Attached files
Exhibit 99.2
Page
Number
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INDEX TO UNAUDITED FINANCIAL STATEMENTS F-1
Report of Independent Registered Accounting Firm F-2
Balance Sheets as of June 30, 2011 (Unaudited) and December 31, 2010 F-3
Statements of Operations for the Three and Six Month Periods Ended
June 30, 2011 and 2010 (Unaudited) F-4
Condensed Consolidated Statements of Members' Equity F-5
Statements of Cash Flows for the Six Months Ended June 30, 2011 and
2010 (Unaudited) F-6
Notes to Unaudited Financial Statements as of June 30, 2011 F-7
[LETTERHEAD OF RATTRAY & ASSOCIATES CPA, LLC]
The Board of Directors
Young Aviation, LLC
4700 Hiatus Road, Suite 252
Sunrise, FL 33351
REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
I have reviewed the accompanying balance sheets of Young Aviation, LLC as of
March 31, 2011 and June 30, 2011, and the related statements of operations,
changes in members' equity and cash flows for the three and six months then
ended. These financial statements are the responsibility of the Company's
management.
I conducted my review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of Interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than in audit conducted in accordance
with the standards of the Public Company Accounting Oversight Board, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should be
made to the financial statements referred to above for them to be 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 SHEETS
June 30, December 31,
2011 2010
-------- --------
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 100 $ 7,083
Inventory 27,705 --
Accounts receivable 3,277 2,585
Other current assets 1,431 1,431
-------- --------
TOTAL CURRENT ASSETS 32,513 11,099
Property and equipment, net 6,000 7,000
Advances receivable - member 24,920 24,920
-------- --------
TOTAL ASSETS $ 63,433 $ 43,019
======== ========
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
Accounts payable $ 18,769 $ 14,670
Other accounts payable 1,158 2,000
Loans payable - member 31,000 31,000
-------- --------
TOTAL CURRENT LIABILITIES 50,927 47,670
-------- --------
TOTAL LIABILITIES 50,927 47,670
-------- --------
MEMBERS' EQUITY
Members' contribution 100 100
Retained earnings 12,406 (4,751)
-------- --------
NET MEMBERS' EQUITY/(DEFICIT) 12,506 (4,651)
-------- --------
TOTAL LIABILITIES AND NET ASSETS $ 63,433 $ 43,019
======== ========
The accompanying notes are an integral part of these financial statements
F-3
YOUNG AVIATION, LLC
STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2011 2010 2011 2010
-------- -------- -------- --------
Sales $ 33,355 $205,697 $ 76,144 $346,421
Cost of Sales 20,220 114,325 40,432 199,388
-------- -------- -------- --------
Gross Profit 13,135 91,372 35,712 147,033
EXPENSES
Selling, general and adminitrative 14,979 42,716 33,418 71,792
Interest expense -- -- -- --
Depreciation 500 500 360 1,000
Bad debt 730 -- 730 --
-------- -------- -------- --------
TOTAL EXPENSES 16,209 43,216 34,508 72,792
-------- -------- -------- --------
Surplus from operations (3,074) 48,156 1,204 74,241
-------- -------- -------- --------
NET PROFIT $ (3,074) $ 48,156 $ 1,204 $ 74,241
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements
F-4
YOUNG AVIATION LLC
Condensed Consolidated Statements of Members' Equity
Member Additional Accumulated
Contribution Contribution Deficit Total
------------ ------------ ------- -----
Beginning balance, January 1, 2010 $ 100 $ -- $(16,743) $(16,643)
Net loss, year ended December 31, 2010 25,750 25,750
Members' distribution (13,758) (13,758)
-------- -------- -------- --------
BALANCE DECEMBER 31, 2010 100 -- (4,751) (4,651)
-------- -------- -------- --------
Members' distribution 15,953 15,953
Net loss, six months ended June 30, 2011 1,204 1,204
-------- -------- -------- --------
BALANCE JUNE 30, 2011 $ 100 $ -- $ 12,406 $ 12,506
======== ======== ======== ========
See accompanying notes to financial statements.
F-5
YOUNG AVIATION, LLC
STATEMENTS OF CASH FLOWS
(unaudited)
For the Six Months Ended
June 30,
---------------------------
2011 2010
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ 1,204 $ 74,241
Adjustments to reconcile increase(decrease) in net assets
to cash provided by operating activities:
Depreciation 1,000 1,000
Changes in operating assets and liabilities:
(Increase) in inventory (27,705) --
(Increase) in other accounts receivable (692) (36,470)
(Decrease) in accounts payables (842) (13,079)
Increase in other payables 4,099 775
Increase in accrued interest payable -- 13,885
-------- --------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (22,935) 40,352
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Member distribution 15,953 (6,817)
-------- --------
NET (CASH USED) IN INVESTING ACTIVITIES 15,953 (6,817)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease/(increase) in loans to members -- (500)
-------- --------
NET CASH USED IN PROVIDED BY FINANCING ACTIVITIES -- (500)
-------- --------
(DECREASE) INCREASE IN CASH (6,983) 33,035
CASH - BEGINNING OF PERIOD 7,083 21
-------- --------
CASH - END OF YEAR $ 100 $ 33,056
======== ========
The accompanying notes are an integral part of these financial statements
F-6
YOUNG AVIATION, LLC
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2011
(Unaudited)
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 unaudited financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. In the
opinion of management, the disclosures included in these financial statements
are adequate to make the information presented not misleading.
F-7
YOUNG AVIATION, LLC
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2011
(Unaudited)
Note 2. Summary of Significant Accounting Policies: (continued)
The unaudited financial statements included in this document have been prepared
on the same basis as the annual financial statements and in management's
opinion, reflect all adjustments, including normal recurring adjustments,
necessary to present fairly the Company's financial position, results of
operations and cash flows for the interim periods presented. The unaudited
financial statements should be read in conjunction with the audited financial
statements and the notes thereto for the years ended December 31, 2010 and 2009
that are included as Exhibit 99.2 elsewhere in this filing. The results of
operations for the three and six month periods ended June 30, 2011 are not
necessarily indicative of the results that the Company will have for any
subsequent quarter or full fiscal year.
The preparation of 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 amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
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 June 30, 2011,
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
F-8
YOUNG AVIATION, LLC
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2011
(Unaudited)
Note 2. Summary of Significant Accounting Policies: (continued)
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 June 30, 2011.
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.
Selling and Marketing Expenses - Selling and marketing expenses are expensed as
incurred. These expenses were $1,796 and $955, respectively, for the six month
periods ended June 30, 2011 and 2010 and consisted of the following:
2011 2010
------ ------
Advertising fees $ 138 $ 265
Promotional travel 590 411
Marketing recruitment and materials 1,068 279
------ ------
Total Selling and Marketing Expenses $1,796 $ 955
====== ======
F-9
YOUNG AVIATION, LLC
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2011
(Unaudited)
Note 2. Summary of Significant Accounting Policies: (continued)
General and Administrative Expenses - General and administrative expenses are
expensed as incurred. These expenses were $32,543 and $71,837, respectively, for
the six month periods ended June 30, 2011 and 2010 and consisted of the
following:
2011 2010
-------- --------
Depreciation and amortization $ 1,000 $ 1,000
Computer and internet 5,680 11,723
Insurance -- --
Licenses and permits 139 1,500
Payroll and compensation 66 10,765
Accounting fees 600 540
Legal fees -- 4,650
Consulting and contracting fees 2,796 14,111
Rent and occupancy expenses 9,619 5,356
Factoring fees 2,450 2,257
Travel expenses 2,031 954
Interest expense 775 9,901
Office and administrative expenses 6,657 9,080
Bad debt expense 730 --
-------- --------
Total General & Administrative Expenses $ 32,543 $ 71,837
======== ========
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.
Financial instruments potentially subjecting the Company to concentrations of
credit risk consist principally of accounts receivable. As of June 30, 2011,
there was no outstanding accounts receivable balance.
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.
F-10
YOUNG AVIATION, LLC
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2011
(Unaudited)
Note 2. Summary of Significant Accounting Policies: (continued)
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 $564 and $74,241, for the six month periods ended
June 30, 2011 and 2010, respectively.
As of June 30, 2011, the Company had no cash and cash equivalents, no accounts
receivable and accounts payable of approximately $200. The Company is confident
that it has sufficient liquidity for the next twelve months based on financing
and contracts currently being finalized.
Note 4. Balance Sheet Information:
Cash and Cash Equivalents consisted of the following at June 30, 2011 and
December 31, 2010:
June 30, December 31,
2011 2010
------ ------
Checking account $ 100 $2,031
Money Market account (442) 5,052
------ ------
Total Cash and cash equivalents $ (342) $7,083
====== ======
F-11
YOUNG AVIATION, LLC
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2011
(Unaudited)
Note 4. Balance Sheet Information: (continued)
The negative cash balance of $342 at June 30, 2011 is included with Other
payables as a liability on the June 30, 2011 financial statements.
Accounts receivable - There is no outstanding accounts receivable balance at
June 30, 2011. 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 year ended December 31, 2010, the
Company's chief executive officer was advanced funds in the aggregate amount of
$25,000 by the Company. The advance is reflected as advances receivable - member
on the accompanying June 30, 2011 and 2010 balance sheets in the amount of
$24,920, is non-interest bearing and is due to the Company on demand.
Inventory - Inventory consists of units and parts and is stated at lower of
historical cost or current cost. Management will establish a reserve for damaged
and discontinued inventory when determined necessary. At June 30, 2011 no
reserve was required.
Other current assets in the amount of $1,431 at June 30, 2011 and December 31,
2010 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 June 30, 2011 and December 31, 2010.
June 30, December 31,
2010 2009
-------- --------
Vehicle $ 10,000 $ 10,000
Software 2,675 2,675
Equipment 313 313
-------- --------
12,988 12,988
Less Accumulated depreciation (6,988) (5,988)
-------- --------
Total Property and equipment, net $ 6,000 $ 7,000
======== ========
Depreciation expense for the six month period ended June 30, 2011 and for the
annual period ended December 31, 2010 was $1,000 and 2,000, respectively, 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.
F-12
YOUNG AVIATION, LLC
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2011
(Unaudited)
Note 4. Balance Sheet Information: (continued)
Notes Payable - The Company had two separate Notes Payable with individuals at
June 30, 2011 and December 31, 2010.
June 30, December 31,
2011 2010
-------- --------
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 June 30, 2011 and 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 $4,748
and $3,973, respectively, on the accompanying June 30, 2011 and December 31,
2010 balance sheets.
Other Payables - The Company had Other Payables consisting of the following at
June 30, 2011 and December 31, 2010:
June 30, December 31,
2011 2010
-------- --------
Accrued expenses $ 10,788 $ 4,497
Accrued interest payable 4,748 3,973
Accrued payroll taxes -- 2,000
Sales tax payable 1,158 --
Overdrawn cash position (342) --
-------- --------
Total Other payables $ 16,352 $ 10,470
======== ========
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.
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.
F-13
YOUNG AVIATION, LLC
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2011
(Unaudited)
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
