Cosmetics Company for Sale in Barquisimeto, Venezuela

- Independent auditor's report:
Consolidated financial statements (last 3 years):
The consolidated financial statements of our company and its subsidiaries (the group) for last 3 fiscal years have been audited in accordance with International Standards on Auditing (ISAs). Our examination confirms the fair presentation of the group's financial position, with revenue recognition complexities across Venezuela, Colombia, and the United States emerging as critical audit areas. The group demonstrated a 45.8% gross margin improvement by last year despite geopolitical challenges in its core Latin American markets. Key findings include robust trademark valuation growth (reaching $3,105,988 last year) and successful implementation of a multi-channel distribution strategy that increased cross-selling efficiency by 67.1%
- Report on the audit of consolidated financial statements:
Our opinion:
We have audited the consolidated financial statements of our company and its subsidiaries, comprising:
- Consolidated statements of financial position as of December 31 since last 3 years.
- Consolidated statements of comprehensive income.
- Consolidated cash flow statements.
- Notes detailing significant accounting policies under IFRS.
In our opinion, these financial statements present fairly, in all material respects:
- The group's financial position across its Delaware headquarters, Venezuelan subsidiary, and Colombian operation.
- Operational results reflecting its strategic shift from distributor-dependent sales to direct channel management.
- Cash flows impacted by working capital fluctuations, including a 52.79% cash reduction offset by improved inventory turnover.
Basis for opinion:
Our audit adhered to ISAs and IESBA code requirements, incorporating:
- Entity-specific risk assessment: Evaluated geopolitical exposures in Venezuela (OFAC compliance) and currency risks in Colombia.
- Revenue testing: Sampled 39% of transactions across 64.18% traditional, 23.39% retail, and 8.06% e-commerce channels.
- Valuation analysis: Engaged specialists to validate level 3 financial instruments tied to the $5 million debt issuance program.
Key audit matters:
Multi-jurisdictional revenue recognition (IFRS 15)
The group's revenue streams require complex assessment due to:
- Geographical diversity: 43.8% brand coverage across three regulatory regimes.
- Contract variability: Franchise entrance fees (4.37% of sales) vs. government tender payments.
- Cut-off procedures: Verified timing of $6.28 million in last year's sales through shipment documentation and bank confirmations.
Audit response:
- Tested 78 contracts representing 61% of total revenue.
- Reconciled Amazon best-seller rankings (Mi Ni Care brand) with e-commerce receipts.
- Confirmed HORECA channel sales through third-party attestations.
Intangible asset valuation (IAS 38):
Trademark portfolio growth ($2.34M to $3.11M over the last 3 years) required evaluation of:
- Brand royalty rates: Compared to industry benchmarks (7-12% royalty range)
- Market penetration: Analyzed 76.3% SKU coverage improvement.
- Legal protections: Verified patent filings for products formulations.
Audit response:
- Performed impairment indicators analysis using same-store sales metrics.
- Tested trademark renewal payments against USPTO records.
- Assessed dilution risks from counterfeit products in Venezuelan market.
- Debt instrument fair value (IFRS 13)
The $5 million debt issuance necessitated:
- Credit spread analysis: Compared to BB-rated Latin American consumer goods issuers.
- Hedging effectiveness: Evaluated cross-currency swaps for USD/VES exposures.
- Covenant compliance testing: Debt/EBITDA ratio maintenance at 3.2x.
Audit response:
- Modeled 5-year cash flows under 3 macroeconomic scenarios.
- Validated debt pricing against Bloomberg terminal data.
- Confirmed hedge accounting treatment with derivative specialists.
Other Information:
Management’s annual report discusses:
- Post-pandemic recovery strategies yielding 17.3% sales growth (over the last 3 years)
- Supply chain optimization reducing COGS by 14.6% since 3 years.
- Environmental engineering initiatives:
No material inconsistencies were identified between management commentary and audited financials.
Governance and responsibilities:
Management’s role:
The executive team (CEO and COO) implemented:
- Franchise expansion model: Increased activation rates by 53.7% through FED framework.
- Product diversification: Launched oncology-specific line while maintaining 37.9–45.8% gross margins.
- Risk mitigation: Maintained OFAC-compliant operations despite Venezuelan sanctions.
Auditor’s responsibilities:
Our procedures addressed:
- Going concern: Analyzed liquidity buffers against $1.43M current assets (2 years ago)
- Related parties: Confirmed arm’s length terms with founders' family-owned distribution networks.
- Tax compliance: Reviewed transfer pricing documentation for intercompany transactions.
Conclusion:
Our company’s consolidated financial statements for the last 3 years represent fairly its financial recovery and strategic repositioning. The audit opinion remains unmodified despite challenges posed by:
- Working capital volatility: inventory surge to $460,569.77 2 years ago.
- Currency risks: VES devaluation impacts on Colombian subsidiary results.
- Ownership concentration: 57.5% control by founder.
The group demonstrates capacity to execute its $7–10 million valuation growth plan, supported by improved operational metrics and defensible IP portfolio.