UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC. 20549

FORM 10-Q/A

 

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2011

or

 

[ ] TRANSITION REPORT PURUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to _________________________

 

Commission file number: 001-03477

 

CATALYST RESOURCE GROUP, INC.

(Exact name of registrant as specified in its charter)

 

FLORIDA 82-0190257

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)

 

17011 Beach Blvd., Suite 1230, Huntington Beach, CA 92647

(Address of principal executive offices) (Zip Code)

 

714-843-5455

(Registrant's telephone number, including area code)

 

JEANTEX GROUP, INC.

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes [X] No [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 for Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]

 

Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of March 01, 2012, there were 255,657,250 shares of the registrant's $0.001 par value Class A Common Stock and 9,958 shares of the registrant’s $0.001 par value Class B Common Stock issued and outstanding, respectively.

 

 

 

EXPLANATORY NOTE

 

This amendment is filed in response to the letters dated January 9, 2012 and February 8, 2012 by the Division of Corporation Finance, Securities and Exchange Commission, regarding Form 10-Q for the fiscal quarter ended September 30, 2011.

 

Form 10-Q for the Fiscal Quarter Ended September 30, 2011

 

Cover Page

 

2. Please use the updated cover page for the Form 10-Q that includes applicable language and boxes to be checked indication compliance with Rule 405 of Regulation S-T. Please also check the “yes” box to indicate you have complied with this Rule. This comment also applies to your Form 10-Q for the fiscal quarter ended June3 0, 2011.

 

3. We note that the interim financial statements as of and for the interim period ended September 30, 2011 have been omitted. Please further amend your filing accordingly.

 

 

RESPONSE

 

The registrant acknowledges that:

 

-                  the company is responsible for the adequacy and accuracy of the disclosure in the filing;

-                  staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking

any action with respect to the filing; and

-                  the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any

person under the federal securities laws of the United States.

 

The registrant files Form 10-Q/A herewith for the fiscal quarter ended September 30, 2011 with the updated cover page and the interim financial statements that were inadvertently omitted from the previous filing due to an error in the edgarization and submission process.

 

CATALYST RESOURCE GROUP, INC.

(Formerly JEANTEX GROUP, INC.)

 

INDEX

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited)

 

Balance Sheets as of September 30, 2011(Unaudited) and December 31, 2010

 

Statements of Operations for the Three Months and Nine Months Ended September 30, 2011 and 2010

and the period from January 1, 2007 (Inception) to September 30, 2011 (Unaudited)

 

Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010 and the period from January 1, 2007 (Inception) to September 30, 2011 (Unaudited)

 

Notes to Unaudited Financial Statements

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Item 3. Quantitative and Qualitative Disclosure about Market Risk

 

Item 4. Control and Procedures

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Item 2. Unregistered Sales of Equity and Use of Proceeds

 

Item 3. Defaults upon Senior Securities

 

Item 4. Submission of Matters to a Vote of Security Holders

 

Item 5. Other Information

 

Item 6. Exhibits

 

Signatures

 

 

 

 

 

 

Catalyst Resource Group, Inc.

(Formerly Jeantex Group, Inc.)         

Notes to Unaudited Consolidated Financial Statements

September 30, 2011

 

 

			CATALYST RESOURCE CROUP, INC
			FORMERLY JEANTEX GROUP, INC
			(DEVELOPMENT STAGE COMPANY)
			CONSOLIDATED BALANCE SHEETS
					September 30,		December 31,
					2011		2010
ASSETS;
Current Assets:
	Cash				$14		$180
TOTAL ASSETS					14		180
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current Liabilities:
	Accounts payable and accrued expense				$203,042		$222,029
	Interest payable				274,720		231,371
	Notes payable				355,040		351,040
	Convertible promissory note,
		net discount $112,772 and $10,809 respectively			38,228		18,191
	Payables to related parties				107,283		246,347
	Derivative Liability				253,558		40,205
		Total Current Liabilities			$1,231,871		$1,109,183
Shareholders' Deficit:
	Common stock, non-assessable, $0.001 par value,
		299,990,000 shares authorized, 103,669,948 and 100,188,411 shares			$103,671		$100,118
		issued and outstanding, respectively
	Class B Common stock, assessable, $0.001 par value
		10,000 shares authorized, 9,958 shares issued and outstanding			10		10
	Common stock payable				150,000		-
	Additional paid in capital				16,803,400		16,778,800
	Accumulated deficit prior to development stage				(16,770,000)		(16,770,000)
	Accumulated deficit during development stage				(1,518,937)		(1,217,931)
Total Stockholders' Deficit					(1,231,857)		(1,109,003)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT					$14		$180
The accompanying notes are an integral part of these financial statements

 

CATALYST RESOURCE GROUP, INC

FORMERLY JEANTEX GROUP, INC

(DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 AND THE PERIOD

FROM THE RE-ENTERING OF THE DEVELOPMENT STAGE,

JANUARY 1, 2007 TO SEPTEMBER 30, 2011

													From Re-entering of
													Development Stage
													January 1, 2007 to
	2011			2010			2011			2010			September 30, 2011
NET SALES	-			-			-			-			-
COST OF GOODS SOLD	-			-			-			-			-
GROSS PROFIT		-			-			-			-			-
OPERATING EXPENSES:
General administration		14,106			6,862			48,541			43,142			407,723
Bad Debts		-			-			-			-			617,336
Total Operating Expenses		14,106			6,862			48,541			43,142			1,025,059
Income(Loss) from Operations		(14,106	)		(6,862	)		(48,541	)		(43,142	)		(1,025,059	)
OTHER INCOME (EXPENSES)
Interest expense		(99,592	)		(19,543	)		(167,701	)		(49,894	)		(404,540	)
Changes in fair value of derivative liability		(78,471	)		-			(102,549	)		-			(107,123	)
Other income		-			-			17,784			3,095			17,784
Total other income (expense)		(178,063	)		(19,543	)		(252,466	)		(46,799	)		(493,879	)
NET LOSS		(192,169	)		(26,405	)		(301,006	)		(89,941	)		(1,518,937	)
Weighted average number of Class A shares
outstanding - basic and diluted		103,371,362			96,258,196			102,659,251			96,258,196
Basic and diluted net loss per share - Class A		-			-			-			-
The accompanying notes are an integral part of these financial statements

CATALYST RESOURCE GROUP, INC

FORMERLY JEANTEX GROUP, INC

(DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

AND THE PERIOD FROM RE-ENTERING THE DEVELOPMENT STAGE,

JANUARY 1, 2007 TO SEPTEMBER 30, 2011

							Period From
							January 1, 2007
							(re-entering
							development stage) to
	2011			2010			September 30, 2011
Cash Flows From Operating Avtivities:
Net loss		(301,006	)		(89,941	)		(1,518,937	)
Adjustments to reconcile net loss to net cash used
in operating activities:
Gain on Conversion Note		-			617,336
Imputed interest charged to equity		2,690			2,566			13,977
Amoratization of Discount		89,730			5,231			109,956
Issuance of shares for consulting services		-			-			135,000
Excess fair value of derivative over face amounts of notes		29,772			-			29,772
Changes in fair value of derivative liability		102,549			3,095			107,123
Changes in asets and liabilities:
Decrease in deposits and prepaid expenses		-			-			46,816
Increase(decrease) in accounts payable		15,119			4,301			(2,534	)
Increase in accured expenses		11,043			44,882			194,934
Total adjustments		250,903			53,885			1,252,380
Net cash used in operating activities		(50,103	)		(36,056	)		(266,557	)
Cash Flow From Financing Activities:
Proceeds from notes - related parties		8,836			12,603			139,119
Payment of Notes - related parties		(147,900	)		(33,000	)		(188,566	)
Proceeds from notes		189,000			61,400			254,440
Payment on notes		-			(3,500	)		(5,000	)
Paymnets of lines of credit		-			-			(1,270	)
Stock issued for cash		-			-			62,600
Net cash orovided by financing activities		49,937			37,503			261,324
Increase (decrease) in cash		(166	)		1,447			(5,232	)
Cash - Beginning of period		180			92			5,247
Cash - End of period		14			1,539			15
Supplemental Cash Flow Information:
Interest paid		-			19,177
Taxes paid		-			-			-
Non-cash investing and financing activities:
Debt Discount		183,695			44,090			227,785
Relief of derivative liability due to conversion		71,000			-			71,000
Common stock payable		150,000			-			150,000

The accompanying notes are an integral part of these financial statements

 

 

1. BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to interim financial statements. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows at September 30, 2011 and for all the periods presented have been made.

 

The financial information included in this quarterly report should be read in conjunction with the consolidated financial statements and related notes thereto in our Form 10-K for the year ended December 31, 2010.

 

The results of operations for the nine months ended September 30, 2011 are not necessarily indicative of the results to be expected for the full year ending December 31, 2011.

 

Development Stage Company

 

The Company has not earned significant revenue from planned principal operations since 2006.  Accordingly, effective January 1, 2007, the Company's activities have been accounted for as those of a "Development Stage Enterprise" as set forth in FASB Pronouncements. Among the disclosures required are that the Company's financial statements be identified as those of a development stage company, and that the statements of operations, stockholders' equity (deficit) and cash flows disclose activity since the date of the Company's inception of development stage.

 

2. GOING CONCERN

The Company's consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has accumulated deficits of $18,288,937 at September 30, 2011. At September 30, 2011, the Company’s current liabilities exceeded its current assets by $1,231,857.  In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

3. NOTES PAYABLE

At September 30, 2011 and December 31, 2010, notes payable consisted of the following:

 

	September 30, 2011			December 31, 2011
Note Payable to ex-president of the Company, unsecured,
8% interest matured September 2006		250,000			250,000
Note Payable due to individual, unsecured, 8% interest due on demand		50,000			50,000
Note Payable due to individual, unsecured, 8% interest due on demand		25,000			25,000
Note Payable due to individual, unsecured, 8% interest due on demand		10,500			10,500
Note Payable due to individual, unsecured, 8% interest due on demand		7,000			7,000
Note Payable due to individual, unsecured, 8% interest due on demand		11,000			7,000
Note Payable due to individual, unsecured, 8% interest due on demand		1,540			1,540
		355,040			351,040

 Total interest expense for the three months ended September 30, 2011 and 2010 was $99,592 and $19,543 respectively.

 

Total interest expense for the nine months ended September 30, 2011 and 2010 was $167,701 and $49,894 respectively.

 

4. PAYABLES TO RELATED PARTIES

 

At September 30, 2011 and December 31, 2010, notes payable to related parties consisted of the following:

 

	September 30, 2011		December 31, 2010
Note Payable to PHI Group, Inc. related by ownership, unsecured, 8% interest, due on demand	$ 85,780		$ 198,049
Note Payable to PHILand Corporation, a subsidiary of PHI Group Inc.	-		1,000
Short-term loan from officer, unsecured, interest free, due on demand	21,503		47,298
	$ 107,283		$ 246,347

 

The decrease in note payable to PHI Group, Inc. was due to partial repayment of principal.

 

Imputed interest on the interest free short-term loan from officer in the amount of $ 834 and $3,487 were included as an increase to additional paid in capital at September 30, 2011 and December 31, 2010, respectively.

 

5. CONVERTIBLE PROMISSORY NOTES

 

The convertible notes issued to Asher Enterprises, Inc. (“Asher”) in May 2010 are due and payable on the due dates with interest of 8% per annum. These notes are convertible at the election of Asher from time to time after the issuance date. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 22% per annum and the notes become immediately due and payable. Should that occur, the Company is liable to pay Asher 150% of the then outstanding principal and interest. The note agreements contain covenants requiring Asher’s written consent for certain activities not in existence or not committed to by the Company on the issue date of the notes, as follows: dividend distributions in cash or shares, stock repurchases, borrowings, sale of assets, certain advances and loans in excess of $45,000, and certain guarantees to third-party liabilities. Outstanding note principal and interest accrued thereon can be converted in whole, or in part, at any time by Asher after the issuance date into an equivalent of the Company’s common stock determined by 58% of the average of the three lowest closing trading prices of the Company’s common stock during the ten trading days prior to the date the conversion notice is sent by Asher.

 

During the first quarter, the remaining $37,000 principal of the convertible notes issued in May 18, 2010 has been converted into 2,477,784 shares which extinguished the derivative liability resulting in a credit to Paid in capital of $41,734. The remaining debt discount was written off to interest expense in the amount of $18,809.

On January 11, 2011 and March 10, 2011, the Company issued a second and third Convertible Promissory Note to Asher for $40,000 each under similar terms and conditions.

The fourth Convertible Promissory Note to Asher was issued on April 15, 2011 for $40,000 under similar terms and conditions.

On July 1, 2011 and July 29, 2011, the Company issued a fifth and sixth Convertible Promissory Note to Asher for $32,500 each under similar terms and conditions.

During the third quarter, $34,000 principal of the $40,000 conversion notes issued on April 15, 2011 was converted into 1,073,753 shares which extinguished a portion of the derivative liability resulting in a credit to Paid in Capital of $58,559.

All note conversions were within the terms of the agreements.

			Conversions			Discount
	12/31/2010	Additions	& Amortization	3/31/2011	Additions	Amortization	6/30/2011	Additions	Conversions	9/30/2011
Asher Enterprises	37.000	80.000	-37.000	80.000	40.000		120.000	65.000	34.000	151.000
Discount on Asher Note	-18,809	-79,035	24,572	-73,272	-39,658	-13,090	-99,830	-65,000	-52,058	-112,772

 

6. DERIVATIVE

 

The Company’s Convertible 8% Notes issued to Asher Enterprise, Inc during first and second quarters contain a conversion feature that allows for conversion into shares at a price discounted from the market price. This amount is set at 58% of the average of the three lowest closing bid prices over the last 10 days. Additionally, the note contains a reset provision to the exercise price and conversion price if the Company issues equity or other derivatives at a price less than the exercise price set forth in such warrants and notes. This ratchet provision results in a derivative liability in our financial statements.

 

We valued the conversion features in its convertible notes using a binomial lattice valuation model. The lattice model values the embedded derivatives based on a probability-weighted discounted cash flow model. This model is based on future projections of the five primary alternatives possible for settlement of the features included within the embedded derivatives, which are: (i) payments are made in cash, (ii) payments are made in stock, (iii) the holder exercises its right to convert the notes, (iv) we exercise our right to convert the notes, and (v) we default on the notes. We use the model to analyze the underlying economic factors that influence which of these events will occur, when they are likely to occur, and the price of its common stock and specific terms of the notes, such as interest rate and conversion price, that will be in effect when they occur. Based on the analysis of these factors, we use the model to develop a set of potential scenarios. Probabilities of each scenario occurring during the remaining term of the notes are determined based on management's projections. These probabilities are used to create a cash flow projection over the term of the notes and determine the probability that the projected cash flow will be achieved. A discounted weighted average cash flow for each scenario is then calculated and compared to the discounted cash flow of the notes without the compound embedded derivative in order to determine a value for the compound embedded derivative.

 

Roll-forward of Defivative Net Liabilities
Derivative balance at 03.31.2011			$                40,205
Derivative balance at issuance (January 11, 2011)			$                40,666
Derivative balance at issuance (March 10, 2011)			$                39,035
Change due to Mark to Market			$                  3,516
Conversion of Note			$               (44,102)
Derivative at 03.31.2011			$                79,320
Derivative balance at issuance (April 15, 2011)			$                39,658
Change due to Mark to Market			$                20,562
Derivative balance at 06.30.2011			$               139,540
Derivative balance at issuance (July 1, 2011)			$                48,760
Derivative balance at issuance (July 29, 2011)			$                45,346
Change due to Mark to Market			$                78,471
Conversions of Note			$               (58,559)
Derivative balance at 09.30.2011			$               253,558

 

During the first quarter, the remaining $37,000 principal of the convertible notes was converted, which extinguished the associated derivative liability. The remaining debt discount of $18,809 was written off to interest expense at the time of conversion.

 

On January 11, 2011 and March 10, 2011, the Company issued a second and third Convertible Promissory Notes to Asher for $40,000 each under similar terms and conditions. Based on current guidance, the Company concluded that the convertible note issued to Asher during the first quarter is also required to be accounted for as a derivative. This guidance requires the Company to bifurcate and separately account for the conversion features of the convertible notes issued as embedded derivatives. Derivative liabilities of $40,666 and $39,035 resulted from the January 11, 2011 and March 10, 2011 note issuances and an associated debt discounts of $40,000 and $39,035, respectively.

 

The Company issued a fourth Convertible Promissory Note to Asher for $40,000 under similar terms and conditions on April 15, 2011. Based on current guidance, the Company concluded that the convertible note issued to Asher on April 15, 2011 is also required to be accounted for as a derivative. This guidance requires the Company to bifurcate and separately account for the conversion features of the convertible notes issued as embedded derivatives. Derivative liabilities of $39,658 resulted from the April 15, 2011 note issuance and an associated debt discount of $39,658. The debt discount is being amortized over the nine-month note life, using the effective interest method.

 

During the third quarter, $34,000 principal of the $40,000 Convertible Promissory Note issued on April 15, 2011 was converted, which extinguished substantially all of the associated derivative liability and unamortized discount.

 

On July 1, 2011 and July 29, 2011, the Company issued a fifth and sixth Convertible Promissory Note to Asher for $32,500 each under similar terms and conditions. Based on current guidance, the Company concluded that the convertible note issued to Asher during the third quarter is also required to be accounted for as a derivative. This guidance requires the Company to bifurcate and separately account for the conversion features of the convertible notes issued as embedded derivatives. Derivative liabilities of $48,760 and $45,346 resulted from the July 1, 2011 and July 29, 2011 note issuances and associated debt discounts of $32,500 and $32,500, respectively.

 

Total debt discount amortization for the period ending September 30, 2011 was $89,730 which was recorded as interest expense during the period.

 

The fair value of the derivative liability at September 30, 2011 and December 31, 2010 is $253,558 and $40,205, respectively.

 

7. FAIR VALUE ACCOUNTING

 

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the financial assets and liabilities measured at fair value, on a recurring basis as of September 30, 2011:

		Carrying				Fair Value Measurements Using
		Value				Level 1				Level 2				Level 3				Total
Derivative liabilities		$	253,558			$	-			$	-			$	253,558			$	253,558
Totals						$	-			$	-			$	253,558			$	253,558

 

Level 3 Valuation Techniques

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.  Our Level 3 liabilities consist of the derivative liabilities associated with certain preferred stock issuances and freestanding warrants that contain down round provisions.

 

8. RECLASSIFICATION

 

For comparative purposes, prior period’s consolidated financial statements have been reclassified to conform with report classifications of the current period.

 

9. STOCKHOLDER’S EQUITY

Pursuant to the amendment of the Articles of Incorporation of the Company as filed with the Secretary of State, Florida, on October 1, 2003, the authorized common stock has been divided into two classes known as Common Stock (previously known as Class A Common Stock) and Class B assessable common stock.

 

Common Stock

On January 3, 2011, Asher Enterprises, Inc. converted $10,000 of the convertible promissory note into 819,672 shares of the Company’s common stock.

On January 19, 2011, Asher Enterprises, Inc. converted $8,000 of the convertible promissory note into 425,532 shares of the Company’s common stock.

On January 21, 2011, Asher Enterprises, Inc. converted $10,000 of the convertible promissory note into 578,035 shares of the Company’s common stock.

On February 17, 2011, Asher Enterprises, Inc. converted $9,000 of the convertible promissory note into 654,545 shares of the Company’s common stock.

On July 21, 2011, Asher Enterprises, Inc. converted $12,000 of the convertible promissory note into 379,747 shares of the Company’s common stock.

On July 25, 2011, Asher Enterprises, Inc. converted $10,000 of the convertible promissory note into 315,457 shares of the Company’s common stock.

On July 29, 2011, Asher Enterprises, Inc. converted $12,000 of the convertible promissory note into 378,549 shares of the Company’s common stock.

At September 30, 2011, the Company’s authorized capital is 299,990,000 shares of Common Stock with a par value of $0.001. Common Stock issued and outstanding of 103,669,948 shares is fully paid and non-assessable.

Class B Common Stock

At September 30, 2011, the Company has authorized for issue, 10,000 shares of Class B Common Stock with a par value of $0.001. Class B Common Stock issued and outstanding of 9,958 shares is assessable, provided however, that any assessments levied upon Class B shares are considered as contributions to capital and must be repaid from net profits before dividends are declared or paid to any Common Stock or Class B Common Stock shareholders. Class B capital assessments can be levied at any time by the Board of Directors at their discretion. Shareholders who fail to pay assessments levied on their Class B shares lose ownership of the shares and the shares are returned to the treasury.

Preferred Stock

The Company has 100,000,000 shares of authorized Preferred Stock, with a par value of $0.001. As of the date of this report, the Company has not issued any Preferred Stock.

 

10. AGREEMENT WITH RERUN RECOVERY, INC.

 

On May 5, 2011, the Company entered into a Business Cooperation Agreement with Rerun Recovery, Inc., a Nevada corporation, according to which both parties would cooperate with each other to utilize the proprietary pre-treatment and separation technologies owned by Rerun Recovery to process and sell platinum group metals (PGMs) and gold from a mine in Alaska and one in Oregon to industrial and private users. The Company will share 70% net profits of the processed minerals from these mines with Rerun Recovery. In return, the Company will be responsible for $400,000 related to the operations of the mines, $3,500,000 for building new processing facilities and issuing 150,000,000 shares of its restricted common stock to Rerun Recovery, Inc. and/or its designees. The Company received the consent of a majority of its shareholders with respect to the Business Cooperation Agreement on May 23, 2011 and filed the Preliminary Information Statement Pursuant to Section 14(c) of the Securities Exchange Act of 1934 on June 1, 2011. Subsequently, the Company filed the Definitive Information Statement pursuant to Section 14(c) of the Securities Exchange Act of 1934 on June 29, 2011. On October 24, 2011, the Company issued 150,000,000 shares of restricted common stock to Rerun Recovery, Inc. and its designees pursuant to the referenced Business Cooperation Agreement. Consequentially, Rerun Recovery, Inc. and its designee(s) have become controlling shareholders of the Company. As of the date of this report, the Company has recorded $150,000 as Common Stock Payable in the accompanying financial statements.

 

11. SUBSEQUENT EVENT

 

On October 17, 2011, Asher Enterprises, Inc. converted $6,000 principal amount of the Convertible Promissory Note dated January 11, 2011, together with $1,600 accrued and unpaid interest thereto, totaling $7,600 into 400,000 shares of common stock of the Company.

 

On October 24, 2011, the Company issued 150,000,000 shares of restricted common stock to Rerun Recovery, Inc., a Nevada corporation, and its designees pursuant to the Business Cooperation Agreement dated May 05, 2011 between Rerun Recovery, Inc. and the Company. Consequentially, Rerun Recovery, Inc. and its designee(s) have become controlling shareholders of the Company.

Item 2. Management's Discussion and Analysis

Forward Looking Information

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" from liability for forward-looking statements. Certain information included in this Form 10-Q and other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by or on behalf of the Company) are forward-looking statements. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions that are not statements of historical facts. This document and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. The words "believe," "expect," "anticipate," "intends," "estimates," "forecast," "project" and similar expressions identify forward-looking statements.

Such forward-looking statements involve important risks and uncertainties, many of which will be beyond the control of the Company. These risks and uncertainties could significantly affect anticipated results in the future, both short-term and long-term, and accordingly, such results may differ from those expressed in forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, changes in external competitive market factors or in the Company's internal budgeting process which might impact trends in the Company's results of operations, unanticipated working capital or other cash requirements, changes in the Company's business strategy or an inability to execute its strategy due to unanticipated change in the industries in which it operates, and various competitive factors that may prevent the Company from competing successfully in the marketplace. Although we believe that these assumptions were reasonable when made, these statements are not guarantees of future performance and are subject to certain risks and uncertainties, some of which are beyond our control, and are difficult to predict. Actual results could differ materially from those expressed in forward-looking statements.

Readers are cautioned not to place undue reliance on any forward-looking statements, which reflect management's view only as of the date of this report. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequence events or circumstances. Readers are also encouraged to review the Company's publicly available filings with the Securities and Exchange Commission.

Company Background

Catalyst Resource Group, Inc., formerly Jeantex Group, Inc., (the "Company") is a Florida corporation, originally incorporated as an Idaho corporation on August 23, 1947 as Western Silver Lead Corporation. Western Silver Lead Corporation (“WSL”) was organized to explore for, acquire and develop mineral properties in the state of Idaho and the western United States. During the first several years WSL's activities have been confined to annual assessment and maintenance work on its Idaho mineral properties and other general and administrative functions. As of September 30, 2000, no proven or probable reserves had been established at any of WSL's mineral properties. On November 1, 2001, WSL entered into an Asset Purchase Agreement to transfer all of its interest in its properties to WSL, LLC, an entity controlled by its former president and director, who is the father of the president and director of WSL at that time. On August 16, 2002, WSL’s shareholders ratified this agreement. On September 24, 2003 the parent Western Silver-Lead Corporation, an Idaho corporation, merged into the wholly-owned subsidiary Western Silver-Lead Corporation, a Florida corporation, whereby each shareholder of the Idaho corporation’s Class A and Class B common stock, par value $0.001, received one share of common stock and Class B common stock, respectively, par value $0.001, of the Florida corporation. The merger was between the parent and the subsidiary corporation and the subsidiary became a surviving corporation.

On September 29, 2003 the Company entered into an Agreement of Merger with Lexor International, Inc, ("Lexor") a Maryland corporation. Pursuant to the Merger Agreement, the Company issued 10,867,000 shares of its Class A common stock to Lexor's shareholders in exchange for all issued and outstanding shares of the Lexor's common stock. On October 1, 2003, the Company changed its name to Lexor Holdings, Inc. On October 3, 2003 the board of directors of the Company resigned and Christopher Long was appointed as the new president of the Company.

On March 31, 2005 Company entered into a Rescission Agreement with Lexor International, Inc., which terminated the merger agreement. Terms of the Rescission Agreement called for the cancellation of 10,867,000 shares of its Class A common stock issued to Christopher Long and Ha Nguyen, the spouse of Christopher Long, the return of all its pre-merger assets, assumption of any and all liabilities associated with to the pedicure spa business by Lexor International, Inc.  The spa business was considered to be discontinued operations of Jeantex Group, Inc.

On June 22, 2005, the Company entered into a Stock Purchase Agreement with Jeantex, Inc., a California corporation. On June 29, 2005, the transaction contemplated in the Stock Purchase Agreement was completed and a Closing Memorandum was executed by all parties. The Company agreed to issue 20,000,000 shares of its Class A common stock to Jeantex, Inc.'s shareholder in exchange for 100% of the issued and outstanding equity interest of Jeantex, Inc. and issue 36,350,000 shares of its Class A common stock for consulting and reorganization expenses in connection with this transaction. On June 29, 2005 the board of director of the Company approved resolutions to the stock transfer agent to issue shares to Jeantex pursuant to the Agreement.  The shares of Lexor Holdings, Inc. common stock to be issued shall be restricted pursuant to Rule 144.

On December 20, 2005, the Company entered into a Stock Purchase Agreement with Yves Castaldi Corporation, a California corporation. Pursuant to the terms of the Agreement, Jeantex Group, Inc. has agreed to acquire 51% of the total issued and outstanding equity interests of Castaldi (10,408 shares of the common stock) in exchange for the payment of $650,000 in cash ($50,000 paid on December 29, 2005 and an executed promissory note for the remaining $600,000 of which $300,000 is to be used for working capital) and the issuance of 10,000,000 newly-issued shares of Jeantex Group, Inc. common stock. The 10,000,000 shares of Jeantex restricted common stock will be vested on a pro-rata basis, based on a minimum of $10,000,000 in revenues and between $2.5 and $3.0 million in net profit to be generated by Yves Castaldi Corporation in the next 12 months. The closing of this acquisition occurred December 30, 2005. In June 2006, this Stock Purchase Agreement was amended whereby the Company has agreed to reduce its stake in Castaldi from 51% to 20% of the total issue and outstanding number of shares of Castaldi.  Castaldi has agreed to retain only 4,000,000 of the 10,000,000 shares originally issued to it pursuant to the Agreement and will also retain $226,650 paid to Castaldi by the Company as consideration for the Company's 20% stake in Castaldi.  The four million (4,000,000) shares of common stock retained by Castaldi will be vested on a pro-rata basis based on Yves Castaldi Corporation's projected revenues of $10,000,000 and net profits of $2,000,000 in the next twenty-four months commencing July 1, 2006. In the event said target revenues and profitability are not reached within said twenty-four months, the amount of vested shares shall be adjusted accordingly on a pro-rata basis. The remaining 6,000,000 shares will be surrendered by Castaldi.

As a result of Yves Castaldi Corp.’s filing for Chapter 11 protection with the United States Bankruptcy Court of the Central District of California and naming the Company as a creditor during the fourth quarter of Fiscal Year 2006, the Company has written off its cash investments in Yves Castaldi Corp. and will reclaim all the 10,000,000 shares that were issued to Yves Castaldi Corp.

During the fourth quarter of fiscal year 2006, Jeantex, Inc. discontinued its private label manufacturing business, sold its fully depreciated equipment and began to look for sourcing opportunities in Asia. As of the date of this report, the Company has not entered into any definitive agreement with a sourcing partner for its private label business. The Company has been inactive and seeking for an acquisition opportunity. The Company re-entered the development stage on January 1, 2007.

 

On April 05, 2010, the Company changed its name to Catalyst Resource Group, Inc. to better reflect its new intended scope of business.

 

New Business Focus:

The Company has taken various steps to revise its operating and financial plans, including negotiating to acquire technologies related to mining, building materials, energy and natural resources. Management believes that these new initiatives will create long-term value for the Company but there is no guarantee that the Company will succeed in its plans.

Results of Operations

 

Three Months Ended September 30, 2011 Compared to Three Months Ended September 30, 2010

 

Revenues:

 

The Company had no revenue for the quarters ended September 30, 2011 or 2010.

 

Operating Expenses:

 

The Company incurred total operating expenses of $14,106 for the quarter ended September 30, 2011 as compared to $6,862 for the same quarter in 2010. The operating expenses consisted of general and administration expenses. The increase is primarily due to the increase in professional fees.

 

Loss from operations:

 

The Company had losses from operations of $14,106 for the quarter ended September 30, 2011 as compared to a loss from operations of $6,862 for the same quarter in 2010. This increase of loss was due to the increase in general and administration expense of $7,244 in the quarter ended September 30, 2011.

 

Other Income (Expenses):

 

The Company incurred $ 99,592 in interest expense for the quarter ended September 30, 2011 as compared to $19,543 in interest expense for the quarter ended September 30, 2010.

 

Net loss:

 

The Company had a net loss of $192,169 for the quarter ended September 30, 2011 as compared to a net loss of $26,405 in the same quarter in 2010.  The net loss based on the basic and diluted weighted average number of common shares outstanding for the quarters ended September 30, 2011 and 2010 was $0.00 for both periods.

 

 

Nine Months Ended September 30, 2011 Compared to Nine Months Ended September 30, 2010

 

Revenues:

 

The Company had no revenue for the nine-month periods ended September 30, 2011 or 2010.

 

Operating Expenses:

 

The Company incurred total operating expenses of $48,541 for the nine-month period ended September 30, 2011 as compared to $43,142 for the same period in 2010. The operating expenses consisted of general and administration expenses. The general administration expenses increased in the period ended September 30, 2011 compared to the same period in the prior year due to an increase in professional fees.

 

Loss from operations:

 

The Company had losses from operations of $48,541 for the nine-month period ended September 30, 2011 as compared to a loss from operations of $43,142 for the same period in 2010. This increase of loss was due to an increase in general and administration expense in the period ended September 30, 2011.

 

Net loss:

 

The Company had a net loss of $301,006 for the nine-month period ended September 30, 2011 as compared to a net loss of $89,941 in the same period in 2010.  The net loss based on the basic and diluted weighted average number of common shares outstanding for the periods ended September 30, 2011 and 2010 was $0.00 for both periods.

 

Liquidity and Capital Resources

 

At September 30, 2011, the Company had $14 in cash. The Company used $50,103 for operating activities during the nine-month period ended September 30, 2011 compared to $36,056 for the same period in 2010. The use of cash in operating activities in 2011 and 2010 were due to the change in value and amortization of derivatives.  

 

In financing activities, the Company obtained $189,000 from proceeds on notes during the nine-month period ended September 30, 2011 and $8,836 from proceeds on notes from related party compared to $61,400 and $12,603 during the nine-month period ended September 30, 2010, respectively.

 

The Company has incurred an accumulated deficit as of September 30, 2011 of $18,288,937.

 

The future of the Company is dependent on its ability to generate cash from the operations of the mines using its proprietary pre-treatment and separation technologies. There can be no assurance that the Company will be able to implement its current plan.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

None

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

 

An evaluation, under the supervision and with the participation of the Company’s management, was carried out including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)).  Based upon that evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, the disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management, including the principal executive officer and principal financial officer, does not expect that its disclosure controls and procedures or its internal controls will prevent all error or fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.  Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, management performed additional analysis and other post-closing procedures in an effort to ensure its consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

Management’s Report on Internal Control Over Financial Reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended.  Management assessed the effectiveness of its internal control over financial reporting as of September 30, 2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.  A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.  The following material weaknesses were identified.

 1.   As of September 30, 2011, the Company’s control over financial reporting was not effective. Specifically, a formally adopted a written code of business conduct and ethics that governs to the Company’s employees, officers and directors was not in place.  Additionally, management has not developed and effectively communicated to its employees its accounting policies and procedures.  This has resulted in inconsistent practices.  Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B.  Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

 2.   As of September 30, 2011, the Company’s control over financial statement disclosure was not effective. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements.   Accordingly, management has determined that this control deficiency constitutes a material weakness.

Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of September 30, 2011, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.

Changes in Internal Controls

 

There was no change in our internal control over financial reporting that occurred during this fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  

 

PART II. OTHER INFORMATION

 Item 1. Legal Proceedings

Christopher Long vs. Jeantex Group, Inc. et al., Case Number 07CC02012

 

On January 22, 2007, Christopher Long, former President and CEO of the Company, filed a claim with the Superior Court of California, County of Orange, Central Justice Center, against the Company and Henry Fahman, Interim President of the Company, for a total of $250,000 and accrued interest at 8% per annum in connection with the promissory note dated March 31, 2005 which was made to Christopher Long as a part of the Rescission Agreement between the Company and Lexor International, Inc. The Company and Christopher Long entered into a Compromise Settlement Agreement and Mutual Release on January 11, 2008 whereby the Company and Christopher Long agreed to allow a stipulation to be entered in favor of Christopher Long in the amount of $250,000 plus interest accruing at a rate of 8% per annum. These amounts have been recorded in the books of the Company.

Item 2. Unregistered Sales of Equity and Use of Proceeds  

None

 

Item 3. Default upon senior Securities

None

 

Item 4. Submission of matters to a vote of security holders

None

 

Item 5. Other information

None

 

Item 6. Exhibits and Reports on Form 8-K

 

(A) Exhibits

       

Index to Exhibits.

 

31.1 Certification of the Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act

of 2002.

31.2 Certification of the Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act

of 2002.

 32.1 Certification of the Principal Executive Officer of the Registrant, pursuant Section 906 of the

Sarbanes-Oxley Act of 2002.

32.2 Certification of the Principal Financial Officer of the Registrant, pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002.

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CATALYST RESOURCE GROUP, INC. Dated: March 19, 2012

Formerly JEANTEX GROUP, INC. By: /s/ Henry Fahman

(Registrant) Henry Fahman, Interim President