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 September 30, 2010
|
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 September 30, 2010, 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.
|
12
|
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
15
|
|
ITEM 4. CONTROLS AND PROCEDURES.
|
15
|
|
|
|
|
PART II – OTHER INFORMATION.
|
|
|
ITEM 1. LEGAL PROCEEDINGS.
|
15
|
|
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
|
15
|
|
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
|
15
|
|
ITEM 4. (REMOVED AND RESERVED)
|
15
|
|
ITEM 5. OTHER INFORMATION.
|
15
|
|
ITEM 6. EXHIBITS.
|
16
|
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Conforce International Inc
.
UNAUDITED CONSOLIDATED BALANCE SHEETS
As at September 30, 2010 and March 31, 2010
|
|
|
September 30, 2010
|
|
|
March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,501
|
|
|
$
|
146,304
|
|
|
Accounts receivable
|
|
|
217,929
|
|
|
|
83,760
|
|
|
Inventory
|
|
|
37,172
|
|
|
|
108,688
|
|
|
Prepaid expenses
|
|
|
2,915
|
|
|
|
16,736
|
|
|
Current assets of discontinued operations (note 11)
|
|
|
-
|
|
|
|
331,755
|
|
|
|
|
|
259,517
|
|
|
|
687,243
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant and equipment
|
|
|
438,478
|
|
|
|
459,229
|
|
|
Intangible assets
|
|
|
18,327
|
|
|
|
20,628
|
|
|
Other non-current assets
|
|
|
33,502
|
|
|
|
14,161
|
|
|
Non-current assets of discontinued operations (note 11)
|
|
|
-
|
|
|
|
1,212,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
749,824
|
|
|
$
|
2,393,914
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
167,822
|
|
|
$
|
189,367
|
|
|
Current portion of term loan (note 5)
|
|
|
22,538
|
|
|
|
23,247
|
|
|
Current liabilities of discontinued operations (note 11)
|
|
|
-
|
|
|
|
475,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
190,360
|
|
|
|
688,581
|
|
|
Deferred rent
|
|
|
4,145
|
|
|
|
8,779
|
|
|
Related party loans payable (note 6)
|
|
|
1,637,089
|
|
|
|
1,824,168
|
|
|
Term loan (note 5)
|
|
|
184,382
|
|
|
|
197,570
|
|
|
Non-current liabilities of discontinued operations (note 11)
|
|
|
-
|
|
|
|
390,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,015,976
|
|
|
|
3,109,964
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ deficiency
|
|
|
|
|
|
|
|
|
|
Share capital (note 7)
|
|
|
9,157
|
|
|
|
9,157
|
|
|
Contributed surplus
|
|
|
616,469
|
|
|
|
531,825
|
|
|
Accumulated other comprehensive income (loss)
|
|
|
(90,517
|
)
|
|
|
(110,308
|
)
|
|
Accumulated deficit
|
|
|
(1,801,261
|
)
|
|
|
(1,407,113
|
)
|
|
|
|
|
(1,266,152
|
)
|
|
|
(976,439
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest in discontinued operations
|
|
|
-
|
|
|
|
260,389
|
|
|
Total shareholders’ equity (deficiency)
|
|
|
(1,266,152
|
)
|
|
|
(716,050
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
749,824
|
|
|
$
|
2,393,914
|
|
|
Going concern (note 2)
Commitments (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 six month periods ending September 30, 2010 and 2009
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
|
September
|
|
|
September
|
|
|
September
|
|
|
September
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composite product revenue
|
|
$
|
55,719
|
|
|
$
|
287,636
|
|
|
$
|
55,719
|
|
|
$
|
581,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product revenue
|
|
|
59,295
|
|
|
|
261,130
|
|
|
|
59,295
|
|
|
|
597,610
|
|
|
Gross profit
|
|
|
(3,576
|
)
|
|
|
26,506
|
|
|
|
(3,576
|
)
|
|
|
(15,961
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
161,022
|
|
|
|
72,797
|
|
|
|
363,031
|
|
|
|
155,921
|
|
|
Research and development
|
|
|
6,629
|
|
|
|
-
|
|
|
|
11,882
|
|
|
|
-
|
|
|
Stock based compensation (note 7)
|
|
|
47,279
|
|
|
|
32,255
|
|
|
|
90,812
|
|
|
|
62,585
|
|
|
Amortization of plant and equipment
|
|
|
25,838
|
|
|
|
27,383
|
|
|
|
48,753
|
|
|
|
51,562
|
|
|
Amortization of intangible assets
|
|
|
1,008
|
|
|
|
1,193
|
|
|
|
2,027
|
|
|
|
2,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
241,776
|
|
|
|
133,628
|
|
|
|
516,505
|
|
|
|
272,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before non-operating items
|
|
|
(245,352
|
)
|
|
|
(107,122
|
)
|
|
|
(520,081
|
)
|
|
|
(288,344
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on related party loans payable (note 6)
|
|
|
15,009
|
|
|
|
5,154
|
|
|
|
27,836
|
|
|
|
9,104
|
|
|
Interest on term loan
|
|
|
2,961
|
|
|
|
2,887
|
|
|
|
5,834
|
|
|
|
5,727
|
|
|
Interest and bank charges
|
|
|
278
|
|
|
|
89
|
|
|
|
397
|
|
|
|
159
|
|
|
Foreign exchange loss
|
|
|
1,233
|
|
|
|
2,601
|
|
|
|
2,060
|
|
|
|
11,314
|
|
|
Loss before discontinued operations and non-controlling interest in subsidiary
|
|
|
(264,833
|
)
|
|
|
(117,853
|
)
|
|
|
(556,208
|
)
|
|
|
(314,648
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of subsidiary company
|
|
|
(150,675
|
)
|
|
|
-
|
|
|
|
(150,675
|
)
|
|
|
-
|
|
|
Net loss (income) on discontinued operations (note 11)
|
|
|
-
|
|
|
|
(42,076
|
)
|
|
|
1,641
|
|
|
|
(82,308
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
|
|
|
(114,158
|
)
|
|
|
(75,777
|
)
|
|
|
(407,174
|
)
|
|
|
(232,340
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest
|
|
|
-
|
|
|
|
20,995
|
|
|
|
(13,026
|
)
|
|
|
41,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Conforce International Inc.
|
|
|
(114,158
|
)
|
|
|
(96,772
|
)
|
|
|
(394,148
|
)
|
|
|
(273,411
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustment on foreign exchange
|
|
|
(20,722
|
)
|
|
|
(18,420
|
)
|
|
|
19,791
|
|
|
|
(25,497
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
$
|
(134,880
|
)
|
|
$
|
(115,192
|
)
|
|
$
|
(374,357
|
)
|
|
$
|
(298,908
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
From discontinued operations
|
|
$
|
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 six month periods ending September 30, 2010 and 2009
|
|
|
September 30
|
|
|
September 30
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Operating activities
|
|
|
|
|
|
|
|
Net loss attributable to Conforce International Inc.
|
|
$
|
(394,148
|
)
|
|
$
|
(273,411
|
)
|
|
Items not affecting cash
|
|
|
|
|
|
|
|
|
|
Amortization of plant and equipment
|
|
|
48,753
|
|
|
|
51,562
|
|
|
Amortization of intangible assets
|
|
|
2,027
|
|
|
|
2,315
|
|
|
Imputed interest on related party loans payable
|
|
|
27,836
|
|
|
|
9,104
|
|
|
Deferred rent
|
|
|
(4,492
|
)
|
|
|
(4,116
|
)
|
|
Stock based compensation
|
|
|
90,812
|
|
|
|
62,585
|
|
|
Gain on sale of discontinued operations
|
|
|
(150,675
|
)
|
|
|
-
|
|
|
|
|
|
(379,887
|
)
|
|
|
(151,961
|
)
|
|
Changes in non-cash working capital (note 13)
|
|
|
(70,161
|
)
|
|
|
71,193
|
|
|
Net cash used in operating activities
|
|
|
(450,048
|
)
|
|
|
(80,768
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in discontinued operations
|
|
|
(30,855
|
)
|
|
|
(42,911
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
Purchase of plant and equipment
|
|
|
(33,902
|
)
|
|
|
(11,916
|
)
|
|
Increase in non-current assets
|
|
|
(19,393
|
)
|
|
|
(377
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(53,295
|
)
|
|
|
(12,293
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by investing activities for discontinued operations
|
|
|
-
|
|
|
|
2,770
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
Repayment of term loan
|
|
|
(10,989
|
)
|
|
|
(9,672
|
)
|
|
Advances from related parties
|
|
|
396,274
|
|
|
|
27,728
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by financing activities
|
|
|
385,285
|
|
|
|
18,056
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by financing activities from discontinued operations
|
|
|
5,102
|
|
|
|
46,303
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange on cash
|
|
|
(992
|
)
|
|
|
5,867
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash during the period
|
|
|
(144,803
|
)
|
|
|
(62,976
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
|
146,304
|
|
|
|
72,232
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
1,501
|
|
|
$
|
9,256
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
5,834
|
|
|
$
|
5,727
|
|
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 six month period ended September 30, 2010
|
|
|
Common Stock
|
|
|
Contributed
|
|
|
Accumulated
|
|
|
Accumulated
other
comprehensive
|
|
|
Noncontrolling
|
|
|
Total
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Surplus
|
|
|
Deficit
|
|
|
Income (loss)
|
|
|
Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at March 31, 2010
|
|
|
120,001,000
|
|
|
|
9,157
|
|
|
$
|
531,825
|
|
|
$
|
(1,407,113
|
)
|
|
$
|
(110,308
|
)
|
|
$
|
260,389
|
|
|
$
|
(716,050
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
|
|
|
|
|
-
|
|
|
|
90,812
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
90,812
|
|
|
Gain on imputed interest
|
|
|
|
|
|
|
-
|
|
|
|
(6,168
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,168
|
)
|
|
Noncontrolling interest
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,026
|
)
|
|
|
(13,026
|
)
|
|
Net loss
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(394,148
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(394,148
|
)
|
|
Translation adjustment
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,791
|
|
|
|
-
|
|
|
|
19,791
|
|
|
Sale of interest in subsidiary
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(247,363
|
)
|
|
|
(247,363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at September 30, 2010
|
|
|
120,001,000
|
|
|
$
|
9,157
|
|
|
$
|
616,469
|
|
|
$
|
(1,801,261
|
)
|
|
$
|
(90,517
|
)
|
|
$
|
-
|
|
|
$
|
(1,266,152
|
)
|
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 six month period ended September 30, 2010
|
|
1.
|
DESCRIPTION OF BUSINESS
|
The Company has developed a polymer based composite flooring system for the transportation industry 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 ocean-going container and highway trailer performance while reducing overall 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 six months ended September 30, 2010 the Company had net cash outflows from continuing operations of $450,048 and will require additional funding which, if not raised, may result in the curtailment of activities. Subsequent to the end of the quarter, the Company closed on a private placement in the amount of $2 million. The Company has incurred a net loss of $394,148 for the six months ended September 30, 2010 and has an accumulated deficit of $1,801,261 as at September 30, 2010. The Company's ability to continue as a going concern depends on its ability to generate positive cash flow from operations or 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 12 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 six months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2011. 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, 2010. These interim consolidated financial statements follow the same accounting policies as the audited consolidated financial statements for the year ended March 31, 2010. Certain operations were sold during the three months ended September 30, 2010 and the comparative financial statements have classified the applicable assets, liabilities, cash flows and income and loss as held for sale.
Conforce International Inc
.
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six month period ended September 30, 2010
4. NEW ACCOUNTING STANDARDS
In January 2010, the FASB issued Accounting Standards Update No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.” ASU 2010-06 amends Subtopic 820-10 to clarify existing disclosures, require new disclosures, and includes conforming amendments to guidance on employers’ disclosures about postretirement benefit plan assets. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The adoption of the new guidance did not have a material impact on the Company’s financial statements.
In February 2010, the FASB issued Accounting Standards Update No. 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements.”
ASU 2010-09 addresses both the interaction of the requirements of Topic 855 with the SEC’s reporting requirements and the intended breadth of the reissuance disclosures provisions related to subsequent events. An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated.
ASU 2010-09
is effective immediately. The adoption of the new guidance did not have a material impact on the Company’s financial statements.
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 5.75% are as follows:
Repayment of the term loan for the twelve month period ended September 30,
|
2011
|
|
$
|
22,538
|
|
|
2012
|
|
|
23,868
|
|
|
2013
|
|
|
25,278
|
|
|
2014
|
|
|
26,771
|
|
|
2015
|
|
|
28,351
|
|
|
Thereafter
|
|
|
80,114
|
|
|
Total amount payable
|
|
|
206,920
|
|
|
Less Current portion
|
|
|
22,538
|
|
|
|
|
$
|
184,382
|
|
|
|
6.
|
RELATED PARTY LOANS PAYABLE AND RELATED PARTY TRANSACTIONS
|
|
|
|
September 30, 2010
|
|
|
March 31, 2010
|
|
|
Due to shareholder
|
|
$
|
-
|
|
|
$
|
224,143
|
|
|
Due to related parties
|
|
|
1,812,950
|
|
|
|
546,684
|
|
|
|
|
|
1,812,950
|
|
|
|
770,827
|
|
|
Less: discount to fair value
|
|
|
(175,862
|
)
|
|
|
(91,119
|
)
|
|
|
|
|
1,637,089
|
|
|
|
679,708
|
|
|
Fair value of amount due to discontinued operations
|
|
|
-
|
|
|
|
1,144,460
|
|
|
|
|
$
|
1,637,089
|
|
|
$
|
1,824,168
|
|
Conforce International Inc
.
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six month period ended September 30, 2010
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 was estimated to occur in 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 six month periods ended September 30, 2010 was $15,009 and $27,836 respectively (2009: $ 5,154 and $9,104 respectively).
During the quarter ended September 30, 2010, the Company sold its 50.1% interest in the container terminal business to Marino Kulas, the CEO of Conforce International for the sum of $417,989 (CAD $445,000). The consideration is in the form of a reduction of the face value of the related party loans payable.
The gain on the sale of the container terminal is calculated as follows:
|
Fair value of consideration received
|
|
$
|
417,989
|
|
|
Carrying value of noncontrolling interest
|
|
|
247,363
|
|
|
Less carrying value of net book value of assets of
|
|
|
|
|
|
discontinued operations
|
|
|
(514,677
|
)
|
|
|
|
|
|
|
|
Gain on sale of discontinued operations
|
|
$
|
150,675
|
|
Preferred Shares
At September 30, 2010, 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 September 30, 2010 and March 31, 2010 no preferred shares were issued and outstanding.
Common Stock
At September 30, 2010 and March 31, 2010, the Company had authorized 250,000,000 shares of Common Stock at a par value of CAD $.0001 per share.
As at September 30, 2010 and March 31, 2010 there were 120,001,000 shares issued and outstanding.
Stock Transactions
On October 31, 2008, the Company extended the VP Product Development Employment Agreement for twelve months to October 31, 2009. Under this extension, the Company granted 80,000 common shared 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 provide 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 six months ended September 30, 2009, an additional 40,000 were expensed under this compensation arrangement with a fair value of $4,597. The remainder of these shares were expensed subsequent to September 30, 2009 in the year ended March 31, 2010.
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 September 30, 2009, 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.
Conforce International Inc
.
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six month period ended September 30, 2010
In November 2009, the Company extended the VP Product Development’s employment agreement to April 30, 2010. Under the terms of this extension, the Company agreed to provide 400,000 common shares, conditional upon the successful certification of the EKO-FLOR product for commercialization. A founding shareholder agreed to provide these common shares. The certification was completed in January 2010 and the 400,000 common shares were considered compensation and expensed in the year ended March 31, 2010 with a fair value of $60,525.
Effective April 1, 2010, the Company extended the employment agreement with its Vice- President Business Development for an additional twelve month term. Under this agreement the VP Business Development would be entitled to 600,000 common shares upon the completion of the twelve month period. A founding shareholder of Conforce has agreed to provide the common shares in satisfaction of this agreement. As at September 30, 2010, 300,000 common shares have been expensed under this agreement with a fair value of $44,115, based on the trading value at the date of grant, being April 1, 2009.
Effective May 1, 2010, the Company extended the employment agreement with its Vice-President Product Development for an additional twelve month term. Under this agreement the VP Product Development would be entitled to 400,000 common shares upon the completion of the twelve month period. In addition the VP Product Development is entitled to an additional 200,000 common shares conditional on certain milestone being completed within the twelve month period. A founding shareholder of Conforce has agreed to provide the common shares in satisfaction of this agreement. As at September 30, 2010, a total of 166,667 common shares have been expensed under this agreement with a fair value of $29,477, based on the trading value at the date of the grant, being May 1, 2010. The compensation tied to the certain milestones has not been expensed as the conditions have not been met as at September 30, 2010, consequently no expense has been recorded for the conditional consideration.
During the six month period ended September 30, 2010, the Company issued 177,907 common shares to a service provider, in settlement of outstanding invoices in lieu of cash. A founding shareholder agreed to provide these shares. The fair value of the shares is $17,220, being the outstanding amount of the invoices settled.
The Company leases office space under a five year lease which runs through April 2012. Monthly lease payments are approximately $4,053.
In December 2008, the Company entered into a three year lease for its production and development centre site space. The monthly payments are approximately $9,656 and will run until March 2011.
Future lease commitments for the fiscal years ending:
|
2011
|
|
$
|
82,253
|
|
|
2012
|
|
|
48,640
|
|
|
|
|
$
|
130,893
|
|
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.
Conforce International Inc
.
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six month period ended September 30, 2010
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 $1,637,089 as of September 30, 2010 and $1,824,168 as of March 31, 2010.
Prior to June 30, 2010, the Company operated in two reportable business segments; Container Terminal and EKO-FLOR. The Container Terminal operations was organized as Conforce 1 Container Terminals, Inc., a 50.1% owned subsidiary of the Company and 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.
Effective July 1, 2010, the Company sold its interest in the container terminal business resulting in a single reportable business segment.
|
|
11.
|
DISCONTINUED OPERATIONS
|
Effective July 1, 2010, the Company sold its interest in Conforce 1 Container Terminals, a 50.1% owned subsidiary to the Company’s Chairman and CEO and the container terminal’s minority shareholder (see note 6 Related party transactions). As a result of this transaction, for comparative purposes, the results of this subsidiary are presented separately on the consolidated statements of operations as discontinued operations. An analysis of the financial results of the discontinued operations is as follows:
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
|
September
|
|
|
September
|
|
|
September
|
|
|
September
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
265,702
|
|
|
$
|
292,505
|
|
|
$
|
524,731
|
|
|
Cost of revenues
|
|
|
-
|
|
|
|
128,096
|
|
|
|
145,510
|
|
|
|
240,000
|
|
|
Gross profit
|
|
|
-
|
|
|
|
137,606
|
|
|
|
146,995
|
|
|
|
284,731
|
|
|
Expenses
|
|
|
-
|
|
|
|
71,425
|
|
|
|
145,511
|
|
|
|
155,322
|
|
|
Income before tax of discontinued operations
|
|
|
-
|
|
|
|
66,181
|
|
|
|
1,484
|
|
|
|
129,409
|
|
|
Income tax expense
|
|
|
-
|
|
|
|
24,105
|
|
|
|
3,125
|
|
|
|
47,101
|
|
|
Income (loss) from discontinued operations
|
|
$
|
-
|
|
|
$
|
42,076
|
|
|
$
|
(1,641
|
)
|
|
$
|
82,308
|
|
Conforce International Inc
.
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six month period ended September 30, 2010
The financial position of the discontinued operations as at March 31, 2010 was:
|
|
|
March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Cheques issued in excess of cash
|
|
$
|
(3,166
|
)
|
|
Accounts receivable
|
|
|
334,921
|
|
|
Plant and equipment
|
|
|
68,193
|
|
|
Loan receivable from Conforce Corporation
|
|
|
1,144,460
|
|
|
Accounts payable and accrued liabilities
|
|
|
(206,638
|
)
|
|
Income taxes payable
|
|
|
(263,164
|
)
|
|
Shareholder loan payable
|
|
|
(6,165
|
)
|
|
Deferred rent
|
|
|
(27,481
|
)
|
|
Related party loans payable
|
|
|
(363,385
|
)
|
|
Net book value of discontinued operations
|
|
|
677,575
|
|
For the three months and six month period ended September 30, 2010, revenue was generated from two customers. For the three and six months period ended September 30, 2009, revenue was generated from a single customer.
|
|
13.
|
CHANGES IN NON-CASH WORKING CAPITAL
|
|
|
|
Six month period ended
|
|
|
|
|
September 30
|
|
|
September 30
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
(134,343
|
)
|
|
$
|
51,189
|
|
|
Inventory
|
|
|
69,655
|
|
|
|
71,660
|
|
|
Prepaid assets
|
|
|
13,515
|
|
|
|
-
|
|
|
Accounts payable and accrued liabilities
|
|
|
(18,988
|
)
|
|
|
(51,656
|
)
|
|
|
|
$
|
(70,161
|
)
|
|
$
|
71,193
|
|
Subsequent to the quarter ended September 30, 2010, the Company sold 13,333,333 common shares at $0.15 per share for gross proceeds of $2,000,000 with costs of $120,000 for net proceeds of $1,880,000. As part of the terms of the financing, the repayment of the related party loans payable are required to be deferred for 10 years after the date of the original advance but before April 2017. Consequently, the fair value of the related party loans payable will be recalculated to reflect this extended estimate of the term before repayment. This recalculation will result in an additional discount of $642,635 which will be charged to contributed surplus.
Subsequent to the quarter ended September 30, 2010, the Company acquired a 155,000 square foot production facility on approximately 16.5 acres of land in Indiana, USA for $400,000. This facility will be used for the manufacturing of the EKO-FLOR panels for the North American trailer industry.
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 fiscal 2011, the Company’s primary focus continues to be on the commercialization of EKO-FLOR.
With the successful testing and certification of the flooring system to-date and the resultant positive response from potential customers, the Company is focusing its attention on the three EKO-FLOR products, as described below. Consequently, subsequent to the three months ended June 30, 2010, the Company entered into an agreement to sell its 50.1% interest in the container terminal business to Marino, Kulas, CEO of Conforce International Inc, (“Purchaser”) for the sum of $417,989 (CAD $445,000). The purchase price is subject to a review by a qualified independent third party and may be adjusted according to the outcome of this review. Consideration will be in the form of reducing the amounts the Company owes to related parties, specifically Marino Kulas and Tony Kulas. The Purchaser will assume certain property and equipment leases and assume all obligations related to the container terminal business. In addition the Purchaser will personally indemnify the Company with respect to any claims or demands applicable to the container terminal business.
Expansion for Conforce is expected to come primarily from sales of EKO-FLOR cs-4 and xts in fiscal 2011, where the Company believes significant growth potential exists with the introduction of composite flooring to the transportation industry. To that end, on October 15, 2010, the Company purchased a 155,000 square foot facility in Peru, Indiana dedicated to the production of EKO-FLOR xts panels for the highway trailer industry. The Company expects to be ramping up volume in January 2011 with full production commencing in April 2011. The Company also expects to establish manufacturing operations in China in 2011 for the production of EKO-FLOR cs-4 panels for the container industry.
EKO-FLOR cs-4:
The Company expects that trials with two major shipping lines will be completed in calendar 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 August 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 for year one production, 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, although there have been numerous discussions with a number of interested parties. However, there are no guarantees that the Company will be able to obtain close on these discussions under reasonable terms.
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 has purchased a facility in
Peru, Indiana for the production of xts panels. At full capacity, the output of the facility is flooring for 50,000 full sized 53’ highway trailers. The Company projects that the amount required will be between $7 and $8 million dollars, of which subsequent to the end of the quarter, two million was raised in a private placement. Currently, for the balance of approximately $6 million, there is no financing in place although there have been numerous discussions with a number of interested parties, however, similar to the cs-4 funding requirements, there are no guarantees that the Company will be able to close on these discussions under reasonable terms.
LIQUIDITY AND CAPITAL RESOURCES
Subsequent to the end of the quarter the Company has raised, by way of a private placement gross proceeds of $2,000,000 with costs of $120,000 for net proceeds of $1,880,000. This Company issued a total of 13.3 million shares at $0.15 per share, being the price at the time the terms of the issuance were established. The use of these funds is intended to commence the process for the establishment of a manufacturing facility in the United States. Subsequent to the capital raise the Company closed on the acquisition of a 155,000 square foot facility in Peru, Indiana which will be outfitted with the necessary plant and equipment to manufacture EKO-FLOR products for the transportation industry.
,The Company also 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 Asia, which combined with expansion of the United States facility, are currently estimated to be approximately $17 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 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.
RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTH INTERIM PERIODS ENDED SEPTEMBER 30, 2010 COMPARED WITH THE THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 20, 2009.
For the three and six month periods ended September 30, 2010 the Company had gross revenues of $55,719 compared with gross revenues of $287,636 for the three month period ended September 30, 2009 and $581,649 for the six month period ended September 30, 2009. The significant decrease in revenues is a result of the Company moving from the development of the EKO-FLOR product into trial production orders for customers. During the three months ended September 30, 2010 the Company had two trial orders while in 2009 there was a single order for EKO-FLOR ms-1 military shelving that was being fulfilled throughout the six month period ended September 30, 2009. It is expected that revenue will increase as the Company moves into the early manufacturing phase of its development.
For the three and six month periods ended September 30, 2010, cost of revenues was $59,295 compared with $261,130 for the three month period ended September 30, 2009 and $597,610 for the six month period ended September 30, 2009. The decrease in cost of revenues is attributable to the change in revenues. Gross margins for the three months ended September 30, 2010 were negative 6% compared with 9% and negative 3% for the three and six month periods ended September 30, 2009 respectively. The negative margins in 2010 are primarily a result of the limited production to fulfill the limited trial orders. For 2009 the low and negative margins were because the manufacturing of the EKO-FLOR ms-1 composite product which was entirely outsourced to a contract manufacturer.
General and administrative expenses consist of labour and salaries, rent, professional fees, utilities and office supplies. General and administrative expenses for the three and six month periods ended September 30, 2010 were $161,022 and $363,031 respectively, compared with $72,797 and $155,921 for the three and six month periods ended September 30, 2009. For the three months ended September 30, 2010, the increase in general and administrative expenses is due to additional professional fees incurred in order to improve the financial reporting information. In addition, the Company employed additional people during the three months ended September 30, 2010 compared with the same period in 2009 for the operation of the equipment and handling of raw and finished goods. In addition the Vice-president of business development was not receiving cash compensation during the three months ended September 30, 2009. Finally there were additional advertising and travel expenses incurred during the three months ended September 30, 2010 to promote and demonstrate the EKO-FLOR product. Similarly, for the six months ended September 30, 2010 the increase is primarily attributable to the additional professional fees to improve the financial reporting of the Company and the additional people hired as either consultants or employees. In 2009 the manufacturing was outsourced, consequently the handing of raw and finished goods was minimal.
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 and six month periods ended September 30, 2010 were $6,629 and $11,882 respectively, compared with nil for both the three and six month periods ended September 30, 2009. This slight increase is primarily due to the new EKO-FLOR orders and adjustments that were made to the design and operation. In contrast, the same periods in 2009 were focused on the management of the outsourced services for the ms-1 military shelving order.
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. 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 and six month periods ended September 30, 2010 were $47,279 and $90,812 respectively, compared with $32,255 and $62,585 for the same periods ended September 30, 2009. This increase is primarily a result of the higher fair value associated with the stock based compensation.
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 8.75% depending on the timing of the advance. The imputed interest rate is calculated at Prime + 4%. Interest on related party loans payable for the three and six month periods ended September 30, 2010 was $15,009 and $27,836, respectively, compared with $5,154 and $9,104 for the same periods in 2009. This increase is due to the increase in loans outstanding as the related parties continue to provide the necessary funding for the continued operation of the business. The repayment of the related party loans payable has been estimated to occur on or around March 31, 2012. However, subsequent to the quarter end a $2 million private placement was closed, raising net proceeds of $1,880,000, which specified that the related party loans payable be deferred for 10 years from the initial advance or at least until April 2017. This will result in a re-calculation of the fair value of the related party loans payable for the quarter ended December 31, 2010. This recalculation will result in an additional discount of $642,635 which will be charged to contributed surplus
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 effect 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 $167,822 at September 30, 2010 compared with $189,366 for the year ended March 31, 2010, a decrease of $21,544.
At September 30, 2010, the Company has related party loans payable of $1,637,089 compared with $1,373,687 as at March 31, 2010 The related party loans payable are interest free with no fixed terms of repayment and have been calculated assuming they will be repaid on or around March 31, 2012. . These loans have been advanced in various increments depending on the needs of the Company, and have also arose from expenses paid by the container
terminal business, which was a 50.1% owned subsidiary prior to its sale on July 1, 2010 . 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 or about March 31, 2012 with imputed interest charged at rates between 6.25% and 8.75%. The imputed interest for the three and six month periods ended September 30, 2010 was $15,009 and $27,836 respectively compared with $5,154 and $9,104 for the same periods in 2009.
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, September 30, 2010, 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 direction for the daily accounting functions and guidance and direction in the proper accounting for transactions. This lack of direction results in a number of quarter end adjustments that detract from effectiveness of ongoing monitoring and oversight by management as well as reliance on external consultants to make the necessary corrections during the preparation of the financial report preparation. 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
Management has engaged the services of a chartered accountant, for the preparation of the quarter and year end reporting and will continue to look to further strengthen the finance and accounting group with qualified 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. (REMOVED AND RESERVED)
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
Description
2.0
Acquisition Agreement and Plan of Merger dated May 24, 2005 (1)
3.1
Certificate of Incorporation for Conforce International, Inc. (1)
3.1.1
Certificate of Incorporation for Conforce Container Corporation (1)
3.1.2
Certificate of Incorporation for Conforce 1 Container Terminals, Inc. (1)
3.2
Bylaws (1)
10.1
Canada Small Business Financial Loan dated November 26, 2008 (2)
10.2
Sea Box, Inc. Purchase Order dated November 25, 2009 (3)
10.3
Letter of Agreement in Connection with the Strategic Partnership Between Conforce International, Inc. and Bayer MaterialScience, LLC. dated February 2, 2009 (3)
10.4
Advisory Agreement between WorldWide Associates, Inc. and Conforce International, Inc. dated April 2, 2007 (3)
10.5
Employment Renewal Proposal for Joseph DeRose dated October 31, 2008 (4)
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 February 9, 2009 with Conforce International, Inc.’s 10-12G Registration Statement.
(2) Denotes previously filed exhibits: filed on May 28, 2009 with Conforce International, Inc.’s 10-12G/A Registration Statement.
(3) Denotes previously filed exhibits: filed on June 29, 2009 with Conforce International, Inc.’s 10-12G/A Registration Statement.
(4) Denotes previously filed exhibits: filed on August 19, 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.
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Conforce International, Inc.
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November 15, 2010
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By:
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/s/ Marino Kulas
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Marino Kulas
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Chairman & CEO
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