Attached files
EXHIBIT 99.1
Page
Number
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INDEX TO AUDITED FINANCIAL STATEMENTS F-1
Report of Independent Registered Public Accounting Firm F-2
Balance Sheets as of December 31, 2010 and 2009 F-3
Statements of Operations and Comprehensive Income for the
Years Ended December 31, 2010 and 2009 F-4
Statement of Members' Equity for period from December 31, 2008
to December 31, 2010 F-5
Statements of Cash Flows for the Years Ended December 31, 2010
and 2009 F-6
Notes to Financial Statements F-7
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
Young Aviation, LLC
Sunrise, Florida
I have audited the accompanying balance sheets of Young Aviation, LLC as of
December 31, 2010 and 2009, and the related statements of operations, members'
equity, and cash flows for the years ended December 31, 2010 and 2009. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audits.
I conducted my audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor was I engaged to perform an audit of its internal control over
financial reporting. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. I believe that
my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Young Aviation, LLC as of December
31, 2010 and 2009, and the results of its operations and its cash flows for the
years ended December 31, 2010 and 2009, in conformity with U.S. generally
accepted accounting principles.
/s/ Harris F. Rattray, CPA
--------------------------------------------
Harris F. Rattray, CPA
Pembroke Pines, Florida
September 30, 2011
F-2
YOUNG AVIATION LLC
BALANCE SHEET
As At December 31,
2010 2009
-------- --------
ASSETS
Current assets:
Cash $ 7,083 $ 21
Accounts receivable 2,585 --
Other current assets 1,431 1,431
-------- --------
Total current assets 11,099 1,452
Property and equipment, net 7,000 9,000
Loan to members 24,920 25,000
-------- --------
Total assets $ 43,019 $ 35,452
======== ========
LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable $ 14,670 $ 21,095
Other accounts payable 2,000 --
Loans payable - members 31,000 31,000
-------- --------
Total current liabilities 47,670 52,095
-------- --------
Total liabilities 47,670 52,095
-------- --------
Members' equity:
Members' contribution 100 100
Retained earnings (4,751) (16,743)
-------- --------
Net members equity/(deficit) (4,651) (16,643)
-------- --------
Total liabilities and equity $ 43,019 $ 35,452
======== ========
The accompanying notes are an integral part of these financial statements
F-3
YOUNG AVIATION LLC
STATEMENT OF OPERATIONS
For the Year Ended December 31,
2010 2009
-------- --------
Revenues $557,828 $356,526
-------- --------
Cost of Sales 378,984 208,455
-------- --------
Gross profit 178,844 148,071
Expenses:
Selling, general and administrative 139,555 101,906
Interest expense 11,542 2,845
Depreciation and amortization 2,000 1,000
Bad Debt -- 5,320
-------- --------
Total expenses 153,097 111,071
-------- --------
Surplus/(Loss) from operations 25,747 37,000
Interest Income 3 11
Distribution -- --
-------- --------
Net Profit $ 25,750 $ 37,011
======== ========
The accompanying notes are an integral part of these financial statements
F-4
YOUNG AVIATION LLC
Statements of Members' Equity
Members Additional
Contribution Paid-in Accumulated
Amount Contribution Deficit Total
------ ------------ ------- -----
Beginning balance, January1, 2009 $ 100 $ -- $(20,564) $(20,464)
Net Profit, year ended December 31, 2009 37,011 37,011
Distribution (33,190) (33,190)
-------- -------- -------- --------
BALANCE DECEMBER 31, 2009 100 -- (16,743) (16,643)
-------- -------- -------- --------
Net Profit, year ended December 31, 2010 25,750 25,750
Distribution (13,758) (13,758)
-------- -------- -------- --------
BALANCE DECEMBER 31, 2010 $ 100 $ -- $ (4,751) $ (4,651)
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements
F-5
YOUNG AVIATION LLC
STATEMENT OF CASH FLOWS
For the Year Ended December 31,
2010 2009
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit $ 25,750 $ 37,011
Adjustments to reconcile increase(decrease) in net
assets to cash provided by operating activities:
Depreciation 2,000 1,000
Changes in operating assets and liabilities:
(Increase) in prepaid expenses (2,585) --
(Decrease)/increase in accounts payable (6,425) 19,772
Increase in amounts due from related parties 2,000 --
-------- --------
Net cash provided by operating activities 20,740 57,783
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment -- (10,000)
Member distributions (13,758) (33,190)
-------- --------
Net (cash used) in investing activities (13,758) (43,190)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loan from director 80 (15,000)
Increase in shareholders' equity -- 10,000
-------- --------
Net cash used in provided by financing activities 80 (5,000)
-------- --------
INCREASE IN CASH 7,062 9,593
CASH - BEGINNING OF YEAR 21 (9,572)
-------- --------
CASH - END OF YEAR $ 7,083 $ 21
======== ========
The accompanying notes are an integral part of these financial statements
F-6
YOUNG AVIATION, LLC
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2010 and 2009
Note 1. Description of Business:
Young Aviation, LLC (" Young Aviation" or the "Company"), a privately held,
minority-owned Florida limited liability company located in Sunrise, Florida, is
a diversified broker and supplier of parts, products and services to the
worldwide aviation, aerospace, government and defense markets. The Company
services a broad range of clients such as aircraft leasing companies, major
airlines, repair stations, fixed-base operators ("FBO's"), leasing companies and
after market suppliers.
Founded in 2004, Young Aviation, LLC was organized in the state of Florida on
May 10, 20044 The Company services a broad range of commercial and military
clients such as aircraft leasing companies, major airlines, repair stations,
leasing companies and after market suppliers.
We are accredited to FAA Advisory Circular AC 00-56 and TAC2000. We are a
registered U.S. GSA government contractor. And we hold U.S. Defense Department
Form 23245 for military critical technical data.
The Company currently operates in three business segments:
* Aviation Supply Chain
* Aircraft Maintenance Support
* Asset Management
Our customers include industry leaders Boeing, Moog, Flightstar, Woodward HRT
and L3 Communications. We are a fast-growing vendor of aviation and aerospace
parts and components, electromechanical, hydraulic and guidance systems, surplus
materials, military equipment and defense electronic components.
In order to provide working capital, Young Aviation borrowed an aggregate amount
of $31,000 from investors during the period April 2007 to present.
Note 2. Summary of Significant Accounting Policies:
This summary of significant accounting policies is provided to assist the reader
in understanding the Company's financial statements. The financial statements
and notes thereto are representations of the Company's management. The Company's
management is responsible for their integrity and objectivity. These accounting
policies conform to accounting principles generally accepted in the United
States of America and have been consistently applied in the preparation of the
financial statements.
Basis of Presentation - The accompanying financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America for complete financial statements.
F-7
YOUNG AVIATION, LLC
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2010 and 2009
Note 2. Summary of Significant Accounting Policies: (continued)
Accounts Receivable - The Company's accounts receivable are unsecured and the
Company is at risk to the extent such amounts become uncollectible. Management
continually monitors accounts receivable balances and provides for an allowance
for doubtful accounts at the time collection becomes questionable based on
payment history or age of the receivable. The Company sells products and
services and generally factors the receivable amount on terms of immediately
receiving 80% of the invoice amount from the factor upon shipment and the
remaining 20% upon collection by the factor from the customer. The Company is
charged financing fees on late payments and a nominal factoring fee by the
factor. Accounts receivable are charged to the allowance for bad debts when the
Company has exhausted all reasonable means of collection. At December 31, 2010,
management deemed that all accounts receivable were fully collectible and that
no bad debt reserve was required.
Property and Equipment - Property and equipment are stated at historical cost,
which consists of the net book value of the assets carried on the prior
company's books. Depreciation is computed over the estimated useful lives of the
assets using the straight-line method generally over a 3 to 5-year period.
Leasehold improvements will be amortized on the straight-line method over the
life of the related lease. Expenditures for ordinary maintenance and repairs are
charged to expense as incurred. Upon retirement or disposal of assets, the cost
and accumulated depreciation are eliminated from the account and any gain or
loss is reflected in the statement of operations. Depreciation expense for
property and equipment is recorded as either cost of goods sold or general and
administrative expense, depending on the use of the assets.
Impairment of Long Lived Assets - The Company evaluates its long-lived assets
for impairment, in accordance with FASB ASC 360-10, when events or changes in
circumstances indicate that the related carrying amount may not be recoverable.
Impairment is considered to exist if the total estimated future cash flow on an
undiscounted basis is less than the carrying amount of the related assets. An
impairment loss is measured and recorded based on the discounted estimated
future cash flows. Changes in significant assumptions underlying future cash
flow estimates or fair values of assets may have a material effect on the
Company's financial position and results of operations. No such impairment was
indicated at December 31, 2010.
Shipping and Handling Costs - The Company includes shipping and handling costs
that are billed to our customers in revenue and the actual costs incurred for
shipping and handling are included in costs of goods sold in accordance with the
provisions of FASB ASC 605-45-45-20. The related costs are considered necessary
to complete the revenue cycle.
Revenue Recognition - The Company recognizes revenue from product sales when
persuasive evidence of an arrangement exists, shipment has occurred, the
seller's price to the buyer is fixed or determinable and collectability is
reasonably assured.
F-8
YOUNG AVIATION, LLC
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2010 and 2009
Note 2. Summary of Significant Accounting Policies: (continued)
Selling and Marketing Expenses - Selling and marketing expenses are expensed as
incurred. These expenses were $4,016 and $10,009, respectively, for the years
ended December 31, 2010 and 2009 and consisted of the following:
2010 2009
-------- --------
Advertising fees $ 265 $ 779
Promotional travel 2,646 2,464
Marketing recruitment and materials 1,105 6,766
-------- --------
Total Selling and Marketing Expenses $ 4,016 $ 10,009
======== ========
General and Administrative Expenses - General and administrative expenses are
expensed as incurred. These expenses were $129,713 and $101,062, respectively,
for the years ended December 31, 2010 and 2009 and consisted of the following:
2010 2009
-------- --------
Depreciation and amortization $ 2,000 $ 1,000
Computer and internet 17,458 14,501
Insurance 1,453 1,204
Licenses and permits 2,213 2,028
Payroll and compensation 21,786 912
Accounting fees 1,543 680
Legal fees 3,597 --
Consulting and contracting fees 18,018 48,300
Rent and occupancy expenses 11,044 9,015
Factoring fees -- 9,688
Travel expenses 2,781 1,762
Interest expense 7,072 1,800
Office and administrative expenses 40,748 4,852
Bad debt expense -- 5,320
-------- --------
Total General & Administrative Expenses $129,713 $101,062
======== ========
Concentrations of Credit Risk - Credit risk represents the accounting loss that
would be recognized at the reporting date if counterparties failed completely to
perform as contracted. Concentrations of credit risk (whether on or off balance
sheet) that arise from financial instruments exist for groups of customers or
counterparties when they have similar economic characteristics that would cause
their ability to meet contractual obligations to be similarly affected by
changes in economic or other conditions.
F-9
YOUNG AVIATION, LLC
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2010 and 2009
Note 2. Summary of Significant Accounting Policies: (continued)
Financial instruments potentially subjecting the Company to concentrations of
credit risk consist principally of accounts receivable. As of December 31, 2010,
two customers had balances representing 32% or more of the Company's accounts
receivable.
Use of Estimates - The preparation of the financial statements in conformity
with accounting principles generally accepted in the United States of America
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 balance sheet and the reported amounts of revenue
and expenses during the reporting period.
Income Taxes - The Company will account for its income taxes under the
provisions of FASB-ASC-10 "Accounting for Income Taxes." This statement requires
the use of the asset and liability method of accounting for deferred income
taxes. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax reporting purposes, at
the applicable enacted tax rates. The Company will provide a valuation allowance
against its deferred tax assets when the future realizability of the assets is
no longer considered to be more likely than not.
The Company will account for uncertain tax positions in accordance with FASB ASC
740-10, 30 and 270, "Accounting for Uncertainty in Income Taxes." The
application of income tax law is inherently complex. As such, the Company is
required to make certain assumptions and judgments regarding its income tax
positions and the likelihood whether such tax positions would be sustained if
challenged. Interest and penalties related to uncertain tax provisions are
recorded as a component of the provision for income taxes. Interpretations and
guidance surrounding income tax laws and regulations change over time. As such,
changes in the Company's assumptions and judgments can materially affect amounts
recognized in the Company's consolidated balance sheets and statement of
operations.
Note 3. Liquidity and Operations:
The Company had net income of $33,702 and $37,011, for the years ended December
31, 2010 and 2009, respectively.
As of December 31, 2010, the Company had cash and cash equivalents of
approximately $7,000. In addition, the Company had accounts receivable of
approximately $2,500 and accounts payable of approximately $700. The Company is
confident that it has sufficient liquidity for the next twelve months.
F-10
YOUNG AVIATION, LLC
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2010 and 2009
Note 4. Balance Sheet Information:
Cash and Cash Equivalents consisted of the following at December 31,
2010 2009
-------- --------
Checking account $ 2,031 $ (580)
Money Market account 5,052 (13,149)
-------- --------
Total Cash and cash equivalents $ 7,083 $(13,729)
======== ========
The negative cash balance of $13,729 at December 31, 2009 is included with Other
payables as a liability on the December 31, 2009 financial statements.
Accounts receivable - The December 31, 2010 accounts receivable balance of
$2,585 consists of the remaining 20% balance due from three customers. When
products are shipped to our large customers, the invoice amounts are normally
factored with our factoring agent, Paragon Financial Group, Inc. We are
immediately advanced 80% of the amount of factored invoices with the remaining
20% paid to us when collected by our agent.
Advances receivable-member - During the years ended December 31, 2010 and 2009,
the Company's chief executive officer was advanced funds in the aggregate amount
of $25,000 by the Company. These advances are reflected as advances receivable -
member on the accompanying December 31, 2010 and 2009 balance sheets in the
amounts of $24,920 and $25,000, respectively, are non-interest bearing and are
due to the Company on demand.
Other current assets in the amount of $1,431 at December 31, 2010 and 2009
consists of a one month security deposit, pursuant to the terms of our lease
agreement with our landlord.
Property and equipment are stated at cost, net of accumulated depreciation.
Expenditures for maintenance and repairs are expensed as incurred; additions,
renewals and betterments are capitalized. Depreciation of property and equipment
is provided using the straight-line method with estimated lives ranging from 3
to 5 years as follows at December 31,
2010 2009
-------- --------
Furniture and fixtures $ 147 $ 147
Office equipment 165 165
Computer software 2,675 2,675
Motor vehicle 10,000 10,000
-------- --------
12,988 12,988
-------- --------
Accumulated depreciation 5,987 3,987
-------- --------
Total $ 7,000 $ 9,000
======== ========
F-11
YOUNG AVIATION, LLC
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2010 and 2009
Note 4. Balance Sheet Information: (continued)
Depreciation expense for the annual periods ended December 31, 2010 and 2009 was
$2,000 and $1,000 and was recorded as a general and administrative expense. The
use of our property and equipment determines if the depreciation is recorded as
cost of goods sold or as general and administrative expenses.
Notes Payable - The Company had two separate Notes Payable with individuals at
December 31,
2010 2009
-------- --------
Note payable - Party number 1 $ 25,000 $ 25,000
Note payable - Party number 2 6,000 6,000
-------- --------
Total notes payable $ 31,000 $ 31,000
======== ========
As of December 31, 2010, the Company had issued Notes Payable with two separate
individuals. Both notes were issued when the individuals loaned money to the
Company to be used for working capital purposes, are unsecured and bear interest
at the rate of 5%. The aggregate amount of accrued interest on both Notes is
reflected as other payables in the amounts of $3,973 and $2,423, respectively,
on the accompanying December 31, 2010 and 2009 balance sheets.
Other Payables - The Company had Other Payables consisting of the following at
December 31,
2010 2009
-------- --------
Accrued expenses $ 4,497 $ 4,922
Accrued interest payable 3,973 2,423
Accrued payroll taxes 2,000 --
Overdrawn cash position -- 13,729
-------- --------
Total Other payables $ 10,470 $ 21,074
======== ========
Note 5. Members' Equity:
The Company's managing member and chief operating officer, Joel Young, decided
the initial value of the member's equity to be $100 when the Company was formed
on May 10, 2004.
F-12
YOUNG AVIATION, LLC
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2010 and 2009
Note 6. Commitments and Contingencies:
Operating Leases -- The Company has been leasing corporate offices and warehouse
facilities in Sunrise, Florida since 2006. Commencing May 23, 2011 the Company
began leasing additional warehouse space. The current lease, including the
additional warehouse space, is valid through January 31, 2013 at the monthly
charge of $1,493 and can be renewed by the parties prior to the termination.
Note 7. Related Party Transactions:
As described in Note 4, above, the Company advanced funds and holds an advance
receivable of approximately $25,000 from the President and Chief Executive
Officer of the Company, Joel Young. The advance amount is due upon request by
the Company.
Note 8. Subsequent Events:
Other than the events noted below, the Company is not aware of any subsequent
events which would require recognition or disclosure in the financial
statements.
In August of 2011, in an effort to raise up to $500,000 for expansion and market
growth, the Company began to distribute a Private Placement Offering.
On September 2, 2011, the Company entered into a Share Exchange Agreement with
Datamill Media Corp. in which Young Aviation would become a wholly-owned
subsidiary of Datamill Media Corp. upon closing of the transaction.
F-1
