UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended December 31, 2009
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from ____________ to ____________
Commission
file number:
001-34203
CONFORCE
INTERNATIONAL, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
|
68-6077093
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
51A
Caldari Road
2nd
Floor
Concord,
Ontario L4K 4G3
Canada
(Address
of principal executive offices)
(416)
234-0266
(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 such 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
o
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 definition of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
|
Large
accelerated filer
|
o
|
Accelerated
filer
|
o
|
|
Non-accelerated
filer
|
o
|
Smaller
reporting company
|
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
o
No
x
As of
December 31, 2009, 120,001,000 shares of the Company’s common stock, $0.0001 par
value, were issued and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
|
PART
I – FINANCIAL INFORMATION.
|
|
|
ITEM
1. FINANCIAL STATEMENTS.
|
3
|
|
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
|
15
|
|
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
|
18
|
|
ITEM
4. CONTROLS AND PROCEDURES.
|
18
|
|
|
|
|
PART
II – OTHER INFORMATION.
|
|
|
ITEM
1. LEGAL PROCEEDINGS.
|
19
|
|
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.
|
19
|
|
ITEM
3. DEFAULTS UPON SENIOR SECURITIES.
|
19
|
|
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
|
19
|
|
ITEM
5. OTHER INFORMATION.
|
19
|
|
ITEM
6. EXHIBITS.
|
19
|
PART
I – FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
Conforce
International Inc.
UNAUDITED
CONSOLIDATED BALANCE SHEETS
As at
December 31, 2009 (unaudited) and March 31, 2009 (audited)
|
|
|
December
31,
2009
|
|
|
March
31,
2009
|
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
33,354
|
|
|
$
|
72,232
|
|
|
Accounts
receivable
|
|
|
420,813
|
|
|
|
397,560
|
|
|
Inventory
|
|
|
-
|
|
|
|
64,276
|
|
|
Prepaid
expenses
|
|
|
11,418
|
|
|
|
-
|
|
|
|
|
|
465,585
|
|
|
|
534,068
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant
and equipment
|
|
|
536,758
|
|
|
|
517,338
|
|
|
Intangible
assets
|
|
|
21,183
|
|
|
|
20,785
|
|
|
Other
non-current assets
|
|
|
19,852
|
|
|
|
16,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,043,378
|
|
|
$
|
1,088,367
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
309,107
|
|
|
$
|
400,016
|
|
|
Income
taxes payable
|
|
|
208,212
|
|
|
|
84,601
|
|
|
Current
portion of term loan (note 5)
|
|
|
22,180
|
|
|
|
17,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
539,499
|
|
|
|
502,402
|
|
|
Deferred
rent
|
|
|
40,045
|
|
|
|
42,334
|
|
|
Related
party loans payable (note 6)
|
|
|
739,698
|
|
|
|
445,508
|
|
|
Term
loan (note 5)
|
|
|
196,714
|
|
|
|
177,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,515,959
|
|
|
|
1,168,172
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity deficiency
|
|
|
|
|
|
|
|
|
|
Share
capital (note 7)
|
|
|
9,157
|
|
|
|
9,157
|
|
|
Contributed
surplus
|
|
|
430,194
|
|
|
|
340,684
|
|
|
Accumulated
other comprehensive income
|
|
|
7,618
|
|
|
|
39,049
|
|
|
Accumulated
deficit
|
|
|
(1,164,952
|
)
|
|
|
(669,816
|
)
|
|
|
|
|
(717,983
|
)
|
|
|
(280,926
|
)
|
|
Noncontrolling
interest
|
|
|
245,405
|
|
|
|
201,121
|
|
|
Total
shareholders’ equity deficiency
|
|
|
(472,578
|
)
|
|
|
(79,805
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,043,378
|
|
|
$
|
1,088,367
|
|
|
Going
concern (note 2)
Commitment
(note 8)
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
|
Conforce International
Inc
.
UNAUDITED
CONSOLIDATED INTERIM STATEMENT OF OPERATIONS
For the
three and nine month periods ending December 31, 2009 and 2008
|
|
|
Three
months ended
|
|
|
Nine
months ended
|
|
|
|
|
December
|
|
|
December
|
|
|
December
|
|
|
December
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Container
service revenue
|
|
$
|
255,699
|
|
|
$
|
327,785
|
|
|
$
|
780,430
|
|
|
$
|
1,333,772
|
|
|
Composite
product revenue
|
|
|
280,181
|
|
|
|
-
|
|
|
|
861,830
|
|
|
|
-
|
|
|
|
|
|
535,880
|
|
|
|
327,785
|
|
|
|
1,642,260
|
|
|
|
1,333,772
|
|
|
Cost
of services
|
|
|
134,368
|
|
|
|
181,116
|
|
|
|
374,368
|
|
|
|
697,091
|
|
|
Cost
of product revenue
|
|
|
320,736
|
|
|
|
-
|
|
|
|
918,346
|
|
|
|
-
|
|
|
|
|
|
455,104
|
|
|
|
181,116
|
|
|
|
1,292,714
|
|
|
|
697,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
80,776
|
|
|
|
146,669
|
|
|
|
349,546
|
|
|
|
636,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
174,906
|
|
|
|
297,734
|
|
|
|
462,141
|
|
|
|
683,949
|
|
|
Research
and development
|
|
|
68,091
|
|
|
|
28,541
|
|
|
|
68,091
|
|
|
|
56,327
|
|
|
Interest
on term loan
|
|
|
2,897
|
|
|
|
-
|
|
|
|
8,624
|
|
|
|
-
|
|
|
Interest
and bank charges
|
|
|
156
|
|
|
|
350
|
|
|
|
592
|
|
|
|
515
|
|
|
Stock
based compensation (note 7)
|
|
|
821
|
|
|
|
1,990
|
|
|
|
63,406
|
|
|
|
1,796
|
|
|
Amortization
of plant and equipment
|
|
|
31,837
|
|
|
|
71,450
|
|
|
|
92,698
|
|
|
|
114,371
|
|
|
Amortization
of intangible assets
|
|
|
1,241
|
|
|
|
1,138
|
|
|
|
3,556
|
|
|
|
2,429
|
|
|
Foreign
exchange loss (gain)
|
|
|
110
|
|
|
|
(500
|
)
|
|
|
12,534
|
|
|
|
(558
|
)
|
|
|
|
|
280,059
|
|
|
|
400,703
|
|
|
|
711,642
|
|
|
|
858,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before non-operating item
|
|
|
(199,283
|
)
|
|
|
(254,034
|
)
|
|
|
(362,096
|
)
|
|
|
(222,148
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on related party loans payable (note 6)
|
|
|
12,542
|
|
|
|
8,011
|
|
|
|
34,969
|
|
|
|
20,903
|
|
|
Income
(loss) before income tax
|
|
|
(211,825
|
)
|
|
|
(262,045
|
)
|
|
|
(397,065
|
)
|
|
|
(243,051
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense (recovery)
|
|
|
6,686
|
|
|
|
(44,134
|
)
|
|
|
53,787
|
|
|
|
5,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss)
|
|
|
(218,511
|
)
|
|
|
(217,911
|
)
|
|
|
(450,852
|
)
|
|
|
(248,936
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling
interest
|
|
|
3,213
|
|
|
|
(48,227
|
)
|
|
|
44,284
|
|
|
|
(3,554
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss attributable to Conforce International Inc.
|
|
|
(221,724
|
)
|
|
|
(169,684
|
)
|
|
|
(495,136
|
)
|
|
|
(245,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation
adjustment on foreign exchange
|
|
|
(5,934
|
)
|
|
|
18,785
|
|
|
|
(31,431
|
)
|
|
|
22,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive loss
|
|
$
|
(227,657
|
)
|
|
$
|
(150,899
|
)
|
|
$
|
(526,567
|
)
|
|
$
|
(223,215
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share - basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
Weighted
average number of shares outstanding
|
|
|
120,001,000
|
|
|
|
120,001,000
|
|
|
|
120,001,000
|
|
|
|
120,001,000
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
Conforce International
Inc
.
UNAUDITED
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
For the
nine month period ending December 31, 2009 and 2008
|
|
|
Nine
months ended
|
|
|
|
|
December
|
|
|
December
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
Net
loss attributable to Conforce International Inc.
|
|
$
|
(495,136
|
)
|
|
$
|
(245,382
|
)
|
|
Items
not affecting cash
|
|
|
|
|
|
|
|
|
|
Amortization
of plant and equipment
|
|
|
92,698
|
|
|
|
114,371
|
|
|
Amortization
of intangible assets
|
|
|
3,556
|
|
|
|
2,429
|
|
|
Imputed
interest on related party loans payable
|
|
|
34,969
|
|
|
|
20,903
|
|
|
Stock
based compensation
|
|
|
63,406
|
|
|
|
1,796
|
|
|
Noncontrolling
interest
|
|
|
44,284
|
|
|
|
(3,554
|
)
|
|
|
|
|
(256,223
|
)
|
|
|
(109,437
|
)
|
|
Changes
in non-cash working capital (note11)
|
|
|
44,760
|
|
|
|
394,898
|
|
|
Net cash
provided by (used in) operating activities
|
|
|
(211,463
|
)
|
|
|
285,461
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
|
|
|
|
|
Purchase
of plant and equipment
|
|
|
(13,215
|
)
|
|
|
(646,179
|
)
|
|
Investment
in intangible assets
|
|
|
-
|
|
|
|
(15,644
|
)
|
|
Increase
in non-current assets
|
|
|
(435
|
)
|
|
|
(9,301
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(13,650
|
)
|
|
|
(671,124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
|
|
|
|
Increase
in bank indebtedness
|
|
|
-
|
|
|
|
20,897
|
|
|
Repayment
of term loan
|
|
|
(15,004
|
)
|
|
|
-
|
|
|
Advances
from related parties
|
|
|
218,390
|
|
|
|
162,411
|
|
|
Repayments
of related party loans payable
|
|
|
(31,674
|
)
|
|
|
-
|
|
|
Short
term advances from related parties
|
|
|
-
|
|
|
|
122,489
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
provided by financing activities
|
|
|
171,712
|
|
|
|
305,797
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of foreign exchange on cash
|
|
|
14,523
|
|
|
|
(4,786
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash during the period
|
|
|
(38,878
|
)
|
|
|
(84,652
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
beginning of period
|
|
|
72,232
|
|
|
|
84,652
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
end of period
|
|
$
|
33,354
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
8,624
|
|
|
|
-
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
Conforce International
Inc
.
UNAUDITED
CONSOLIDATED INTERIM STATEMENT OF SHAREHOLDERS’ EQUITY (DEFICIENCY)
For the
periods ended December 31, 2009 (unaudited) and March 31, 2009 (audited)
|
|
|
Common
Stock
|
|
|
Contributed
|
|
|
Noncontrolling
|
|
|
Accumulated
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Total
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Surplus
|
|
|
interest
|
|
|
Deficit
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as at March 31, 2009 (audited)
|
|
|
120,001,000
|
|
|
|
9,157
|
|
|
|
340,684
|
|
|
|
201,121
|
|
|
|
(669,816
|
)
|
|
|
39,049
|
|
|
|
(79,805
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
based compensation
|
|
|
|
|
|
|
-
|
|
|
|
63,406
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63,406
|
|
|
Gain
on imputed interest
|
|
|
|
|
|
|
-
|
|
|
|
26,104
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26,104
|
|
|
Noncontrolling
interest
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
44,284
|
|
|
|
-
|
|
|
|
-
|
|
|
|
44,284
|
|
|
Net
loss
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(495,136
|
)
|
|
|
-
|
|
|
|
(495,136
|
)
|
|
Translation
adjustment
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(31,431
|
)
|
|
|
(31,431
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as at December 31, 2009 (unaudited)
|
|
|
120,001,000
|
|
|
$
|
9,157
|
|
|
$
|
430,194
|
|
|
$
|
245,405
|
|
|
$
|
(1,164,952
|
)
|
|
$
|
7,618
|
|
|
$
|
(472,578
|
)
|
The
accompanying notes are an integral part of these consolidated financial
statements.
Conforce International
Inc
.
NOTES TO
THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the
period ended December 31, 2009.
|
|
1.
|
DESCRIPTION
OF BUSINESS
|
The
Company has two operations, the first is providing handling, storage and
transportation of overseas containers for international shipping lines as well
as domestic retailers through its 50.1% owned subsidiary Conforce 1 Container
Terminals Inc. The second, is the development and testing of a
polymer based composite shipping container flooring product trademarked under
the name EKO-FLOR through its 100% owned subsidiary Conforce Containers
Corporation. The composite flooring product has been designed to
provide an environmentally friendly product to increase container versatility
while reducing shipping costs.
The
Company was incorporated on May 18, 2004 in the state of Delaware as Now
Marketing Corp. and was renamed on May 25, 2005 to Conforce International
Inc.
These
consolidated financial statements have been prepared on the basis of United
States generally accepted accounting principles ("GAAP") applicable to a 'going
concern', which assume that the Company will continue in operation for the
foreseeable future and will be able to realize its assets and discharge its
liabilities in the normal course of operations. For the nine months ended
December 31, 2009 the Company had net cash outflows from operations of $211,463
and will require additional funding which, if not raised, may result in the
curtailment of activities. The Company has incurred a net loss of $495,136 for
the nine months ended December 31, 2009 and has an accumulated deficit of
$1,164,952 as at December 31, 2009. The Company's ability to continue as a going
concern depends on its ability to generate positive cash flow from operations
and secure additional debt or equity financing.
Management
regularly reviews and considers the current and forecast activities of the
Company in order to satisfy itself as to the viability of operations. These
ongoing reviews include consideration of current orders and future business
opportunities, current development and production activities, customer and
supplier exposure and forecast cash requirements and balances. Based on these
evaluations management concluded that the Company is able to continue as a going
concern for the next twelve months.
There can
be no assurances that the Company's activities will be successful or sufficient
and as a result there is doubt regarding the "going concern" assumption and,
accordingly, the use of accounting principles applicable to a going concern.
These consolidated financial statements do not reflect adjustments that would be
necessary if the "going concern" assumption were not appropriate. If the "going
concern" assumption were not appropriate for these consolidated financial
statements, then adjustments to the carrying values of the assets and
liabilities, the reported revenues and expenses and the balance sheet
classifications, which could be material, would be necessary.
The
accompanying unaudited interim consolidated financial statements of the Company
have been prepared in accordance with U.S. GAAP for interim financial
information and are presented in US dollars, unless otherwise noted.
Accordingly, they do not include all of the information and footnotes required
by GAAP for annual consolidated financial statements.
The
accompanying financial information reflects all adjustments, consisting
primarily of normal recurring adjustments, which are, in the opinion of
management, necessary for a fair presentation of results for interim periods.
Operating results for the nine months ended December 31, 2009 are not
necessarily indicative of the results that may be expected for the fiscal year
ending March 31, 2010. The accounting policies used in the preparation of these
interim consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and notes to the financial statements
for the year ended March 31, 2009. These interim consolidated
financial statements follow the same accounting policies as the audited
consolidated financial statements for the year ended March 31, 2009, except for
the adoption of the FAS 160
“Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No.
51”
which, according to the standard, has been adopted
prospectively.
Conforce International
Inc
.
NOTES TO
THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the
period ended December 31, 2009.
|
|
4.
|
NEW
ACCOUNTING STANDARDS
|
In
December 2007, the FASB issued FAS No. 160,
"Noncontrolling Interests in
Consolidated Financial Statements
-
an amendment of ARB No. 51
",
("FAS No. 160"). FAS No. 160 requires (i) that non-controlling (minority)
interests be reported as a component of shareholders' equity, (ii) that net
income attributable to the parent and to the non-controlling interest be
separately identified in the consolidated statement of operations, (iii) that
changes in a parent's ownership interest while the parent retains its
controlling interest be accounted for as equity transactions, (iv) that any
retained noncontrolling equity investment upon the deconsolidation of a
subsidiary be initially measured at fair value, and (v) that sufficient
disclosures are provided that clearly identify and distinguish between the
interests of the parent and the interests of the non-controlling owners. FAS No.
160 is effective for annual periods beginning after December 15, 2008 and should
be applied prospectively. The presentation and disclosure requirements of the
statement shall be applied retrospectively for all periods presented. We adopted
FAS No. 160 on April 1, 2009.
In
December 2007, the FASB issued Statement SFAS No. 141 (revised 2007),
“Business Combinations,” which replaces SFAS No 141. The standard retains
the purchase method of accounting for acquisitions, but requires a number of
changes, including changes in the way assets and liabilities are recognized in
the purchase accounting. It also changes the recognition of assets acquired and
liabilities assumed arising from contingencies, requires the capitalization of
in-process research and development at fair value, and requires the expensing of
acquisition-related costs as incurred. SFAS No. 141R is effective for the
Corporation beginning April 1, 2009 and will apply prospectively to
business combinations completed on or after that date.
In April
2008, the FASB issued guidance that amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset. The guidance is effective for fiscal years
beginning after December 15, 2008. Early adoption is prohibited. The
adoption of this standard did not have a material effect on the Company’s
results of operations or financial position.
In April
2009, the FASB issued guidance concerning interim disclosures about fair value
of financial instruments requiring publicly traded companies to provide
disclosure about the fair value of financial instruments whenever interim
summarized financial information is reported. Previously, disclosures about the
fair value of financial instruments were only required on an annual basis.
Disclosure shall include the method(s) and significant assumptions used to
estimate the fair value of financial instruments and shall describe changes in
method(s) and significant assumptions, if any, during the period. This guidance
was effective for interim and annual periods ending after June 15, 2009,
and, as such, the Company has adopted this disclosure. See note 9.
In May
2009, the FASB issued guidance regarding the disclosure of subsequent events.
This guidance made no changes to current accounting but added required
disclosures regarding the date through which the Company has evaluated
subsequent events and whether that evaluation date is the date of financial
statement issuance or the date the financial statements were available to be
issued. This guidance was effective, and was adopted by the Company, for interim
and annual periods ending after June 15, 2009.
In June
2009, the FASB approved the “FASB Accounting Standards Codification” (the
“Codification”) as the single source of authoritative nongovernmental U.S. GAAP
to be launched on July 1, 2009. The codification does not change current
U.S. GAAP, but is intended to simplify user access to all authoritative U.S.
GAAP by providing all the authoritative literature related to a particular topic
in one place. All existing accounting standard documents will be superseded and
all other accounting literature not included in the Codification will be
considered not authoritative. The Codification is effective for interim and
annual periods ending after September 15, 2009. Adoption by the Company is
not expected to lead to any material impact on its consolidated financial
position, results of operation or cash flows.
Conforce International
Inc
.
NOTES TO
THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the
period ended December 31, 2009.
In
November 2008, the company entered into a loan agreement in the amount of CAD $
250,000 under the
Canada Small
Business Financing Act
for the purchase of machinery and equipment to be
used in the manufacturing of the composite flooring. The loan is
secured with a first charge on the equipment purchased and a CAD $62,500
personal guarantee provided by the CEO.
The term
of the loan is ten years with interest at a floating rate of prime +
3%. The minimum blended loan and re- payments for the next 5 years
and thereafter, assuming, the floating interest rate remains constant at 5.25%
are as follows:
Repayment
of the term loan for the twelve month period ended December 31,
|
2010
|
|
$
|
22,180
|
|
|
2011
|
|
|
23,373
|
|
|
2012
|
|
|
24,630
|
|
|
2013
|
|
|
25,955
|
|
|
2014
|
|
|
27,351
|
|
|
Thereafter
|
|
|
95,405
|
|
|
Total
amount payable
|
|
|
218,894
|
|
|
Less
Current portion
|
|
|
22,180
|
|
|
|
|
$
|
196,714
|
|
|
|
6.
|
RELATED
PARTY LOAN PAYABLE AND RELATED PARTY
TRANSACTIONS
|
|
|
|
December
31,
2009
|
|
|
March
31,
2009
|
|
|
Due
to shareholder
|
|
$
|
633,045
|
|
|
$
|
527,957
|
|
|
Due
to related party
|
|
|
243,883
|
|
|
|
39,676
|
|
|
|
|
|
876,928
|
|
|
|
567,633
|
|
|
Less:
discount to fair value
|
|
|
(137,230
|
)
|
|
|
(122,125
|
)
|
|
|
|
$
|
739,698
|
|
|
$
|
445,508
|
|
The
amounts due to shareholder and amounts due to related party are unsecured,
non-interest bearing with no specific terms of repayment. The amounts
due to related parties arise from cash advances from the shareholder and other
related parties made to the Company for the purchase of machinery and equipment,
primarily relating to the development of the composite flooring product and to
fund ongoing operating activities.
The loans
have been advanced at different increments depending on the needs of the Company
and repayment is not expected to occur until 2012. Given the long
term nature of these loans, each time an amount is advanced by a related party,
a fair value calculation has been recorded with the discount on the loan being
charged to contributed surplus. The discount to fair value
assumes repayment will be made on March 31, 2012 with imputed interest charged
at rates between 6.25% and 10%. Imputed interest for the three
and nine month periods ended December 31, 2009 was $12,542 (2008: $ 8,011) and
$34,969 (2008: $ 20,903) respectively.
The
Company rents equipment used in the terminal operations on a month-to-month
basis from a company owned by a relative of the CEO. Rent expense for
the three and nine month periods ending December 31, 2009 was $14,338 (2008:
$14,476) and $59,292 (2008: $ 8,686) respectively. The
rental rate paid by the Company to the related party is felt by management to be
at market rates.
The CEO
is the 49.9 % Noncontrolling shareholder of Conforce 1 Container Terminals,
Inc.
Conforce International
Inc
.
NOTES TO
THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the
period ended December 31, 2009.
Preferred
Shares
At
December 31, 2009, the Company had authorized 5,000,000 preferred shares with a
par value of $.0001 per share and may be issued in designated series from time
to time by one or more resolutions adopted by the Board of
Directors.
As at
December 31, 2009 and March 31, 2009 no preferred shares were issued and
outstanding.
Common
Stock
At
December 31, 2009 and March 31, 2009, the Company had authorized 250,000,000
shares of Common Stock at a par value of CAD $.0001 per
share.
As at
December 31, 2009 and March 31, 2009 there were 120,001,000 shares issued and
outstanding.
Stock
Transactions
On
October 31, 2007, the Company entered into an extension of the VP Employment
Agreement for a period of twelve months, through October 31, 2008. In
accordance with this extension, additional compensation in the form of common
shares of the Company would be granted if certain performance criteria were
satisfied in connection with the development of the EKO-FLOR
products. A founding shareholder of Conforce agreed to provide the
common shares required under the terms of this extension. None of the
performance criteria were met, consequently, no additional shares of Common
Stock were provided under the VP Employment Agreement.
On
October 31, 2008, the Company further extended its VP Employment Agreement for
an additional twelve months to October 31, 2009. Under this extension, the
Company agreed to provide 320,000 shares of common shares at the end of the
period provided certain performance criteria is satisfied in connection with the
development and commercialization of Eko-Flor products. If required,
a founding shareholder of Conforce has agreed to provide the common shares in
satisfaction of this agreement. As at March 31, 2009, the
performance criteria were not satisfied in connection to the development of the
Eko-Flor product and no common shares were transferred to the VP Product
Development. The agreement also provided for the granting
of an additional 80,000 shares of common stock at the end of the renewal period
(October 31, 2009) from a previous agreement for which the performance criteria
has been met. A founding shareholder agreed to providing these
additional common shares. As at March 31, 2009, a total of
33,333 common shares were expensed under this provision with a fair value of
$4,333 based on the trading value of shares as at March 31, 2009. For
the nine months ended December 31, 2009, an additional 46,667 shares have been
expensed under this compensation arrangement with a fair value of
$5,418.
In March
2009, effective April 1, 2009, the Company entered into an employment agreement
with its Vice- President Business Development for an initial term of twelve
months. For the first six months of this agreement the VP Business
Development would be entitled to 400,000 common shares in lieu of cash
compensation. A founding shareholder of Conforce has agreed to
provide the common shares in satisfaction of this agreement. As at
December 31, 2009, the 400,000 common shares have been expensed under this
agreement with a fair value of $57,988, based on the trading value at the date
of grant, being April 1, 2009.
The
Company leases office space under a five year lease which runs through April
2012. Monthly lease payments are approximately $3,915.
The
Company leases container terminal site space under a lease which originally ran
from April 2004 to March 2007. The lease was renewed in April 2007 for an
additional five year term to March 2012 with monthly lease payments of
approximately $15,267 per month.
In
December 2008, the Company entered into a three year lease for its production
and development centre site space. The monthly payments are approximately $9,407
and will run until December 2011.
Conforce International
Inc
.
NOTES TO
THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the
period ended December 31, 2009.
Future
lease commitments for the fiscal years ending:
|
2010
|
|
$
|
89,037
|
|
|
2011
|
|
|
352,802
|
|
|
2012
|
|
|
184,197
|
|
|
2013
|
|
|
10,576
|
|
|
|
|
$
|
636,612
|
|
The
Company’s financial instruments
consist
primarily of cash, accounts receivable, accounts payable and debt instruments
including related party loans payable. The carrying values of financial
instruments, other than debt instruments, are representative of their fair
values due to their short-term maturities. The carrying values of the Company’s
long-term debt instruments excluding related party loans are considered to
approximate their fair values because the interest rates of these instruments
are variable or comparable to current rates offered to the Company.
Fair
value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. The Company has determined that there were no assets or
liabilities that fall into the “Level 1” category, which values assets at the
quoted prices in active markets for identical assets. The Company has determined
that there were no assets or liabilities that fall into the “Level 2” category,
which values assets and liabilities from observable inputs other than quoted
market prices. The Company’s related party loans fall into “Level 3” category,
which values assets and liabilities from inputs that are generally less
observable from objective sources. The fair value of the Company’s related
party loans have been determined by discounting the loans based on inputs from
the Company’s other debt instruments and expensing the imputed interest over a
range of periods up to fiscal 2012. The fair value of the Company’s
related party loans totalled $739,698 as of December 31, 2009 and $445,508 as of
March 31, 2009.
The
Company operated in three reportable business segments; Container Terminal,
EKO-FLOR and Administrative. The Container Terminal operations are
organized as Conforce 1 Container Terminals, Inc., a 50.1% owned subsidiary of
the Company. The subsidiary is responsible for all container terminal
operations. EKO-FLOR is organized as Conforce Container Corporation a
100% owned subsidiary of the Company. This subsidiary is responsible
for the development, manufacturing and marketing of the Company’s EKO-FLOR
product. Operations to date have been research and development and an
order from one customer. The Administrative operations are the
operations of the parent company Conforce International, Inc. The
operations to date have been minimal since formation.
Conforce International
Inc
.
NOTES TO
THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the
period ended December 31, 2009.
Business
Segments - For the three months ended December 31, 2009
|
|
|
Container
|
|
|
|
|
|
|
|
|
|
|
Terminals
|
|
|
EKO-FLOR
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
255,699
|
|
|
$
|
280,181
|
|
|
$
|
535,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
of services and product revenue
|
|
|
134,368
|
|
|
|
320,736
|
|
|
|
455,104
|
|
|
Interest
expense and bank charges
|
|
|
7,200
|
|
|
|
8,395
|
|
|
|
15,595
|
|
|
Amortization
of long lived assets
|
|
|
5,205
|
|
|
|
27,873
|
|
|
|
33,078
|
|
|
Income
tax expense
|
|
|
6,686
|
|
|
|
-
|
|
|
|
6,686
|
|
|
Other
expenses
|
|
|
95,132
|
|
|
|
148,796
|
|
|
|
243,928
|
|
|
Noncontrolling
interest
|
|
|
3,213
|
|
|
|
-
|
|
|
|
3,213
|
|
|
Net
income (loss)
|
|
$
|
3,895
|
|
|
$
|
(225,619
|
)
|
|
$
|
(221,724
|
)
|
Business
Segments - For the nine months ended December 31, 2009:
|
|
|
Container
|
|
|
|
|
|
|
|
|
|
|
Terminals
|
|
|
EKO-FLOR
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
780,430
|
|
|
$
|
861,830
|
|
|
$
|
1,642,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
of services and product revenue
|
|
|
374,368
|
|
|
|
918,346
|
|
|
|
1,292,714
|
|
|
Interest
expense and bank charges
|
|
|
20,866
|
|
|
|
23,319
|
|
|
|
44,185
|
|
|
Amortization
of long lived assets
|
|
|
14,512
|
|
|
|
81,742
|
|
|
|
96,254
|
|
|
Income
tax expense
|
|
|
53,787
|
|
|
|
-
|
|
|
|
53,787
|
|
|
Other
expenses
|
|
|
227,585
|
|
|
|
378,587
|
|
|
|
606,172
|
|
|
Noncontrolling
interest
|
|
|
44,284
|
|
|
|
-
|
|
|
|
44,284
|
|
|
Net
income (loss)
|
|
$
|
45,028
|
|
|
$
|
(540,164
|
)
|
|
$
|
(495,136
|
)
|
Total
Assets, December 31, 2009
|
Container
Terminals
|
|
$
|
442,029
|
|
|
EKO-FLOR
|
|
|
601,349
|
|
|
Consolidated
Total Assets
|
|
$
|
1,043,378
|
|
For the
three months and nine month periods ending December 31, 2009, 90.6% and 90.3%,
respectively, of the Container Terminal revenue is generated from 2 major
customers. For both periods 100% of the EKO-FLOR revenue is generated
from a single customer.
Conforce International
Inc
.
NOTES TO
THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the
period ended December 31, 2009.
Business
Segments –For the three months ended December 31, 2008
|
|
|
Container
|
|
|
|
|
|
|
|
|
|
|
Terminals
|
|
|
EKO-FLOR
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
327,785
|
|
|
$
|
-
|
|
|
$
|
327,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
of services and product revenue
|
|
|
181,116
|
|
|
|
-
|
|
|
|
181,116
|
|
|
Interest
expense
|
|
|
7,396
|
|
|
|
965
|
|
|
|
8,361
|
|
|
Amortization
of long lived assets
|
|
|
6,457
|
|
|
|
66,131
|
|
|
|
72,588
|
|
|
Income
tax expense
|
|
|
(44,134
|
)
|
|
|
-
|
|
|
|
(44,134
|
)
|
|
Other
expenses
|
|
|
273,621
|
|
|
|
54,144
|
|
|
|
327,765
|
|
|
Noncontrolling
interest
|
|
|
(48,227
|
)
|
|
|
-
|
|
|
|
(48,227
|
)
|
|
Net
loss
|
|
$
|
(48,444
|
)
|
|
$
|
(121,240
|
)
|
|
$
|
(169,684
|
)
|
Business
Segments –For the nine months ended December 31, 2008
|
|
|
Container
|
|
|
|
|
|
|
|
|
|
|
Terminals
|
|
|
EKO-FLOR
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,333,772
|
|
|
$
|
-
|
|
|
$
|
1,333,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
of services and product revenue
|
|
|
697,091
|
|
|
|
-
|
|
|
|
697,091
|
|
|
Interest
expense
|
|
|
19,584
|
|
|
|
1,834
|
|
|
|
21,418
|
|
|
Amortization
of long lived assets
|
|
|
17,444
|
|
|
|
99,356
|
|
|
|
116,800
|
|
|
Income
tax expense
|
|
|
5,885
|
|
|
|
-
|
|
|
|
5,885
|
|
|
Other
expenses
|
|
|
600,889
|
|
|
|
140,625
|
|
|
|
741,514
|
|
|
Noncontrolling
interest
|
|
|
(3,554
|
)
|
|
|
-
|
|
|
|
(3,554
|
)
|
|
Net
loss
|
|
$
|
(3,567
|
)
|
|
$
|
(241,815
|
)
|
|
$
|
(245,382
|
)
|
Total
Assets, December 31, 2008
|
Container
Terminals
|
|
$
|
353,864
|
|
|
EKO-FLOR
|
|
|
551,363
|
|
|
Consolidated
Total
Assets
|
|
$
|
905,227
|
|
For the
three and nine month periods ending December 31, 2008, 93% and 91%,
respectively, of the Container Terminal revenue is generated from 3
customers.
Conforce International
Inc
.
NOTES TO
THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the
period ended December 31, 2009.
|
|
11.
|
CHANGES IN NON-CASH WORKING
CAPITAL
|
|
|
|
Nine
months ended
|
|
|
|
|
December
|
|
|
December
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
$
|
53,150
|
|
|
$
|
333,047
|
|
|
Inventory
|
|
|
73,303
|
|
|
|
-
|
|
|
Prepaid
expenses
|
|
|
(10,860
|
)
|
|
|
-
|
|
|
Accounts
payable and accrued liabilities
|
|
|
(162,195
|
)
|
|
|
15,542
|
|
|
Income
taxes payable
|
|
|
101,553
|
|
|
|
39,926
|
|
|
Deferred
Rent
|
|
|
(10,191
|
)
|
|
|
6,383
|
|
|
|
|
$
|
44,760
|
|
|
$
|
394,898
|
|
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Safe
Harbor Act Disclaimer for Forward-Looking Statements
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.
PLAN
OF OPERATIONS
In
calendar 2010, the Company’s primary focus will be on the commercialization of
EKO-FLOR. As a result of projected orders of cs-4 and xts and ms-1 panels, the
reliance on revenues from the container terminal will decrease. Accordingly, the
Company intends to pursue opportunities as they relate to the aforementioned
three EKO-FLOR products (as more fully described below). While the container
terminal is expected to continue to provide revenues and moderate earnings, if
any at all, growth in the terminal operations is not
expected. Furthermore, should volume commitments for its EKO-FLOR
products be secured, the Company will consider its options as they relate to the
divestiture of the container operations. Management believes that the terminal
operations, although once relevant, may detract from the Company’s focus on its
projected EKO-FLOR manufacturing initiatives. As a result of the global economic
downturn, quarter-over-quarter revenue for the terminal operations, was $780,430
for the nine month period ended December 31, 2009 and $1,333,772 for the same
period in 2008, a decrease of 41%.
Expansion
for Conforce is expected to come primarily from sales of EKO-FLOR cs-4 and xts
in calendar 2010 and 2011, where the Company believes that notwithstanding the
recent global economic slowdown, significant growth potential exists with the
introduction of composite flooring to the transportation industry. Should the
container industry in 2011 collectively produce one half of its 2007 new build
volume of 3.9 million twenty foot equivalent containers (TEU), the Company would
still experience significant growth assuming it is able to secure projected
orders of approximately 60,000 TEU or approximately 3% of total new build
volume. In advance of production orders for cs-4, the Company projects that it
will receive orders for xts trailer panels in second quarter of calendar 2010
for production commencing in or around October 2010. Notwithstanding
management’s projections and expectations, there are no assurances that these
orders will be received.
EKO-FLOR
cs-4:
The Company expects that trials with two
major shipping lines will be completed in or around September 2010. Once trials
are completed and depending on the outcome of such trials, the Company intends
to secure EKO-FLOR cs-4 orders for production commencing in or around April
2011. Provided that a combination of volume commitments, letters of intent,
supply agreements or other similar written expressions of interest are secured
and that such commitments are in-line with Conforce expectations of
approximately 60,000 TEU for year one production, then the Company will begin
the process of formalizing the details of a financial offering to adequately
capitalize the establishment of a company owned facility in Asia. The Company
projects that the amount required will be between $8 and $10 million
dollars. Currently, there is no such financing in place, nor are
there any preliminary or final term sheets or agreements in place in support of
such financing. At such time as the Company receives volume
indications and commitments as described above, then various funding options
such as private placements, public offerings, debt financings, or a combination
thereof, will be considered. However, there are no guarantees that the
Company will be able to obtain such funding under reasonable terms, if at
all.
EKO-FLOR
ms-1: EKO-FLOR ms-1 is a variation of the cs-4 container flooring
panel designed for use as load bearing shelving panels in special application
military containers. Although the initial one-year term of the
contract in connection with the sale of ms-1 to the Company’s US military
sub-contractor ended in January 2010, Conforce expects that should the US
Military require additional product, the Company would receive ms-1 orders under
similar terms and conditions as stated in the original agreement between
Conforce and its military sub-contractor.
EKO-FLOR
xts: Based on customer evaluations of EKO-FLOR xts, a modified
variation of the cs-4 container panel, the Company expects to receive, in the
near term, a combination of volume commitments, letters of intent,
supply
agreements or other similar written expressions of interest. As such, the
Company is reviewing its options as they relate to the establishment of a
manufacturing facility in the United States. The Company projects that the
amount required will be between $4 and $5 million dollars. Currently, there is
no such financing in place, nor are there any preliminary or final term sheets
or agreements in place in support of such financing. As per the
process described in the cs-4 section above, the Company, at such time as it
receives volume indications and commitments as described above, will consider
various funding options such as private placements, public offerings, debt
financings, or a combination thereof. However, there are no guarantees that
the Company will be able to obtain such funding under reasonable terms, if at
all.
The
Company intends to apply for listing on the OTC Bulletin Board at such time as
its Forms 10 and 211 reach the no-comment stage by the appropriate regulatory
agencies, however, there is no guarantee that the Company’s application for
listing will be accepted.
LIQUIDITY
AND CAPITAL RESOURCES
The
Company intends to raise, either through a Public Offering of its securities, a
Private Placement, the use of Debt financing instruments, or combination
thereof, the capital required for the establishment and operation of multi-line
EKO-FLOR manufacturing facilities in both Asia and the United States, which
combined, are currently estimated to be approximately $19
million. The company will make the decision in terms of the
establishment of these production facilities at such time as volume commitments,
letters of intent, supply agreements or other similar written expressions of
interest are secured with shipping lines, leasing companies, trailer owners /
operators, and container and trailer manufacturers.
The
Company does not currently have any outstanding lines or letters of
credit. Conforce does have a business development loan through a
government sponsored program in the amount of $250,000 payable over 10 years
(due January 2019). The loan was made through the small business
development loan program (SBL) and is limited in its use to the purchases of
equipment. Funds from the loan have been used to finance a portion of
the production equipment in the Company’s new development and production
facility in Concord, Ontario and such equipment has been used as collateral for
the loan. Under the rules governing SBL’s, in the event the Company
defaults on the loan, the Company is only responsible for repayment of an amount
equal to 25% of the total funds advanced, of which 10% has already been provided
by the Company by way of down payment on the loan.
The
Company does not have any agreements in place to finance its operations for the
next 12 months, although it is attempting to secure funds, in the amount of
approximately $500,000, by way of non-interest bearing, non-callable loans
from certain minority founding shareholders. It is anticipated that these
shareholders will attempt to raise capital for the aforementioned related party
loans through the sale of a portion of their Conforce common stock holdings by
way of private transactions with accredited investors. 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. Proceeds from these transactions will be used to fund any and all
costs associated with the sale, production and development of EKO-FLOR
products.
RESULTS
OF OPERATIONS
FOR THE
THREE MONTH INTERIM PERIOD ENDED DECEMBER 31, 2009 COMPARED WITH THE THREE MONTH
PERIOD ENDED DECEMBER 31, 2008.
For the
three months ended December 31, 2009 the Company had gross revenues of $535,880
compared with gross revenues of $327,785 for the three months ended December 31,
2008. The $208,095 increase in revenues was a result of
$280,181 in sales of composite products, offset with a decline of $72,086 in
container servicing revenue. Composite product revenue was
generated from the partial fulfillment of an order for EKO-FLOR ms-1 military
shelving. Container service revenue decreased primarily due to the
global downturn during the period and the resultant decrease in demand for
transportation and container handling services along with increased competition
for the reduced business.
For the
three months ended December 31, 2009, cost of revenues was $455,104 compared
with $181,116 for the three months ended December 31, 2008. The
increased cost of revenues is attributable to the manufacturing of the EKO-FLOR
ms-1 composite product which was entirely outsourced to a contract
manufacturer. The cost of container services revenues was
$134,368 for the three months ended December 31, 2009 compared with $181,116
for
the same period in 2008. This decline is attributable to the decline
in revenues. Gross margins for container services were 47% for the
three months ended December 31, 2009 compared with 45% in the same period in
2008.
General
and administrative expenses consist of labour and salaries, rent, professional
fees, utilities and office supplies. General and administrative
expenses for the three months ended December 31, 2009 were $174,906 compared
with $297,734 for the three months ended December 31, 2008. The
decrease in general and administrative cost is primarily attributable to reduced
labour costs required for the container services business along with a reduction
in consulting and professional fees incurred in 2008 as the EKO-FLOR business
was being developed.
Research
and development costs consist of materials, supplies and consultants for the
development of the EKO-FLOR product. Research and development costs
for the three months ended December 31, 2009 was $68,091 compared with $28,541
for the three months ended December 31, 2008. The increase in
research and development is a result of a focus in the third quarter to
manufacture samples of the EKO-FLOR container and trucking floor product for
suppliers to use for validation and testing. These samples were
completed and shipped in early fourth quarter.
Interest
on the term loan is the interest applicable to the Small Business loan entered
into during January 2009. Interest is charged at a rate of prime +
3%. There is no comparable loan in 2008.
Stock
based compensation consists of common shares issued to senior employees involved
in the EKO-FLOR operation, either as compensation in lieu of cash or in addition
to the cash compensation under employment agreements, or as incentives for
certain development milestones. The common shares issued under these
arrangements have been made available by a founding shareholder and are not
additional share issuances. Stock based compensation for the three
months ended December 31, 2009 was $821 compared with $1,990 for the three
months ended December 31, 2008. The decrease in stock based
compensation depends on the timing of reaching certain EKO-FLOR development
milestones.
The
related party loans payable are unsecured and interest free and have a fair
value calculated using an imputed interest rate of between 6.25% and 10%
depending on the timing of the advance. The imputed interest rate is
calculated at Prime + 4%. Interest on related party loans payable was
$12,542 for the three months ended December 31, 2009 compared with $8,011 for
the three months ended December 31, 2008. The increase in interest on
related party loans is a result of the increase in shareholder loans between the
two respective reporting periods and the imputed interest.
FOR THE
NINE MONTH INTERIM PERIOD ENDED DECEMBER 31, 2009 COMPARED WITH THE NINE MONTH
PERIOD ENDED DECEMBER 31, 2008.
For the
nine months ended December 31, 2009 the Company had gross revenues of $1,642,260
compared with gross revenues of $1,333,772 for the nine months ended December
31, 2008. The increase of $308,488 is a result of the
$861,830 in sales of composite products, offset with a decline of $553,342 in
container servicing revenue. Composite product revenue was
generated from the partial fulfillment during the year of an order for EKO-FLOR
ms-1 military shelving. Container service revenue decreased due to
the global downturn during the period and the resultant decrease in demand for
transportation and container handling services and increased
competition.
For the
nine months ended December 31, 2009, cost of revenues was $1,292,714 compared
with $697,091 for the nine months ended December 31, 2008. The
increased cost of revenues is attributable to the manufacturing of the EKO-FLOR
ms-1 composite product which was entirely outsourced to a contract
manufacturer. The cost of container services revenues was
$374,368 for the nine months ended December 31, 2009 compared with $697,091 for
the same period in 2008. This decline is primarily attributable to
the decline in revenues. Gross margins for container services were
52% for the nine months ended December 31, 2009 compared with 48% in the same
period in 2008. Gross margins for the EKO-FLOR products were negative
6% due to this being the first commercial production and the manufacturing
process being entirely outsourced.
General
and administrative expenses for the nine months ended December 31, 2009 were
$462,141 compared with $683,949 for the nine months ended December 31,
2008. The decrease in general and administrative cost is
primarily
attributable to the decline container services businesses and the resultant
decrease in labour costs for servicing the business. In addition,
consulting and professional fees were reduced for the EKO-FLOR
business.
Research
and development costs for the nine months ended December 31, 2009 was $68,091
compared with $56,327 for the nine months ended December 31,
2008. The increase in research and development is a result of a focus
in the third quarter to manufacture samples of the EKO-FLOR container and
trucking floor product for suppliers to use for validation and
testing. These samples were completed and shipped early in the fourth
quarter.
Stock
based compensation for the nine months ended December 31, 2009 was $63,406
compared with $1,796 for the three months ended December 31, 2008. This increase
in stock based compensation is attributable to the granting of common stock
during the first and second quarter by a founding shareholder to senior
individuals responsible for the development and sales of the EKO-FLOR composite
products.
Interest
on related party loans payable was $34,969 for the nine months ended December
31, 2009 compared with $20,903 for the nine months ended December 31,
2008. The increase in interest on related party loans is a result of
additional advances from shareholders of $218,390 during the nine months ended
December 31, 2009, with $143,269 in advances from related parties during late in
the third quarter, therefore not having a significant impact on the overall
expense for the quarter. During the quarter $33,138 was repaid
to a related party.
OFF-BALANCE SHEET
ARRANGEMENTS
The
Company has not entered into any off-balance sheet arrangements that have or are
reasonably likely to have a current or future affect on its financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources and would be considered
material to investors.
LIABILITIES
The
Company had accounts payable of $309,107 at December 31, 2009 compared with
$400,016 for the year ended March 31, 2009, a decrease of
$90,909. This is primarily attributable to the drawing down of
materials purchased for the EKO-FLOR manufacturing that remained unpaid as at
March 31, 2009 and the timing of invoices for manufacturing runs for the
EKO-FLOR production. Considerable effort is being made to manage cash
flow during the development phase of the EKO-FLOR products.
At
December 31, 2009, the Company has related party loans payable to Marino
Kulas, CEO of $633,045 and other related parties in the amount of $243,883 for a
total of $876,928 compared with $567,633 for the year ended March 31, 2009.
The related party loans payable are interest free with no fixed
terms of repayment and were not expected to be repaid until 2012. However,
during the third quarter one related party received repayment in the amount of
$33,138 due to their cash flow requirements. This repayment was
replaced by other related parties who collectively advanced $143,269 during the
quarter.
These
loans have been advanced in various increments depending on the needs of the
Company. Given the long term nature of these loans, each time an
amount is advanced by a related party, a fair value calculation has been
recorded with the discount on the loan being charged to contributed
surplus. The discount to fair value assumes repayment will be
made on March 31, 2012 with imputed interest charged at rates between 6.25% and
10% and the imputed interest for the nine months ended December 31, 2009 was
$34,969 compared with $20,903 for the same period in 2008.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
Not
applicable as Conforce is a smaller reporting company.
ITEM
4. CONTROLS AND PROCEDURES.
As of the
end of the reporting period covered by this report, December 31, 2009, our Chief
Executive Officer and Acting Chief Financial Officer carried out an evaluation
of the effectiveness of the Company’s disclosure controls and procedures as
defined in Securities Exchange Act of 1934 Rule 13a-15(e).
The Chief
Executive Officer and Acting Chief Financial Officer have concluded, based on
their evaluation, that as of the end of the period covered by this report, the
Company’s disclosure controls and procedures were not effective as a result of
the material weakness in internal control discussed below.
Identification
of a Material Weakness
Management
has identified a lack of accounting knowledge from the service providers
contracted to perform various accounting duties or offer guidance and direction
in the proper accounting and disclosure of transactions. This lack of
knowledge resulted in a number of errors in the previously reported financial
statements. Specific areas of concern that were noted include
the incorrect recording of transactions, a lack of timely reconciliations and an
absence of supporting schedules.
Changes
in Internal Control Over Financial Reporting
During
the quarter ended December 31, 2009, the company engaged the services of a
chartered accountant whose mandate is to improve the quality of the financial
reporting with the focus on correcting errors noted in prior periods and
bringing the Company’s filings up to date. This is a material positive change in
the Company’s internal control over financial reporting. In addition,
subsequent to December 31, 2009, Management has started the process of
strengthening the finance and accounting group with the addition of qualified
support staff.
PART
II – OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS.
The
Company is not a party to any litigation and, to its knowledge, no action, suit
or proceeding has been threatened against the Company. There are no material
proceedings to which any director, officer or affiliate of the Company or
security holder is a party adverse to the Company or has a material interest
adverse to the Company.
ITEM
2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF
PROCEEDS.
None.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM
5. OTHER INFORMATION.
None.
ITEM
6. EXHIBITS.
Description
10.1
Canada
Small Business Financial Loan dated November 26, 2008 (1)
31.1
Certification
pursuant to section 302 of the Sarbanes - Oxley Act of 2002.
31.2
Certification
pursuant to section 302 of the Sarbanes - Oxley Act of 2002.
32.1
Certification
of Officer pursuant to section 906 of the Sarbanes - Oxley Act of
2002.
32.2
Certification
of Officer pursuant to section 906 of the Sarbanes - Oxley Act of
2002.
(1)
Denotes previously filed exhibits: filed on May 28, 2009 with Conforce
International, Inc.’s 10-12G/A Registration Statement.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
|
|
Conforce
International, Inc.
|
|
|
|
|
|
|
|
May
12, 2010
|
By:
|
/s/ Marino
Kulas
|
|
|
|
|
Marino
Kulas
|
|
|
|
|
President
& CEO
|
|
Conforce (GM) (USOTC:CFRI)
Gráfico Histórico do Ativo
De Jan 2025 até Fev 2025
Conforce (GM) (USOTC:CFRI)
Gráfico Histórico do Ativo
De Fev 2024 até Fev 2025
