Attached files
| file | filename |
|---|---|
| EX-31.2 - EX312 - Dragon's Lair Holdings, Inc. | ex312.htm |
| EX-32.1 - EX321 - Dragon's Lair Holdings, Inc. | ex321.htm |
| EX-21.1 - EX211 - Dragon's Lair Holdings, Inc. | ex211.htm |
| EX-31.1 - EX311 - Dragon's Lair Holdings, Inc. | ex311.htm |
| 10-Q - MAINBODY - Dragon's Lair Holdings, Inc. | mainbody.htm |
Independent
Auditor’s Report
To the
Shareholders
Twelve
Oaks Properties, Inc.
100 Four
Star Lane
Odenville,
AL 35120
We have
audited the accompanying balance sheets of Twelve Oaks Properties, Inc. as of
December 31, 2008 and 2009, and the related statements of operations, changes in
shareholders’ equity, and cash flows for the years ended December 31, 2008 and
2009. These financial statements are the responsibility of Twelve Oaks
Properties’ management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide 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 Twelve Oaks Properties, Inc. as of
December 31, 2008 and 2009, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Labrozzi
& Co., P.A.
Miami,
Florida
February
1, 2010
- 1
-
|
TWELVE
OAKS PROPERTIES, INC.
|
||||||||
|
BALANCE
SHEETS
|
||||||||
|
December
31, 2008 and 2009
|
||||||||
|
ASSETS
|
||||||||
|
2009
|
2008
|
|||||||
|
Cash
|
$
|
43,467
|
$
|
196,926
|
||||
|
Employee
Advances
|
2,000
|
-
|
||||||
|
Inventories
|
-
|
-
|
||||||
|
Notes
receivable-related parties
|
519,210
|
170,210
|
||||||
|
Capitalized
interest
|
224,591
|
135,167
|
||||||
|
Real
estate held for sale
|
1,282,942
|
1,370,604
|
||||||
|
Land
held for development
|
2,605,509
|
2,267,668
|
||||||
|
TOTAL
ASSETS
|
$
|
4,677,719
|
$
|
4,140,575
|
||||
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
||||||||
|
Liabilities:
|
||||||||
|
Accounts
Payable
|
$
|
-
|
$
|
35,027
|
||||
|
Current
maturity of Development Loan
|
640,523
|
652,571
|
||||||
|
Due
from affiliate
|
32,505
|
-
|
||||||
|
Loan
payable - related party
|
604,664
|
620,164
|
||||||
|
Development
loan payable
|
628,020
|
790,972
|
||||||
|
Deferred
Revenue - 12 Oaks Improvement District
|
2,611,095
|
1,816,077
|
||||||
|
TOTAL
LIABILITIES
|
4,516,807
|
3,914,811
|
||||||
|
Shareholders'
equity:
|
||||||||
|
Common
stock
|
2,500
|
2,500
|
||||||
|
Retained
earnings
|
158,412
|
223,264
|
||||||
|
Total
shareholders' equity
|
160,912
|
225,764
|
||||||
|
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
4,677,719
|
$
|
4,140,575
|
||||
The
accompanying notes are an integral part of these financial
statements.
- 2
-
TWELVE OAKS PROPERTIES, INC.
STATEMENTS
OF OPERATIONS
Years
Ended December 31, 2008 and 2009
|
2009
|
2008
|
|||||||
|
Revenue
|
||||||||
|
Sales
|
$ | 175,000 | $ | 600,000 | ||||
|
Cost
of sales
|
117,116 | 456,868 | ||||||
|
Gross
profit
|
57,884 | 143,132 | ||||||
|
Operating
expenses
|
||||||||
|
Environmental
fees
|
9,593 | 9,222 | ||||||
|
Equipment
rental
|
1,980 | 68,678 | ||||||
|
Excavating
|
2,368 | 35,027 | ||||||
|
Fuel
|
- | 18,337 | ||||||
|
Other
|
3,899 | 4,049 | ||||||
|
Total
operating expenses
|
17,840 | 135,313 | ||||||
|
Non-operating
expenses:
|
||||||||
|
Consulting
Fees
|
- | 5,000 | ||||||
|
Professional
fees
|
21,347 | 16,116 | ||||||
|
Interest
|
10,118 | 8,192 | ||||||
|
Taxes
|
6,011 | 3,458 | ||||||
|
Utilities
|
6,334 | 4,242 | ||||||
|
Miscellaneous
|
534 | 611 | ||||||
|
Total
non-operating expenses
|
44,344 | 37,619 | ||||||
|
Total
expenses
|
62,184 | 172,932 | ||||||
|
Other
income (expense)
|
||||||||
|
Twelve
Oaks Improvement District revenue
|
49,095 | 251,143 | ||||||
|
Twelve
Oaks Improvement District expenses
|
(109,647 | - | ||||||
|
Timber
revenue
|
8,300 | |||||||
|
Net
other income (expense)
|
(60,552 | 259,443 | ||||||
|
Net
income (loss)
|
$ | (64,852 | $ | 229,643 | ||||
|
SHAREHOLDERS'
EQUITY DECEMBER 31, 2008
|
$ | 225,764 | ||||||
|
2009
NET LOSS
|
(64,852 | |||||||
|
SHAREHOLDERS'
EQUITY DECEMBER 31, 2009
|
$ | 160,912 | ||||||
The
accompanying notes are an integral part of these financial
statements.
- 3
-
|
TWELVE
OAKS PROPERTIES, INC.
|
||||||||
|
STATEMENTS
OF CASH FLOWS
|
||||||||
|
Years
Ended December 31, 2008 and 2009
|
||||||||
|
2009
|
2008
|
|||||||
|
Cash
Flows from Operating Activities
|
||||||||
|
Net
income (loss) from operations
|
$
|
(64,852
|
)
|
$
|
229,643
|
|||
|
Adjustments
to reconcile net income to net cash
|
||||||||
|
used
in operating activities:
|
||||||||
|
Employee
Advances
|
(2,000
|
)
|
-
|
|||||
|
Notes
receivable-related parties
|
(349,000
|
)
|
(170,210
|
)
|
||||
|
Capitalized
interest
|
(89,424
|
)
|
(135,167
|
)
|
||||
|
Real
estate held for sale
|
87,662
|
(1,370,604
|
)
|
|||||
|
Land
held for development
|
(337,841
|
)
|
74,562
|
|||||
|
Accounts
Payable
|
(35,027
|
)
|
35,027
|
|||||
|
Due
from Affiliate
|
32,505
|
-
|
||||||
|
Current
Maturity of development loan
|
(12,048
|
)
|
620,164
|
|||||
|
Deferred
Revenue - 12 Oaks Improvement Dist
|
(49,095
|
)
|
(251,143
|
)
|
||||
|
Issuance
of Common Stock for services
|
-
|
-
|
||||||
|
Net
cash used in operating activities
|
(819,120
|
)
|
(967,728
|
)
|
||||
|
Cash
Flows from Financing Activities:
|
||||||||
|
Funds
Rec'd from 12 Oaks Improvement Dist
|
844,113
|
2,067,219
|
||||||
|
Increase
in Notes Payable - Related Party
|
(15,500
|
)
|
176,262
|
|||||
|
Decrease
in development loan payable
|
(162,952
|
)
|
(1,078,827
|
)
|
||||
|
Net
cash provided by financing activities
|
665,661
|
1,164,654
|
||||||
|
Net
change in cash and cash equivalents
|
(153,459
|
)
|
196,926
|
|||||
|
Cash
and cash equivalents - beginning of year
|
196,926
|
-
|
||||||
|
Cash
and cash equivalents - end of year
|
$
|
43,467
|
$
|
196,926
|
||||
|
Supplemental
Disclosure of Cash Flow Information:
|
||||||||
|
Cash
paid for interest
|
$
|
106,306
|
$
|
143,359
|
||||
|
Cash
paid for taxes
|
$
|
6,011
|
$
|
3,458
|
||||
The
accompanying notes are an integral part of these financial
statements.
- 4
-
NOTE
1 - DESCRIPTION OF ORGANIZATION
Organization. Twelve
Oak Properties, Inc. (the “Company”) was formed on July 11, 2007 under the laws
of the state of Alabama. The Company is a developer for build-to-suit real
estate development projects for affiliated companies and other developers in the
St. Clair County near Birmingham, Alabama. Project construction operations are
conducted through the Company’s affiliates who share the same ownership. The
Company creates each project such that it will generate income from the
placement of the construction loan through its affiliates and/or the capital
appreciation of the facility upon sale. Affiliates and management of the Company
will develop the construction and permanent financing for the benefit of the
Company.
The
Twelve Oaks Improvement District (the “District”) is an Alabama public
corporation organized and existing under Chapter 99A of Title 11 of the Code of
Alabama 1975 (the “Act”). The Act was enacted in 1999 to provide for the
establishment of independent improvement districts to manage and finance basic
public infrastructure throughout the state of Alabama. The District improvements
include roads, network of lakes, storm drainage, water and sanitary sewer
systems, a clubhouse and pool, parks, and walking trails. The shareholders of
the Company serve as the board of directors of the District. (See Note
8)
Basis of
accounting – The financial statements are prepared using the accrual
basis of accounting. Revenues are recognized when services are
rendered and expenses are recognized in the period in which they were incurred.
The basis of accounting conforms to accounting principles generally accepted in
the United States of America.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLCIES
Use of estimates. The
preparation of financial statements in conformity with generally accepted
accounting principles (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and cash
equivalents. The Company considers all highly liquid investments with
original maturities of three months or less to be cash equivalents. There were
no cash equivalents at December 31, 2009.
- 5
-
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLCIES (Continued)
Revenue
recognition. The Company recognizes revenue in accordance with Statement of Accounting Standards
No. 66, Accounting for Real Estate Sales. The Company recognizes revenue
from real estate sales under the full accrual method. Under the full accrual
method, profit may be realized in full when real estate is sold, provided
(1) the profit is determinable and (2) the earnings process is
virtually complete (the Company is not obligated to perform significant
activities after the sale to earn the profit). The Company recognizes revenue
from its real estate sales transactions on the closing date.
Income
taxes: The Company has elected subchapter S status for income tax purposes.
Accordingly, a provision for income taxes has not been established.
New
accounting pronouncements:
FASB
Accounting Standards Codification
(Accounting
Standards Update (“ASU”) 2009-01)
In
June 2009, FASB approved the FASB Accounting Standards Codification (“the
Codification”) as the single source of authoritative nongovernmental GAAP. All
existing accounting standard documents, such as FASB, American Institute of
Certified Public Accountants, Emerging Issues Task Force and other related
literature, excluding guidance from the Securities and Exchange Commission
(“SEC”), have been superseded by the Codification. All other non-grandfathered,
non-SEC accounting literature not included in the Codification has become
non-authoritative. The Codification did not change GAAP, but instead introduced
a new structure that combines all authoritative standards into a comprehensive,
topically organized online database. The Codification is effective for interim
or annual periods ending after March 15, 2009, and impacts the Company’s
financial statements as all future references to authoritative accounting
literature will be referenced in accordance with the Codification. There have
been no changes to the content of the Company’s financial statements or
disclosures as a result of implementing the Codification during the quarter
ended June 30, 2010. As a result of the Company’s
implementation of the Codification during the quarter ended June 30, 2010,
previous references to new accounting standards and literature are no longer
applicable. In the current quarter financial statements, the Company will
provide reference to both new and old guidance to assist in understanding the
impacts of recently adopted accounting literature, particularly for guidance
adopted since the beginning of the current fiscal year but prior to the
Codification.
In
June 2009, the FASB revised the authoritative guidance for consolidating
variable interest entities, which changes how a company determines when an
entity that is insufficiently capitalized or is not controlled through voting
(or similar rights) should be consolidated. The determination of whether a
company is required to consolidate an entity is based on, among other things, an
entity’s purpose and design and a company’s ability to direct the activities of
the entity that most significantly impact the entity’s economic performance. The
Company is currently evaluating the impact the adoption of this guidance will
have on its consolidated financial statements.
In
January 2010, the FASB issued ASU 2010-06, “Improving Disclosures about
Fair Value Measurements,” which requires additional disclosures about transfers
between Levels 1 and 2 of the fair value hierarchy and disclosures about
purchases, sales, issuances and settlements in the roll forward of activity in
Level 3 fair value measurements. This guidance was effective for the Company in
the current quarter, except for the Level 3 activity disclosures, which are
effective for fiscal years beginning after December 15, 2010. The adoption
of this guidance, which is related to disclosure only, will not have a material
impact on the Company’s consolidated financial position, results of operations
or cash flows.
- 6
-
NOTE 2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLCIES (Continued)
Business
Combinations
In
December 2007, the FASB issued SFAS No. 141(R) “Business
Combinations”. This Statement replaces the original SFAS No.
141. This Statement retains the fundamental requirements in
Statement 141 that the acquisition method of accounting (which Statement
No. 141 called the purchase method) be used for all business combinations and
for an acquirer to be identified for each business combination. The objective of
this SFAS No. 141(R) is to improve the relevance, and comparability of the
information that a reporting entity provides in its financial reports about a
business combination and its effects. To accomplish that, SFAS No. 141(R)
establishes principles and requirements for how the acquirer:
|
1.
|
Recognizes
and measures in its financial statements the identifiable assets acquired,
the liabilities assumed, and any non-controlling interest in the
acquiree.
|
|
2.
|
Recognizes
and measures the goodwill acquired in the business combination or a gain
from a bargain purchase. the beginning of the first annual reporting
period beginning on or after December 15, 2008 and may not be applied
before that date.
|
Fair
Value Option for Financial Assets and Financial Liabilities
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
for Financial Assets and Financial Liabilities – Including an amendment of FASB
Statement No. 115”, which became effective for the Company on February 1,
2008, permits companies to choose to measure many financial instruments and
certain other items at fair value and report unrealized gains and losses in
earnings. Such accounting is optional and is generally to be applied instrument
by instrument. The Company does not anticipate that the election, of this
fair-value option will have a material effect on its financial condition,
results of operations, cash flows or disclosures.
NOTE
3- NOTE RECEIVABLE-RELATED PARTY
The
Company made loans to an affiliated company, Four Star Investments, LLC. The
Shareholders of the Company are also members of Four Star Investments, LLC. The
balance of the outstanding receivable as of December 31, 2009 is
$519,210.
NOTE
4- CAPITALIZED INTEREST
For the
year ended December 31, 2009 the Company has recognized $106,306 in
interest expense that was capitalized and $10,118 interest expensed directly to
the Statement of Operations. Project interest expense is recorded on the balance
sheet or statement of operations depending on the status of the project(s). The
balance as of December 31, 2009 was $224,591.
NOTE
5- LAND HELD FOR DEVELOPEMENT AND REAL ESTATE HELD FOR SALE
Land
acquisition costs are capitalized as “Land Held for Development”. Project costs
that are clearly associated with the development and construction of a real
estate project are capitalized as a cost of that project. Costs are allocated to
individual projects by the specific identification method. Interest costs are
capitalized while development is in progress. When a project is completed it is
reclassified as “Real Estate Held for Sale” until it is sold. Once a project is
sold, the capitalized costs are reclassified as cost of lots sold in the
Statement of Operations.
- 7
-
NOTE
6- DEVELOPMENT LOAN PAYABLE-RELATED PARTY
Four Star
Investments, LLC, a related party controlled by the Company’s president, agreed
to purchase land in exchange for a loan in the amount of $1,943,543. This loan
is evidenced by an unsecured promissory note dated August 15, 2007. The note
carries a 5% interest rate and matures on August 15, 2012. Four Star Investments
obtained the funds through Aliant Bank. The balance of the note as of December
31, 2009 was $1,343,543 with $640,523 as the current maturity.
NOTE
7- LOAN PAYABLE-RELATED PARTY
Initial
operations were funded by an affiliated company controlled by the Company’s
president. The Company was unable to obtain necessary funds for operations from
financial institutions due to lack of established credit.
There is
no written agreement between the two entities and no imputed interest. The loan
balance as of December 31, 2009 was $604,664.
NOTE
8- TWELVE OAKS IMPROVEMENT DISTRICT DEFERRED REVENUE
Special
Assessment Capital Improvement Revenue Bonds, Series 2008, (the “Series 2008
Bonds”), were issued by the District on May 1, 2008 in fully registered form,
without coupons, initially in denominations of $100,000 under the constitution
and laws of the State of Alabama, Title 11 of the Code of Alabama 1975. The
Series 2008 Bonds, principal amount of $4,395,000, bearing 7.80% interest, are
payable semi-annually commencing November 1, 2008 and mature May 1,
2038.
Qualified
expenditures for District improvements are verified and approved by an
engineering company. Once approved, the Company is reimbursed for said
expenditures by the District in accordance with the limited offering memorandum
dated July 31, 2008. As of December 31, 2009, the balance of these expenditures
amounted to $2,611,095.
- 8
-