PwrCor, Inc. - Quarter Report: 2010 December (Form 10-Q)
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
1-9370
(COMMISSION FILE NUMBER)
FOR THE QUARTERLY PERIOD DECEMBER 31, 2010
FOR
RECEIVABLE ACQUISITION & MANAGEMENT CORPORATION
(Exact Name of Registrant as Specified in the Charter)
DELAWARE
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13-3186327
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(State of Other Jurisdiction
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(I.R.S. Employer
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of Incorporation)
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Identification Number)
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2 Executive Drive, Suite 630
Fort Lee, NJ 07024
201-677-8904
Check whether the Registrant (1) has filed all reports required 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 [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Small reporting company [X]
Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date:
February 14, 2011
Common Stock: 17,748,896
TABLE OF CONTENTS
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1
PART I
ITEM 1. FINANCIAL STATEMENTS
RECEIVABLE ACQUISITION AND MANAGEMENT CORPORATION AND SUBSIDIARIES
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||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
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||||||||
ASSETS
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||||||||
December 31,
2010
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September 30,
2010
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|||||||
CURRENT ASSETS
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||||||||
Cash
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$ | 173,819 | $ | 186,401 | ||||
Employee Advances
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7,250 | - | ||||||
Finance receivables - short term
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14,947 | 18,923 | ||||||
Total current assets
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196,016 | 205,324 | ||||||
OTHER ASSETS
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||||||||
Finance receivables - long-term
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29,893 | 38,418 | ||||||
Total other assets
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29,893 | 38,418 | ||||||
TOTAL ASSETS
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$ | 225,909 | $ | 243,742 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
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||||||||
CURRENT LIABILITIES
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||||||||
Accrued and other expenses
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$ | 36,002 | $ | 41,481 | ||||
Total current liabilities
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36,002 | 41,481 | ||||||
COMMITMENT & CONTINGENCIES
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||||||||
STOCKHOLDERS' EQUITY
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||||||||
Preferred stock, par value $10 per share;
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||||||||
10,000,000 shares authorized in 2010 and 2009 and 0 shares
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||||||||
issued and outstanding at December 31, 2010 and
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||||||||
September 30, 2010, respectively
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- | - | ||||||
Common stock, par value $.001 per share;
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||||||||
325,000,000 shares authorized in 2010 and 2009
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||||||||
and 17,748,896 and 16,802,896 shares issued and
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||||||||
outstanding at December 31, 2010 and September 30, 2010, respectively
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17,749 | 16,803 | ||||||
Stock subscription receivable
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(345 | ) | - | |||||
Additional paid-in capital
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657,797 | 651,648 | ||||||
Accumulated deficit
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(485,294 | ) | (466,190 | ) | ||||
189,907 | 202,261 | |||||||
Less: Cost of treasury stock, 1,070,000 shares
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- | - | ||||||
Total stockholders' equity
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189,907 | 202,261 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 225,909 | $ | 243,742 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
RECEIVABLE ACQUISITION AND MANAGEMENT CORPORATION AND SUBSIDIARIES
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||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
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||||||||
FOR THE THREE MONTHS ENDED DECEMBER 31, 2010 AND 2009
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||||||||
2010
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2009
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|||||||
REVENUES
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||||||||
Financing income
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$ | 9,801 | $ | 53,920 | ||||
Service income and other
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187 | 2,800 | ||||||
Total revenues
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9,988 | 56,720 | ||||||
COSTS AND EXPENSES
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||||||||
Selling, general and administrative
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29,157 | 74,590 | ||||||
Impairment of receivables
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- | - | ||||||
Total costs and expenses
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29,157 | 74,590 | ||||||
INCOME (LOSS) FROM OPERATIONS
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(19,169 | ) | (17,870 | ) | ||||
OTHER INCOME (EXPENSES)
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||||||||
Interest income
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65 | 121 | ||||||
Total other income (expenses)
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65 | 121 | ||||||
0 | ||||||||
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK
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$ | (19,104 | ) | $ | (17,749 | ) | ||
INCOME (LOSS) PER COMMON SHARE, BASIC
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$ | (0.00 | ) | $ | (0.00 | ) | ||
INCOME (LOSS)PER COMMON SHARE, FULLY DILUTED
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$ | (0.00 | ) | $ | (0.00 | ) | ||
WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC
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17,646,200 | 16,052,896 | ||||||
WEIGHTED AVERAGE SHARES OUTSTANDING, DILUTED
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17,646,200 | 16,052,896 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
RECEIVABLE ACQUISITION AND MANAGEMENT CORPORATION AND SUBSIDIARIES
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||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
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FOR THE THREE MONTHS ENDED DECEMBER 31, 2010 AND 2009
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2010
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2009
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|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
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|
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||||||
Net income (loss)
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$ | (19,104 | ) | $ | (17,749 | ) | ||
Adjustments to reconcile net income to net cash
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||||||||
provided by operating activities:
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||||||||
Changes in Operating Assets and Liabilities
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||||||||
Collections applied to principal on finance receivables
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12,501 | 1,862 | ||||||
Decrease in prepaid expenses
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- | 939 | ||||||
Increase in employee advances
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(7,250 | ) | ||||||
Decrease accrued expenses
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(5,479 | ) | 4,087 | |||||
Net cash provided by operating activities
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(19,332 | ) | (10,861 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES
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||||||||
Proceeds from exercise of stock options
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6,750 | - | ||||||
Net cash (used in) financing activities
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6,750 | - | ||||||
NET (DECREASE) IN CASH
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(12,582 | ) | (10,861 | ) | ||||
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR
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186,401 | 196,443 | ||||||
CASH AND CASH EQUIVALENTS - END OF YEAR
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$ | 173,819 | $ | 185,582 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
RECEIVABLE ACQUISITION AND MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009 (UNAUDITED)
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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A.
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THE COMPANY AND PRESENTATION
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The condensed consolidated unaudited interim financial statements included herein have been prepared by Receivable Acquisition and Management Corporation and Subsidiaries (the "Company"), formerly Feminique Corporation and Subsidiaries without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted as allowed by such rules and regulations, and the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the September 30, 2010 audited consolidated financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these condensed consolidated financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.
The management of the Company believes that the accompanying unaudited condensed consolidated financial statements contain all adjustments (including normal recurring adjustments) necessary to present fairly the operations, changes in stockholders' equity (deficit), and cash flows for the periods presented.
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B.
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FINANCE RECEIVABLES
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The Company has adopted the provisions of Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) 310-30 for its investment in finance receivables, “Accounting for Loans or Certain Debt Securities Acquired in a Transfer.” This SOP limits the yield that may be accreted (accretable yield) to the excess of the Company’s estimate of undiscounted expected principal, interest and other cash flows (cash flows expected at the acquisition to be collected) over the Company’s initial investment in the finance receivables. Subsequent increases in cash flows expected to be collected are recognized prospectively through adjustment of the finance receivables yield over its remaining life. Decreases in cash flows expected to be collected are recognized as impairment to the finance receivable portfolios. The Company’s proprietary collections model is designed to track and adjust the yield and carrying value of the finance receivables based on the actual cash flows received in relation to the expected cash flows.
During the three months ended December 31, 2010 and 2009, the Company neither acquired nor sold any finance receivables.
5
RECEIVABLE ACQUISITION AND MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009 (UNAUDITED)
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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B.
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FINANCE RECEIVABLES (CONTINUED)
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In the event that cash collections would be inadequate to amortize the carrying balance, an impairment charge would be taken with a corresponding write-off of the receivable balance. Accordingly, the Company does not maintain an allowance for credit losses.
The agreements to purchase the aforementioned receivables include general representations and warranties from the sellers covering account holder death or bankruptcy, and accounts settled or disputed prior to sale. The representation and warranty period permitting the return of these accounts from the Company to the seller is typically 90 to 180 days. Any funds received from the seller of finance receivables as a return of purchase price are referred to as buybacks. Buyback funds are simply applied against the finance receivable balance received. They are not included in the Company’s cash collections from operations nor are they included in the Company’s cash collections applied to principal amount. Gains on sale of finance receivables, representing the difference between sales price and the unamortized value of the finance receivables, are recognized when finance receivables are sold.
Changes in finance receivables for the three months ended December 31, 2010 were as follows:
2010
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||||
Balance at beginning of year October 1,
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$ | 57,341 | ||
Cash collections applied to principal
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(12,501 | ) | ||
Balance at the end of the period
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$ | 44,840 | ||
Estimated Remaining Collections (“ERC”)*
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$ | 44,840 |
*Estimated remaining collection refers to the sum of all future projected cash collections from acquired portfolios. ERC is not a balance sheet item, however, it is provided for informational purposes. Income recognized on finance receivables was $9,801 and $53,920 for the periods ended December 31, 2010 and 2009 respectively.
Under ASC 310-30 debt security impairment is recognized only if the fair market value of the debt has declined below its amortized costs. Currently no amortized costs are below fair market value. Therefore, the Company has not recognized any impairment for the finance receivables.
6
RECEIVABLE ACQUISITION AND MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009 (UNAUDITED)
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C.
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PRINCIPLES OF CONSOLIDATION
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The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
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D.
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CASH AND CASH EQUIVALENTS
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The Company considers all highly liquid debt instruments and other short-term investments with an initial maturity of six months or less to be cash or cash equivalents. There were no cash equivalents as of December 31, 2010 and September 30, 2010.
The Company maintains cash and cash equivalents balances at financial institutions that are insured by the Federal Deposit Insurance Corporation up to $250,000.
E. INCOME TAXES
The Company accounts for income taxes pursuant to the provisions of the ASC 740, Accounting for Income Taxes, which requires an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities.
F. USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during this reported period. Actual results could differ from those estimates.
G. EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Historical net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents were not included in the computation of diluted earnings per share when the Company reported a loss because to do so would be antidilutive for periods presented.
7
RECEIVABLE ACQUISITION AND MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009 (UNAUDITED)
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. RECENT ACCOUNT PRONOUNCEMENTS
In January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-06, “Improving Disclosures about Fair Value Measurements” (the “Update”). The Update provides amendments to FASB Accounting Standards Codification (“ASC”) 820-10 that require entities to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers. In addition the Update requires entities to present separately information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements using significant unobservable inputs (Level 3). The disclosures related to Level 1 and Level 2 fair value measurements are effective for the Company in 2010 and the disclosures related to Level 3 fair value measurements are effective for the Company in 2011. The Update requires new disclosures only, and has no impact on our consolidated financial position, results of operations, or cash flow.
NOTE 2- STOCK OPTIONS
In April 2004, the Company adopted a stock option plan upon approval by the shareholders at the Annual General Meeting under which selected eligible key employees of the Company are granted the opportunity to purchase shares of the Company’s common stock. The plan provides that 37,500,000 shares of the Company’s authorized common stock be reserved for issuance under the plan as either incentive stock options or non-qualified options. Options are granted at prices not less than 100 percent of the fair market value at the end of the date of grant and are exercisable over a period of ten years or as long as that person continues to be employed or serve on the on the Board of Directors, whichever is shorter. At December 31, 2009 and September 30, 2009, the Company had no options outstanding under this plan.
NOTE 3- WARRANTS
The Company issued warrants during the year 2004. At December 31, 2010 and September 30, 2010, respectively, the Company had 946,000 warrants outstanding exercisable at approximately $.0075 per warrant per share. In October, 2010 the Company received $6,750 for exercising 900,000 warrants and in January, 2011 the Company received $345 for exercising the final balance 46,000 warrants.
NOTE 4- INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due. Deferred taxes related to differences between the basis of assets and liabilities for financial and income tax reporting will either be taxable or deductible when the assets or liabilities are recovered or settled. The difference between the basis of assets and liabilities for financial and income tax
8
RECEIVABLE ACQUISITION AND MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009 (UNAUDITED)
NOTE 4- INCOME TAXES (CONTINUED)
reporting are not material therefore, the provision for income taxes from operations consist of income taxes currently payable.
There was no provision for income tax for the three months ended December 31, 2010 and 2009.
Due to the uncertainty of utilizing the approximate $ 485,294 and $347,621 in net operating losses, for the three months ended December 31, 2010 and 2009 respectively, and recognizing the deferred tax assets, an offsetting valuation allowance has been established. The losses are available to offset future taxable income through 2031.
December 31,
2010
|
December 31,
2009
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|||||||
Deferred tax assets
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$ | 169,853 | $ | 121,667 | ||||
Less: valuation
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(169,853 | ) | (121,667 | ) | ||||
Totals
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$ | - | $ | - |
NOTE 5- STOCK HOLDERS’ EQUITY
COMMON STOCK
There were 325,000,000 shares of common stock authorized, with 16,802,896 and 16,052,896 shares issued and outstanding at December 31, 2010 and September 30, 2009, respectively. The par value for the common stock is $.001 per share.
The following details the stock transactions for the three months ended December 31, 2010 and 2009.
There were no common stock transactions for the three months ended December 31, 2009.
During the three months ended December 31, 2010 the Company issued stock for 900,000 and 46,000 warrants, the Company received cash of $6,750 and recorded $345 for subscription receivable which was paid in January, 2011.
PREFERRED STOCK
There were 10,000,000 shares of preferred stock authorized, no shares issued and outstanding as of December 31, 2010 and September 30, 2010.
9
RECEIVABLE ACQUISITION AND MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009 (UNAUDITED)
NOTE 6- RELATED PARTY
The Company receives fees from Ramco Income Fund Limited (“Fund”) a Bermuda entity. The Company is the investment manager of the Fund. The servicing fees for the three months ended December 31, 2010 and 2009 were $187 and $2,800 respectively.
NOTE 7- FAIR VALUE MEASUREMENTS
The Company has categorized its financial assets and liabilities based upon the fair value hierarchy specified by FASB Accounting Standards Codification (“ASC “) Topic 820, Fair Value Measurement and Disclosures (“ASC 820”) This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurement, but discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). This standard provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
The Company has categorized its financial assets and liabilities based upon the fair value hierarchy specified by FASB Accounting Standards Codification (“ASC “) Topic 820, Fair Value Measurement and Disclosures (“ASC 820”) This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurement, but discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). This standard provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1 – Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active
Level 3 – Unobservable inputs that reflect the Company’s own assumptions.
10
RECEIVABLE ACQUISITION AND MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009 (UNAUDITED)
NOTE 7- FAIR VALUE MEASUREMENTS (CONTINUED)
The following table represents the fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2010.
Assets
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Level I
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Level II
|
Level III
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Total
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||||||||||||
Finance receivables
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- | - | $ | 44,840 | $ | 44,840 | ||||||||||
Total Assets
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- | - | $ | 44,840 | $ | 44,840 | ||||||||||
Liabilities
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- | - | - | - | ||||||||||||
Total Liabilities
|
- | - | - | - |
The following table represents the fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2010:
Assets
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Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Finance receivables
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- | - | $ | 57,341 | $ | 57,341 | ||||||||||
Total Assets
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- | - | $ | 57,341 | $ | 57,341 | ||||||||||
Liabilities
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- | - | - | - | ||||||||||||
Total Liabilities
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- | - | - | - |
The following table is a reconciliation of changes in the net fair value of finance receivables which are classified as level 3 in the fair value hierarchy.
December 31, 2010
|
September 30, 2010
|
|||||||
Finance Receivables
|
||||||||
Balance as of October 1, 2010
|
$ | 57,341 | $ | 141,163 | ||||
Cash Collected
|
$ | 12,501 | $ | 22,521 | ||||
Impairment of Receivables
|
- | $ | 61,301 | |||||
Balance as of December 31, 2010
|
||||||||
and September 30, 2010
|
$ | 44,840 | $ | 57,341 |
11
RECEIVABLE ACQUISITION AND MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009 (UNAUDITED)
NOTE 8- SUBSEQUENT EVENTS
Management has evaluated all subsequent events occurring since December 31, 2010 through February 7, 2011, the date these financials were issued. In January, 2011 the Company received $345 for exercising 460,000 warrants. This has been the only subsequent events that would require changes to the accompanying financial statements or disclosure therein other than what is noted above.
12
ITEM 2.
MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10K as of and for the year ended September 30, 2010 as filed with the Securities and Exchange Commission. Cautionary Statements Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995:
This report contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risks, uncertainties and assumptions that, if they never materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements. All statements, other than statements of historical fact, are forward-looking statements, including statements regarding overall trends, gross margin trends, operating cost trends, liquidity and capital needs and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts.
RESULTS OF OPERATIONS
Overview
The Company is engaged in the purchase and recovery of defaulted consumer receivables. These receivables are acquired at deep discounts and outsourced for collections on a contingency basis. The Company also manages Ramco Income Fund, Ltd, a Bermuda domiciled mutual fund fund. The Company ceased investing in new portfolios in September 2007 and is currently seeking to merge with or acquire another operating entity seeking to go public via reverse merger. There is no assurance that the company will succeed in such a merger or acquisition.
Revenue
During the quarter ended December 31, 2010, the Company had a net loss of ($19,104) on revenue of $9,988 versus a net loss of ($17,749) on revenue of $56,720. Total revenue for the quarter ended December 31, 2010 included finance income of $9,801 and servicing income of $187 versus finance income of $53,920 and servicing income of $2,800 during the quarter ended December 31, 2009. Finance income declined by approximately 82% or $44,119 and servicing income declined by approximately 97% or $5,798 during the quarter ended December 31, 2010 when compared to quarter ended December 31, 2009. Servicing income has declined due to closure of Ramco Income Fund Ltd which the Company used to mange.
Operating Expenses
Total operating expenses for the three month ended December 31, 2010 were $29,157 versus $74,590 during the three month ended December 31, 2009. The Company has taken additional step to reduce expenses and conserve cash so a strategic transaction can be completed.
Rent and Occupancy
Rent and occupancy expenses were $6,000 for the three months ended December 31, 2010 versus $10,059 for the three months ended December 31, 2009.
13
Depreciation
The Company did not record any depreciation expense for the three months ended December 31, 2010.
Purchase of Defaulted Receivables
During the quarters ended December 31, 2010 and December 31, 2009, the Company did not acquire any portfolios.
Recovery Partners
The Company outsources all its recovery activities to carefully selected debt collection agencies and network of collection attorneys with specific collection expertise. The company is currently using 6 collection agencies and several law firms in the U.S. and U.K. The average contingent collections fee is approximately 25% which is expected to rise during the later years of recovery. The Company records revenues net of all collection fees.
Seasonality
Collections tend to be higher in the first and second quarters of the year and lower in the third and fourth quarter of the year, due to consumer payment patterns in connection with seasonal employment, income tax refunds and holiday spending habits.
Liquidity and Capital Resources
As of December 31, 2010, the Company had a working capital of $160,014 versus working capital of $190,131 at December 31, 2009. The decrease in working capital is largely due to declining collections and servicing fees and will continue to decline for the same reasons. The Company believes that funds generated from operations, resale of portfolios together with existing cash will be sufficient to finance its operations for the foreseeable future. At the end of three month ended December 31, 2010, the Company had net cash of $173,819 versus $186,401 at September 30, 2010. Net cash used by operating activities was ($19,332) versus net cash used of ($10,861) for the three months ended December 31, 2009. Cash provided from financing activities during the quarter ended December 31, 2010 was $6,750 from the exercise of warrants versus none during the quarter ended December 31, 2009. There was no cash flow from financing activities in comparable quarters.
Cash generated from operations is depended upon the Company’s ability to collect on its defaulted consumer receivables. Many factors, including the economy, purchase price and the Company’s ability to retain the services of its recovery partners, are essential to generate cash flows. Fluctuations in these factors that cause a negative impact on the Company’s business could have a material negative impact on its expected future cash flows.
The Company believes that funds generated from operations, together with existing cash will be sufficient to finance its operations for the foreseeable future The Company has begun strategic review of operations and exploring the possibility of non-strategic acquisition or merger with another operating company.
Income Taxes
We did not record any income tax provision for the three months ended December 31, 2010.
Contractual Obligation
The Company entered into a 24 month lease at $2,000 per month which includes broadband and telephone. The lease expires on March 31, 2012.
14
Market Outlook for Charged-off Receivables
Recently there has been a substantial inflow of capital into this business which has resulted in significant increase in prices paid. Prices have started to come down due to tighter credit environment and declining quality of consumer credit. Any pronounced correction will force many too sell their remaining portfolios and exit the market considering the payback periods have been stretched due to high prices paid.
Critical Accounting Policy & Estimates
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. These accounting policies are described at relevant sections in this discussion and analysis and in the condensed consolidated financial statements included in this quarterly report.
The Company utilizes the interest method under guidance provided by the Financial Accounting Standards Board Accounting Standards Certification (“ASC”) 310-30 to determine income recognized on finance receivables
In October 2003, ASC 310-30, “Accounting for Loans or Certain Securities Acquired in a Transfer” was issued. This ASC proposes guidance on accounting for differences between contractual and expected cash flows from an investor’s initial investment in loans or debt securities acquired in a transfer if those differences are attributable, at least in part, to credit quality. This ASC is effective for loans acquired in fiscal years beginning after December 15, 2004. The ASC would limit the revenue that may be accrued to the excess of the estimate of expected future cash flows over a portfolio’s initial cost of accounts receivable acquired. The ASC would require that the excess of the contractual cash flows over expected cash flows not be recognized as an adjustment of revenue, expense, or on the balance sheet. The ASC would freeze the internal rate of return, referred to as IRR, originally estimated when the accounts receivable are purchased for subsequent impairment testing. Rather than lower the estimated IRR if the original collection estimates are not received, the carrying value of a portfolio would be written down to maintain the original IRR. Increases in expected future cash flows would be recognized prospectively through adjustment of the IRR over a portfolio’s remaining life. The ASC provides that previously issued annual financial statements would not need to be restated. Management is in the process of evaluating the application of this ASC. In accordance with ASC 310-30, the Company is currently is using the cost recovery method for revenue recognition for all its current portfolios.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
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RISK FACTORS
IN ADDITION TO OTHER INFORMATION IN THIS REPORT, YOU SHOULD CONSIDER THE FOLLOWING RISK FACTORS CAREFULLY. THESE RISKS MAY IMPAIR THE COMPANY'S OPERATING RESULTS AND BUSINESS PROSPECTS AS WELL AS THE MARKET PRICE OF THE COMPANY'S COMMON STOCK.
PENNY STOCK REGULATIONS AND REQUIREMENTS FOR LOW PRICED STOCK
The SEC adopted regulations which generally define a "penny stock" to be any non-Nasdaq equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Based upon the price of the Common Stock as currently traded on the NASDAQ Bulletin Board, the Company's Common Stock is subject to Rule 15g-9 under the Exchange Act which imposes additional sales practice requirements on broker-dealers which sell securities to persons other than established customers and "accredited investors." For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received a purchaser's written consent to the transaction prior to sale. Consequently, this rule may have a negative effect on the ability of stockholders to sell common shares of the Company in the secondary market.
The risks, uncertainties and assumptions may include the following:
§ Due to inability to raise capital and deep recession, the Company decided not to make new investments and has subsequently been in a run-off mode. The management is focused on merging with or acquiring another operating company that may be seeking to go public via reverse merger. There is no assurance that the management will succeed and as a result, shareholders may be adversely affected.
§ changes in the business practices of credit originators in terms of selling defaulted consumer receivables or outsourcing defaulted consumer receivables to third-party contingent fee collection agencies;
§ ability to acquire sufficient portfolios;
§ ability to recover sufficient amounts on acquired portfolios;
§ a decrease in collections if bankruptcy filings increase or if bankruptcy laws or other debt collection laws change;
§ changes in government regulations that affect the Company’s ability to collect sufficient amounts on its acquired or serviced receivables;
§ the Company’s ability to retain the services of recovery partners;
§ changes in the credit or capital markets, which affect the Company’s ability to borrow money or raise capital to purchase or service defaulted consumer receivables;
§ the degree and nature of the Company’s competition; and
§ our ability to respond to changes in technology and increased competition;
§ the risk factors listed from time to time in the Company’s filings with the Securities and Exchange Commission.
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ITEM 4T. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
The term “ disclosure controls and procedures “ is defined in Rules 13(a)-15e and 15(d) - 15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act). Our principal executive officer and principal financial officer have evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2010. They have concluded that, as of December 31, 2010 that our disclosures were effective to ensure that:
(1)
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That information required to be disclosed by the Company in reports that it files or submits under the act is recorded, processed, summarized and reported, within the time periods specified in the Commissions’ rules and forms, and
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(2)
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Controls and procedures are designed by the Company to ensure that information required to be disclosed by Receivable Acquisition & Management Corporation Inc. in the reports it files or submits under the Act is accumulated and communicated to the issuer’s management including the principal executive and principal financial officers or persons performing similar functions, as appropriate to allow timely decisions regarding financial disclosure.
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This term refers to the controls and procedures of a Company that are designed to ensure that information required to be disclosed by a Company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within the required time periods. Our principal executive officer and principal financial officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report. They have concluded that, as of December 31, 2010 our disclosure and procedures were effective in ensuring that required information will be disclosed on a timely basis in our reports filed under the exchange act.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
No changes in the Company’s internal control over financial reporting have come to management’s attention during the Company’s last fiscal quarter that have materially affected, or are likely to materially affect, the Company’s internal control over financial reporting.
PART II
OTHER INFORMATION
ITEM 1.
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LEGAL PROCEEDINGS
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Not Applicable.
ITEM 2.
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UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
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Not Applicable
ITEM 3.
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DEFAULTS UPON SENIOR SECURITIES
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Not Applicable.
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ITEM 4.
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SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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Not Applicable.
ITEM 5.
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OTHER INFORMATION
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Not Applicable
ITEM 6. EXHIBITS
Exhibits:
Exhibit
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Number
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Description
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31.1
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Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32.1
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Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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In accordance with the requirements of the Exchange Act, the Company has caused this report to be signed by the undersigned, thereunto duly authorized.
RECEIVABLE ACQUISITION & MANAGEMENT CORPORATION
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Date: February 14, 2011
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By: /s/ Max Khan
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Max Khan
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Chief Executive Officer
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Chief Financial Officer
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Director
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In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
By: /s/ Max Khan
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Max Khan
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Chief Executive Officer,
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Chief Financial Officer and
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Director
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Date: February 14, 2011
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