EX-99.2 4 tm2132481d1_ex99-2.htm EXHIBIT 99.2

 

Exhibit 99.2

 

STADCO CONDENSED CONSOLIDATED BALANCE SHEETS

 

    Unaudited
June 30,		     Audited December 31,  
    2021     2020  
ASSETS                
Current assets:                
Cash and cash equivalents   $ 4,213     $ 1,831  
Accounts receivable, net     2,119,369       2,367,710  
Raw materials     557,588       563,022  
Work-in-process     2,638,345       3,052,538  
Other current assets     737,682       266,147  
Total current assets     6,057,197       6,251,248  
Property, plant and equipment, net     1,736,756       2,056,956  
Total assets   $ 7,793,953     $ 8,308,204  
                 
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT):                
Current liabilities:                
Accounts payable   $ 2,137,783     $ 2,562,970  
Accrued expenses     5,230,131       4,690,440  
Line of credit     3,974,153       4,335,118  
Current portion of long-term debt     7,063,885       7,270,414  
Total current liabilities     18,405,952       18,858,942  
Long-term debt     501,414       613,493  
Stockholders’ Equity (Deficit):                
Common stock, no par value; 20,000,000 shares authorized, 12,028,500 shares issued and outstanding     1,100,000       1,100,000  
Series A Preferred stock, net of stock issuance costs, no par value; 850,000 shares authorized, issued, and outstanding     208,712       208,712  
Accumulated other comprehensive income (loss)     10,316       (17,374 )
Accumulated deficit     (12,432,441 )     (12,455,569 )
Total stockholder’s equity (deficit)     (11,113,413 )     (11,164,231 )
Total liabilities and stockholder’s equity   $ 7,793,953     $ 8,308,204  

 

 

 

 

STADCO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 

    Six months ended June 30,  
    2021     2020  
Net sales   $ 7,679,345     $ 7,989,356  
Cost of sales     7,367,524       7,792,725  
Gross profit     311,821       196,631  
Selling, general and administrative     1,372,474       1,241,796  
(Loss) from operations     (1,060,653 )     (1,045,165 )
Other income     1,628,600       -  
Interest expense     (541,335 )     (590,376 )
Total other income (expense), net     1,087,265       (590,376 )
Income (loss) before income taxes     26,612       (1,635,541 )
Income tax expense (benefit)     3,484       (12 )
Net income (loss)   $ 23,128     $ (1,635,529 )
Other comprehensive income:                
Foreign currency translation adjustments     27,690       -  
Other comprehensive income, net of tax     27,690       -  
Comprehensive income (loss)   $ 50,818     $ (1,635,529 )

 

 

 

 

STADCO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S (DEFICIT)

 For the Six Months Ended June 30, 2021 and 2020

 

    Common stock     Preferred stock     Accumulated     Accumulated Other Comprehensive    

Total

Stockholders’

  
    Shares     Amount     Shares     Amount     Deficit     Loss     Deficit  
Balance 12/31/2019     12,028,500     $ 1,100,000       850,000     $ 208,712     $ (6,569,940 )   $ (15,538 )   $ (5,276,766 )
                                                      -  
Net loss                                     1,635,529               1,635,529  
Currency translation adjustment                                                     -  
Balance 6/30/2020     12,028,500     $ 1,100,000       850,000     $ 208,712     $ (8,205,469 )   $ (15,538 )   $ (6,912,295 )
                                                         
Balance 12/31/2020     12,028,500     $ 1,100,000       850,000     $ 208,712     $ (12,455,569 )   $ (17,374 )   $ (11,164,231 )
Preferred stock dividends                                                     -  
Net income                                     23,128               23,128  
Currency translation adjustment                                             27,690       27,690  
Balance 6/30/2021     12,028,500     $ 1,100,000       850,000     $ 208,712     $ (12,432,441 )   $ 10,316     $ (11,113,413 )

 

 

 

 

STADCO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    Six Months Ended June 30,  
    2021     2020  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net income (loss)   $ 23,128     $ 1,635,529  
Adjustments to reconcile net income (loss) to net cash used in operating activities:                
Depreciation     430,424       1,086,975  
Amortization of debt issue costs     15,762       15,762  
PPP loan forgiveness     (1,570,295 )     -  
Changes in operating assets and liabilities:                
Accounts receivable     248,342       10,537  
Inventories     419,627       459,246  
Other current assets     (471,535 )     84,120  
Accounts payable     (425,187 )     (509,181 )
Accrued expenses     539,691       (285,497 )
Net cash used in operating activities     (790,043 )     (773,567 )
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchases of property, plant and equipment     (110,224 )     (272,831 )
Net cash used in investing activities     (110,224 )     (272,831 )
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from payroll protection program     1,570,295       1,570,295  
Net payments of line of credit     (360,965 )     (553,873 )
Repayments of long-term debt     (334,371 )     (473,113 )
Net cash provided by financing activities     874,959       543,309  
Effect of exchange rate on cash and cash equivalents     27,690       -  
Net increase (decrease) in cash and cash equivalents     2,382       (503,089 )
Cash and cash equivalents, beginning of period     1,831       554,519  
Cash and cash equivalents, end of period   $ 4,213     $ 51,430  

 

 

 

 

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1. Nature of Business

 

STADCO (the “Company”), a California corporation, was founded in 1941, and is a key supplier of large flight-critical components on several high-profile commercial and military aircraft programs, including military helicopters. It has been a critical supplier to a blue-chip customer base that includes some of the largest OEMs and prime contractors in the defense and aerospace industries. STADCO provides world-class expertise in the design, engineering, fabricating, and machining of complex, high-precision, close-tolerance parts, assemblies, and tooling.

 

2. Basis of Presentation and Significant Accounting Policies

 

Basis of Presentation - The accompanying condensed consolidated balance sheet as of June 30, 2021, and the condensed consolidated statements of comprehensive income (loss), stockholder’s equity (deficit) and cash flows for the six months ended June 30, 2021 and 2020, are unaudited, but, in the opinion of management, include all adjustments that are necessary for a fair presentation of our financial statements for interim periods in accordance with U.S. Generally Accepted Accounting Principles, or U.S. GAAP. All adjustments are of a normal, recurring nature, except as otherwise disclosed. The results of operations for an interim period are not necessarily indicative of the results of operations to be expected for the fiscal year. The accompanying condensed consolidated balance sheet as of December 31, 2020, is audited.

 

Use of Estimates in the Preparation of Financial Statements - In preparing the condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and revenues and expenses during the reported period. We continually evaluate our estimates, including those related to accounts receivable, inventories, the realization of long-lived assets and estimation of costs for contracts. We base our estimates on historical and current experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates.

 

STADCO’s significant accounting policies are set forth in detail in Note 2 to the December 31, 2020 and 2019 audited consolidated financial statements included with this filing. There have been no significant changes to the critical accounting policies during the six months ended June 30, 2021.

 

3. PAYCHECK PROTECTION PROGRAM

 

In April 2020, the Company issued a promissory note, or the Note, evidencing an unsecured loan in the amount of $1,570,295 made to STADCO under the Paycheck Protection Program, or the PPP. The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act and is administered by the U.S. Small Business Administration, or the SBA. The loan to STADCO was made through Sunflower Bank. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loan granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds for payment of payroll costs, certain group health care benefits and insurance premiums, and any payments of mortgage interest, rent, and utilities.

 

The Company met the PPP’s loan forgiveness requirements, and therefore, applied for forgiveness in October 2020. Forgiveness of the debt was received January 2021. The amount forgiven, $1,570,295, is included in other income in its statement of comprehensive income (loss) for the six months ended June 30, 2021.

 

In February 2021, the Company was granted a second PPP loan in the amount of $1,570,295. The terms and conditions were the same as the PPP loan granted in April 2020. The Company met the PPP’s loan forgiveness requirements and applied for forgiveness in June 2021. Forgiveness of the debt was received in August 2021.