venga final fs - december 31, 2009

8/9/2019 Venga Final FS - December 31, 2009

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VENGA AEROSPACE SYSTEMS INC.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008


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Index to the Consolidated Financial Statements

DECEMBER 31, 2009 AND 2008

INDEX

Page

Auditors' report 1

FINANCIAL STATEMENTS

Consolidated balance sheet 2

Consolidated statement of operations and deficit 3

Consolidated statement of cash flows 4

Notes to the consolidated financial statements 5 - 13


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AUDITORS' REPORT

To the Shareholders of:Venga Aerospace Systems Inc.

We have audited the consolidated balance sheets of VENGA AEROSPACE SYSTEMS INC. as atDecember 31, 2009 and 2008 and the consolidated statements of operations and deficit and cash flowsfor the years then ended. These financial statements are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Canadian generally accepted auditing standards. Thosestandards require that we plan and perform an audit to obtain reasonable assurance whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating theoverall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financialposition of the Company as at December 31, 2009 and 2008 and the results of its operations and thechanges in cash flows for the years then ended in accordance with Canadian generally acceptedaccounting principles.

Rich Rotstein LLPRICH ROTSTEIN LLPChartered AccountantsLicensed Public Accountants

Toronto, CanadaApril 29, 2010

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CONSOLIDATED BALANCE SHEETSAS AT DECEMBER 31, 2009 AND 2008

ASSETS

2009 2008$ $

Current AssetsCash 42,025 74,942Prepaids and sundry receivables 10,102 13,835

52,127 88,777

Other AssetsInvestment (note 8, 3(a) and 13) 300,000 300,000Investment in Global Mineral Investments, LLC (note 9 and 3(b)) 485,400 485,400

Total Assets 837,527 874,177

LIABILITIES

Current LiabilitiesAccounts payable and accrued charges 24,784 23,496Deferred revenue 0 3,579

24,784 27,075

SHAREHOLDERS' EQUITY

Capital stock (note 10) 17,268,966 17,268,966Contributed surplus 890,684 890,684Deficit (17,346,907) (17,312,548)

812,743 847,102

Total Liabilities and Shareholders' Equity 837,527 874,177

Going concern (note 2)

Approved by the Board of Directors:

" Hirsh Kwinter " Director " Dr. Ezra Franken " Director

The accompanying notes are an integral part of these consolidated financial statements

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CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICITFOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

2009 2008$ $

REVENUE 50,000 50,000

EXPENSESBad debt expense 50,000 50,000General and administrative 18,133 32,680Professional fees 16,226 26,590

84,359 109,270

LOSS FROM OPERATIONS (34,359) (59,270)

Impairment of long-term investments (Note 13) 0 (300,000)

NET LOSS FOR THE YEAR (34,359) (359,270)

DEFICIT - BEGINNING OF YEAR (17,312,548) (16,953,278)

DEFICIT - END OF YEAR (17,346,907) (17,312,548)

Net loss per share - basic and fully diluted (0.0001) (0.0016)


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CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

2009 2008$ $OPERATING ACTIVITIES

Net (Loss) (34,359) (359,270)Items not affecting cash

Deferred revenue amortization (3,579) 0(37,938) (359,270)

Changes in non-cash working capital itemsPrepaids and sundry receivables 3,733 (8,717)Accounts payable and accrued charges 1,288 1,770

5,021 (6,947)

CASH USED IN OPERATING ACTIVITIES (32,917) (366,217)

INVESTING ACTIVITIESDecrease in investment 0 300,000Increase in investment in private company 0 (435,000)

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 0 (135,000)

FINANCING ACTIVITIESProceeds from issuance of common stock 0 545,000

CASH PROVIDED BY FINANCING ACTIVITIES 0 545,000

NET (DECREASE) INCREASE IN CASH (32,917) 43,783

Cash - beginning of year 74,942 31,159

CASH - END OF YEAR 42,025 74,942

Cash is represented by:Cash 42,025 74,942


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2009 AND 2008

1. CORPORATE PROFILE

The Company was incorporated under the Business Corporations Act (Ontario) by certificates ofamalgamation dated April 26, 1979, amalgamating Frodac Mines Ltd., Great Bear Silver MinesLimited 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 VengaJoint Venture Ltd., which is inactive.

2. GOING CONCERN

These financial statements have been prepared in accordance with Canadian generally acceptedaccounting principles applicable to a going concern which assumes that the Company will be ableto realize its assets, including the ultimate realization of its long-term investments, and discharge itsliabilities in the normal course of business. Recurring sources of revenue have not yet proven to besufficient. 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 itsobligations. Management continues to monitor the cash needs and consider various alternatives toraise additional financing. However, management is reasonably confident but can offer noguarantee that it will be able to secure the necessary financing to enable the Company to continueas a going concern. These financial statements do not give effect to adjustments that would benecessary should the Company be unable to continue as a going concern. There is no assurancethat this will be successful.

If the going concern basis is not appropriate, material adjustments may be necessary in the carryingamounts and/or classification of assets and liabilities and the loss for the period reported in thesefinancial statements.

3. OPERATIONS

a. 3D Graphics Unit

In November of 2006, the Company entered into a joint venture agreement (the "New JVAgreement") with 3DP North America, Inc., of Kenner, Louisiana; United Business & CapitalServices, 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 andconsumer 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 thebusiness 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 isentitled to its capital account share in assets of the New JV. The Company has no managementrights or further funding requirements or obligations with respect to the New JV. The Company'sparticipation in the New JV is limited to the Company's right to receive 30% of the New JV's netprofits as and when such profits are distributed to the joint venturers in accordance with the termsand provisions of the New JV Agreement. The Company is only liable to the extent of its investmentand is indemnified from the other joint venturers for any excess losses and liabilities. The New JVpurchased two Chinese manufactured, specialized, 3D print / processors which have now beendelivered to the New JV's Houston, Texas production facility and are fully operational sinceDecember 31, 2009.

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b. Mining and Resource Unit

The Company initially acquired a 3% interest, together with an option to acquire up to an additional15% interest, in Global Mineral Investments, LLC ("GMI"), a private U.S. corporation that proposesto lease and develop gold mining concessions in West Africa. On August 31, 2007, GMI wasawarded four Class B Gold Mining Licences by the Ministry of Lands, Mines and Energy of theRepublic of Liberia for four, separate concessions located in the Sanquin Mining Zone, SinoeCounty in the Republic of Liberia. In consideration of services that the Company rendered GMI, onSeptember 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 beenrenewed by the Ministry for an additional one year period.

On October 10, 2008 the Company announced that it has entered into a funding and operatingagreement (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 throughthe issue of 10,700,000 common shares at a price of $0.05 per share. The announced use of theproceeds from the Offering was to fund GMI's Proposed Dredging Operations; to acquire anadditional 16% equity interest in GMI (giving Venga a 20% total interest) and for general corporatepurposes. 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 theFunding Agreement create, whether directly or indirectly, a joint venture between the parties. Underthe terms of the Funding Agreement, the Company secured an immediate 20% investment interestin 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

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;

Venga was granted an option over the next year to acquire up to an additional 5% equity

interest in GMI at a cost of $100,000 per 1% so acquired; and

Any additional mining concessions secured or negotiated by GMI or Venga in Liberia or

West Africa to be acquired in the joint names of GMI and Venga to reflect the parties'

ownership of such additional concessions.

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation

The consolidated financial statements include the accounts of Venga Aerospace SystemsInc. ("the Company") and its subsidiary.

(b) Basis of Presentation

The Company has prepared these comparative financial statements on a consolidatedbasis which includes its wholly-owned subsidiary, Venga Joint Venture Ltd.

(c) Use of Estimates

The preparation of these consolidated financial statements, in conformity with Canadian

generally accepted accounting principles, requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities, the disclosure ofcontingent assets and liabilities at the date of the financial statements and the reportedamounts of revenue and expense during the reporting period. Actual results could differfrom these estimates. Significant estimates include prepaid expenses and certain accruedliabilities.

(d) Financial Instruments

The Company classifies all financial instruments. The Company classifies cash, accountsreceivable, accounts payable and accrued liabilities as held for trading financialinstruments. Investments with a maturity date and fixed or determinable payments that theentity 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, areclassified as available-for-sale financial instruments.

(e) Income Taxes

The Company uses the asset and liability method of accounting for income taxes underwhich future tax assets and liabilities are recognized for differences between the financialstatement carrying amounts of existing assets and liabilities and their respective tax bases.Future tax assets and liabilities are measured using substantively enacted tax rates ineffect in the year in which those temporary differences are expected to be recovered orsettled. The effect on future tax assets and liabilities of a change in tax rates is recognizedas part of the provision for income taxes in the year that includes the enactment date. Avaluation allowance is recorded to the extent there is uncertainty regarding realization offuture tax assets.

(f) Translation of Foreign Currencies

Monetary assets and liabilities denominated in foreign currencies are translated at the rateof exchange prevailing at the year end, non-monetary assets and liabilities are translated athistorical rates and revenue and expenses are translated at the rate of exchange in effecton the transaction dates. Exchange gains and losses arising on translation of monetaryitems are included in income in the year in which they occur.

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(g) Long-term Investments

Long-term investments are recorded at cost. Long-term investments classified as held-to-maturity financial instruments, are valued at amortized cost, with changes in valuationcharged to operations. Long-term investments classified as available-for-sale financialinstruments, are valued at fair market value, with changes in valuation charged tocomprehensive income. Gains and losses are recognized when investments are sold.Income is recognized only to the extent dividends are received.

(h) Impairment of Long-lived Assets

Long-lived assets, including capital assets, are amortized over their useful lives. TheCompany reviews long-lived assets for impairment when events or changes incircumstances indicate that the carrying amount may not be recoverable. If the sum of theundiscounted 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 impairmentloss is measured as the amount by which the carrying amount of the group of assetsexceeds its fair value.

(i) Basic and Diluted Loss per Share

The Canadian Institute of Chartered Accountants ("CICA") recommends the use of thetreasury stock method in computing earnings/loss per share. Under this method, basic lossper share is computed by dividing earnings available to common shareholders by theweighted average number of common shares outstanding during the year. In computing theloss per share on a fully diluted basis, the treasury stock method assumes that proceedsreceived from in-the-money stock options are used to repurchase common shares at theprevailing market rate.

The weighted average number of common shares outstanding during the year was239,171,893 (2008 - 230,361,060).

(j) Revenue Recognition

Revenue is earned from the provision of consulting services, licence fees and providing 3Dfilm print/processing services. The Company recognizes revenue from consulting serviceswhen performance of the consulting services are complete and recognizes revenue fromthe provision of 3D film print/processing services when the printed 3D images are shippedto the customer. The licence fees represent an annual fee that the New JV pays theCompany for use of the Company's CLIK 3D trade name. Deferred revenue is amortized toincome as it is earned.

5. CHANGES IN ACCOUNTING POLICIES

On January 1, 2008, the Company adopted the revised CICA Handbook Section 1400 - GeneralStandards of Financial Statement Presentation. Based on the revisions in this Section, theCompany is now required to disclose any uncertainties related to its ability to continue as a goingconcern. The Company has complied with these requirements and has made the requireddisclosures in note 2.

As of January 1, 2008, the Company adopted CICA Handbook Section 3031 - Inventories whichrequires that additional details be provided regarding the determination and recognition ofinventories and the information to be presented. The adoption of this new section does not haveany effect on the Company's financial statements for the year ended December 31, 2009.

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As of January 1, 2008, the Company adopted CICA Handbook Sections 3862 - FinancialInstruments Disclosures; and 3863 - Financial Instruments Presentation which replaces the

existing Section 3861 Financial Instruments - Disclosure and Presentation.

As of January 1, 2008 the Company adopted CICA Handbook Section 1535 Capital Disclosures. Inaccordance with this section, the Company is required to disclose its objectives, policies andprocesses for managing capital. This information is included in note 7.

As of January 1, 2009, the Company adopted CICA Handbook Section 3064 - Goodwill andIntangible Assets which replaces CICA Handbook Sections 3062 - Goodwill and Other IntangibleAssets and Section 3450 - Research and Development Costs. The adoption of this new sectiondoes not have any effect on the Company's financial statements for the year ended December 31,2009.

FUTURE CHANGE IN ACCOUNTING POLICIES

In 2006, the Canadian Accounting Standards Board ("AcSB") published a new strategic plan thatwill significantly affect financial reporting requirements for Canadian companies. The AcSBstrategic plan outlines the convergence of Canadian GAAP with IFRS over an expected five yeartransitional period. In February 2008, the AcSB announced that 2011 is the changeover date forpublicly-listed companies to use IFRS, replacing Canada'S own GAAP. The date is for interim andannual financial statements relating to fiscal years beginning on or after January 1, 2011. Thetransition date of January 1, 2011 will require the restatement for comparative purposes of amountsreported by the Company for the year ended December 31, 2010. While the Company has begunassessing the adoption of IFRS for 2011, the financial reporting impact of the transition to IFRScannot be reasonably estimated at this time.

6. FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash, accounts receivable, investments, accountspayable and accrued liabilities. It is the opinion of management that the Company is not exposed tosignificant interest risk arising from its financial instruments. The fair values of these financialinstruments approximate their carrying values, unless otherwise noted.

Credit Risk:

The Company derived net sales from one (2008 - one) major customer amounting to approximately$50,000 representing 100% of total revenues (2008 - $50,000 representing 100% of totalrevenues). Accounts receivable from the above significant customer at December 31, 2009amounted to approximately $Nil (2008 - $Nil).

Foreign Currency Risk:

Consulting contracts billed in U.S. dollars by the Company are recorded at the exchange rate ineffect at the time of sale, and are collected on standard trade payable terms. Excess U.S. dollarbalances are converted to Canadian dollars on a regular basis. The Company does not enter intoforeign currency hedges. Further devaluation in the U.S. dollar relative to the Canadian dollar couldimpact the Company's ability to continue at current sales growth rates and attain cash positiveoperations as substantially all of the sales contracts are denominated in U.S. dollars.

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7. CAPITAL MANAGEMENT

The Company's objectives when managing capital are to safeguard its ability to continue as a goingconcern to pursue the development of its three business segments and to maintain a flexible capitalstructure which optimizes the cost of capital within a framework of acceptable risk. In themanagement 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 ineconomic conditions and the risk characteristics of the underlying assets. To maintain or adjust itscapital structure, the Company may issue new shares, issue new debt, acquire or dispose of assetsor adjust the amount of cash and cash equivalents.

The Company is dependent on the capital markets and potential private investors as its sole sourceof operating capital and the Company's capital resources are largely determined by the strength ofthe 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.

The Company is not subject to externally imposed capital requirements.

8. INVESTMENT IN NEW JV

The Company, which holds a 30% interest in the New JV has no management rights or ongoingfunding requirements or obligations with respect to the New JV. The Company's participation in themanagement and operation of the New JV is limited to the Company's right to receive 30% of theNew JV's net profits or losses as and when such profits or losses are distributed to the jointventurers in accordance with the terms and provisions of the New JV Agreement. The Company isonly liable to the extent of its investment and is indemnified from the other joint venturers for anyexcess losses and liabilities. Upon termination of the New JV, the Company is entitled to its capitalaccount share in net assets of the New JV.

9. INVESTMENT IN PRIVATE COMPANY

Pursuant to the terms and provisions of the Funding Agreement, the Company, currently has a 20%(2008 - 20%) interest with an option to acquire up to an additional 5% interest in GMI. The FundingAgreement provides that the Company will participate in the profits generated through GMI'sbusiness operations in an amount that is equal to the Company's then investment/equity interest inGMI. Aside from the Company's management of the financial aspects of the Proposed DredgingOperation, for which the Company is entitled to receive a management fee, the Company has nomanagement rights or ongoing funding requirements with respect to GMI or the Proposed DredgingOperation. The Company and GMI have specifically agreed that no term, condition or provision inthe Funding Agreement will act to, or be deemed to, create or establish in law, or otherwise, a formof 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 venturebetween the Company and GMI with respect to the Proposed Dredging Operation or otherwise.

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10. CAPITAL STOCK

(a) Authorized:Unlimited common stock

(b) Issued and outstanding:Number of Amount

Shares $

Balance at December 31, 2007 228,271,893 16,723,966Private placement (c) 10,900,000 545,000Balance at December 31, 2008 and 2009 239,171,893 17,268,966

Weighted average number of shares outstanding: 2009 2008

Basic and fully diluted 239,171,893 230,361,060

(c) Private placement

Further to the terms of an offering that the Company first announced on October 10, 2008 (the"October Offering"), the Exchange accepted and approved for filing documentation with respect tothe October Offering on October 21, 2008. Pursuant to the terms of the Exchange's said approval,the Company on the closing of the October Offering, the Company agreed to issue 10,900,000common shares at $0.05 per share for gross proceeds of $545,000. The Company announced thatthe proceeds of the October Offering would be used to finance the Proposed Dredging Operationsand for the Company's general corporate purposes. On November 24, 2008, the Companyannounced the closing of the October Offering and issued 10,900,000 common shares for gross

proceeds of $545,000 in accordance with the terms of the approved October Offering.

11. SEGMENTED INFORMATION

The Company has determined that it has two active operating segments (3D graphic's unit andMining and Resource unit). During the period ending December 31, 2009 revenues from U.S. salestotalled $NIL and Canadian sales totalled $50,000.

Segmented information:

2009$

2008$

3D graphics 50,000 50,000

Mining and resource 0 0Total 50,000 50,000

12. ECONOMIC DEPENDENCE

Approximately 100% (2008 - 100%) of the Company's revenue has been derived from one (2008 -one) customer.

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13. IMPAIRMENT OF LONG-TERM INVESTMENT

In fiscal 2008, as a direct consequence of the accumulated and unexpected delays that the New JV(notes 3(a) and 8) has encountered in becoming operational, management decided to recordapproximately 50% as a write-down of the Company's investment interest in the New JV.

14. INCOME TAXES

(a) Provision of income taxes

The provision for income taxes differs from that calculated by applying statutory rates forthe following reasons:

2009$

2008$

Net loss before income taxes (34,359) (359,270)

Expected income tax recovery based upon the combinedCanadian federal and provincial expected tax rates of33.5% (2008 - 33.5%) 11,510 120,355

Adjustments to tax benefit resulting from:Permanent differences (items not deductible for tax

purposes) 0 (100,500)Share issue costs tax effect 0 1,554Timing differences 0 0Unrecorded tax benefit of losses (11,510) (21,409)

Provision for income taxes 0 0

(b) Future income tax balances

The tax effect of temporary differences that gives rise to future income tax assets andliabilities are as follows:

2009$

2008$

Non-capital losses 368,800 472,430Share issue costs 0 1,124Timing differences tax recovery (potential future taxes) 0 0

Total gross future tax assets 368,800 473,554

Valuation allowance (368,800) (473,554)

Total net future tax assets 0 0

In assessing the realizability of future tax assets, management considers whether it is more likelythan not that some portion or all of the future tax assets will not be realized. The ultimate realizationof future tax assets is dependent upon the generation of future taxable income during the periods inwhich those temporary differences become deductible.

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The Company has accumulated losses for income tax purposes totalling approximately $1,100,897

for which the tax benefits have not been recognized in the financial statements. These losses canbe deducted from future years' taxable income and expire as follows:$

2010 113,7182014 345,2772015 244,7802026 219,4732027 82,4662028 60,8242029 34,359

1,100,897

15. LITIGATION

The Company has now issued a claim against Anchor Securities Limited ("Anchor") and Anchor'spresident Martin Heppner, in the Ontario Superior Court of Justice to recover the $10,000advance/deposit that the Company forwarded Anchor in 2008 with respect to a now lapsed TermSheet wherein Anchor was engaged by the Company to assist in the raising of financing for theCompany's Liberian gold mining interests.

16. SUBSEQUENT EVENTS

On the February 2, 2010 the Company announced that GMI had signed a letter of intent ("LOI") withRAM Consulting Group ("RAM Consulting") of Charlotte, North Carolina wherein RAM agreed, on abest efforts basis, to raise $12 million dollars to finance GMI's proposed land based gold miningoperations in Liberia. On April 22, 2010, the Company announced that GMI's dredging operation inthe Dugbe River during the period of March 1 through March 31, 2010 had produced or recovered a

further 19 ounces of what the Ministry described as 'high grade' gold. The Company alsoannounced that GMI continued to be in consultation with RAM Consulting with respect to the LOI.

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venga final fs - december 31, 2009

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