Attached files
| file | filename |
|---|---|
| 8-K/A - AMENDED CURRENT REPORT - Research Solutions, Inc. | v226360_8-k.htm |
| EX-99.2 - UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS OF DERYCZ SCIEN - Research Solutions, Inc. | v226360_ex99-2.htm |
| EX-23.1 - CONSENT OF INDEPENDENT AUDITORS - Research Solutions, Inc. | v226360_ex23-1.htm |
|
Exhibit 99.1
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|
TECHNIQUES APPLIQUEES AUX ARTS GRAPHIQUES, S.P.A.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
AND FOR THE THREE MONTHS ENDED
MARCH 31, 2011 AND 2010 (UNAUDITED)
TECHNIQUES APPLIQUEES AUX ARTS GRAPHIQUES, S.P.A.
CONTENTS
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PAGE
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1
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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PAGE
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2
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BALANCE SHEETS AS OF DECEMBER 31, 2010 AND DECEMBER 31, 2009 AND MARCH 31, 2011 (UNAUDITED)
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PAGE
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3
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STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 AND FOR THE THREE MONTHS ENDED MARCH 31, 2011 (UNAUDITED) AND 2010 (UNAUDITED)
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PAGE
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4
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STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY) FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 AND FOR THE THREE MONTHS ENDED MARCH 31, 2011 (UNAUDITED)
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PAGE
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5
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STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 AND FOR THE THREE MONTHS ENDED MARCH 31, 2011 (UNAUDITED) AND 2010 (UNAUDITED)
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PAGES
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6-12
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NOTES TO FINANCIAL STATEMENTS
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACOUNTING FIRM
The Board of Directors
Techniques Appliquées aux Arts Graphiques, S.p.a.
We have audited the accompanying balance sheets of Techniques Appliquées aux Arts Graphiques, S.p.a. (the "Company") as of December 31, 2010 and 2009 and the related statements of operations and comprehensive loss, stockholders' equity (deficiency) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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. Our audits 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 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 Techniques Appliquées aux Arts Graphiques, S.p.a. as of December 31, 2010 and 2009 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.
As more fully discussed in Note 13, on March 31, 2011, Fimmotaag, the Company’s parent company, entered into a stock purchase agreement with Derycz Scientific, Inc. (Derycz), a publicly held company, pursuant to which Derycz acquired all of the outstanding capital stock of the Company.
Weinberg & Company, P.A.
Los Angeles, California
June 20, 2011
Techniques Appliquées aux Arts Graphiques, S.p.a.
Balance Sheets
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March 31,
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December 31,
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|||||||||||
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2011
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2010
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2009 | ||||||||||
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(Unaudited)
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||||||||||||
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ASSETS
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||||||||||||
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CURRENT ASSETS
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||||||||||||
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Cash and cash equivalents
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$ | 325,383 | $ | 140,007 | $ | 244,993 | ||||||
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Receivables
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||||||||||||
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Trade accounts receivable, net
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2,074,914 | 2,543,199 | 3,473,508 | |||||||||
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Due from factor
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— | 115,690 | — | |||||||||
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Inventories
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883,671 | 948,030 | 973,048 | |||||||||
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Prepaid expenses
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230,588 | 139,158 | 152,180 | |||||||||
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Other current assets
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126,992 | 236,432 | 199,418 | |||||||||
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TOTAL CURRENT ASSETS
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3,641,548 | 4,122,516 | 5,043,147 | |||||||||
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PROPERTY AND EQUIPMENT, net
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1,578,915 | 1,702,177 | 2,804,531 | |||||||||
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DEPOSITS AND OTHER ASSETS
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113,017 | 106,817 | 115,479 | |||||||||
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TOTAL ASSETS
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$ | 5,333,480 | $ | 5,931,510 | $ | 7,963,157 | ||||||
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY
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||||||||||||
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CURRENT LIABILITIES
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||||||||||||
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Accounts payable
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$ | 2,331,089 | $ | 2,575,342 | $ | 3,249,109 | ||||||
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Accrued expenses
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910,212 | 1,251,477 | 1,273,902 | |||||||||
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Capital lease obligation, current portion
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602,430 | 560,871 | 618,720 | |||||||||
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Notes payable, current portion
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321,391 | 314,307 | 414,886 | |||||||||
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Due to factor
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27,832 | — | — | |||||||||
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Advances from parent
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267,907 | 263,280 | 122,741 | |||||||||
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TOTAL CURRENT LIABILITIES
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4,460,861 | 4,965,277 | 5,679,358 | |||||||||
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CAPITAL LEASE OBLIGATION, less current portion
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1,410,268 | 1,469,256 | 2,195,576 | |||||||||
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NOTES PAYABLE, less current portion
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119,833 | 123,906 | 201,653 | |||||||||
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TOTAL LIABILITIES
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5,990,962 | 6,558,439 | 8,076,587 | |||||||||
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STOCKHOLDERS' DEFICIENCY
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||||||||||||
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Common stock: $120 par value; 1,000 shares
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||||||||||||
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authorized, issued and outstanding
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120,000 | 120,000 | 120,000 | |||||||||
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Accumulated other comprehensive income
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63,110 | 102,844 | 93,618 | |||||||||
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Accumulated deficit
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(840,592 | ) | (849,773 | ) | (327,048 | ) | ||||||
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TOTAL STOCKHOLDERS' DEFICIENCY
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(657,482 | ) | (626,929 | ) | (113,430 | ) | ||||||
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY
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$ | 5,333,480 | $ | 5,931,510 | $ | 7,963,157 | ||||||
See notes to financial statements
Techniques Appliquées aux Arts Graphiques, S.p.a.
Statements of Operations and Comprehensive Loss
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Year Ended
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Three Months Ended
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|||||||||||||||
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December 31,
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March 31,
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|||||||||||||||
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2010
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2009
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2011
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2010
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|||||||||||||
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(Unaudited)
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(Unaudited)
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|||||||||||||||
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NET SALES
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$
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13,599,137
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$
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15,005,841
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$
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3,702,446
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$
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3,598,813
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||||||||
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COST OF SALES
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8,335,298
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9,148,006
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2,317,050
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2,203,039
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||||||||||||
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GROSS PROFIT
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5,263,839
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5,857,835
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1,385,396
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1,395,774
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||||||||||||
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OPERATING EXPENSES:
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||||||||||||||||
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General and administrative
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5,524,086
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6,392,953
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1,332,520
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1,516,973
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||||||||||||
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Marketing and advertising
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25,774
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49,297
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7,752
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28,488
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||||||||||||
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TOTAL OPERATING EXPENSES
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5,549,860
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6,442,250
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1,340,272
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1,545,461
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||||||||||||
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INCOME (LOSS) FROM OPERATIONS
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(286,021)
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(584,415
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)
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45,124
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(149,687
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)
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||||||||||
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Other Income (expense)
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24,953
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(35,140
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)
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—
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||||||||||||
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Interest expense
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(142,389)
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(178,763
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)
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(35,943
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)
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(34,263
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)
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|||||||||
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NET INCOME (LOSS)
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(403,457)
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(798,318
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)
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9,181
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(183,950
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)
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||||||||||
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OTHER COMPREHENSIVE INCOME (LOSS)
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||||||||||||||||
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Foreign currency translation
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9,226
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89,418
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(39,734)
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12,225
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||||||||||||
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COMPREHENSIVE LOSS
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$
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(394,231
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)
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$
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(708,900
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)
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$
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(30,553
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)
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$
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(171,725
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)
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||||
See notes to financial statements
Techniques Appliquées aux Arts Graphiques, S.p.a.
Statement of Stockholders' Equity (Deficiency)
For the years ended December 31, 2010 and 2009
and for the three months ended March 31, 2011 (Unaudited)
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Common stock
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||||||||||||||||||||
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Shares
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Amount
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Retained earnings
(Accumulated
Deficit)
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Other
Comprehensive
Income (Loss)
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Total
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||||||||||||||||
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Balance, January 1, 2009
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1,000 | $ | 120,000 | $ | 471,270 | $ | 4,200 | $ | 595,470 | |||||||||||
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Net loss
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(798,318 | ) | (798,318 | ) | ||||||||||||||||
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Foreign currency translation
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89,418 | 89,418 | ||||||||||||||||||
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Balance December 31, 2009
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1,000 | 120,000 | (327,048 | ) | 93,618 | (113,430 | ) | |||||||||||||
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Dividend payment
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(119,268 | ) | (119,268 | ) | ||||||||||||||||
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Net loss
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(403,457 | ) | (403,457 | ) | ||||||||||||||||
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Foreign currency translation
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9,226 | 9,226 | ||||||||||||||||||
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Balance, December 31, 2010
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1,000 | 120,000 | (849,773 | ) | 102,844 | (626,929 | ) | |||||||||||||
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Net income
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9,181 | 9,181 | ||||||||||||||||||
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Foreign currency translation
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(39,734 | ) | (39,734 | ) | ||||||||||||||||
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Balance, March 31, 2011 (Unaudited)
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1,000 | $ | 120,000 | $ | (840,592 | ) | $ | 63,110 | $ | (657,482 | ) | |||||||||
See notes to financial statements
Techniques Appliquées aux Arts Graphiques, S.p.a.
Statements of Cash Flows
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Years ended
December 31,
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Three months ended
March 31,
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|||||||||||||||
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2010
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2009
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2011
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2010
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|||||||||||||
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(Unaudited)
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(Unaudited)
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|||||||||||||||
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CASH FLOWS FROM OPERATING ACTIVITIES:
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||||||||||||||||
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Net income (loss)
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$ | (403,457 | ) | $ | (798,318 | ) | $ | 9,181 | $ | (183,950 | ) | |||||
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Adjustment to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||||||||||
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Depreciation and amortization
|
878,890 | 1,027,954 | 241,735 | 252,696 | ||||||||||||
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Changes in operating assets and liabilities:
|
||||||||||||||||
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Trade accounts receivable
|
669,720 | 1,140,895 | 611,362 | 867,624 | ||||||||||||
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Due from factor
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(115,891 | ) | — | 146,294 | — | |||||||||||
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Inventories
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(48,390 | ) | (26,738 | ) | 121,062 | 112,528 | ||||||||||
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Prepaid expenses and other current assests
|
(50,798 | ) | (142,353 | ) | 40,703 | 56,015 | ||||||||||
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Accounts payable and accrued expenses
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(355,973 | ) | (779,993 | ) | (804,451 | ) | (1,002,921 | ) | ||||||||
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Net cash provided by operating activities
|
574,101 | 421,447 | 365,886 | 101,992 | ||||||||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||
|
Deposits
|
(40 | ) | (6,359 | ) | 600 | — | ||||||||||
|
Purchase of property and equipment
|
(39,508 | ) | (165,466 | ) | (16,898 | ) | (4,039 | ) | ||||||||
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Net cash used in investing activities
|
(39,548 | ) | (171,825 | ) | (16,298 | ) | (4,039 | ) | ||||||||
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CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||
|
Payments of capital lease obligations
|
(573,088 | ) | (595,162 | ) | (142,536 | ) | (147,328 | ) | ||||||||
|
Increase in notes payable
|
— | 305,316 | — | 100,845 | ||||||||||||
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Principal payments on notes payable
|
(132,094 | ) | (155,267 | ) | (24,202 | ) | (45,720 | ) | ||||||||
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Due to parent
|
150,049 | 122,741 | (11,808 | ) | ||||||||||||
|
Net cash used in financing activities
|
(555,133 | ) | (322,372 | ) | (178,546 | ) | (92,203 | ) | ||||||||
|
Effect of foreign currency translation
|
(84,406 | ) | 41,791 | 14,334 | (15,540 | ) | ||||||||||
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(104,986 | ) | (30,959 | ) | 185,376 | (9,790 | ) | |||||||||
|
CASH AND CASH EQUIVALENTS,
Beginning of period
|
244,993 | 275,952 | 140,007 | 244,993 | ||||||||||||
|
CASH AND CASH EQUIVALENTS, End of period
|
$ | 140,007 | $ | 244,993 | $ | 325,383 | $ | 235,203 | ||||||||
|
Supplemental Disclosure Information
|
||||||||||||||||
|
Cash paid for interest
|
$ | 142,389 | $ | 178,763 | $ | 35,943 | $ | 34,263 | ||||||||
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Cash paid for income taxes
|
$ | — | $ | — | $ | — | $ | — | ||||||||
See notes to financial statements
Techniques Appliquées aux Arts Graphiques, S.p.a.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2010 and 2009
and for the three months ended March 31, 2011 and 2010 (Unaudited)
Note 1 — Organization, Nature of Business
Organization and nature of business
Techniques Appliquées aux Arts Graphiques, S.p.a. (the “Company” or “TAAG”) is organized in France. The Company provides commercial printing services. The Company conducts substantially all of its business activities in France and in the European Union.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and includes the accounts of the Company.
Unaudited Interim Consolidated Financial Statements
The unaudited interim consolidated financial statements as of March 31, 2011 and for the three months ended March 31, 2011 and 2010 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments and entries) considered necessary for a fair presentation have been included. Unaudited operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011. All information disclosed in the footnotes in relation to the three months ended March 31, 2011 and 2010 is unaudited.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.
The more significant items subject to such estimates and assumptions include the carrying amount and useful lives of property and equipment, valuations of accounts receivable and inventories.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity date of three months or less to be cash equivalents.
Fair Value Measurements
The fair value hierarchy consists of the following three levels:
Level 1 –Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 –Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.
Level 3 –Inputs are derived from valuation techniques in which one or more significant input or value drivers are unobservable.
Accounts Receivable
Accounts receivable are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis and thus trade receivables do not bear interest. The Company performs ongoing credit evaluations of its customers’ financial condition and does not normally require collateral to support such receivables. The Company regularly reviews the accounts receivable aging and applies various expected loss percentages to certain accounts receivable categories based upon historical bad debt experience in order to determine whether an allowance for doubtful accounts resulting from the inability, failure or refusal of customers to make required payments, is appropriate. The Company established an allowance for doubtful accounts of $25,500, $18,015 and $22,175 as of March 31, 2011, December 31, 2010 and December 31, 2009, respectively.
Property and equipment
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally two to five years. Assets acquired under capital leases are amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the terms of the leases. Amortization of assets acquired under capital leases is included in depreciation expense. Repairs and maintenance costs are charged to expense as incurred. When assets are retired or otherwise disposed of, the asset and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recorded in the results of operations.
Long-Lived Assets
Long-lived assets include property and equipment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If an impairment indicator is present, the Company evaluates recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the assets are impaired, the impairment recognized is measured by the amount by which the carrying amount exceeds the estimated fair value of the assets. Based upon management’s estimates, there were no impairment charges for long-lived assets for the years ended December 31, 2010 and 2009.
Revenue Recognition
The Company recognizes revenue from printing services when the sales process is deemed complete and associated revenue has been earned, which occurs when services have been rendered and the printed materials have been delivered to the customer. The Company's policy is to recognize revenue when services have been performed, risk of loss and title to the product transfers to the customer, the selling price is fixed and determinable and collectability is reasonably assured.
Other Comprehensive Income (Loss)
Comprehensive income (loss) includes the Company’s net income (loss) as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. Other comprehensive income (loss) includes foreign currency translation adjustments.
Concentration of credit risk
One customer accounted for 18% of the revenues for the year ended December 31, 2010 and one customer accounted for 16% of the revenue for the year ended December 31, 2009.
As of December 31, 2010, two customers accounted for 22% and 14% of accounts receivable, and two customers accounted for 23% and 16% of accounts receivable at December 31, 2009. During the year ended December 31, 2010 the Company's purchases from two vendors represented 24% and 20% of our cost of goods sold and during the year ended December 31, 2009, the Company's purchases from two vendors represented 23% and 17% of our costs of goods sold.
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and unsecured trade accounts receivable.
Cash denominated in Euros with a US dollar equivalent of $325,383, $140,007, and $244,993 at March 31, 2011, December 31, 2010 and 2009, respectively, was held in accounts at financial institutions located in Europe. The Company has not experienced any losses in such accounts and does not believe the cash is exposed to any significant risk.
Income taxes
The Company accounts for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Foreign currency translation
The accompanying financial statements are presented in United States dollars, however, the functional currency of the Company is the Euro. Capital accounts of the Company are translated into United States dollars from foreign currency at their historical exchange rates. Assets and liabilities are translated at the exchange rate as of the balance sheet date and income and expenses are translated at the average exchange rate of the period.
Shipping and handling costs
The Company includes shipping and handling charges billed to its customers in its revenues, and classifies shipping and handling costs of the sale of its products as a component of cost of sales. Those costs were approximately $334,132 and $196,247 for the years ended December 31, 2010 and 2009, respectively.
Marketing and advertising expenses
Marketing and advertising expenses are expensed as incurred and consist primarily of various forms of advertising. Marketing and advertising expense amounted to $25,774 and $49,297 for the years ended December 31, 2010 and 2009, respectively.
Recently issued accounting pronouncements
Recently issued accounting pronouncements issued by the Financial Accounting Standards Board (the “FASB”) (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission have either been implemented or are not significant to the Company.
Note 3 — Inventories
Inventories consist of the following at:
|
March 31, 2011 (Unaudited)
|
December 31,
2010
|
December 31,
2009
|
||||||||||
|
Raw materials/paper
|
$ | 122,285 | $ | 129,398 | $ | 169,902 | ||||||
|
Work in process
|
220,281 | 181,876 | 143,773 | |||||||||
|
Finished goods
|
572,269 | 666,051 | 679,700 | |||||||||
| 914,835 | 977,325 | 993,375 | ||||||||||
|
Reserve
|
(31,164 | ) | (29,295 | ) | (20,327 | ) | ||||||
| $ | 883,671 | $ | 948,030 | $ | 973,048 | |||||||
Note 4 — Property and Equipment
Property and equipment consists of the following as of March 31, 2011, December 31, 2010, and December 31 2009:
|
March 31,
2011
|
December 31,
2010
|
December 31,
2009
|
||||||||||
|
(Unaudited)
|
||||||||||||
|
Computer equipment
|
$ | 159,268 | $ | 148,036 | $ | 195,974 | ||||||
|
Software
|
58,063 | 54,578 | 57,818 | |||||||||
|
Printing equipment
|
4,764,145 | 4,465,930 | 4,822,344 | |||||||||
|
Furniture and fixtures
|
26,558 | 24,964 | 26,999 | |||||||||
|
Vehicles
|
151,468 | 142,378 | 141,627 | |||||||||
|
Leasehold improvements
|
357,900 | 334,039 | 361,260 | |||||||||
| 5,517,402 | 5,169,925 | 5,606,022 | ||||||||||
|
Less accumulated depreciation
|
(3,938,487 | ) | (3,467,748 | ) | (2,801,491 | ) | ||||||
| $ | 1,578,915 | $ | 1,702,177 | $ | 2,804,531 |
Printing equipment includes $4,192,078, $3,942,903 and $4,264,239 of equipment under capital leases and related accumulated depreciation of $2,940,528, $2,567,046 and $1,974,222 as of March 31, 2011, December 31, 2010 and 2009, respectively.
Depreciation expense for the years ended December 31, 2010 and 2009 was $932,051 and $1,001,927, respectively.
Note 5 — Leases
The Company leases its production facility and certain equipment under non-cancelable operating and capital leases expiring on various dates through 2017. The Company’s future minimum lease payments under capital and operating leases that have noncancelable terms at March 31, 2011 are as follows for the years ended December 31:
|
Capital leases
|
Operating leases
|
|||||||
|
2011
|
$ | 505,866 | $ | 129,000 | ||||
|
2012
|
674,489 | 184,000 | ||||||
|
2013
|
605,600 | 214,000 | ||||||
|
2014
|
255,055 | 250,000 | ||||||
|
2015
|
127,532 | 250,000 | ||||||
|
Thereafter
|
— | 428,000 | ||||||
|
Total future minimum lease payments
|
2,168,542 | $ | 1,455,000 | |||||
|
Amounts representing interest
|
(155,844 | ) | ||||||
|
Net minimum lease payments
|
2,012,698 | |||||||
|
Less current portion
|
(602,430 | ) | ||||||
|
Long term portion of capital lease obligation
|
$ | 1,410,268 | ||||||
Rent expense was approximately $295,000 and $301,000 for the years ended December 31, 2010 and 2009, respectively, and approximately $73,300 and $74,100 for the three months ended March 31, 2011 and 2010, respectively. Amortization of capitalized leased assets is included in depreciation expense.
Note 6 – Notes payable
The Company has entered into various loan agreements with financial institutions. At March 31, 2011, December 31, 2010, and December 31, 2009, outstanding borrowings totaled $441,224, $438,213, and $616,539, respectively. The notes mature through September 2014 and bear interest at 4.7% to 6.11% percent per annum, interest payable quarterly, and secured by all the assets of the Company.
Future principal payments under the notes payable at March 31, 2011 are as follows for the year ended December 31:
|
2011
|
$ | 306,391 | ||
|
2012
|
50,955 | |||
|
2013
|
47,940 | |||
|
2014
|
35,938 | |||
|
Total future minimum principal payments
|
441,224 | |||
|
Less current portion
|
(321,391 | ) | ||
|
Long-term portion
|
$ | 119,833 | ||
Note 7 – Factor Agreement
During 2010, the Company entered into a factoring agreement with ABN Amro (“ABN”) for working capital and credit administration purposes. Under the agreement, ABN purchases trade accounts receivable assigned to ABN by the Company. The accounts are sold at the invoice amount subject to a factor commission and other miscellaneous fees. Trade accounts receivable not sold remain in the Company's custody and control and the Company maintains all credit risk on those accounts.
Under the agreement with ABN, the Company can borrow up to approximately $1.4 million (Euro 1,000,000), limited to 40% of its trade accounts. The factor fee is 0.26% of the customer invoice including VAT and interest is charged on amount financed at Euribor + 1.2% (1.98% at March 31, 2011 and 1.79% at December 31, 2010). At March 31, 2011, $102,395 was due from ABN, $130,227 was due to ABN, resulting in a net payable to ABN of $27,832. At December 31, 2010, $281,490 was due from ABN, $165,800 was due to ABN, resulting in a net receivable from ABN of $115,690.
The reconciliation of the effective income tax rate to the federal statutory rate is as follows:
|
Year ended December 31,
|
||||||||
|
|
2011
|
2010
|
||||||
|
Federal income tax rate
|
(34.00
|
)%
|
(34.00
|
)%
|
||||
|
Change in valuation allowance
|
34.00
|
%
|
34.00
|
%
|
||||
|
Effective income tax rate
|
0.00
|
%
|
0.00
|
%
|
||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. The deferred tax asset is primarily made up of losses incurred for income taxes that have been carried over to future periods. The Company has provided a full valuation allowance on the deferred tax assets at December 31, 2010 and 2009 to reduce such asset to zero since there is no assurance that the Company will generate future taxable income to utilize such asset. Management will review this valuation allowance requirement periodically and make adjustments as warranted.
Effective January 1, 2007, the Company adopted FASB guidelines that address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This guidance also provides guidance on derecognition, classification, interest and penalties on income taxes, and accounting in interim periods and requires increased disclosures. At the date of adoption, and as of March 31, 2011 and December 31, 2010, the Company did not have a liability for unrecognized tax benefits, and no adjustment was required at adoption.
The Company’s policy is to record interest and penalties on uncertain tax positions as income tax expense. As of March 31, 2011 and December 31, 2010, the Company had no accrued interest or penalties related to uncertain tax positions.
Note 9 - Retirement indemnity
The Company is required by French law to provide a retirement benefit indemnity for its employees. The provision for the retirement indemnity represents an accrual for lump-sum retirement indemnity payments to be paid at the time an employee retires. At March 31, 2011, December 31, 2010, and December 31, 2009, the balance of the retirement indemnity recorded by the Company was approximately $21,000.
Note 10 - Stockholders’ Equity (Deficiency)
The capital stock of the Company consists of 1,000 shares authorized, issued, and outstanding. Each share has a par value of $120.
Dividend Rights
Dividends may be distributed from the statutory retained earnings, subject to the requirements of French law and the Company’s by-laws. For the year ended December 31, 2010, the Company declared and paid a dividend of $119,268.
Note 11 - Related party transactions
At March 31, 2011, December 31, 2010, and December 31, 2009, the Company owed Fimmotaag, its parent company, $267,907, $262,280, and $122,741, respectively. The advances are non-interest bearing, unsecured, and due on demand. Fimmotaag is owned by the Company’s two managing directors.
Note 12 - Contingencies
At March 31, 2011 and December 31, 2010, we were defendants in lawsuits associated with the normal conduct of our businesses and operations. We believe that there are meritorious defenses to these actions and that these actions will not have a material adverse effect upon our results of operations, cash flows or financial condition.
Note 13 - Acquisition by Derycz Scientific, Inc.
On March 31, 2011, Fimmotaag, the Company’s parent company, entered into an amendment (the “Amendment”) modifying certain provisions of the agreement previously entered into by Fimmotaag on February 24, 2011 (the “Purchase Agreement”) with Derycz Scientific, Inc. (“Derycz”). Pursuant to the terms of the Purchase Agreement, as modified by the Amendment, Derycz acquired all the outstanding capital stock of the Company for 336,921 shares of Derycz’s common stock valued at 750,000 Euros (approximately US$1,000,000), in addition to post-closing earn-out payments to be made to Fimmotaag based on achieving certain net revenue (as defined) targets during each of the five years ending December 31, 2011 through December 31, 2015. Each year, the earn-out will be calculated based on the following formula: 20% of the first 200,000 Euros of net income before taxes of the Company for the applicable year; plus 30% of the net income before taxes of the Company between 200,000 and 300,000 Euros; plus 40% of the net income before taxes of the Company in excess of 300,000 Euros.