Attached files
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| EX-3.2 - EXHIBIT 3.2 - STRAGENICS, INC. | ex3-2.htm |
| EX-10.1 - EXHIBIT 10.1 - STRAGENICS, INC. | ex10-1.htm |
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date of
Report (Date of earliest event reported): February 22, 2010
RESOURCE
EXCHANGE OF AMERICA CORP.
(Exact
name of registrant as specified in its charter)
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Florida
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333-157565
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26-4065800
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(State
or other jurisdiction
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(Commission
File Number)
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(IRS
Employer
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of
Incorporation)
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Identification
Number)
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27
Fletcher Ave.
Sarasota,
FL 34237
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(Address
of principal executive offices)
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(941)
312-0330
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(Registrant’s
Telephone Number)
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Mobieyes
Software, Inc.
(Former
name or former address, if changed since last report)
Copy of
all Communications to:
Carrillo
Huettel, LLP
3033
Fifth Avenue, Suite 201
San
Diego, CA 92103
phone:
619.399.3090
fax:
619.399.0120
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
£
Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
£
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
£
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
£
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
1
FORWARD
LOOKING STATEMENTS
This
current report contains forward-looking statements as that term is defined in
the Private Securities Litigation Reform Act of 1995. These statements relate to
future events or our future results of operation or future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as “may”, “should”, “intends”, “expects”, “plans”,
“anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue”
or the negative of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks in the section entitled “Risk Factors” in
this current report, which may cause our or our industry’s actual results,
levels of activity or performance to be materially different from any future
results, levels of activity or performance expressed or implied by these
forward-looking statements.
Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity or
performance. You should not place undue reliance on these statements, which
speak only as of the date that they were made. These cautionary statements
should be considered with any written or oral forward-looking statements that we
may issue in the future. Except as required by applicable law, including the
securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to reflect actual
results, later events or circumstances or to reflect the occurrence of
unanticipated events.
In
this report, unless otherwise specified, all dollar amounts are expressed in
United States dollars and all references to “common shares” refer to the common
shares in our capital stock.
As
used in this current report and unless otherwise indicated, the terms “we”,
“us”, the “Company” and “RexCo” refer to Resource Exchange of America Corp.
(f/k/a Mobieyes Software, Inc.).
On
February 22, 2010, Resource Exchange of America Corp., a Florida corporation
formerly known as Mobieyes Software, Inc., entered into an Asset Purchase
Agreement (the “Purchase Agreement”) with UTP Holdings, LLC, a privately held
Florida limited liability company ("UTP"). In accordance with the
terms and provisions of the Purchase Agreement, the Company acquired one hundred
percent of the assets of UTP in exchange for (i) the assumption of the
outstanding balance of a line of credit issued to Dana J. Pekas, UTP's majority
shareholder, by Regions Bank (f/k/a AmSouth Bank) in an amount of up to $800,000
which shall be fully repaid on or before December 31, 2010; and, (ii) the
issuance of a two hundred fifty thousand dollar ($250,000) 10% Convertible
Promissory Note, with such Note being fully due and payable on or before
December 31, 2010.
The above
description of the Purchase Agreement is intended as a summary only, which is
qualified in its entirety by the terms and conditions set forth therein, a copy
of the Purchase Agreement is filed as an exhibit to this Current Report on Form
8-K (the "Current Report").
The
information set forth above in Item 1.01 of this Current Report on Form 8-K is
incorporated herein by this reference. The Purchase Agreement was accounted for
as a recapitalization wherein RexCo is considered the acquirer for accounting
and financial reporting purposes. The assets and liabilities of the UTP have
been brought forward at their book value. As a result of the Purchase Agreement,
our principal business became the business of UTP, which is more fully described
below.
2
FORM
10 DISCLOSURE
As
disclosed elsewhere in this report, we acquired 100% of the assets and
liabilities of UTP. Item 2.01(f) of Form 8-K states that if the registrant was a
shell company like we were immediately before the transaction disclosed under
Item 2.01, then the registrant must disclose the information that would be
required if the registrant were filing a general form for registration of
securities on Form 10.
Accordingly,
we are providing the following information that would be included in a Form 10
if we were to file a Form 10. Please note that the information provided below
relates to the post Asset Purchase Agreement entity, except that information
relating to periods prior to the date of the transaction relates to the
pre-transaction company, unless otherwise specifically indicated.
ITEM
1. BUSINESS
Historical
We were
incorporated in the State of Florida on January 15, 2009 under the name Mobieyes
Software, Inc.
From
inception through February 22, 2010, our business model was that of a mobile
enterprise software company aimed at improving the productivity of the field
service organization. As such, we planned to revolutionize the efficiencies of
the service chain for high technology products by intending to use its cutting
edge mobile and wireless platform.
On
February 22, 2010, we consummated the Purchase Agreement with UTP Holdings, LLC,
a privately held Florida limited liability company. In accordance
with the terms and provisions of the Purchase Agreement, the Company acquired
one hundred percent of the assets of UTP. The Purchase Agreement
closed on February 22, 2010. As a result of the Purchase Agreement transaction,
our principal business became the business of UTP, which is more fully described
herein.
Accordingly,
the Registrant changed its name to Resource Exchange of America Corp. by way of
Certificate of Amendment to its Articles of Incorporation filed with the Florida
Secretary of State on February 23, 2010.
Overview
Resource
Exchange of America Corp. goal is to become a U.S. based scrap recycling
powerhouse, combining demolition/asset recovery services with sorting,
recycling, brokering and distribution. We intend to initially offer demolition
services in Florida with plans to expand to other states in the Southeastern
United States. RexCo will sell ferrous and nonferrous metal to both U.S. buyers
as well as buyers abroad. Our goal is to deliver reliable, high-quality services
to all our clients, big and small, local, domestic and
international.
RexCo
intends to take full advantage of the present economic climate to acquire a
number of key pieces to realize its vision of becoming a scrap recycling
powerhouse. Research indicates that rough economic periods can create good
opportunities for companies to buy undervalued assets, but that many do just the
opposite: they are more likely to undertake divestments during downturns (and
buy new businesses when times are good). For this reason, the principals of
RexCo have determined that this is potentially an excellent time to consolidate
a number of demolition companies, metals processing yards, a recycling company
and an international trading company specializing in trading ferrous and
nonferrous metals.
Accordingly,
we will seek to acquire companies with key personnel with either in-depth
knowledge of sales to Brazil, Russia, India, China and Korea, or preferably with
a General Administration of Quality Supervision, Inspection, and Quarantine
number ("AQSIQ") which allows for direct trade with China. If we are successful
in rolling these individual companies into one single entity we will achieve
significant economies of scale. Assets can be reused across divisions, newly
purchased assets will have less idle time, stores can be combined and
administrative functions can be gathered, making it possible to vie for bigger
demolition/asset recovery jobs due to bigger cash reserves, tools and
manpower.
3
In the
scrap recycling business there are about 8,000 companies, and the top 50 account
for about only 40% of the market. The remaining, some 7,950 companies, are
primarily small “Mom and Pop” operations with annual turnovers less than five
million dollars. These companies work within small geographic areas, making
them very vulnerable in the present economic climate. As a result, these
companies maybe more than willing to sell equipment, stores or perhaps their
entire operation at less than book value. With the current market situation, we
believe that a consolidation process is the right strategic step, making it
possible to grow the business significantly and capture a segment of the $30
billion recycling industry, of which 60% stems from recycling of ferrous and
nonferrous metals.
We intend
to offer three main products:
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1.
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Demolition/Asset
Recovery
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2.
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Scrap
Sorting, Processing, Shredding and
Baling
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3.
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Scrap
brokering and sales
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In order
to be able to offer all three products, we will have to meet four key objectives
within our first year of operation:
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1.
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To
acquire the companies needed to fulfill our vision and
mission.
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2.
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To
improve and build out acquired companies, making the fullest use of their
equipment, human resources and other
assets.
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3.
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To
create synergies between the companies acquired, so that all entities work
as a cohesive unit within our corporate structure, while actively seeking
to maintain minimal administrative
overhead.
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4.
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To
constantly improve existing sources of materials for processing and to and
improve sales channels both domestically and
abroad.
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Management
believes that the aggregated Company will be able to achieve significant
economies of scale, will be able to acquire assets and stores at less than book
value allowing the RexCo to show a positive result within our first year of
operation.
Business
Strategy
We intend
to fulfill our strategic goals by seeking to acquire either successful or
underperforming companies within the scrap industry. RexCo will seek to acquire
companies at different stages of the scrap recycling process chain. RexCo
intends to take advantage of the present climate in the scrap industry, we
believe that in 2010 acquisition costs for underperforming companies are likely
to be very low, while the cyclic nature of the business makes it likely that
business will be blooming again within the next 3-4 years. We have come to the
conclusion that in order to make an acceptable profit within the scrap and
recycling business, it is better to make acquisitions at the bottom of the
cycle, and to control the entire value chain, rather than only one or
some of the phases (demolition/asset recovery, processing, sorting, selling and
distribution).
RexCo
plans to acquire established dismantling and demolition/asset recovery companies
with proven track records showing their ability to handle big and complex
demolitions in a timely manner, with acceptable profit margins and impeccable
safety records. These demolition companies will ensure a steady and viable
inventory stream, which will itself be a source of income. Additionally, we plan
to acquire one or more scrap processing yards with optimal locations between the
demolition companies, major industrial centers and ports and
rail. When identifying potential scrap processing yards we will seek
out companies that have the competencies and space to sort and bale all of the
different kinds of scrap that the demolition companies can provide. Finally,
RexCo will attempt to locate a company that is both proficient in selling both
ferrous and nonferrous scrap in the U.S. and also has in-depth knowledge of
selling to major importers. This way, RexCo will have control of the
entire process and value chain.
4
On the
tactical level the Company has set the following main objectives for its first
three years of operation:
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1.
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To
acquire the companies needed to fulfill the Company’s vision and
mission.
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2.
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To
improve and build out the companies, making the fullest use of their
equipment, human resources and other
assets.
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3.
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To
create synergies between the companies acquired, so that all companies
work as a cohesive whole within
RexCo.
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4.
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To
constantly improve existing streams of materials for processing, and
improve sales channels both in the U.S. and
abroad.
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The first
objective requires significant work and is a prerequisite for the ensuing goals.
At this stage, significant legal, accounting and advisory services are required,
which will require substantial cash reserves and an unimpeded cash flow. All
acquisition targets will be scrutinized and will undergo thorough due diligence
to uncover hidden issues, threats or benefits. Before this step, an intensive
search process will take place, where potential acquisition targets will be
narrowed down until there is a shortlist of companies that fit our description
and that can then be evaluated.
The
second phase will run parallel with the due diligence of the individual company,
so that as soon as the acquisition is finalized the processes within the
individual company can be improved, and its assets can be utilized to the
greatest extent. Human resources will be evaluated through interviews so that
individual strengths can be determined. The RexCo team will utilize these
guidelines to evaluate all targets while accountants and attorneys perform
further due diligence.
The third
step involves assessing each acquired individual company’s strengths, weaknesses
and differences to ensure that synergy can be maximized and intra-company
differences and conflicts can be immediately addressed. Also, administrative
processes will be centralized, lessening the need for administrative staff
within the individual divisions. This task will become increasingly relevant as
new companies are added to RexCo.
The
fourth goal will be met through extensive channel analysis and improvement.
Potential clients will be contacted so that they are aware of the additional
product offerings from RexCo. As the individual companies are rolled into RexCo,
a dedicated team will continually work to meet objectives 3 and 4.
To ensure
that both short and long-term goals can be met, we will focus on four key areas
of success:
1. Experienced Personal
Contacts
At RexCo,
the demolition/asset recovery services lie at the beginning of the value chain,
and dedicated experienced demolition teams are of great importance to the
success of our business. Without excellent demolition services, all other facets
of our business model will be less successful. The demolition business is
heavily fragmented, and there is a great variety between the players in the
market with regards to pricing, adherence to deadlines and integrity. RexCo
demolition will do its utmost to stand out from the competition, and a core
Company value will be to conduct our business honorably, with integrity, and on
time.
Even
though long-term demolition contracts are extremely hard to obtain (demolition
is very often a onetime contract), all potential assignments should be met with
the possibility of future related business in mind. Therefore, initial contact
between a potential client and the demolition experts of RexCo will be handled
by a personal and dedicated representative with the necessary experience to give
the potential client proper advice and project management. It is important that
the demolition contacts are proactive and seek out every possible job, and that
they are generally good at cultivating potential clients.
The
personal contact will have knowledge of all Company staff, their experience and
training, all demolition equipment (shears, balers etc), and of the possible
sorting and transportation options.
5
As the
different companies, forming the entire value chain, are added to RexCo the
personal contact will be able to give further advice, when needed, based on the
different transportation, sorting and selling options that RexCo can provide. As
a company-wide Enterprise Resource Planning system (as further described below)
is launched, the personal contacts will have more information at their
fingertips, enabling them to give even better advice to clients.
2. Controlling the Entire Value
Chain
Our
product originates from several sources, depicted in the product flow chart
illustration below. The first product source is the general public,
who arrive at our processing centers with various whole or dismantled objects
containing ferrous and nonferrous metals, which are sometimes pre-sorted, but,
more often, combined with other metallic and non-metallic substances.
Demolition/asset recovery projects of our own, or from other companies, generate
dismantled portions of buildings, factories, agricultural facilities, bridges,
chemical plants, train derailments and other sources, which contain ferrous and
nonferrous metals.
Once the
product arrives at our processing centers, it will be sorted into ferrous or
nonferrous product codes. It is then processed into standard portions
by shearing, torching, and/or shredding. It is then sorted and graded
according to ISRI (Institute of Scrap Recycling Industries) standards and
shipped to domestic or foreign mills or smelters by truck, trains or ocean
containers.
The
product supply chain:
There are
advantages to controlling the entire value chain, not the least of which is
increased profits and because RexCo will control the entire value chain, we
anticipate that there will always be business somewhere along the value chain.
For instance, if the price on the world market for ferrous scrap is at a low
(near the $150 mark), RexCo can still take in demolition jobs (being paid for
taking the scrap metal away when demolishing, instead of paying anything for the
metal at all) and stockpile the scrap metal until the rates go up again.
Likewise, if the rates go up, RexCo will still have its own supply lines through
its own demolition companies, and will not be forced to bid for the scrap
between different demolition companies or scrap yards.
6
3. Development of the Company’s Digital
Infrastructure
Controlling
the entire value chain increases the requirements for a solid resource-planning
tool. The companies that RexCo intends to acquire will almost certainly have
only a few computer tools aiding them in their work. As more stages of the value
chain are integrated, the need for a comprehensive corporate Enterprise Resource
Planning ("ERP") tool increases exponentially.
The ERP
tool will enable the all companies along the value chain to effectively move
resources among them. For instance, demolition teams can be alerted about price
increases for particular metals and projects or portions of projects containing
that metal can be fast-tracked. If there is an oversupply of a metal, sales
teams can be notified of an oversupply so that they can focus on the sale of the
overabundant metals. Or they can try to bundle it at a fair price with imminent
deliveries in order to lower the stock.
In a new
organizational structure where the different divisions are previously separate
entities, it will be a challenge to incorporate a corporate-wide ERP tool due to
inherent resistance against change. This is particularly true in a business as
old as the demolition and scrap business, which has been around since before the
Civil War. It is imperative to implement a well-designed and adaptable ERP
system as early as possible, and to create awareness that the system will
benefit everybody.
A proper
digital infrastructure will also enable potential sellers to “book” a demolition
and potential buyers
can make requests on specific grades of scrap metal online, and get a quote back
almost immediately. And finally, buyers can check the transport online with
regards to delivery date and other important matters.
4. Wide Range of Sales Channels
The
demolition and scrap industries are extremely cyclical, with a long track record
of over 150 years. Often, when the market is down in one part of the world, it
is up in other places.
It is
therefore important for RexCo to have several sales channels at its disposal, so
that the scrap metal can be sold to the buyers that can give the premium price
at that particular time. RexCo can only succeed with a very dedicated sales team
with in-depth insights in the markets both domestic and abroad. Also, the
members of the sales team will have to be able to cultivate the relationships
with the buyers.
Apart
from sales personnel attending to the domestic market, it is also important to
attract people who have the required knowledge of such markets as Korea and BRIC
markets (Brazil, Russia, India and China), which are the greatest net importers
of scrap metal at the present time. Finding an acquisition target with an AQSIQ
number will help the Company immensely, as it will allow for export directly to
China.
In order
to make the best use of potential sales channels, it will be important for RexCo
to be located near a deep-water port in order to sell scrap to buyers outside of
the U.S. Simultaneously, a location near railroad or major highways is needed to
serve clients in the Midwest and other domestic markets.
Finally,
it should be possible for the buyers to follow their delivery online – when and
where it has been loaded, the contents of the containers, and when to expect
delivery.
Services
and the Market Space
RexCo
will undertake demolition/asset recovery of obsolete housing quarters,
refineries, processing plants, hotels, and any other kind of major structure
that needs to be torn down by specialists. Depending on the size and kind of
building, different kinds of demolition tactics will be employed. The different
building materials will be cut down to size, sorted, and recycled depending on
their type. Of particular interest to RexCo will be metal plating, sheets, T-
and I-beams and other structural pieces of metal, as well as nonferrous metals
(copper, alloys, aluminum etc.) that are of widespread use in factories and
processing plants.
Demolition
is a blue-collar, labor-intensive job, and the average pay is 14% below the
median for similar manual labor. As demolishing a building is a rather dangerous
business, RexCo will ensure that everyone at the demolition division is properly
trained in safety measures and precautions. The safety record will in itself be
used as a yardstick that the Company can measure its success by.
7
During
the demolition/asset recovery process, the different materials are diligently
sorted according to international specifications regarding grade, type and size.
At major demolition sites, a mobile shredder could be used to cut the ferrous
and nonferrous metals into smaller size. A mobile baler can create bales
according to various ISRI specifications. The baler and mobile shredder can be
taken to any location to bale ferrous and nonferrous metals on-site, which can
then be put into containers that can be shipped directly to buyers. Baling and
shredding allows for more weight to be put into ocean containers than if the
material is loaded in loose weight. Having mobile equipment will allow RexCo to
optimize utilization of the equipment, acquire smaller processing facilities,
and thereby increase overall profits.
Finally,
RexCo will provide a sales service, getting the best possible quotes for the
ferrous and nonferrous metals acquired through demolition projects or purchased
from others with excess stores. During 2010, RexCo will seek to buy cheap stores
of scrap metal to be sold later at a premium.
The US
scrap industry is composed of approximately 8,000 companies with combined annual
revenues of
approximately $30 billion. The demolition and recycling business is unique in
the sense that it is the only business with data covering almost two centuries.
Analyzing this ancient data it has become evident that the scrap and recycling
business is extremely cyclical. Basically, when times are booming, old
factories, cars, trucks, equipment etc. are demolished and recycled, because
businesses demand new and modernized factories, cars, trucks, equipment, which
in-turn need new metal to be produced. Conversely, in a recession the demand for
new assets is so low that scrap metal prices plummet, and there is less business
justification for demolishing anything. This happened in the wake of the
depression in 1929-1934, after WWII, during the energy crisis in the late
1970’s, again in 2008-2009 and it is likely to continue through 2010 as
well.
Fortunately,
the scrap and recycling business is counter-cyclical in other parts of the
world: Even though the US scrap metal market has plummeted in the past year, the
BRIC countries (Brazil, Russia, India and China) still show significant need for
scrap metal for new projects. Despite the economic development in past years,
there is an ever-increasing demand overseas for scrap metal due to the rapid
growth and expansion of the BRIC countries, as well as in Korea, and this demand
will continue to grow as the world becomes still more
industrialized.
As the
U.S. Scrap industry is extremely fragmented, with the top 50 companies holding
only about 40% share of the market, the remaining 60% of the market space are
struggling to make ends meet. There are approximately 7,950 companies in the
U.S. scrap and recycling industry that are potential acquisition targets for the
Company.
Annually,
the industry processes about 75 million tons of ferrous metals and 10 million
tons of nonferrous metals. Ferrous and non-nonferrous metals account for 60% of
the entire recycling industry.
The
amount of metal being processed is highly demand-driven, so that, at the moment
the amount of recycled metal is significantly less than just two years ago. U.S.
demand for ferrous metal comes mainly from the U.S. steel industry, which is
driven by the auto, machinery and construction industries. As the big three U.S.
automotive companies have been taking some major hits in the past years, demand
for metal has been heavily influenced. Fortunately, the markets abroad have more
than outweighed this development.
As with all
marketing strategies, understanding a client's needs is central to success. The
ability to satisfy a clients’ needs better than the competition will help build
customer loyalty and increase sales.
However,
both customer needs and the business environment in which RexCo operates are
constantly changing. RexCo understands this; this is why the marketing strategy
considers the changes that are taking place, as well as the opportunities and
threats that are emerging. If RexCo is able to adapt to the new market situation
while our competitors are not, RexCo will come out ahead of the
competition.
8
RexCo
intends to have two target markets at each end of the value chain: There is the
market for demolition/asset recovery at one end, and the market for sorted,
processed, baled ferrous and nonferrous metal at the other end of the value
chain. When local demand is low, demolition costs are low too. People will pay
to have their demolished scrap taken away, whereas in an upturn, they will want
a premium for the demolished materials. During 2010 and in the near future, it
should be possible to acquire and stockpile ferrous and nonferrous metal for
sale at a later date, when rates are better. It will be RexCo’s strategy to use
some of its anticipated profits to begin to stockpile low-cost metals for that
purpose.
Controlling
the other end of the value chain will ensure that the scrap can actually be sold
at the right rates to clients wherever they are in the world. Bypassing the
brokers will make it possible for RexCo to always achieve the best rates without
having to share the profits with others – and in turn give RexCo more peace of
mind when bidding for demolition jobs.
The scrap
metal industry is compartmentalized, fragmented and disorganized, with thousands
of smaller companies with revenues of less than five million dollars. At the
other end of the spectrum are 50 companies, who total about 40% of the market.
Of the thousands of smaller companies, many are “mom-and-dad” operations working
locally within a 100-mile radius around their business. Many of these companies
are struggling at the moment.
Mini-mills,
smelting scrap metal are primarily placed in the northeast corner of the
country, some in the Midwest and Texas, and fewer towards the east
coast.
Local
mini-mills, integrated steel mills and demolition companies saw a 30-60%
decrease in revenues in 2009 compared to 2007-2008. Competitors are therefore
being weeded out on a daily basis. RexCo will do business in a part of the U.S.
that, while only having few mini-mills nearby, has the advantage of proximity to
deep water harbors where scrap metal can be sent to clients abroad. This is a
significant advantage to RexCo.
We intend
to operate with significant competitive advantages over other recycling and
processing companies. A demolition/asset recovery division brings in large
quantities of material at discounted prices, while RexCo’s location in southern
Florida will provide for numerous sales outlets.
The
demolition division will acquire scrap material at deep discounts from market
price. Historically, demolition projects have produced scrap metal at a discount
of up to 60% of the fair market value. This reduced cost of the scrap metal will
allow RexCo to offer more competitively priced material to buyers. The
demolition division also brings in large quantities of scrap
material.
9
When the
market softens and the amount of material that is brought in from the public
declines, RexCo anticipates continuing to have a steady flow of inventory coming
in from the demolition division. An additional competitive advantage is the
location of the processing yards. Located just outside the deep-water port of
Tampa in Florida, the processing yards provide the opportunity to export
material to overseas mills when domestic markets soften.
RexCo
will seek to have personnel with in-depth knowledge of clients in the BRIC
countries and Korea. Preferably, it might be possible to acquire an AQSIQ
number, which will allow for shipping directly to Chinese steel mills. AQSIQ
numbers are very difficult to acquire and applications for them can take up to
two years for approval. Being able to ship directly to Chinese mills will
eliminate the brokerage network into China, which will increase sales margins by
3% to 10%. Already, RexCo is establishing a diverse customer base to make these
international sales. These competitive advantages will keep RexCo profitable
even during an economic downturn.
Operating
internationally dictates that RexCo must at all times maintain a high level of
integrity and credibility, to stand out from the competition.
RexCo will,
over time, become an aggregate of several companies, as it is the mission of
RexCo to acquire several key companies during the present economic slump. The
following section will go more in-depth with regards to company ownership and
the scalability and profit of the business.
Scalability
The
business model is to expand RexCo’s interests in ferrous and nonferrous metals,
as well as to expand into demolition projects that are larger and more complex.
As the acquisitions move forward, RexCo will have the assets necessary to
accomplish this goal. The market potential is huge; looking at the world markets
as a natural next step makes it even more potent. When it comes to scalability,
it requires little or no extra human resources to substantially increase
revenues.
With
RexCo’s central location in Florida, several deep-water harbors are easily
accessible, for instance in Tampa, Miami, Jacksonville and Savannah. RexCo will
seek to acquire demolition companies, which are located so as to take advantage
of these ports, as well as having the experienced demolition bidding department
and management skills necessary to carry out large demolition
projects. Also, they will seek to have the heavy equipment needed to
perform the demolition and the logistics and processing experience necessary to
transport out the raw materials.
If RexCo
is able to acquire a company with an AQSIQ number, which bypasses the broker
network and provides a direct link to Chinese steel mills, RexCo will be able to
improve its margins significantly. Next in importance will be for the
acquisition target to have staff with a deep understanding of selling to BRIC
countries and Korea. An experienced sales force in both domestic and
international markets and a diverse customer base to sell the raw materials at
the most competitive prices will be major advantages.
When all
of the business segments are combined, RexCo will control several processes
involved in transforming scrap metal into sales. In order to take advantage of
the current favorable market conditions, RexCo will attempt to start
consolidating soon.
Insurance
We do
not currently maintain any insurance. However, we intend to acquire and maintain
insurance appropriate to our new activities in the near future on such terms
that management shall deem to be commercially reasonable.
Intellectual
Property
Although
limited, we will depend on our ability to develop and maintain the proprietary
aspects of our technology to distinguish our services from our competitors’. To
protect our proprietary technology and services we will rely primarily on a
combination of confidentiality procedures. It is our policy to require employees
and consultants to execute confidentiality agreements and invention assignment
agreements upon the commencement of their relationship with us. These agreements
provide that confidential information developed or made known during the course
of a relationship with us must be kept confidential and not disclosed to third
parties except in specific circumstances and for the assignment to us of
intellectual property rights developed within the scope of the employment
relationship.
10
Properties
Our
principal executive office is located at 27 Fletcher Avenue, Sarasota, Florida
34237. Our telephone number is (941) 312-0330. We are currently leasing generic
office space on a month-to-month basis for $3,500 per month. This space is
utilized for office purposes and it is our belief that the space is
adequate for our immediate needs. Additional space may be required as we expand
our business activities. We do not foresee any significant difficulties in
obtaining any required additional facilities.
Employees/Consultants
As of
February 22, 2010, we have 2 consultants that work with us on a full-time basis
and an additional 5 consultants that work with us on a part-time basis. We
frequently use consultants to assist in the completion of various projects. Our
consultants are instrumental to keep the development of projects on time and on
budget.
Where
You Can Get Additional Information
We file
annual, quarterly and current reports, proxy statements and other information
with the SEC. You may read and copy our reports or other filings made with the
SEC at the SEC’s Public Reference Room, located at 100 F Street, N.W.,
Washington, DC 20549. You can obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. You can also access these
reports and other filings electronically on the SEC’s web site, www.sec.gov.
ITEM
1A. RISK
FACTORS
Prices of
commodities we own are volatile, which may adversely affect our operating
results and financial condition.
Although
we will seek to turn over our inventory of raw or processed scrap metals as
rapidly as possible, we will be exposed to commodity price risk during the
period that we have title to products that are held in inventory for processing
and/or resale. Prices of commodities, including scrap metals, have been
extremely volatile and have declined significantly during the current global
economic crisis and we expect this volatility to continue. Such volatility can
be due to numerous factors beyond our control, including:
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general
domestic and global economic conditions, including metal market
conditions;
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competition;
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the
financial condition of our major suppliers and
consumers;
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the
availability of imported finished metal products;
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international
demand for U.S. scrap;
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the
availability and relative pricing of scrap metal
substitutes;
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import
duties and tariffs;
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currency
exchange rates; and
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domestic
and international labor costs.
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The
volatile nature of metal commodity prices makes it difficult for us to predict
future revenue trends as shifting international and domestic demand can
significantly impact the prices of our products, supply and demand for our
products and effect anticipated future results. Most consumers purchase
processed non-ferrous scrap according to a negotiated spot sales contract that
establishes the price and quantity purchased for the month. In addition, the
volatility of commodity prices, and the resulting unpredictability of revenues
and costs, can adversely and materially affect our operating margins and other
results of operations.
11
The
profitability of our scrap recycling operations will depend, in part, on the
availability of an adequate source of supply.
We will
depend on scrap for our operations and will acquire our scrap inventory from
numerous sources. These suppliers generally are not bound by long-term contracts
and have no obligation to sell scrap metals to us. In periods of low industry
prices, suppliers may elect to hold scrap waiting for higher prices. In
addition, the slowdown in industrial production and consumer consumption in the
U.S. during the current economic crisis has reduced and is expected to
continue to reduce the supply of scrap metal available to us. If an adequate
supply of scrap metal is not available to us, we would be unable to recycle
metals at desired volumes and our results of operations and financial condition
would be materially and adversely affected.
The cyclicality
of our industry could negatively affect our sales volume and
revenues.
The
operating results of the scrap metals recycling industry in general are highly
cyclical in nature. The industry tends to reflect, and be amplified by, general
economic conditions, both domestically and internationally. Historically, in
periods of national recession or periods of slowing economic growth, the
operating results of scrap metals recycling companies have been materially and
adversely affected. For example, during recessions or periods of slowing
economic growth, the automobile and the construction industries typically
experience major cutbacks in production, resulting in decreased demand for
steel, copper and aluminum. As a result of the current economic crisis in the
United States and throughout the world and major cutbacks in the automotive and
construction industries, if we experience significant fluctuations in supply,
demand and pricing for our products, this would materially and adversely
affected our results of operations and financial condition.
The volatility of
the import and export markets may adversely affect our future operating results
and financial condition.
Our
business may be adversely affected by increases in steel imports into the United
States which will generally have an adverse impact on domestic steel production
and a corresponding adverse impact on the demand for scrap metals domestically.
Our future operating results could also be negatively affected by strengthening
or weakening in the US dollar. US dollar weakness provides some support to
prices of commodities that are denominated in US dollars but with large non-US
consumption and cost bases. For example, appreciation in the Chinese and Indian
currencies have increased marginal costs of aluminum and iron ore production,
thereby increasing the underlying cost basis for prices. Export markets,
including Asia and in particular China, are important to the scrap metal
recycling industry. Weakness in economic conditions in Asia and in particular
slowing growth in China, could negatively affect us further.
We
may seek to make acquisitions that prove unsuccessful or strain or divert our
resources.
We will
continuously evaluate potential acquisition candidates. We may not be able to
complete any acquisitions on favorable terms or at all. Acquisitions present
risks that could materially and adversely affect our business and financial
performance, including:
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the
diversion of our management’s attention from our everyday business
activities;
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the
contingent and latent risks associated with the past operations of, and
other unanticipated problems arising in, the acquired business, including
managing such acquired businesses either through our senior management
team or the management of such acquired
business; and
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the
need to expand management, administration, and operational
systems.
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12
If we make such acquisitions we
cannot predict whether:
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we
will be able to successfully integrate the operations and personnel of any
new businesses into our business;
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we
will realize any anticipated benefits of completed
acquisitions; or
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there
will be substantial unanticipated costs associated with acquisitions,
including potential costs associated with environmental liabilities
undiscovered at the time of
acquisition.
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In addition, future acquisitions by us
may result in:
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potentially
dilutive issuances of our equity
securities;
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the
incurrence of additional debt;
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restructuring
charges.
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The markets in
which we intend to operate are highly competitive. Competitive pressures from
existing and new companies could have a material adverse effect on our financial
condition and results of operations.
The
markets for scrap metal are highly competitive, both in the purchase of raw
scrap and the sale of processed scrap. We will compete to purchase raw scrap
with numerous independent recyclers, large public scrap processors and smaller
scrap companies. Successful procurement of materials is determined primarily by
the price and promptness of payment for the raw scrap and the proximity of the
processing facility to the source of the unprocessed scrap. We may face
competition for purchases of unprocessed scrap from producers of steel products,
such as integrated steel mills and mini-mills, which have vertically integrated
their operations by entering the scrap metal recycling business. Many of these
producers have substantially greater financial, marketing and other resources.
If we are unable to compete with these other companies in procuring raw scrap,
our operating costs could increase.
We intend
to compete in the global market with regard to the sale of processed scrap.
Competition for sales of processed scrap is based primarily on the price,
quantity and quality of the scrap metals, as well as the level of service
provided in terms of consistency of quality, reliability and timing of delivery.
To the extent that one or more of our competitors becomes more successful with
respect to any key factor, our ability to attract and retain consumers could be
materially and adversely affected. Our scrap metal processing operations will
also face competition from substitutes for prepared ferrous scrap, such as
pre-reduced iron pellets, hot briquetted iron, pig iron, iron carbide and other
forms of processed iron. The availability of substitutes for ferrous scrap could
result in a decreased demand for processed ferrous scrap, which could result in
lower prices for such products.
Unanticipated
disruptions in our operations could materially and adversely affect our revenues
and our relationship with our consumers.
Our
ability to process and fulfill orders and manage inventory depends on the
efficient and uninterrupted operation of our facilities. In addition, our
products will be transported to consumers by third-party truck, rail carriers
and cargo ships. As a result, we will rely on the timely and uninterrupted
performance of third party shipping companies and dock workers. Any interruption
in our operations or interruption or delay in transportation services could
cause orders to be canceled, lost or delivered late, goods to be returned or
receipt of goods to be refused or result in higher transportation costs. As a
result, our relationships with our consumers and our revenues and results of
operations and financial condition could be materially and adversely
affected.
The loss of any
member of our senior management team or a significant number of our managers
could have a material adverse effect on our ability to manage our
business.
Our
operations depend heavily on the skills and efforts of our senior management
team, including Dana J. Pekas, our President and Chief Executive Officer. We
will rely substantially on the experience of the management of our subsidiaries
with regard to day-to-day operations. We face intense competition for qualified
personnel, and many of our competitors have greater resources than we have to
hire qualified personnel. The loss of any member of our senior management team
or a significant number of managers could have a material adverse effect on our
ability to manage our business.
13
A significant
increase in the use of scrap metal alternatives by current consumers of
processed scrap metals could reduce demand for our products.
During
periods of high demand for scrap metals, tightness can develop in the supply and
demand balance for ferrous scrap. The relative scarcity of ferrous scrap,
particularly the “cleaner” grades, and its high price during such periods have
created opportunities for producers of alternatives to scrap metals, such as pig
iron and direct reduced iron pellets, to offer their products to our consumers.
Although these alternatives have not been a major factor in the industry to
date, the use of alternatives to scrap metals may proliferate in the future if
the prices for scrap metals rise or if the levels of available unprepared
ferrous scrap decrease. As a result, we may be subject to increased competition
which could adversely affect our revenues and materially and adversely affect
our operating results and financial condition.
Our
operations are subject to stringent regulations, particularly under applicable
environmental laws, which could subject us to increased costs.
The
nature of our business and previous operations by others at facilities owned or
operated by us make us subject to significant government regulation, including
stringent environmental laws and regulations. Among other things, these laws and
regulations impose comprehensive statutory and regulatory requirements
concerning, among other matters, the treatment, acceptance, identification,
storage, handling, transportation and disposal of industrial by-products,
hazardous and solid waste materials, waste water, storm water effluent, air
emissions, soil contamination, surface and ground water pollution, employee
health and safety, operating permit standards, monitoring and spill containment
requirements, zoning, and land use, among others. Various laws and regulations
set prohibitions or limits on the release of contaminants into the environment.
Such laws and regulations also require permits to be obtained and manifests to
be completed and delivered in connection with the operations of our businesses,
and in connection with any shipment of prescribed materials so that the movement
and disposal of such material can be traced and the persons responsible for any
mishandling of such material can be identified. This regulatory framework
imposes significant actual, day-to-day compliance burdens, costs and risks on
us. Violation of such laws and regulations may and do give rise to significant
liability, including fines, damages, fees and expenses, and closure of a site.
Generally, the governmental authorities are empowered to act to clean up and
remediate releases and environmental damage and to charge the costs of such
cleanup to one or more of the owners of the property, the person responsible for
the release, the generator of the contaminant and certain other parties or to
direct the responsible party to take such action. These authorities may also
impose a penalty or other liens to secure the parties’ reimbursement
obligations.
Environmental
legislation and regulations have changed rapidly in recent years, and it is
possible that we will be subject to even more stringent environmental standards
in the future. For these reasons, future capital expenditures for environmental
control facilities cannot be predicted with accuracy; however, if environmental
control standards become more stringent, our compliance expenditures could
increase substantially. The location of some of any acquired facility in an
urban area may increase the risk of scrutiny and claims. We cannot predict
whether any such future inquiries or claims will in fact arise or the outcome of
such matters.
Moreover,
environmental legislation has been enacted, and may in the future be enacted, to
create liability for past actions that were lawful at the time taken but that
have been found to affect the environment and to create public rights of action
for environmental conditions and activities. If damage to persons or the
environment has been caused, or is in the future caused, by hazardous materials
activities of us or our predecessors, we may be fined and held liable for such
damage. In addition, we may be required to remedy such conditions and/or change
procedures. Thus, liabilities, expenditures, fines and penalties associated with
environmental laws and regulations might be imposed on us in the future, and
such liabilities, expenditures, fines or penalties might have a material adverse
effect on our results of operations and financial condition.
We are
subject to potential liability and may also be required from time to time to
clean up or take certain remedial action with regard to sites currently or
formerly used in connection with our operations. Furthermore, we may be required
to pay for all or a portion of the costs to clean up or remediate sites we never
owned or on which we never operated if we are found to have arranged for
transportation, treatment or disposal of pollutants or hazardous or toxic
substances on or to such sites. We are also subject to potential liability for
environmental damage that our assets or operations may cause nearby landowners,
particularly as a result of any contamination of drinking water sources or soil,
including damage resulting from conditions existing prior to the acquisition of
such assets or operations. Any substantial liability for environmental damage
could materially adversely affect our operating results and financial condition,
and could materially adversely affect the marketability and price of our
stock.
14
Our operations
present significant risk of injury or death. We may be subject to claims that
are not covered by or exceed our insurance.
Because
of the heavy industrial activities conducted at our facilities, there exists a
risk of injury or death to our employees or other visitors, notwithstanding the
safety precautions we take. Our operations are subject to regulation by federal,
state and local agencies responsible for employee health and safety, including
the Occupational Safety and Health Administration (“OSHA”). While we intend to
have in place policies to minimize such risks, we may nevertheless be unable to
avoid material liabilities for any employee death or injury that may occur in
the future. These types of incidents may not be covered by or may exceed our
insurance coverage and may have a material adverse effect on our results of
operations and financial condition.
The Company’s stock price may be
volatile.
The
market price of the Company’s common stock is likely to be highly volatile and
could fluctuate widely in price in response to various factors, many of which
are beyond the Company’s control, including the following:
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new
products and services by the Company or its
competitors;
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additions
or departures of key personnel;
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the
Company’s ability to execute its business
plan;
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operating
results that fall below
expectations;
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loss
of any strategic relationship;
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industry
developments;
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economic
and other external factors; and
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period-to-period
fluctuations in the Company’s financial
results.
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In
addition, the securities markets have from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of
particular companies. These market fluctuations may also materially and
adversely affect the market price of the Company’s common stock.
There is currently no liquid trading
market for the Company’s common stock and the Company cannot ensure that one
will ever develop or be sustained.
The
Company’s common stock is currently approved for quotation on the OTC Bulletin
Board trading under the symbol MOBE.OB. However, there is limited trading
activity and not currently a liquid trading market. There is no assurance
as to when or whether a liquid trading market will develop, and if such a market
does develop, there is no assurance that it will be maintained.
Furthermore, for companies whose securities are quoted on the
Over-The-Counter Bulletin Board maintained by the Financial Industry Regulatory
Authority (the “OTCBB”), it is more difficult (1) to obtain accurate quotations,
(2) to obtain coverage for significant news events because major wire services
generally do not publish press releases about such companies, and (3) to obtain
needed capital. As a result, purchasers of the Company’s common stock may
have difficulty selling their shares in the public market, and the market price
may be subject to significant volatility.
The Company’s common stock is
currently deemed to be “penny stock”, which makes it more difficult for
investors to sell their shares.
The
Company’s common stock is currently subject to the “penny stock” rules adopted
under section 15(g) of the Exchange Act. The penny stock rules apply to
companies whose common stock is not listed on the NASDAQ Stock Market or other
national securities exchange and trades at less than $5.00 per share or that
have tangible net worth of less than $5,000,000 ($2,000,000 if the company has
been operating for three or more years). These rules require, among other
things, that brokers who trade penny stock to persons other than “established
customers” complete certain documentation, make suitability inquiries of
investors and provide investors with certain information concerning trading in
the security, including a risk disclosure document and quote information under
certain circumstances. Many brokers have decided not to trade penny stocks
because of the requirements of the penny stock rules and, as a result, the
number of broker-dealers willing to act as market makers in such securities is
limited. If the Company remains subject to the penny stock rules for any
significant period, it could have an adverse effect on the market, if any, for
the Company’s securities. If the Company’s securities are subject to the penny
stock rules, investors will find it more difficult to dispose of the Company’s
securities.
15
ITEM
1B. Unresolved
Staff Comments
None.
ITEM
2. Management's
Discussion And Analysis Of Plan Of Operations
Management's
Discussion and Analysis of Financial Condition and Result of
Operations
Our
business is highly dependent upon the price of metal commodities, as our
remuneration for these activities is calculated as a percentage of the value of
the commodities traded. When the global economic decline caused the
price of steel to fall 80% in late 2008, our revenues for the ensuing year,
2009, also fell dramatically. Accordingly, our net sales decreased by
2/3 between 2008 and 2009 going from $5,132,722 to $1,617,090 during that
period.
Although
our business plan is to acquire operating facilities, in the past, our
activities have been limited to trading metals. Accordingly, our
assets have been limited to inventories of metal and the cash to buy it with, as
well as notes receivable and some prepaid expenses. Our assets
declined significantly with the decline in the value of the steel we were
holding and with the decline in the amounts of cash generated by the
transactions in which we engaged. As a result, total assets in 2009
(again, mostly cash) were approximately half of the total assets in 2008,
declining from $343,338 to $170,072.
Result
of Operations
In 2008,
our operations generated $5,132,722 in net sales and $1,512,582 gross profit.
Due to the global economic decline and the ensuing decrease in the price of
metals, those figures declined approximately 70% in 2009, net sales dropping to
$1,617,090 and gross profits decreasing to $443,624. Fixed expenses,
such as selling, administrative expenses, professional fees and interest
expense, which do not vary directly with the level of sales, declined by only
about 50% each, thus causing net income to decline by a much larger percentage
than net sales, going from $296,250 in 2008 to $11,276 in 2009.
Liquidity
and Capital Resources
As stated
above, although our business plan calls for us to acquire operating facilities
and the plant and equipment with which to conduct those operations, until now,
the major activity has been trading metals and the primary production tool of
our business has been cash, which is used to buy metals which are then
resold. Because the global economic decline caused an 80% decrease in
the price of metals and because our revenue is a percentage of the value of
metals traded, it took almost the same amount of cash from internal and external
financing activities to achieve the much smaller net sales and gross profit from
those trading activities for 2009. Net cash used by financing
activities declined by only 18% between 2008 and 2009, going from $217,760 to
$178,050 while the net sales and gross profit generated by the use of those sums
of cash declined by 68-70% during those same years. Net cash provided
by operating activities declined by the same approximate percentage as gross and
net revenues, going from $169,951 in 2008 to $50,032 in 2009, a decline of
approximately 70%.
Plan
of Operation and Funding
Existing
working capital, cash flow from operations, further advances from the bank, as
well as debt instruments or stock subscriptions are expected to be adequate to
fund our operations over the next twelve months.
In
connection with our business plan, management anticipates that administrative
expenses will increase over the next twelve months. Additional issuances of
equity or convertible debt securities may be required which will result in
dilution to our current shareholders. Furthermore, such securities might have
rights, preferences or privileges senior to our common stock. Additional
financing may not be available upon acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be
able to take advantage of prospective new business opportunities, which could
significantly and materially restrict our business operations.
16
Material
Commitments
We do not
have any material commitments for the fiscal years ended January 31, 2010 and
2009.
Off
Balance Sheet Arrangements
We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.
Going
Concern
The
independent auditors' report accompanying our January 31, 2010 and January 31,
2009 financial statements, prepared before and without consideration of the
effect of the acquisition of the assets of UTP Holdings, LLC, contains an
explanatory paragraph expressing substantial doubt about our ability to continue
as a going concern. The financial statements have been prepared "assuming that
we will continue as a going concern," which contemplates that we will realize
our assets and satisfy our liabilities and commitments in the ordinary course of
business.
Recent
Accounting Pronouncements
Effective
June 30, 2009, the FASB issued a new accounting standard related to the
disclosure requirements of the fair value of the financial instruments. This
standard expands the disclosure requirements of fair value (including the
methods and significant assumptions used to estimate fair value) of certain
financial instruments to interim period financial statements that were
previously only required to be disclosed in financial statements for annual
periods.
In August
2009, the FASB issued an amendment to the accounting standards related to the
measurement of liabilities that are recognized or disclosed at fair value on a
recurring basis. This standard clarifies how a company should measure the fair
value of liabilities and that restrictions preventing the transfer of a
liability should not be considered as a factor in the measurement of liabilities
within the scope of this standard. The Company does not expect the impact of
this amendment to be material to its financial statements.
On
September 30, 2009, the FASB issued changes to the authoritative hierarchy of
GAAP. These changes establish the FASB Accounting Standards
Codification (Codification) as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with GAAP. Rules
and interpretive releases of the Securities and Exchange Commission (SEC) under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants. The FASB will no longer issue new standards in the
form of Statements, FASB Staff Positions, or Emerging Issues Task Force
Abstracts; instead the FASB will issue Accounting Standards
Updates. Accounting Standards Updates will not be authoritative in
their own right as they will only serve to update the
Codification. These changes and the Codification itself do not change
GAAP. Other than the manner in which new accounting guidance is
referenced, the adoption of these changes had no impact on the Financial
Statements.
In
October 2009, the FASB issued an amendment to the accounting standards related
to the accounting for revenue in arrangements with multiple deliverables
including how the arrangement consideration is allocated among delivered and
undelivered items of the arrangement. Among the amendments, this standard
eliminated the use of the residual method for allocating arrangement
considerations and requires an entity to allocate the overall consideration to
each deliverable based on an estimated selling price of each individual
deliverable in the arrangement in the absence of having vendor-specific
objective evidence or other third party evidence of fair value of the
undelivered items. This standard also provides further guidance on how to
determine a separate unit of accounting in a multiple-deliverable revenue
arrangement and expands the disclosure requirements about the judgments made in
applying the estimated selling price method and how those judgments affect the
timing or amount of revenue recognition. This standard, for which the Company is
currently assessing the impact, will become effective for the Company on January
1, 2011.
17
In
October 2009, the FASB issued an amendment to the accounting standards related
to certain revenue arrangements that include software elements. This standard
clarifies the existing accounting guidance such that tangible products that
contain both software and non-software components that function together to
deliver the product’s essential functionality, shall be excluded from the scope
of the software revenue recognition accounting standards. Accordingly, sales of
these products may fall within the scope of other revenue recognition standards
or may now be within the scope of this standard and may require an allocation of
the arrangement consideration for each element of the arrangement. This
standard, for which the Company is currently assessing the impact, will become
effective for the Company on January 1, 2011.
ITEM
2A. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market
risk represents the risk of loss that may impact our financial position, results
of operations or cash flows due to adverse changes in foreign currency and
interest rates.
ITEM
3. PROPERTIES
Our
principal executive office is located at 27 Fletcher Avenue, Sarasota, Florida
34237. Our telephone number is (941) 312-0330. We are currently leasing generic
office space on a month-to-month basis for $3,500 per month. This space is
utilized for office purposes and it is our belief that the space is adequate for
our immediate needs. Additional space may be required as we expand our business
activities. We do not foresee any significant difficulties in obtaining any
required additional facilities.
ITEM
5. DIRECTORS
AND EXECUTIVE OFFICERS
Each
director serves until our next annual meeting of the stockholders or unless they
resign earlier. The Board of Directors elects officers and their terms of office
are at the discretion of the Board of Directors.
Each of
our directors serves until his or her successor is elected and qualified. Each
of our officers is elected by the board of directors to a term of one (1) year
and serves until his or her successor is duly elected and qualified, or until he
or she is removed from office. At the present time, members of the board of
directors are not compensated for their services to the board.
Compliance with Section 16(a) of the
Securities Exchange Act of 1934
Section
16(a) of the Securities Exchange Act of 1934 requires our executive officers and
directors, and persons who beneficially own more than 10% of our equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and greater than 10%
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. We believe that during the fiscal
year ended January 31, 2010 all such filing requirements applicable to our
officers and directors have been met.
Audit
Committee
The
Company intends to establish an audit committee of the board of directors. The
audit committee’s duties would be to recommend to the Company’s board of
directors the engagement of an independent registered public accounting firm to
audit the Company’s financial statements and to review the Company’s accounting
and auditing principles. The audit committee would review the scope, timing and
fees for the annual audit and the results of audit examinations performed by the
internal auditors and independent registered public accounting firm, including
their recommendations to improve the system of accounting and internal controls.
The audit committee would at all times be composed exclusively of directors who
are, in the opinion of the Company’s board of directors, free from any
relationship which would interfere with the exercise of independent judgment as
a committee member and who possess an understanding of financial statements and
generally accepted accounting principles.
18
Compensation
Committee
The
Company intends to establish a compensation committee of the Board of Directors.
The compensation committee would review and approve the Company’s salary and
benefits policies, including compensation of executive officers.
Code
of Ethics
We
adopted a code of ethics. This policy will serve as guidelines in helping
employee to conduct our business in accordance with our values. Compliance
requires meeting the spirit, as well as the literal meaning, of the law, the
policies and the Values. It is expected that employee will use common sense,
good judgment, high ethical standards and integrity in all their business
dealings.
ITEM
6. EXECUTIVE
COMPENSATION
Compensation
of Officers
A summary
of cash and other compensation paid in accordance with management consulting
contracts for our Principal Executive Officer and other executives for the most
recent three years is as follows:
|
Name
and Principal
Position
|
Year
|
Salary
|
Bonus
Awards
|
Stock
Awards
|
Other
Incentive
Compensation
|
Non-Equity
Plan
Compensation
|
Nonqualified
Deferred
Earnings
|
All
Other
Compensation
|
Total
|
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
||
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
Dana
J, Pekas
CEO,
President and Director
|
2009
2008
2007
|
0
0
0
|
0
0
0
|
0
0
0
|
0
0
0
|
0
0
0
|
0
0
0
|
0
0
0
|
0
0
0
|
|
David
Finkelstein
CFO,
Secretary and
Director
|
2009
2008
2007
|
0
0
0
|
0
0
0
|
0
0
0
|
0
0
0
|
0
0
0
|
0
0
0
|
0
0
0
|
0
0
0
|
|
Clarence
M. McCulley
COO
and Director
|
2009
2008
2007
|
0
0
0
|
0
0
0
|
0
0
0
|
0
0
0
|
0
0
0
|
0
0
0
|
0
0
0
|
0
0
0
|
Retirement,
Resignation or Termination Plans
We
sponsor no plan, whether written or verbal, that would provide compensation or
benefits of any type to an executive upon retirement, or any plan that would
provide payment for retirement, resignation, or termination as a result of a
change in control of our Company or as a result of a change in the
responsibilities of an executive following a change in control of our
Company.
Directors'
Compensation
The
persons who served as members of our board of directors, including executive
officers did not receive any compensation for services as director for the year
ended January 31, 2010.
ITEM
7. CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, ANDDIRECTOR INDEPENDENCE.
As
previously disclosed, on February 8, 2010 (the “Closing Date”), Dana J. Pekas
acquired the majority of the issued and outstanding common stock of Mobieyes
Software, Inc., a Florida corporation (the “Company”), from Kevin Miller (the
“Seller”), in accordance with a stock purchase agreement (the “Stock Purchase
Agreement”) between Dana J. Pekas, SFJ Family Trust, Richard Lupient and the
Seller.
19
Pursuant
to the terms of the Stock Purchase Agreement, Dana J. Pekas acquired control of
eleven million one hundred eighteen thousand (11,118,000) shares of the
Company’s issued and outstanding common stock representing approximately 84.69%.
SFJ Family Trust acquired eight hundred eight hundred sixty four thousand
(864,000) shares of the Company’s issued and outstanding common stock
representing approximately 6.54% of the Company’s issued and outstanding common
stock. Richard Lupient acquired control of eighteen thousand (18,000) shares of
the Company’s issued and outstanding common stock representing approximately
0.13%. Dana J. Pekas acquired a total of eleven million nine hundred eighty two
thousand (11,982,000) shares as he is the trustee of the SFJ Family Trust,
accordingly Mr. Pekas aggregate ownership represents approximately 90.77% of the
shares of outstanding common stock of the Company at the time of transfer.
The aggregate purchase price for the shares was Three Hundred Thousand dollars
($300,000).
Except
for the foregoing, none of the following persons has any direct or indirect
material interest in any transaction to which we were or are a party since the
beginning of our last fiscal year, or in any proposed transaction to which we
propose to be a party:
(A) any
of our directors or executive officers;
(B) any
nominee for election as one of our directors;
|
|
(C)
|
any
person who is known by us to beneficially own, directly or indirectly,
shares carrying more than 5% of the voting rights attached to our common
stock; or
|
|
|
(D)
|
any
member of the immediate family (including spouse, parents, children,
siblings and in-laws) of any of the foregoing persons named in paragraph
(A), (B) or (C) above
|
We
anticipate reviewing all related party transactions as they are presented to us,
and we would not anticipate that such review procedures would be in writing
until such time as our Board of Directors felt it was necessary.
ITEM 8. LEGAL
PROCEEDINGS
We are
not presently a party to any litigation or threatened litigation.
|
ITEM 9.
|
MARKET
PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
|
Market
Information
Our
common stock is currently quoted on the OTC Bulletin Board. Our common stock has
been quoted on the OTC Bulletin Board since November 11, 2009 under the symbol
“MOBE.OB.” Because we are quoted on the OTC Bulletin Board, our
securities may be less liquid, receive less coverage by security analysts and
news media, and generate lower prices than might otherwise be obtained if they
were listed on a national securities exchange.
The
following table sets forth the high and low bid quotations for our common stock
as reported on the OTC Bulletin Board for the periods indicated.
|
2009
|
High
|
Low
|
|||||
|
Third
Quarter
|
1.05
|
1.00
|
|||||
|
2010
|
|||||||
|
First
Quarter
|
NIL
|
NIL
|
Information
for the periods referenced above has been furnished by the OTC Bulletin Board.
The quotations furnished by the OTC Bulletin Board reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not reflect actual
transactions.
We have
never declared or paid any cash dividends on our common stock nor do we intend
to do so in the foreseeable future. Any future determination to pay cash
dividends will be at the discretion of our board of directors and will depend
upon our financial condition, operating results, capital requirements, any
applicable contractual restrictions and such other factors as our board of
directors deems relevant.
20
Trading
Information
The
Company’s common stock is currently approved for quotation on the OTCBB under
the symbol “MOBE.OB,” but there is currently no liquid trading market for the
Company’s common stock. The information for our transfer agent is as
follows:
StockTrans,
Inc.
44
West Lancaster Ave.
Adrmore,
PA 19003
Tel:
610-649-7300
Fax:610-649-7302
Holders
As of
February 22, 2010, we had 12 stockholders of record.
Dividends
On
February 24, 2010, the Company voted to implement a forward split its issued and
outstanding common shares, whereby every share of common stock held was
exchanged for 25 shares of common stock. As a result, the issued and outstanding
shares of common stock were increased from approximately 3,000,000 prior to the forward
split to 75,000,000 following the forward split. The record date of the forward
split was February 24, 2010 and the forward split shall be payable as a dividend
to shareholders on or about March 8, 2010, or as soon as deemed effective by
FINRA. The dividend shall be payable upon the surrender of
certificates.
Purchases
of Equity Securities by the Company and Affiliated Purchasers
None.
Section
15(g) of the Securities Exchange Act of 1934
Our
company’s shares are covered by Section 15(g) of the Securities Exchange Act of
1934, as amended that imposes additional sales practice requirements on
broker/dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in excess
of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouses). For
transactions covered by the Rule, the broker/dealer must make a special
suitability determination for the purchase and have received the purchaser’s
written agreement to the transaction prior to the sale. Consequently, the Rule
may affect the ability of broker/dealers to sell our securities and also may
affect your ability to sell your shares in the secondary market.
Section
15(g) also imposes additional sales practice requirements on broker/dealers who
sell penny securities. These rules require a one page summary of certain
essential items. The items include the risk of investing in penny stocks in both
public offerings and secondary marketing; terms important to in understanding of
the function of the penny stock market, such as “bid” and “offer” quotes, a
dealers “spread” and broker/dealer compensation; the broker/dealer compensation,
the broker/dealers duties to its customers, including the disclosures required
by any other penny stock disclosure rules; the customers rights and remedies in
causes of fraud in penny stock transactions; and, the NASD’s toll free telephone
number and the central number of the North American Administrators Association,
for information on the disciplinary history of broker/dealers and their
associated persons.
ITEM
11. DESCRIPTION OF THE REGISTRANT’S
SECURITIES
Common
Stock
21
Our
authorized capital stock consists of 250,000,000 shares of common stock, par
value $0.0001 per share. The holders of our common stock:
|
*
|
have
equal ratable rights to dividends from funds legally available if and when
declared by our board of directors;
|
|
|
*
|
are
entitled to share ratably in all of our assets available for distribution
to holders of common stock upon liquidation, dissolution or winding up of
our affairs;
|
|
|
*
|
do
not have preemptive, subscription or conversion rights and there are no
redemption or sinking fund provisions or rights; and
|
|
|
*
|
are
entitled to one non-cumulative vote per share on all matters on which
stockholders may vote.
|
We refer
you to our Articles of Incorporation, Bylaws and the applicable statutes of the
State of Florida for a more complete description of the rights and liabilities
of holders of our securities.
Non-cumulative
Voting
Holders
of shares of our common stock do not have cumulative voting rights, which means
that the holders of more than 50% of the outstanding shares, voting for the
election of directors, can elect all of the directors to be elected, if they so
choose, and, in that event, the holders of the remaining shares will not be able
to elect any of our directors.
Anti-Takeover
Provisions
None.
ITEM
12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our
Articles of Incorporation and Florida law permit, under certain circumstances,
the indemnification of any person with respect to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, to which such person was or is a party or is threatened to be
made a party, by reason of his or her being an officer, director, employee or
agent of the corporation or is or was serving at the request of such corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against liability incurred in
connection with such proceeding, including appeals thereof; provided, however,
that the officer, director, employee or agent acted in good faith and in a
manner that he or she reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any such third-party action by judgment, order, settlement,
or conviction or upon a plea of nolo contendere or its equivalent does not, of
itself, create a presumption that the person (i) did not act in good faith
and in a manner which he or she reasonably believed to be in, or not opposed to,
the best interests of the corporation or (ii) with respect to any criminal
action or proceeding, had reasonable cause to believe that his or her conduct
was unlawful.
In the
case of proceedings by or in the right of the corporation, Florida law permits
indemnification of any person by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of such corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against liability incurred in connection with such proceeding, including appeals
thereof; provided, however, that the officer, director, employee or agent acted
in good faith and in a manner that he or she reasonably believed to be in, or
not opposed to, the best interests of the corporation, except that no
indemnification is made where such person is adjudged liable, unless a court of
competent jurisdiction determines that, despite the adjudication of liability
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper. To the extent that such person is successful on the merits or otherwise
in defending against any such proceeding, Florida law provides that he or she
shall be indemnified against expenses actually and reasonably incurred by him or
her in connection therewith.
22
In
addition to the authority granted to us by Florida law to indemnify our
directors, certain other provisions of the Florida Act have the effect of
further limiting the personal liability of our directors. Pursuant to Florida
law, a director of a Florida corporation cannot be held personally liable for
monetary damages to the corporation or any other person for any act or failure
to act regarding corporate management or policy except in the case of certain
qualifying breaches of the director’s duties.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to our directors and officers, or to persons
controlling us, pursuant to our Articles of Incorporation or Florida law, we
have been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
ITEM
14. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND FINANCIAL DISCLOSURE
There
have been no disagreements on accounting and financial disclosures from the
inception of our company through February 22, 2010.
Item
2.01(f) of Form 8-K states that if the registrant was a shell company like we
were immediately before the transaction disclosed under Item 2.01, then the
registrant must disclose the information that would be required if the
registrant were filing a general form for registration of securities on Form 10.
The foregoing Items enumerated 1 through 14 are intended to satisfy and relate
such information required by Item 2.01(f) for Form 8-K. The following enumerated
Items relate to this current report on Form 8-K.
ITEM
5.01. Changes
in Control of Registrant
On
February 8, 2010 (the “Closing Date”), Dana J. Pekas acquired the majority of
the issued and outstanding common stock of Mobieyes Software, Inc., a Florida
corporation (the “Company”), from Kevin Miller (the “Seller”), in accordance
with a stock purchase agreement (the “Stock Purchase Agreement”) between Dana J.
Pekas, SFJ Family Trust, Richard Lupient and the Seller.
Pursuant
to the terms of the Stock Purchase Agreement, Dana J. Pekas acquired control of
eleven million one hundred eighteen thousand (11,118,000) shares of the
Company’s issued and outstanding common stock representing approximately 84.69%.
SFJ Family Trust acquired eight hundred eight hundred sixty four thousand
(864,000) shares of the Company’s issued and outstanding common stock
representing approximately 6.54% of the Company’s issued and outstanding common
stock. Richard Lupient acquired control of eighteen thousand (18,000) shares of
the Company’s issued and outstanding common stock representing approximately
0.13%. Dana J. Pekas acquired a total of eleven million nine hundred eighty two
thousand (11,982,000) shares as he is the trustee of the SFJ Family Trust,
accordingly Mr. Pekas aggregate ownership represents approximately 90.77% of the
shares of outstanding common stock of the Company at the time of transfer.
The aggregate purchase price for the shares was Three Hundred Thousand dollars
($300,000).
As part
of the acquisition the following changes to the Company's directors and officers
have occurred:
|
·
|
Kevin
Miller resigned as the sole member of the Company's Board of Directors and
as the Company's President, Chief Executive Officer, Secretary, Treasurer,
Principal Financial and Accounting Officer effective February 9,
2010.
|
|
·
|
As
of February 9, 2010, Dana J. Pekas was appointed as the Company's
President, Chief Executive Officer, and as a member of the Company's Board
of Directors.
|
|
·
|
As
of February 9, 2010, David Finkelstein was appointed as the Company's
Chief Financial Officer, Secretary and as a member of the Company's Board
of Directors.
|
|
·
|
As
of February 9, 2010, Clarence M. McCulley was appointed as the Company's
Chief Operating Officer and as a member of the Company's Board of
Directors.
|
23
ITEM
5.02 Departure of Principal Directors or
Principal Officers; Election of Directors; Appointment of Principal
Officers
Kevin
Miller resigned as a member of the Company's Board of Directors effective as of
February 9, 2010. Kevin Miller also resigned as the Company's President,
Chief Executive Officer, Treasurer, Secretary and Principal Accounting and
Financial Officer and the Company's sole Director, such resignation was
effective February 9, 2010. The resignation was not the result of any
disagreement with the Company on any matter relating to the Company's
operations, policies or practices.
On
February 9, 2010, Dana J. Pekas was appointed as the Company's President, Chief
Executive Officer and as a member of the Company's Board of
Directors.
On
February 9, 2010, Clarence M. McCulley was appointed as the Company's Chief
Operating Officer and as a member of the Company's Board of
Directors.
On
February 9, 2010, David Finkelstein was appointed as the Company's Chief
Financial Officer, Secretary and as a member of the Company's Board of
Directors.
Chief Executive Officer, President
and Director
Mr. Dana
J. Pekas, attended the University of Minnesota from 1981 to 1984. From 1984 to
1999, Mr. Pekas was a senior officer and owner of Amcom Corporation/Express
Point. From 1999 to 2004, he was a senior officer and owner of Universal
Products Corp which merged into UTP Holdings, LLC.. He has been the managing
member since 2004. Mr. Pekas also has served as a board of director or manager
for the following companies: Express Point Technologies, Knead’n Dough and Toy
Box Storage.
Chief
Financial Officer, Secretary and Director
Mr. David
N. Finkelstein is an Attorney at law and a CPA. He graduated from the law school
at the University of North Carolina at Chapel Hill in 1984 after obtaining his
Bachelor of Science degrees in Accounting and Business Administration from
Chapel Hill in 1978. Before founding his own firm in 1990, Mr. Finkelstein
practiced for ten years with two of the largest and most prominent law firms in
the country, Fulbright & Jaworski in Houston and Holland & Knight. Prior
to that, he practiced as a CPA in Atlanta and served as controller of a
subsidiary of the Georgia Power Company. Mr. Finkelstein has served as tax
counsel to the local Bar Association and a former treasurer of that
organization. He has also served as technical advisor to the editor of CPA Today
magazine, the official journal of the Florida Institute of Certified Public
Accountants. Mr. Finkelstein regularly participates in the pro bono program of
the Lawyers’ Referral Service. He is a Master Mason and member of the Shrine
Club. Mr. Finkelstein has been working with UTP Holdings, LLC as a legal and
financial advisor since August 2008.
Chief
Operating Officer and Director
Mr.
Clarence M. McCulley, attended Wayne County College in Michigan from 1974 to
1976. From 1976 to 1990, he owned Waterfront Industrial, a company
whose core businesses were trucking of steel coils for the auto industry and
scrap metal for the steel industry, warehousing and logistics for the steel mill
and auto industries, and demolition for state and county municipalities in
Michigan. From 1990 to 1999, he was a demolition consultant for US
Dismantling in Pennsylvania, Michigan and for various firms in the state of
Florida. In 2000, he started American Salvage Inc. and in 2003 he purchased
T&M. He is currently owner and operator of these two
companies. He has also served on the board of directors for
Waterfront Industrial, US Dismantling, T&M Salvage and American Salvage and
Trading.
Item
5.03 Amendment To Articles Of Incorporation
Or Bylaws; Change In Fiscal Year
We filed
a Certificate of Amendment with the Florida Secretary of State on February 23,
2010, and will notify the Financial Industry Regulatory Authority ("FINRA") of
the name change in short order. The name Change will take effect in the market
upon its approval by FINRA. Once FINRA processes the name change, we will be
issued a new symbol and will disclose the change on a Current Report on Form
8-K.
As a
result of the consummation of the Purchase Agreement, the registrant is no
longer a shell corporation as that term is defined in Rule 405 of the Securities
Act and Rule 12b-2 of the Exchange Act.
|
(a)
|
Financial Statements of
Businesses Acquired.
|
In
accordance with Item 9.01(a), the audited financial statements of UTP for the
periods ended December 31, 2009 and December 31, 2008 are filed
herewith.
24
|
Bobbitt, Pittenger & Company, P.A.
Certified Public Accountants
|
| January
13, 2010
To
the Members of
UTP
Holdings, LLC
Sarasota,
Florida
UREPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
We
have audited the accompanying balance sheets of UTP Holdings, LLC as of
December 31, 2009 and 2008, and the related statements of income and
members’ 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 consolidated
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
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. We believe that our audits provide a reasonable
basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of UTP Holdings, LLC at
December 31, 2009 and 2008, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
 Certified
Public Accountants
|
25
See notes to financial statements.
26
See notes to
financial statements.
27
See notes to
financial statements.
28
See notes to
financial statements.
29
UTP
HOLDINGS, LLC
NOTES TO
FINANCIAL STATEMENTS
FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
NOTE A -
NATURE OF OPERATIONS AND DESCRIPTION OF BUSINESS
UTP
Holdings, LLC (the “Company”) was organized on September 9, 2004 as a Florida
limited liability company. The Company is a United States of America based
recycling company with global distribution, specializing in exporting ferrous
and nonferrous scrap from their North American location. The Company has local
representation in Europe, India, the Caribbean and the United States and has
built a solid supply line of recyclable products with their customers and
suppliers.
The
Company purchases product and then processes the product with little or no
overhead costs. They have agreements with large processing facilities, which
allows for them to ship bulk orders of products without the added cost of
holding the inventory. Most products are shipped via ocean containers to global
customers.
NOTE B -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of
Presentation
The
accompanying financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (“SEC”) and accounting
principles generally accepted in the United States of America (“GAAP”). The
Company’s reporting currency is the United States dollar.
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles 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 date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Accordingly, actual results could differ
from these estimates.
Concentrations of Credit
Risk
Financial
instruments which potentially subject the Company to concentrations of credit
risk consist of cash. The Company maintains cash accounts in FDIC insured
financial institutions. The Company had no cash balances in excess of FDIC
insured amounts.
Concentrations
Approximately
78% and 88% of the Company’s sales were with two customers for the years ended
December 31, 2009 and 2008, respectively. The Company’s business is
dependent upon these customers, the loss of which would have a materially
adverse effect on the Company. The Company has a long history with
these customers, and does not anticipate significant changes in their current
arrangements.
Cash and Cash
Equivalents
Cash and
cash equivalents include cash in banks, money market funds, and certificates of
term deposits with maturities of less than three months from date of purchase,
which are readily convertible to known amounts of cash and which, in the opinion
of management, are subject to an insignificant risk of loss in value. The
Company had no cash equivalents at December 31, 2009 and 2008.
30
Fair Value
Measurements
Effective
January 1, 2008, the Company adopted Statement of Financial Accounting Standards
(“SFAS”) No. 157, Fair Value
Measurements (“SFAS 157”), which is now codified under ASC Topic 820
(“ASC 820”). ASC 820 defines fair value, establishes a framework for
measuring fair value and enhances disclosures about fair value
measurements.
ASC 820
defines fair value as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. ASC 820 also establishes
a fair value hierarchy which requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring
fair value. The standard describes three levels of inputs that may be
used to measure fair value:
Level
1: Observable inputs such as quoted prices (unadjusted) in active
markets for identical assets or liabilities.
Level
2: Inputs other than quoted prices that are observable for the asset
or liability, either directly or indirectly. These include quoted
prices for similar assets or liabilities in active markets; quoted prices for
identical or similar assets or liabilities that are not active; and model-driven
valuations whose inputs are observable or whose significant value drivers are
observable. Valuations may be obtained from, or corroborated by,
third-party pricing services.
Level
3: Unobservable inputs to measure fair value of assets and
liabilities for which there is little, if any market activity at the measurement
date, using reasonable inputs and assumptions based upon the best information at
the time, to the extent that inputs are available without undue cost and
effort.
Fair Value of Financial
Instruments
The
carrying amount reported in the balance sheet for cash, prepaid expenses, and
accounts payable approximates fair value because of the immediate or short-term
maturity of these financial instruments. The carrying amount of the
notes receivable and line of credit approximates fair value because it is priced
at an interest rate that is consistent with the Company’s current borrowing
rate.
NOTE B -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial
Instruments (Continued)
The
estimated fair values of the Company’s financial instruments are as
follows:
|
Carrying
Amount
|
Fair Value | |||||||
| Financial assets: | ||||||||
| Cash and cash equivalents | $ | 2,622 | $ | 2,622 | ||||
| Notes receivable | 150,000 | 150,000 | ||||||
| Prepaid expenses | 5,000 | 5,000 | ||||||
| Financial liabilities: | ||||||||
| Accounts payable | 2,475 | 2,475 | ||||||
| Line of credit | 715,073 | 715,073 | ||||||
Accounts
Receivable
Accounts
receivable are recorded at the invoiced amount. The allowance for
doubtful accounts is the Company’s best estimate of the amount of probable
credit losses in the Company’s existing accounts receivable. The
Company determines the allowance based on historical write-off experience by
industry. The Company reviews its allowance for doubtful accounts
monthly. Past due balances over 90 days and specified receivable
amounts are reviewed individually for collectibility. All other
balances are reviewed on a pooled basis by industry.
31
Account
balances are charged off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered
remote. Interest income, finance or late fee charges are accrued
monthly but not recognized on past due trade receivables until management
determines that such interest or charges will be collected. As of December 31,
2009 there were no accounts receivable. As of December 31, 2008, there was one
account receivable totaling $2,929. This account was fully allowanced at
December 31, 2008.
Inventory
Inventory
is stated at the lower of cost or market and consists of cube cargo shipping
containers.
Sales
Commissions
The
Company has sales commission agreements with various entities and individuals.
Sales commissions are expensed as revenue from the sales of products is
recognized.
NOTE B -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue
Recognition
The
Company recognizes revenue from the sale of products and services in accordance
with the Securities and Exchange Commission Staff Accounting Bulletin No. 104
(“SAB 104”), “Revenue Recognition in Financial Statements.” Revenue will
consist of sales of goods and will be recognized only when the following
criteria have been met.
|
1)
|
Persuasive
evidence for an agreement exists;
|
|
2)
|
Delivery
has occurred;
|
|
3)
|
The
fee is fixed or determinable; and
|
|
4)
|
Revenue
is reasonably assured.
|
Recent Accounting
Pronouncements
In May
2009 the FASB issued Statement No. 165, “Subsequent Events” (“SFAS 165”), which
is now codified under ASC Topic 855 (“ASC 855”) “Subsequent Events”. ASC 855
establishes general standards of accounting for, and requires disclosure of,
events that occur after the balance sheet date but before financial statements
are issued or available to be issued. ASC 855 is effective for fiscal years and
interim periods ending after June 15, 2009. The Company adopted the provisions
of ASC 855 in the year ended December 31, 2009 and has evaluated subsequent
events through the date of this report.
In June
2009, the FASB issued SFAS No. 166 “Accounting for Transfers of Financial
Assets,” (“SFAS 166”), which is now codified under ASC Topic 860 (“ASC
860”). ASC 860 will require more information about transfers of
financial assets, including securitization transactions where entities have
continuing exposure to the risks related to transferred financial
assets. It eliminates the concept of a “qualifying special purpose
entity”, changes the requirements for de-recognizing financial assets and
requires additional disclosures. ASC 860 is effective at the start of
the first fiscal year beginning after November 15, 2009. The Company
does not expect ASC 860 to have a material impact on its financial
statements.
In June
2009, the FASB issued SFAS No. 167, “Amendments to FIN 46(R)” (“SFAS 167”),
which is now codified under ASC Topic 810 (“ASC 810”). ASC 810
modifies how a reporting entity determines when an entity that is insufficiently
capitalized or is not controlled through voting (or similar rights) should be
consolidated. In addition, a reporting entity will be required to
provide additional disclosures about its involvement with variable interest
entities and any significant changes in risk exposure due to that
involvement. ASC 810 is effective at the start of the first fiscal
year beginning after November 15, 2009. The Company does not expect
ASC 810 to have a material impact on its financial statements.
32
In June
2009, the FASB issued Statement No. 168, “the FASB Accounting Standards
Codification (Codification)”. The Codification became the single source for all
authoritative GAAP recognized by the FASB to be applied for financial statements
issued for periods ending after September 15, 2009. As the Codification was
not intended to change existing GAAP, it will not have any impact on the
Company’s financial statements.
NOTE B -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting
Pronouncements (Continued)
In August
2009, the FASB issued ASU No. 2009-05, “Fair Value Measurements and Disclosures
(Topic 820) – Measuring Liabilities at Fair Value” (“ASU 2009-05”) which
represents an update to ASC 820. ASU 2009-05 provides clarification
that in circumstances in which a quoted price in an active market for the
identical liability is not available, a reporting entity is required to measure
fair value using one or more of the following techniques: 1) a
valuation technique that uses either the quoted price of the identical liability
when traded as an asset or quoted prices for similar liabilities or similar
liabilities when traded as an asset; or 2) another valuation technique that is
consistent with the principles in ASC 820 such as the income and market approach
to valuation. The amendments in this update also clarify that when
estimating the fair value of a liability, a reporting entity that is not
required to include a separate input or adjustment to other inputs relating to
the existence of a restriction that prevents the transfer of the
liability. This update further clarifies that if the fair value of a
liability is determined by reference to a quoted price in an active market for
an identical liability, that price would be considered a Level 1 measurement in
the fair value hierarchy. Similarly, if the identical liability has a
quoted price when traded as an asset in an active market, it is also a Level 1
fair value measurement if no adjustments to the quoted price of the asset are
required. This update is effective for the first reporting period
(including interim periods) beginning after issuance. The Company is
currently assessing the impact that ASU 2009-05 will have on the financial
statements.
Income
Taxes
Under
provisions of the Internal Revenue Code, limited liability companies that are
treated as partnerships are not subjected to income taxes, and any income or
loss realized is taxed to the individual members. Accordingly, no provisions for
federal income taxes appear in the financial statements.
NOTE C -
RELATED PARTY TRANSACTIONS
The
Company has entered into an operating rental agreement with an entity that is
owned by the Company’s majority member which is outlined in Note G.
The
Company has entered into a consulting agreement for the purpose of providing
management and accounting services to the Company with an entity that is 100%
owned by the Company’s majority member. Under the agreement, the Company paid a
total of $43,723 and $62,000, to the related entity during the years ended
December 31, 2009 and 2008, respectively.
NOTE D -
PREPAID EXPENSES
The
Company has prepaid expenses consisting primarily of advance deposits to
suppliers for purchases. At December 31, 2008, the Company had advance deposits
of $185,326. There were no advance deposits at December 31, 2009.
NOTE E -
NOTES RECEIVABLE
On
November 24, 2009, the Company entered into two separate note receivable
agreements with a Florida salvage company. One note bears interest, beginning
March 3, 2010, at 5% annually. Weekly payments of $881, including principal and
interest, are due to begin April 10, 2010 with the note maturing on March 30,
2013. The balance on the note as of December 31, 2009 is $127,593. The second
note bears no interest and is due in monthly installments of $375 beginning
December 16, 2009 and matures December 16, 2014. The balance remaining on the
note as of December 31, 2009 is $22,407.
33
NOTE F -
LINE OF CREDIT
The
Company entered into a line of credit agreement with a financial institution
effective January 31, 2005 allowing for borrowings of up to $800,000 with annual
interest of prime, 3.25% at December 31, 2009. The line of credit is secured by
the majority member’s principal residence and matures February 2023. Monthly
interest-only payments are required with all outstanding principal due as a
single balloon payment at the maturity date. As of December 31, 2009 and 2008,
the outstanding balance was $715,073 and $734,524, respectively.
NOTE G –
COMMITMENTS AND CONTINGENCIES
Operating
Leases
The
Company leases an office facility under a month to month
agreement. The facility is leased from an entity owned 100% by the
Company’s majority member. The Company paid a total of $35,000 and
$42,000, including operating expenses, to the related entity for rent during the
years ended December 31, 2009 and 2008, respectively.
The
Company makes payments on an automobile leased under the Company’s majority
member under a 38 month lease agreement dated December 24, 2008, which replaced
another lease that the company assumed payments on in September 2007. The
monthly obligation under the lease agreements were $516 for the lease dated
December 24, 2008 and $656 for the expired lease. The Company paid a total of
$6,188 and $7,870 for the leases during 2009 and 2008,
respectively.
Future
minimum lease payments are as follows:
Year Ending December
31,
2010 $
6,188
2011 $
6,188
2012 $
1,031
On
December 7, 2009, the Company entered into an agreement proposing the
introduction of the Company to a Nevada or Delaware incorporated reporting
company whose shares of common stock are traded on a stock exchange or quotation
system in the United States (the “PubCo”) with a view to PubCo completing an
acquisition of the Company and the Company completing a subsequent financing.
34
NOTE H -
SUBSEQUENT EVENTS
The
Company has evaluated subsequent events for recognition or disclosure through
the date of the report, January 13, 2010. Subsequent to December 31, 2009, the
Company took an additional $65,000 draw on the line of credit.
(b) Pro Forma Financial
Information
In
accordance with Item 9.01(b), the following pro forma consolidated balance
sheets, pro forma consolidated statements of operations give effect to the
merger of the Company and UTP Holdings, LLC.
The pro
forma consolidated balance sheets and the pro forma consolidated statements of
operations have been prepared utilizing the historical financial statements of
the Company and UTP Holdings, LLC and should be read in conjunction with the
historical financial statements and notes thereto.
The pro
forma consolidated balance sheets have been prepared as if the merger
occurred on January 31, 2010. The pro forma consolidated statements of
operations have been prepared as if the merger occurred on February 1, 2009 and
carried through to January 31, 2010.
This pro
forma consolidated financial data is provided for illustrative purposes only,
and does not purport to be indicative of the actual financial position or
results of operations had the merge occurred at the beginning of the fiscal
period presented, nor is it necessarily indicative of the results of future
operations.
35
|
RESOURCE
EXCHANGE OF AMERICA CORP.
|
||||||||||||
|
UNAUDITED
PRO FORMA
|
||||||||||||
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
||||||||||||
|
AS
OF JANUARY 31, 2010
|
||||||||||||
|
Resource
Exchange of America Corp.
|
UTP
Holdings, LLC
|
Proforma
|
||||||||||
|
January
31, 2010
|
December
31, 2009
|
|||||||||||
|
ASSETS
|
||||||||||||
|
Current
Assets
|
||||||||||||
|
Cash
and cash equivalents
|
$ | 5,847 | $ | 2,622 | $ | 8,469 | ||||||
|
Inventory
|
- | 12,450 | 12,450 | |||||||||
|
Notes
receivable, current portion
|
- | 34,196 | 34,196 | |||||||||
|
Prepaid
expenses
|
- | 5,000 | 5,000 | |||||||||
|
Total
Current Assets
|
5,847 | 54,268 | 60,115 | |||||||||
|
Notes
Receivable, net of current portion
|
- | 115,804 | 115,804 | |||||||||
|
TOTAL
ASSETS
|
$ | 5,847 | $ | 170,072 | $ | 175,919 | ||||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||||||
|
Current
Liabilities
|
||||||||||||
|
Accounts
payable
|
$ | - | $ | 2,475 | $ | 2,475 | ||||||
|
Accrued
expenses
|
4,900 | - | 4,900 | |||||||||
|
Total
Current Liabilities
|
4,900 | 2,475 | 7,375 | |||||||||
|
Line
of Credit
|
- | 715,073 | 715,073 | |||||||||
|
TOTAL
LIABILITIES
|
4,900 | 717,548 | 722,448 | |||||||||
|
Stockholders'
Equity (Deficit)
|
||||||||||||
|
Common
Stock
|
1,320 | - | 1,320 | |||||||||
|
Additional
paid-in capital
|
18,259 | - | 18,259 | |||||||||
|
Accumulated
(Deficit)
|
(18,632 | ) | (547,476 | ) | (566,108 | ) | ||||||
|
Total
Stockholders' Equity (Deficit)
|
947 | (547,476 | ) | (546,529 | ) | |||||||
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
$ | 5,847 | $ | 170,072 | $ | 175,919 | ||||||
36
|
RESOURCE
EXCHANGE OF AMERICA CORP.
|
||||||||||||
|
UNAUDITED
PRO FORMA
|
||||||||||||
|
CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
|
||||||||||||
|
FOR
THE YEAR ENDED JANUARY 31, 2010
|
||||||||||||
|
Resource
Exchange of America Corp.
|
UTP
Holdings, LLC
|
Proforma
|
||||||||||
|
For
the Year Ended
|
For
the Year Ended
|
|||||||||||
|
January
31, 2010
|
December
31, 2009
|
|||||||||||
|
Net
Sales
|
$ | - | $ | 1,617,090 | $ | 1,617,090 | ||||||
|
Cost
of Sales
|
- | (1,173,466 | ) | (1,173,466 | ) | |||||||
|
Gross
Profit
|
- | 443,624 | 443,624 | |||||||||
|
Expenses
|
||||||||||||
|
General
and Administrative
|
18,553 | 67,738 | 86,291 | |||||||||
|
Freight
and delivery charges
|
- | 289,043 | 289,043 | |||||||||
|
Professional
fees
|
- | 53,918 | 53,918 | |||||||||
|
Total
Expenses
|
18,553 | 410,699 | 429,252 | |||||||||
|
INCOME
FROM OPERATIONS
|
(18,553 | ) | 32,925 | 14,372 | ||||||||
|
Other
Expense
|
||||||||||||
|
Interest
Expense
|
- | 21,649 | 21,649 | |||||||||
|
NET
INCOME
|
(18,553 | ) | 11,276 | (7,277 | ) | |||||||
|
Accumulated
Deficit, beginning of the year
|
(79 | ) | (395,074 | ) | (395,153 | ) | ||||||
|
Members'
Contributions
|
- | 244,000 | 244,000 | |||||||||
|
Members'
Distributions
|
- | (407,678 | ) | (407,678 | ) | |||||||
|
Accumulated
Deficit, end of year
|
$ | (18,632 | ) | $ | (547,476 | ) | $ | (566,108 | ) | |||
37
(c) Shell Company
Transactions.
The
information set forth above in Item 9.01 of this Current Report on Form 8-K is
incorporated herein by this reference.
(d) Exhibits.
|
Exhibit
Number
|
Description
|
Filed
|
|
3.1
|
Articles
of Incorporation
|
As
an Exhibit to the Company's Form S-1 as filed with the SEC on February 27,
2009.
|
|
3.2
|
Articles
of Amendment to Articles of Incorporation
|
Filed
herewith.
|
|
3.3
|
Bylaws
|
As
an Exhibit to the Company's Form S-1 as filed with the SEC on February 27,
2009.
|
|
10.1
|
Asset
Purchase Agreement by and between the Company and UTP Holdings,
LLC
|
Filed
herewith.
|
38
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
| RESOURCE EXCHANGE OF AMERICA CORP. | |||
|
Date:
February 24, 2010
|
By:
|
/s/ Dana J. Pekas | |
| Dana J. Pekas, President | |||
39