods beginning on or after December 15, 2017. We have performed a preliminary evaluation of this standard and plan to adopt it effective January 1, 2019.
9
 
9
 
 
WHOLESALE EXPRESS, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
 
NOTE 8 – NEW ACCOUNTING PRONOUNCEMENTS (Continued)
 
We cannot currently estimate the impact of this change upon adoption of this standard and will continue to review the impact of this standard on potential disclosure changes in our financial statements, as well as which transition approach will be applied. Our evaluation of this standard will continue through the date of adoption.
 
The FASB issued ASU 2016-02, Leases (Topic 842), in February 2016. ASU 2016-02 requires the recognition by lessees of assets and liabilities that arise from all lease transactions, except for leases with a lease term of 12 months or less. The lessee accounting model under ASU 2016-02 retains two types of leases: finance leases, which are to be accounted for in substantially the same manner as the existing accounting for capital leases, and operating leases, which are to be accounted for both in the statement of activities and the statement of cash flows in a manner consistent with existing accounting for operating leases. ASU 2016-02 also requires expanded qualitative and quantitative disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 applies to the Company's financial statements for the year ending December 31, 2020, with earlier implementation permitted. The Company's management has not determined the impact on its financial statements as a result of implementing ASU 2016-02.
 
NOTE 9 – SUBSEQUENT EVENTS
 
Management has evaluated events and transactions subsequent to the balance sheet date through the date of the independent auditor’s report (the date the financial statements were available to be issued) for potential recognition or disclosure in the combined financial statements. Other than the matter identified below, management has not identified any additional items requiring recognition or disclosure.
 
In August 2018 the management signed a letter of intent to sell the equity interest of the company and is currently negotiating a final agreement for those transactions.
 
 
10
EX-99.3 6 rmbl_ex993.htm COMBINED FINANCIAL STATEMENTS Blueprint
Exhibit 99.3
 
WHOLESALE, INC.
 
COMBINED FINANCIAL STATEMENTS
 
SEPTEMBER 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
WHOLESALE, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS
 
SEPTEMBER 30, 2018
 
(See Independent Accountant's Review Report)
 

 
 
 PAGE
INDEPENDENT ACCOUNTANT'S REVIEW REPORT 
 
1-2
 
 
 
 
 
 
 
 
COMBINED BALANCE SHEETS 
 
 
 
 
3
 
 
 
 
 
 
 
 
COMBINED STATEMENTS OF OPERATIONS 
 
 
4
 
 
 
 
 
 
 
 
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY 
 
5
 
 
 
 
 
 
 
 
COMBINED STATEMENTS OF CASH FLOWS 
 
 
6
 
 
 
 
 
 
 
 
NOTES TO COMBINED FINANCIAL STATEMENTS 
 
 
7-15
 
 
 
 
 
 
 
 
SUPPLEMENTARY INFORMATION 
 
 
 
 16
 
 
 
 
 
 
 
 
COMBINING BALANCE SHEET – SEPTEMBER 30, 2018 
 
 17
 
 
 
 
 
 
 
 
COMBINING BALANCE SHEET – DECEMBER 31, 2017 
 
 
 18
 
 
 
 
 
 
 
 
COMBINING STATEMENT OF OPERATIONS – SEPTEMBER 30, 2018 
19
 
 
 
 
 
 
 
 
COMBINING STATEMENT OF OPERATIONS – SEPTEMBER 30, 2017 
 20
 
 
 
 
 
 
 
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
 
To the Stockholder
Wholesale, Inc.
Mt. Juliet, Tennessee
 
We have reviewed the accompanying combined financial statements of Wholesale, Inc., which comprise the combined balance sheets as of September 30, 2018, and the related combined statements of operations, stockholders' equity, and cash flows for the nine month period then ended, and the related notes to the financial statements. A review includes primarily applying analytical procedures to management's financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.
 
Management's Responsibility for the Financial Statements
 
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting 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.
 
Accountant's Responsibility
 
Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion.
 
 
1
 
 
Accountant's Conclusion
 
Based on our review, we are not aware of any material modifications that should be made to the accompanying September 30, 2018 financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America.
 
Other Matter - Balance Sheet at December 31, 2017
 
The December 31, 2017 balance sheet was audited by us, and we expressed an unmodified opinion on it in our report dated October 22, 2018. We have not performed any auditing procedures since that date.
 
Other Matter - Statements for the period ended September 30, 2017
 
The September 30, 2017 financial statements were reviewed by us. Based on our review, we are not aware of any material modifications that should be made to the accompanying September 30, 2017 financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America.
 
Report on Supplementary Information
 
The accompanying combining schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from, and relates directly to, underlying accounting and other records used to prepare the financial statements. The supplementary information has been subjected to the review procedures applied in our review of the basic financial statements. We are not aware of any material modifications that should be made to the supplementary information. We have not audited the supplementary information and do not express an opinion on such information.
 
Chattanooga, Tennessee
January 10, 2019
 
 
 
 
 
2
 
 
 
WHOLESALE, INC.
COMBINED BALANCE SHEETS
SEPTEMBER 30, 2018 AND DECEMBER 31, 2017
(See Independent Accountant's Review Report)
 
ASSETS
 
CURRENT ASSETS
 
(Reviewed) As of September 30, 2018
 
 
 
(Audited) As of December 31, 2017
 
 
Cash and cash equivalents
 $2,497,659 
  3,461,002 
Accounts receivables
  4,051,862 
  2,162,214 
Vehicle inventory, net of valuation allowance
  58,932,938 
  47,253,754 
Other receivables
  461,858 
  535,091 
Prepaid expense
  310,267 
  214,578 
Investments
  880,091 
  973,146 
Total current assets
  67,134,675 
  54,599,785 
OTHER ASSETS
    
    
Property and equipment, net
  2,779,022 
  2,886,693 
Due from stockholder
  - 
  3,621,422 
Total other assets
  2,779,022 
  6,508,115 
TOTAL ASSETS
 $69,913,697 
 $61,107,900 
LIABILITIES AND STOCKHOLDER'S EQUITY          
CURRENT LIABILITIES
    
    
Checks drawn in excess of available bank balance
 $3,074,292 
  3,711,995 
Note payable - floorplan
  56,367,075 
  47,797,323 
Accounts payable
  3,740,747 
  1,094,279 
Due to related party
  720,000 
  215,000 
Accrued expenses and liabilities
  3,600,604 
  3,137,376 
Deferred revenue
  100,000 
  100,000 
Income tax payable
  379,502 
  230,831 
Total current liabilities
  67,982,220 
  56,286,804 
LONG-TERM LIABILITIES
    
    
Deferred tax liability
  46,000 
  18,000 
Total long-term liabilities
  46,000 
  18,000 
TOTAL LIABILITIES
  68,028,220 
  56,304,804 
STOCKHOLDER'S EQUITY
    
    
Common stock - $1 par value, 1,000 shares
authorized, issued and outstanding
  1,000 
  1,000 
Retained earnings
  1,884,477 
  4,802,096 
Total stockholder's equity
  1,885,477 
  4,803,096 
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
 $69,913,697 
 $61,107,900 
 
The accompanying notes are an integral part of the combined financial statements.
 
3
 
 
WHOLESALE, INC.
COMBINED STATEMENTS OF OPERATIONS
NINE MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
(See Independent Accountant's Review Report)
 
 
 
2018
 
 
2017
 
REVENUES
 
 
 
 
 
 
Wholesale vehicles
 $424,245,853 
 $392,995,166 
Retail vehicles
  65,703,165 
  65,580,843 
Other sales and revenues
  7,108,132 
  7,922,926 
Total revenues
  497,057,150 
  466,498,935 
EXPENSES
    
    
Cost of sales
  480,221,497 
  450,810,483 
Selling, general and administrative
  13,825,952 
  12,759,977 
Depreciation and amortization
  244,312 
  178,175 
Total expenses
  494,291,761 
  463,748,635 
OPERATING INCOME
  2,765,389 
  2,750,300 
Interest expense
  (2,030,693)
  (1,398,468)
Investment income
  125,312 
  36,241 
INCOME BEFORE TAXES
  860,008 
  1,388,073
 
Provision for income taxes
  86,000 
  48,500
 
NET INCOME
 $774,008 
 $1,339,573 
 
The accompanying notes are an integral part of the combined financial statements.
 
 
4
 
 
 
WHOLESALE, INC.
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2018
(See Independent Accountant's Review Report)
 
 
 
Common Stock
Shares Amount
 
 
      
Retained Earnings 
 
 
  Total    
 
BALANCE - December 31, 2017
  1,000 
 $1,000 
  4,802,096 
 $4,803,096 
 
    
    
    
    
Net income
  -
 
  -
 
  774,008 
  774,008 
 
    
    
    
    
Stockholder distributions
  -
 
  -
 
  (3,691,627)
  (3,691,627)
 
    
    
    
    
BALANCE - September 30, 2018
  1,000 
 $1,000 
 $1,884,477 
 $1,885,477 
 
 
 
5
 
 
 
WHOLESALE, INC.
COMBINED STATEMENTS OF CASH FLOWS
NINE MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
(See Independent Accountant's Review Report)
 
 
 
2018
 
 
2017
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Net income
 $774,008 
 $1,339,573 
Adjustments to reconcile net income to net cash from operating activities:
    
    
Depreciation and amortization
  244,312 
  178,175 
Realized and unrealized loss (gain) on investments
  (97,362)
  (34,554)
Loss on disposal of property and equipment
    
  227,928 
Provision for deferred income taxes
  28,000 
  (56,000)
Reinvested interest and dividend income, net
  (27,962)
  (22,919)
Changes in assets and liabilities:
    
    
Accounts receivable
  (1,889,648)
  (1,563,227)
Vehicle inventory
  (11,679,184)
  (13,102,752)
Other receivables
  73,233 
  (10,562)
Prepaid expenses
  (95,689)
  (152,380)
Note payable - floorplan
  8,569,752 
  14,553,751 
Accounts payable
  2,646,468 
  396,798 
Accrued expenses and liabilities
  463,228 
  933,746 
Deferred revenue
    
  100,000 
Income tax payable
  148,671 
  90,892 
Net cash from operating activities
  (842,173)
  2,878,469 
CASH FLOWS FROM INVESTING ACTIVITIES
    
    
Due from related party
  505,000 
  150,000 
Purchases of property and equipment
  (136,641)
  (1,657,484)
Proceeds from sale of investments
    
  3,263,005 
Purchases of investments
  218,379 
    
Change in due from stockholder
  3,621,422 
  (3,236,382)
Net cash from investing activities
  4,208,160 
  (1,480,861)
CASH FLOWS FROM FINANCING ACTIVITIES
    
    
Checks drawn in excess of bank balance
  (637,703)
  1,217,460 
Stockholder distributions
  (3,691,627)
  (1,530,005)
Net cash from financing activities
  (4,329,330)
  (312,545)
NET CHANGE IN CASH AND CASH EQUIVALENTS
  (963,343)
  1,085,063 
Cash and cash equivalents - beginning of period
  3,461,002 
  2,971,534 
Cash and cash equivalents - end of period
 $2,497,659 
 $4,056,597 
SUPPLEMENTAL DISCLOSURES
    
    
Cash paid for interest
 $1,480,260 
 $1,454,643 
Cash paid for income taxes
 $58,000 
 $58,000 
 
 
 
6
 
 
WHOLESALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(See Independent Accountant's Review Report)
 
NOTE 1— ORGANIZATION AND DESCRIPTION OF BUSINESS
 
Organization
 
The combined financial statements comprise those of Wholesale, Inc. and SRB Remarketing, LLC, collectively referred to as the "Company".
 
Wholesale, Inc. was incorporated on April 24, 2003, in the state of Tennessee. SRB Remarketing, LLC was formed on May 4, 2016 as a Tennessee limited liability company.
 
Description of Business
 
The Company is engaged in the retail and wholesale sales of motor vehicles. The Company operates a retail location in Madison, Tennessee, and a combined retail and wholesale location in Mt. Juliet, Tennessee.
 
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Cash Equivalents and Contingent Risk Regarding Cash Balances
 
The Company considers cash in the bank and all highly liquid investments with an original maturity of three months or less to be cash. Under our cash management system, outstanding checks that are in excess of the cash balances at certain banks are included under current liabilities in the combined balance sheets and changes in these amounts are reflected in financing cash flows in the accompanying combined statements of cash flows. The Company considers contracts in transit to be cash equivalents as the contracts are normally purchased by a financial institution for face value within a few business days.
 
Accounts Receivable
 
Accounts receivable consist primarily of amounts due from customers, third-party finance companies and related parties. Management considers receivables outstanding for ninety days to be delinquent and believes it maintains an adequate allowance for any uncollectable amounts. Interest is not charged on accounts considered delinquent. Management establishes an allowance for doubtful accounts based on historical experience and trends.
 
Vehicle inventory consists of used vehicles, primarily acquired at auction. Direct and indirect vehicle reconditioning costs including parts and labor, inbound transportation costs and other incremental costs are capitalized as a component of inventory. Inventory is stated at the lower of cost or net realizable value. Vehicle inventory cost is determined by specific identification. Net realizable value is the estimated selling price less costs to complete, dispose and transport the vehicles. Selling prices are derived from historical data and trends, such as sales price and inventory turn times of similar vehicles, as well as independent, market resources. Each reporting period the Company recognizes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value through cost of sales in the accompanying combined income statements.
 
Property and Equipment
 
Property and equipment consist of land, buildings and improvements, transportation fleet equipment, software and furniture, fixtures and equipment and is stated at cost less accumulated depreciation and amortization. Repairs and maintenance costs that extend the life or utility of an asset are also capitalized. Ordinary repairs and maintenance are charged to expense as incurred. Costs incurred during construction are capitalized as construction in progress and reclassified to the appropriate categories when the project is completed.
 
 
7
 
 
Depreciation and amortization are computed using the straight-line method over the lesser of the remaining lease term or the following estimated useful lives:
 
Furniture, fixtures, and equipment 3-7 years
Leasehold improvements  5-15 years
Software  3 years
Vehicles  3 years
 
Shipping and Handling Costs
 
The Company is charged shipping costs on each vehicle delivered to the dealership. These costs are expensed in cost of sales.
 
Investments
 
The Company's investments in marketable securities are classified as available for-sale. The Company has elected the fair value option. Thus, investments are recorded at fair value on the balance sheet as current assets, with the change in fair value during the period included in earnings.
 
Income Taxes
 
Income taxes are reported in accordance with Financial Standards Accounting Board (FASB) Accounting Standards Codification (ASC) Topic 740, Income Taxes. This statement requires the establishment of deferred tax accounts for all temporary differences between the book and tax basis of assets and liabilities. In addition, deferred tax accounts must be adjusted to reflect new rates if enacted into law.
 
Effective January 1, 2010, the Company elected S corporation status. Earnings and losses after that date are included in the personal income tax returns of the stockholder and taxed at the individual level. Accordingly, the Company will not incur additional federal income tax obligations from current operations, and future financial statements will not include a provision for federal income taxes on current operations. The Company remains subject to state of Tennessee excise tax on profits at a rate of 6.5%.
 
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between depreciation and unrealized gains or losses for financial and income tax reporting. The deferred taxes represent the future tax return consequences of those differences, which will either be deductible or taxable when the assets and liabilities are recovered or settled.
 
Revenue Recognition
 
The Company records revenue when vehicles are delivered to customers. Conditions for completing a sale include having an agreement with the customer, including pricing, and the sales price must be reasonably expected to be collected.
 
The Company arranges financing for customers through various financial institutions and receives a commission from the financial institution either in a flat fee amount or in an amount equal to the difference between the interest rates charged to customers over the predetermined interest rates set by the financial institution.
 
The Company also receives commissions from the sale of various insurance contracts to customers. The Company may be assessed a chargeback fee in the event of early cancellation of a loan or insurance contract by the customer.
 
Interest Expense
 
The Company recognizes interest expense at the earlier of when incurred or when paid, with certain exceptions.
 
Use of Estimates
 
The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
 
8
 
 
NOTE 3 — ACCOUNTS RECEIVABLE
 
Accounts receivable consists of the following as of:
 
 
 
September 30,
2018
 
 
December 31,
2017
 
Trade
 $3,842,558 
 $1,588,800 
Finance
  197,574 
  234,690 
Employees
  11,730 
  338,724 
 
 $4,051,862 
 $2,162,214 
 
NOTE 4 — INVENTORY
 
Inventory consists of the following as of:
 
 
 
September 30,
2018
 
 
December 31,
2017
 
Used vehicles
 $60,161,524 
 $48,446,419 
Parts and other
  8,414 
  44,335 
 
  60,169,938 
  48,490,754 
Used vehicle valuation allowance
  (1,237,000)
  (1,237,000)
 
 $58,932,938 
 $47,253,754 
 
NOTE 5 — PROPERTY AND EQUIPMENT, NET
 
Property and equipment consist of the following major classifications as of:
 
 
 
September 30,
2018
 
 
December 31,
2017
 
Furniture, fixtures, and equipment
 $918,881 
 $876,010 
Leasehold improvements
  3,123,596 
  3,103,861 
Software
  284,153 
  209,852 
Vehicles
  57,362 
  57,362 
Accumulated depreciation
  (1,604,970)
  (1,360,392)
 
 $2,779,022 
 $2,886,693 
 
 
9
 
 
NOTE 6 — NOTE PAYABLE — FLOORPLAN
 
The Company has a floor plan arrangement with a third party to finance its used vehicle inventory, which is secured by substantially all of its assets and is renewed on an annual basis. The note includes a personal guarantee of payment by the stockholder and another related party. The note had a maximum availability of $70,000,000 at December 31, 2017 and September 30, 2018, and bears interest at a rate per annum equal to one-month LIBOR plus 3.25%
 
NOTE 7 — INVESTMENTS
 
Investments held by the Company include debt and equity securities and money market funds. In accordance with ASC Topic 320, Investments-Debt and Equity Securities, these securities are classified as available-for-sale and are reported at their fair values as determined by the market price listed by the appropriate trading exchange on the last day of the year.
 
Cost and fair value of investments at September 30, 2018, are as follows:
 
 
 
Fair Market
Value
 
 
Cost
 
 
Unrealized Gain
 
 
Unrealized Loss
 
Money market funds
 $39,079 
 $39,079 
 $- 
 $- 
Corporate bonds
  111,563 
  119,267 
  - 
  (7,704)
Equities
  729,449 
  645,847 
  83,602 
  - 
Total
 $880,091 
 $804,193 
 $83,602 
 $(7,704)
(Continued)
    
    
    
    
 
 
 
 
10
 
 
 
WHOLESALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(See Independent Accountant's Review Report)
 
 
 
Fair Market Value
 
 
Cost
 
 
Unrealized Gain
 
 
Unrealized Loss
 
Restricted investments:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 $51,638 
 $51,638 
 $- 
 $- 
Corporate bonds
  453,282 
  466,491 
  - 
  (13,209)
Equities
  206,301 
  184,432 
  21,869 
  - 
Total
  711,221 
  702,561 
  21,869 
  (13,209)
 
    
    
    
    
Other investments:
    
    
    
    
Money market funds
  91,453 
  91,453 
  - 
  - 
Equities
  148,302 
  132,797 
  15,505 
  - 
Exchange traded funds
  22,170 
  19,943 
  2,227 
  - 
Total
  261,925 
  244,193 
  17,732 
  - 
 
 $973,146 
 $946,754 
 $39,601 
 $(13,209)
 
Contractual maturities of available                                                                -for-sale debt securities as of September 30, 2018:                                                                                     
 
Due in one year or less
 $- 
Due in 1-2 years
  - 
Due in 2-5 years
  - 
Due after 5 years
  111,563 
Total investments in debt securities
 $111,563 
 
 
11
 
 
NOTE 8 — FAIR VALUE MEASUREMENTS
 
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in an orderly transaction between unaffiliated market participants at the measurement date.
 
Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:
 
Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
 
Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.
 
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.
 
The carrying amounts reported for financial instruments approximate their fair values.
 
 
 
 
 
 
Fair Value Measurements Using:
 
 
 
September 30, 2018
 
 
(Level 1)
 
 
(Level 2)
 
Money market funds
 $39,079 
 $39,079 
 $- 
Corporate bonds
  111,563 
  - 
  111,563 
Equities
  729,449 
  729,449 
  - 
Total investments
 $880,091 
 $768,528 
 $111,563 
 
 
 
 
December 31, 2017
 
 
(Level 1)
 
 
(Level 2)
 
Money market funds
 $143,091 
 $143,091 
 $- 
Corporate bonds
  453,282 
  - 
  453,282 
Equities
  354,603 
  354,603 
  - 
Exchange Traded Funds
  22,170 
  22,170 
  - 
Total investments
 $973,146 
 $519,864 
 $453,282 
 
 
12
 
 
 
WHOLESALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(See Independent Accountant's Review Report)
 
NOTE 9 – INCOME TAXES
 
The state income tax provision consists of the following as of:
 
 
 
September 30,
2018
 
 
September 30,
2017
 
 
 
 
 
 
 
 
Current tax expense
 $58,000 
 $104,500 
Deferred tax expense (benefit)
  28,000 
  (56,000)
Total provision for income taxes
 $86,000 
 $48,500 
 
Net deferred income taxes on the balance sheet include the following amounts of deferred income tax assets and liabilities as of:
 
 
 
September 30,
2018
 
 
December 31,
2017
 
 
 
 
 
 
 
 
Deferred tax assets
 $- 
 $- 
Deferred tax liabilities
  (46,000)
  (18,000)
Net
 $(46,000)
 $(18,000)
 
 
Deferred income taxes are provided for the temporary differences between the financial reporting basis and tax basis of the Company's assets and liabilities. The deferred income tax liabilities result from the use of accelerated methods of depreciation of property and equipment for income tax purposes and from unrelated gains on marketable securities.
 
 
13
 
 
NOTE 10 — UNCERTAIN TAX POSITIONS
 
The Company follows the guidance of FASB ASC Topic 740-10, Income Taxes, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In addition, it provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
 
Based on its evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. The Company's evaluation was performed for the tax years ended December 31, 2015 through the nine month period ended September 30, 2018, for U.S. federal income tax, and for the state of Tennessee, the years which remain subject to examination as of September 30, 2018.
 
NOTE 11— RELATED PARTY TRANSACTIONS
 
The Company leases its administrative offices and retail facilities on a month-to-month basis from the sole stockholder of the Company for approximately $54,000 per month. Total rent paid to the stockholder was $486,000, for the nine-month periods ended September 30, 2018 and 2017.
 
In the normal course of operations, the Company utilizes transportation services of Wholesale Express, LLC ("Express"), a related party through common ownership. Freight purchases from Express totaled $1,495,983 for the nine-month period ended September 30, 2018. As of September 30, 2018, the Company had a due to Express for $720,000.
 
Amounts due from stockholder represent unreimbursed personal expenses paid by the Company on behalf of the stockholder. This receivable is due on demand and interest is not charged. The amount due from the stockholder totaled $0 and $3,621,422 as of September 30, 2018 and December 31, 2017, respectively.
 
NOTE 12 — RISKS AND UNCERTAINTIES
 
The Company has investments in various marketable securities. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and those changes could materially affect the fair market value of the marketable securities reported in the balance sheet.
 
NOTE 13 — CONCENTRATIONS
 
The Company is dependent on a third-party provider of wholesale auto auctions. The Company is dependent on their ability to provide services on a timely basis and at favorable pricing terms. The loss of this principal provider or a significant reduction in service availability could have a material adverse effect on the Company. The Company believes that its relationship with this provider is satisfactory.
 
 
14
 
 
NOTE 14 — COMMITMENTS AND CONTINGENCIES
 
The Company is subject to various claims that arise in the normal course of business. Management believes that any liability it may incur would not have a material adverse effect on its financial condition or its results of operations.
 
NOTE 15 — SUBSEQUENT EVENTS
 
Management has evaluated events and transactions subsequent to September 30, 2018 through the date of the independent accountant's review report (the date the financial statements were available to be issued) for potential recognition or disclosure in the combined financial statements. Other than the matter identified below, management has not identified any items requiring recognition or disclosure.
 
In October 2018, the Company agreed to sell the remaining equity interest and merge with RumbleOn, Inc. Following the transaction in October 2018, SRB Remarketing, LLC ceased all business activities and is no longer in operation.
 
 
 
15
 
 
 
 
 
 
 
 
 
 
 
SUPPLEMENTARY INFORMATION
 
 
 
 
16
 
 
 
WHOLESALE, INC.
COMBINING BALANCE SHEET
SEPTEMBER 30, 2018
 
ASSETS
 
 
 
Wholesale, Inc.
 
 
SRB Remarketing, LLC
 
 
Eliminations
 
 
Total
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $2,470,389 
 $27,270 
 $- 
 $2,497,659 
Receivables, net
  4,080,830 
  - 
  (28,968)
  4,051,862 
Vehicle inventory
  58,932,938 
  - 
  - 
  58,932,938 
Other receivables
  461,858 
  - 
  - 
  461,858 
Prepaid expense
  310,267 
  - 
  - 
  310,267 
Investments
  880,091 
  - 
  - 
  880,091 
Total current assets
  67,136,373 
  27,270 
  (28,968)
  67,134,675 
 
    
    
    
    
OTHER ASSETS
    
    
    
    
Property and equipment, net
  2,779,022 
  - 
  - 
  2,779,022 
Due from stockholder
  - 
  - 
  - 
  - 
Total other assets
  2,779,022 
  - 
  - 
  2,779,022 
 
    
    
    
    
TOTAL ASSETS
 $69,915,395 
 $27,270 
 $(28,968)
 $69,913,697 
 
    
    
    
    
LIABILITIES AND STOCKHOLDER'S EQUITY
 
    
    
    
    
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
 
Checks drawn in excess of available bank balance
 $3,074,292 
 $- 
 $- 
 $3,074,292 
Note payable - floorplan
  56,367,075 
  - 
  - 
  56,367,075 
Accounts payable
  3,740,746 
  28,969 
  (28,968)
  3,740,747 
Due to related party
  720,000 
  - 
  - 
  720,000 
Accrued expenses and liabilities
  3,600,604 
  - 
  - 
  3,600,604 
Deferred revenue
  100,000 
  - 
  - 
  100,000 
Income tax payable
  379,502 
  - 
  - 
  379,502 
Total current liabilities
  67,982,219 
  28,969 
  (28,968)
  67,982,220 
 
    
    
    
    
LONG-TERM LIABILITIES
    
    
    
    
Deferred tax liability
  46,000 
  - 
  - 
  46,000 
Total long-term liabilities
  46,000 
  - 
  - 
  46,000 
 
    
    
    
    
TOTAL LIABILITIES
  68,028,219 
  28,969 
  (28,968)
  68,028,220 
 
    
    
    
    
STOCKHOLDER'S EQUITY
    
    
    
    
Common stock - $1 par value, 1,000 shares authorized, issued and outstanding
  1,000 
  - 
  - 
  1,000 
Retained earnings
  1,886,176 
  (1,699)
  - 
  1,884,477 
Total stockholder's equity
  1,887,176 
  (1,699)
  - 
  1,885,477 
 
    
    
    
    
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
 $69,915,395 
 $27,270 
 $(28,968)
 $69,913,697 
 
 
17
 
 
 
WHOLESALE, INC.
COMBINING BALANCE SHEET
DECEMBER 31, 2017
 
 
ASSETS
 
 
 
Wholesale, Inc.
 
 
SRB Remarketing, LLC
 
 
Eliminations
 
 
Total
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $3,383,285 
 $77,717 
 $- 
 $3,461,002 
Receivables, net
  2,239,594 
  20,750 
  (98,130)
  2,162,214 
Vehicle inventory
  47,253,754 
  - 
  - 
  47,253,754 
Other receivables
  535,091 
  - 
  - 
  535,091 
Prepaid expense
  214,578 
  - 
  - 
  214,578 
Restricted investments
  711,221 
  - 
  - 
  711,221 
Other investments
  261,925 
  - 
  - 
  261,925 
Total current assets
  54,599,448 
  98,467 
  (98,130)
  54,599,785 
 
    
    
    
    
OTHER ASSETS
    
    
    
    
Property and equipment, net
  2,886,693 
  - 
  - 
  2,886,693 
Due from stockholder
  3,621,422 
  - 
  - 
  3,621,422 
Total other assets
  6,508,115 
  - 
  - 
  6,508,115 
TOTAL ASSETS
 $61,107,563 
 $98,467 
 $(98,130)
 $61,107,900 
 
    
    
    
    
 
LIABILITIES AND STOCKHOLDER'S EQUITY
 
 
    
    
    
    
CURRENT LIABILITIES
    
    
    
    
Checks drawn in excess of available bank balance
 $3,711,995 
 $- 
 $- 
 $3,711,995 
Note payable - floorplan
  47,797,323 
  - 
    
  47,797,323 
Accounts payable
  1,094,279 
  98,130 
  (98,130)
  1,094,279 
Due to related party
  215,000 
  - 
  - 
  215,000 
Accrued expenses and liabilities
  3,137,376 
  - 
  - 
  3,137,376 
Deferred revenue
  100,000 
  - 
  - 
  100,000 
Income tax payable
  230,831 
  - 
  - 
  230,831 
Total current liabilities
  56,286,804 
  98,130 
  (98,130)
  56,286,804 
LONG-TERM LIABILITIES
    
  - 
    
  - 
Deferred tax liability
  18,000 
  - 
  - 
  18,000 
Total long-term liabilities
  18,000 
  - 
  - 
  18,000 
 
    
    
    
    
TOTAL LIABILITIES
  56,304,804 
  98,130 
  (98,130)
  56,304,804 
 
    
    
    
    
STOCKHOLDER'S EQUITY
    
    
    
    
Common stock - $1 par value, 1,000 shares authorized, issued and outstanding
  1,000 
  - 
  - 
  1,000 
Retained earnings
  4,801,759 
  - 
  - 
  4,802,096 
Total stockholder's equity
  4,802.759 
  - 
  - 
  4,803,096 
TOTAL LIABILITIES ANDSTOCKHOLDER'S EQUITY
 $61,107,563 
 $98,467 
 $(98,130)
 $61,107,900 
 
 
 
18
 
 
 
WHOLESALE, INC.
COMBINING STATEMENT OF OPERATIONS
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2018
 
REVENUES
 
Wholesale, Inc.
 
 
SRB Remarketing, LLC
 
 
Eliminations
 
 
Total
 
Wholesale vehicles
 $423,923,715 
 $3,587,611 
 $(3,265,473)
 $424,245,853 
Retail vehicles
  65,703,165 
  - 
  - 
  65,703,165 
Other sales and revenues
  7,108,132 
  - 
  - 
  7,108,132 
Total revenues
  496,735,012 
  3,587,611 
  (3,265,473)
  497,057,150 
 
    
    
    
    
EXPENSES
    
    
    
    
Cost of sales
  479,907,915 
  3,579,055 
  (3,265,473)
  480,221,497 
Selling, general and administrative
  13,815,360 
  10,592 
  - 
  13,825,952 
Depreciation and amortization
  244,312 
  - 
  - 
  244,312 
Total expenses
  493,967,587 
  3,589,647 
  (3,265,473)
  494,291,761 
 
    
    
    
    
OPERATING INCOME (LOSS)
  2,767,425 
  (2,036)
  - 
  2,765,389 
Interest expense
  (2,030,693)
  - 
  - 
  (2,030,693)
Investment income
  125,312 
  - 
  - 
  125,312 
 
    
    
    
    
INCOME (LOSS) BEFORE TAXES
  862,044 
  (2,036)
  - 
  860,008 
Provision for income taxes
  86,000 
  - 
  - 
  86,000 
 
    
    
    
    
NET INCOME (LOSS)
 $776,044 
 $(2,036)
 $- 
 $774,008 
 
 
 
19
 
 
 
WHOLESALE, INC.
COMBINING STATEMENT OF OPERATIONS
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2017
 
REVENUES
 
Wholesale, Inc.
 
 
SRB Remarketing, LLC
 
 
Eliminations
 
 
Total
 
Wholesale vehicles
 $392,866,681 
 $2,611,266 
 $(2,482,781)
 $392,995,166 
Retail vehicles
  65,580,843 
  - 
  - 
  65,580,843 
Other sales and revenues
  7,922,926 
  - 
  - 
  7,922,926 
Total revenues
  466,370,450 
  2,611,266 
  (2,482,781)
  466,498,935 
 
    
    
    
    
EXPENSES
    
  - 
  - 
    
Cost of sales
  450,686,788 
  2,606,476 
  (2,482,781)
  450,810,483 
Selling, general and administrative
  12,752,609
 
  7,368 
  - 
  12,759,977
 
Depreciation and amortization
  178,175 
    
  - 
  178,175 
Total expenses
  463,617,572
 
  2,613,844 
  (2,482,781)
  463,748,635
 
 
    
    
    
    
OPERATING INCOME
  2,752,878
 
  (2,578)
  - 
  2,750,300
 
Interest expense
  (1,398,468)
  - 
  - 
  (1,398,468)
Investment income
  36,241 
  - 
  - 
  36,241 
INCOME BEFORE TAXES
  1,390,651
 
  (2,578)
  - 
  1,388,073
 
Provision for income taxes
  48,500
 
  - 
  - 
  48,500
 
 
    
    
    
    
NET INCOME
 $1,342,151 
 $(2,578)
 $- 
 $1,339,573 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20
EX-99.4 7 rmbl_ex994.htm UNAUDITED FINANCIAL STATEMENTS Blueprint
 
Exhibit 99.4
 
 
WHOLESALE EXPRESS, LLC
 
FINANCIAL STATEMENTS
 
SEPTEMBER 30, 2018
 
 
 
 
 
 
 
 
 

 
 
 
WHOLESALE EXPRESS, LLC
 
INDEX TO REPORT
 
SEPTEMBER 30, 2018
 
PAGE
 
INDEPENDENT ACCOUNTANT’S REVIEW REPORT
1-2
 
 
BALANCE SHEET
3
 
 
STATEMENT OF INCOME AND MEMBER'S EQUITY
4
 
 
STATEMENT OF CASH FLOWS
5
 
 
NOTES TO THE FINANCIAL STATEMENTS
6-10
 
 
 
 
 
 
INDEPENDENT ACCOUNTANT’S REVIEW REPORT
 
To the Member
Wholesale Express, LLC
Mount Juliet, Tennessee
 
We have reviewed the accompanying financial statements of Wholesale Express, LLC, which comprise the balance sheet as of September 30, 2018, and the related statement of income and member’s equity, and cash flows for the nine-month period then ended and the related notes to the financial statements. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.
 
Management’s Responsibility for the Financial Statements
 
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting 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 the financial statements that are free from material misstatement whether due to fraud or error.
 
Accountant’s Responsibility
 
Our responsibility is to conduct the review engagements in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of 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 financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion.
 
Accountant’s Conclusion
 
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying September 30, 2018 financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.
 
Other Matter - Balance Sheet at December 31, 2017
 
The December 31, 2017 balance sheet was audited by us, and we expressed an unmodified opinion on it in our report dated October 23, 2018. We have not performed any auditing procedures since that date.
 
 
 
1200 Market Street, Chattanooga, TN 37402 | T 423.756.7771 | F 423.265.8125
 

AN INDEPENDENT MEMBER OF THE BDO ALLIANCE USA
 
 
 
1
 
 
 
Other Matter - Statements for the period ended September 30, 2017
 
The September 30, 2017 financial statements were reviewed by us. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.
 
Chattanooga, Tennessee
January 9, 2019
 
 
 
 
 
2
 
 
WHOLESALE EXPRESS, LLC
 
BALANCE SHEET
 
SEPTEMBER 30, 2018 AND DECEMBER 31, 2017
 
(See Independent Accountant's Review Report)
 

 
ASSETS
 
 
 
Reviewed as of
September 30,
2018
 
 
Audited as of
December 31,
2017
 
CURRENT ASSETS
 
 
 
 
 
 
Accounts receivable, net of allowance
 $2,405,577 
 $1,817,382 
Accounts receivable - related party
  495,385 
  15,284 
Prepaid expenses
  62,627 
  79,729 
Total current assets
  2,963,589 
  1,912,395 
 
    
    
PROPERTY AND EQUIPMENT
    
    
Leasehold improvements
  24,396 
  24,396 
Accumulated depreciation
  (2,173)
  (953)
Cost less accumulated amortization
  22,223 
  23,443 
 
    
    
OTHER ASSETS
    
    
Due from related party
  720,000 
  215,000 
TOTAL ASSETS
 $3,705,812 
 $2,150,838 
 
LIABILITIES AND MEMBER'S EQUITY
 
CURRENT LIABILITIES
 
 
 
 
 
 
Checks drawn in excess of available bank balance
 $21,854 
 $105,828 
Accounts payable
  1,055,731 
  577,075 
Accrued state taxes
  64,105 
  21,300 
Deferred tax
  116,000 
  79,000 
Total current liabilities
  1,257,690 
  783,203 
 
    
    
MEMBER'S EQUITY
  2,448,122 
  1,367,635 
 
    
    
TOTAL LIABILITIES AND MEMBER'S EQUITY
 $3,705,812 
 $2,150,838 
 
 
The accompanying notes are an integral part of these financial statements.
 
 
3
 
 
WHOLESALE EXPRESS, LLC
 
STATEMENT OF INCOME AND MEMBER'S EQUITY
 
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
 
(See Independent Accountant's Review Report)
 

 
 
 
2018
 
 
2017
 
REVENUES
 $22,753,900 
 $13,807,904 
 
    
    
COST OF REVENUES
  18,307,575 
  11,133,617 
Gross profit
  4,446,325 
  2,674,287 
 
    
    
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
  3,193,096 
  2,129,257 
 
    
    
OPERATING INCOME
  1,253,229 
  545,030 
 
    
    
INCOME TAX EXPENSE
    
    
Current tax expense
  35,742 
  12,574 
Deferred tax expense
  37,000 
  25,000 
Total income tax expense
  72,742 
  37,574 
 
    
    
NET INCOME
  1,180,487 
  507,456 
Member's equity - beginning of year
  1,367,635 
  486,547 
Distributions
  (100,000)
  - 
Member's equity - end of period
 $2,448,122 
 $994,003 
 
 
 
The accompanying notes are an integral part of these financial statements.
 
 
4
 
 
WHOLESALE EXPRESS, LLC
 
STATEMENT OF CASH FLOWS
 
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
 
(See Independent Accountant's Review Report)
 

 
 
 
2018
 
 
2017
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Net income
 $1,180,487 
 $507,456 
Adjustments to reconcile net income to net cash from operating activities:
    
    
Depreciation
  1,220 
  585 
Provision for deferred income taxes
  37,000 
  25,000 
Changes in current assets and liabilities:
    
    
Accounts receivable
  (1,068,296)
  (951,907)
Prepaid expenses
  17,102 
  (29,884)
Due from related party
  (505,000)
  (150,000)
Accrued taxes
  42,805 
  12,574 
Accounts payable
  478,658 
  425,102 
Net cash from operating activities
  183,976 
  (161,074)
 
    
    
CASH FLOWS FROM INVESTING ACTIVITIES
    
    
Purchases of property and equipment
  - 
  (11,700)
Net cash from investing activities
  - 
  (11,700)
 
    
    
CASH FLOWS FROM FINANCING ACTIVITIES
    
    
Distribution to member
  (100,000)
    
Checks drawn in excess of balance
  (83,976)
  172,774 
Net cash from financing activities
  (183,976)
  172,774 
 
    
    
NET CHANGE IN CASH
  - 
  - 
Cash - beginning of year
  - 
  - 
Cash - end of period
 $- 
 $- 
 
 
The accompanying notes are an integral part of these financial statements.
 
 
5
WHOLESALE EXPRESS, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
 
SEPTEMBER 30, 2018
 
(See Independent Accountant’s Review Report)
 

 
NOTE 1 – NATURE OF OPERATIONS
 
Wholesale Express, LLC, (the Company) is a Tennessee based limited liability company headquartered in Mt. Juliet, Tennessee. Wholesale Express is a nationwide high-volume automotive transport company and is engaged in domestic freight brokerage.
 
The Company shares common ownership as their related company Wholesale Inc., a used car retailer and wholesaler based in Mt. Juliet, Tennessee.
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Accounting Principles
 
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Financial Accounting Standards Board (FASB) has established the Accounting Standards Codification (ASC) as the sole source of authoritative GAAP.
 
Cash
 
The Company considers cash in the bank and all highly liquid investments with an original maturity of three months or less to be cash. The Company maintains an account with a financial institution which may exceed federally insured amounts at times.
 
Accounts Receivable
 
Accounts receivable includes certain amounts due from customers and the related party. Management believes the Company maintains an adequate allowance for uncollectible accounts. As of September 30, 2018 and December 31, 2017, the allowance for doubtful accounts was $181,150 and $64,000, respectively .
 
Management considers all trade receivables ninety days past due as delinquent. Interest is not charged on accounts considered delinquent.
 
Property and Equipment
 
Property and equipment consist of leasehold improvements that are stated at cost. Expenditures for repairs and maintenance are charged to expense as incurred. Upon sale or other retirement of depreciable property, the cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the depreciable assets. Depreciation expense totaled $1,220 and $585 for the periods ended September 30, 2018 and 2017.
 
(Continued)
 
 
6
WHOLESALE EXPRESS, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
 
SEPTEMBER 30, 2018
 
(See Independent Accountant’s Review Report)
 

 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 
Revenue Recognition
 
The Company is primarily a non-asset-based carrier and as such owns no transportation assets. Revenue is derived from the purchase of transportation services from direct (asset-based) carriers and resale of those services to customers as an indirect carrier. Revenues related to shipments are recognized based on the terms in the contract of carriage, primarily when goods reach their destination.
 
Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
Income Taxes
 
The Company, with the consent of its member, has elected to be taxed as a pass-through entity under the provisions of the Internal Revenue Code. The member is personally liable for their proportionate share of the Company’s federal taxable income. Therefore, no provision for federal income taxes is reflected in these financial statements. The Company is a taxable entity for state purposes.
 
Uncertain Tax Positions
 
The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the positions will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. As of September 30, 2018 and 2017, the Company has not recognized liabilities for uncertain tax positions or associated interest and penalties. The Company’s evaluation was performed for the tax years ended December 31, 2016 and 2017, for U.S. federal income tax, and for the state of Tennessee, the years which remain subject to examination as of September 30, 2018.
 
Advertising
 
Advertising costs are charged to operations when incurred. Advertising expense totaled $17,825 and $3,420 for the periods ended September 30, 2018 and 2017.
 
 
7
WHOLESALE EXPRESS, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
 
SEPTEMBER 30, 2018
 
(See Independent Accountant’s Review Report)
 

 
NOTE 3 – OPERATING LEASES
 
The Company leases facilities in Arizona and Michigan under noncancelable operating leases which expire at various dates through August 31, 2021. The leases generally require the Company to pay taxes, maintenance, and insurance. Management expects that in the normal course of business, leases that expire will be renewed or replaced by other leases. The Company also rents a facility in Tennessee from Wholesale Inc. on a month to month basis. Rent expense for the period ended September 30, 2018 and 2017 was $91,505 and $49,102, respectively. Future monthly rentals under the property leases are as follows:
 
2018
 $31,056 
2019
  127,595 
2020
  123,362 
2021
  34,800 
 
 $316,813 
 
NOTE 4 – RELATED PARTY TRANSACTIONS
 
Transactions and outstanding balances with entities under common control are summarized as following:
 
 
 
September 30,
2018
 
 
December 31,
2017
 
Due from
 $720,000 
 $215,000 
Accounts receivable
  495,385 
  15,284 
Accounts payable
  33,049 
  34,756 
 
 
 
September 30,
2018
 
 
December 31,
2017
 
Sales
  2,213,432 
  643,992 
Reimbursements
  344,434 
  464,146 
 
NOTE 5 – INCOME TAXES
 
The state income tax provisions consist of the following as of:
 
 
 
September 30,
2018
 
 
December 31,
2017
 
Current tax expense
 $35,742 
 $12,574 
Deferred tax expense
  37,000 
  25,000 
Total provision for income taxes
 $72,742 
 $37,574 
 
(Continued)
 
 
8
 
 
WHOLESALE EXPRESS, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
 
SEPTEMBER 30, 2018
 
(See Independent Accountant’s Review Report)
 

 
NOTE 5 – INCOME TAXES (Continued)
 
Net deferred income taxes on the balance sheet as of September 30, 2018 and December 31, 2017, include deferred income tax liabilities of $116,000 and $79,000, respectively.
 
Deferred income taxes are provided for the temporary differences between the financial reporting basis and tax basis of the Company’s assets and liabilities. The deferred income tax assets and liabilities results from the use of accelerated methods of depreciation of property and equipment, the use of cash basis reporting for income tax purposes and net operating loss carryforwards.
 
NOTE 6 – COMMITMENTS AND CONTINGENCIES
 
During the normal course of its operations, the Company from time to time becomes involved in various legal actions. Management is of the opinion that there were no existing or pending legal actions which will have a material effect on the financial condition of the Company.
 
NOTE 7 – NEW ACCOUNTING PRONOUNCEMENTS
 
In May 2014, the FASB issued Accounting Standard Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606), a new standard on revenue recognition. Further, the FASB has issued a number of additional ASU's regarding the new revenue recognition standard. The new standard, as amended, will supersede existing revenue recognition guidance and apply to all entities that enter into contracts to provide goods or services to customers. The guidance also addresses the measurement and recognition of gains and losses on the sale of certain non-financial assets, such as real estate, property, and equipment. The new standard will become effective for annual reporting periods beginning on or after December 15, 2018 and interim periods within that year. The standard can be adopted either retrospectively to each reporting period presented or as a cumulative effect adjustment as of the date of adoption. Early adoption of the standard is permitted, but not before annual reporting periods beginning on or after December 15, 2017. We have performed a preliminary evaluation of this standard and plan to adopt it effective January 1, 2019. We cannot currently estimate the impact of this change upon adoption of this standard and will continue to review the impact of this standard on potential disclosure changes in our financial statements, as well as which transition approach will be applied. Our evaluation of this standard will continue through the date of adoption.
 
The FASB issued ASU 2016-02, Leases (Topic 842), in February 2016. ASU 2016-02 requires the recognition by lessees of assets and liabilities that arise from all lease transactions, except for leases with a lease term of 12 months or less. The lessee accounting model under ASU 2016-02 retains two types of leases: finance leases, which are to be accounted for in substantially the same manner as the existing accounting for capital leases, and operating leases, which are to be accounted for both in the statement of activities and the statement of cash flows in a manner consistent with existing accounting for operating leases. ASU 2016-02 also requires expanded qualitative and quantitative disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 applies to the Company's financial statements for the year ending December 31, 2020, with earlier implementation permitted. The Company's management has not determined the impact on its financial statements as a result of implementing ASU 2016-02.
 
 
 
9
WHOLESALE EXPRESS, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
 
SEPTEMBER 30, 2018
 
(See Independent Accountant’s Review Report)
 

 
NOTE 8 – SUBSEQUENT EVENTS
 
Management has evaluated events and transactions subsequent to the balance sheet date through the date of the independent accountant's review report (the date the financial statements were available to be issued) for potential recognition or disclosure in the financial statements.
 
In October 2018 the Company’s equity interest was sold along with the equity interest of Wholesale Inc., a company under common ownership.
 
Management has not identified any additional items requiring recognition or disclosure.
 
 
 
 
10
EX-99.5 8 rmbl_ex995.htm THE UNAUDITED PRO FORMA FINANCIAL INFORMATION FOR RUMBLEON, INC. Blueprint
  Exhibit 99.5
 
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
 
On October 26, 2018, RumbleOn, Inc., a Nevada corporation (“RumbleOn” or the “Company”), entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) by and among the Company, the Company’s newly-formed acquisition subsidiary RMBL Tennessee, LLC, a Delaware limited liability company (“Merger Sub”), Wholesale Holdings, Inc., a Tennessee corporation (“Holdings”), Wholesale, LLC, a Tennessee limited liability company and wholly-owned subsidiary of Holdings (“Wholesale”), Steven Brewster and Janelle Brewster (each a “Wholesale Stockholder,” and together the “Wholesale Stockholders”), with Mr. Brewster, as the representative of each Wholesale Stockholder, and, for the limited purposes of Section 5.8 of the Merger Agreement, Marshall Chesrown and Steven R. Berrard, providing for the merger of Holdings with and into Merger Sub, with Merger Sub surviving as a wholly-owned subsidiary of the Company and Wholesale continuing as a wholly-owned subsidiary of Merger Sub (the “Wholesale Transaction”). On October 29, 2018, the Company entered into an Amendment to the Merger Agreement making a technical correction to the definition of “Parent Consideration Shares” contained in the Merger Agreement.
 
Also, on October 26, 2018, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”), by and among the Company, Mr. Brewster and Justin Becker (together the “Express Sellers”), with Mr. Brewster as representative of the Express Sellers, pursuant to which the Company acquired all of the membership interests (the “Express Transaction,” and together with the Wholesale Transaction, the “Transactions”) in Wholesale Express, LLC, a Tennessee limited liability company (“Express,” and together with Wholesale, the “Wholesale Entities”).
 
The Transactions were both completed on October 30, 2018. As consideration for the Wholesale Transaction, the Company (i) paid cash consideration of $12,353,941, subject to certain customary post-closing adjustments, and (ii) issued to the Wholesale Stockholders 1,317,329 shares (the “Stock Consideration”) of the Company’s Series B Non-Voting Convertible Preferred Stock, par value $0.001 (the “Series B Preferred”). As consideration for the Express Transaction, the Company paid cash consideration of $4,000,000, subject to certain customary post-closing adjustments.
 
Additionally, on October 30, 2018, the Company completed the private placement of an aggregate of 3,030,000 shares of its Class B Common Stock (the “Private Placement”), at a price of $7.10 per share for non-affiliates of the Company, and, with respect to directors participating in the Private Placement, at a price of $8.10 per share. Gross proceeds from the Private Placement were approximately $21.6 million. The Company paid the placement agents a fee of 6.5% of the gross proceeds in the Private Placement. Net proceeds from the Private Placement were used to partially fund the cash consideration of the Transactions and the balance will be used for working capital purposes.
 
The following Unaudited Pro Forma Condensed Combined Financial Statements are based on the historical financial statements of RumbleOn and the Wholesale Entities after giving effect to the Transactions and the Private Placement. The Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2018, gives effect to the Transactions and the Private Placement as if they had occurred on that date. The Unaudited Pro Forma Condensed Combined Statements of Operations for the year ended December 31, 2017 and the nine-month period ended September 30, 2018 gives effect to the Transactions and the Private Placement as if they had occurred on January 1, 2017.
 
The Unaudited Pro Forma Condensed Combined Financial Statements should be read in conjunction with (i) RumbleOn’s historical consolidated financial statements for the year ended December 31, 2017 and the accompanying notes thereto, as filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Form 10-K”), (ii) RumbleOn’s condensed consolidated financial statements (unaudited) as of and for the nine-month period ended September 30, 2018, and the accompanying notes thereto, as filed with the Company’s Quarterly Report on Form 10-Q for the quarterly period then ended (the “2018 Q3 Form 10-Q”), (iii) the Wholesale Entities’ historical financial statements as of and for the year ended December 31, 2017 and the accompanying notes thereto and as of and for the nine-month period ended September 30, 2018 and the accompanying notes thereto, each as included with this filing, and (iv) the accompanying Notes to these Unaudited Pro Forma Condensed Combined Financial Statements.
 
The unaudited pro forma financial data are based on the historical financial statements of RumbleOn and the Wholesale Entities as described above, and on publicly available information and certain assumptions RumbleOn believes are reasonable, which are described in the Notes to Unaudited Pro Forma Condensed Combined Financial Statements. RumbleOn has not performed a detailed valuation analysis necessary to determine the fair market values of the Wholesale Entities’ assets acquired and liabilities assumed. For the purpose of the Unaudited Pro Forma Condensed Combined Financial Statements, preliminary allocations of estimated acquisition consideration have been based on: (i) the cash payment of $12,353,941 and the issuance of the Stock Consideration for Wholesale and (ii) the cash payment of $4,000,000 for Express. The acquisition consideration has been preliminarily allocated to certain assets and liabilities using management assumptions as further described in the accompanying notes. RumbleOn has commenced with its valuations of the fair value of the assets acquired and the liabilities assumed and determination as to the useful lives of the assets acquired.
 

PF-1
 
 
The Unaudited Pro Forma Condensed Combined Financial Statements are provided for informational purpose only. The pro forma information provided is not necessarily indicative of what the combined company’s financial position and results of operations would have actually been had the Transactions been completed on the dates used to prepare these pro forma financial statements. The adjustments to fair value and the other estimates reflected in the accompanying Unaudited Pro Forma Condensed Combined Financial Statements may be materially different from those reflected in the combined company’s consolidated financial statements subsequent to the Transactions. In addition, the Unaudited Pro Forma Condensed Combined Financial Statements do not purport to project the future financial position or results of operations of the combined companies. Reclassifications and adjustments may be required if changes to RumbleOn’s financial presentation are needed to conform RumbleOn’s accounting policies to the accounting policies of the Wholesale Entities.
 
These Unaudited Pro Forma Condensed Combined Financial Statements do not give effect to any anticipated synergies, operating efficiencies or cost savings that may be associated with the Transactions. These financial statements also do not include any integration costs the companies may incur related to the Transactions as part of combining the operations of the companies. The Unaudited Pro Forma Condensed Combined Statement of Operations do not include an estimate for transaction costs of approximately $926,000.
 
 
 
 
 
 
 
 
 
 
 
PF-2
 
 
RumbleOn Inc. and Subsidiaries
Pro Forma Condensed Combined Balance Sheet
as of September 30, 2018
(Unaudited)
 
 
 
RumbleOn
 
 
Wholesale
 
 
Express
 
 
Pro Forma
Adjustments
 
 
 
Pro Forma Combined
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash
 $11,831,602 
 $2,497,659 
 $- 
 $(1,767,786)
(A), (B), (F)
 $12,561,475 
Restricted cash
  350,000 
  - 
  - 
  5,500,000 
(A), (F)
  5,850,000 
Investments
  - 
  880,091 
  - 
  - 
 
  880,091 
Accounts receivable, net
  193,135 
  4,051,862 
  2,405,577 
  - 
 
  6,650,574 
Accounts receivable-related party
  - 
  - 
  495,385 
  (495,385)
(J)
  - 
Inventory
  5,626,186 
  58,932,938 
  - 
  - 
 
  64,559,124 
Prepaid expense
  132,433 
  310,267 
  62,627 
  - 
 
  505,327 
Other
  - 
  461,858 
  - 
  - 
 
  461,858 
Total current assets
  18,133,356 
  67,134,675 
  2,963,589 
  3,236,829 
 
  91,468,449 
 
    
    
    
    
 
    
Property and equipment - net
  4,145,437 
  2,779,022 
  22,223 
  - 
 
  6,946,682 
Goodwill
  1,850,000 
  - 
  - 
  18,672,853 
(C)
  20,522,853 
Due from related party
  - 
  - 
  720,000 
  (720,000)
(J)
  - 
Other noncurrent assets
  103,235 
  - 
  - 
  - 
 
  103,235 
Total assets
 $24,232,028 
 $69,913,697 
 $3,705,812 
 $21,189,682 
 
 $119,041,219 
 
    
    
    
    
 
    
LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
    
    
 
    
 
    
    
    
    
 
    
Current liabilities:
    
    
    
    
 
    
Accounts payable and accrued liabilities
 $1,839,210 
 $10,515,643 
 $1,257,690 
  (495,385)
(J)
 $13,117,158 
Accrued interest payable
  93,324 
  - 
  - 
  - 
 
  93,324 
Income tax payable
  - 
  379,502 
  - 
  - 
 
  379,502 
Due to related party
  - 
  720,000 
  - 
  (720,000)
(J)
  - 
Current portion of long-term debt
  4,349,746 
  56,367,075 
  - 
  - 
 
  60,716,821 
Total current liabilities
  6,282,280 
  67,982,220 
  1,257,690 
  (1,215,385)
 
  74,306,805 
 
    
    
    
    
 
    
Long term liabilities:
    
    
    
    
 
    
Note payable
  4,653,708 
  - 
  - 
  - 
 
  4,653,708 
Other liabilities
  - 
  46,000 
  - 
  - 
 
  46,000 
Total long-term liabilities
  4,653,708 
  46,000 
  - 
  - 
 
  4,699,708 
 
    
    
    
    
 
    
Total liabilities
  10,935,988 
  68,028,220 
  1,257,690 
  (1,215,385)
 
  79,006,513 
 
    
    
    
    
 
    
Commitments and Contingencies
    
    
    
    
 
    
 
    
    
    
    
 
    
Stockholders' equity:
    
    
    
    
 
    
Preferred stock
  - 
  - 
  - 
  1,317 
(A), (D)
  1,317 
Common stock
  15,406 
  1,000 
  - 
  2,030 
(E)
  18,436 
Member equity
  - 
  - 
  2,448,122 
  (2,448,122)
(E)
  - 
Additional paid in capital
  37,656,377 
  - 
  - 
  26,734,319 
(A), (D)
  64,390,696 
Retained earnings (deficit)
  (24,375,743)
  1,884,477 
  - 
  (1,884,477)
(E)
  (24,375,743)
Total stockholders' equity
  13,296,040 
  1,885,477 
  2,448,122 
  22,405,067 
 
  40,034,706 
Total liabilities and stockholders' equity
 $24,232,028 
 $69,913,697 
 $3,705,812 
 $21,189,682 
 
 $119,041,219 
 
See Accompanying Notes to Pro Forma Financial Statements.
 
 
PF-3
 
 
RumbleOn Inc. and Subsidiaries
Pro Forma Condensed Combined Statement of Operations
For the Nine-Months ended September 30, 2018
(Unaudited)
 
 
 
RumbleOn
 
 
Wholesale
 
 
Express
 
 
Pro Forma
Adjustments
 
 
 
Pro Forma
Combined
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale vehicles
 $36,384,996 
 $424,245,853 
 $- 
 $- 
 
 $460,630,849 
Retail vehicles
  4,436,768 
  65,703,165 
  - 
  - 
 
  70,139,933 
Transportation
  - 
  - 
  22,753,900 
  (465,575)
(K)
  22,288,325 
Other sales and revenue
  399,308 
  7,108,132 
  - 
  -
 
  7,507,440 
Subscription fees
  28,689 
  - 
  - 
  - 
 
  28,689 
Total Revenue
  41,249,761 
  497,057,150 
  22,753,900 
  (465,575)
 
  560,595,236 
 
    
    
    
    
 
    
Cost of sales
  37,419,594 
  480,221,497 
  18,307,575 
  (465,575)
(K)
  535,483,091 
 
    
    
    
    
 
    
Gross profit
  3,830,167 
  16,835,653 
  4,446,325 
  - 
 
  25,112,145 
 
    
    
    
    
 
    
Selling, general and administrative
  17,857,561 
  13,825,952 
  3,193,096 
  750,000 
(G)
  35,626,609 
Depreciation and amortization
  671,264 
  244,312 
  - 
  - 
 
  915,576 
 
    
    
    
    
 
    
Operating income (loss)
  (14,698,658)
  2,765,389 
  1,253,229 
  (750,000)
 
  (11,430,040)
 
    
    
    
    
 
    
Interest expense
  657,788 
  2,030,693 
  - 
  - 
 
  2,688,481 
Other (income) expense
  - 
  (125,312)
  - 
  - 
 
  (125,312)
 
    
    
    
    
 
    
Net income before provision for income taxes
  (15,356,446)
  860,008 
  1,253,229 
  (750,000)
 
  (13,993,209)
 
    
    
    
    
 
    
Income tax (benefit) expense
  - 
  86,000 
  72,742 
  (158,742)
(H)
  - 
 
    
    
    
    
 
    
Net income (loss)
 $(15,356,446)
 $774,008 
 $1,180,487 
 $(591,258)
 
 $(13,993,209)
 
    
    
    
    
 
    
Weighted average number of common shares outstanding - basic and fully diluted
    
    
    
    
 
  19,268,022 
 
    
    
    
    
 
    
Net loss per share - basic and fully diluted
    
    
    
    
 
  (0.73)
 
See Accompanying Notes to Pro Forma Financial Statements.
 
 
PF-4
 
 
RumbleOn Inc. and Subsidiaries
Pro Forma Condensed Combined Statement of Operations
For the Year ended December 31, 2017
(Unaudited)
 
 
 
RumbleOn
 
 
Wholesale
 
 
Express
 
 
Pro Forma
Adjustments
 
 
 
Pro Forma
Combined
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale vehicles
 $7,020,070 
 $503,860,499 
 $- 
 $- 
 
 $510,880,569 
Retail vehicles
  - 
  87,113,151 
  - 
  - 
 
  87,113,151 
Transportation
  - 
  - 
  19,153,124 
  (398,255)
(L)
  18,754,869 
Other sales and revenue
  159,230 
  10,101,992 
  - 
  - 
 
  10,261,222 
Subscription fees
  126,602 
  - 
  - 
  - 
 
  126,602 
Total Revenue
  7,305,902 
  601,075,642 
  19,153,124 
  (398,255)
 
  627,136,413 
 
    
    
    
    
 
    
Cost of sales
  7,027,793 
  580,244,867 
  15,402,561 
  (398,255)
(L)
  602,276,966 
Gross profit
  278,109 
  20,830,775 
  3,750,563 
  - 
 
  24,859,447 
 
    
    
    
    
 
    
Selling, general and administrative
  7,586,999 
  17,357,156 
  2,807,901 
  1,000,000 
(G)
  28,752,056 
 
    
    
    
    
 
    
Depreciation and amortization
  668,467 
  250,458 
  - 
  - 
 
  918,925 
Operating income (loss)
  (7,977,357)
  3,223,161 
  942,662 
  (1,000,000)
 
  (4,811,534)
 
    
    
    
    
 
    
Interest expense
  595,966 
  1,941,106 
  - 
  - 
 
  2,537,072 
Other (income) expense
  - 
  (119,688)
  - 
  - 
 
  (119,688)
 
    
    
    
    
 
    
Net income before provision for income taxes
  (8,573,323)
  1,401,743 
  942,662 
  (1,000,000)
 
  (7,228,918)
 
    
    
    
    
 
    
Income tax (benefit) expense
  - 
  48,500 
  61,573 
  (110,073)
(I)
  - 
 
    
    
    
    
 
    
Net income (loss)
 $(8,573,323)
 $1,353,243 
 $881,089 
 $(889,927)
 
 $(7,228,918)
 
    
    
    
    
 
    
Weighted average number of common shares outstanding-basic and fully diluted
    
    
    
    
 
  14,189,121 
 
    
    
    
    
 
    
Net loss per share - basic and fully diluted
    
    
    
    
 
 $(0.51)
 
See Accompanying Notes to Pro Forma Financial Statements.
 
 
PF-5
 
 
Notes to Unaudited Pro Forma
Condensed Combined Financial Statements
 
Note 1 - Basis of Presentation
 
The following Unaudited Pro Forma Condensed Combined Financial Statements of RumbleOn, Inc. are based on the historical financial statements of the Company after giving effect to the Transactions, the Private Placement and the assumptions and adjustments described in these Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
 
The unaudited pro forma balance sheet as of September 30, 2018 is presented as if the Transactions and the Private Placement had occurred on September 30, 2018. The unaudited pro forma statements of operations for the year ended December 31, 2017 and for the nine-month period ended September 30, 2018 are presented as if the Transactions and the Private Placement had occurred on January 1, 2017.
 
The allocation of the purchase price used in the unaudited pro forma financial statements is based upon a preliminary valuation by management. The final estimate of the fair values of the assets and liabilities will be determined with the assistance of a third-party valuation firm. The Company’s preliminary estimates and assumptions are subject to change upon the finalization of internal studies and third-party valuations of assets, including investments, property and equipment, intangible assets including goodwill, and certain liabilities.
 
The Unaudited Pro Forma Condensed Combined Financial Statements are provided for informational purpose only and is not necessarily indicative of what the combined company’s financial position and results of operations would have actually been had the Transactions been completed on the dates used to prepare these pro forma financial statements. The adjustments to fair value and the other estimates reflected in the accompanying Unaudited Pro Forma Condensed Combined Financial Statements may be materially different from those reflected in the combined company’s consolidated financial statements subsequent to the Transactions. In addition, the Unaudited Pro Forma Condensed Combined Financial Statements do not purport to project the future financial position or results of operations of the combined companies. Reclassifications and adjustments may be required if changes to RumbleOn’s financial presentation are needed to conform RumbleOn’s accounting policies to the accounting policies of the Wholesale Entities.
 
These Unaudited Pro Forma Condensed Combined Financial Statements do not give effect to any anticipated synergies, operating efficiencies or cost savings that may be associated with the Transactions. These financial statements also do not include any integration costs the companies may incur related to the Transactions as part of combining the operations of the companies. The Unaudited Pro Forma Condensed Combined Statement of Operations do not include an estimate for transaction costs of approximately $926,000.
 
Note 2 - Summary of Significant Accounting Policies
 
The Unaudited Pro Forma Condensed Combined Financial Statements have been prepared in a manner consistent with the accounting policies adopted by the Company. The accounting policies followed for financial reporting on a pro forma basis are the same as those disclosed in the 2017 Form 10-K and 2018 Q3 Form 10-Q. The Unaudited Pro Forma Condensed Combined Financial Statements do not assume any differences in accounting policies among the Company and the Wholesale Entities. The Company is reviewing the accounting policies of the Wholesale Entities to ensure conformity of such accounting policies to those of the Company and, as a result of that review, the Company may identify differences among the accounting policies of the three companies, that when conformed, could have a material impact on the combined financial statements. At this time, the Company is not aware of any difference that would have a material impact on the Unaudited Pro Forma Condensed Combined Financial Statements.
 
Note 3 - Transactions
 
On October 26, 2018, the Company entered into the Merger Agreement providing for the Wholesale Transaction. On October 29, 2018, the Company entered into an Amendment to the Merger Agreement making a technical correction to the definition of "Parent Consideration Shares" contained in the Merger Agreement. Also, on October 26, 2018, the Company entered into the Purchase Agreement providing for the Express Transaction.
 
 
PF-6
 
 
On October 30, 2018, the Transactions were both completed. As consideration for the Express Transaction, the Company paid cash consideration of $4,000,000, subject to certain customary post-closing adjustments. As consideration for the Wholesale Transaction, the Company (i) paid cash consideration of $12,353,941, subject to certain customary post-closing adjustments, and (ii) issued to the Wholesale Stockholders 1,317,329 shares of Series B Preferred. Shares of Series B Preferred rank pari passu with the Company’s Class B Common Stock, except that holders of Series B Preferred shall not be entitled to vote on any matters presented to the stockholders of the Company. Each share of Series B Preferred is convertible on a one-for-one basis into shares of the Company’s Class B Common Stock. The Series B Preferred will automatically convert into the Company’s Class B Common Stock 21 days after the mailing of a definitive information statement of the type contemplated by and in accordance with Regulation 14C of the Securities Exchange Act of 1934, as amended (“the Exchange Act”), to the Company’s stockholders, without any further action on the part of the Company or any holder. In connection with the Wholesale Transaction, stockholders of the Company holding a majority of the voting power of the Company’s common stock approved the conversion of the Series B Preferred into an equal number of shares of the Company’s Class B Common Stock. A definitive information statement describing the acquisitions and the conversion will be mailed to non-consenting stockholders of the Company in accordance with Regulation 14C of the Exchange Act.
 
Additionally, on October 30, 2018, the Company completed the Private Placement. Gross proceeds from the Private Placement were approximately $21.6 million. Net proceeds from the Private Placement were used to partially fund the cash consideration of the Transactions and the balance will be used for working capital purposes.
 
For purposes of the pro forma September 30, 2018 balance sheet, the total purchase price of the Transactions is allocated as follows:
 
 
 
Wholesale
 
 
Express
 
Estimated fair value of assets:
 
 
 
 
 
 
Cash
 $2,497,659 
 $- 
Investments
  880,091 
  - 
Accounts receivable
  4,051,862 
  2,405,577 
Accounts receivable-related party
  - 
  495,385 
Inventory
  58,932,938 
  - 
Prepaid expenses
  310,267 
  62,627 
Property & equipment
  2,779,022 
  22,223 
Due from Related party
  - 
  720,000 
Other Assets
  461,858 
  - 
 
  69,913,697 
  3,705,812 
 
    
    
Estimated fair value of liabilities assumed:
    
    
Accounts payable and other
  10,515,643 
  1,257,690 
Floor plan liability
  56,367,075 
  - 
Income tax payable
  379,502 
  - 
Due to related party
  720,000 
  - 
Notes payable
  46,000 
  - 
 
  68,028,220 
  1,257,690 
 
    
    
Net tangible assets
  1,885,477 
  2,448,122 
 
    
    
Goodwill
  17,120,976 
  1,551,878 
 
    
    
Total purchase price
 $19,006,453 
 $4,000,000 
 
    
    
Issuance of shares
 $6,652,512 
 $- 
Cash paid
  12,353,941 
  4,000,000 
Total purchase price
 $19,006,453 
 $4,000,000 
 
 
PF-7
 
 
Note 3 - Pro Forma Adjustments
 
The following pro forma adjustments are included in the Unaudited Pro Forma Condensed Combined Financial Statements:
 
(A) 
To adjust cash to reflect net proceeds of $20,086,155 received in the Private Placement, less (i) $12,353,941 cash consideration paid in the Wholesale Transaction and (ii) $4,000,000 cash consideration paid in the Express Transaction.
 
(B) 
Does not include $5 million cash received from an advance on the Company’s credit facility in connection with the Transactions.
 
(C) 
To reflect Goodwill of (i) $17,120,976 acquired in the Wholesale Transaction and (ii) $1,551,877 acquired in the Express Transaction.
 
(D) 
To reflect the issuance of 1,317,329 shares of Series B Preferred stock to seller and 3,030,000 of Class B common stock to Private Placement investors in connection with the Wholesale Transaction.
 
(E) 
To reflect the elimination of (i) $1,885,477 of Wholesale retained earnings and common stock and (ii) $2,448,122 of Express member’s equity.
 
(F) 
To reflect the restricted cash deposit required by the floor plan lender in connection with the assumption of the existing Wholesale floor plan line.
 
(G) 
To adjust Selling, General and Administrative Expenses for the issuance of restricted stock units under the Company’s Stock Incentive Plan to certain management members of the Wholesale Entities in connection with the Transactions.
 
(H) 
To adjust income tax expense for the nine-months ended September 30, 2018.
 
(I) 
To adjust income tax expense for the year ended December 31, 2017.
 
(J) 
To eliminate intercompany payables and receivables between Wholesale Inc. and Wholesale Express as of September 30, 2018.
 
(K) 
To eliminate intercompany transactions between Wholesale Inc. and Wholesale Express for the nine-months ended September 30, 2018.
 
(L) 
To eliminate intercompany transactions between Wholesale Inc. and Wholesale Express for the year ended December 31, 2017.
 
 
 
PF-8
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