EXHIBIT 99.1
Financial Statements of Intelligent Digital Systems, LLC
REPORT OF INDEPENDENT AUDITORS
The Members
Intelligent Digital Systems, LLC
We have audited the accompanying balance sheet of Intelligent Digital Systems, LLC as of December 31, 2007 and the related statements of income and members’ capital and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Intelligent Digital Systems, LLC at December 31, 2007 and the results of their preparations and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.
January 28, 2008
Perlson, Touhy & Company LLP
North Massapequa, NY
Intelligent Digital Systems, LLC | ||||||
Balance Sheets | At | At | ||||
December 31, 2007 | March 31, 2008 | |||||
(audited) | (unaudited) | |||||
Current Assets | ||||||
Cash and cash equivalents | $ | 5,217 | $ | 2,777 | ||
Accounts Receivable | 38,874 | 3,185 | ||||
Inventory | 44,155 | 20,123 | ||||
Prepaid Expenses | 1,150 | - | ||||
Total Current Assets | 89,396 | 26,085 | ||||
Property and Equipment, net | 300 | 225 | ||||
Total Assets | 89,696 | 26,310 | ||||
Current Liabilities | ||||||
Accounts payable | 1,093 | 15,000 | ||||
Long term liabilities | 15,000 | |||||
Member's capital | 73,603 | 10,502 | ||||
Total liabilites and member's capital | $ | 89,696 | $ | 26,310 | ||
Intelligent Digital Systems, LLC | ||||||
Statements of Operations | ||||||
For the twelve months ended | For the three months ended | |||||
December 31, 2007 (audited) | March 31, 2008 (unaudited) | |||||
Revenues - net | $ | 131,260 | $ | 9,918 | ||
Cost of revenues | 130,716 | 63,849 | ||||
Gross margin | 544 | (53,931 | ) | |||
Operating expenses | 337,585 | 17,303 | ||||
Loss from operations | (337,041 | ) | (71,234 | ) | ||
Other (income) expenses | ||||||
Debt conversion expense | - | |||||
Interest income | (12 | ) | - | |||
Interest expense | - | |||||
Miscellaneous income | - | |||||
- | (12 | ) | - | |||
Net Profit (Loss) | $ | (337,029 | ) | $ | (71,234 | ) |
Intelligent Digital Systems, LLC | For the twelve months ended | For the three months ended | ||||
Statements of Cash Flows | December 31, 2007 | March 31, 2008 | ||||
(audited) | (unaudited) | |||||
Cash flows from operating activities | ||||||
Net loss | $ | (337,029 | ) | $ | (71,234 | ) |
Adjustment to reconcile net loss to net cash | ||||||
used by operating activities: | ||||||
Depreciation | 1,865 | 75 | ||||
Effects of changes in operating assets and liabilities | ||||||
Accounts receivable | 32,261 | 35,689 | ||||
Inventories | 37,843 | 24,032 | ||||
Prepaid payroll taxes | (1,150 | ) | 1,150 | |||
Accounts payable | 466 | (1,093 | ) | |||
Payroll taxes payable | (5,137 | ) | 808 | |||
Net cash used by operating activities | (270,881 | ) | (10,573 | ) | ||
Cash flows from financing activities | ||||||
Contributed capital by members | 267,667 | 8,133 | ||||
Net decrease in cash and cash equivalents | (3,214 | ) | (2,440 | ) | ||
Net increase in cash and cash equivalents | - | - | ||||
Cash and cash equivalents, beginning of year | 8,431 | 5,217 | ||||
Cash and cash equivalents, end of period | $ | 5,217 | $ | 2,777 |
See notes to financial statements
INTELLIGENT DIGITAL SYSTEMS, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2007
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
Description of Business
Intelligent Digital Systems, LLC (the “Company”), is a developer and distributor of digital video recording equipment. The company has an office in West Islip, New York.
Inventories
Inventories are stated at the lower of cost or market on a first-in, first-out basis.
Property and Equipment
Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the respective assets, which range from 3 to 7 years. Leasehold improvements are stated at cost and are depreciated using the straight-line method over the shorter of the lease term or estimated useful life of the asset. Expenditures for major renewals and improvements are capitalized, while repairs and maintenance that do not extend the useful life of such assets are charged to expense as incurred. The cost of assets sold or retired and the related accumulated depreciation are removed from the accounts with any resulting gain or loss included in net income (loss). Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Income Taxes
Under the provisions of the Internal Revenue Code, the Company, is a limited liability company and is not directly subject to federal or state income taxes. The results of its operations are includable in the individual tax returns of its members, therefore no provision for income tax expense has been included in the accompanying financial statements. There are no significant differences between the tax basis and the reported amounts of assets and liabilities.
Revenue Recognition
The company recognizes revenue from product sales upon shipment to the customer.
Use of Estimates
The preparation of the audited 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 from the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NOTE 2 - ACCOUNTS RECEIVABLE
Accounts receivable are presented without a reserve for bad debt since the entire balance has been collected subsequent to the balance sheet date.
NOTE 3 - DUE TO RELATED ENTITY
The Company owes a related entity $15,000. The advance is non-interest bearing.