FLORHAM CONSULTING CORP - FORM 8-K/A - EX-99.7 - February 16, 2011

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Independent Auditor's Report

To the Board of Directors
Professional Culinary Institute LLC
New York, NY

I have audited the accompanying balance sheet of Professional Culinary Institute LLC as of December 31, 2009, and the related statements of income, members' equity, and cash flows for the year then ended.  These financial statements are the responsibility of management.  My responsibility is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with auditing standards generally accepted in the United States, and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that I 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.  I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Professional Culinary Institute LLC as of December 31, 2009, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States.

In accordance with Government Auditing Standards, I have also issued my report dated June 2, 2010 on my consideration of Professional Culinary Institute LLC's internal control over financial reporting and on my tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of my testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of my audit.
 
/s/ Steven F. Landau, CPA
Steven F. Landau, CPA
June 2, 2010

 
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PROFESSIONAL CULINARY INSTITUTE LLC
BALANCE SHEET
DECEMBER 31, 2009

ASSETS
      
       
Current Assets
      
Cash
   $ 4,740  
Student tuition receivable, net of allowance for uncollectables of $274
     27,101  
Related party receivables
     27,900  
Prepaid expense
     1,062  
Total current assets
     60,803  
         
Other Assets
        
Organization costs, net of accumulated amortization of $73
     661  
         
Total assets
   $ 61,464  
         
LIABILITIES AND MEMBERS' EQUITY
        
         
Current Liabilities
        
Accounts payable
   $ 11,988  
Accrued expenses payable
     5,552  
Deferred tuition revenue
     28,050  
Total current liabilities
     45,590  
         
Members' Equity
     15,874  
         
Total liabilities and members' equity
   $ 61,464  

See accompanying notes to the financial statements.
 
 
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PROFESSIONAL CULINARY INSTITUTE LLC
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2009

Revenues
      
Tuition and student fees
   $ 452,025  
Less: tuition refunds
     (7,506 )
Net tuition revenue and fees
     444,519  
         
Operating Costs and Expenses
        
Student instructional costs
     175,064  
Recruitment costs
     10,400  
Occupancy costs
     35,518  
General and administrative expenses
     30,614  
Total operating costs and expenses
     251,596  
         
Operating income before management fees
     192,923  
         
Related party management fees
     182,350  
         
Income before depreciation
     10,573  
         
Depreciation and amortization expense
     49  
         
Net income
   $ 10,524  

See accompanying notes to the financial statements.
 
 
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PROFESSIONAL CULINARY INSTITUTE LLC
STATEMENT OF MEMBERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2009

Balance - January 1, 2009
   $ 800  
         
Capital contributions, net
     4,550  
         
Net income for the year ended December 31, 2009
     10,524  
         
Balance - December 31, 2009
   $ 15,874  

See accompanying notes to the financial statements.
 
 
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PROFESSIONAL CULINARY INSTITUTE LLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2009

Cash Flows from Operating Activities
      
Net income
   $ 10,524  
Noncash items included in net income:
        
Depreciation expense
     49  
      10,573  
         
Changes in operating assets and liabilities
        
Decrease (increase) in assets:
        
Student tuition receivable
     (27,101 )
Prepaid expense
     (1,062 )
Increase (decrease) in liabilities:
        
Accounts payable
     11,988  
Accrued expenses payable
     5,552  
Deferred tuition revenue
     28,050  
      17,427  
         
Net cash provided by operating activities
     28,000  
         
Cash Flows from Investing Activities:
     0  
         
Cash Flows from Financing Activities:
        
Increase in receivables from related party
     (27,900 )
Capital contributions from members
     4,550  
         
Net increase in cash
     4,650  
         
Cash - January 1, 2009
     90  
         
Cash - December 31, 2009
   $ 4,740  
         
Supplemental disclosure of cash flow information:
        
Cash paid during the year for interest
   $ 0  
Cash paid during the year for income taxes
   $ 0  

See accompanying notes to the financial statements.
 
 
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Professional Culinary Institute LLC
Notes to Financial Statements
December 31, 2009

Note 1 - Summary of Significant Accounting Policies

Nature of Operations
Professional Culinary Institute, LLC. (the "Company") was organized as a limited liability company (LLC) in the State of New York on July 18, 2008. The company owns and operates state licensed vocational training schools. The schools provide vocational education and training programs to students under funded contracts at various training sites located in New York State.

Revenue Recognition
The financial statements of the company are prepared on the accrual basis of accounting.  Tuition billed to students is recognized as revenue, determined by the percentage of completion method.

Concentration of Credit Risk
At various times during the year, cash balances maintained in bank accounts may exceed FDIC insurable limits. In the normal course of business, the company extends unsecured credit to its students. Many students receive financial assistance from community based and government agencies. Collection of student accounts receivable is reasonably assured provided that the school and students continuously comply with various financial assistance regulations.

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

Accounts Receivable
Accounts Receivable are recorded net of an allowance for uncollectibles. The allowance is estimated from historical performance and managements' experience.

Fixed Assets and Depreciation
Property and equipment are recorded at cost.  Depreciation is provided on the straight-line method over the estimated useful lives of the respective assets.  Maintenance and repairs are charged to expense as incurred.

Income taxes
The company is a limited liability company which is treated as a partnership for tax purposes.  Accordingly, the company's members are responsible for income taxes on their proportionate share of the company's income.

 
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Professional Culinary Institute LLC
Notes to Financial Statements
December 31, 2009

Note 2 - Lease Commitments
During 2009, the company occupied instructional training facilities in Buffalo NY, Poughkeepsie NY, and Monticello NY, subject to various written and verbal leases. Rent expense incurred during 2009 was $34,650. In addition, the company is responsible for maintenance, insurance and other occupancy expenses. The minimum remaining rent payments under written lease agreements are as follows:

 
Year
      
  
2010
   $ 26,516  

Note 3 - Related Party Transactions
During 2009, $182,350 in administrative management fees were paid to a related company which is owned by the members of Professional Culinary Institute LLC. Furthermore, as of December 31, 2009, an additional $27,900 had been advanced to the related company.

Note 4 - Advertising
The company expenses advertising as incurred.  Advertising expense for the year ended December 31, 2009 was $10,400.

Note 5 - Significant Subsequent Events
In May 2010 the members of Professional Culinary Institute LLC signed a letter of intent to sell a majority interest in the company. The sale is contingent on approval from the NY State Education Department. The current management and other personnel of the company are expected to operate the schools after the change of ownership occurs.
 
In addition, the company expects to apply for approval from the NY State Education Department for a name change in order to avoid the possiblity of any future confusion with a California company with a similar name.

 
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