Regional Brands : December 31, 2021 Audited Financial Statements

Regional Brands Inc.

Audited Financial Statements

As of and for the Years Ended December 31, 2021 and 2020

REGIONAL BRANDS INC.

FINANCIAL STATEMENTS

CONTENTS

INDEPENDENT AUDITOR'S REPORT ............................................................................................................................................	2 - 3
CONSOLIDATED BALANCE SHEETS .................................................................................................................................................	4
CONSOLIDATED STATEMENTS OF INCOME ...................................................................................................................................	5
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ..........................................................................	6
CONSOLIDATED STATEMENTS OF CASH FLOWS..........................................................................................................................	7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS................................................................................................	8 - 21

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Independent Auditor's Report

To the Board of Directors and Stockholders

Regional Brands Inc.

Opinion

We have audited the consolidated financial statements of Regional brands Inc. (the Company), which comprise the consolidated balance sheets as of December 31, 2021 and 2022, the related consolidated statements of income, changes in stockholders' equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management 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, and for 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.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.

2

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit 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 Company's internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Buffalo, New York

March 17, 2022

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REGIONAL BRANDS INC.
CONSOLIDATED BALANCE SHEETS
		As of December 31,
		2021			2020
ASSETS
Current assets:
Cash and cash equivalents	$	9,022,539		$	3,118,662
Short-term investments		1,335,463			2,662,367
Accounts receivable, net of allowance for doubtful accounts		3,737,595			6,669,052
Inventories, net		595,899			731,787
Costs and estimated earnings in excess of billings on uncompleted contracts		2,020,681			2,630,421
Prepaid expenses and other current assets		1,576,151			1,164,335
Total current assets		18,288,328			16,976,624
Equipment, net		367,841			512,215
Right of use assets, net		1,664,370			2,038,901
Intangibles, net		-			1,000,000
Goodwill		3,045,481			3,045,481
Other assets		667,596			554,333
Deferred taxes		1,153,677			1,044,647
Total assets	$	25,187,293		$	25,172,201
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	924,487		$	958,235
Accrued expenses and other current liabilities		696,420			466,945
Dividends payable		3,029,848			-
Line of credit		-			1,637,622
Current portion of lease liability		389,968			418,246
Current portion of Subordinated Term Note		250,000			-
Billings in excess of costs and estimated earnings on uncompleted contracts		1,343,693			1,293,941
Total current liabilities		6,634,416			4,774,989
Lease liability		1,274,402			1,620,655
Subordinated Term Note		1,750,000			2,000,000
Total liabilities		9,658,818			8,395,644
Commitments (Note 11)
Stockholders' equity:
Preferred stock $.01 par value, 50,000 shares authorized; issued and outstanding -none		-			-
Common stock $.00001 par value, 3,000,000 shares authorized; 1,211,939 and 1,227,757 shares
issued and outstanding at December 31, 2021 and 2020, respectively		12			13
Additional paid-in capital		18,464,284			18,663,899
Accumulated deficit		(2,935,821)			(1,887,355)
Total stockholders' equity		15,528,475			16,776,557
Total liabilities and stockholders' equity	$	25,187,293		$	25,172,201

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

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