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.