Exhibit 99.1
World Jet Corporation
Financial Statements
December 31, 2003 and 2002
World Jet Corporation
Financial Statements
December 31, 2003 and 2002
Table of Contents
Page
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Independent Auditor's Report 1
Financial Statements
Balance Sheets 2
Statements of Operations 3
Statements of Retained Earnings 4
Statements of Cash Flows 5
Notes to Financial Statements 6 - 10
Larry O'Donnell, CPA, P.C.
Telephone (303) 745-4545 2228 South Fraser Street
Unit 1
Aurora, Colorado 80014
Independent Auditor's Report
Board of Directors
World Jet Corporation
I have audited the accompanying balance sheets of World Jet Corporation as of
December 31, 2003 and 2002 and the related statements of operations, retained
earnings and cash flows for the years then ended. 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 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe 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 World Jet Corporation as of
December 31, 2003 and 2002 and the results of its operations and cash flows for
the years then ended in conformity with generally accepted accounting principles
in the United States of America.
Larry O'Donnell, CPA, P.C.
November 23, 2004
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World Jet Corporation
Balance Sheets
December 31, 2003 and 2002
Assets
2003 2002
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Current Assets
Cash $ 590,356 $ 869,901
Accounts receivable, allowance for
doubtful accounts $43,834,2003 and 2002 983,796 1,756,746
Inventories 1,445,856 1,733,450
Prepaid expenses 9,593 --
Income tax refunds receivable -- 18,321
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Total current assets 3,029,601 4,378,418
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Property and equipment, net of
accumulated depreciation 2003 $113,515,
2002 $98,096 37,642 18,249
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$3,067,243 $4,396,667
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Liabilities and Stockholders' Equity
Current Liabilities
Note payable $1,682,929
Account payable $ 359,642 670,302
Accrued expenses 170,433 --
Income taxes payable -- 124,402
Loans payable-related parties 744,000 --
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Total current liabilities 1,274,075 2,477,633
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Stockholders' equity
Common stock, no par value, 25,000 shares,
Authorized, issued and outstanding 25,000 25,000
Retained earnings 1,768,168 1,894,034
---------- ----------
1,793,168 1,919,034
$3,067,243 $4,396,667
========== ==========
See Notes to Financial Statements
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World Jet Corporation
Statements of Income
Years Ended December 31, 2003 and 2002
2003 2002
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Net sales $ 4,394,280 $ 8,198,308
Cost of sales 3,705,809 6,552,386
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Gross profit 688,471 1,645,922
Selling general and administrative 2,822,975 1,692,284
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Income (loss) from operations (2,134,504) (46,362)
Other income (expenses)
Insurance settlement income 2,037,541 551,753
Interest expenses (54,965) (71,092)
----------- -----------
Income before income taxes (151,928) 434,299
Income taxes (26,062) 115,775
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Net income (loss) $ (125,866) $ 318,524
=========== ===========
See Notes to Financial Statements
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World Jet Corporation
Statements of Retained Earnings
Years Ended December 31, 2003 and 2002
Balance, December 31, 2001 $ 1,575,510
Net income for the period 318,524
-----------
Balance, December 31, 2002 1,894,034
Net loss for the period (125,866)
-----------
Balance, December 31, 2003 $ 1,768,168
===========
See Notes to Financial Statements
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World Jet Corporation
Statements of Cash Flows
Years Ended December 31, 2003 and 2002
2003 2002
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Cash flows from operating activities
Net income(loss) $ (125,866) $ 318,525
Noncash items included in net loss
Depreciation 15,419 6,303
Increase (decrease) in:
Accounts receivable 772,950 593,058
Inventory 287,594 (585,716)
Income tax refund receivable 18,321 (18,321)
Other assets (9,593) 480
(Increase) decrease in:
Accounts payable (310,660) (286,595)
Accrued expenses 170,433 (10,998)
Income taxes payable (124,402) 87,708
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Net Cash provided by operating activities 694,196 104,444
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Cash flows from investing activities
Purchase of property and equipment (34,812) (14,460)
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Net cash used by investing activities (34,812) (14,460)
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Cash flows from financing activities
Increase(decrease) in notes payable (1,682,929) 794,442
Increase (decrease) in loans payable-related parties 744,000 (170,472)
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Net cash provided by financing activities (938,929) 623,970
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Increase (decrease) in cash (279,545) 713,954
Cash, beginning 869,901 155,947
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Cash ending $ 590,356 $ 869,901
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Supplemental disclosures of cash flow information
Cash paid during the year for
Interest $ 54,965 $ 71,092
Income taxes $ 80,019 $ 46,388
See Notes to Financial Statements
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World Jet Corporation
Notes to Financial Statements
Note 1 - Organization and Summary of Significant Accounting Policies
Nature of Operations
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The Company provides large aircraft maintenance, repair and modification
services to owners and operators of large transport-category commercial jet
aircraft. Services of this nature are required and needed by passenger and cargo
air carriers, aircraft lessors, and governmental entities.
Use of Estimates
- ----------------
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 reporting amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the periods. Management makes these estimates using the best information
available at the time the estimates are made; however, actual results could
differ materially from these estimates.
Fair Value of Financial Instruments
- -----------------------------------
Fair value estimates are based upon certain market assumptions and pertinent
information available to management as of September 30, 2004 and December 31,
2003. The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments include
cash (bank overdraft) and accrued expenses. Fair values were assumed to
approximate carrying values for cash and payables because they are short term in
nature and their carrying amounts approximate fair values or they are payable on
demand.
Comprehensive Income
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Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income, establishes requirements for disclosure of comprehensive income (loss).
The Company did not have any components of comprehensive income (loss) to
report.
Cash equivalents
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The Company maintains a cash balance in a non-interest-bearing account that
currently does not exceed federally insured limits. For the purpose of the
statements of cash flows, all highly liquid investments with an original
maturity of three months or less are considered to be cash equivalents.
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World Jet Corporation
Notes to Financial Statements (continued)
Note 1 - Organization and Summary of Significant Accounting Policies (continued)
Property and Equipment
- ----------------------
Property and equipment are stated at cost, net of accumulated depreciation.
Depreciation is provided primarily by the straight-line method over the
estimated useful lives of the related assets.
Net Loss Per Share
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SFAS No. 128, Earnings per Share, requires dual presentation of basic and
diluted earnings or loss per share ("EPS") for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted EPS
computation. Basic EPS excludes dilution; diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity.
Basic loss per share is computed by dividing net loss applicable to common
shareholders by the weighted average number of common shares outstanding during
the period. Diluted loss per share reflects the potential dilution that could
occur if dilutive securities and other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company, unless the effect is to
reduce a loss or increase earnings per share. The Company had no potential
common stock instruments which would result in a diluted loss per share.
Therefore, diluted loss per share is equivalent to basic loss per share.
Stock-Based Compensation
- ------------------------
SFAS No. 123, Accounting For Stock-Based Compensation, defines a
fair-value-based method of accounting for stock-based employee compensation
plans and transactions in which an entity issues its equity instruments to
acquire goods or services from non-employees, and encourages but does not
require companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company, at times, issues shares of common
stock in payment for services rendered to the Company. The estimated fair value
of the shares issued approximates the value of the services provided.
The Company accounts for employee stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
Accounting For Stock Issued To Employees ("APB No. 25") and related
interpretations. Accordingly, compensation cost for stock options is measured as
the excess, if any, of the quoted market price of the Company's common stock at
the date of the grant over the amount an employee must pay to acquire the stock.
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World Jet Corporation
Notes to Financial Statements (continued)
Note 1 - Organization and Summary of Significant Accounting Policies (continued)
Accounts receivable
- -------------------
Accounts receivable are stated at the amount management expects to collect from
outstanding balances. Management provides for probable uncollectible amounts
through a charge to earnings and a credit to a valuation allowance based on its
assessment of the current status of individual accounts. Balances that are still
outstanding after management has used reasonable collection efforts are written
off through a charge to the valuation allowance and a credit to trade accounts
receivable. Changes in the valuation allowance has not been material to the
financial statements.
Inventories
- -----------
Inventories are valued at the lower of cost or market using the first-in,
first-out (FIFO) method for determining cost.
Revenue recognition
- -------------------
The Company recognizes revenue on an accrual basis as it invoices for services.
The Company recognizes revenue after the services are provided and invoiced.
Income Taxes
- ------------
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to reverse. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the statement of
operations in the period that includes the enactment date.
Recently Issued Accounting Pronouncements
- -----------------------------------------
In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets, which
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of and the accounting and reporting
provisions of APB Opinion No. 30. SFAS No. 144 addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and is
effective for fiscal years beginning after December 15, 2001, and interim
periods within those fiscal years.
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World Jet Corporation
Notes to Financial Statements (continued)
Note 1 - Organization and Summary of Significant Accounting Policies (continued)
Recently Issued Accounting Pronouncements (continued)
- -----------------------------------------------------
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Others FIN 45 requires that upon issuance of a guarantee,
the guarantor must recognize a liability for the fair value of the obligation it
assumes under that guarantee. The interpretations provisions for initial
recognition and measurement should be applied on a prospective basis to
guarantees issued or modified after December 31, 2002. The disclosure
requirements are effective for financial statements of both interim and annual
periods that end after December 15, 2002. The Company believes the adoption of
FIN 45 will not have a material impact on its financial statements.
In December 2002, the FASB issued SFAS No. 148, Accounting or Stock Based
Compensation--Transition and Disclosure--an Amendment of SFAS No. 123,
Accounting for Stock-Based Compensation. This Statement provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, this Statement
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the methods of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The statement has varying effective dates commencing
with interim periods beginning after December 15, 2002. The Company does not
expect the adoption of SFAS No. 148 to have a material effect on its financial
statements.
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities--an Interpretation of ARB No. 51.
FIN 46 addresses consolidation of business enterprises of variable interest
entities. FIN 46 is effective February 1, 2003. The Company does not expect the
adoption of FIN 46 to have an effect on its financial statements.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity This Statement
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. This
Statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. SFAS No. 150 is to be implemented by
reporting the cumulative effect of a change in an accounting principal for
financial instruments created before the issuance date of the Statement and
existing at the beginning of the interim period of adoption. The Company does
not expect the adoption of SFAS No. 150 to have a material effect on its
financial statements.
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World Jet Corporation
Notes to Financial Statements (continued)
Note 2 - Acquisition by Renegade Venture (NEV) Corporation
On July 15, 2004, the Company's shareholders entered into a stock purchase
agreement with Renegade Venture (NEV) Corporation, a publicly traded company. On
July 28, 2004, Renegade Venture (NEV) Corporation completed an acquisition of
100 percent of the outstanding common stock of World Jet Corporation. Thus the
Company became a wholly owned subsidiary of Renegade Venture (NEV) Corporation.
Note 3 - Property and equipment
2003 2002
-------- --------
Computer equipment $ 78,068 $ 64,840
Machinery and equipment 38,957 26,297
Furniture and equipment 25,208 25,208
Leasehold improvements 8,924
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151,157 116,345
Accumulated depreciation 113,515 98,096
-------- --------
$ 37,642 $ 18,249
======== ========
Note 4 - Related party transactions
The Company has loans payable due to its officers. The loans have no fixed due
date, are unsecured and do not bear interest.
The Company sales to Hamilton Aerospace Technologies, a wholly owned subsidiary
of Renegade Venture (NEV) Corporation of $1,025,675 and $709,526, for the years
ended December 31, 2003 and 2002, respectively. The Company had an account
receivable due from Hamilton Aerospace Technologies of $449,893 and $508,608 as
of December 31, 2003 and 2002, respectively.
The Company sales to Hamilton Aviation, Inc., whose assets have been acquired by
a Hamilton Aerospace Technologies, of $10,047 for the year ended December 31,
2002. The Company had an account receivable due from Hamilton Aviation, Inc. of
$ $115,132 as of December 31, 2002.
Note 5 - Insurance Settlement
The Company received a settlement with an insurance claim due to damage incurred
to inventory of $2,037,542 and 551,753 for the years ended December 31, 2003 and
2002, respectively.
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World Jet Corporation
Notes to Financial Statements (continued)
Note 6- Income Taxes
Income taxes at the federal statutory rate is reconciled to the Company's actual
income taxes as follows:
2003 2002
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Federal income tax benefit at statutory rate (34%) $ (52,000) $ 147,000
State income tax benefit net of federal tax effect (5,500) 14,000
Effect of expenses not deducted for tax purposes 31,438
Effect of income not subject to tax (45,225)
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$ (26,062) $ 115,775
========= =========
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