Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2010
Commission File Number 000-51503
Scrap China Corporation
(Exact Name of registrant as specified in its charter)
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Utah
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81 - 0674073
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(State or other jurisdiction of
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(I.R.S. Employer
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Incorporation or organization)
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Identification No.)
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4804 Skycrest Park Cove, Salt Lake City, Utah
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84108
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801-531-0404
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(Address of principal executive offices)
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(Zip Code)
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(Registrant's telephone number)
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www.scrapchina.com
(Web Address)
(Copies to:)
Steve Taylor, 4804 Skycrest Park Cove, Salt Lake City, Utah, 84108 801 578-3283
Securities to be registered under Section 12 (b) of the Act:
Title of each class: N/A
Name of each exchange on which Registered: N/A
Securities to be registered under Section 12(g) of the Act: Common Shares No Par Value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ( ) No ( x )
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act Yes ( ) No ( x )
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ( x ) No( )
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
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Large Accelerated Filer ( )
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Accelerated Filer ( )
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Non-Accelerated Filer ( )
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Smaller Reporting Company ( x )
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ x ] No [ ]
As of September 2, 2010, there were 7,710,843 shares of common stock outstanding.
As of June 30, 2010, the common stock of Scrap China Corporation is not trading and therefore has no aggregate market value.
SCRAP CHINA CORPORATION
INDEX
Table of Contents
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Part One
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Item 1:
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Business
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3
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Item 1A:
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Risk Factors
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5
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Item 1B:
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Unresolved Staff Comments
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5
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Item 2:
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Properties
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5
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Item 3:
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Legal Proceedings
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6
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| Item 4: | Submission of Matters to a Vote of Security Holders | 6 |
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Part Two
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Item 5:
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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6
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Item 6:
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Selected Financial Data
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6
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Item 7:
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Managements Discussion and Analysis of Financial Condition and Results of Operations
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7
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Item 7A:
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Quantitative and Qualitative Disclosures About Market Risk
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8
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Item 8:
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Financial Statements and Supplemental Data
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9
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Item 9:
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Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
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18
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Item 9A:
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Controls and Procedures
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18
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| Item 9B: | Other Information | 19 |
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Part Three
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Item 10:
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Directors and Executive Officers, and Corporate Governance
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19
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Item 11:
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Executive Compensation
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21
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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21
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Item 13:
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Certain Relationships and Related Transactions and Director Independence
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22
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Item 14:
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Principal Accountant Fees and Services
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23
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Part Four
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Item 15:
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Exhibits, Financial Statement Schedules
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23
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2
FORWARD LOOKING STATEMENTS
Scrap China Corporation (the "Company", "we" or "us") cautions readers that certain important factors may affect our actual results and could cause such results to differ materially from any forward-looking statements that may have been made in this Form 10-K or that are otherwise made by or on behalf of us. For this purpose, any statements contained in the Form 10-K that are not statements of historical fact may be deemed to be forward-looking statements.
Without limiting the generality of the foregoing, words such as "may," "expect," "believe," "anticipate," "intend," "could," "estimate," "plan" or “continue" or the negative other variations thereof or comparable terminology are intended to identify forward-looking statements. Factors that may affect our results include, but are not limited to, our limited history of non-profitability, our dependence on a limited number of customers and key personnel, the need for additional financing and our dependence on certain industries. We are also subject to other risks detailed herein or detailed from time to time in our filings with the Securities and Exchange Commission.
PART ONE
ITEM 1: BUSINESS
Company History
In the year 2000, Maydao Corporation (formerly RecycleNet Corporation) recognized the need for specific geographic web portals within its business and it established an online presence to correspond with each continent. The management of Maydao Corporation believed that the growing potential for business in Asia demanded separate attention and therefore, implemented a strategy to establish a Secondary Commodity Clearinghouse service in China.
On June 15, 2005, Scrap China Corporation (“the Company”) was organized under the laws of the State of Utah as a wholly owned subsidiary of Maydao Corporation. The Company is a development stage enterprise and is in the process of raising capital to fund operations. As such, the Company has, since inception, spent most of its efforts in developing its business plan and in raising capital to fund its operations. The Company has relied upon cash flows from equity issuances and advances from Maydao Corporation to sustain operations.
The Company plans to specialize in importing scrap materials into China. These materials include, but are not limited to, scrap metal, waste paper, scrap plastic, scrap glass, etc. The Company’s main focus will be on freight consolidation resulting in better economics in the transactions.
On November 30, 2005 Maydao Corporation announced the spin-off of Scrap China Corporation effective January 20, 2006. The spin-off was in the form of a pro-rata share dividend to Maydao Corporation common shareholders. On January 20, 2006, the common shareholders of record of Maydao Corporation received one share of Scrap China Corporation for every ten shares of Maydao Corporation. The remaining undistributed share balance of 2,289,157 was returned to the Scrap China Corporation treasury at no cost from Maydao Corporation. The balance of issued and outstanding shares of Scrap China Corporation as of June 30, 2010 was 7,710,843.
Maydao Corporation trades publicly as OTC: MYDO and is a "Reporting Company" under the Securities Exchange Act of 1934.
3
On September 30, 2009, Maydao Corporation implemented a re-organization resulting in the centralization of all of Maydao Corporation’s operations and websites into Scrap.Net Inc, a wholly owned subsidiary of Maydao Corporation as of September 30, 2009. The effect of this re-organization of Maydao Corporation is that the loan payable by the Company due to Maydao Corporation is now due to Scrap.Net Inc.
The Company is continuing to mature its business plan and is proceeding to raise capital in order to execute the proof of concept phase for the company’s operations. The Company has had no revenues from any source since inception.
Business Condition — The Company has limited operating history and it has not yet been able to develop and execute its business plan. This situation raises substantial doubt about its ability to continue as a going concern. The Company plans to fund its operations by issuing equity securities or loans from related parties. Success in these efforts is not assured. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
Bankruptcy or Receivership or Similar Proceedings
None
Outline of Business Plan
Scrap China Corporation is a development stage company. The Company plans to specialize in importing scrap materials into China. These materials include, but are not limited to, scrap metal, waste paper, scrap plastic, scrap glass, etc. The Company’s main focus will be on freight consolidation resulting in better economics in the transactions.
The Company is continuing to mature its business plan and is proceeding to raise capital in order to execute the proof of concept phase for the companies operations.
Effect of Government Regulations
The Company is unaware of any existing or probable government regulations in the United States or China that would have any material negative impact on our business.
The Company has assessed which permits, registrations or licenses are required to import goods into China and the costs associated with them. There are a number of permits, registrations and licenses that may be required by either the Company, or by any buyer or seller that the Company deals with, in order to be in compliance with any Chinese rules, regulations and environmental laws. The Company does not anticipate any difficulties in completing this process or any difficulties in obtaining any necessary documentation that may be required.
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To date the Company has determined that the following permits, registrations or licenses may be required in China:
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1.
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General Administration for Quality Supervision, Inspection and Quarantine - AQSIQ
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2.
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Compulsory Certificate – CCC
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Employees
Scrap China Corporation currently has no employees.
Competition
The management of Scrap China Corporation is unaware of any direct competition in the Secondary Commodity Clearinghouse market. The Secondary Materials & Commodity Clearinghouse is an open access, neutral marketplace for buyers and sellers to market their recyclable materials. These materials include, but are not limited to, scrap metal, scrap paper, scrap plastic, scrap glass, etc. Buyers and sellers using the Secondary Materials & Commodity Clearinghouse do not have to know each other and they do not have to be concerned about the credit worthiness of the counter party. The Secondary Materials & Commodity Clearinghouse guarantees the financial integrity of the transactions. The Secondary Materials & Commodity Clearinghouse allows liquidity for buyers and sellers to find a counter party at any time and allows anyone access to competitive world market prices in a transaction with little to no risk. Management has identified hundreds of consumers and traders of scrap materials in China that they believe to be potential customers. The Company does not anticipate having any one principal supplier or buyer that they would be dependent on.
Reports to Security Holders
The Company is a "reporting company" under the Securities Exchange Act of 1934 and is required to file annual, quarterly and periodic reports with the Securities and Exchange Commission, such as Forms 10-K, 10-Q, and 8-K. The reports are available at the Commission's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549, telephone 1-800-SEC-0330 and may be retrieved electronically via the Internet at www.sec.gov.
The Company intends to prepare and deliver to its security holders an annual report each year, which will include audited financial statements.
ITEM 1A. RISK FACTORS
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2: PROPERTIES
Facilities
Currently, the company does not own, lease or occupy its own facilities. All operations are conducted from the offices occupied by Maydao Corporation (formerly RecycleNet Corporation), the former parent company of Scrap China Corporation.
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ITEM 3: LEGAL PROCEEDINGS
Neither the Company, nor any of its officers, directors, or greater than 10% beneficial shareholders, are involved in any litigation or legal proceedings involving the business of the Company.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
PART TWO
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
As of June 30, 2010, the number of holders of record of the Company's common shares was 704. The Company has not declared or paid any cash dividends. It is not anticipated that any cash dividends will be declared or paid in the near future. There are no contractual or other restrictions that limit the ability of the Company to pay dividends on its common shares and none are anticipated in the future.
Description of Securities
The Company has authorized 250,000,000 common shares. There are no provisions in the Articles of Incorporation of the Company that would delay, defer, or prevent a change in control of the Company. The Company has no debt securities issued.
Recent Sales of Unregistered Securities
On November 30, 2005, Maydao Corporation announced the spin-off of Scrap China Corporation, a wholly owned subsidiary. The spin-off was in the form of a pro-rata share dividend to Maydao Corporation common shareholders. On January 20, 2006, the common shareholders of record of Maydao Corporation received one share of Scrap China Corporation for every ten shares of Maydao Corporation. The remaining undistributed share balance of 2,289,157 was returned to the Scrap China Corporation treasury at no cost from Maydao Corporation. The balance of issued and outstanding shares of Scrap China Corporation as of June 30, 2010 is 7,710,843.
The Company has made no other offers or sales and none are intended at the present time.
ITEM 6. SELECTED FINANCIAL DATA
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
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ITEM 7: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and notes related thereto, included elsewhere in this report.
Plan of Operation
Scrap China Corporation is a development stage company. The Company plans to specialize in importing scrap materials into China. These materials include, but are not limited to, scrap metal, waste paper, scrap plastic, scrap glass, etc. The Company’s main focus will be on freight consolidation resulting in better economics in the transactions.
The Company is continuing to mature its business plan and is proceeding to raise capital in order to execute the proof of concept phase for the companies operations.
Since inception, Maydao Corporation (formerly RecycleNet Corporation), and Scrap.Net Inc. paid certain expenses for travel, management, and legal and accounting expenses on behalf of Scrap China Corporation. The Company anticipates that Scrap.Net Inc, if required, would provide additional funds; however, there is no assurance of future advances from these related parties. Terms for repayment have not been established and the advances are due on demand and bear no interest.
At June 30, 2010 the Company owed $185,976 to Scrap.Net Inc., a company related through common ownership and management.
As of the year ended June 30, 2009 this loan was payable to Maydao Corporation (formerly RecycleNet Corporation) for the amount of $166,872.
On September 30, 2009, Maydao Corporation (formerly RecycleNet Corporation) re-organized, resulting in the centralization of all of its recycling operations and websites into Scrap.Net Inc., a wholly owned subsidiary of Maydao Corporation. On November 30, 2009, Maydao Corporation sold Scrap.Net, Inc. to Inter-Continental Recycling, Inc., a related party through common ownership. The effect of this re-organization and sale resulted in the amount owing from the Company to Maydao Corporation to being transferred to Scrap.Net Inc.
The amount owing of $185,976 as discussed above is classified as a payable to related parties on the balance sheet as of June 30, 2010 and 2009.
The Company does not anticipate the purchase of any significant equipment or buildings during the development stage.
The Company does not expect any significant change in employees.
7
Results of Operations
In January 2006, Scrap China Corporation was spun off from Maydao Corporation (formerly RecycleNet Corporation). To date the Company has not recorded any sales revenue.
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2010
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2009
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Operating Expenses
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$ | (18,040 | ) | $ | (18,773 | ) | ||
Operating Expenses decreased in 2010 over 2009 by $733. Professional fees costs were reduced by $2,155.
Offsetting these savings were increased expenses in office and administration fees of $972, postage of $300, and travel of $150, which are primarily costs associated with maintaining its position as a reporting company with the United States Securities and Exchange Commission.
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2010
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2009
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Net Loss
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$ | (18,040 | ) | $ | (18,773 | ) | ||
As discussed above, Scrap China is still in the developmental stage and has no sales, therefore all costs attributed to development of the Company attribute to the losses recorded.
From inception to the present, Maydao Corporation (formerly RecycleNet Corporation) and Scrap.Net, Inc. have provided all funding to the Company. On September 30, 2009, Maydao Corporation did a re-organization resulting in the centralization of all of Maydao Corporation’s operations and websites into Scrap.Net Inc, a wholly owned subsidiary of Maydao Corporation as of September 30, 2009. The effect of this re-organization of Maydao Corporation is that the loan payable by the Company due to Maydao Corporation is now due to Scrap.Net Inc. The funds provided were used toward establishing a base of operations in China. As of June 30, 2010 and 2009, the Company had a $185,976 and $166,872 payable to Scrap.Net Inc., and Maydao Corporation respectively. During the years ended June 30, 2010 and 2009, Scrap.Net Inc. and Maydao Corporation paid certain expenses for travel, office and legal and accounting expenses on behalf of Scrap China Corporation. The Company anticipates that Scrap.Net Inc., if required, will provide additional funds, however, there is no assurance that future advances will be made. Terms for repayment have not been established and the advances are due on demand and bear no interest.
Off-Balance Sheet Arrangements
None
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” (as defined by Item 10 of Regulation S-K), the Company is not required to provide information required by this Item, as defined by Regulation S-K Item 305(e).
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ITEM 8: FINANCIAL STATEMENTS
Scrap China Corporation
(A Development Stage Enterprise)
INDEX TO FINANCIAL STATEMENTS
TABLE OF CONTENTS
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Page
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Report of Independent Registered Public Accounting Firm
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F-1
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Balance Sheets
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F-2
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Statements of Operations
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F-2
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Statements of Stockholders’ Equity (Deficit)
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F-3
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Statements of Cash Flows
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F-4
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Notes to Financial Statements
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F-5
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9
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HANSEN, BARNETT & MAXWELL, P.C.
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A Professional Corporation
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Registered with the Public Company
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CERTIFIED PUBLIC ACCOUNTANTS
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Accounting Oversight Board
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5 Triad Center, Suite 750
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Salt Lake City, UT 84180-1128
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Phone: (801) 532-2200
Fax: (801) 532-7944
www.hbmcpas.com
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Scrap China Corporation
We have audited the balance sheets of Scrap China Corporation (a development stage enterprise) as of June 30, 2010 and 2009 and the related statements of operations, stockholders’ deficit and cash flows for the years then ended and for the period from June 15, 2005 (date of inception) through June 30, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Scrap China Corporation as of June 30, 2010 and 2009 and the results of its operations and its cash flows for the years then ended and for the period from June 15, 2005 (date of inception) through June 30, 2010, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s lack of operating history, operating losses since inception and negative cash flows raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Hansen, Barnett and Maxwell, P.C.
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HANSEN, BARNETT & MAXWELL, P.C.
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Salt Lake City, Utah
August 31, 2010
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SCRAP CHINA CORPORATION
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(A Development Stage Company)
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BALANCE SHEETS
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June 30,
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June 30,
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2010
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2009
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ASSETS
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Current Assets
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Cash
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$ | 291 | $ | 327 | ||||
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Total Assets
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$ | 291 | $ | 327 | ||||
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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Current Liabilities
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Accrued liabilities
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$ | 9,750 | $ | 10,850 | ||||
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Payable to related parties
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185,976 | 166,872 | ||||||
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Total Current Liabilities
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195,726 | 177,722 | ||||||
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Stockholders' Deficit
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Common shares - par value $0.001 per share; 250,000,000 shares authorized;
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7,710,843 shares issued and outstanding, respectively
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7,711 | 7,711 | ||||||
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Additional paid-in capital
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2,289 | 2,289 | ||||||
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Deficit accumulated during development stage
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(205,435 | ) | (187,395 | ) | ||||
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Total Stockholders' Deficit
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(195,435 | ) | (177,395 | ) | ||||
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Total Liabilities and Stockholders' Deficit
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$ | 291 | $ | 327 | ||||
The accompanying notes are an integral part of these financial statements.
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SCRAP CHINA CORPORATION
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(A Development Stage Company)
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STATEMENTS OF OPERATIONS
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For the period from
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For the Years Ended
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June 15, 2005 (date of
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June 30,
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inception) through
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2010
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2009
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June 30, 2010
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Sales
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$ | - | $ | - | $ | - | ||||||
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Operating Expenses
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Selling, general and
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adminstrative expenses
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18,040 | 18,773 | 205,435 | |||||||||
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Total Operating Expenses
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18,040 | 18,773 | 205,435 | |||||||||
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Net Loss
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$ | (18,040 | ) | $ | (18,773 | ) | $ | (205,435 | ) | |||
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Basic and Diluted Net Loss per Share
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$ | - | $ | - | ||||||||
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Weighted-Average Common
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Shares Outstanding
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7,710,843 | 7,710,843 | ||||||||||
The accompanying notes are an integral part of these financial statements.
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SCRAP CHINA CORPORATION
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(A Development Stage Company)
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STATEMENT OF STOCKHOLDERS' DEFICIT
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Additional
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Total
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Common Shares
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Paid-in
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Accumulated
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Stockholders'
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Shares
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Amount
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Capital
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Deficit
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Deficit
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Issuance of Common Shares to RecycleNet
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Corporation - June 15, 2005; $0.001 per share
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10,000,000 | $ | 10,000 | $ | - | $ | - | $ | 10,000 | |||||||||||
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Return of Shares from Spin-off of Corporation -
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February 15, 2006; no cost
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(2,289,157 | ) | (2,289 | ) | 2,289 | - | - | |||||||||||||
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Net loss for the period from June 15, 2005
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(Date of Inception) Through June 30, 2008
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- | - | - | (168,622 | ) | (168,622 | ) | |||||||||||||
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Balance - June 30, 2008
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7,710,843 | 7,711 | 2,289 | (168,622 | ) | (158,622 | ) | |||||||||||||
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Net loss for the year ended June 30, 2009
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- | - | - | (18,773 | ) | (18,773 | ) | |||||||||||||
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Balance - June 30, 2009
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7,710,843 | 7,711 | 2,289 | (187,395 | ) | (177,395 | ) | |||||||||||||
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Net loss for the year ended June 30, 2010
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- | - | - | (18,040 | ) | (18,040 | ) | |||||||||||||
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Balance - June 30, 2010
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7,710,843 | $ | 7,711 | $ | 2,289 | $ | (205,435 | ) | $ | (195,435 | ) | |||||||||
The accompanying notes are an integral part of these financial statements.
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SCRAP CHINA CORPORATION
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(A Development Stage Company)
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STATEMENTS OF CASH FLOWS
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For the period from
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For the Years Ended
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June 15, 2005 (date of
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June 30,
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inception) through
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2010
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2009
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June 30, 2010
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Cash Flows From Operating Activities:
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Net loss
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$ | (18,040 | ) | $ | (18,773 | ) | $ | (205,435 | ) | |||
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Changes in assets and liabilities:
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Accrued liabilities
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(1,100 | ) | 2,600 | 9,750 | ||||||||
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Net Cash From Operating Activities
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(19,140 | ) | (16,173 | ) | (195,685 | ) | ||||||
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Cash Flows From Investing Activities:
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- | - | - | |||||||||
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Cash Flows From Financing Activities:
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Payable to related parties
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19,104 | 16,137 | 185,976 | |||||||||
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Proceeds from sale of common stock
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- | - | 10,000 | |||||||||
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Net Cash From Financing Activities
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19,104 | 16,137 | 195,976 | |||||||||
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Net Change in Cash
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(36 | ) | (36 | ) | 291 | |||||||
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Cash at Beginning of Period
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327 | 363 | - | |||||||||
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Cash at End of Period
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$ | 291 | $ | 327 | $ | 291 | ||||||
The accompanying notes are an integral part of these financial statements.
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SCRAP CHINA CORPORATION
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
Note 1 – Organization and Significant Accounting Policies
Basis of Presentation - The accompanying financial statements present the financial position of Scrap China Corporation (the Company) and the results of its operations and cash flows in accordance with accounting principles generally accepted in the United States of America.
Business Condition — The Company is a development stage enterprise with minimal operating history. It has not yet been able to develop and execute its business plan. This situation raises substantial doubt about its ability to continue as a going concern, and could lead to discontinuance of operations. The Company plans to fund its operations by issuing equity securities or loans from related parties. Success in these efforts is not assured. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
Organization and Nature of Operations — On June 15, 2005, Scrap China Corporation (“the Company”) was organized under the laws of the State of Utah as a wholly owned subsidiary of Maydao Corporation (formerly RecycleNet Corporation). The Company is considered a development stage enterprise and is in the process of raising capital to fund operations. As such, the Company has, since inception, spent most of its efforts in developing its business plan and in trying to raise capital to fund its operations. The Company has relied upon cash flows from equity issuances and advances from Maydao Corporation and its former subsidiary, Scrap.Net, to sustain operations.
The Company plans to specialize in importing scrap materials into China. These materials include, but are not limited to, scrap metal, waste paper, scrap plastic, scrap glass, etc. The Company’s main focus will be on freight consolidation resulting in better economics in the transactions.
On November 30, 2005 Maydao Corporation announced the spin-off of Scrap China Corporation effective January 20, 2006. The spin-off was in the form of a pro-rata share dividend to Maydao Corporation common shareholders. On January 20, 2006, the common shareholders of record of Maydao Corporation received one share of Scrap China Corporation for every ten shares of Maydao Corporation. The remaining undistributed share balance of 2,289,157 shares was returned to the Scrap China Corporation treasury at no cost from Maydao Corporation.
The Company is continuing to mature its business plan and is attempting to raise capital in order to execute the proof of concept phase for the company’s operations.
Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain 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. Actual results could differ from those estimates.
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Fair Value of Financial Instruments — The carrying amounts reported in the accompanying financial statements for current assets and current liabilities approximate fair values because of the immediate or short-term maturities of these financial instruments.
Revenue Recognition - The Company is continuing to mature its business plan and is attempting to raise capital in order to execute the proof of concept phase for the Company’s operations. To date the Company has not recorded any sales revenue.
Income Taxes — The Company recognizes an asset or liability for the deferred tax consequences of all temporary differences between the tax basis of assets or liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years when the reported amounts of the asset or liabilities are recovered or settled. Deferred tax assets or liabilities are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. Deferred tax assets are reviewed periodically for recoverability and valuation allowances are provided as necessary.
Net Loss Per Share — Basic and diluted loss per common share is computed on the basis of the weighted-average number of common shares outstanding during the period. There were no potentially issuable common stock equivalents outstanding at June 30, 2010 or 2009.
Note 2 – Related Party Transactions
As of June 30, 2010 and 2009, the Company had an $185,976 and $166,872 payable to Scrap.Net, Inc., and Maydao Corporation respectively. During the years ended June 30, 2010 and 2009, Scrap.Net, Inc. and Maydao Corporation paid certain expenses for travel, management and legal and accounting expenses on behalf of Scrap China Corporation. The Company anticipates that Scrap.Net, Inc., if required, would provide additional funds; however, there is no assurance that future advances will be made. Terms for repayment have not been established and the advances are due on demand and bear no interest.
Note 3 – Stockholders’ Equity
The Company is authorized to issue 250,000,000 common shares. The board of directors is authorized to designate one or more series within the class of common shares and to designate relative preferences, limitations and rights.
In June 2005, the Company issued 10,000,000 shares of common stock to Maydao Corporation for cash proceeds of $10,000 or $0.001 per share, making the Company a wholly owned subsidiary of Maydao Corporation.
On November 30, 2005 Maydao Corporation announced the spin-off of Scrap China Corporation effective January 20, 2006. The spin-off was in the form of a pro-rata share dividend to Maydao Corporation shareholders. On January 20, 2006, the shareholders of record of Maydao Corporation received one share of Scrap China Corporation for every ten shares of Maydao Corporation. The remaining undistributed share balance of 2,289,157 was returned to the Scrap China Corporation treasury at no cost from Maydao Corporation.
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Note 4 – Income Taxes
The components of the net deferred tax asset as of June 30, 2010 and 2009, are as follows:
|
As of June 30,
|
2010
|
2009
|
||||||
|
Operating loss carryforwards
|
$ | 76,627 | $ | 69,898 | ||||
|
Valuation allowance
|
(76,627 | ) | (69,898 | ) | ||||
|
Net Deferred Tax Asset
|
$ | - | $ | - | ||||
The Company had no income tax expense for the years ended June 30, 2010 and 2009 due to the realization of the net operating loss carry-forwards.
The following is a reconciliation of the amount of benefit that would result from applying the federal statutory rate to pretax loss with the provision for income taxes for the fiscal years ended June 30, 2010 and 2009:
|
For the Years Ended June 30,
|
2010
|
2009
|
||||||
|
Tax at statutory rate (34%)
|
$ | (6,134 | ) | $ | (6,383 | ) | ||
|
Change in valuation allowance
|
6,729 | 7,003 | ||||||
|
State tax benefit, net of federal tax effect
|
(595 | ) | (620 | ) | ||||
|
Provision for Income Taxes
|
$ | - | $ | - | ||||
The Company has U.S. federal operating loss carry-forwards of $205,434 that begin to expire in 2026. The uses of U.S. operating loss carry-forwards are limited and may not be available to offset future income.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
The Company is neither a large accelerated filer nor an accelerated filer as those terms are defined in Rule 126-2 of the Exchange Act, therefore information is in Item 9A.(T).
Item 9A(T). Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company has established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) to ensure that material information relating to the Company is made known to the officers who certify the Company’s financial reports and to other members of senior management and the Board of Directors. These disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's (“SEC”) rules and forms. Under the supervision and with the participation of management, including the principal executive officer and principal financial officer an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2010 was completed based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are functioning effectively.
Management's Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s principal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial reporting and preparation of the Company’s financial statements for external purposes in accordance with generally accepted accounting principles.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can only provide reasonable, not absolute, assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate as a result of changes in conditions or deterioration in the degree of compliance.
At June 30, 2010, management assessed the effectiveness of the Company’s internal control over financial reporting based on COSO framework. Based on the assessment, management has concluded that the Company’s internal control over financial reporting was effective as of June 30, 2010 and provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.
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This annual report on internal control over financial reporting (“Annual Report”) does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this Annual Report.
Changes in Internal Control over Financial Reporting
There was no change in the Company’s internal control over financial reporting during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information
None
PART THREE
ITEM 10: DIRECTORS AND EXECUTIVE OFFICES, AND CORPORATE GOVERNANCE
|
Name
|
Age
|
Position
|
Term of Office
|
||
|
Paul Roszel
|
53 |
Chief Executive Officer,
|
Inception to
|
||
|
(Note 1)
|
President, Director
|
Present
|
|||
|
Richard Ivanovick, C.A
|
69 |
Chief Financial Officer
|
Inception to
|
||
|
Director
|
Present
|
||||
|
James Roszel
|
28 |
Director
|
2009 to
|
||
|
(Note 1)
|
Present
|
||||
| Note 1) James Roszel is the son of Paul Roszel | |||||
Paul Roszel
For the past five years Mr. Roszel has been responsible for the ongoing development and promotion of the former parent company, Maydao Corporation (formerly RecycleNet Corporation). Mr. Roszel is the founding director and Chief Executive Officer of Maydao Corporation. He is a Director of Oldwebsite.com, Inc., a former wholly owned subsidiary of Maydao Corporation. Mr. Roszel has over 30 years of hands on experience in the recycling industry. He has been actively involved in the development and implementation of collection, processing, transportation and sales/marketing programs for secondary commodities.
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Richard Ivanovick
Over the past five years, Mr. Ivanovick, as Chief Financial Officer and a Director of Maydao Corporation (formerly RecycleNet Corporation), a position he has held since 1999, has been directly responsible for the preparation of financial reporting, documents and compliance under the Sarbanes Oxley Act of 2002 and the Securities Exchange Act of 1934. Mr. Ivanovick, is a registered Chartered Accountant. He has been the President of Marsh Tire Service Ltd. since 1977, a company involved in automobile service, sales and leasing in the Guelph, Ontario Canada area.
James Roszel
For the past nine years James Roszel has been responsible for the ongoing marketing, and participated in business development, of Maydao Corporation. James Roszel is a Director of Maydao Corporation. James Roszel has been the President and a Director of Oldwebsites.com, Inc., formerly Fiberglass.com, Inc., since its inception.
Involvement in Certain Legal Proceedings
To the knowledge of the Company there are no pending or threatened litigation or proceedings against the Company.
Indemnification of Directors and Officers
Section 16-10a-901 through 909 of the Utah Revised Business Corporation Act authorizes a corporation's board of directors or a court to award indemnification to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred, including counsel fees) arising under the Securities Act of 1933. A director of a corporation may only be indemnified if: (1) the conduct was in good faith; and (2) the director reasonably believed that the conduct was in or not opposed to the corporation's best interest; and (3) in the case of any criminal proceeding, the director had no reasonable cause to believe the conduct was unlawful. A corporation may not indemnify a person under the Utah Act unless and until the corporation's board of directors has determined that the applicable standard of conduct set forth above has been met.
The Company's Articles of Incorporation do not provide for any additional or different indemnification procedures other than those provided by the Utah Act, nor has the Company entered into any indemnity agreements with its current directors and officers regarding the granting of other or additional or contractual assurances regarding the scope of the indemnification allowed by the Utah Act. At present, there is no pending litigation or proceeding involving a director, officer or employee of the Company regarding which indemnification is sought, nor is the Company aware of any threatened litigation that may result in claims of indemnification. The Company has not obtained director's and officer's liability insurance, although the board of directors of the Company may determine to investigate and, possibly, acquire such insurance in the future.
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ITEM 11: EXECUTIVE COMPENSATION
The following table shows compensation earned during the years ended June 30, 2010, 2009 and 2008 by the Officers and Directors of the Company. No other miscellaneous compensation was paid or stock options granted during this period.
|
Name & Principal Positions
|
Fiscal Year
|
Salary
|
|||
|
Paul Roszel, President & Chairman
|
2010
|
$ | - | ||
|
2009
|
$ | - | |||
|
2008
|
$ | - | |||
|
Richard R Ivanovick , CFO
|
2010
|
$ | - | ||
|
2009
|
$ | - | |||
|
2008
|
$ | - | |||
|
James Roszel, Director
|
2010
|
$ | - | ||
|
2009
|
$ | - | |||
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS
At this time there is no public trading market.
The following tables sets forth, as of the date herein, the share ownership of each person known by the Company to be the beneficial owner of 5% or more of the Company's shares, each officer and director individually and all directors and officers of the Company as a group.
|
Title
|
Name & Address
|
Amount& Nature
|
Percent
|
|
of Class
|
of Beneficial Owner
|
of Beneficial
|
of Class
|
|
Ownership
|
|||
|
|
|||
|
Common
|
Inter-Continental
|
3,858,785
|
50.04%
|
|
Recycling, Inc. (Note 1)
|
|||
|
7 Darren Place
|
|||
|
Guelph, Ontario Canada
|
|||
|
Common
|
Paul Roszel (Note 2)
|
174,465
|
2.26%
|
|
7 Darren Place
|
|||
|
Guelph, Ontario Canada
|
|||
|
Common
|
Richard R. Ivanovick
|
410,562
|
5.32%
|
|
23 Cottontail Place
|
|||
|
Cambridge, Ontario Canada
|
|||
|
Common
|
James Roszel (Note 3)
|
92,348
|
1.20%
|
|
7 Darren Place
|
|||
|
Guelph, Ontario Canada
|
|||
|
Common
|
Directors, as a Group
|
4,536,160
|
58.83%
|
Note (1) Inter-Continental Recycling Inc. is owned and beneficially held by Mr. Paul Roszel, a director of the Company, and his immediate family.
Note (2) Mr. Roszel owns and beneficially holds 174,465 shares. In addition, he may be deemed to be a beneficial owner of the 3,858,785 common shares held by Inter-Continental Recycling, Inc.
Note (3) James Roszel is the son of Paul Roszel.
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ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
All Directors of Scrap China Corporation are Directors in the former parent company, Maydao Corporation (formerly RecycleNet Corporation). Maydao Corporation trades publicly as OTC: MYDO and is a "Reporting Company" under the Securities Exchange Act of 1934 and files annual, quarterly and periodic reports with the Securities and Exchange Commission, such as Forms 10-K, 10-Q, and 8-K. The reports are available at the Commission's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549, telephone 1-800-SEC-0330 and may be retrieved electronically via the Internet at www.sec.gov.
As at June 30, 2010, the Company had a $185,976 payable to Scrap.Net, Inc. This resulted from expenses incurred for travel, office, and legal and accounting expenses paid on behalf of Scrap China Corporation. Additional funds, if required, will be provided by Scrap.Net, Inc. and will be treated as a payable to a related party. These advances are due on demand and bear no interest.
Inter-Continental Recycling Inc. owns 3,858,785 common shares of Scrap China Corporation. Inter-Continental Recycling, Inc. is controlled 100% by Mr. Paul Roszel, a director of the company and his immediate family.
Promoters of the Company
The promoter of the Company is Mr. Paul Roszel. Mr. Roszel is the founding Director and CEO of Maydao Corporation (formerly RecycleNet Corporation), the former parent company of Scrap China Corporation.
Description of Securities
The Company has authorized 250,000,000 common shares, of which 7,710,843 common shares were issued and outstanding at June 30, 2010.
Cumulative voting for the election of directors is not provided for in the Company's amended Articles of Incorporation, which means that the holders of a majority of the shares voted can elect all of the directors then standing for election. The voting shares are not entitled to preemptive rights and are not subject to conversion or redemption. Upon a liquidation, dissolution or winding-up of the Company, the assets legally available for distribution to stockholders are distributable equally among the holders of the shares after payment of claims of creditors. Each outstanding share is, and all shares that may be issued in the future, will be fully paid and non-assessable.
There are no provisions in the amended Articles of Incorporation of the Company that would delay, defer, or prevent a change in control of the Company. The Company has no debt securities issued and the Company does not contemplate issuing any in the near future.
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ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Hansen, Barnett & Maxwell, P.C. served as the Company’s Independent Registered Public Accounting Firm for the years ended June 30, 2010 and 2009 and for the period from June 15, 2005 (date of inception) through June 30, 2010, and is expected to serve in that capacity for the current year. Principal accounting fees for professional services rendered for the Company by Hansen, Barnett & Maxwell, P.C. for the years ended June 30, 2010 and 2009 are summarized as follows:
|
2010
|
2009
|
|||||||
|
Audit
|
$ | 15,000 | $ | 13,750 | ||||
|
Audit related
|
– | – | ||||||
|
Tax
|
850 | 800 | ||||||
|
All other
|
– | – | ||||||
|
Total
|
$ | 15,850 | $ | 14,550 | ||||
Audit Fees. Audit fees were for professional services rendered in connection with the Company’s annual financial statement audits and quarterly reviews of financial statements and review of and preparation of consents for registration statements for filing with the Securities and Exchange Commission.
Tax Fees. Tax fees related to services for tax compliance and consulting.
Audit Committee Pre-Approval Policies and Procedures. At its regularly scheduled and special meetings, the Board of Directors, which is comprised of independent directors knowledgeable of financial reporting, considers and pre-approves any audit and non-audit services to be performed by the Company’s independent accountants. The Board of Directors has the authority to grant pre-approvals of non-audit services.
PART FOUR
ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibit 3.1 – Articles of Incorporation(1)
Exhibit 20 – Resolution of Board of directors re Acquisition of Shares(1)
Exhibit 31.1 - Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 - Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1 - Certification of Chief Executive Officer pursuant to U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2 - Certification of Chief Financial Officer pursuant to U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
_____________________
(1)Incorporated by reference herein filed as exhibits to the Company’s Registration Statement on Form 10SB previously filed with the SEC on August 18, 2005 and subsequent amendments thereto.
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SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Scrap China Corporation
/s/ Paul Roszel
Paul Roszel, President /Chief Executive Officer
September 2, 2010
/s/ Richard Ivanovick
Richard Ivanovick, C.A., Chief Financial and Accounting Officer
September 2, 2010
24