Date: 28 JAN 2021 2:37:42 +0000 From: "Darlene Wardlaw" Subject: Liabilities Testing Both you and Taylor will be working on testing liabilities. The payroll related liabilities are tested together with payroll so you do not need to worry about those here. In my quick scan of the trial balance, I noticed there is not an interest payable account, did they make an interest These emails are NOT workpapers. payment on the last day of the year. I am not saying it's impossible but it seems unlikely - could Rather they are useful you please check into that. It's highly likely that they forgot to accrue the interest so you'll need communications for completing to do that if that is the case (I don't want to brag but I am hardly wrong about this kind of thing, your case. They do not get a kpaper reference. it's my superpower). I went ahead and had Taylor pull the sample for the search for unrecorded liabilities, and leave you notes about the voucher detail, you just need to finish that testing up and propose any adjustments for liabilities that should have been recorded in 2020 but weren't or should not have been but were (although that is less likely). Also, I just heard from Apollo's attorney - they are preparing the legal confirmation for us but the said there are $3.6M of legal fees that have been incurred but not yet billed related to 2020 work. Once you are finished I'd love you to email me and tell me if you feel sufficiently comfortable that liabilities is complete based on your search for unrecorded liabilities. Just a gut feeling. I spoke to the controller about any new debt, he said they took out a new NP of 12M and rolled the 10M from the line of credit into it (that happened as of 02/01/2020). There is something in the BOD minutes about it (I am attaching them here). Then they started a new line of credit for the $44M on 07/01. I asked about leases, he assured me they don't have any capital leases. I looked over the assets; I am prone to agree with him. So I wouldn't burden yourself looking high and low for those. I am working on getting the debt agreements for you, do what you can in the meanwhile. Check the 10-K from last year and read over the debt footnote, make a note of anything you think we are missing in our testing that will show up there. DW MEETING HELD JANUARY 6, 2020 MEETING HELD JANUARY 6, 2021 Larry Lancaster, chairman of the board, presided over the regular meeting, beginning at 2 P.M. All members Larry Lancaster, chairman of the board, presided over the first meeting of the year, beginning at 3 P.M. The were present: meeting was conducted in the boardroom of Apollo's new global headquarters. All members were present: Larry Lancaster Larry Lanc Josephine Mandeville* Fritz Brenner* * Josephine Mandeville* Fritz Brenner* * Ivan Gorr* Theodore Horstmann* * Ivan Gorr* Theodore Horstmann* * Harry Baker* Eric Unum Harry Baker* Eric Unum * Outside director ** Outside director and member of the audit committee. Outside director ** Outside director and member of the audit committee. The minutes of the December 16, 2019 meeting were reviewed and approved. The minutes of the June 30 meeting we eviewed and approved. Reporting on the annual meeting of shareholders, Mr. Lancaster welcomed the new or reelected board The selection by the audit committee of Anderson, Olds & Watershed as auditors was ratified. The $750,000 members: Josephine C. Mandeville, Professor of Accountancy and Typing at the Graduate School of fee was approved for the 2020 audit. Business and Clerical Skills; Ivan W. Gor, President and President and CEO of Far More Drugs; Harry R. Baker, Ms. Mandeville moved, and Mr. Gorr seconded, a proposal to declare retroactively a cash dividend of Executive Vice President and Treasurer of the Iguana Growers of America Inc., Theodore Horstmann, $860,000 payable March 1, 2021, to stockholders of record on December 31, 2020. Approved by a vote of 5- Minister of Commerce of Anglonesia; and Fritz Brenner, President of The Widget Corporation 2. Mr. Unum presented the forecast for the year, attached. Sales are ex attached. Sales are expected to increase 10 percent, with costs Ms. Fultz, VP-Legal affairs, stated that on January 5, 2021 (yesterday), a class action suit alleging gross of goods sold and general expenses bearing about the same relationships as experienced last year. Mr. Lancaster stated, "Well, they better increase by that much, or heads will roll!" Mr. Lancaster's plan to move negligence and violation of warranty of merchantability was brought against Apollo for $12,000,000. The action stems from the use of one of the Company's products in an aquatic environment, which may have production to within the company was discussed. Over Mr. Horstmann's vehement disagreement, the boar authorized purchase of equipment totaling $1.3 million to facilitate internal production of Apollo products by caused severe electrical shock to the wearer(s). She is working closely with Apollo's legal counsel, Perley a vote of 6-1. Stebbins, to vigorously defend Apollo's good name. Ms.Fultz stated that the company's current insurance loes not cover these types of actions. Mr. Unum reported that the Company's short-term line of credit was refinanced as of February 2, 2020 and Mr. Baker inquired as to the status of the machinery purchased in early 2020. Mr. Lancaster replied that the rolled into a note payable with the Twenty-First National Bank of Maine, due January 1, 2021. machinery would be set up "soon." Mr. Brenner moved a declaration of dividends for the year ended the previous December 31. The motion died for lack of a second. Mr. Lancaster moved and Mr. Unum seconded the approval of officers' bonuses for the year just ended . Approved by a 4-3 vote. Mr. Unum moved, and Mr. Lancaster seconded, officers' salary increases of 10 percent for 2020 as well as stipends for outside Board Members of $90,000 each. The board approved these salaries and stipends by a 6- 1 vote: resident, Larry Lancaster $200.000 P Marketing, Fred Durkin 50,000 VP Finance, Eric Unum 50,000 2020 Salary VP Information Systems, Ernst Hathaway 50,000 UP Legal Affairs, Sue Fultz 50,000 50.000 President and CEO, Larry Lancaster $466,000 VP Operations. Daisy Gardne Exec Sr. VP and CFO. Joe Bootwell 246.000 eting, Fred Durkin 322.000 ce. Eric Unum 367,000 The Board approved the Company's contribution to the Employee Benefits program. Mr. Unum stated that nation Systems, Sue Fultz 167.000 he contribution was increased by $300,000 for 2020, up 10% over the past s VP Operations, Daisy Gardner 320,000 employee dissatisfaction. Given the company's plans to automate the distribution process, Mr. Unum stated Internal Audit Director, Karina Ramirez 167.400 that employee benefits will decrease significantly in future years. Treasurer, Mary Costain 187.400 Controller, Samuel Carbo 209.600 Mr. Unum noted also that the company decided not to air a Super Bowl ad this year. Mr. Lancaster encouraged everyone to watch the 2020 Super Bowl to watch for Apollo's 15- second Meeting ended 8:30 P.M. mercial. He noted that the cost of the commercial time rose approximately 10% from last year. The cost /s/ Jeff Chesnut, Secretary duction and airing the ad is now approaching w approaching $1,000,000. . The costApollo Shoes, Inc. F-1 Liabilities Lead Schedule Prepared by For Year Ended 12/31/2020 Reviewed by (Audited) Unaudited Balance Balance Adjustments Audited Acct # Account Title 12/31/19 12/31/20 AJE# Dr Cr 12/31/20 WP 20000 Accounts Payable ($4,633,118.09) ($1,922,095.91) ($1,922,095.91) 24100 Line of Credit ($10,000,000.00) $44,403,000.00) ($44,403,000.00) 24200 Current Portion Long-Term Debt $0.00 $0.00 $0.00 24700 Other Current Liabilities $0.00 $0.00 $0.00 27000 Notes Payable-Noncurrent $0.00 $12,000,000.00) ($12,000,000.00) ($14,633,118.09) $58,325,095.91) ($58,325,095.91) Tickmark Legend F - Footed without exception M - Amount is considered immaterial, no further work necessary. TB - Agrees to Trial Balance without exception PY - Agrees to prior year audited financial statements without exceptionF-2.1 Client's Statement We have provided to our accountants the following information as of the close of business on the Request Date below regarding our deposit and loan balances. Please confirm the accuracy of the information, n oting any exceptions to the information provided. If the balances have been left blank, please complete this form by furnishing the balance in the app appropriate space below. + Although we do not request nor expect you to conduct a comprehensive, detailed search of your records, if during the process of completing this confirmation additional information about oth deposit and loan accounts we may have with you comes t o your attention, please include such information below. At the close of business on the Request Date below, our records indicated the below deposit es, and that we were also directly liable to the financial institution for loans at the close of business on the sta ted Request Date as indicated below. Ordinarily, balances are intentionally left blank if they are not available at the time the form is prepared Client's Company Information Requestor Information Apollo Shoes Inc Engagement Number Anderson, Olds, Lead One Shoe Place 21379380 Watershed, CPAs LLC Taylor Crump Shoetown ME, 00001 Office: 580-555-1212 Shoetown, ME 00001 United States tcrump@aow.com United States Authorized Signers Name Job Title Phone Email Samuel Carboy Controller 570-565-5835 Scarboy@apolloshoes.com Responder Information Twenty-First National Bank Contact P.O. Box 1 I.M. Rich Shoetown, ME 00001 United States Client's Account Information Type/Form Account ID Account Name Note Payable NP #106316 Note Confirmation Request Status As of Date Currency Request ID Delivery Method Completed 12/31/2020 (mm/dd/yyyy) USD' m06va2g38v5si1 In-Network Balance: $ 12,000,000 Interest: 8.15% USD - United States of America, Dollars Questions / Comments 01/22/2021 10:46 AM) I.M. Rich said - Balance as of 12/31/2020, due date 01/01/2021, interest paid through 1 1/30/2020. Description of collateral is current inventory Responder Statements The information presented is in agreement with our records. Although we have not conducted a comprehensive, detailed search of our records, no other deposit or loan accounts have come to our attention except as noted.F-2.2 Client's Statement We have provided to our accountants the following information as of the close of business on the Request Date below regarding our deposit and loan balances. Please confirm the accuracy of the information, n oting any exceptions to the information provided. If the balances have been left blank, please complete this form by furnishing the balance in the appropriate space below. 1 Although we do not request nor expect you to conduct a comprehensive, detailed search of your records, if during the process of completing this confirnation additional information about other deposit and loan accounts we may have with you comes t o your attention, please include such information below. At the close of business on the Request Date below, our records indicated the below deposit balances, and that we were also directly liable to the financial institution for loans at the close of business on the sta ted Request Date as indicated below. 1 Ordinarily, balances are intentionally left blank if they are not available at the time the form is prepared. Client's Company Information Requestor Information Apolle Shoes Inc. Engagement Number Anderson, Olds, Lead One Shoe Place 21379380 Watershed, CPAs LLC Taylor Crump Shoetown ME, 00001 Office: 580-555-1212 Shoetown, ME 00001 United States terump@acw.com United States Authorized Signers Name Job Title Phone Email Samuel Carboy Controller 570-555-5635 Scarboy@apolloshoes.com Responder Information Twenty-First National Bank Contact P.O.Box 1 o - .M. Rich Shoetown, ME 00001 Ahakis United States i Client's Account Information Type/Form Account ID Account Name Line of Credit 750-04-38 Loc Confirmation Request Status As of Date Currency Request ID Delivery Method o Completed 12/31/2020 (mm/dd/yyyy) usD* m06va2g36vEsi1 s In-Network Balance: $44,403,000 Interest: 9.16% *USD - United States of America, Dollars Questions / Comments (01/22/2021 10:46 AM) |.M. Rich said - Balance as of 12/31/2020, due date revolving, interest paid through 11/30/2020. Description of collateral is current inventory. Responder Statements The information presented is in agreement with our records. Although we have not conducted a comprehensive, detailed search of our records, no other deposit or loan accounts have come to our attention except as noted. NOTE: The auditor recognizes that the inventory is listed as collateral on more than one debt item, this should be included in the footnotes to the financial statements. N M W TN U U W = W W TN W D W N = Apollo Shoes, Inc. F-3 AP Aging Schedule PBC For Year Ended 12/31/2020 Current Past Due Vendor Outstanding Amt