Exhibit 99.1
JAVACO, INC.
Audited Financial Statements
DECEMBER 31, 2007 AND 2006
Table of Contents
Page
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Audited Financial Statements:
Report of Independent Certified Public Accountant 1
Balance Sheets 2-3
Statements of Operations 4
Statement of Stockholders' Equity 5
Statements of Cash Flows 6
Notes to the Financial Statements 7-9
GATELY & ASSOCIATES, LLC
WINTER PARK, FL
REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors and shareholder
Javaco, Inc.
Hilliard, OH
We have audited the accompanying balance sheets of Javaco, Inc. as of December
31, 2007 and 2006, and the related statements of operations, equity and cash
flows for the twelve months 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 the standards of the Public Company
Accounting Oversight Board (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 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. 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 Javaco, Inc., as of December
31, 2007 and 2006, and the results of its operations and its cash flows for the
twelve months then ended in conformity with U.S. generally accepted accounting
principles.
/s/ Gately & Associates, LLC
- ------------------------------------
Gately & Associates, LLC
June 26, 2008
1
JAVACO, INC.
BALANCE SHEET
AS OF DECEMBER 31, 2007 AND 2006
ASSETS
12/31/2007 12/31/2006
---------- ----------
CURRENT ASSETS
Cash $ 7,539 $ 450
Prepaid expense 3,217 --
Accounts receivable 1,525,404 808,512
Inventory 559,179 514,822
Due from employee 901 4,792
Due from related party - Javacable 6,560 6,422
---------- ----------
Total Current Assets 2,102,800 1,334,998
---------- ----------
PROPERTY AND EQUIPMENT
Computer equipment and software 18,467 15,695
Furniture and fixture 3,919 3,676
Vehicles 36,848 36,848
Forklift 3,744 3,744
Less accumulated depreciation (37,187) (34,170)
---------- ----------
Total Property and Equipment 25,791 25,793
---------- ----------
OTHER ASSET
Deposits 4,333 --
---------- ----------
TOTAL ASSETS $2,132,924 $1,360,791
========== ==========
The accompanying notes are an integral part of these financial statements.
2
JAVACO, INC.
BALANCE SHEET
AS OF DECEMBER 31, 2007 AND 2006
LIABILITIES AND STOCKHOLDERS' EQUITY
12/31/2007 12/31/2006
---------- ----------
CURRENT LIABILITIES
Bank overdraft $ -- $ 24,068
Accounts payable 1,078,149 581,777
Accrued expenses 29,909 40,160
Demand note payable 101,000 --
---------- ----------
Total Current Liabilities 1,209,058 646,005
---------- ----------
LONG-TERM LIABILITIES
Notes payables 343,382 347,196
---------- ----------
TOTAL LIABILITIES 1,552,440 993,201
---------- ----------
STOCKHOLDERS' EQUITY
Capital Stock, 101 shares issued 101 101
Retained earnings 580,383 367,489
---------- ----------
Total Stockholders' Equity 580,484 367,590
---------- ----------
TOTAL LIABILITIES AND EQUITY $2,132,924 $1,360,791
========== ==========
The accompanying notes are an integral part of these financial statements.
3
JAVACO, INC.
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDING DECEMBER 31, 2007 AND 2006
12 MONTHS 12 MONTHS
ENDING ENDING
12/31/2007 12/31/2006
---------- ----------
SALES $5,996,761 $4,476,648
---------- ----------
COST OF SALES
Inventory 4,876,230 3,696,156
Warehousing 110,330 88,742
---------- ----------
Total Cost of Sales 4,986,560 3,784,898
---------- ----------
GROSS PROFIT 1,010,201 691,750
---------- ----------
SELLING GENERAL AND ADMINISTRATIVE EXPENSES
Selling 261,031 185,575
General and administrative 484,513 399,845
---------- ----------
Total Selling General and Administrative 745,544 585,420
---------- ----------
OPERATING INCOME 264,657 106,330
---------- ----------
OTHER INCOME AND (EXPENSE)
Interest income 107 1,753
Interest expense (26,496) (27,545)
Finance charge (8,321) (6,035)
Loss on sale of equipment (326) --
---------- ----------
Total Other Income (Expense) (35,036) (31,827)
---------- ----------
NET INCOME $ 229,621 $ 74,503
========== ==========
EARNINGS (LOSS) PER SHARE, BASIC $ 2,273.48 $ 737.65
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 101 101
The accompanying notes are an integral part of these financial statements.
4
JAVACO, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
AS OF DECEMBER 31, 2007
SHARES CAPITAL RETAINED TOTAL
ISSUED STOCK EARNINGS EQUITY
------ ----- -------- ------
Balance, December 31, 2005 100 $ 100 $ 346,385 $ 346,485
===== ===== ========= =========
On February 9, 2006 one share
was issued for attorney services 1 1 1
Net income 74,503 74,503
Distributions (53,399) (53,399)
----- ----- --------- ---------
Balance, December 31, 2006 101 $ 101 $ 367,489 $ 367,590
===== ===== ========= =========
Net income 229,621 229,621
Distrubutions (16,727) (16,727)
----- ----- --------- ---------
Balance, December 31, 2007 101 $ 101 $ 580,383 $ 580,484
===== ===== ========= =========
The accompanying notes are an integral part of these financial statements.
5
JAVACO, INC.
STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDING DECEMBER 31, 2007 AND 2006
12 MONTHS 12 MONTHS
ENDING ENDING
12/31/2007 12/31/2006
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 229,621 $ 74,503
--------- ---------
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 4,794 7,569
Stock issued as compensation -- 1
(Increase) Decrease in prepaid (3,217) --
(Increase) Decrease in accounts receivable (716,892) 67,074
(Increase) Decrease in inventory (44,357) 26,379
(Increase) Decrease in due from employee 3,891 5,752
(Increase) Decrease in due related party (138) (6,422)
Increase (Decrease) in accounts payable 496,372 (136,281)
Increase (Decrease) in accrued expenses (10,251) 2,440
--------- ---------
Total adjustments to net income (269,798) (33,488)
--------- ---------
Net cash provided by (used in) operating activities (40,177) 41,015
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for furniture and equipment (9,125) (3,779)
--------- ---------
Net cash flows provided by (used in) investing activities (9,125) (3,779)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received - demand note 101,000 --
Net cash received (payed) notes payable (3,814) (34,139)
Distributions (16,727) (12,500)
--------- ---------
Net cash provided by (used in) financing activities 80,459 (46,639)
--------- ---------
CASH RECONCILIATION
Net increase (decrease) in cash 31,157 (9,403)
Cash or (Overdraft) - beginning balance (23,618) (14,215)
--------- ---------
CASH BALANCE END OF PERIOD $ 7,539 $ (23,618)
========= =========
The accompanying notes are an integral part of these financial statements.
6
JAVACO, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Please read the independent auditors report.)
NOTE 1 --- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Javaco, Inc., formerly known as Java Company, (the "Company") was incorporated
on March 28, 2000 under the laws of the State of Ohio. The Company distributes
equipment and tools for the Cable TV and Telecommunications industry. The
company distributes to major television systems and their contractors in North
and Latin America.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES --- Management uses estimates and assumptions in preparing
these financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses. Actual results could vary from those
estimates.
CASH AND CASH EQUIVALENTS, AND CREDIT RISK --- For purposes of reporting cash
flows, the Company considers all cash accounts with maturities of 90 days or
less and which are not subject to withdrawal restrictions or penalties, as cash
and cash equivalents in the accompanying balance sheet.
The Company has deposits in financial institutions that insure its deposits with
the FDIC up to $100,000 per depositor. There is no portion of deposits in excess
of $100,000.
RECEIVABLES --- The receivables are trade receivables and due to the Company's
credit policy bad debts have been immaterial and therefore no allowance for
doubtful accounts has been established. The Company follows the practice of
filing statutory liens on large projects when it is deemed necessary. The liens
serve as collateral for receivables.
PROPERTY AND EQUIPMENT --- Property and equipment are stated at cost.
Depreciation is computed using the straight-line and accelerated methods over
the estimated useful lives of the assets. Expenditures for repairs and
maintenance are charged to expense as incurred, as are any items purchased which
are below the Company's capitalization threshold of $1,000.
For assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any related gain or loss is
reflected in income for the period.
7
REVENUE AND COST RECOGNITION--- Revenues are accounted for when a sales contract
has been completed and the product has been set for delivery.
Cost of inventory is accounted on the moving average, perpetual method.
INCOME TAXES --- The Company has elected to have its income taxed under the
provisions of Subchapter S of the Internal Revenue Code, which provide that, in
lieu of corporate income taxes, the stockholder separately accounts for the
Company's items of income, deductions, losses and credits. Accordingly, these
financial statements do not include any provision for federal income taxes.
NOTE 2 --- NOTES PAYABLE
During May of 2005 the Company entered into a loan for an auto for a term of 5
years that requires payments of $586 which includes interest at a rate of 4%.
The balance at December 31, 2007 is $15,655.
On March 6, 2003 the Company entered into an annual renewable revolving credit
agreement in the amount $350,000 which terms are accrual of interest at a rate
of .50% above prime. The current balance as of December 31, 2007 is $327,727.
NOTE 3 --- COMMITMENTS AND CONTINGENCIES
On July 25, 2007 the Company entered into an office lease for 36 months with
monthly payments of $4,333during the first year, $4,500 for the second and
$4,667.
Management is not aware of any contingent matters that could have a material
adverse effect on the Company's financial condition, results of operations, or
liquidity.
Subsequent to the year ending December 31, 2007:
The Company entered into a Small Business Administration line of credit on March
11, 2008 in the amount of $200,000 with final payment due on the 48th month.
NOTE 4 --- LITIGATION
From time to time in the normal course of business a Company may be involved in
litigation. The Company has no current litigation and is not aware of any claims
that are unasserted.
8
NOTE 5 --- RELATED PARTY
A majority shareholder of the Company operates a branch office in Mexico doing
business as Javacable and is considered a related business. As of December 31,
2007 and 2006 the Company had a note receivable of $6,560 and $5,600,
respectively.
A majority shareholder has loaned the Company funds in the form of an informal
demand note with a minimal amount of interest accrued. The balance of the note
as of December 31, 2007 and 2006 was $101,000 and $0, respectively.
NOTE 6 --- STOCKHOLDER EQUITY
Upon incorporation, March 28, 2000, the Company issued to a sole shareholder 100
common shares of stock for a value of $100, or $1.00 per share.
9