The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
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a Technology License Agreement with Manthey Redmond (Aust) Pty Ltd that superseded the Patent Licensing Agreement (entered into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.