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FINANCIAL STATEMENTS
Toronto, Canada
April 28, 2011
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VENGA AEROSPACE SYSTEMS INC.
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2010 AND 2009
ASSETS
2010 2009
$ $
Current Assets
Cash 9,809 42,025
Prepaids and sundry receivables 717 10,102
10,526 52,127
Other Assets
Investment (note 8, 3(a) and 13) 200,000 300,000
Investment in Global Mineral Investments, LLC (note 10 and 3(b)) 485,400 485,400
LIABILITIES
Current Liabilities
Accounts payable and accrued charges 37,896 24,784
37,896 24,784
SHAREHOLDERS' EQUITY
658,030 812,743
" Hirsh Kwinter " Director " Dr. Ezra Franken " Director
The accompanying notes are an integral part of these consolidated financial statements
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VENGA AEROSPACE SYSTEMS INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
2010 2009
$ $
EXPENSES
Bad debt expense 0 50,000
Office expenses 40,224 18,133
Professional fees 14,489 16,226
54,713 84,359
Net loss per share - basic and fully diluted (0.0006) (0.0001)
The accompanying notes are an integral part of these consolidated financial statements
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VENGA AEROSPACE SYSTEMS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
2010 2009
$ $
OPERATING ACTIVITIES
Net (Loss) (154,713) (34,359)
Items not affecting cash
Deferred revenue amortization 0 (3,579)
(154,713) (37,938)
Changes in non-cash working capital items
Prepaids and sundry receivables 9,385 3,733
Accounts payable and accrued charges 13,112 1,288
22,497 5,021
INVESTING ACTIVITIES
Decrease in investment 100,000 0
The accompanying notes are an integral part of these consolidated financial statements
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VENGA AEROSPACE SYSTEMS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
1. CORPORATE PROFILE
The Company was incorporated under the Business Corporations Act (Ontario) by certificates of
amalgamation dated April 26, 1979, amalgamating Frodac Mines Ltd., Great Bear Silver Mines
Limited and Silver Monarch Mines Limited to become Frodac Consolidated Energy Resources Ltd.
On July 25, 1985, it changed its name to Global Aerospace Systems Inc. and on November 3,
1987, the company further changed its name to Venga Aerospace Systems Inc.
In addition, these consolidated financial statements include the wholly owned subsidiary Venga
Joint Venture Ltd., which is inactive.
2. GOING CONCERN
These financial statements have been prepared in accordance with Canadian generally accepted
accounting principles applicable to a going concern which assumes that the Company will be able
to realize its assets, including the ultimate realization of its long-term investments, and discharge its
liabilities in the normal course of business. Recurring sources of revenue have not yet proven to be
sufficient. The Company needs to obtain additional financing to enable it to continue its business.
In the absence of additional financing, the Company may not have sufficient funds to meet its
obligations. Management continues to monitor the cash needs and consider various alternatives to
raise additional financing. However, management is reasonably confident but can offer no
guarantee that it will be able to secure the necessary financing to enable the Company to continue
as a going concern. These financial statements do not give effect to adjustments that would be
necessary should the Company be unable to continue as a going concern. There is no assurance
that this will be successful.
If the going concern basis is not appropriate, material adjustments may be necessary in the carrying
amounts and/or classification of assets and liabilities and the loss for the period reported in these
financial statements.
3. OPERATIONS
a. 3D Graphics Unit
In November of 2006, the Company entered into a joint venture agreement (the "New JV
Agreement") with 3DP North America, Inc., of Kenner, Louisiana; United Business & Capital
Services, LLC of Kenner, Louisiana; EKG, LLC of Lafayette, Louisiana and Armadillo Photo Supply,
Inc. of Houston, Texas, creating a business venture, the 3DP North America Joint Venture (the
"New JV"), to provide a range of advanced 3D products and print services for both commercial and
consumer markets. The Company has a 30% ownership interest in the New JV with 3DP North
America, Inc., who acts as the managing venturer of the New JV, owning the remaining 70% of the
business venture. Pursuant to the terms of the New JV Agreement, the Company advanced
$600,000 USD of capital to the New JV and upon termination of the New JV, the company is
entitled to its capital account share in assets of the New JV. The Company has no management
rights or further funding requirements or obligations with respect to the New JV. The Company's
participation in the New JV is limited to the Company's right to receive 30% of the New JV's net
profits as and when such profits are distributed to the joint venturers in accordance with the terms
and provisions of the New JV Agreement. The Company is only liable to the extent of its investment
and is indemnified from the other joint venturers for any excess losses and liabilities. The New JV
purchased two Chinese manufactured, specialized, 3D print / processors which have now been
delivered to the New JV's Houston, Texas production facility.
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VENGA AEROSPACE SYSTEMS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
The Company initially acquired a 3% interest, together with an option to acquire up to an additional
15% interest, in Global Mineral Investments, LLC ("GMI"), a private U.S. corporation that proposes
to lease and develop gold mining concessions in West Africa. On August 31, 2007, GMI was
awarded four Class B Gold Mining Licences by the Ministry of Lands, Mines and Energy of the
Republic of Liberia for four, separate concessions located in the Sanquin Mining Zone, Sinoe
County in the Republic of Liberia. In consideration of services that the Company rendered GMI, on
September 6, 2007, the Company's ownership interest in GMI was increased from 3% to 4%.
In February of 2010, the Company was advised by GMI that the GMI Mining Licences had been
renewed by the Ministry for an additional one year period.
On October 10, 2008 the Company announced that it has entered into a funding and operating
agreement (the "Funding Agreement") with GMI and a number of investors to raise, by way of a
non-brokered private placement (the "offering" or the "placement"), the sum of $535,000 through
the issue of 10,700,000 common shares at a price of $0.05 per share. The announced use of the
proceeds from the Offering was to fund GMI's Proposed Dredging Operations; to acquire an
additional 16% equity interest in GMI (giving Venga a 20% total interest) and for general corporate
purposes. The Company and GMI specifically agreed that the Funding Agreement did not create
(whether directly or by implication) a partnership between the Company and GMI, nor did the
Funding Agreement create, whether directly or indirectly, a joint venture between the parties. Under
the terms of the Funding Agreement, the Company secured an immediate 20% investment interest
in GMI with:
GMI retaining full and complete operational control of all GMI's business operations
including, but not limited to, the Proposed Dredging Operations and Venga being given
management of the financial affairs of the Proposed Dredging Operations;
Venga being given the entitlement to receive an annual financial management fee (which
fee nor any portion of same have yet to be received by the Company as of the date of these
financial statements) calculated as being the greater of $120,000 or an amount equal to 1%
of all monies received, disbursed or distributed by the Company as the financial manager of
the Proposed Dredging Operations;
Revenues derived from the recovery of all minerals other than gold, being for the benefit of
all parties to the Funding Agreement so that such revenues will be included in the
calculation of the distributed profits from the Proposed Dredging Operations that are
payable to such parties pursuant to the terms of the Funding Agreement;
The records of Liberia's Ministry of Lands, Mines and Energy with respect to the GMI's
Concessions to be amended to reflect Venga's direct ownership of these concessions in a
percentage that is equal to Venga's then equity ownership position in GMI;
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VENGA AEROSPACE SYSTEMS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
The consolidated financial statements include the accounts of Venga Aerospace Systems
Inc. ("the Company") and its subsidiary.
The Company classifies all financial instruments. The Company classifies cash, accounts
receivable, accounts payable and accrued liabilities as held for trading financial
instruments. Investments with a maturity date and fixed or determinable payments that the
entity has the positive intention and ability to hold to maturity, are classified as held-to-
maturity financial instruments. Investments that do not have fixed terms or determinable
payments and are not actively bought and sold for the purpose of profit taking, are
classified as available-for-sale financial instruments.
(e) Income Taxes
The Company uses the asset and liability method of accounting for income taxes under
which future tax assets and liabilities are recognized for differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases.
Future tax assets and liabilities are measured using substantively enacted tax rates in
effect in the year in which those temporary differences are expected to be recovered or
settled. The effect on future tax assets and liabilities of a change in tax rates is recognized
as part of the provision for income taxes in the year that includes the enactment date. A
valuation allowance is recorded to the extent there is uncertainty regarding realization of
future tax assets.
Monetary assets and liabilities denominated in foreign currencies are translated at the rate
of exchange prevailing at the year end, non-monetary assets and liabilities are translated at
historical rates and revenue and expenses are translated at the rate of exchange in effect
on the transaction dates. Exchange gains and losses arising on translation of monetary
items are included in income in the year in which they occur.
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VENGA AEROSPACE SYSTEMS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Long-lived assets, including capital assets, are amortized over their useful lives. The
Company reviews long-lived assets for impairment when events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the sum of the
undiscounted cash flows expected to result from the use and eventual disposition of a
group of assets is less than its carrying amount, it is considered impaired. An impairment
loss is measured as the amount by which the carrying amount of the group of assets
exceeds its fair value.
The Canadian Institute of Chartered Accountants ("CICA") recommends the use of the
treasury stock method in computing earnings/loss per share. Under this method, basic loss
per share is computed by dividing earnings available to common shareholders by the
weighted average number of common shares outstanding during the year. In computing the
loss per share on a fully diluted basis, the treasury stock method assumes that proceeds
received from in-the-money stock options are used to repurchase common shares at the
prevailing market rate.
The weighted average number of common shares outstanding during the year was
239,171,893 (2009 - 239,171,893).
Revenue is earned from the provision of consulting services, licence fees and providing 3D
film print/processing services. The Company recognizes revenue from consulting services
when performance of the consulting services are complete and recognizes revenue from
the provision of 3D film print/processing services when the printed 3D images are shipped
to the customer. The licence fees represent an annual fee that the New JV pays the
Company for use of the Company's CLIK 3D trade name. Deferred revenue is amortized to
income as it is earned.
As of January 1, 2009, the Company adopted CICA Handbook Section 3064 - Goodwill and
Intangible Assets which replaces CICA Handbook Sections 3062 - Goodwill and Other Intangible
Assets and Section 3450 - Research and Development Costs. The adoption of this new section
does not have any effect on the Company's financial statements for the year ended December 31,
2010.
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VENGA AEROSPACE SYSTEMS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
In February 2008, the Canadian Institute of Chartered Accountants' Accounting Standards Board
("Canadian AcSB") confirmed that Canadian GAAP ("CGAAP") for publicly accountable enterprises
will be converged with International Financial Reporting Standards ("IFRS") effective in calendar
year 2011. The implementation of IFRS will apply to the Company's interim and annual financial
statements beginning on January 1, 2011, including the restatement of comparative amounts for
2010. While IFRS employs a conceptual framework that is similar to CGAAP, significant differences
exist in certain matters of recognition, measurement and disclosure. The Company has completed
its determination of all significant accounting policies and finalized the IFRS 1 elective exemptions
expected to be applied in the IFRS opening balance sheet. Quantification of the preliminary IFRS
opening balance sheet is currently being undertaken. Based on the work completed to date, the
transition to IFRS did not result in significant impacts to the Company's business activities or its
covenants, capital requirements or compensation arrangements. The transition did not result in
significant changes to key controls during or after the transition to IFRS nor to the Company's
financial reporting processes, data systems or internal control and disclosure control
documentation. The Company will report under IFRS starting with the interim period ending March
31, 2011, with restatement for comparative purposes of amounts reported under Canadian GAAP.
6. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts receivable, investments, accounts
payable and accrued liabilities. It is the opinion of management that the Company is not exposed to
significant interest risk arising from its financial instruments. The fair values of these financial
instruments approximate their carrying values, unless otherwise noted.
Consulting contracts billed in U.S. dollars by the Company are recorded at the exchange rate in
effect at the time of sale, and are collected on standard trade payable terms. Excess U.S. dollar
balances are converted to Canadian dollars on a regular basis. The Company does not enter into
foreign currency hedges. Further devaluation in the U.S. dollar relative to the Canadian dollar could
impact the Company's ability to continue at current sales growth rates and attain cash positive
operations as substantially all of the sales contracts are denominated in U.S. dollars.
7. CAPITAL MANAGEMENT
The Company's objectives when managing capital are to safeguard its ability to continue as a going
concern to pursue the development of its three business segments and to maintain a flexible capital
structure which optimizes the cost of capital within a framework of acceptable risk. In the
management of capital, the Company includes share capital, contributed surplus and deficit.
The Company manages the capital structure and makes adjustments to it in light of changes in
economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its
capital structure, the Company may issue new shares, issue new debt, acquire or dispose of assets
or adjust the amount of cash and cash equivalents.
The Company is dependent on the capital markets and potential private investors as its sole source
of operating capital and the Company's capital resources are largely determined by the strength of
the junior public markets and by the status of the Company's projects in relation to these markets
and its ability to compete for investor support of its projects.
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VENGA AEROSPACE SYSTEMS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
8. INVESTMENT IN NEW JV
The Company, which holds a 30% interest in the New JV has no management rights or ongoing
funding requirements or obligations with respect to the New JV. The Company's participation in the
management and operation of the New JV is limited to the Company's right to receive 30% of the
New JV's net profits or losses as and when such profits or losses are distributed to the joint
venturers in accordance with the terms and provisions of the New JV Agreement. The Company is
only liable to the extent of its investment and is indemnified from the other joint venturers for any
excess losses and liabilities. Upon termination of the New JV, the Company is entitled to its capital
account share in net assets of the New JV.
Pursuant to the terms of the New JV Agreement, the Company granted the New JV a licence (the
"Venga Licence") during the currency of the New JV Agreement to use, market, operate and
commercially exploit the business trade name 'CLIK 3D'. In consideration of the Company's
granting of the Venga Licence, the New JV agreed to pay Venga, the sum of fifty thousand
($50,000.00) dollars (the "Venga Licence Fee") each year or part year during the currency of the
New JV Agreement. Notwithstanding the terms of the New JV Agreement, the New JV has failed to
pay the Company the required Venga Licence Fee for the years 2006 through 2010. The Company
has advised the New JV that the Company is not waiving any right to recover any portion of the
accumulated, unpaid and outstanding amount for the Venga Licence Fee and that the Company is
and continues to regard the accumulated, unpaid and outstanding amount for the Venga Licence
Fee a valid, legal debt owed by the New JV to the Company.
Pursuant to the terms and provisions of the Funding Agreement, the Company, currently has a 20%
(2009 - 20%) interest in GMI. The Funding Agreement provides that the Company will participate in
the profits generated through GMI's business operations in an amount that is equal to the
Company's then investment/equity interest in GMI. Aside from the Company's management of the
financial aspects of the Proposed Dredging Operation, for which the Company is entitled to receive
a management fee, the Company has no management rights or ongoing funding requirements with
respect to GMI or the Proposed Dredging Operation. The Company and GMI have specifically
agreed that no term, condition or provision in the Funding Agreement will act to, or be deemed to,
create or establish in law, or otherwise, a form of partnership between GMI or the Company nor will
the terms, conditions and provisions of the Funding Agreement create, or be deemed to create or
establish, in law or otherwise, a joint venture between the Company and GMI with respect to the
Proposed Dredging Operation or otherwise.
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VENGA AEROSPACE SYSTEMS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
(a) Authorized:
Unlimited common stock
The Company has determined that it has two active operating segments (3D graphic's unit and
Mining and Resource unit). During the period ending December 31, 2010 revenues from U.S. sales
totalled $NIL and Canadian sales totalled $NIL.
Segmented information:
2010 2009
$ $
3D graphics 0 50,000
Mining and resource 0 0
Total 0 50,000
As a direct consequence of the continuing and unexpected delays that the New JV (notes 3(a) and
8) has encountered in being operational, Management has decided to record an additional
$100,000.00 write-down of the Company's investment interest in the New JV.
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VENGA AEROSPACE SYSTEMS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
The provision for income taxes differs from that calculated by applying statutory rates for
the following reasons:
2010 2009
$ $
The tax effect of temporary differences that gives rise to future income tax assets and
liabilities are as follows:
2010 2009
$ $
In assessing the realizability of future tax assets, management considers whether it is more likely
than not that some portion or all of the future tax assets will not be realized. The ultimate realization
of future tax assets is dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible.
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VENGA AEROSPACE SYSTEMS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
The Company has accumulated losses for income tax purposes totalling approximately $1,041,892
for which the tax benefits have not been recognized in the financial statements. These losses can
be deducted from future years' taxable income and expire as follows:
$
2014 345,277
2015 244,780
2026 219,473
2027 82,466
2028 60,824
2029 34,359
2030 54,713
1,041,892
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