CFM HOLDINGS, INC. 

Smyrna, Tennessee 

Compiled Consolidated Financial Statements 

Year Ended August 31, 2012 
Consolidated Financial Statements 

Consolidated Balance Sheet Consolidated Statement of Income 

Consolidated Statement of Stockholders' Equity 

Consolidated Statement of Cash Flows 

Notes to Consolidated Financial Statements 

Supplementary Information 

Schedule I- Consolidated Schedule of Expenses 

2 

3 

4 

5 

6-16 

17 
Smyrna, Tennessee 

We have compiled the accompanying consolidated balance sheet of CFM Holdings, Inc. and its 

subsidiaries, as of August 31, 2012, and the related consolidated statements of income, 

stockholders' equity, and cash flow for the year then ended and the accompanying 

supplementary information. We have not audited or reviewed the accompanying consolidated 

financial statements and supplementary schedule and, accordingly, do not express an opinion or 

provide any assurance about whether the consolidated financial statements are in accordance 

with accounting principles generally accepted in the United States of America. 

CFM Holdings, Inc. (the "Company") is responsible for the preparation and fair presentation of 

the financial statements in accordance with accounting principles generally accepted in the 

United States of America and for designing, implementing, and maintaining internal control 

relevant to the preparation and fair presentation of the financial statements. 

Our responsibility is to conduct the compilation in accordance with Statements on Standards for 

Accounting and Review Services issued by the American Institute of Certified Public 

Accountants. The objective of a compilation is to assist management (the owners) in presenting 

financial information in the form of financial statements without undertaking to obtain or provide 

any assurance that there are no material modifications that should be made to the financial 

statements. However, we did become aware of a departure from generally accepted accounting 

principles that is described in the following paragraph. 

As disclosed in Note 21 to the financial statements, generally accepted accounting principles 

require the primary beneficiary of a variable interest entity to consolidate the variable interest 

entity in its financial statements. Management has informed us that the Company's financial 

statements do not include the accounts of related entities that the Company has determined are 

variable interest entities. The effects of this departure from accounting principles generally 

accepted in the United States of America on the consolidated financial position, consolidated 

results of operations, and consolidated cash flows have not been determined. 

Nashville, Tennessee 

December 20, 2012 
Current assets 

Accounts receivable - trade Affiliates receivable 

Deferred tax benefit 

Notes receivable 

Prepaid expenses 

Inventories 

Restricted cash deposits 

Total current assets 

Property and equipment 

Equipment and machinery 

Buildings 

Furniture and fixtures 

Leasehold improvements Less: Accumulated depreciation 

Property and equipment, net 

Other assets 

Deposits 

Other assets Other investments 

Total other assets 

Total assets 

$ 

$ 

3,825,906 

2,198,580 

115,572 

14,839 

516,604 

4,118,459 

263,839 

11,053,799 

2,572,264 

I ,351,269 

308,845 367,986 

4,600,364 

(2,028,820) 

2,571,544 

320 

300,481 

138,472 

439,273 

14,064,616 

See independent accountants' compilation report and accompanying notes to financial statements. 

2 
CmTent liabilities 

Checks written in excess of cash balance 

Accounts payable 

Affiliate payables 

Accrued expenses 

Credit cards payable 

Notes payable 

Taxes payable 

Total current liabilities 

Other liabilities 

Deferred tax liability 

Refundable customer deposits Refundable insurance deposits 

Other investments 

Total other liabilities 

Long term debt 

Total liabilities 

Minority interest in subsidiaries 

Stockholders' equity 

Common stock - no par value 

I 0,000 shares authorized; I ,000 shares issued 

and outstanding 

Additional paid-in capital 

Less: Treasury stock 

Retained earnings 

Total stockholders' equity 

Total liabilities and stockholders' equity 

$ 

$ 

117,686 

4,404,369 

56,424 

7,217 

47,952 

2,386,094 

231,334 

7,251,076 

316,515 

1,767,359 

I 08,635 

I ,432,390 

3,624,899 

2,680,486 

13,556,461 

468,788 

10,000 

81,885 

(67,846) 

15,328 

39,367 

14,064,616 
Cost of sales 

Purchases 

Labor 

Sales costs 

Maintenance cost 

Insurance costs 

Lease costs 

Other costs - charter 

Total cost of sales 

Gross profit on sales 

Operating expenses 

Operating income Other income (expense) 

Interest income 

Other income 

Interest expense 

Total other net income 

Income before income taxes 

Provision (Benefit) for income taxes 

Income before minority interests 

Minority interests 

Consolidated comprehensive net income 

14,338,824 

5,025,137 

173,778 

25,624 

41 '139 

6,331,965 

l ,600,675 

27,537J42 

8,320,986 

7,980,809 

340,177 

6,738 

322,137 

(165,011) 

163,864 

504,041 

(9,874) 

513,915 

(93,425) 

$ 420,490 

See independent accountants' compilation report and accompanying notes to financial statements. 

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Net income 513,915 513,915 

Less minority interest (93,425) (93,425) 

End of year $ 10,000 $ (67,846) $ 81,885 $ 15,328 $ 39,367 

See independent accountants' compilation report and accompanying notes to financial statements. 

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Provided by operating activities: 

Minority interest earnings of VIE 

Depreciation 

(Increase) decrease in 

Accounts receivable - trade Accounts receivable - affiliate 

Deferred tax benefit 

Notes receivable 

Prepaid expenses 

Inventories 

Increase (decrease) in 

Accounts payable Affiliate payables 

Credit card payable 

Deferred tax liability 

Short term notes payable 

Refundable account receivable deposits 

Taxes payable 

Accrued expenses 

Net cash provided by operating activities 

Cash flows from investing activities 

Purchases of property and equipment 

Investments 

Net cash used by investing activities 

Cash flows from financing activities 

Net changes on long term debt 

Net cash used by financing activities 

Net decrease in cash 

Cash - beginning of year 

Cash - end of year 

93,425 

387,657 

(626,442) (495,207) ( 115,572) 

9,102 

(76,759) 

1,124,398 

152,684 

(457,674) 

17,447 

(26,981) 

(425,531) 

73,868 

(65,644) 

(534) 

(II ,273) 

(170,282) 

93,014 

(77,268) 

(59,557) (59,557) 

(148,098) 

30,412 

$ (117,686) 

See independent accountants' compilation report and accompanying notes to financial statements. 

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Interest paid 

165,011 
presented to assist in understanding the Company's consolidated financial statements. The 

consolidated financial statements and notes are representations of the Company's management, 

which is responsible for their integrity and objectivity. 

Principles of Consolidation and Reporting Entities 

The consolidated financial statements include the accounts of the CFM Holdings, Inc., Corporate 

Flight Management, Inc., which is 81.55% owned by CFM Holdings, Inc., 410 Investors, LLC, 

which is 90.91% owned by Jetquick, LLC, Jetquick, LLC, which is 51% owned by Corporate 

Flight Management, Inc., Wings of Eagles, LLC, which is 70% owned by Corporate Flight 

Management, Inc., and JWN Wings of Eagles, LLC which is 50.10% owned by Corporate Flight 

Management, Inc. All material intercompany accounts and transactions are eliminated in 

consolidation. 

Business Activitv 

Corporate Flight Management, Inc. was incorporated on July 26, 1982, in accordance with the 

Tennessee General Corporation Act. The Company's primary purpose is to conduct business in 

the field of aviation, charter, maintenance, aircraft management, flight school, and FBO. The 

main oftices and operations of the Company are located in Smyrna, Tennessee. 

Cash and Cash Equivalents 

For financial statement purposes, the Company considers all cash and highly liquid investments 

which have original maturities of three months or less, to be cash equivalents. 

Use of Estimates 

The preparation of financial statements in conformity with accounting principles generally 

accepted in the United States of America 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 elate of the financial statements and the reported amounts of revenues 

and expenses during the reporting period. Actual results could differ from those estimates. 

Variable Interest Entities 

FASB ASC 810 requires a variable interest entity ("VIE") to be consolidated if a party with 

ownership, contractual or other financial interest in the VIE (a variable interest holder) is 

obligated to absorb a majority of the risk of loss from the VIE's activities, is entitled to receive a 

majority of the VIE's residual returns (if no patiy absorbs a majority of the VIE's losses), or 

both. A variable interest holder that consolidated the VIE is called the primary beneficiary. 

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record bad debts using the direct write-off method. Generally accepted accounting principles 

require that the allowance method be used to recognize bad debts; however, the effect of using 

the direct write-off method is not materially different from the results that would have been 

obtained under the allowance method. 

Inventories 

Inventories consist of parts, fuel, aircraft and work in process. Inventory is calculated on a cost 

average system. 

Prepaid Expenses Prepaid expenses are amortized over the period of benefit using the straight-line method. 

Property and Equipment Property and equipment are stated at cost. Depreciation lS computed using the straight line 

method over estimated useful lives of3 to 39 years. 

The Company evaluates long-lived assets for impairment whenever events or changes in 

circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such 

an occurrence, recoverability of assets to be held <mel used is measured by comparing the 

carrying amount to estimated undiscounted future cash flows. If the carrying amount of the asset 

exceeds its estimated future cash flows, an impairment charge is recognized based upon the 

amount by which the carrying amount exceeds the fair value of the asset. 

Revenue Recognition Revenue is recognized when the earnings process is complete and the risks and rights of 

ownership have transferred to the customer, which is generally considered to have occurred 

when products have been delivered, and title and risk of ownership pass. 

Income Taxes 

The Company provides for income taxes and recognizes deferred tax liabilities and assets for the 

expected tax consequences of temporary differences between the financial statement 

carrying amounts and the tax basis of assets and liabilities. 

Advertising Costs 

Advertising costs are charged to operations when incurred. Advertising expense was $48,531 for 

the year ended August 31, 2012. 

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at August 31,2012. 

Note 3. Accounts Receivable- Trade 

An aging of Accounts Receivable at August 31 was as follows: 

Current 

30 Days 60 Days 

90 Days and Over 

Note 4. Accounts Receivable- Affiliates 

Jetstream Air, LLC 

CFM Airport Development, LLC 

CFM- HL Joint Venture 

Jetstream Sales, LLC 

Total Accounts Receivable - Affiliates 

2012 

$ I ,357,232 

918,312 

363,915 

1,186,447 

$ 3,825,906 

August 31,2012 

$ 1,640,775 

191,082 123,279 

243,444 

$ 2,198,580 

During the period, Jetquik, LLC and 410 Investors, LLC closed their operations. The Company 

wrote off $4,008 in debt owed by the subsidiary. 

Note 5. Notes Receivable 

Notes receivable comprise two separate notes from Chuck Howell and David Augustin, both part 

owners of the Company. At August 31,2012 the balances of Note receivable- Chuck Howell and 

David Augustin were $2,329 and $12,510, respectively. 

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Aircraft 

Parts 

Work in Process 

Fuel 

Total Inventories 

Note 7. Restricted Cash Deposits 

1,898,921 1,470,621 

557,264 

191,653 

$ 4,118,459 

The Company holds insurance escrow deposits for different policies as well as letter of credit 

deposits. The balance at August 31,2012 is $263,839. 

Note 8. Investments 

Investments in related entities at August 31, 2012 consisted of the following: 

Investment- GBA Gyro planes 

Investment- .Jetstream Air (deficit) Investment- CFM-HL Joint Venture (deficit) 

Total Net Investments (deficit) 

Note 9. Credit Cards Payable 

Equity 

$ 138,472 $ 138,472 

Deficit 

(1,282,357) 

(150,033) 

($ 1 ,432,390) 

The Company cunently has a $500,000 limit credit card for operating aircraft and parts 

inventory purchases. As of August 31, 2012, the balance was $47,952. 

9 
CFM Airport Development 

Due to Stockholders 

Total Affiliates Payable 

Note 11. Refundable Customer Deposits 

2012 

$ 17,317 

39,107 

$ 56,424 

The Company requires customer deposits before undertaking large maintenance projects or 

booking flight times. The following is a summary of all refundable customer deposits at August 

31,2012: 

Charter Prepays 

Maintenance Refi.trbishment 

FBO- Pre-purchases 

Aircraft Sales 

Total Refi.mdable Customer Deposits 

Note 12. Refundable Insurance Deposits 

2012 

$ 987,956 

257,908 

13,198 

508,297 

$ 1,767,359 

The Company offers the managed aircraft owners the opportunity to par!Jc1pate in the 

Company's fleet insurance program, which usually affords some discounts on premiums due to 

volume buying. As part of the fleet insurance program, the insurance company requires a deposit 

as reserve against monthly premiums. The Company pays the deposit (recorded as restricted 

cash) from cash received from each owner. The Company is obligated to reimburse each aircraft 

owner when the aircraft leaves the insurance program. 

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Current Noncurrent 

(I)- Chappell Smith & Associates 

(2)- Quantum Control (3)- First Tennessee ( 4 )- BancorpSouth Bank 

(5)- BancorpSouth Bank (6)- Executive Group Holdings (7)- John R. Patrick 

(8)- Pacenka, JTWS (9)- First Insurance Funding Group (!0)- Ally Bank (2012 Ford) 

( ll )- A. Howell 

( 12)- Jetstream Sales 

( 13 )- Ricardo Tostada 

(14)- John Floyd (15)- Hvizdak Loan 

(16)- Pinnacle Bank 

(17)- Dell Financial Services 

(18)- Ally Bank (2011 Ford) 

(19)- Beacon Federal (20)- Reece Howell 

(21 )- Pinnacle Bank Line of Credit 

(22)- Tom Chappell 

Total Notes Payable $ 

$ 

27,991 

137,439 

106,760 

1,797 

100,000 167,667 

6,328 

17,000 

48,500 

393,928 

374,8!8 

57,554 

542,170 

4,974 

6,168 

250,000 

143,000 

2,386,094 

$ 265,610 

19,594 

1,282,352 

744,128 

100,000 

50,000 

17,261 

I 0,005 

17,041 

76,758 

97,737 

$ 2,680,486 

(!) Note payable to Chappell Smith & Associates, payable in monthly installments of $1,500 -

interest only at 6% through January 2016, unsecured. 

(2) Note payable to Quantum Control, payable in monthly installments of $2,333, with no 

interest and a maturity date of May 2014. 

(3) Note payable to First Tennessee, payable in monthly installments of $11,453, including 

interest at 3.25% through September 2013. Collateralized by aircraft 565HK. 

(4) Note payable to BancorpSouth Bank, payable in monthly installments of $8,897, including 

interest at 6.25% through August 2024. Collateralized by West Side FBO building. 

(5) Note payable to BancorpSouth Bank, payable in monthly installments of $593, including 

interest at 7.75% through November 2012. Collateralized by Jeep Wrangler. 

(6) Note payable to Executive Group Holdings, with option to convert to stock, payable in 

quarterly installments- interest only at 5% through September 2014, unsecured. 

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(8) Note payable to Michael and Claudia Pacenka, .ITWS, payable in one lump sum balloon 

payment on or before September 2012, unsecured. 

(9) Note payable to First Insurance Funding Group, payable in monthly installments of 

$38,112 including interest at 5.95% through December 2012. Insurance policy premiums 

are financed for nine months, renewable each April. 

(1 0) Note payable to Ally Financial, payable in monthly installments of $527 including interest 

at 9.69% through April2017. Collateralized by Ford transit van. 

(II) Note payable to A. Howell, no monthly payments and no interest rate, unsecured with no 

maturity date. 

(12) Note payable to Jetstream Sales for the down payment on Phenom Position. No monthly 

payments and no interest rate. Unsecured with no maturity date. 

(13) Note payable to Ricardo Tostada, no monthly payments and no interest rate, for the 

balance due from Sale of aircraft N9!3ae. Unsecured with no maturity date. 

(14) Note payable to John Floyd, no monthly payments and no interest rate, unsecured and a 

maturity date of August 2012. 

(15) Note payable on demand to Hvizdak, no monthly payments with an interest rate of I 0%. 

Unsecured. 

(16) Note payable to Pinnacle Bank, payable in monthly installments of $9,840 including 

interest at 5.5% through September 2012. Collateralized by two J-32 aircraft. 

(17) Note payable to Dell Financial Services, payable in monthly installments of $415 including 

interest at 9.8% through February 2016. Collateralized by computer equipment. 

(18) Note payable to Ally Financial, payable in monthly installments of $514 including interest 

at 9.95% through May 2017. Collateralized by Ford transit van. 

(19) Note payable to Beacon Federal Bank, payable in monthly installments of $1,094- interest 

only at 5.25% through May 2013. Collateralized by King Air 6045S. 

(20) Note payable to Reece Howell. The Company has not made any payments and future 

payments are not known at this time. 

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(22) Note payable to Tom Chappell, payable upon sale of aircraft 564HK, with no interest. 

Future minimum payments under the notes payable to the banks are as follows: 

Year Ending August 31, 

2013 2014 2015 2016 2017 

Thereafter 

Note 14. Operating Leases (Non-Related l'arty) 

$ 2,386,094 

I ,426,176 

300,988 

479,474 

156,760 

317,088 

$ 5,066,580 

The Company also conducts operations from tacilities that are leased under operating leases. 

Rental expense under these leases amounted to $1,019,864 for the year ended August 31, 2012. 

The future minimum rental payment under these leases for the next five years and in the 

aggregate is as follows: 

Year Ending August 31, Facilities EguiJ.!ment 

2013 $ 940,476 $ 90,046 

2014 940,476 89,312 

2015 940,476 83,320 

2016 940,476 71,348 

2017 940,476 71,082 

Total $ 4,702,380 $ 405,108 

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Sales Tax 

Payroll Taxes Accrued and Withheld 

State Taxes 

Federal Taxes 

Property Taxes 

Total Taxes Payable 

Note 16. Income Taxes 

$ $ 

43,797 

2,134 

73,785 

100,315 

11 ,303 

231,334 

Income tax expense includes federal and state taxes currently payable and deferred taxes arising 

from temporary dilTerences between income for financial reporting and income tax purposes. 

The provision for income taxes for the year ended August 31, 2012 consisted of the following 

components: 

Federal State Total 

Current Tax Expense $ 39,037 $ $ 39,037 

Deferred Tax (Benefit) Expense (62,992) 14,081 (48,911) 

Total Income Tax (Benefit) Expense $ (23,955) $ 14,081 $ (9,874) 

Deferred taxes result from differences in the recognition of depreciation expense for tax and 

book purposes. Amounts for deferred tax liabilities at August 31, 2012, were as follows: 

Federal 

Deferred Tax Asset/(Liability)- current $ 122,084 

Deferred Tax Liability- noncurrent $ 278,539 

14 

State 

$ (6,512) 

$ 37,976 

Total 

$ 115,572 

$ 316,515 
HL Aviation 

Arvest Bank 

Regions Bank First Bank 

Real estate, Hangar at John Tune Airport 

Seven J-32 aircraft 

Flight simulator at Smyrna Airport 

Aircraft 1 OUP 

Total 

Note 18. Employee Retirement Plan 

$ 956,107 

1,200,000 

9,158 

508,092 

$ 2,673,357 

The Company offers to its employees a 40l(k) Plan as defined by Section 401(k) of the Internal 

Revenue Code. This plan is a Multiple Employer Plan and covers all employees, age 21 or older, 

who have six months or more of service. The Company matches 50% of the first 6% of the 

employee's contributions. The contributions are invested either in a mutual fund or a money 

market fund which is decided by the employee. An employee is l 00% vested once they become 

eligible to participate in the plan. 

The amount contributed to the plan and charged to operations was $90,034, for the year ended 

August 31,2012. 

Note 19. Other Income 

Other income consisted of the following at August 31: 

Income from Investment- various K-1 activity 

Income from Sale of Asset- Wings of Eagles, LLC 

Income from Bad Debt Recovery 

Miscellaneous Income- Corporate Flight Management 

Total 

Note 20. Economic Dependency 

$ 

2012 

59,359 

78,269 

82,782 

101,727 

322,137 

A downturn in aircraft charter and aircraft maintenance/fuel sales could have an adverse effect 

on Company operations. 

15 
MQY Wings of Eagles, LLC 

CFM Airport Development, LLC CFM HL Joint Venture 

Jetstream Sales, LLC 

Jetstream Air, LLC 

Financial Accounting Standards Board ("FASB") Interpretation No. 46, Consolidation ol 

Variable Interest Entities, (FASB Accounting Codification (ASC) 810-10, 

Consolidations) requires consolidation of these entities. The effects of this consolidation have 

not been determined. 

Note 22. Subsequent Events 

The Company is currently being audited by the Internal Revenue Service for Federal Excise Tax 

purposes. The current audit involves tax year 2010. The primary audit issue is the interpretation 

of the definition of "commercial aviation" as defined in a recent Chief Counsel advice 

memorandum which was issued in 2012. This impacts the owners use of managed aircraft. The 

Company does expect an audit adjustment and a potential tax assessment but the amount is not 

known at this time. 

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SUPPLEMENTARY INFORMATION 
Bad debt 

Depreciation Dues and subscriptions 

Employee training and uniforms 

Fees 

Insurance 

Rent - real property 

Maintenance and repairs 

Meals and entertainment Miscellaneous 

Office 

Officers life insurance 

Professional services 

Salaries and wages 

Taxes 

Travel 

Utilities 

Total operating expenses 

See independent accountants' compilation report. 

17 

21,952 

387,657 

136,907 

271,550 273,572 

381,419 

1,019,864 

380,866 

34,527 

112,633 130,824 

20,508 

127,119 

3,871,925 

91,461 

257,998 

356,287 

$ 7,980,809 
Supplemental Notes to the CFM Holdings, Inc. 

Compiled Consolidated Financial Statements 

Dated August 31, 2012 

Agreements related to stock ownership and conversion of debt to equity. 

In December of 2011, CFM issued a Promissory Note in the amount of $100,000 to Executive Group 

Holdings, LLC (“EGH”). The note pays interest quarterly and matures March 20, 2014. The promissory 

note contains an agreement that stipulates that EGH has an option to convert the note to 12,110 shares 

of common stock out of the company treasury at its discretion on or before maturity. EGH owns 

approximately 2.56% of CFM’s stock. If EGH elected to convert the note, it would still own less than 10% 

of CFM’ stock. 

On January 12, 2012, CFM issued a Promissory Note in the amount of $50,000 to John R. Patrick, an 

individual who resides in Ridgefield, CT. The note pays interest quarterly and matures January 12, 2017. 

The note contains an agreement that allows Mr. Patrick to convert the debt to 6,055 shares of common 

stock on or before the note maturity. Mr. Patrick is not presently a shareholder of CFM. If he elected to 

convert the note, he would own approximately 1% of CFM’s stock. 

Exhibit CFM - 303