Exhibit 99.2
INDEX TO UNAUDITED INTERIM FINANCIAL STATEMENTS
RBA, INC.
CONTENTS
| | Page |
| | |
Balance Sheets | | B-2 |
Statements of Income | | B-3 |
Statements of Cash Flows | | B-4 |
Notes to Financial Statements | B-5 - B-6 |
B-1
RBA, INC.
BALANCE SHEETS
(Unaudited)
June 30, 2007 and 2006
| | 2007 | | 2006 | |
ASSETS | | | | | |
Current assets | | | | | |
Cash | | $ | 5,519 | | $ | — | |
Accounts receivable: | | | | | |
Trade | | 891,737 | | 513,997 | |
Related party | | 32,960 | | 320,722 | |
Costs and estimated earnings in excess of billings on uncompleted contracts | | 121,362 | | 105,907 | |
Due from shareholder | | 149,652 | | — | |
Other current assets | | 100 | | — | |
| | | | | |
Total current assets | | 1,201,330 | | 940,626 | |
| | | | | |
Property and equipment | | | | | |
Leasehold improvements | | 140,732 | | 140,732 | |
Equipment | | 1,509,701 | | 1,496,251 | |
Vehicles | | 46,055 | | 46,055 | |
| | | | | |
| | 1,696,488 | | 1,683,038 | |
Less accumulated depreciation | | 1,234,564 | | 1,128,921 | |
| | | | | |
Net property and equipment | | 461,924 | | 554,117 | |
| | | | | |
Other assets | | | | | |
Deposits | | 49,296 | | — | |
| | | | | |
TOTAL ASSETS | | $ | 1,712,550 | | $ | 1,494,743 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | |
| | | | | |
Current liabilities | | | | | |
Checks written in excess of bank balance | | $ | — | | $ | 46,658 | |
Notes payable - line of credit | | 463,025 | | 925,019 | |
Notes payable - related party | | — | | 619,547 | |
Trade accounts payable | | 89,059 | | 231,023 | |
Accrued liabilities: | | | | | |
Wages and related expenses | | 36,525 | | 26,243 | |
Interest | | 235 | | 6,420 | |
Other | | 41,792 | | 63,650 | |
| | | | | |
Total current liabilities | | 630,636 | | 1,918,560 | |
| | | | | |
Stockholders’ equity (deficit) | | | | | |
Common stock, authorized 1,000 shares no par value; issued and outstanding 230 shares | | 1,512,144 | | 1,512,144 | |
Accumulated deficit | | (430,230 | ) | (1,935,961 | ) |
| | | | | |
Total stockholders’ equity (deficit) | | 1,081,914 | | (423,817 | ) |
| | | | | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | $ | 1,712,550 | | $ | 1,494,743 | |
The accompanying notes are an integral part of these consolidated financial statements.
B-2
RBA, INC.
STATEMENTS OF INCOME
(Unaudited)
Six-Months Ended June 30, 2007 and 2006
| | 2007 | | 2006 | |
| | | | | |
Contract revenues | | $ | 2,400,743 | | $ | 1,622,182 | |
| | | | | |
Cost of revenues | | 1,552,019 | | 1,292,770 | |
| | | | | |
Gross profit | | 848,724 | | 329,412 | |
| | | | | |
Operating expenses | | | | | |
General and administrative expenses | | 302,390 | | 235,706 | |
Selling expenses | | 1,753 | | 4,658 | |
Gain on settlement | | (100,000 | ) | — | |
| | | | | |
Total operating expenses | | 204,143 | | 240,364 | |
| | | | | |
Income from operations | | 644,581 | | 89,048 | |
| | | | | |
Other income (expense) | | | | | |
Interest income | | 3,667 | | | |
Interest expense | | (32,788 | ) | (41,328 | ) |
| | | | | |
Other expense, net | | (29,121 | ) | (41,328 | ) |
| | | | | |
Net income | | $ | 615,460 | | $ | 47,720 | |
The accompanying notes are an integral part of these consolidated financial statements.
B-3
RBA, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six-Months Ended June 30, 2007 and 2006
| | 2007 | | 2006 | |
| | | | | |
Operating activities | | | | | |
Net income | | $ | 615,460 | | $ | 47,720 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation | | 52,858 | | 52,785 | |
Changes in operating assets and liabilities: | | | | | |
Accounts receivable - trade | | (388,605 | ) | (111,607 | ) |
Accounts receivable - related party | | 386,448 | | (33,850 | ) |
Other receivables | | 100,000 | | — | |
Costs and estimated earnings in excess of billings on uncompleted contracts | | 99,863 | | 21,184 | |
Other current asset | | (100 | ) | — | |
Deposits | | (49,296 | ) | — | |
Accounts payable | | (58,778 | ) | 73,920 | |
Accrued liabilities | | (17,807 | ) | (15,749 | ) |
| | | | | |
Net cash provided by operating activities | | 740,043 | | 34,403 | |
| | | | | |
Investing activities | | | | | |
Due from shareholder | | (149,652 | ) | — | |
Purchase of equipment | | (13,450 | ) | — | |
| | | | | |
Net cash used in investing activities | | (163,102) | | — | |
| | | | | |
Financing activities | | | | | |
Checks written in excess of bank balance | | — | | 46,658 | |
Payments on notes payable - line of credit | | (525,188 | ) | (57,014 | ) |
Proceeds from notes payable - line of credit | | 135,000 | | 1,000 | |
Payments on notes payable - related party | | (372,617 | ) | (68,178 | ) |
Distribution paid | | (3,070 | ) | — | |
Payment of short-term note payable | | — | | — | |
| | | | | |
Net cash used in financing activities | | (765,875 | ) | (77,534 | ) |
| | | | | |
Cash | | | | | |
Net decrease | | (188,934 | ) | (43,131 | ) |
Beginning of period | | 194,453 | | 43,131 | |
| | | | | |
End of period | | $ | 5,519 | | $ | — | |
The accompanying notes are an integral part of these consolidated financial statements.
B-4
RBA, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 2007 and 2006
Note 1 - Basis of presentation
The accompanying unaudited financial information has been prepared by RBA, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 8-K/A of the Securities and Exchange Commission (SEC). Accordingly, it does not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of this financial information have been included. Financial results for the interim six-month period ended June 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007. This financial information should be read in conjunction with the annual financial statements and notes included within this filing.
Note 2 - Revenue and cost recognition
Revenues from fixed-price contracts are recognized on the percentage-of-completion method measured by the percentage of costs incurred to date to estimated total costs for each contract. This method is used because management considers costs to be the best available measure of progress on these contracts. Revenues from cost-plus-fee contracts are recognized on the basis of costs incurred during the period plus fees earned measured by costs incurred to date plus a percentage.
Contract costs include all direct material, labor and subcontract costs and those indirect costs related to contract performance such as indirect labor, supplies, tools, repairs and depreciation costs. Most direct materials are supplied by the customers. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined.
Note 3 - Contracts in process
Information relative to the Company’s contracts in process are as follows at June 30:
| | 2007 | | 2006 | |
| | | | | |
Costs incurred on uncompleted contracts | | $ | 65,079 | | $ | 246,877 | |
Estimated earnings | | | 56,283 | | | 97,066 | |
| | | | | |
| | | 121,362 | | | 343,943 | |
Less billings to date | | | — | | | 238,036 | |
| | | | | |
| | $ | 121,362 | | $ | 105,907 | |
B-5
RBA, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 2007 and 2006
Note 3 - Contracts in process, continued
And are included in the accompanying balance sheets under the following captions at June 30:
| | 2007 | | 2006 | |
| | | | | |
Costs and estimated earnings in excess of billings on uncompleted contracts | | $ | 121,362 | | $ | 105,907 | |
| | | | | |
Billings in excess of costs and estimated earnings on uncompleted contracts | | $ | — | | $ | — | |
| | | | | |
Note 4 - Related party transactions
The Company outsources some of its labor to a corporation, which shares some of the Company’s stockholders. The Company’s billings to that corporation for the six months ended June 30, 2007 and 2006 were $48,826 and $46,405, respectively for contracted labor. At June 30, 2007 and 2006, $32,960 and $320,722, respectively was due the Company and was included in accounts receivable — related party.
Note 5 - Other receivable / Gain on settlement
During 2006, the Company agreed upon a $500,000 settlement with a significant customer for breach of a verbal contract that occurred in prior years. Of the total settlement, $400,000 was immediately recognized as operating income in 2006; $300,000 was received prior to December 31, 2006 and $100,000 was received subsequent to year end. Since collection was assured and there was no further performance commitment for the $100,000, a receivable was recorded for this amount at December 31, 2006. Payment of the remaining $100,000 was contingent upon a minimum number of production hours being provided on future jobs for the customer. That production level was obtained in June, 2007, and the remaining $100,000 was subsequently received and recorded as operating income in 2007.
B-6