Form 10-Q
(Mark One)
x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2012
or
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission file number: 333-161600
MANTHEY REDMOND CORPORATION.
(Exact name of registrant as specified in
its charter)
Delaware
(State or other
jurisdiction of
incorporation or
organization)
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26-4722406
(I.R.S. Employer
Identification No.)
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10940 Wilshire
Boulevard, Suite
1600
Los Angeles CA
(Address of principal
executive offices)
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90024
(Zip Code)
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(310) 443-4116
(Registrant’s telephone number, including
area code)
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
preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes
x
No
¨
Indicate by check mark 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 of Regulation S-T (§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
x
No
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Large accelerated filer
¨
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
x
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(Do not check if a
smaller
reporting
company.)
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Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
¨
No
x
As of November 14, 2012, there were 10,250,000
outstanding shares of the registrant’s common stock, par value $0.0001 per share.
MANTHEY REDMOND CORPORATION.
Quarterly Report on Form 10-Q
for the Quarter Ended September 30, 2012
INDEX
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements (unaudited)
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3
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Consolidated Balance Sheets
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F-1
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Consolidated Statements of Operations
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F-2
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Consolidated Statements of Cash Flows
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F-3
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Notes to Unaudited Consolidated Financial Statements
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F-4
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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4
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
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9
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Item 4. Controls and Procedures
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10
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PART II. OTHER INFORMATION
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Item 1. Legal Proceedings
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10
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Item 1A. Risk Factors
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10
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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10
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Item 3. Defaults Upon Senior Securities
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10
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Item 4. [Removed and Reserved]
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10
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Item 5. Other Information
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11
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Item 6. Exhibits
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11
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SIGNATURES
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11
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EX-31.1
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EX- 31.2
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EX-32.
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PART I. FINANCIAL INFORMATION
Item 1.Financial Statements (Unaudited)
MANTHEY REDMOND CORPORATION
(A Development Stage Company)
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 2012
Unaudited Consolidated Financial Statements:
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Consolidated Balance Sheets
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F-1
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Consolidated Statements of Operations
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F-2
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Consolidated Statements of Cash Flows
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F-3
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Notes to Unaudited Consolidated Financial Statements
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F-4
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MANTHEY REDMOND CORPORATION
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
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September 30,
2012
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December 31,
2011
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(Unaudited)
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(Audited)
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Assets
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Current Assets
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Cash and cash equivalents
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$
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21
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$
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9,734
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Other Assets
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1,050
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1,050
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Total Assets
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$
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1,071
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$
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10,784
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Liabilities and Stockholders' Deficit
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Current Liabilities
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Accrued expense
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$
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512,287
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$
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507,727
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Other payable - related party
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38,950
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38,950
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Total Current Liabilities
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551,237
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546,677
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Stockholders' Deficit
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Preferred stock - $.0001 par value; 20,000,000 shares authorized, 0 shares issued and outstanding
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-
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-
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Common stock - $.0001 par value; 100,000,000 shares authorized, 10,250,000 shares issued and outstanding
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1,025
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1,025
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Additional paid-in capital
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245,758
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208,078
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Accumulated deficit
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(796,949
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)
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(744,996
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)
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Total Stockholders' Deficit
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(550,166
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)
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(535,893
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)
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Total Liabilities and Stockholders' Deficit
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$
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1,071
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$
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10,784
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The accompanying notes are an integral part
of these consolidated financial statements.
MANTHEY REDMOND CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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For The Three
Months Ended
September 30,
2012
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For The Three
Months Ended
September 30,
2011
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For The Nine
Months Ended
September 30,
2012
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For The Nine
Months Ended
September 30,
2011
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From April 20,
2009 (Inception)
through
September 30,
2012
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Net revenue
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$
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-
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$
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-
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$
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$
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$
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-
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Operating expenses
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Professional services
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8,173
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8,129
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27,795
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60,553
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186,755
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Rent expense
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3,181
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3,364
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9,576
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10,089
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41,276
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Advertising and promotion
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-
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-
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7,500
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497
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8,917
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Other
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150
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616
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7,082
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8,312
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20,001
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Research and development expense
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-
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-
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-
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139,000
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540,000
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Total operating expenses
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11,504
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12,109
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51,953
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218,451
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796,949
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Net loss
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$
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(11,504
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$
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(12,109
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$
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(51,953
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)
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$
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(218,451
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)
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$
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(796,949
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Net loss per common share - basic and diluted
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$
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(0.00
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$
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(0.00
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$
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(0.01
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$
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(0.02
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$
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(0.08
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)
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Weighted average number of common shares outstanding, basic and diluted
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10,250,000
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10,250,000
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10,250,000
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10,250,000
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9,911,089
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The accompanying notes are an integral part
of these consolidated financial statements.
MANTHEY REDMOND CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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For The Nine
Months Ended
September 30,
2012
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For The Nine
Months Ended
September 30,
2011
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From April 20,
2009 (Inception) to
September 30,
2012
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net loss
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$
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(51,953
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$
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(218,451
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$
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(796,949
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Adjustments to reconcile net income to net cash provided by operating activities:
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Decrease (increase) in assets:
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Other assets
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-
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-
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(1,050
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)
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Increase (decrease) in liabilities:
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Accrued expense and other liabilities
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4,560
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144,000
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512,287
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Net cash used in operating activities
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(47,393
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(74,451
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(285,712
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CASH FLOWS FROM FINANCING ACTIVITIES
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Borrowings from related party
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-
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-
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38,950
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Proceeds from issuance of common stock
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-
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-
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1,025
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Additonal capital contribution
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37,680
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74,632
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245,758
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Net cash provided by financing activities
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37,680
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74,632
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285,733
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NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS
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(9,713
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)
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181
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21
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CASH & CASH EQUIVALENTS, BEGINNING BALANCE
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9,734
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1,569
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-
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CASH & CASH EQUIVALENTS, ENDING BALANCE
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$
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21
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$
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1,750
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$
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21
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SUPPLEMENTAL DISCLOSURES:
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Interest paid
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$
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-
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$
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-
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$
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-
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Income tax paid
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$
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-
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$
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-
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$
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-
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The accompanying notes are an integral part
of these consolidated financial statements.
MANTHEY REDMOND CORPORATION
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS
Manthey Redmond Corporation (the “Company”)
is a development stage company incorporated in the State of Delaware in April, 2009 to research, design, manufacture, and market
technology now leased and to be developed by the Company. Manthey Redmond (Aust) Pty Ltd., an Australian corporation ("Manthey
Redmond (Aust)"), is the patent owner and developer of the Manthey Redmond Eco-Engine, a fuel-efficient, lightweight, low-emission,
multi-fuel engine smaller and less expensive than conventional internal combustion engines initially targeted for marine applications.
In May, 2009, the Company entered into
a Patent Licensing Agreements with Manthey Redmond (Aust) for the development, manufacture, use, sale, and sublicense of the Manthey
Redmond Eco-Engine and all developed technology and products related to the technology patent (the "Technology") for
a royalty payment to Manthey Redmond (Aust) of 5% of annual gross profits. Pursuant to an Investment Agreement entered into with
the Company in May, 2009, Manthey Redmond (Aust) agreed to fund to the Company monthly payments of $40,000 up to a maximum of $4,200,000
in aggregate to assist the Company in commercializing products based on the Technology. All three of the Company’s directors
serve as the directors of Manthey Redmond (Aust).
On May 17, 2012, the Company entered into
a Technology License Agreement with Manthey Redmond (Aust) Pty Ltd that superseded the Patent Licensing Agreement (entered into
between the parties in April 2009) so as to grant to the Company an exclusive license for intellectual property for the following
territories: United States of America, Canada, Mexico, China and India.
In May, 2009, the Company entered into
a Development Agreement with Manthey Holdings Pty Limited (“Manthey Holdings”) for the exclusive use of Manthey Holdings'
engineering facility and employees for research and development of and related to the Technology at a monthly fee of $30,000 up
to a maximum of $540,000 in aggregate. In November, 2009, the Development Agreement was amended to remove the exclusivity of the
use of Manthey Holdings’ engineering facility and employees, and to defer the commencement date of the agreement and first
payment to November 20, 2009. The Company’s president/director is the sole shareholder and director of Manthey Holdings which
serves as the trustee of the Manthey Holdings Trust. The Company’s president/director is also the beneficiary of the Manthey
Holdings Trust and may be deemed the beneficial owner of the 3,040,000 shares, or 29.6% of the Company’s common stock owned
by the Manthey Holdings Trust. On November 6, 2009, the agreement was amended to revise the commencement date of payment from July
1, 2009 to November 20, 2009. The maximum amount of $540,000 has been reached in the second quarter of 2011 under the development
agreement, $502,227 of which has not been paid. It was recorded as accrued expenses on the consolidated balance sheets as of September
30, 2012 and December 31, 2011.
On June 23, 2011, the Company set up a
wholly owned subsidiary MRC Global Limited in Hong Kong.
NOTE 2 – GOING CONCERN
The Company’s consolidated financial
statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern,
which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company
has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going
concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund
operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease
operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
Management’s Plan to Continue
as a Going Concern
In order to continue as a going concern,
the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for
the Company include (1) obtaining capital from the sale of its securities, (2) the sublicensing and sale of the Manthey Redmond
Eco-Engine, (3) additional capital injection from Manthey Redmond (Aust) pertaining to the Investment Agreement (see Note 4), and
(3) short-term borrowings from shareholders or related party when needed. However, management cannot provide any assurance that
the Company will be successful in accomplishing any of its plans.
MANTHEY REDMOND CORPORATION
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
The ability of the Company to continue
as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and
eventually secure other sources of financing and attain profitable operations.
NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The unaudited consolidated financial statements
of Manthey Redmond Corporation have been prepared in accordance with U.S. generally accepted accounting principles for interim
financial information and pursuant to the requirements for reporting on Form 10-Q. Accordingly, they do not include
all the information and footnotes required by accounting principles generally accepted in the United States of America for annual
consolidated financial statements. However, the information included in these interim consolidated financial statements
reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary
for the fair presentation of the financial position and the results of operations. Results shown for interim periods
are not necessarily indicative of the results to be obtained for a full year. The consolidated balance sheet information
as of December 31, 2011 was derived from the audited consolidated financial statements included in the Company’s Annual Report
on Form 10-K. These interim consolidated financial statements should be read in conjunction with that report. Certain
comparative amounts have been reclassified to conform to the current period's presentation.
Fiscal Year
The fiscal year of the Company is January
1 to December 31.
Cash and Cash Equivalents
Cash and cash equivalents include unrestricted
deposits and short-term investments with an original maturity of three months or less. The Company minimizes its risk
associated with cash and cash equivalents by periodically evaluating the credit quality of its primary financial institution. The
balance at times may exceed federally insured limits. At September 30, 2012, the balance did not exceed the federally
insured limit. As of September 30, 2012 and December 31, 2011, cash and cash equivalents amounted to $21 and $9,734, respectively.
Revenue Recognition
We recognize product revenue when the following
fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) our price to
the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is reasonably assured. We recognize
revenue for product sales upon transfer of title to the customer. Customer purchase orders and/or contracts are generally used
to determine the existence of an arrangement. Shipping documents and the completion of any customer acceptance requirements, when
applicable, are used to verify product delivery or that services have been rendered. We assess whether a price is fixed or determinable
based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. We
will record reductions to revenue for estimated product returns and pricing adjustments in the same period that the related revenue
is recorded. These estimates will be based on historical sales returns when available, analysis of credit memo data, and other
factors known at the time.
Use of Estimates
The preparation of consolidated 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 disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
MANTHEY REDMOND CORPORATION
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
Net Loss per Common Share
Basic net loss per share is calculated
by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss
per share reflects the potential dilution of securities by including common stock equivalents, such as stock options, stock warrants
and convertible preferred stock, in the weighted average number of common shares outstanding for a period, if dilutive. At
September 30, 2012 and December 31, 2011, there were no potentially dilutive securities.
Recently Issued Accounting Pronouncements
The Company has adopted all recently issued
accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not
anticipated to have a material effect on the financial position or results of operations of the Company.
NOTE 4 – RELATED PARTY TRANSACTIONS
Advances from Related Party
On June 3, 2009, the Company received $38,950
of advances from Manthey Redmond (Aust), all directors of which are also directors of the Company. The advances were
non-interest bearing loan to be repaid at the discretion of the Board of Directors of the Company. As of September 30, 2012
and December 31, 2011, advances from related party remained at $38,950.
Patent Licensing Agreement
On May 1, 2009, the Company entered into
a Patent Licensing Agreement with Manthey Redmond (Aust). Manthey Redmond is the owner, developer and patent applicant of the Eco-Engine
and all related technology (the "Technology") developed and to be developed. Pursuant to the agreement, Manthey Redmond
(Aust) has granted to the Company, a license to develop, manufacture, have manufactured, use and sell or supply the Technology
in return for a royalty fee equal to 5% of the Company's gross profits earned as a result of the license agreement. The Company
has the right to sublicense its rights under the agreement and is entitled to information and use of any inventions or improvements
on the Technology made by Manthey Redmond (Aust) without additional charge. Manthey Redmond (Aust) will apply for valid patents
pursuant to each invention or improvements on the Technology. The agreement may be terminated at the option of Manthey Redmond
(Aust) in the event that the Company becomes insolvent, or seeks protection from its creditors under any United States federal
or state bankruptcy act or if an outside administrator or controller is voluntary or involuntarily appointed to control the Company.
The agreement is subject to and governed by the law of Queensland, Australia.
On May 17, 2012, the Company entered into
a Technology License Agreement with Manthey Redmond (Aust) Pty Ltd. that superseded the Patent Licensing Agreement (entered into
between the parties in April 2009) so as to grant to the Company an exclusive license for intellectual property for the following
territories: United States of America, Canada, Mexico, China and India.
Investment Agreement
On May 1, 2009, the Company entered into
an Investment Agreement with Manthey Redmond (Aust) by which Manthey Redmond (Aust) has agreed to invest a non-refundable amount
of $40,000 per month beginning July 1, 2009, aggregating $4,200,000 to assist the Company in commercializing products based on
the Technology. Manthey Redmond (Aust) may terminate this agreement in the event that the Patent Licensing Agreement
is terminated. The agreement is subject to and governed by the law of Queensland, Australia.
MANTHEY REDMOND CORPORATION
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
In November 2009, March 2010, May 2010,
January 2011, March 2011, June 2011, August 2011, September 2011, October 2011, December 2011, February 2012, May 2012, and August
2012, the Company received $39,925, $955, $43,887, $29,596, $19,950, $20,000, $100, $4,986, $33,907, $14,771, $16,669, $17,009,
and $4,003 of capital injection, respectively, or $245,758 in aggregate from Manthey Redmond(Aust) pursuant to the Investment Agreement,
which was recorded as additional paid-in capital.
Development Agreement
On May 1, 2009 the Company entered into
a Development Agreement with Manthey Holdings by which, commencing July 1, 2009, Manthey Holdings will provide exclusive use of
its engineering facility and employees for the purpose of research and development related to the Technology for which the Company
will pay Manthey Holdings $30,000 per month beginning July 1, 2009 up to a maximum of $540,000 at which time the agreement shall
terminate. On November 6, 2009 the Company entered into an amended Development Agreement dated May 1, 2009 with Manthey Holdings. The
amended agreement removed the exclusivity of the use of Manthey Holdings’ engineering facility and employees, and deferred
the commencement date of the agreement and first payment to November 20, 2009. Our president/director is the sole shareholder
and director of Manthey Holdings which serves as the trustee of the Manthey Holdings Trust. Our president/director is
also the beneficiary of the Manthey Holdings Trust and may be deemed the beneficial owner of the 3,040,000 shares, or 29.6% of
the Company’s common stock owned by the Manthey Holdings Trust.
On November 6, 2009, the agreement was
amended to revise the commencement date of payment from July 1, 2009 to November 20, 2009. For the three and nine months ended
September 30, 2012, the Company incurred $0 of service fees pursuant to the amended agreement with Manthey Holdings and recorded
in accrued expense. As of September 30, 2011, the maximum amount of $540,000 has been reached under the development agreement,
$502,227 of which has not been paid. It was recorded as accrued expenses on the consolidated balance sheet as of September
30, 2012 and December 31, 2011, respectively.
The agreement will also terminate in the
event that the Patent Licensing Agreement is terminated. Manthey Holdings has agreed to build and test prototypes based on the
Technology at its research facility. The agreement is subject to and governed by the law of Queensland, Australia.
NOTE 5 - ACCRUED EXPENSES
Accrued expenses consisted of the following:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Accrued research and development expense – related party
|
|
$
|
502,227
|
|
|
$
|
502,227
|
|
Accrued professional fees
|
|
|
9,000
|
|
|
|
5,500
|
|
Accrued rent
|
|
|
1,060
|
|
|
|
-
|
|
Total
|
|
$
|
512,287
|
|
|
$
|
507,727
|
|
MANTHEY REDMOND CORPORATION
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 6 – STOCKHOLDERS’ DEFICIT
The Company is authorized to issue 100,000,000
shares of common stock with a par value of $.0001 and 20,000,000 shares of preferred stock with a par value of $.0001. On
June 1, 2009, the Company issued 10,250,000 shares of common stock at par value to its sixty-six (66) initial stockholders.
Holders of shares of common stock are entitled
to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative
voting rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time
to time by the board of directors in its discretion from funds legally available therefore. In the event of a liquidation,
dissolution or winding up, the holders of common stock are entitled to share pro rata all assets remaining after payment in full
of all liabilities. Holders of common stock have no preemptive rights to purchase the Company’s common stock. There
are no conversion or redemption rights or sinking fund provisions with respect to the common stock.
In November 2009, March 2010, May
2010, January 2011, March 2011, June 2011, August 2011, September 2011, October 2011, December 2011, February 2012, May 2012, and
August 2012, the Company received $39,925, $955, $43,887, $29,596, $19,950, $20,000, $100, $4,986, $33,907, $14,771, $16,669, and
$17,009, and $4,003 of capital injection, respectively, or $245,758 in aggregate from Manthey Redmond(Aust) pursuant to the Investment
Agreement(See Note 4), which was recorded as additional paid-in capital.
NOTE 7 – OPERATING LEASES
On July 10, 2009, the Company entered into
a lease agreement with Premier Business Centers, under which the Company will lease approximately 165 square feet of office space
located at 10940 Wilshire Boulevard, Suite 1600, Los Angeles, California 90024 at a monthly rate of $1,050. The lease
term is month-to-month commencing August 3, 2009 with security deposit of one-month rent of $1,050 recorded as Other Assets as
of September 30, 2012 and December 31, 2011.
NOTE 8 – SUBSEQUENT EVENTS
The Company has evaluated events subsequent
to the consolidated balance sheet date of September 30, 2012 through the date of this filing, which is the date the unaudited consolidated
financial statements were available to be issued.
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q, including
"Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of Part I of this report
include forward-looking statements. These forward looking statements are based on our management’s current expectations and
beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. In
some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts," "potential,"
"proposed," "intended," or "continue" or the negative of these terms or other comparable terminology.
You should read statements that contain these words carefully, because they discuss our expectations about our future operating
results or our future financial condition or state other "forward-looking" information. Many factors could cause our
actual results to differ materially from those projected in these forward-looking statements, including but not limited to: variability
of our revenues and financial performance; risks associated with product development and technological changes; the acceptance
our products in the marketplace by existing and potential future customers; general economic conditions. You should be aware that
the occurrence of any of the events described in this Quarterly Report could substantially harm our business, results of operations
and financial condition, and that upon the occurrence of any of these events, the trading price of our securities could decline.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future
results, growth rates, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking
statements after the date of this Quarterly Report to conform these statements to actual results.
Current Operations
The Company was formed on April 20, 2009
and is a development stage company with no operating revenues or profits. The Company has developed prototypes of the
Manthey Redmond Eco-Engine which will be tested for performance validation by government agencies, potential joint venture partners
and academic institutions. After validation of the tests, the Company will market the Eco-Engine to manufacturers in
the United States and overseas.
Expenses and Capital Expenditures
Other than the development agreement for
use of the testing facilities at Manthey Holdings, the Company has not incurred any large expenses nor made or planned any large
capital expenditures.
Report on Development of Technology
The Company intends to continue research
and development of the Manthey Redmond Eco-Engine during 2012. The Company is currently testing the latest prototype
of the Eco-engine with field testing having commenced in mid. 2012. The Company is not incurring research and development
cost for the three months ended September 30, 2012 as the facility was funded directly by the licensor.
Development of the company’s licensed
Technology is conducted in a competitive business environment as new technology related to internal combustion engines attempting
to make engines more fuel efficient and more economical appear on the market frequently. The successful marketing of
the Technology will depend on the ability of the Company to demonstrate sustainable advantages over existing proven and other newly
developed technology. Specifically, the licensed Technology must prove successful in field testing and match dynamometer performances
that earlier prototypes of the Technology realized during laboratory testing.
Since the original 2009 prototype completed
proof-of-concept status, subsequent prototypes (through ongoing advancements to various internal components) have yielded greater
torque - output whilst maintaining the same cylinder displacement during dynamometer testing. In mid 2012 this ongoing refinement
of the licensed Technology progressed to marine field testing. This development milestone was delayed until a marine vessel was
properly adapted for prototype testing - a task undertaken by the Manthey Holdings’ development facility (the facility) in
2011 and completed by mid 2012.
Once initial marine field testing commenced
in mid 2012 it continued for approximately six (6) weeks so as to evaluate the performance of the engine in various conditions
and under various loads in a marine environment. Considerable data was collated during this period of evaluation by the facility’s
development team. Analysis by the facility’s development team (and particularly the inventor Steven Manthey) of the data
highlighted that greater performance could be realized through the improved design
of certain engine components. In particular
the data highlighted that greater thermal efficiency was available for this latest prototype through improvements to air/fuel flow
into the engine and also by raising the prototype’s in-cylinder compression ratio. Such enhancements, if successful, can
translate into a more fuel efficient engine and further support the marketing of the licensed Technology and its performance when
compared to our competitors’ current and future products.
The facility has elected to test the prototype
(incorporating the new components) in the marine field testing vessel instead of on its laboratory’s dynamometer in the first
instance. Ultimately the current prototype will also be tested on the facility’s dynamometer as it will enable additional
data to be collated (particularly data related to emissions) to both further evaluate the performance of this prototype and identify
possible enhancements whilst also providing data for future marketing purposes.
As part of the ongoing commercialization
strategy of the licensed Technology, a revised provisional patent was filed by the Licensor in August 2012 and now forms part of
the licensed Technology to the Company. This revised provisional patent incorporates the enhancements referred to above.
Future Research and Development
The current prototype is spark-ignited
and is expected to have reached a suitable stage for marketing purposes to commence once the prototype has been evaluated on the
Australia facility’s dynamometer as discussed above. Marketing of this engine will focus on the small to mid range powered
engines in various applications. Future research planned for the Facility will target much larger applications such as heavy duty
trucks and industrial power supply. This research will center on the development of compression-ignition prototypes of the licensed
Technology.”
Results of Operations
Comparison of the results of operations for the Three Months
ended September 30, 2012 and 2011:
|
|
For The Three
Months Ended
September 30,
2012
|
|
|
For The Three
Months Ended
September 30,
2011
|
|
|
Change in $
|
|
|
Change in %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional services
|
|
|
8,173
|
|
|
|
8,129
|
|
|
|
44
|
|
|
|
1
|
%
|
Rent expense
|
|
|
3,181
|
|
|
|
3,364
|
|
|
|
(183
|
)
|
|
|
-5
|
%
|
Other
|
|
|
150
|
|
|
|
616
|
|
|
|
(466
|
)
|
|
|
-76
|
%
|
Total operating expenses
|
|
|
11,504
|
|
|
|
12,109
|
|
|
|
(605
|
)
|
|
|
-5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(11,504
|
)
|
|
$
|
(12,109
|
)
|
|
$
|
605
|
|
|
|
-5
|
%
|
The Company was incorporated in April 2009
to primarily engage business in the development and commercialization of the Manthey Redmond Eco-Engine and related Technologies. For
the three months ended September 30, 2012 and 2011, the Company had not generated any revenue.
The Company incurred $11,504 operating
expenses for the three months ended September 30, 2012 compared to $12,109 operating expenses incurred for the three months ended
September 30, 2011. The total operating expenses for the three months ended September 30, 2012 primarily consisted
of professional services of $8,173 and rent expense of $3,181. The operating expenses for the three months ended September
30, 2012 remained substantially steady as compared to the same period last year.
Comparison of the results of operations
for the Nine Months ended September 30, 2012 and 2011:
|
|
For The Nine
Months Ended
September 30,
2012
|
|
|
For The Nine
Months Ended
September 30,
2011
|
|
|
Change in $
|
|
|
Change in %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional services
|
|
|
27,795
|
|
|
|
60,553
|
|
|
|
(32,758
|
)
|
|
|
-54
|
%
|
Rent expense
|
|
|
9,576
|
|
|
|
10,089
|
|
|
|
(513
|
)
|
|
|
-5
|
%
|
Advertising and promotion
|
|
|
7,500
|
|
|
|
497
|
|
|
|
7,003
|
|
|
|
1409
|
%
|
Other
|
|
|
7,082
|
|
|
|
8,312
|
|
|
|
(1,230
|
)
|
|
|
-15
|
%
|
Research and development expense
|
|
|
-
|
|
|
|
139,000
|
|
|
|
(139,000
|
)
|
|
|
-100
|
%
|
Total operating expenses
|
|
|
51,953
|
|
|
|
218,451
|
|
|
|
(166,498
|
)
|
|
|
-76
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(51,953
|
)
|
|
$
|
(218,451
|
)
|
|
$
|
166,498
|
|
|
|
-76
|
%
|
The Company was incorporated in April 2009
to primarily engage business in the development and commercialization of the Manthey Redmond Eco-Engine and related Technologies. For
the nine months ended September 30, 2012 and 2011, the Company had not generated any revenue.
The Company
is not incurring research and development cost for the nine months ended September 30, 2012 as the facilities was funded directly
by the licensor. The Company incurred $51,953 operating expenses for the nine months ended September 30, 2012
compared to $218,451 operating expenses incurred for the nine months ended September 30, 2011,
representing
a decrease of $166,498, or approximately 76%.
The total operating expenses for the nine
months ended September 30, 2012 primarily consisted of professional services of $27,795, rent expense of $9,576, and advertising
and promotion expense of $7,500. Professional services expense has decreased by $32,758, or 54% from $60,553 for the
nine months ended September 30, 2011 to $27,795 for the same period this year. The decrease in professional services expense for
the nine months ended Sep 30, 2012 was mainly because some expenses incurred in 2011 was subject to one-time charge, including
the agent's fee of $3,900 to set up a subsidiary in Hong Kong in 2011, the Company’s intranet security installation fee of
$5,400, and a consulting fee of $11,000 for the Company’s S-1 filing. The research and development expenses of $139,000 for
the nine months ended September 30, 2011 were incurred pursuant to the amended Development Agreement with Manthey Holdings on November
6, 2009, which revises the commencement date of development service fee payment from July 1, 2009 to November 20, 2009. As
of September 30, 2011, the maximum amount of $540,000 has been reached under the development agreement, $502,227 of which has not
been paid. It was recorded as accrued expenses on the consolidated balance sheet as of September 30, 2012,
and December 31, 2011, respectively. As a result, no research and development expense was recorded during the nine months
ended September 30, 2012.
Liquidity and Capital Resources
The following summarizes and compares the
key component of the company’s cash flows for the nine months ended September 30, 2012 and the nine months ended September
30, 2011.
|
|
2012
|
|
|
2011
|
|
Net cash used in operating activities
|
|
$
|
(47,393
|
)
|
|
$
|
(74,451
|
)
|
Net cash used in investing activities
|
|
$
|
-
|
|
|
$
|
-
|
|
Net cash provided by financing activities
|
|
$
|
37,680
|
|
|
$
|
74,632
|
|
Net (decrease)increase in cash and cash equivalents
|
|
$
|
(9,713
|
)
|
|
$
|
181
|
|
Net cash used in operating activities was
$47,393 and $74,451 for the nine months ended September 30, 2012 and 2011, respectively, which were mainly driven by net losses
in the amount of $51,953 and $218,451, partially offset by increases in accrued expense and other liabilities in the amount of
$4,560 and $144,000, respectively. Increases in accrued expense and other liabilities for the nine months ended September
30, 2012 and 2011 were primarily to record unpaid professional service fees and research and development expenses to Manthey Holdings
Pty Ltd pursuant to the Development Agreement, respectively.
Net cash provided by financing activities
was $37,680 and $74,632 for the nine months ended September 30, 2012 and 2011, respectively. During its initial organization,
the Company received $38,950 in advances from Manthey Redmond (Aust) not pursuant to the Investment Agreement, and is a loan, interest
free, which must be repaid. No formal loan terms were established, but the Company intends to repay the loan once in
a position to do so. In February 2012, May 2012, and August 2012, and in January 2011, March 2011, June 2011, August
2011, and September 2011, the Company received $16,669, $17,008, and $4,003 and $29,596, $19,950, $20,000, $100, and $4,986 of
capital injection, respectively from Manthey Redmond (Aust) pursuant to the Investment Agreement, which was recorded as additional
paid-in capital.
The Company’s consolidated financial
statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern,
which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The
Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue
as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining
adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital,
it could be forced to cease operations. The accompanying consolidated financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.
Management’s Plan to Continue as
a Going Concern
In order to continue as a going concern,
the Company will need, among other things, additional capital resources. Management’s plans to obtain such
resources for the Company include (1) obtaining capital from the sale of its securities, (2) the sublicensing and sale of the Manthey
Redmond Eco-Engine, (3) additional capital injection from Manthey Redmond (Aust) pertaining to the Investment Agreement, and (3)
short-term borrowings from shareholders or related party when needed. However, management cannot provide any assurance
that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue
as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and
eventually secure other sources of financing and attain profitable operations.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Inflation
We do not believe our business and operations
have been materially affected by inflation.
Critical Accounting Policies and Estimates
Our critical accounting policies are as
follows:
Revenue Recognition
We recognize product revenue when the following
fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) our price to
the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is reasonably assured. We recognize
revenue for product sales upon transfer of title to the customer. Customer purchase orders and/or contracts are generally used
to determine the existence of an arrangement. Shipping documents and the completion of any customer acceptance requirements, when
applicable, are used to verify product delivery or that services have been rendered. We assess whether a price is fixed or determinable
based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. We
will record reductions to revenue for estimated product returns and pricing adjustments in the same period that the related revenue
is recorded. These estimates will be based on historical sales returns when available, analysis of credit memo data, and other
factors known at the time.
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 disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Recently Issued Accounting Pronouncements
The Company has adopted all recently issued
accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not
anticipated to have a material effect on the financial position or results of operations of the Company.
Item 3. Quantitative and Qualitative
Disclosures About Market Risk.
As a “smaller reporting company”,
we are not required to provide the information under this Item 3.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under
the supervision and with the participation of our management, including our principal executive officer and principal financial
officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures,
as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this
report (the “Evaluation Date”).
The framework used by management in making that
assessment was the criteria set forth in the document entitled “ Internal Control – Integrated Framework” issued
by the Committee of Sponsoring Organizations of the Treadway Commission.
Based
upon the evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date that our
disclosure controls and procedures were effective. Disclosure controls are controls and procedures designed to reasonably ensure
that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls include controls
and procedures designed to reasonably ensure that such information is accumulated and communicated to our management, including
our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls Over Financial
Reporting
There were no changes in our internal controls
over financial reporting that occurred during the quarterly period covered by this report that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
Not applicable
Item 2 Unregistered Sales of
Equity Securities and use of proceeds
None
Item 3 Defaults upon senior
securities
None
Item 4. [removed and reserved]
Item 5. Other Information
None
Item 6. Exhibits
(a) Exhibits
Exhibit
Number
|
|
Description
|
31.1*
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
31.2*
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32*
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith.
|
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
|
MANTHEY REDMOND CORPORATION.
|
|
(Registrant)
|
|
|
|
Date: November 14, 2012
|
By:
|
/s/ Steven Charles Manthey
|
|
|
Steven Charles Manthey
|
|
|
Director, President and
|
|
|
Chief Executive Officer
|
Manthey Redmond (CE) (USOTC:MHYR)
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