CFRI Conforce International Inc (GM)

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On May 18, 2004 “Now Marketing Corp.” was duly formed through the filing of its Certificate of Incorporation with the Delaware Secretary of State by Chairman and Director, Marino Kulas. As was the case with FNPCS, Now Marketing Corp was also originally established for the venture involving payment systems for cruise ships.

As of May 24, 2005 and upon execution of the Acquisition Agreement and Plan of Merger in connection with Conforce 1 and CCC, Marino Kulas, President and Chief Executive Officer was the founder and sole owner of Now Marketing Corp. and was the founder and majority shareholder of CCC, which is the company responsible for the development of EKO-FLOR. Mr. Kulas was also the founder and sole owner of Conforce 1 Container Terminals, Inc., which is the company responsible for the Company’s container terminal operations.

 

As of the date of this filing, the common stock of Conforce is listed on the Pink Sheets Electronic OTC Market under the trading symbol “CFRI.”
 

PRINCIPAL PRODUCTS

Conforce is comprised of two separate and distinct operating divisions:

 

EKO-FLOR cs-4 was designed throughout 2008 as a result of evaluations and suggestions by container industry participants. The product contains a new anti-slip top coat surface jointly developed by Conforce and Bayer MaterialScience AG . The product meets specified requirements in terms of the weight and forces exerted on the product before failure occurs (“load bearing” or “load bearing properties”). The product was tested by the American Bureau of Shipping using standardized testing procedures for shipping containers. The primary test involved exerting pressure on the floor by rolling a test cart with a weight of 7,260kgs on two 7” wide solid rubber tires. The second major test involved lifting the container 6 - 12” off the ground while carrying 60,960kgs of cargo (two times its maximum capacity of 30,480kgs per twenty foot container).  EKO-FLOR cs-4 will replace xcs and cs-2 and is the version of the product that will be tested by customers in ocean-going trials.

 

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Container Terminal Division

The principal challenges related to the terminal business are customer retention in a competitive environment and decreasing container traffic as a result of the global economic downturn which has adversely affected storage and transportation services required by international shipping lines. The Company is currently estimating that revenues in the terminal operations division will decrease by approximately 30% in 2009.

EKO-FLOR Division

One of the principal challenges faced by EKO-FLOR is that the buyers must pay an upfront premium. This hurdle was significant when the product was first introduced to the industry in 2006; however, the product price has since decreased while awareness of the competitive strengths of the product has increased.  As a result, product for ocean-going trials has been ordered.

Another challenge the Company will face will be the establishment of a manufacturing facility in China. To do so, the Company will need to rely on strategic partnerships with entities having expertise as it relates to business and production practices in China.

 

It is also important to note that although damage to EKO-FLOR panels is unlikely, certain repairs may be required, as would be the case with wood floors, if the following events were to occur: the container experiences major cargo shifting causing extreme localized contact with the floor; mishandling of the container by crane operators may cause the frame to bend potentially resulting in lifted or cracked panels; and if the container is placed on the ground and lands on a protruding object this may cause either cracked or loosened panels.

 

While Conforce has a well established core business with regard to its container storage terminal, it does not contemplate much, if any, growth in terminal revenues.  However, the Company’s EKO-FLOR container flooring system, which is in the development stage, continues to exhibit significant growth potential, e.g. oceangoing trials planned by international shipping lines.  The Company’s success depends to a significant extent on the performance of a number of senior management personnel and other key employees, including production and research and development personnel.  The success of Conforce continues to depend to a significant extent on its ability to identify, attract, hire, train and retain qualified professional, technical, production and managerial personnel.

 

In May of 2008 Conforce received a Letter of Intent (LOI) from a U.S. based Military contractor, Sea Box, Inc., for the purchase of the Company’s newly developed composite product, EKO-FLOR ms-1, designed exclusively for use as load bearing shelving in special application United States Military shipping containers.  The LOI contemplates a renewable multi-year contract whereby Conforce will provide product for a minimum of 10,000 special application containers. In December 2008, the company received its first order in connection with the LOI for EKO-FLOR ms-1 from its US military contractor, Sea Box, Inc. to provide the product for over 5,000 special application military containers.

 

The Company has received trial orders for its EKO-FLOR cs-4 composite container flooring system from various shipping lines and leasing companies. Currently, shipping lines will purchase approximately 60 – 65% of their fleets annually while the balance will be leased. Therefore, leasing companies represent on average approximately 40% of the annual purchases of new build containers. The trials will consist of placing EKO-FLOR equipped containers loaded with various types of cargo, to be determined at the discretion of the shipping lines, and to have such loaded containers placed on ocean-going vessels to be transported on routes also to be determined at the sole discretion of the shipping lines. The success of the trials is adjudged not only by the securing of purchase orders but also by what is gained or learned from the feedback provided by the shipping lines.  The evaluation criteria applied by the shipping lines is subjective and unknown by Conforce.  Accordingly, test participants may elect to not purchase EKO-FLOR for a variety of subjective reasons, which may or may not be unrelated to the product’s performance.  The trial orders are not firm commitments to purchase on-going product and do not guarantee generating revenue beyond the revenue generated by the trial orders themselves.

 

The Company intends to develop flooring for the Cruise Line industry and has had preliminary discussions with Carnival Cruise Lines. The Company expects to produce a prototype panel for use as a replacement to teak wood currently used on cruise ships. The Company does not expect to provide product if at all, to Carnival until March of 2011. Total cost of entry into the decking market for cruise lines is unknown at this time, however, the Company intends to use net proceeds from the sale of EKO-FLOR cs-4 and ms-1 for the development of the product.

Shipping rates are also expected to decrease, which could put additional pressure on shipping lines as revenues and earnings decrease. According to Drewry Supply Chain Advisors division director Philip Damas, “Demand is no longer sufficient to absorb new vessel capacity. As a result of anemic growth and over-capacity, container freight rates have fallen on several key routes, with the notable exception of the transpacific, where carriers have withdrawn substantial capacity. Shippers should expect container rates to decline by about 15 percent during the current down-cycle, although any reductions will also depend on the level of fuel surcharges.”

According to a report published on December 8, 2008 by Deutsche Bank Research, the long-term prospects for container shipping are favourable. The report states that “Despite the current economic slowdown, container shipping is expected to continue to be a growth sector (+7 to 8% p.a. until 2015).” The report states that while it expects significant problems for shipping companies in the short-term as a result of over-capacities and declining freight and charter rates, the medium and long-term prospects remain intact. The report concludes although “the crisis is severe, there is no reason [for the industry] to panic.”

 

 

 

On April 9, 2009, Conforce International, Inc.’s registration statement was automatically declared effective and Conforce International, Inc. is now subject to the requirements of Regulation 13A under the Exchange Act, which will require the Company to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and it will be required to comply with all other obligations of the Exchange Act applicable to issuers filing registration statements pursuant to Section 12(g). The public may read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0030. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxies and information statements and other information regarding issuers that file electronically with the SEC.

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Safe Harbor Act Disclaimer for Forward-Looking Statements

Forward-looking statements in this Form 10 under Management’s Discussion and Analysis of Financial Condition and results of Operations are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Certain statements in this document may contain words such as “anticipates”, “believes”, “could”, “estimates”, "expects", "intends", “may”, “projects”, “plans”, “targets” and other similar language and are considered forward-looking statements. These statements are based on management’s current expectations, estimates, forecasts and projections about the success of its container terminal operations, its newly developed container and trailer flooring products, as well as certain other composite based flooring products in various stages of development. These forward-looking statements are subject to important assumptions, risks and uncertainties which are difficult to predict and therefore the actual results may be materially different from those discussed.

OVERVIEW

 

 

EKO-FLOR xts:   Beginning in the second quarter of calendar 2009, the Company intends to introduce EKO-FLOR xts to the North American highway trailer industry. The Company will offer a modified variation of its cs-4 container panel in order to commence actual road testing by industry participants. The Company expects to have the modified cs-4 panels placed into highway trailers for road testing in or around July 2009.

 

The Company intends to apply for listing on the OTC Bulletin Board at such time as it's Forms 10 and 211 have been approved by the appropriate regulatory agencies, however, there is no guarantee that the Company’s application for listing will be accepted.

The Company had gross profit of $1,071,845 for the year ended March 31, 2008, compared to gross profit of $673,279 for the year ended March 31, 2007, an increase in gross profit of $398,566 or 37.18% over the prior period. The increase was due primarily to the increase in volume.

 

The Company had administrative expenses of $964,449 for the year ended March 31, 2008, compared to administrative expenses of $870,811 for the year ended March 31, 2007, an increase in administrative expenses of $93,638 or 9.7% from the prior period.  The increase in administrative expenses was due to primarily to an increase salaries and wages as a result of the increase in terminal traffic necessitating the need for additional employees and increased hours of operation.

The Company’s research and development costs include the creation of architectural drawings as they relate to panel specifications, the creation of dies, the manufacturing of test panels, the creation of specific panel testing equipment, costs relating to independent certification testing, consulting costs associated with utilizing process experts and engineers and costs associated with the setup of the research and production center. The Company anticipates that research and development costs will increase in fiscal 2009 as a result of final preparations for the production of trial product, as well as costs associated with the development of the highway trailer product.

The Company had income from operations of $99,111 for the year ended March 31, 2008, compared to a loss from operations of ($198,090) for the year ended March 31, 2007.  The increase in profits was primarily due to the increase in sales and a reduction in spending for the Flooring Systems’ Research and development expenses by $42,706.

The Company reported a net loss of ($54,854) for the year ending March 31, 2008 compared to a net loss of ($225,062) for the year ending March 31, 2007.

PERIOD ENDED DECEMBER 31, 2008 COMPARED TO THE PERIOD ENDED DECEMBER 31, 2007

The Company had sales of $1,575,118 for the nine month period ended December 31, 2008, compared to sales of $1,586,689 for the nine month period ended December 31, 2007, a decrease in sales from the prior period of $11,571 or 0.007%. 

The Company had a loss from operations of ($22,692) for the nine month period ended December 31, 2008, compared to a loss from operations of ($96,522) for the nine month period ended December 31, 2007.  

The net loss for the year was ($54,598) for the nine month period ended December 31, 2008 compared to net loss of ($110,385) for the nine month period ended December 31, 2007.

 

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The Company does not have any agreements to fund the operations for the next 12 months, although it is attempting to secure funds  by way of non-interest bearing, non-callable (for 10 years) loans from certain minority founding shareholders. Such shareholders will attempt to access funds for the aforementioned loans through private transactions with accredited investors involving the sale of a portion of their holdings of Conforce common stock. Proceeds from the sale will be loaned to Conforce, in whole or in part, net of applicable taxes and fees if applicable, at the sole discretion of such minority founding shareholders.

 

LIABILITIES

The Company had Accounts payable of $147,120 at December 31, 2008 compared to March 31, 2008, an increase of $80,798.  Such increase is attributable to a decrease in the Company’s working capital primarily as the result of Fixed Asset purchases and the continued funding of EKO-FLOR product development.

The Company had Accrued liabilities of $5,088 at December 31, 2008 compared to $24,949 at March 31, 2008, a decrease of $15,157.  The decrease is due primarily to a decrease in the tax accrual.  

The Company had Accrued wages of $7,101 at December 31, 2008 compared to $24,055 at March 31, 2008, a decrease of $16,954.  The decrease is primarily due to a decrease in the accrual for personal time. 

The Company had Shareholder’s loans of $450,114 at December 31, 2008 compared to $324,850 at March 31, 2008.  The Shareholder loans are interest free with no fixed terms of repayment.  There was an increase of $324,850 at March 31, 2008, in borrowing during the nine month period ending December 31, 2008.  The increase was needed to fund the working capital requirements and the continued funding of the EKO-FLOR product development.

The Company’s headquarters are located at 51A Caldari Road, 2nd Floor, Concord, Ontario L4K 4G3, Canada.  The annual lease cost of these premises is $51,017. The Company has a container terminal located at 584 Hazelhurst Road, Mississauga, Ontario, Canada. The annual lease cost of these premises is $195,300. The Company has a 13,400 sq.ft production and development centre located at 111 Romina Drive in Concord, Ontario. The annual lease cost of these premises is $159,600.

 

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Conforce International, Inc.
Statements of Income
For the Years Ending March 31, 2008 and 2007
RESTATED
		2008				2007
REVENUES
Revenues		$	2,364,945			$	1,567,187
DIRECT COST OF REVENUES
Equipment rental			69,530				81,502
Fuel			76,166				69,218
Repairs & maintenance			41,125				13,407
Transportation			847,916				511,977
Rent			228,049				133,207
Subcontractors			30,314				84,597
			1,293,100				893,908
GROSS PROFIT			1,071,845				673,279
EXPENSES
Administrative			725,891				597,713
Flooring System expenses;
Research & development			209,437				252,143
Depreciation			30,121				20,955
			965,449				870,811
OTHER INCOME AND EXPENSE
(Gain)/loss on currency conversion			7,285				558
INCOME FROM OPERATIONS			99,111				(198,090	)
TAX PROVISIONS			-				-
NET INCOME/(LOSS) BEFORE MINORITY
INTEREST			99,111				(198,090	)
LESS MINORITY INTEREST IN
CONSOLIDATED SUBSIDIARIES			(153,965	)			(26,972	)
NET INCOME		$	(54,854	)		$	(225,062	)
NET LOSS PER SHARE
Average shares outstanding			120,001,000				120,001,000
Loss per share		$	(0.00	)		$	(0.00	)
See accompanying notes to financial statements.

Conforce International, Inc.
Statement of Shareholders' Equity
For the Years Ending March 31, 2008 and 2007
RESTATED																										Additional
		Preferred Stock								Common Stock								Treasury Stock								Contributed				Retained
		Shares				Amount				Shares				Amount				Shares				Amount				Capital				Earnings				Total
Balances April 1, 2006			-			$	-				120,001,000			$	9,157				-			$	-			$	-			$	99,985				109,142
Stock contributed for
employment agreement			-				-				-				-				50,000				27,300				-				-				27,300
Stock issued for
employment agreement			-				-				-				-				(50,000	)			(27,300	)			27,300				-				-
Net loss for the period			-				-				-				-				-				-				-				(225,062	)			(225,062	)
Balances at March 31, 2007			-				-				120,001,000				9,157				-				-				27,300				(125,077	)			(88,620	)
Stock contributed for
employment agreement			-				-				-				-				200,000				62,600				-				-				62,600
Stock issued for
employment agreement			-				-				-				-				(200,000	)			(62,600	)			62,600				-				-
Net Income for the year			-				-				-				-				-				-				-				(54,854	)			(54,854	)
Balances at March 31, 2008			-			$	-				120,001,000			$	9,157				-			$	-			$	89,900			$	(179,931	)		$	(80,874	)
See accompanying notes to financial statements.

Conforce International, Inc.
Statements of Cash Flows
For the Years Ending March 31, 2008 and 2007
RESTATED
		2008				2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income/(loss) for the period		$	(54,854	)		$	(225,062	)
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Minority interest in consolidated subsidiary			153,965				26,972
Depreciation			30,121				20,955
Compensation paid by stock			62,600				27,300
Changes in Current assets and liabilities:
(Increase) decrease in Accounts receivable			(264,340	)			80,899
(Increase) decrease in Other receivables			(851	)			4,752
(Decrease) Increase in Accounts payable			24,828				(21,924	)
(Decrease) Increase in Accrued liabilities			3,818				3,457
(Decrease) Increase in Accrued wages			7,179				2,464
NET CASH (USED) BY
OPERATING ACTIVITIES			(37,534	)			(80,187	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Fixed assets			(39,972	)			(17,574	)
Purchase of Deposits			-				(4,813	)
NET CASH (USED) BY
INVESTING ACTIVITIES			(39,972	)			(22,387	)
CASH FLOWS FROM FINANCING ACTIVITIES
NET CASH PROVIDED BY
FINANCING ACTIVITIES			-				-
EFFECT OF EXCHANGE RATE ON CASH			37,475				2,888
NET INCREASE IN CASH			(40,031	)			(99,686	)
CASH AT BEGINNING OF PERIOD			74,832				174,521
CASH AT END OF PERIOD		$	34,801			$	74,835
See accompanying notes to financial statements.

Conforce International, Inc.

NOTES TO FINANCIAL STATEMENTS

March 31, 2008 and 2007

History

The Company was incorporated on May 18, 2004 in the state of Delaware as Now Marketing Corp.

On May 24, 2005, the Company acquired Conforce Container Corporation in exchange for 120,000,000 shares of the Company’s Common Stock, making Conforce Container Corporation a wholly owned subsidiary.  Immediately prior to the acquisition, the Company had 1,000 shares of common stock issued and outstanding.  The acquisition was accounted for as a recapitalization of Conforce Container Corporation, as the shareholders of Conforce Container Corporation controlled the Company after the acquisition was completed.  Conforce Container Corporation was treated as the acquiring entity for accounting purposes.  There were no adjustments to the carrying value of the assets or liabilities of acquired company or to the assets and liabilities of the acquiring company.  On May 20, 2005 Conforce Container Corporation was renamed from First National Preferred Card Service, Inc., which was incorporated under the laws of Ontario on February 9, 2001.  Conforce Container Corporation’s Balance Sheet on the date of acquisition was as follows;

 

The Company was renamed from Now Marketing Corp to Conforce International, Inc. at this time.

On May 24, 2005, the Company acquired 50.1% of Conforce 1 Container Terminals, Inc., for $100.  Conforce 1 Container Terminals, Inc. was incorporated under the laws of Ontario on November 12, 2003.  The combination was accounted for as a reverse acquisition as the shareholders of Conforce 1 Container Terminals, Inc. controlled the Company after the acquisition was completed.  Conforce 1 Container Terminals, Inc. was treated as the acquiring entity for accounting purposes.  There were no adjustments to the carrying value of the assets or liabilities of acquired company or to the assets and liabilities of the acquiring company.

The Company’s 50.1% subsidiary, Conforce 1 Container Terminals, Inc., provides handling, storage and transport of overseas shipping containers for international steamship lines, as well as domestic retailers.  All revenues for the two fiscal years reported here were generated by the operations of Conforce 1 Container Terminals, Inc.  Conforce Container Corporation has embarked on the development of a new container flooring system, EKO-FLOR   which has been designed to provide an environmentally friendly product to increase container versatility while reducing shipping costs.

Financial Statement Presentation

The accompanying statements have been prepared form the books and records of the Company and its subsidiaries.  All significant intercompany accounts have been eliminated.  The Company’s 50.1% subsidiary enjoys an October 31, yearend for tax purposes.  The books and records included herein have been adjusted for the twelve month period ending March 31, 2008 and 2007 respectively.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents.  There was no cash paid during the periods for interest or taxes.

Property and Equipment

Property and equipment are carried at cost.  Maintenance, repairs and renewals are expensed as incurred.  Depreciation of property and equipment is provided for over their estimated useful lives, which range from three and five years, using the declining balance method.  Leasehold improvements are amortized over the life of the lease.  Depreciation expense was $30,314 and $20,955 for the years ending March 31, 2008 and 2007 respectively.

Use of Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.

NOTE 2 – INCOME TAXES

The Company accounts for income taxes under Generally Accepted Accounting Principles used in the United States of America, which requires the Company to recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns.  Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax basis of the assets and liabilities using enacted tax rates.  The Company has no significant differences between book and tax accounting.   The operating loss carry forward from the year ending March 31, 2007 was use to reduce taxable income in the year ending March 31, 2008 to $0.

NOTE 3 – EQUITY

Preferred Stock

At March 31, 2008 and 2007, the Company had authorized 5,000,000 shares of Preferred Stock at a par value of $.0001 per share.  There were 0 shares outstanding.  The unissued shares of Preferred stock may be divided into and issued in designated series from time to time by one or more resolutions adopted by the Board of Directors.

Common Stock

At March 31, 2008 and 2007, the Company had authorized 250,000,000 shares of Common Stock at a par value of $.0001 per share.  There were 120,001,000 shares outstanding.

NOTE 4 – RELATED PARTIES

The Company also rents three pieces of equipment on a month to month basis from a related party.  Rent expense for these items was $13,625 and $0 for the years ending March 31, 2008 and 2007.  The rental rate paid by the Company to the related party is felt by management to be a competitive rate.

Conforce International, Inc.

NOTES TO FINANCIAL STATEMENTS

March 31, 2008 and 2007

NOTE 5 – COMMITMENTS

The Company leases office space under a five year lease which runs through April 2012.  Monthly lease payments are $2,883.

The Company leases site space under a five year lease which runs through November 2008.  The lease is renewable for an additional five years.  The Company intends to renew the lease at an approximately a 7 to 8 percent increase.  Monthly lease payments are $11,127.

Future lease commitments are as follows; the site lease was included through the end of the original term.  Future payments under the intended renewal period have not been included since the renewal is not effective and the rental rate is unknown at this time.

Future commitments;

Conforce International, Inc.

NOTES TO FINANCIAL STATEMENTS

March 31, 2008 and 2007

NOTE 7 – BUSINESS SEGMENTS

Business Segments –For the Year Ended March 31, 2008

Total Assets, March 31, 2008

 

Conforce International, Inc.

NOTES TO FINANCIAL STATEMENTS

March 31, 2008 and 2007

NOTE 7 – BUSINESS SEGMENTS – CONTINUED

Business Segments –For the Year Ended March 31, 2007