CFMHOLDINGS,INC.Smyrna,TennesseeCompiledConsolidatedFinancialStatementsYearEndedAugust31,2012CONTENTSIndependentAccountants'CompilationRepottConsolidatedFinancialStatementsConsolidatedBalanceSheetConsolidatedStatementofIncomeConsolidatedStatementofStockholders'EquityConsolidatedStatementofCashFlowsNotestoConsolidatedFinancialStatementsSupplementaryInformationScheduleI-ConsolidatedScheduleofExpenses23456-1617wlslwCertifiedPuhlieRobertV.'Whisenant,CPA.CVAGeoffreyL.Stewal't.,CPArl'rentonD.\Vatrous,CPA.CVA,INDEPENDENTACCOUNTANTS'COMPILATIONREPORTTotheBoardofDirectorsCFMHoldings,Inc.Smyrna,TennesseeWehavecompiledtheaccompanyingconsolidatedbalancesheetofCFMHoldings,Inc.anditssubsidiaries,asofAugust31,2012,andtherelatedconsolidatedstatementsofincome,stockholders'equity,andcashflowfortheyearthenendedandtheaccompanyingsupplementaryinformation.Wehavenotauditedorreviewedtheaccompanyingconsolidatedfinancialstatementsandsupplementaryscheduleand,accordingly,donotexpressanopinionorprovideanyassuranceaboutwhethertheconsolidatedfinancialstatementsareinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.CFMHoldings,Inc.(the"Company")isresponsibleforthepreparationandfairpresentationofthefinancialstatementsinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericaandfordesigning,implementing,andmaintaininginternalcontrolrelevanttothepreparationandfairpresentationofthefinancialstatements.OurresponsibilityistoconductthecompilationinaccordancewithStatementsonStandardsforAccountingandReviewServicesissuedbytheAmericanInstituteofCertifiedPublicAccountants.Theobjectiveofacompilationistoassistmanagement(theowners)inpresentingfinancialinformationintheformoffinancialstatementswithoutundertakingtoobtainorprovideanyassurancethattherearenomaterialmodificationsthatshouldbemadetothefinancialstatements.However,wedidbecomeawareofadeparturefromgenerallyacceptedaccountingprinciplesthatisdescribedinthefollowingparagraph.AsdisclosedinNote21tothefinancialstatements,generallyacceptedaccountingprinciplesrequiretheprimarybeneficiaryofavariableinterestentitytoconsolidatethevariableinterestentityinitsfinancialstatements.ManagementhasinformedusthattheCompany'sfinancialstatementsdonotincludetheaccountsofrelatedentitiesthattheCompanyhasdeterminedarevariableinterestentities.TheeffectsofthisdeparturefromaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericaontheconsolidatedfinancialposition,consolidatedresultsofoperations,andconsolidatedcashflowshavenotbeendetermined.Nashville,TennesseeDecember20,2012ASSETSCurrentassetsAccountsreceivable-tradeAffiliatesreceivableDeferredtaxbenefitNotesreceivablePrepaidexpensesInventoriesRestrictedcashdepositsTotalcurrentassetsPropertyandequipmentEquipmentandmachineryBuildingsFurnitureandfixturesLeaseholdimprovementsLess:AccumulateddepreciationPropertyandequipment,netOtherassetsDepositsOtherassetsOtherinvestmentsTotalotherassetsTotalassetsCFMHOLDINGS,INC.ConsolidatedBalanceSheetAugust31,2012$$3,825,9062,198,580115,57214,839516,6044,118,459263,83911,053,7992,572,264I,351,269308,845367,9864,600,364(2,028,820)2,571,544320300,481138,472439,27314,064,616Seeindependentaccountants'compilationreportandaccompanyingnotestofinancialstatements.2LIABILITIESANDSTOCKHOLDERS'EQUITYCmTentliabilitiesCheckswritteninexcessofcashbalanceAccountspayableAffiliatepayablesAccruedexpensesCreditcardspayableNotespayableTaxespayableTotalcurrentliabilitiesOtherliabilitiesDeferredtaxliabilityRefundablecustomerdepositsRefundableinsurancedepositsOtherinvestmentsTotalotherliabilitiesLongtermdebtTotalliabilitiesMinorityinterestinsubsidiariesStockholders'equityCommonstock-noparvalueI0,000sharesauthorized;I,000sharesissuedandoutstandingAdditionalpaid-incapitalLess:TreasurystockRetainedearningsTotalstockholders'equityTotalliabilitiesandstockholders'equity$$117,6864,404,36956,4247,21747,9522,386,094231,3347,251,076316,5151,767,359I08,635I,432,3903,624,8992,680,48613,556,461468,78810,00081,885(67,846)15,32839,36714,064,616SalesCostofsalesPurchasesLaborSalescostsMaintenancecostInsurancecostsLeasecostsOthercosts-charterTotalcostofsalesGrossprofitonsalesOperatingexpensesOperatingincomeOtherincome(expense)InterestincomeOtherincomeInterestexpenseTotalothernetincomeCFMHOLDINGS,INC.ConsolidatedStatementofIncomeYearEndedAugust31,2012IncomebeforeincometaxesProvision(Benefit)forincometaxesIncomebeforeminorityinterestsMinorityinterestsConsolidatedcomprehensivenetincome$35,858,12814,338,8245,025,137173,77825,62441'1396,331,965l,600,67527,537J428,320,9867,980,809340,1776,738322,137(165,011)163,864504,041(9,874)513,915(93,425)$420,490Seeindependent accountants'compilationreportandaccompanyingnotestofinancialstatements.3CFMHOLDINGS,INC.ConsolidatedStatementofStockholders'EquityYearEndedAugust31,2012CapitalTreasuryPaidinRetainedStockStockCapitalEarningsTotalBeginningofyear$10,000$(67,846)$81,885$(405,162)$(381,123)Netincome513,915513,915Lessminorityinterest(93,425)(93,425)Endofyear$10,000$(67,846)$81,885$15,328$39,367Seeindependentaccountants'compilationreportandaccompanyingnotestofinancialstatements.4CFMHOLDINGS,INC.ConsolidatedStatementofCashFlowYearEndedAugust31,2012CashflowsfromoperatingactivitiesConsolidatedcomprehensivenetincomeAdjustmentstoreconcilenetincometonetcashProvidedbyoperatingactivities:MinorityinterestearningsofVIEDepreciation(Increase)decreaseinAccountsreceivable-tradeAccountsreceivable-affiliateDeferredtaxbenefitNotesreceivablePrepaidexpensesInventoriesIncrease(decrease)inAccountspayableAffiliatepayablesCreditcardpayableDeferredtaxliabilityShorttermnotespayableRefundableaccountreceivabledepositsTaxespayableAccruedexpensesNetcashprovidedbyoperatingactivitiesCashflowsfrominvestingactivitiesPurchasesofpropertyandequipmentInvestmentsNetcashusedbyinvestingactivitiesCashflowsfromfinancingactivitiesNetchangesonlongtermdebtNetcashusedbyfinancingactivitiesNetdecreaseincashCash-beginningofyearCash-endofyear$420,49093,425387,657(626,442)(495,207)(115,572)9,102(76,759)1,124,398152,684(457,674)17,447(26,981)(425,531)73,868(65,644)(534)(II,273)(170,282)93,014(77,268)(59,557)(59,557)(148,098)30,412$(117,686)Seeindependentaccountants'compilationreportandaccompanyingnotestofinancialstatements.5SupplementalDisclosureofCashFlowInformationIncometaxespaidInterestpaid$32,280165,011CFMHOLDINGS,INC.ANDSUBSIDIARIESYearEndedAugust31,2012NOTESTOCONSOLIDATEDFINANCIALSTATEMENTSNote1.PrinciplesofConsolidation,ReportingEntitiesandSummaryofSignificantAccountingPoliciesThissummaryofthesignificantaccountingpoliciesofCFMHoldings,Inc.,(the"Company")ispresentedtoassistinunderstandingtheCompany'sconsolidatedfinancialstatements.TheconsolidatedfinancialstatementsandnotesarerepresentationsoftheCompany'smanagement,whichisresponsiblefortheirintegrityandobjectivity.PrinciplesofConsolidationandReportingEntitiesTheconsolidatedfinancialstatementsincludetheaccountsoftheCFMHoldings,Inc.,CorporateFlightManagement,Inc.,whichis81.55%ownedbyCFMHoldings,Inc.,410Investors,LLC,whichis90.91%ownedbyJetquick,LLC,Jetquick,LLC,whichis51%ownedbyCorporateFlightManagement,Inc.,WingsofEagles,LLC,whichis70%ownedbyCorporateFlightManagement,Inc.,andJWNWingsofEagles,LLCwhichis50.10%ownedbyCorporateFlightManagement,Inc.Allmaterialintercompanyaccountsandtransactionsareeliminatedinconsolidation.BusinessActivitvCorporateFlightManagement,Inc.wasincorporatedonJuly26,1982,inaccordancewiththeTennesseeGeneralCorporationAct.TheCompany'sprimarypurposeistoconductbusinessinthefieldofaviation,charter,maintenance,aircraftmanagement,flightschool,andFBO.ThemainofticesandoperationsoftheCompanyarelocatedinSmyrna,Tennessee.CashandCashEquivalentsForfinancialstatementpurposes,theCompanyconsidersallcashandhighlyliquidinvestmentswhichhaveoriginalmaturitiesofthreemonthsorless,tobecashequivalents.UseofEstimatesThepreparationoffinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericarequiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosureofcontingentassetsandliabilitiesattheelateofthefinancialstatementsandthereportedamountsofrevenuesandexpensesduringthereportingperiod.Actualresultscoulddifferfromthoseestimates.VariableInterestEntitiesFASBASC810requiresavariableinterestentity("VIE")tobeconsolidatedifapartywithownership,contractualorotherfinancialinterestintheVIE(avariableinterestholder)isobligatedtoabsorbamajorityoftheriskoflossfromtheVIE'sactivities,isentitledtoreceiveamajorityoftheVIE'sresidualreturns(ifnopatiyabsorbsamajorityoftheVIE'slosses),orboth.AvariableinterestholderthatconsolidatedtheVIEiscalledtheprimarybeneficiary.6CFMHOLDINGS,INC.ANDSUBSIDIARIESYearEndedAugust31,2012NOTESTOCONSOLIDATEDFINANCIALSTATEMENTSNotel.PrinciplesofConsolidation,ReportingEntitiesandSummaryofSignificantAccountingPolicies-continuedAccountsReceivable-TradeandRevenueRecognitionAccountsreceivablearereflectedatestimatednetrealizablevalue.TheCompanyhaselectedtorecordbaddebtsusingthedirectwrite-offmethod.Generallyacceptedaccountingprinciplesrequirethattheallowancemethodbeusedtorecognizebaddebts;however,theeffectofusingthedirectwrite-offmethodisnotmateriallydifferentfromtheresultsthatwouldhavebeenobtainedundertheallowancemethod.InventoriesInventoriesconsistofparts,fuel,aircraftandworkinprocess.Inventoryiscalculatedonacostaveragesystem.PrepaidExpensesPrepaidexpensesareamortizedovertheperiodofbenefitusingthestraight-linemethod.PropertyandEquipmentPropertyandequipmentarestatedatcost.DepreciationlScomputedusingthestraightlinemethodoverestimatedusefullivesof3to39years.TheCompanyevaluateslong-livedassetsforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountofanassetmaynotberecoverable.Uponsuchanoccurrence,recoverabilityofassetstobeheld<melusedismeasuredbycomparingthecarryingamounttoestimatedundiscountedfuturecashflows.Ifthecarryingamountoftheassetexceedsitsestimatedfuturecashflows,animpairmentchargeisrecognizedbasedupontheamountbywhichthecarryingamountexceedsthefairvalueoftheasset.RevenueRecognitionRevenueisrecognizedwhentheearningsprocessiscompleteandtherisksandrightsofownershiphavetransferredtothecustomer,whichisgenerallyconsideredtohaveoccurredwhenproductshavebeendelivered,andtitleandriskofownershippass.IncomeTaxesTheCompanyprovidesforincometaxesandrecognizesdeferredtaxliabilitiesandassetsfortheexpectedtaxconsequencesoftemporarydifferencesbetweenthefinancialstatementcarryingamountsandthe taxbasisofassetsandliabilities.AdvertisingCostsAdvertisingcostsarechargedtooperationswhenincurred.Advertisingexpensewas$48,531fortheyearendedAugust31,2012.7CFMHOLDINGS,INC.ANDSUBSIDIARIESYearEndedAugust31,2012NOTESTOCONSOLIDATEDFINANCIALSTATEMENTSNote2.ConcentrationofCreditRiskTheCompanymaintainsitscashbalancesinfourfinancialinstitutionslocatedinNashville,Tcm1essee.Thebalancesateach bankareinsuredbytheFederalDepositInsuranceCorporationatAugust31,2012.Note3.AccountsReceivable-TradeAnagingofAccountsReceivableatAugust31wasasfollows:Current30Days60Days90DaysandOverNote4.AccountsReceivable-AffiliatesJetstreamAir,LLCCFMAirportDevelopment,LLCCFM-HLJointVentureJetstreamSales,LLCTotalAccountsReceivable-Affiliates2012$I,357,232918,312363,9151,186,447$3,825,906August31,2012$1,640,775191,082123,279243,444$2,198,580Duringtheperiod,Jetquik,LLCand410Investors,LLCclosedtheiroperations.TheCompanywroteoff$4,008indebtowedbythesubsidiary.Note5.NotesReceivableNotesreceivablecomprisetwoseparatenotesfromChuckHowellandDavidAugustin,bothpartownersoftheCompany.AtAugust31,2012thebalancesofNotereceivable-ChuckHowellandDavidAugustinwere$2,329and$12,510,respectively.8CFMHOLDINGS,INC.ANDSUBSIDIARIESYearEndedAugust31,2012NOTESTOCONSOLIDATEDFINANCIALSTATEMENTSNote6.InventoriesInventoriesconsistedofthefollowingatAugust31:AircraftPartsWorkinProcessFuelTotalInventoriesNote7.RestrictedCashDeposits20121,898,9211,470,621557,264191,653$4,118,459TheCompanyholdsinsuranceescrowdepositsfordifferentpoliciesaswellasletterofcreditdeposits.ThebalanceatAugust31,2012is$263,839.Note8.InvestmentsInvestmentsinrelatedentitiesatAugust31,2012consistedofthefollowing:Investment-GBAGyroplanesInvestment-.JetstreamAir(deficit)Investment-CFM-HLJointVenture(deficit)TotalNetInvestments(deficit)Note9.CreditCardsPayableEquity$138,472$138,472Deficit(1,282,357)(150,033)($1,432,390)TheCompanycunentlyhasa$500,000limitcreditcardforoperatingaircraftandpartsinventorypurchases.AsofAugust31,2012,thebalancewas$47,952.9CFMHOLDINGS,INC.ANDSUBSIDIARIESYearEndedAugust31,2012NOTESTOCONSOLIDATEDFINANCIALSTATEMENTSNote10.AffiliatesPayableAffiliatespayableatAugust31consistedofthefollowing:CFMAirportDevelopmentDuetoStockholdersTotal AffiliatesPayableNote11.RefundableCustomerDeposits2012$17,31739,107$56,424TheCompanyrequirescustomerdepositsbeforeundertakinglargemaintenanceprojectsorbookingflighttimes.ThefollowingisasummaryofallrefundablecustomerdepositsatAugust31,2012:CharterPrepaysMaintenanceRefi.trbishmentFBO-Pre-purchasesAircraftSalesTotalRefi.mdableCustomerDepositsNote12.RefundableInsuranceDeposits2012$987,956257,90813,198508,297$1,767,359TheCompanyoffersthemanaged aircraftownerstheopportunitytopar!Jc1pateintheCompany'sfleetinsuranceprogram,whichusuallyaffordssomediscountsonpremiumsduetovolumebuying.Aspartofthefleetinsuranceprogram,theinsurancecompanyrequiresadepositasreserveagainstmonthlypremiums.TheCompanypaysthedeposit(recordedasrestrictedcash)fromcashreceivedfromeachowner.TheCompanyisobligatedtoreimburseeachaircraftownerwhentheaircraftleavestheinsuranceprogram.10CFMHOLDINGS,INC.ANDSUBSIDIARIESYearEndedAugust31,2012NOTESTOCONSOLIDATEDFINANCIALSTATEMENTSNote13.NotesPayableNotesPayableatAugust31consistedofthefollowing:2012CurrentNoncurrent(I)-ChappellSmith&Associates(2)-QuantumControl(3)-FirstTennessee( 4)-BancorpSouthBank(5)-BancorpSouthBank(6)-ExecutiveGroupHoldings(7)-JohnR.Patrick(8)-Pacenka,JTWS(9)-FirstInsuranceFundingGroup(!0)-AllyBank(2012Ford)(ll)-A.Howell(12)-JetstreamSales(13)-RicardoTostada(14)-JohnFloyd(15)-HvizdakLoan(16)-PinnacleBank(17)-DellFinancialServices(18)-AllyBank(2011Ford)(19)-BeaconFederal(20)-ReeceHowell(21)-PinnacleBankLineofCredit(22)-TomChappellTotalNotesPayable$$27,991137,439106,7601,797100,000167,6676,32817,00048,500393,928374,8!857,554542,1704,9746,168250,000143,0002,386,094$265,61019,5941,282,352744,128100,00050,00017,261I0,00517,04176,75897,737$2,680,486(!)NotepayabletoChappellSmith&Associates,payableinmonthlyinstallmentsof$1,500-interestonlyat6%throughJanuary2016,unsecured.(2)NotepayabletoQuantumControl,payableinmonthlyinstallmentsof$2,333,withnointerestandamaturitydateofMay2014.(3)NotepayabletoFirstTennessee,payableinmonthlyinstallmentsof$11,453,includinginterestat3.25%throughSeptember2013.Collateralizedbyaircraft565HK.(4)NotepayabletoBancorpSouthBank,payableinmonthlyinstallmentsof$8,897,includinginterestat6.25%throughAugust2024.CollateralizedbyWestSideFBObuilding.(5)NotepayabletoBancorpSouthBank,payableinmonthlyinstallmentsof$593,includinginterestat7.75%throughNovember2012.CollateralizedbyJeepWrangler.(6)NotepayabletoExecutiveGroupHoldings,withoptiontoconverttostock,payableinquarterlyinstallments-interestonlyat5%throughSeptember2014,unsecured.11CFMHOLDINGS,INC.ANDSUBSIDIARIESYearEndedAugust31,2012NOTESTOCONSOLIDATEDFINANCIALSTATEMENTSNote13.NotesPayable-continued(7)NotepayabletoJohnR.Patrick,withoptiontoconverttostock,payableinquarterlyinstallments-interestonlyat5%throughOctober2016,unsecured.(8)NotepayabletoMichaelandClaudiaPacenka,.ITWS,payableinonelumpsumballoonpaymentonorbeforeSeptember2012,unsecured.(9)NotepayabletoFirstInsuranceFundingGroup,payableinmonthlyinstallmentsof$38,112includinginterestat5.95%throughDecember2012.Insurancepolicypremiumsarefinancedforninemonths,renewableeachApril.(10)NotepayabletoAllyFinancial,payableinmonthlyinstallmentsof$527includinginterestat9.69%throughApril2017.CollateralizedbyFordtransitvan.(II)NotepayabletoA.Howell,nomonthlypaymentsandnointerestrate,unsecuredwithnomaturitydate.(12)NotepayabletoJetstreamSalesforthedownpaymentonPhenomPosition.Nomonthlypaymentsandnointerestrate.Unsecuredwithnomaturitydate.(13)NotepayabletoRicardoTostada,nomonthlypaymentsandnointerestrate,forthebalanceduefromSaleofaircraftN9!3ae.Unsecuredwithnomaturitydate.(14)NotepayabletoJohnFloyd,nomonthlypaymentsandnointerestrate,unsecuredandamaturitydateofAugust2012.(15)NotepayableondemandtoHvizdak,nomonthlypaymentswithaninterestrateofI0%.Unsecured.(16)NotepayabletoPinnacleBank,payableinmonthlyinstallmentsof$9,840includinginterestat5.5%throughSeptember2012.CollateralizedbytwoJ-32aircraft.(17)NotepayabletoDellFinancialServices,payableinmonthlyinstallmentsof$415includinginterestat9.8%throughFebruary2016.Collateralizedbycomputerequipment.(18)NotepayabletoAllyFinancial,payableinmonthlyinstallmentsof$514includinginterestat9.95%throughMay2017.CollateralizedbyFordtransitvan.(19)NotepayabletoBeaconFederalBank,payableinmonthlyinstallmentsof$1,094-interestonlyat5.25%throughMay2013.CollateralizedbyKingAir6045S.(20)NotepayabletoReeceHowell.TheCompanyhasnotmadeanypaymentsandfuturepaymentsarenotknownatthistime.12CFMHOLDINGS,INC.ANDSUBSIDIARIESYearEndedAugust31,2012NOTESTOCONSOLIDATEDFINANCIALSTATEMENTSNote13.NotesPayable-continued(21)LineofcreditwithPinnacleBank,nomonthlypaymentswithinterestat6.25%throughFebruary2013.(22)NotepayabletoTomChappell,payableuponsaleofaircraft564HK,withnointerest.Futureminimumpaymentsunderthenotespayabletothebanksareasfollows:YearEndingAugust31,20132014201520162017ThereafterNote14.OperatingLeases(Non-Relatedl'arty)$2,386,094I,426,176300,988479,474156,760317,088$5,066,580TheCompanyalsoconductsoperationsfromtacilitiesthatareleasedunderoperatingleases.Rentalexpenseundertheseleasesamountedto$1,019,864fortheyearendedAugust31,2012.Thefutureminimumrentalpaymentundertheseleasesforthenextfiveyearsandintheaggregateisasfollows:YearEndingAugust31,FacilitiesEguiJ.!ment2013$940,476$90,0462014940,47689,3122015940,47683,3202016940,47671,3482017940,47671,082Total$4,702,380$405,10813CFMHOLDINGS,INC.ANDSUBSIDIARIESYearEndedAugust31,2012NOTESTOCONSOLIDATEDFINANCIALSTATEMENTSNote15.TaxesPayableTaxespayableconsistedofthefollowingatAugust31:SalesTaxPayrollTaxesAccruedandWithheldStateTaxesFederalTaxesPropertyTaxesTotalTaxesPayableNote16.IncomeTaxes$$201243,7972,13473,785100,31511,303231,334IncometaxexpenseincludesfederalandstatetaxescurrentlypayableanddeferredtaxesarisingfromtemporarydilTerencesbetweenincomeforfinancialreportingandincometaxpurposes.TheprovisionforincometaxesfortheyearendedAugust31,2012consistedofthefollowingcomponents:FederalStateTotalCurrentTaxExpense$39,037$$39,037DeferredTax(Benefit)Expense(62,992)14,081(48,911)TotalIncomeTax(Benefit)Expense$(23,955)$14,081$(9,874)Deferredtaxesresultfromdifferencesintherecognitionofdepreciationexpensefortaxandbookpurposes.AmountsfordeferredtaxliabilitiesatAugust31,2012,wereasfollows:FederalDeferredTaxAsset/(Liability)-current$122,084DeferredTaxLiability-noncurrent$278,53914State$(6,512)$37,976Total$115,572$316,515CFMHOLDINGS,INC.ANDSUBSIDIARIESYearEndedAugust31,2012NOTESTOCONSOLIDATEDFINANCIALSTATEMENTSNote17.ContingentLiabilitiesTheCompanyisaguarantoronthefollowingnotepayablesasofAugust31,2012:BankHLAviationArvestBankRegionsBankFirstBankCollateralRealestate,HangaratJohnTuneAirportSevenJ-32aircraftFlightsimulatoratSmyrnaAirportAircraft1OUPTotalNote18.EmployeeRetirementPlanAmount$956,1071,200,0009,158508,092$2,673,357TheCompanyofferstoitsemployeesa40l(k)PlanasdefinedbySection401(k)oftheInternalRevenueCode.ThisplanisaMultipleEmployerPlanandcoversallemployees,age21orolder,whohavesixmonthsormoreofservice.TheCompanymatches50%ofthefirst6%oftheemployee'scontributions.Thecontributionsareinvestedeitherinamutualfundoramoneymarketfundwhichisdecidedbytheemployee.Anemployeeisl00%vestedoncetheybecomeeligibletoparticipateintheplan.Theamountcontributedtotheplanandchargedtooperationswas$90,034,fortheyearendedAugust31,2012.Note19.OtherIncomeOtherincomeconsistedofthefollowingatAugust31:IncomefromInvestment-variousK-1activityIncomefromSaleofAsset-WingsofEagles,LLCIncomefromBadDebtRecoveryMiscellaneousIncome-CorporateFlightManagementTotalNote20.EconomicDependency$201259,35978,26982,782101,727322,137Adownturninaircraftcharterandaircraftmaintenance/fuelsalescouldhaveanadverseeffectonCompanyoperations.15CFMHOLDINGS,INC.ANDSUBSIDIARIESYearEndedAugust31,2012NOTESTOCONSOLIDATEDFINANCIALSTATEMENTSNote21.UnconsolidatedRelatedPartiesTheCompanyhasexcludedthefinancialstatementsofthefollowingentitiesfromconsolidationwiththeaccompanyingfinancialstatements:MQYWingsofEagles,LLCCFMAirportDevelopment,LLCCFMHLJointVentureJetstreamSales,LLCJetstreamAir,LLCFinancialAccountingStandardsBoard("FASB")InterpretationNo.46,ConsolidationolVariableInterestEntities,(FASBAccountingCodification(ASC)810-10,Consolidations)requiresconsolidationoftheseentities.Theeffectsofthisconsolidationhavenotbeendetermined.Note22.SubsequentEventsTheCompanyiscurrentlybeingauditedbytheInternalRevenueServiceforFederalExciseTaxpurposes.Thecurrentauditinvolvestaxyear2010.Theprimaryauditissueistheinterpretationofthedefinitionof"commercialaviation"asdefinedinarecentChiefCounseladvicememorandumwhichwasissuedin2012.Thisimpactstheownersuseofmanagedaircraft.TheCompanydoesexpectanauditadjustmentandapotentialtaxassessmentbuttheamountisnotknownatthistime.16SUPPLEMENTARYINFORMATIONOperatingexpensesCFMHOLDINGS,INC.ConsolidatedScheduleofExpensesYearEndedAugust31,2012AdvertisingandmarketingAutoBaddebtDepreciationDuesandsubscriptionsEmployeetraininganduniformsFeesInsuranceRent-realpropertyMaintenanceandrepairsMealsandentertainmentMiscellaneousOfficeOfficerslifeinsuranceProfessionalservicesSalariesandwagesTaxesTravelUtilitiesTotaloperatingexpensesSeeindependentaccountants'compilationreport.17$48,53155,20921,952387,657136,907271,550273,572381,4191,019,864380,86634,527112,633130,82420,508127,1193,871,92591,461257,998356,287$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. Pa trick to convert the debt to 6,055 shares of common

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

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