2007 Financial Statements

VENGA AEROSPACE SYSTEMS INC. CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

VENGA AEROSPACE SYSTEMS INC. Index to the Consolidated Financial Statements DECEMBER 31, 2007 AND 2006

INDEX Page Auditors' report

1

FINANCIAL STATEMENTS Consolidated balance sheet

2

Consolidated statement of operations and deficit

3

Consolidated statement of cash flows

4

Notes to the consolidated financial statements

5 - 16

AUDITORS' REPORT

To the Shareholders of: Venga Aerospace Systems Inc.

We have audited the consolidated balance sheet of VENGA AEROSPACE SYSTEMS INC. as at December 31, 2007 and 2006 and the consolidated statements of operations and deficit and cash flows for the years 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 Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance 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. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2007 and 2006 and the results of its operations and the changes in cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

Rich Rotstein RICH ROTSTEIN LLP Chartered Accountants Licensed Public Accountants Toronto, Canada April 25, 2008

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VENGA AEROSPACE SYSTEMS INC. CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2007 AND 2006

ASSETS 2007 $ Current Assets Cash Accounts receivable

(Restated) 2006 $

31,159 5,118

56,486 4,830

36,277

61,316

Other Assets Investment (note 9 and 5(b)) Investment in Global Mineral Investments, LLC (note 10 and 5(c))

600,000 50,400

667,722 50,400

Total Assets

686,677

779,438

21,726 3,579

32,005 5,072

25,305

37,077

LIABILITIES Current Liabilities Accounts payable and accrued charges Deferred revenue

SHAREHOLDERS' EQUITY Capital stock (note 11) Contributed surplus Deficit

16,723,966 16,723,966 890,684 890,684 (16,953,278) (16,872,289)

Total Liabilities and Shareholders' Equity

661,372

742,361

686,677

779,438

Going concern (note 2)

Approved by the Board of Directors:

" Hirsh Kwinter "

Director

" Dr. Ezra Franken "

Director

The accompanying notes are an integral part of these consolidated financial statements

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VENGA AEROSPACE SYSTEMS INC. CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

2007 $

(Restated) 2006 $

REVENUE (note 12)

84,239

108,918

EXPENSES Bad debt expense General and administrative Professional fees Sundry costs Settlement of lawsuit (note 15)

50,000 31,670 11,291 4,545 0

0 216,624 40,408 12,217 35,000

97,506

304,249

(13,267)

(195,331)

(67,722)

(11,411)

(80,989)

(206,742)

DEFICIT - BEGINNING OF YEAR

(16,872,289)

(16,665,547)

DEFICIT - END OF YEAR (note 4)

(16,953,278)

(16,872,289)

(0.0004)

(0.0010)

LOSS FROM OPERATIONS Foreign exchange NET LOSS FOR THE YEAR

Net loss per share - basic and fully diluted

The accompanying notes are an integral part of these consolidated financial statements

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VENGA AEROSPACE SYSTEMS INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

(Restated) 2006 $

2007 $ OPERATING ACTIVITIES Net (Loss) Items not affecting cash Deferred revenue amortization Foreign exchange loss on investment Changes in non-cash working capital items Accounts receivable Inventory Accounts payable and accrued charges CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

(80,989)

(206,742)

(1,492) 67,722 (14,759)

(990) 0 (207,732)

(288) 0 (10,280) (10,568)

(1,633) 12,217 216,841 227,425

(25,327)

19,693

INVESTING ACTIVITIES Increase in investment Investment in private company funded by liquidation of account receivable

0 0

(667,722) (50,400)

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

0

(718,122)

FINANCING ACTIVITIES Additional loan proceeds from 2930170 Canada Inc. Proceeds from issuance of common stock Share issue costs

0 0 0

87,600 667,620 (7,772)

CASH PROVIDED BY FINANCING ACTIVITIES

0

747,448

NET (DECREASE) INCREASE IN CASH

(25,327)

49,019

Cash - beginning of year

56,486

7,467

CASH - END OF YEAR

31,159

56,486

Cash is represented by: Cash

31,159

56,486

0 0

1,519 686,743

OTHER CASH FLOW INFORMATION: Interest paid Capital stock issued in exchange for debt (note 11(c))

The accompanying notes are an integral part of these consolidated financial statements

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VENGA AEROSPACE SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2007 AND 2006

1.

CORPORATE PROFILE The Company was incorporated under the Business Corporations Act (Ontario) by certificates of amalgamation dated April 26, 1979, amalgamating Frodac Mines Ltd., Great Bear Silver Mines Limited and Silver Monard Mines Limited to become Frodac Consolidated Energy Resources Ltd. On July 25, 1985, it changed its name to Global Aerospace Systems Inc. and on November 3, 1987, the company further changed its name to Venga Aerospace Systems Inc. In addition, these consolidated financial statements include the wholly owned subsidiary Venga Joint Venture Ltd., which is inactive.

2.

GOING CONCERN These financial statements have been prepared in accordance with Canadian generally accepted accounting principles applicable to a going concern which assumes that the Company will be able to realize its assets, including the ultimate realization of its long-term investments, and discharge its liabilities in the normal course of business. Recurring sources of revenue have not yet proven to be sufficient. The Company needs to obtain additional financing to enable it to continue its business. In the absence of additional financing, the Company may not have sufficient funds to meet its obligations. Management continues to monitor the cash needs and consider various alternatives to raise additional financing. However, management is reasonably confident but can offer no guarantee that it will be able to secure the necessary financing to enable the Company to continue as a going concern. These financial statements do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern. There is no assurance that this will be successful. If the going concern basis is not appropriate, material adjustments may be necessary in the carrying amounts and/or classification of assets and liabilities and the loss for the period reported in these financial statements.

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VENGA AEROSPACE SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2007 AND 2006

3.

ACCOUNTING ERROR - RETROSPECTIVE RESTATEMENT During 2007, the Company changed its accounting policy for the treatment of its investment in 3DP North America Joint Venture (the "New JV"). In the prior period, when the investment arose, it was accounted for using the proportionate consolidation method applicable to joint ventures, whereby the Company's proportionate share of revenues, expenses, assets and liabilities were included in the Company's accounts. In the current period, this same investment has been accounted for using the cost method. It was determined that the cost method was a more appropriate method to use as the New JV does not meet the definition of a joint venture, as defined in CICA Handbook section 3055 Interests in Joint Ventures. Furthermore, it was determined that because the Company does not have significant influence over the New JV investment, the equity method would not be appropriate either. The financial statements of 2006 have been restated to correct this error. The effect of the restatement on those financial statements is summarized below. There is no effect in 2007. Balance sheet items

Income statement items Effect on 2006 $

(Decrease) in cash (Decrease) in inventory (Decrease) in deposits on equipment (Decrease) in loan receivable Increase in investment in New JV (Increase) in equity

4.

(151,193) (12,885)

Effect on 2006 $ (Increase) in revenue Increase in expenses (Decrease) in net loss

(42,631) 31,361 (11,270)

(253,654) (238,720) 667,722 (11,270)

PRIOR YEAR DEFICIT RECONCILIATION 2006 $ DEFICIT - END OF YEAR As previously stated Accounting error (note 3) DEFICIT - END OF YEAR AS RESTATED

(16,883,559) 11,270 (16,872,289)

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VENGA AEROSPACE SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2007 AND 2006

5.

OPERATIONS a. Aerospace Unit Venga's aeronautics division was engaged in the development of a full-scale, composite jet drone/aircraft known as the TG-10 Brushfire. In May of 1998, a full-scale prototype of the Company's drone/aircraft was destroyed in a fire. Further development of Venga's composite drone/aircraft program has been held in abeyance pending the securing of adequate funding for the program. On June 17, 2004, the Company entered into a development agreement with Air Combat Warfare International ("ACWI") of Ayr, Ontario, wherein both parties agreed to make coordinated efforts to attempt to exploit ACWI's existing and potential head and sub-contracts to supply flight and combat support services for the U.S. military and the military forces of Canada and various other NATO countries. Though the Company has extended its development agreement with ACWI to April 3, 2008, the Company is currently taking no further actions to attempt to exploit any potential contracts with or through ACWI. The Company, in association with ARINC Incorporated (www.arinc.com), has made an unsolicited proposal to the Canadian government to provide replacement jet aircraft for the Canadian Forces' Snowbirds aerial demonstration squadron. In July of 2007, ARINC advised the Company that as a consequence of ARINC's decision to discontinue its aircraft maintenance division, ARINC was withdrawing from further participation in the Company's Snowbirds' aircraft replacement proposal. As a direct result of the continuing delays in the Canadian government's decision with respect to selecting a program to replace or upgrade the Snowbirds' aircraft, the Company is holding its Snowbirds' aircraft replacement proposal in abeyance pending receipt of a positive response from the Canadian government. b. 3D Graphics Unit In November of 2006, the Company entered into a joint venture agreement (the "New JV Agreement") with 3DP North America, Inc., of Kenner, Louisiana; United Business & Capital Services, LLC of Kenner, Louisiana; EKG, LLC of Lafayette, Louisiana and Armadillo Photo Supply, Inc. of Houston, Texas, creating a business venture, the 3DP North America Joint Venture (the "New JV"), to provide a range of advanced 3D products and print services for both commercial and consumer markets. The Company has a 30% ownership interest in the New JV with 3DP North America, Inc., who acts as the managing venturer of the New JV, owning the remaining 70% of the business venture. Pursuant to the terms of the New JV Agreement, the Company advanced $600,000 USD of capital to the New JV and upon termination of the New JV, the company is entitled to its capital account share in assets of the New JV. The Company has no management rights or further funding requirements or obligations with respect to the New JV. The Company's participation in the New JV is limited to the Company's right to receive 30% of the New JV's net profits as and when such profits are distributed to the joint venturers in accordance with the terms and provisions of the New JV Agreement. The Company is only liable to the extent of its investment and is indemnified from the other joint venturers for any excess losses and liabilities. The New JV has entered into a purchase agreement to acquire two 3D print/processors and subject to the terms of this purchase agreement has paid deposits towards the purchase of this equipment. In June of 2007, the New JV began to process 3D film orders that had been previously forwarded to the Company's CLIK 3D business unit.

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VENGA AEROSPACE SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2007 AND 2006

c. Mining and Resource Unit The Company initially acquired a 3% interest, together with an option to acquire up to an additional 15% interest, in Global Mineral Investments, LLC ("GMI"), a private U.S. corporation that proposes to lease and develop gold mining concessions in West Africa. On August 31, 2007, GMI was awarded four Class B Gold Mining Licences by the Ministry of Lands, Mines and Energy of the Republic of Liberia for four, separate concessions located in the Sanquin Mining Zone, Sinoe County in the Republic of Liberia. In consideration of services that the Company rendered GMI, on September 6, 2007, the Company's ownership interest in GMI was increased from 3% to 4%. 6.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a)

Principles of Consolidation The consolidated financial statements include the accounts of Venga Aerospace Systems Inc. ("the Company") and its subsidiary.

(b)

Basis of Presentation The Company has prepared these comparative financial statements on a consolidated basis which includes its wholly-owned subsidiary, Venga Joint Venture Ltd.

(c)

Use of Estimates The preparation of these consolidated financial statements, in conformity with Canadian generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from these estimates. Significant estimates include prepaid expenses and certain accrued liabilities.

(d)

Financial Instruments The Company classifies all financial instruments. The Company classifies cash, accounts receivable, accounts payable and accrued liabilities as held for trading financial instruments. Investments with a maturity date and fixed or determinable payments that the entity has the positive intention and ability to hold to maturity, are classified as held-tomaturity financial instruments. Investments that do not have fixed terms or determinable payments and are not actively bought and sold for the purpose of profit taking, are classified as available-for-sale financial instruments.

(e)

Income Taxes The Company uses the asset and liability method of accounting for income taxes under which future tax assets and liabilities are recognized for differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using substantively enacted tax rates in effect in the year in which those temporary differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized as part of the provision for income taxes in the year that includes the enactment date. A valuation allowance is recorded to the extent there is uncertainty regarding realization of future tax assets.

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VENGA AEROSPACE SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2007 AND 2006

(f)

Translation of Foreign Currencies Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange prevailing at the year end, non-monetary assets and liabilities are translated at historical rates and revenue and expenses are translated at the rate of exchange in effect on the transaction dates. Exchange gains and losses arising on translation of monetary items are included in income in the year in which they occur.

(g)

Long-term Investments Long-term investments are recorded at cost. Long-term investments classified as held-tomaturity financial instruments, are valued at amortized cost, with changes in valuation charged to operations. Long-term investments classified as available-for-sale financial instruments, are valued at fair market value, with changes in valuation charged to comprehensive income. Gains and losses are recognized when investments are sold. Income is recognized only to the extent dividends are received.

(h)

Impairment of Long-lived Assets Long-lived assets, including capital assets, are amortized over their useful lives. The Company reviews long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the undiscounted cash flows expected to result from the use and eventual disposition of a group of assets is less than its carrying amount, it is considered impaired. An impairment loss is measured as the amount by which the carrying amount of the group of assets exceeds its fair value. At December 31, 2007, no such impairment has occurred.

(i)

Basic and Diluted Loss per Share The Canadian Institute of Chartered Accountants ("CICA") recommends the use of the treasury stock method in computing earnings/loss per share. Under this method, basic loss per share is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding during the year. In computing the loss per share on a fully diluted basis, the treasury stock method assumes that proceeds received from in-the-money stock options are used to repurchase common shares at the prevailing market rate. The weighted average number of common shares outstanding during the year was 228,271,893 (2006 - 205,731,048).

(j)

Revenue Recognition Revenue is earned from the provision of consulting services, licence fees and providing 3D film print/processing services. The Company recognizes revenue from consulting services when performance of the consulting services are complete and recognizes revenue from the provision of 3D film print/processing services when the printed 3D images are shipped to the customer. The licence fees represent an annual fee that the New JV pays the Company for use of the Company's CLIK 3D trade name. Deferred revenue is amortized to income as it is earned.

7.

CHANGES IN ACCOUNTING POLICIES On January 1, 2007, the Company adopted the revised CICA Handbook Section 1506 Accounting Changes. Under the revised section, voluntary changes in accounting policy are permitted only if they result in financial statements which provide more reliable and relevant information. Accounting policy changes are applied retrospectively unless it is impractical to

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VENGA AEROSPACE SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2007 AND 2006 determine the period or cumulative impact of the change. Corrections of prior period errors are applied retrospectively and changes in accounting estimates are applied prospectively by including these changes in earnings. The guidance was effective for all changes in accounting policies, changes in accounting estimates and corrections of prior periods errors initiated in periods beginning on or after January 1, 2007. This new standard did not affect the Company's consolidated financial statements for the year ended December 31, 2007. On January 1, 2007, the Company prospectively adopted CICA Handbook Section 1530 Comprehensive Income. Comprehensive income is the change in a company’s net assets that results from transactions, events and circumstances from sources other than the company’s shareholders and the company’s net income and Other Comprehensive Income. Other Comprehensive Income includes items that would not normally be included in net earnings such as unrealized gains or losses on available-for-sale investments. There were no such items recognized in comprehensive income for the year ended December 31, 2007. The Company also prospectively adopted CICA Handbook Section 3251, Equity which establishes standards for the presentation of equity and changes in equity during the reporting period, effective for fiscal years beginning October 2006. This standard had no impact on the Company's consolidated financial statements for the year ended December 31, 2007. On January 1, 2007, the Company prospectively adopted CICA Handbook Section 3855 Financial Instruments – Recognition and Measurement. In accordance with this new standard the Company now classifies all financial instruments as either held-to-maturity, available-for-sale, held for trading or loans and receivables. On January 1, 2007, the Company prospectively adopted CICA Handbook Section 3865 - Hedges. This new standard specifies the criteria under which hedge accounting can be applied and how hedge accounting can be executed. Company has not designated any hedging relationships. This new standard did not affect the Company's consolidated financial statements for the year ended December 31, 2007. FUTURE CHANGE IN ACCOUNTING POLICIES As of January 1, 2008, the Company will be required to adopt CICA Handbook Section 3031 Inventories. This new standard provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realizable value. The Company is assessing the impact of these new standards on its financial statements; however, the adoption is not expected to have a material impact on its financial statements. As of January 1, 2008, the Company will be required to adopt CICA Handbook Sections 3862 Financial Instruments – Disclosures; 3863 - Financial Instruments – Presentation; 1535 - Capital Disclosures and 1400 - General Standards of Financial Statement Presentation. The Company is assessing the impact of these new standards on its consolidated financial statements and anticipates the main impact will be in terms of additional required disclosures. As of January 1, 2009, the Company will be required to adopt CICA Handbook Section 3064 Goodwill and Intangible Assets which replaces CICA Handbook Sections 3062 - Goodwill and Other Intangible Assets and Section 3450 - Research and Development Costs. The Company is assessing the impact of these new standards on its consolidated financial statements; however, the adoption is not expected to have a material impact on its consolidated financial statements.

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VENGA AEROSPACE SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2007 AND 2006

8.

FINANCIAL INSTRUMENTS The Company's financial instruments consist of cash, accounts receivable, investments, accounts payable and accrued liabilities. It is the opinion of management that the Company is not exposed to significant interest risk arising from its financial instruments. The fair values of these financial instruments approximate their carrying values, unless otherwise noted. Credit Risk: The Company derived net sales from two (2006 - one) major customers amounting to approximately $77,212 representing 92% of total revenues (2006 - $50,400 representing 46% of total revenues). Accounts receivable from the above significant customers at December 31, 2007 amounted to approximately $Nil (2006 - $Nil). Foreign Currency Risk: Consulting contracts billed in U.S. dollars by the Company are recorded at the exchange rate in effect at the time of sale, and are collected on standard trade payable terms. Excess U.S. dollar balances are converted to Canadian dollars on a regular basis. The Company does not enter into foreign currency hedges. Further devaluation in the U.S. dollar relative to the Canadian dollar could impact the Company's ability to continue at current sales growth rates and attain cash positive operations as substantially all of the sales contracts are denominated in U.S. dollars.

9.

INVESTMENT IN NEW JV The Company, which holds a 30% interest in the New JV has no management rights or ongoing funding requirements or obligations with respect to the New JV. The Company's participation in the management and operation of the New JV is limited to the Company's right to receive 30% of the New JV's net profits or losses as and when such profits or losses are distributed to the joint venturers in accordance with the terms and provisions of the New JV Agreement. The Company is only liable to the extent of its investment and is indemnified from the other joint venturers for any excess losses and liabilities. Upon termination of the New JV, the Company is entitled to its capital account share in net assets of the New JV.

10.

INVESTMENT IN PRIVATE COMPANY The Company, currently has a 4% (2006 - 3%) interest and an option to acquire up to an additional 15% interest in Global Mineral Investments, LLC ("GMI") a private U.S. corporation engaged in the leasing and development of gold mining concessions in West Africa. On August 31, 2007, GMI was awarded four Class B Gold Mining Licences by the Ministry of Lands, Mines and Energy of the Republic of Liberia for four, separate concession areas located in the Sanquin Mining Zone, Sinoe County in the Republic of Liberia.

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VENGA AEROSPACE SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2007 AND 2006

11.

CAPITAL STOCK (a)

Authorized: Unlimited common stock

(b)

Issued and outstanding: Number of Shares Balance at December 31, 2004 Debt to equity conversions Balance at December 31, 2005 Debt to equity conversions (c) Private placement (d) Share issuance costs Balance at December 31, 2006 and 2007 Weighted average number of shares outstanding: Basic and fully diluted

(c)

Amount $

196,754,833 4,429,800 201,184,633 13,734,860 13,352,400 0 228,271,893

15,155,885 221,490 15,377,375 686,743 667,620 (7,772) 16,723,966

2007

2006

228,271,893

205,731,048

Debt to equity conversion

On September 15, 2006, the Company announced that it had completed a series of agreements to settle outstanding debts with creditors through the issuance of capital stock of the Company. These agreements required the issuance of 13,734,860 common shares (the "Consideration Shares") at a price of $0.05 CDN per common share for a total of $686,743 CDN. The Exchange, on September 27, 2006, granted the Company its approval to the issuance of the Consideration Shares. (d)

Private placement

As a further term of the New JV Agreement, EKG, LLC was required to advance the Company the sum of $600,000 USD in the form of a private placement (the "EKG Private Placement") in accordance with the Exchange's Policy 4.1 - Private Placements. On December 4, 2006, the Exchange accepted and approved for filing documentation with respect to the EKG Private Placement for the issuance of 13,352,400 common shares which EKG, LLC would purchase at a price of $0.05 per share. On December 5, 2006, the Company received the first tranche of the EKG Private Placement in the amount of $250,000 USD for which the Company issued 5,563,500 common shares. The Company closed the second tranche of the EKG Private Placement on December 18, 2006 when it issued 4,784,610 common shares priced at $0.05 CDN for gross proceeds of $215,000 USD. The final tranche of the EKG Private Placement was closed on December 19, 2006 through the issuance of 3,004,290 common shares priced at $0.05 CDN for gross proceeds of $135,000 USD.

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VENGA AEROSPACE SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2007 AND 2006

12.

SEGMENTED INFORMATION The Company has determined that it has two active operating segments (3D graphic's unit and Mining and Resource unit). During the period ending December 31, 2007 revenues from U.S. sales totaled $84,239 and Canadian sales totaled $Nil. Segmented information: 2007 $

13.

2006 $

3D graphics Mining and resource

57,251 26,988

58,518 50,400

Total

84,239

108,918

ECONOMIC DEPENDENCE Approximately 92% (2006 - 76%) of the Company's revenue has been derived from two (2006 one) customers.

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VENGA AEROSPACE SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2007 AND 2006

14.

INCOME TAXES (a)

Provision of income taxes The provision for income taxes differs from that calculated by applying statutory rates for the following reasons: 2007 2006 $ $ Net loss before income taxes Expected income tax recovery based upon the combined Canadian federal and provincial expected tax rates of 36.12% (2006 - 36.12%) Adjustments to tax benefit resulting from: Permanent differences (items not deductible for tax purposes) Share issue costs tax effect Timing differences Unrecorded tax benefit of losses Provision for income taxes

(b)

(80,989)

(206,742)

29,253

78,746

0 561 0 (29,814)

(34) 561 0 (79,273)

0

0

Future income tax balances The tax effect of temporary differences that gives rise to future income tax assets and liabilities are as follows: 2007 2006 $ $ Non-capital losses Share issue costs Timing differences tax recovery (potential future taxes) Total gross future tax assets Valuation allowance Total net future tax assets

419,347 1,685 0

400,380 2,246 0

421,032 (421,032)

402,626 (402,626)

0

0

In assessing the realizability of future tax assets, management considers whether it is more likely than not that some portion or all of the future tax assets will not be realized. The ultimate realization of future tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

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VENGA AEROSPACE SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2007 AND 2006

The Company has accumulated losses for income tax purposes totaling approximately $1,160,984 for which the tax benefits have not been recognized in the financial statements. These losses can be deducted from future years' taxable income and expire as follows: $ 2008 109,455 2009 47,853 2010 113,718 2014 345,277 2015 244,780 2026 219,473 2027 80,428 1,160,984 15.

LITIGATION The Company was subject to an arbitration proceeding (the "Ongoing Litigation") instituted by a former insider (and other related parties of the insider) of the Company (collectively referred to as the "Claimants") for matters that were the subject of claims that the Claimants had raised in a number of Ontario small claims court actions; a Superior Court of Ontario action and matters pertaining to the Claimants' past involvement in the Company's business operations. The Company has denied liability to the Claimants for these claims and actions and had both defended these claims and actions and had instituted its own counter-claim against the Claimants. On August 30, 2006, the Company, other named respondents in the Ongoing Litigation and unnamed related parties (collectively referred to as the "Releasors") reached a final settlement with the Claimants that resolved and terminated the Ongoing Litigation and a settlement for $35,000. In addition, the Releasors and the Claimants signed a full and final release (the "Mutual Releases") releasing and indemnifying the other for any claims or demands that either the Releasors or the Claimants could raise against the other with respect to any matter contained or referred to in the Ongoing Litigation or could otherwise be raised or advanced as of the date of the Mutual Releases.

16.

COMPARATIVE FIGURES The Company has reclassified the comparative figures, where necessary, to conform to the current year's presentation.

17.

SUBSEQUENT EVENTS (a)

On January 24, 2008, the Company announced the New JV had received delivery of the first of the two CPX 1, 3D Print/Processors at the New JV's Houston, Texas production facility.

(b)

On March 12, 2008, the Company signed an agreement with GMI (the "Venga/GMI Funding Agreement") wherein the parties agreed that in consideration of the Company providing GMI with one million dollars USD in financing (the "GMI Funding") for GMI's proposed gold dredging operation in those portions of the Upper Tartweh River that flows through the GMI Concessions (the "Proposed Dredging Operations"), the Company's equity ownership interest in GMI would be increased to 25%; the Company would be granted a gross overriding royalty on all revenues derived from the Proposed Dredging Operations (the "GMI Royalty"); the Company would be given full and complete control and manage all financial aspects of the Proposed Dredging Operations and the agreement of the parties that all rights to any future concessions and or mineral rights in Liberia and West Africa that the parties wished to secure would be registered in the Company's sole name.

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VENGA AEROSPACE SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2007 AND 2006

(c)

On March 12, 2008 the Company signed a term sheet with Anchor Securities Limited of Toronto, Canada (the "Term Sheet") wherein the Company would receive up to $1.75 million CDN (the "Issue Amount") in financing. Investors providing the Issue Amount would receive units that were comprised of common shares, warrants and participatory share in a gross overriding royalty ("GOR") on the revenues derived from the Proposed Dredging Operations (the "Calculated Revenues"). Each investor will receive a pro rata share of the GOR which starts at 8% of the Calculated Revenues and then is reduced, first to 4% and then to 2% of the Calculated Revenues as specified distribution milestones are reached to a maximum return or payout to the investors of $17.5 million CDN. In addition, the GOR provides that all net revenues derived from the Proposed Dredging Operations are paid to the investors until the investors have received distributions totaling the Issue Amount. To insure that the investors receive payment of the GOR in accordance with the Term Sheet, the Company has agreed and warranted in the Term Sheet to hold the GMI Royalty for the benefit of the investors and to pay the proceeds of the GMI Royalty to the investors in accordance with the terms and provisions of the GOR as set out in the Term Sheet. The financing contemplated by the Term Sheet is conditional on the Company securing the TSX Venture Exchange's approval of a private placement that would see the issue of 35 million common shares at $0.05 per share, plus the issue of a similar number of warrants, that are exercisable for a period of two years at a rate of two warrants for one common share at a price of $0.15 per share. The Term Sheet further required that the Issue Amount be advanced on or by April 10, 2008 (the "Closing Date"). The Company announced that it would use the net proceeds of the Issue Amount to provide the Company with general working capital and, pursuant to the terms and conditions of the Venga/GMI Funding Agreement, to increase the Company's equity position in GMI to 25% and finance the Proposed Dredging Operations. The Issue Amount was not advanced or closed by the Closing Date and on April 11, 2008, the Company announced that the Term Sheet had lapsed. Upon the lapse of the Term Sheet, the Venga/GMI Funding Agreement was terminated.

(d)

On March 12, 2008 the Company announced that, pursuant to TSX Venture Exchange's Policy 4.3 - Shares for Debt, it had completed a series of agreements to settle outstanding debts with unsecured creditors. These agreements require the issuance of 3.2 million common shares (the "Consideration Shares") at a price of $0.05 CDN per common share for a total of $160,000 CDN. The TSX Exchange has yet to grant its final approval to the issuance of the Consideration Shares.

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