NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2013
UNAUDITED
Note 1 - Nature and Description of Business
The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Accordingly, certain information and footnote disclosure required for complete financial statements are not included herein. It is recommended that these financial statements be read in conjunction with the financial statements and related notes of AvWorks Aviation Corp (the "Company") as reported in the Company's Annual Report on Form 10-K for the year ended December 31, 2012. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations, and cash flows at the dates and for the periods presented have been included. The results of operations for the nine months ended September 30, 2013 may not be indicative of the results that may be expected for the year ending December 31, 2013, or any other period.
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.
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.
Note 2 - Going Concern
As reflected in the accompanying consolidated financial statements, the Company had a net loss and net cash used in operations of $21,285 and $0, respectively, for the three months ended September 30, 2013. In addition, the Company had a working capital deficit of $280,184 at September 30, 2013. 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 3 - 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. 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 AvWorks Aviation Corp 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.
Property and equipment is as follows as of September 30, 2013 and December 31, 2012:
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|
2013
|
|
|
2012
|
|
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
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|
Accumulated depreciation
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|
|
11,487
|
|
|
|
9,987
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|
Net property and equipment
|
|
$
|
1,500
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|
|
$
|
3,000
|
|
Depreciation expense for the three months ended September 30, 2013 and December 31, 2012 was $500 and $2,000 respectively. 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 4 – Notes Payable
The Company had notes payable totaling $150,593 as at September 30, 2013 and December 31, 2012 respectively.
4.1.
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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. In lieu of paying interest on the note, restricted shares of the Company's common stock was issued to the note-holder. The Note was paid in full in April 2012.
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4.2.
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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 $832 at September 30, 2013 and is included in the Accrued Interest section of the Company's balance sheet
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4.3.
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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 $10,583 at September 30, 2013 and is included in the Accrued Interest section of the Company's balance sheet
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4.4.
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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. In May 2012, the Company repaid 28,000 of this note together with accrued interest thereon. As a result, the balance of the note amounted to $14,500 The accrued interest payable balance on this note was $1,563 at September 30, 2013 and is included in the Accrued Interest section of the Company's balance sheet.
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4.5.
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On April 18, 2012, the Company borrowed funds from Asher Enterprises in the amount of $32,500 bearing interest at the rate of 8% per year. The accrued interest payable balance on this note was $3,857 at September 30, 2013 and is included in the Accrued Interest section of the Company's balance sheet.
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4.6.
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On June 1 2012, the Company’s director converted accrued expense and / or loaned the Company a total of $40,000. The accrued interest payable balance on this note was $4,000 at September 30, 2013 and is included in the Accrued Interest section of the Company's balance sheet.
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4.7.
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On June 1, 2012, the Company borrowed $8,877 from Sunny Boyd Williams LLC bearing interest at the rate of 8% per year. The accrued interest payable balance on this note was $905 at September 30, 2013 and is included in the Accrued Interest section of the Company's balance sheet.
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All of the above notes are now due on demand and are uncollateralized.
As a result of the above, the balance of the notes payable is $150,593 and the accrued interest thereon is $21,740.
Other Current Liabilities - The Company had other current liabilities consisting of the following at December 31,
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2013
|
|
|
2012
|
|
Accrued Payroll
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|
$
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113,909
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|
|
$
|
70,000
|
|
Accrued interest payable
|
|
|
21,740
|
|
|
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12,204
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Total Accrued expense
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|
$
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135,649
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|
|
$
|
82,204
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Note 5 - Stock
Preferred stock
The Company is authorized to issue 10,000,000 shares of preferred stock at a par value $0.001. One million shares were issued and outstanding as of September 30, 2013 and no shares were issued or outstanding at December 31, 2012.
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 270,020,145 issued and outstanding common stock shares as of September 30, 2013 and December 31, 2012, respectively.
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.
The Company is not aware of any pending or threatened legal matters that would have a material impact on our financial condition.