EX-99.2 2 cmw3445a.htm AUDITED FINANCIAL STATEMENTS - FYE DEC. 31, 2005 AND 2006

Exhibit 99.2









iSYS, LLC

Financial Statements
And
Accountant’s Audit Report
December 31, 2006

iSYS, LLC

December 31, 2006

Table of Contents

Page

Accountants’ Audit Report		 2

Balance Sheet		 3

Statement of Income and Member’s Equity		    4-6

Statement of Cash Flows		 7

Notes to Financial Statements		 8
CHRISTINE WANG & ASSOCIATES, LTD.

ROCKVILLE, MARYLAND OFFICE		 A PROFESSIONAL CORPORATION MEMBERS
301-340-2904 Certified Public Accountant
501 Church St., Suite 211, NE AMERICAN INSTITUTE OF CERTIFIED
Vienna, VA 22180 PUBLIC ACCOUNTANTS
____________________ VIRGINIA SOCIETY OF CERTIFIED
PUBLIC ACCOUNTANTS
(O) 703-242-7804
(F) 703-242-7805

Independent Auditor’s Report

Board of Directors
iSYS, LLC
McLean, VA

We have audited the accompanying balance sheet of iSYS, LLC as of December 31, 2006, and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of iSYS, LLC as of December 31, 2006, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.

Christine Wang &Associates, Ltd.
March 20, 2007




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iSYS, LLC
Balance Sheet
December 31, 2006

Assets        
      Current Assets  
            Cash   $ 87,949.00  
            Accounts Receivable    2,662,480.00  

                  Total Current Assets		   $ 2,750,429.00  

      Fixed Assets		  
            Vehicle   $ 30,000.00  
            Office Equipment    12,759.00  
            Less: Accumulated Depreciation    (13,538.00 )

                  Total Fixed Assets		   $ 29,221.00  

      Other Assets		  
            Prepaid Expenses   $ 13,808.00  
            Security Deposit    7,917.00  

                  Total Other Assets		   $ 21,725.00  

                        Total Assets		   $ 2,801,375.00  

Liabilities and Member’s Equity		  
      Current Liabilities  
            Accounts Payable   $ 1,671,809.00  
            Accrued Wages    174,752.00  
            Other Accrued Expense    71,142.00  

                  Total Current Liabilities		   $ 1,917,703.00  

      Member’s Equity		   $ 883,672.00  

                        Total Liabilities and Member’s Equity		   $ 2,801,375.00  

See Accompanying Notes and Accountants’ Audit Report

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iSYS, LLC
Statement of Income and Member’s Equity
For the year ended December 31, 2006

Revenue        
      8(a) Revenue   $ 6,049,048.00  
      Non 8(a) Revenue    4,972,761.00  
    $ 11,021,809.00  

Cost of Labor		  
      Direct Labor   $ 1,016,747.00  
      Other Direct Labor    33,819.00  
      Travel    13,373.00  
      Subcontract Cost    8,253,109.00  
            Total Cost of Labor   $ 9,317,048.00  

      Gross Profit		   $ 1,704,761.00  

Expenses		  
      Fringe Benefits  
            Insurance   $ 55,737.00  
            Other Welfare    13,194.00  
            Paid Leave    129,126.00  
            Payroll Taxes    105,806.00  
            Cafeteria Plan    300.00  
            Retirement Funds    13,961.00  
                  Total Fringe Benefits   $ 318,124.00  

See Accompanying Notes and Accountants’ Audit Report

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iSYS, LLC
Statement of Income and Member’s Equity
For the year ended December 31, 2006

General and Administrative Expenses        
      Bank Charges   $ 2,510.00  
      Office Expenses    2,866.00  
      Dues and Subscriptions    444.00  
      Administrative Labor    69,961.00  
      Insurance    9,469.00  
      Internet Fees    1,406.00  
      Licenses and Permits    114.00  
      Marketing Expense    1,884.00  
      Membership Fees    292.00  
      Office Expenses    9,865.00  
      Office Supplies    4,409.00  
      Payroll Service Fees    2,624.00  
      Accounting Fees    138,900.00  
      Property Tax    2,061.00  
      Rent    8,774.00  
      Telephone    2,556.00  
            Total General and Administrative Expenses   $ 258,135.00  

Overhead Expenses		  
      Auto Expenses   $ 8,722.00  
      Bonus    68,496.00  
      Office Expenses    4,083.00  
      Meals and Entertainment    21,351.00  
      Dues and Subscriptions    400.00  
      Internet Fees    1,031.00  
      Office Supplies    243.00  
      Overhead Labor    136,554.00  
      Postage and Delivery    1,088.00  
      Recruiting Expenses    20,111.00  
      Rent    8,774.00  
      Depreciation Expense    12,038.00  
      Repair and Maintenance    7,194.00  
      Telephone    3,352.00  
      Training and Seminar    17,171.00  
      Travel    7,237.00  
      Subcontract Handling Fees    150,804.00  
            Total Overhead Expenses   $ 468,649.00  

See Accompanying Notes and Accountants’ Audit Report

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iSYS, LLC
Statement of Income and Member’s Equity
For the year ended December 31, 2006

      Unallowable Expenses        
            Contributions   $ 2,800.00  
            Entertainment    14,090.00  
            Interest Expense    52.00  
            Late Fees and Penalties    9,645.00  
                  Total Unallowable Expenses   $ 26,587.00  

Net Operating Income		   $ 633,266.00  

Other Income and Expenses		  
      Interest Income    4,769.00  
      Other Income    6,362.00  
     11,131.00  

Net Income		   $ 644,397.00  

Beginning Member’s Equity, January 1, 2006		   $ 501,599.00  
      Member Draws    (262,324.00 )

Ending Member’s Equity, December 31, 2006		   $ 883,672.00  

See Accompanying Notes and Accountants’ Audit Report




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iSYS, LLC
Statement of Cash Flow
For the year ended December 31, 2006

Cash Flows from Operating Activities        
      Net Income   $ 644,397.00  
      Adjustments to Reconcile Net Income to Net Cash Flows:  
            Depreciation    12,038.00  
      Change in Current Assets and Liabilities:  
            Increase in Accounts Receivable    (2,337,754.00 )
            Decrease in Prepaid Insurance    7,971.00  
            Increase in Accounts Payable    1,666,001.00  
            Increase in Accrued Wages    65,125.00  
            Increase in Other Accrued Expense    61,367.00  

                  Net Cash Provided by Operating Activities		    119,145.00  

Cash Flows from Investing Activities		  
      Increase in Fixed Assets    (12,759.00 )
      Increase in Prepaid Expenses    (13,808.00 )
      Increase in Security Deposit    (7,917.00 )

                  Net Cash Used in Investing Activities		    (34,484.00 )

Cash Flows from Financing Activities		  
      Member's Withdrawal    (262,324.00 )
            Net Cash Used in Financing Activities   $ (262,324.00 )

Increase / Decrease in Cash		    (177,663.00 )

Cash at January 1, 2006		    265,612.00  

Cash at December 31, 2006		   $ 87,949.00  

See Accompanying Notes and Accountants’ Audit Report

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iSYS, LLC
Notes to Financial Statements
December 31, 2006

Note A-Summary of Significant Accounting Policies

  Nature of Business
The Company was organized as a Virginia, single member, limited liability company on February 22, 2002. Regular operations began December 1, 2002 when the company received approval as Small Business Administration “8A” entity. Receivables and trade payables were assigned from a predecessor S-Corporation.

  The company provides computer systems integration, data base application and data base management services to government agencies and other government contractors.

  Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires the members to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly actual results could differ from those estimates.

  Income Taxes
All tax effects of the company’s income or loss are passed through to the member, consequently neither federal or state income taxes are provided for the company.

  Property and Equipment
Property and equipment are recorded at cost. Maintenance, repairs and renewals are expenses, and additions and improvements are capitalized. Depreciation is computed using accelerated methods over estimated useful lives of the assets.

  All of the company’s work was on a contract basis to a government agency or as a subcontractor to other government contractors. As such the company used government equipment and facilities exclusively with the exception to vehicle.

  The depreciation expense for vehicle in 2006 was $11,400.00

Note B-Concentrations

  During 2006, the company had 17 contracts; 8 out of 17 contracts with total revenue of $ 8,649,462.00 were earned by subcontractor from the government.

Note C-Debt

  The company has a line of credit of $ 500,000 with United Bank. The company can draw on the line of credit between 80% and 90% of “eligible” accounts receivable depending on the type of receivable. The line is secured by the accounts receivable and a lien on the residence of the member. The interest rate on this line is the Prime Rate only. The line is due July 31, 2007. The balance as of December 31, 2006 was zero.

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iSYS, LLC

Financial Statements
And
Accountant’s Audit Report
December 31, 2005

iSYS, LLC

December 31, 2005

Table of Contents

Page

Accountants’ Audit Report		 2

Balance Sheet		 3

Statement of Income and Member’s Equity		    4-6

Statement of Cash Flows		 7

Notes to Financial Statements		 8
CHRISTINE WANG & ASSOCIATES, LTD.

ROCKVILLE, MARYLAND OFFICE		 A PROFESSIONAL CORPORATION MEMBERS
301-340-2904 Certified Public Accountant
501 Church St., Suite 211, NE AMERICAN INSTITUTE OF CERTIFIED
Vienna, VA 22180 PUBLIC ACCOUNTANTS
____________________ VIRGINIA SOCIETY OF CERTIFIED
PUBLIC ACCOUNTANTS
(O) 703-242-7804
(F) 703-242-7805

Independent Auditor’s Report

Board of Directors
iSYS, LLC
McLean, VA

We have audited the accompanying balance sheet of iSYS, LLC as of December 31, 2005, and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of iSYS, LLC as of December 31, 2005, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.

Christine Wang &Associates, Ltd.
November 15, 2007



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iSYS, LLC
Balance Sheet
December 31, 2005

Assets        
      Current Assets  
            Cash   $ 265,612  
            Accounts Receivable    324,726  

                  Total Current Assets		   $ 590,338  

      Fixed Assets		  
            Vehicle   $ 30,000  
            Less: Accumulated Depreciation    (1,500 )

                  Total Fixed Assets		   $ 28,500  

      Other Assets		  
            Prepaid Expenses   $ 6,877  

                  Total Other Assets		   $ 6,877  

                        Total Assets		   $ 625,715  

Liabilities and Member’s Equity		  
      Current Liabilities  
            Accounts Payable   $ 5,807  
            Accrued Wages    109,629  
            Other Accrued Expense    9,775  

                  Total Current Liabilities		   $ 125,211  

      Member’s Equity		   $ 500,504  

                        Total Liabilities and Member’s Equity		   $ 625,715  

See Accompanying Notes and Accountants’ Audit Report

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iSYS, LLC
Statement of Income and Member’s Equity
For the year ended December 31, 2005

Revenue        
      8(a) Revenue   $ 725,115  
      Non 8(a) Revenue    1,159,669  
    $ 1,884,784  

Cost of Labor		  
      Direct Labor   $ 788,784  
      Other Direct Labor    56,507  
      Travel    6,743  
      Subcontract Cost    283,498  
            Total Cost of Labor   $ 1,135,532  

      Gross Profit		   $ 749,252  

Expenses		  
      Fringe Benefits  
            Insurance   $ 47,457  
            Other Welfare    19,231  
            Paid Leave    80,533  
            Payroll Taxes    78,387  
                  Total Fringe Benefits   $ 225,608  

See Accompanying Notes and Accountants’ Audit Report

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iSYS, LLC
Statement of Income and Member’s Equity
For the year ended December 31, 2005

General and Administrative Expenses        
      Bank Charges   $ 2,220  
      Office Expenses    773  
      Insurance    8,233  
      Internet Fees    766  
      Licenses and Permits    50  
      Marketing Expense    281  
      Membership Fees    145  
      Legal Fees    14,114  
      Office Supplies    1,661  
      Payroll Service Fees    1,933  
      Accounting Fees    129,668  
      Property Tax    1,154  
      Telephone    563  
            Total General and Administrative Expenses   $ 161,561  

Overhead Expenses		  
      Auto Expenses   $ 6,950  
      Bonus    15,864  
      Office Expenses    6,472  
      Meals and Entertainment    15,493  
      Dues and Subscriptions    388  
      Internet Fees    967  
      Office Supplies    959  
      Overhead Labor    207,845  
      Postage and Delivery    584  
      Recruiting Expenses    77,398  
      Depreciation Expense    1,500  
      Repair and Maintenance    4,496  
      Telephone    2,313  
      Training and Seminar    1,698  
      Travel    2,042  
            Total Overhead Expenses   $ 344,969  

See Accompanying Notes and Accountants’ Audit Report

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iSYS, LLC
Statement of Income and Member’s Equity
For the year ended December 31, 2005

      Unallowable Expenses        
            Contributions   $ 2,440  
            Entertainment    5,884  
                  Total Unallowable Expenses   $ 8,324  

Net Operating Income		   $ 8,790  

Other Income and Expenses		  
      Interest Income   $ 934  
            Total Other Income   $ 934  

Net Income		   $ 9,724  

Beginning Member’s Equity, January 1, 2005		   $ 735,540  
      Member Draws    (244,760 )

Ending Member’s Equity, December 31, 2005		   $ 500,504  

See Accompanying Notes and Accountants’ Audit Report

-6-

iSYS, LLC
Statement of Cash Flow
For the year ended December 31, 2005

Cash Flows from Operating Activities        
      Net Income   $ 9,723  
      Adjustments to Reconcile Net Income to Net Cash Flows:  
            Depreciation    1,500  
      Change in Current Assets and Liabilities:  
            Decrease in Accounts Receivable    446,800  
            Decrease in Prepaid Expense    1,362  
            Decrease in Loan to Employee    625  
            Decrease in Accounts Payable    (50,818 )
            Increase in Accrued Expense    6,764  
            Increase in Accrued Wages and Payroll Taxes    14,818  

                  Net Cash Provided by Operating Activities		    430,774  

Cash Flows from Investing Activities		  
      Increase in Fixed Assets    (30,000 )

                  Net Cash Used in Investing Activities		    (30,000 )

Cash Flows from Financing Activities		  
      Member’s Withdrawal    (244,760 )

            Net Cash Used in Financing Activities		   $ (244,760 )

Increase / Decrease in Cash		    156,014  

Cash at January 1, 2005		    109,598  

Cash at December 31, 2005		   $ 265,612  

See Accompanying Notes and Accountants’ Audit Report

-7-

iSYS, LLC
Notes to Financial Statements
December 31, 2005

Note A-Summary of Significant Accounting Policies

  Nature of Business
The Company was organized as a Virginia, single member, limited liability company on February 22, 2002. Regular operations began December 1, 2002 when the company received approval as Small Business Administration “8A” entity. Receivables and trade payables were assigned from a predecessor S-Corporation.

  The company provides computer systems integration, data base application and data base management services to government agencies and other government contractors.

  Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires the members to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly actual results could differ from those estimates.

  Income Taxes
All tax effects of the company’s income or loss are passed through to the member, consequently neither federal or state income taxes are paid by the company.

  Property and Equipment
Property and equipment are recorded at cost. Maintenance, repairs and renewals are expenses, and additions and improvements are capitalized. Depreciation is computed using accelerated methods over estimated useful lives of the assets.

  All of the company’s work was on a contract basis to a government agency or as a subcontractor to other government contractors. As such the company used government equipment and facilities exclusively with the exception to vehicle.

  The depreciation expense for vehicle in 2005 was $1,500.00

Note B-Concentrations

  During 2005, the company had 14 contracts; 6 out of 14 contracts with total revenue of $615,000.00 were earned as subcontractor from 3 prime contractors. The major revenue during 2005 was earned from the government as a prime contractor.

Note C-Debt

  The company has a line of credit of $ 500,000 with United Bank. The company can draw on the line of credit between 80% and 90% of “eligible” accounts receivable depending on the type of receivable. The line is secured by the accounts receivable and a lien on the residence of the member. The interest rate on this line is the Prime Rate plus one-half of one percent (0.5%) and is no less than 4.75%. The line is due July 31, 2006. The balance as of December 31, 2005 was zero.

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