UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended March 31, 2012
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number: 000-27795
AVWORKS AVIATION CORP.
(Exact name of issuer as specified in charter)
Nevada 98-0427526
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
4700 Hiatus Road, Suite 252, Sunrise, Florida 33351
(Address of principal executive offices)
(954) 749-0484
(Issuer's telephone number, including area code)
Check whether the Issuer (1) has filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 262,037,165 shares at May 22, 2012
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
AVWORKS AVIATION CORP.
FORM 10-Q
QUARTERLY PERIOD ENDED MARCH 31, 2012
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 4
Balance Sheets as of March 31, 2012 (Unaudited) and December 31, 2011 4
Statements of Operations for the Three Months Ended March 31, 2012
and 2011(Unaudited) 5
Statements of Cash Flows for the Three Months Ended March 31, 2011
and 2010(Unaudited) 6
Notes to Financial Statements as of March 31, 2012 (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Plan of Development Stage Activities 13
Item 4. Controls and Procedures 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17
Item 3. Default Upon Senior Securities 17
Item 4. Mine Safety Disclosures 17
Item 5. Other Information 17
Item 6. Exhibits 17
2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this quarterly report contain or may contain
forward-looking statements that are subject to known and unknown risks,
uncertainties and other factors which may cause actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
forward-looking statements were based on various factors and were derived
utilizing numerous assumptions and other factors that could cause our actual
results to differ materially from those in the forward-looking statements. These
factors include, but are not limited to, our ability to increase our revenues,
develop our brands, implement our strategic initiatives, economic, political and
market conditions and fluctuations, government and industry regulation, U.S. and
global competition, and other factors. Most of these factors are difficult to
predict accurately and are generally beyond our control.
You should consider the areas of risk described in connection with any
forward-looking statements that may be made in our annual report as filed with
the SEC. Readers are cautioned not to place undue reliance on these
forward-looking statements and readers should carefully review this quarterly
report in its entirety, except for our ongoing obligations to disclose material
information under the Federal securities laws, we undertake no obligation to
release publicly any revisions to any forward-looking statements, to report
events or to report the occurrence of unanticipated events. These
forward-looking statements speak only as of the date of this quarterly report,
and you should not rely on these statements without also considering the risks
and uncertainties associated with these statements and our business. When used
in this quarterly report, the terms the "Company," "we," and "us" refers to
AvWorks Aviation Corp.
3
AVWORKS AVIATION CORP.
(f/k/a DATAMILL MEDIA CORP.)
BALANCE SHEETS
March 31, 2012 December 31, 2011
-------------- -----------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 6,945 $ 4,123
Accounts Receivable 16,872 19,030
Inventory 78,838 45,100
Advances receivable - related party -- 20,138
Other current assets 4,541 3,653
----------- -----------
TOTAL CURRENT ASSETS 107,196 92,044
----------- -----------
Property and equipment, net 4,500 5,000
----------- -----------
TOTAL ASSETS $ 111,696 $ 97,044
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 73,957 $ 39,581
Notes payable 118,500 76,000
----------- -----------
TOTAL CURRENT LIABILITIES 192,457 115,581
----------- -----------
TOTAL LIABILITIES 192,457 115,581
----------- -----------
STOCKHOLDERS' DEFICIT
Preferred stock, $0.001 par value, 10,000,000 shares authorized,
none issued and outstanding -- --
Common stock, $0.001 par value, 500,000,000 shares authorized,
262,037,165 issued and outstanding at March 31, 2012 and
December 31, 2011 262,037 262,037
Additional paid-in capital 989,896 989,896
Accumulated deficit during development stage (1,208,666) (1,208,666)
Accumulated deficit (124,028) (61,804)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT (80,761) (18,537)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 111,696 $ 97,044
=========== ===========
See unaudited notes to financial statements
4
AVWORKS AVIATION CORP.
(f/k/a DATAMILL MEDIA CORP.)
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended March 31,
------------------------------------
2012 2011
------------ ------------
Sales $ 36,346 $ 32,285
Cost of Sales 19,612 20,921
------------ ------------
Gross Profit 16,734 11,364
OPERATING EXPENSES
Selling and marketing expenses 9,561 3,954
General and administrative expenses 66,930 11,320
------------ ------------
Total Operating Expenses 76,491 15,274
------------ ------------
Loss from Operations (59,757) (3,910)
OTHER INCOME (EXPENSE):
Interest expense (2,467) (232)
------------ ------------
Total Other Income (Expense) $ (2,467) $ (232)
Net Loss (62,224) (4,142)
============ ============
Net Loss per share - Basic and diluted $ (0.00) $ (0.01)
============ ============
Weighted Average Shares Outstanding
- Basic and diluted 174,429,802 325,000
============ ============
See unaudited notes to financial statements
5
AVWORKS AVIATION CORP.
(f/k/a DATAMILL MEDIA CORP.)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended March 31,
------------------------------------
2012 2011
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(62,224) $ (4,142)
Adjustments to reconcile net loss from operations
to net cash used in operating activities:
Depreciation 500 500
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 2,158 (5,408)
Increase in inventory (33,738) --
Increase in other assets (888) --
Increase in accrued expenses 31,909 9,414
Increase in accrued interest payable 2,467 1,550
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (59,816) (1,914)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES: -- --
-------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES -- --
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Officer advance receivable decrease 20,138 4,782
Proceeds from notes payable 42,500 --
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 62,638 4,782
-------- --------
NET INCREASE IN CASH 2,822 6,696
CASH - beginning of period 4,123 387
-------- --------
CASH - end of period $ 6,945 $ 7,083
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ -- $ --
======== ========
Income taxes $ -- $ --
======== ========
Non-cash investing and finance $ -- $ --
======== ========
See unaudited notes to financial statements
6
AVWORKS AVIATION CORP.
(f/k/a DATAMILL MEDIA CORP.)
Notes to Financial Statements
March 31, 2012
(Unaudited)
Note 1 - Nature and Description of Business
We had been originally incorporated under the laws of Canada on January 15,
1990, under the name "Creemore Star Printing, Inc." We changed our name on June
15, 2003 to "Smitten Press: Local Lore and Legends, Inc." We domesticated in the
State of Nevada by filing Articles of Incorporation in Nevada on May 8, 2007,
and we were incorporated in the State of Nevada on May 8, 2007, as Smitten
Press: Local Lore and Legends, Inc. On April 30, 2010, our Board of Directors
approved a change in our name to DataMill Media Corp., effective at the close of
business on June 30, 2010. In June 2011, we completed our initial public
offering of 5,000,000 shares of Common Stock and received $100,000 in proceeds
from the offering.
We were a management consulting firm that planned to educate and assist small
businesses to improve their management, corporate governance, regulatory
compliance and other business processes, with a focus on capital market
participation. However, after we completed our initial public offering, we
explored a couple of opportunities to acquire operating companies in order to
enhance shareholder value. On September 2, 2011, we entered into a Share
Exchange Agreement with Young Aviation, LLC. On September 19, 2011, we amended
our Articles of Incorporation to (i) increase our authorized capital stock to
500,000,000 shares of Common Stock and (ii) effect a 10 shares for one share
forward stock split. On October 3, 2011, we closed the Share Exchange Agreement,
which resulted in Young Aviation, LLC becoming a wholly-owned subsidiary. On
November 10, 2011, a majority of our shareholders approved a change in our name
to AvWorks Aviation Corp., effective November 30, 2011, to reflect our new
business focus.
Young Aviation, founded in 2004, is currently a diversified broker and supplier
of parts, components and products to the general aviation and aerospace markets
of the U.S., Europe and Asia. "General aviation" is defined as all aviation
other than military and scheduled commercial airlines. Over 20% of our sales
revenue has been derived from international sales for the period from January 1,
2009 to date.
Young Aviation services a broad range of clients such as aircraft leasing
companies, major airlines, repair stations, fixed-base operators, leasing
companies and after market suppliers.
As a result of the Share Exchange Agreement, the Company acquired Young Aviation
and Joel A. Young became the President, Chief Executive Officer and sole
Director of the Company on October 3, 2011, when our prior management officials
resigned. In addition, as a result of acquiring Young Aviation, we ceased being
a "shell company" as that term is defined in Section 12b-2 of the Securities
Exchange Act of 1934.
The acquisition of Young Aviation, considered a reverse merger, resulted in a
change in control at the Company and new management decided to abandon our
former business of management consulting and focus solely on the business of
Young Aviation.
The Company accounted for the share exchange transaction as a recapitalization
of Young Aviation, LLC, as the members of the LLC obtained a majority interest
and management control of the Company. As a recapitalization of Young Aviation,
LLC, it is considered the accounting acquirer.
The Company is carrying on the business of Young Aviation, LLC as its sole line
of business. Young Aviation is a diversified broker and supplier of parts,
products and services to the worldwide aviation, aerospace, government and
defense markets. Young Aviation services a broad range of clients such as
aircraft leasing companies, major airlines, repair stations, fixed-base
operators, leasing companies and after market suppliers.
7
AVWORKS AVIATION CORP.
(f/k/a DATAMILL MEDIA CORP.)
Notes to Financial Statements
March 31, 2012
(Unaudited)
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 financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America for complete financial statements.
Use of estimates - In preparing financial statements, management is required to
make estimates and assumptions that effect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and revenues and expenses during the
periods presented. Actual results may differ from these estimates.
Significant estimates in the periods included in the accompanying consolidated
financial statements include an estimate of the deferred tax asset valuation
allowance, valuation of shares issued for services, and valuation of contributed
services.
Principles of Consolidation - The consolidated financial statements include the
accounts of AvWorks Aviation Corp. (f/k/a Datamill Media Corp.) as of the date
the Share Exchange Agreement closed, October 3, 2011, and its wholly-owned
subsidiary, Young Aviation, LLC. All material intercompany balances and
transactions have been eliminated in consolidation. All financial and related
data has been retroactively adjusted in the accompanying consolidated financial
statements and footnotes to reflect the effect of the recapitalization of Young
Aviation and the presentation of consolidated historical financial data.
The acquisition of Young Aviation, considered a reverse merger, resulted in a
change in control at the Company and new management decided to abandon our
former business of management consulting and focus solely on the business of
Young Aviation. The Company accounted for the share exchange transaction as a
recapitalization of Young Aviation, LLC, as the members of the LLC obtained a
majority interest and management control of the Company. As a recapitalization
of Young Aviation, LLC, it is considered the accounting acquirer.
Reclassifications - Certain reclassifications have been made to prior year
amounts to conform to the current year presentation.
As of March 31 2012, the Company's significant accounting policies and
estimates, which are detailed in the Company's Annual Report on Form 10-K for
the year ended December 31, 2011, have not changed materially.
Selling and Marketing Expenses - Selling and marketing expenses are expensed as
incurred. These expenses were $9,561 and $3,954, respectively, for the three
month periods ended March 31, 2012 and 2011.
General and Administrative Expenses - General and administrative expenses are
expensed as incurred. These expenses were $140,358 and $111,100, respectively,
for the three month periods ended March 31, 2012 and 2011.
8
AVWORKS AVIATION CORP.
(f/k/a DATAMILL MEDIA CORP.)
Notes to Financial Statements
March 31, 2012
(Unaudited)
Note 3 - Balance Sheet Information
Cash - Consisted of the following at March 31,
2012 2011
-------- --------
Checking and money market accounts $ 6,945 $ 4,123
======== ========
Accounts Receivable - The March 31, 2012 accounts receivable balance of $16,872
consists of the remaining 20% balance due from two customers. 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-Related Party - During the years ended December 31, 2011 and
2010, the Company's Chief Executive Officer was advanced funds under a verbal
arrangement in the aggregate amount of $25,000 by the Company. These advances
were paid back to the Company in full during the three month period ended March
31, 2012.
Other Current Assets - The amounts of $4,541 and $3,653 at March 31, 2012 and
2011, respectively, consist of a one month security deposit pursuant to the
terms of our lease agreement with our landlord, and a minor additional amount
representing the reserve amount held by our factoring agent on that date.
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 March 31,
2012 2011
-------- --------
Furniture and fixtures $ 147 $ 147
Office equipment 165 165
Computer software 2,675 2,675
Motor vehicle 10,000 10,000
-------- --------
12,987 12,987
-------- --------
Accumulated depreciation 8,487 7,987
-------- --------
Net property and equipment $ 4,500 $ 5,000
======== ========
9
AVWORKS AVIATION CORP.
(f/k/a DATAMILL MEDIA CORP.)
Notes to Financial Statements
March 31, 2012
(Unaudited)
Note 3 - Balance Sheet Information (continued)
Depreciation expense for the three month periods ended March 31, 2012 and 2011
was $500 for each period, 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.
Notes Payable - The Company had notes payable totaling $118,500 at March 31
2012.
$20,000 Note: On August 15, 2011, an individual loaned the Company $20,000 in
exchange for a Promissory Note bearing interest at 5% for a term of six months.
As a result of the recapitalization and presentation of the Share Exchange
Agreement on the Company's financial statements, this note is presented at
December 31, 2011. In lieu of paying interest on the note, restricted shares of
the Company's common stock will be issued to the note-holder. The Note was paid
in full in April 2012.
$6,000 Note: On November 22, 2011, an individual loaned the Company $6,000 in
exchange for a Promissory Note bearing interest at 10% for a term of six months.
The accrued interest payable balance on this note was $216 at march 31, 2011,
included in the Other Current Liabilities section of the Company's balance
sheet.
$50,000 Note: On December 5, 2011, an individual loaned the Company $50,000 in
exchange for a Promissory Note bearing interest at 12% for a term of one month,
renewable each month if agreed upon by the parties. To date, the parties have
agreed to renew and extend the note each month. The accrued interest payable
balance on this note was $1933 at March 31, 2012, included in the Other Current
Liabilities section of the Company's balance sheet.
$42,500 Note: On February 2, 2012, an entity loaned the Company $42,500 in
exchange for a Promissory Note bearing interest at 8% for a term of nine months,
convertible after nine months at 50% of the market price of our shares. The
accrued interest payable balance on this note was $567 at March 31, 2012,
included in the Other Current Liabilities section of the Company's balance
sheet.
Other Current Liabilities - The Company had other current liabilities consisting
of the following at March 31,
2012 2011
-------- --------
Accrued expenses $ 67,188 $ 35,279
Accrued interest payable 6,769 4,302
-------- --------
Total Other Current Liabilities $ 73,957 $ 39,581
======== ========
10
AVWORKS AVIATION CORP.
(f/k/a DATAMILL MEDIA CORP.)
Notes to Financial Statements
March 31, 2012
(Unaudited)
Note 4 - Stockholders' Deficit
Common stock
The Company is authorized to issue up to 500,000,000 shares of common stock with
a par value of $0.001, under terms and conditions established by the Board of
Directors.
The Company had 262,037,165 issued and outstanding common stock shares as of
March 31, 2012. Details of the issued and outstanding common stock shares are
shown below:
Amount of
Description shares issued
----------- -------------
Shares issued and outstanding prior to Share
Exchange Agreement closing on October 3, 2011 153,250,000
Share Exchange Agreement activity:
Cancellation of prior CEO's shares (67,000,000)
Share issuance to Young Aviation members 165,167,165
Shares issued for conversion of notes payable 620,000
Shares issued pursuant to service agreements 10,000,000
------------
Shares issued and outstanding as of March 31, 2012 262,037,165
============
Prior to the closing of the Share Exchange Agreement, AvWorks Aviation Corp.
(f/k/a Datamill Media Corp.) had 153,250,000 shares of common stock outstanding
on a post forward split basis. As a condition to the closing of the Share
Exchange Agreement, Vincent Beatty, Datamill's President, on October 3, 2011,
surrendered 67,000,000 (post forward split) shares of common stock held by Mr.
Beatty for cancellation and such shares were cancelled by their transfer agent.
On October 3, 2011, Datamill acquired 100% of Young Aviation's member's
interests, pursuant to the Share Exchange Agreement in exchange for the issuance
by Datamill of 165,167,165 shares of restricted common stock shares and the
issuance by Datamill of 620,000 shares of restricted common stock shares for the
conversion of notes payable. Following the closing of the Share Exchange
Agreement, Datamill had 252,037,165 shares of common stock issued and
outstanding. Young Aviation became a wholly-owned subsidiary of Datamill. The
Shares were issued to ten individuals with the majority share (165,000,000
shares) issued to Joel A. Young, who is now the President and Chief Executive
Officer and our sole Director of the surviving entity
On October 5, 2011, the Company issued an aggregate of 10,000,000 restricted
common stock shares pursuant to one year agreements with two individuals in
exchange for consulting and advisory services in relation to the Company's
accounting and compliance requirements and the provision of federal securities
advice to the Company and the preparation of required filings.
In addition, on October 5, 2011, the Company approved and adopted the
Corporation's 2011 Employee and Consultant Stock Incentive Plan ("Plan") and
reserved 12,000,000 shares of its common stock for issuance under the Plan.
Preferred stock
The Company is authorized to issue 10,000,000 shares of preferred stock, par
value $0.001 per share. Currently, there are no shares of preferred stock issued
and outstanding.
11
AVWORKS AVIATION CORP.
(f/k/a DATAMILL MEDIA CORP.)
Notes to Financial Statements
March 31, 2012
(Unaudited)
Note 5 - Going Concern
As reflected in the accompanying consolidated financial statements, the Company
had a net loss and net cash used in operations of $62,224 and $59,816,
respectively, for the three month period ended March 31, 2012. In addition, the
Company had a working capital deficit of $85,261 at March 31, 2012. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. The ability of the Company to continue as a going concern is
dependent on the Company's ability to raise additional capital, further
implement its business plan and to generate additional revenues.
Management believes that the actions presently being taken provide the
opportunity for the Company to continue as a going concern. The consolidated
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
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.
On October 5, 2011, the Company entered into one year agreements with two
individuals for the provision of accounting, compliance and legal services. The
aggregate monthly cost for the services is $10,000 and the aggregate annual cost
for the services is $120,000.
Note 7 - Related Party Transactions
As described in Note 3, above, the Company advanced funds that were paid back by
the President and Chief Executive Officer of the Company, Joel Young.
Note 8 - Legal Matters
The Company is not aware of any pending or threatened legal matters that would
have a material impact on our financial condition.
Note 9 - 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.
On April 11, 2012, the Company issued a Promissory Note bearing interest at 12%,
convertible after one year at 50% of the market price of our shares, for a term
of one year in exchange for funds loaned to the Company in the amount of
$20,000.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
DEVELOPMENT STAGE ACTIVITIES
FORWARD-LOOKING STATEMENTS
The following discussion and analysis is provided to increase the understanding
of, and should be read in conjunction with, the Financial Statements of the
Company and Notes thereto included elsewhere in this Report. Historical results
and percentage relationships among any amounts in these financial statements are
not necessarily indicative of trends in operating results for any future period.
The statements, which are not historical facts contained in this Report,
including this Plan of Operations, and Notes to the Financial Statements,
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are based on currently
available operating, financial and competitive information, and are subject to
various risks and uncertainties. Future events and the Company's actual results
may differ materially from the results reflected in these forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, dependence on existing and future key strategic and strategic
end-user customers, limited ability to establish new strategic relationships,
ability to sustain and manage growth, variability of operating results, the
Company's expansion and development of new service lines, marketing and other
business development initiatives, the commencement of new engagements,
competition in the industry, general economic conditions, dependence on key
personnel, the ability to attract, hire and retain personnel who possess the
technical skills and experience necessary to meet the service requirements of
its clients, the potential liability with respect to actions taken by its
existing and past employees, risks associated with international sales, and
other risks described herein and in the Company's other SEC filings.
The safe harbors of forward-looking statements provided by Section 21E of the
Exchange Act are unavailable to issuers of penny stock. As we issued securities
at a price below $5.00 per share, our shares are considered penny stock and such
safe harbors set forth under the Reform Act are unavailable to us.
OVERVIEW
We had been originally incorporated under the laws of Canada on January 15,
1990, under the name "Creemore Star Printing, Inc." We changed our name on June
15, 2003 to "Smitten Press: Local Lore and Legends, Inc." We domesticated in the
State of Nevada by filing Articles of Incorporation in Nevada on May 8, 2007,
and we were incorporated in the State of Nevada on May 8, 2007, as Smitten
Press: Local Lore and Legends, Inc. On April 30, 2010, our Board of Directors
approved a change in our name to DataMill Media Corp., effective at the close of
business on June 30, 2010. In June 2011, we completed our initial public
offering of 5,000,000 shares of Common Stock and received $100,000 in proceeds
from the offering.
We were a management consulting firm that planned to educate and assist
small businesses to improve their management, corporate governance, regulatory
compliance and other business processes, with a focus on capital market
participation. However, after we completed our initial public offering, we
explored a couple of opportunities to acquire operating companies in order to
enhance shareholder value. On September 2, 2011, we entered into a Share
Exchange Agreement with Young Aviation, LLC. On September 19, 2011, we amended
our Articles of Incorporation to (i) increase our authorized capital stock to
500,000,000 shares of Common Stock and (ii) effect a 10 shares for one share
forward stock split. On October 3, 2011, we closed the Share Exchange Agreement,
which resulted in Young Aviation, LLC becoming a wholly-owned subsidiary. On
November 10, 2011, a majority of our shareholders approved a change in our name
to AvWorks Aviation Corp., effective November 30, 2011, to reflect our new
business focus.
13
Young Aviation, founded in 2004, is currently a diversified broker and
supplier of parts, components and products to the general aviation and aerospace
markets of the U.S., Europe and Asia. "General aviation" is defined as all
aviation other than military and scheduled commercial airlines. Over 20% of our
sales revenue has been derived from international sales for the period from
January 1, 2009 to date.
Young Aviation services a broad range of clients such as aircraft leasing
companies, major airlines, repair stations, fixed-base operators, leasing
companies and after market suppliers.
As a result of the Share Exchange Agreement, the Company acquired Young
Aviation and Joel A. Young became the President, Chief Executive Officer and
sole Director of the Company on October 3, 2011, when our prior management
officials resigned. In addition, as a result of acquiring Young Aviation, we
ceased being a "shell company" as that term is defined in Section 12b-2 of the
Securities Exchange Act of 1934.
The acquisition of Young Aviation, considered a reverse merger, resulted in
a change in control at the Company and new management decided to abandon our
former business of management consulting and focus solely on the business of
Young Aviation.
RESULTS OF OPERATIONS OF THE COMPANY
THREE MONTHS ENDED MARCH 31, 2012 COMPARED TO THREE MONTHS ENDED MARCH 31, 2011
NET SALES. Net sales for the three month periods ended March 31, 2012 and
2011 were $ 36,346 and $32,285, respectively.
COST OF SALES. Cost of sales for the three month periods ended March 31,
2012 and 2011 was $19,612 and $20,921, respectively.
GROSS PROFIT. Gross profit for the three month periods ended March 31, 2012
and 2011 was $16,734 and $11,364, respectively.
OPERATING EXPENSES. Our operating expenses consist of selling and marketing
expenses and general and administrative expenses. For the three month periods
ended March 31, 2012 and 2011, operating expenses were $76,491 and $15,274,
respectively.
Selling and marketing expenses for the three month periods ended March 31,
2012 and 2011 were $9,561 and $3,954, respectively.
General and administrative expenses for the three month periods ended March
31, 2012 and 2011 were $66,930 and $11,320, respectively.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS - THREE MONTHS ENDED MARCH 31, 2012 COMPARED TO THREE MONTHS
ENDED MARCH 31, 2011
Net cash used in operating activities was $59,816 for the three month
period ended March 31, 2012, compared with net cash provided by operating
activities of $1,914 for the three month period ended March 31, 2011.
There was no cash provided by or used in investing activities for the three
month periods ended March 31, 2012 and 2011
Net cash provided by financing activities was $62,638 and $4,782,
respectively, for the three month periods ended March 31, 2012 and 2011.
14
CAPITAL RESOURCES
The Company has financed operations primarily through cash flows from
operations, officer advances, and debt and equity financings. We believe that
our current cash and cash equivalents and anticipated cash flow from operations
will not be sufficient to meet our anticipated cash needs, including our cash
needs for working capital and capital expenditures, for the next twelve months.
The Company expects to continue to incur capital, inventory, administrative
and other expenses. The Company's current monthly "burn rate" is approximately
$13,800, which includes aggregate monthly fees of $10,000 for two consultants
that are being accrued until funds are available for payment. We are in the
process of forming a funding strategy to raise approximately $500,000 in order
to fully implement our business plan, which includes recruiting and hiring
additional individuals, expanding our inventory and obtaining additional
licenses and certifications, as discussed in the Business Development -
Short-Term Growth section of the Description of Business. We have not decided on
a funding strategy yet and we have no firm commitments from any investors to
date. Our monthly "burn rate" will increase to approximately $17,250 per month
if we are successful in raising the approximate $500,000 in funding. The Company
will need to generate significant revenues in order to achieve and maintain
profitability. There are no additional financing requirements required to
maintain and continue the Company's operations during the next twelve months.
Management believes that our current cash and cash equivalents and anticipated
cash flow from operations will be sufficient to meet our anticipated cash needs,
including our cash needs for working capital and capital expenditures, for at
least the next twelve months. The Company's business will be materially and
adversely affected if we fail to achieve additional revenues, if revenues grow
more slowly than anticipated or if our operating or capital expenses increase
more than expected or cannot be reduced in the event of lower revenues.
We may also seek to raise additional cash to fund future growth and
expansion plans we may decide to pursue. To the extent it becomes necessary to
raise additional cash in the future, we may seek to raise it through the sale of
debt or equity securities, funding from joint-venture or strategic partners,
debt financing or loans, issuance of common stock, or a combination of the
foregoing. We currently do not have any binding commitments for additional
financing, although our current plans in place to raise additional capital are
by offering equity financing. However we reserve the right to raise additional
capital in the future in which case the percentage ownership of our shareholders
would be diluted. We cannot provide any assurances that we will be able to
secure the additional cash or working capital we may require to continue our
operations.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our Principal
Executive Officer and Principal Financial Officer of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our Principal Executive Officer and Principal Financial Officer
concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934) were
effective.
15
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Commencing with our Annual Report for the 2011 fiscal year, our management
is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. Our internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Our internal control over
financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our
assets;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with U.S. GAAP, and that our receipts and expenditures are being made
only in accordance with the authorization of our management and
directors; and
(3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
At March 31, 2012, we carried out an evaluation required by Rule 13a-15 or
Rule 15d-15 of the Securities Exchange Act of 1934 (the "Exchange Act") under
the supervision and with the participation of our management, including our
Principal Executive Officer and Principal Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures.
Based upon such evaluation, such person concluded that as of such date, our
disclosure controls and procedures were not effective at the reasonable
assurance level because, due to financial constraints, the Company does not
maintain a sufficient complement of personnel with an appropriate level of
technical accounting knowledge, experience and training in the application of
generally accepted accounting principles commensurate with our financial
accounting and reporting requirements. In the event that we may receive
sufficient funds for internal operational purposes, we plan to retain the
services of additional internal management staff to provide assistance to our
current management with the monitoring and maintenance of our internal controls
and procedures.
This Quarterly Report does not include an attestation report of the
Company's registered public accounting firm due to a transition period
established by rules of the Securities and Exchange Commission for newly public
companies.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.
We did not change our internal control over financial reporting during our
last fiscal quarter that materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.
16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not aware of any threatened or pending litigation against
the Company.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See Exhibit Index below for exhibits required by Item 601 of regulation
S-K.
31.1 Certification of the Chief Executive Officer and Chief Financial
Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of the Chief Executive Officer and Chief Financial
Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
101* Interactive Data Files pursuant to Rule 405 of Regulation S-T.
----------
* To be provided by amendment
17
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AVWORKS AVIATION CORP.
(f/k/a DATAMILL MEDIA CORP.)
Date: May 22, 2012 /s/ Joel Young
-------------------------------------
Joel Young
Director, Chief Executive Officer and
Chief Financial Officer
18