DRAFT DATED 11/8/07
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2007
o TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission file number 000-52706
SENTRA CONSULTING CORP.
| Nevada | | 20-5297544 |
(state or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
Sentra Consulting Corp.
466 Central Avenue, Suite 200
Cedarhurst, New York 11516
(Address of principal executive offices)
Phone: (516) 301-3939
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes x No o
As of November 14, 2007, 3,175,000 shares of common stock, par value $0.001 per share, were outstanding.
Transitional Small Business Disclosure Format (Check One): Yes o No x
Table of Contents
| Description | Page |
PART I - FINANCIAL INFORMATION | 1 |
| Item 1. | Financial Statements | 1 |
| Item 2. | Management's Discussion and Analysis or Plan of Operation | 8 |
| Item 3. | Control and Procedures | 10 |
PART II - OTHER INFORMATION | 11 |
| Item 1. | Legal Proceedings | 11 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 11 |
| Item 3. | Defaults Upon Senior Securities | 11 |
| Item 4. | Submission of Matters to a Vote of Security Holders | 11 |
| Item 5. | Other Information | 11 |
| Item 6. | Exhibits | 11 |
| Signatures | 12 |
PART I
FINANCIAL INFORMATION
SENTRA CONSULTING CORP.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEET
SEPTEMBER 30, 2007
(Unaudited)
ASSETS | | | | |
| | | | | |
| Current Assets: | | | | |
| Cash | | $ | 25,045 | |
| Notes Receivable | | | 1,960,000 | |
| Accrued Interest Receivable | | | 48,999 | |
| | | | | |
| Total Current Assets | | | 2,034,044 | |
| | | | | |
| Total Assets | | $ | 2,034,044 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| | | | | |
| Current Liabilities: | | | | |
| Notes Payable | | $ | 960,000 | |
| Accounts Payable | | | 13,744 | |
| Accrued Expenses | | | 43,062 | |
| | | | | |
| Total Current Liabilities | | | 1,016,806 | |
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Stockholders’ Equity: | | | | |
| Preferred Stock, $.001 par value; 9,997,000 shares authorized, none issued and outstanding | | | - | |
| Series A Convertible Preferred Stock, $.001 par value; 3,000 shares authorized, 1,000 shares issued and outstanding; liquidation preference $1,000 per share | | | 1 | |
| Common Stock, $.001 par value; 100,000,000 shares authorized, 3,175,000 shares issued and outstanding | | | 3,175 | |
| Additional Paid-In Capital | | | 1,182,285 | |
| Deficit Accumulated During the Development Stage | | | ( 165,061 | ) |
| Deferred Finance Costs | | | ( 3,162 | ) |
| | | | | |
| Total Stockholders’ Equity | | | 1,017,238 | |
| | | | | |
| Total Liabilities and Stockholders’ Equity | | $ | 2,034,044 | |
The accompanying notes are an integral part of these financial statements.
SENTRA CONSULTING CORP.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
| | | For the Period | | | | | | For the Period | |
| | | July 6, 2006 | | For the Nine | | For the Three | | July 6, 2006 | |
| | | (Inception) To | | Months Ended | | Months Ended | | (Inception) To | |
| | | September 30, 2006 | | September 30, 2007 | | September 30, 2007 | | September 30, 2007 | |
| | | | | | | | | | |
| Net Revenues | | $ | - | | $ | - | | $ | - | | $ | - | |
| | | | | | | | | | | | | | |
| Costs and Expenses: | | | | | | | | | | | | | |
| Professional Fees | | | - | | | 25,440 | | | 4,181 | | | 39,441 | |
| Start Up Costs | | | - | | | 3,851 | | | - | | | 5,142 | |
| Other General and Administrative Expenses | | | 749 | | | 34,117 | | | 30,253 | | | 34,117 | |
| | | | | | | | | | | | | | |
| Total Costs and Expenses | | | 749 | | | 63,408 | | | 34,434 | | | 78,700 | |
| | | | | | | | | | | | | | |
| Operating Loss | | | (749 | ) | | (63,408 | ) | | (34,434 | ) | | (78,700 | ) |
| | | | | | | | | | | | | | |
| Other Income (Expense): | | | | | | | | | | | | | |
| Interest Income | | | - | | | 48,999 | | | 47,964 | | | 49,000 | |
| Amortization of Deferred Finance Costs | | | - | | | (92,299 | ) | | (89,648 | ) | | (92,299 | ) |
| Interest Expense | | | - | | | (43,062 | ) | | (42,026 | ) | | (43,062 | ) |
| | | | | | | | | | | | | | |
| Total Other Income (Expense) | | | - | | | (86,362 | ) | | (83,710 | ) | | (86,361 | ) |
| | | | | | | | | | | | | | |
| Net Loss | | $ | (749 | ) | $ | (149,770 | ) | $ | (118,144 | ) | $ | (165,061 | ) |
| | | | | | | | | | | | | | |
| Basic and Diluted Loss Per Share | | $ | (0.00 | ) | $ | (0.05 | ) | $ | (0.04 | ) | | | |
| | | | | | | | | | | | | | |
| Weighted Average Basic and Diluted Shares Outstanding | | | 2,500,000 | | | 3,104,416 | | | 3,175,000 | | | | |
The accompanying notes are an integral part of these financial statements.
SENTRA CONSULTING CORP.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
| | | For the Period | | | | For the Period | |
| | | July 6, 2006 | | For the Nine | | July 6, 2006 | |
| | | (Inception) To | | Months Ended | | (Inception) To | |
| | | September 30, 2006 | | September 30, 2007 | | September 30, 2007 | |
| Cash Flows from Operating Activities: | | | | | | | | | | |
| Net Loss | | $ | (749 | ) | $ | (149,770 | ) | $ | (165,061 | ) |
| | | | | | | | | | | |
| Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | | | | | | | | | | |
| Common Stock Issued for Services | | | - | | | 15,000 | | | 15,000 | |
| Amortization of Deferred Finance Costs | | | - | | | 92,299 | | | 92,299 | |
| Changes in Assets and Liabilities: | | | | | | | | | | |
| Increase in Accrued Expenses | | | - | | | 43,062 | | | 43,062 | |
| Increase in Accounts Payable | | | 749 | | | 13,744 | | | 13,744 | |
| | | | | | | | | | | |
| Net Cash Used in Operating Activities | | | - | | | 14,335 | | | (956 | ) |
| | | | | | | | | | | |
| Cash Flows from Investing Activities: | | | - | | | - | | | - | |
| | | | | | | | | | | |
| Cash Flows from Financing Activities: | | | | | | | | | | |
| Proceeds from Borrowings | | | - | | | 960,000 | | | 960,000 | |
| Payments on Issuance of Notes | | | - | | | (1,960,000 | ) | | (1,960,000 | ) |
| Increase in Accrued Interest Receivable | | | - | | | (48,999 | ) | | (48,999 | ) |
| Proceeds from Sale of Common Stock | | | 25,000 | | | 50,000 | | | 75,000 | |
| Proceeds from Sale of Preferred Stock | | | - | | | 1,000,000 | | | 1,000,000 | |
| | | | | | | | | | | |
| Net Cash Provided by Financing Activities | | | 25,000 | | | 1,001 | | | 26,001 | |
| | | | | | | | | | | |
| Increase in Cash | | | 25,000 | | | 15,336 | | | 25,045 | |
| | | | | | | | | | | |
| Cash – Beginning of Period | | | - | | | 9,709 | | | - | |
| | | | | | | | | | | |
| Cash – End of Period | | $ | 25,000 | | $ | 25,045 | | $ | 25,045 | |
| | | | | | | | | | | |
| Supplemental Disclosures of Cash Flow Information: | | | | | | | | | | |
| Interest Paid | | $ | - | | $ | - | | $ | - | |
| Income Taxes Paid | | $ | - | | $ | - | | $ | - | |
| | | | | | | | | | | |
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: | | | | | | | | | | |
| Accrual of Deferred Offering Costs | | $ | 19,000 | | $ | - | | $ | - | |
| Deferred Finance Costs Arising from Issuance of Warrants | | $ | - | | $ | 85,366 | | $ | 85,366 | |
The accompanying notes are an integral part of these financial statements.
SENTRA CONSULTING CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 – Basis of Presentation
In the opinion of the Company’s management, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the information set forth therein. These financial statements are condensed and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.
The Company is a development stage company and has not commenced planned principal operations. The Company had no revenues and incurred a net loss of $149,770 for the nine months ended September 30, 2007 and a net loss of $165,061 for the period July 6, 2006 (inception) to September 30, 2007. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
On June 21, 2007, as amended on October 25, 2007, the Company entered into a non-binding letter of intent to acquire all the membership interests of Karat Platinum, LLC (“Karat Platinum”), a company which manufactures and sells a platinum alloy and platinum jewelry. In consideration therefore, the Company would issue to the members of Karat Platinum 30,000,000 shares of common stock. The closing of the transaction contemplated by the letter of intent is subject to the satisfaction of certain conditions, including without limitation, the execution of a mutually acceptable definitive agreement, the consent from the lenders to Karat Platinum of the transaction with the Company and/or the release of the collateral of Karat Platinum satisfactory to the Company, the completion of the due diligence investigation of both parties, and the making of loans by the Company to Karat Platinum in an amount of not less than $1,000,000. Karat Platinum agreed that it will not directly or indirectly solicit, negotiate, or accept any offer from a third party to acquire any of Karat Platinum’s assets or securities until January 31, 2008.
There can be no assurance that sufficient funds will be generated during the next year or thereafter from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital could force the Company to curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company's existing stockholders.
The Company is attempting to address its lack of liquidity by raising additional funds, either in the form of debt or equity or some combination thereof. The Company has raised net proceeds of approximately $50,000 through an offering of its common stock during the quarter ended March 31, 2007. There can be no assurances that the Company will be able to raise the additional funds it requires.
The accompanying condensed financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
Certain items in these condensed financial statements have been reclassified to conform to the current period presentation.
NOTE 2 - Notes Receivable
During the period June 22, 2007 to September 25, 2007 the Company made a series of loans, aggregating $1,960,000 principal, to Karat Platinum, LLC (“Karat Platinum”). These loans were made simultaneously with the execution of Promissory Notes by Karat Platinum to the Company (the “Karat Notes”). Pursuant to the terms of the Karat Notes, the outstanding notes totaling $960,000 principal and accrued interest at the rate of 18% per year shall be due and payable at various dates between September 22, 2007 and October 16, 2007. Outstanding notes totaling $1,000,000 principal and accrued interest at the rate of 9% per year shall be due and payable at various dates between November 20, 2007 and January 21, 2008. If Karat Platinum does not pay each of these Notes when due, interest shall accrue on the outstanding principal amount at the rate of 9% per month thereafter. Karat Platinum has the right to prepay the Notes without penalty or premium. Each of these loans are secured by a continuing lien and first priority security interest in all of the assets and personal property of Karat Platinum.
SENTRA CONSULTING CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 3 - Notes Payable
During the period June 22, 2007 to June 26, 2007, the Company raised an aggregate of $600,000 which was subsequently loaned to Karat Platinum (see Note 2). On each of June 22, 25, and 26, 2007, the Company issued promissory notes to three minority shareholders of the Company, in the original principal amounts aggregating $100,000, $50,000 and $450,000, respectively. Principal and interest, which accrues at 18% per year, are due and payable by the Company 90 days after the respective issuance dates of each of the notes. If the Company does not pay these amounts when due, interest shall accrue on the outstanding principal amount at the rate of 2% per month thereafter. The Company has the right to prepay the notes without penalty or premium. Each of these notes were initially secured by a guaranty of payment by a principal of Karat Platinum; this guaranty was terminated on July 11, 2007 upon the issuance by Karat Platinum to the Company of a continuing lien and first priority security interest in all of the assets of Karat Platinum (as described above). As additional consideration, the Company issued an aggregate of 60,000 common stock purchase warrants to such persons. Each warrant grants the holder the right to purchase one share of common stock of the Company at an exercise price of $0.50 per share for a term of 3 years from the date of the 6 month anniversary date of the note. In connection with the issuance of the 60,000 warrants, the Company recorded deferred finance costs in the amount of $49,568 using the Black-Scholes option pricing model with the following assumptions: expected volatility 280.24%; expected dividends 0%; expected term 3.5 years; and risk-free rate of 5%. These deferred finance costs have been fully amortized over the term of the related debt. Amortization expense was $49,568 for the period ended September 30, 2007. If the Company issues additional equity securities after the issuance date of the warrants for a consideration per share less than the $0.50 exercise price of the warrants, the exercise price of the warrants shall be reduced to such price.
During the period July 6, 2007 to July 10, 2007, the Company raised an aggregate of $360,000 which was subsequently loaned to Karat Platinum (see Note 2). The Company issued promissory notes, in the original principal amounts aggregating $360,000. Principal and interest, which accrues at 18% per year, are due and payable by the Company 90 days after the respective issuance dates of each of the notes. If the Company does not pay these amounts when due, interest shall accrue on the outstanding principal amount at the rate of 2% per month thereafter. The Company has the right to prepay the notes without penalty or premium. Each of these notes were initially secured by a guaranty of payment by a principal of Karat Platinum; this guaranty was terminated on July 11, 2007 upon the issuance by Karat Platinum to the Company of a continuing lien and first priority security interest in all of the assets of Karat Platinum (as described above). As additional consideration, the Company issued an aggregate of 60,000 common stock purchase warrants to such persons. Each warrant grants the holder the right to purchase one share of common stock of the Company at an exercise price of $0.50 per share for a term of 3 years from the date of the 6 month anniversary date of the note. In connection with the issuance of the 36,000 warrants, the Company recorded deferred finance costs in the amount of $35,798 using the Black-Scholes option pricing model with the following assumptions: expected volatility 280.24%; expected dividends 0%; expected term 3.5 years; and risk-free rate of 5%. These deferred finance costs are being amortized over the term of the related debt. Amortization expense was $32,636 for the quarter ended September 30, 2007. If the Company issues additional equity securities after the issuance date of the warrants for a consideration per share less than the $0.50 exercise price of the warrants, the exercise price of the warrants shall be reduced to such price.
SENTRA CONSULTING CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 4 - Common Stock
During the quarter ended March 31, 2007 the Company sold 625,000 shares of common stock pursuant to its public offering for gross proceeds of $50,000.
NOTE 5 - Series A Convertible Preferred Stock
On August 20, 2007, the Company filed a Certificate of Designation with the Secretary of State of Nevada (the “Certificate”) authorizing and creating a series of 3,000 shares of preferred stock which the Company designated as Series A Convertible Preferred Stock (the “Series A Preferred”).
Each share of Series A Preferred shall, at the option of the holder thereof, at any time and from time to time after the 90th day a share of Series A Preferred is issued, be convertible into shares of fully paid and non-assessable shares of common stock of the Company. Each share of Series A Preferred is convertible into the amount of shares of common stock as is calculated by dividing the original issued price of the Series A Preferred (currently $1,000) by the lower of (i) $0.50 per share, as adjusted, and (ii) the daily volume weighted average market price of the common stock for the 30 trading days prior; provided, however, that this number shall not be less than $0.20 per share. The holders of the Series A Preferred shall be entitled to receive dividends, on an as-converted basis when, as, and if paid on the common stock. Each holder of Series A Preferred shall have a right to purchase their respective pro rata portion of all, or any part, of common stock and securities convertible into common stock, subject to certain exceptions, that the Company may propose to issue. Each holder of Series A Preferred shall be entitled to the number of votes equal to the number of shares of common stock into which such shares of Series A Preferred could be converted and shall have voting rights and powers equal to the voting rights and powers of the common stock. The holders of Series A Preferred vote together with the holders of the common stock as a single class.
During the quarter ended September 30, 2007 the Company sold 1,000 shares of its newly designated Series A Preferred stock for gross proceeds of $1,000,000.
NOTE 6 - Subsequent Events
On October 23, 2007, Karat Platinum and the Company executed an Amendment to the Secured Promissory Notes with respect to the Secured Promissory Notes (see Note 2) issued by Karat Platinum to the Company on each of June 22, 2007, June 29, 2007, July 12, 2007 and July 16, 2007. These Notes represent an aggregate principal balance owed to the Company of $960,000. The amendment extended the original maturity date of each of said Notes for ninety days, so that on December 19, 2007, December 26, 2007, January 10, 2008 and January 14, 2008, Karat Platinum will owe the Company original principal of $150,000, $450,000, $100,000 and $260,000, respectively, and accrued interest at the rate of 18% per year. In addition, the Company waived payment by Karat Platinum of an aggregate of $3,262, representing the default interest which had accrued under each of these Notes.
SENTRA CONSULTING CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 6 - Subsequent Events (Continued)
During the period October 9, 2007 to November 8, 2007 the Company lent Karat Platinum an aggregate of $295,000 and Karat Platinum issued a corresponding amount of Secured Promissory Notes to the Company. Each of these notes bear interest at 9% per annum and is due and payable with accrued interest on or before January 31, 2008.
On October 8, 2007, the Company issued a promissory note to Bonnie Septimus, the Company’s Treasurer, Secretary and a director, in consideration for loans previously made and to be made by Ms. Septimus to the Company of up to an aggregate of $1,500,000. Pursuant to the terms and provisions of this note, the outstanding principal and accrued interest (at the rate of 12% per annum) are due and payable on November 1, 2008. The Company has the right to prepay such note at any time without premium. As of November 8, 2007, Bonnie Septimus had advanced an aggregate of $800,000 to the Company. Proceeds from the loans made by Bonnie Septimus to the Company have been used to satisfy and cancel four Secured Promissory Notes issued by the Company (see Note 3) in the aggregate amount of $460,000 and to make additional loans to Karat Platinum (as described above).
At any time, Bonnie Septimus has the right to convert all or any portion of the outstanding principal amount and accrued interest thereon into shares of the Company’s newly created Series B Convertible Preferred Stock (the “Series B Preferred”).
Each share of Series B Preferred is convertible into the amount of shares of common stock determined by dividing the original issue price of the Series B Preferred (currently $1,000) by $0.25 per share, as adjusted. The Certificate of Designation provides for full ratchet anti-dilution provisions with respect to certain securities issuance. The holders of the Series B Preferred vote with the holders of the common stock on an as converted basis and are entitled to dividends, on an as converted basis when, as, and if paid on the common stock, but not before the declaration and payment of any dividends payable to the holders of the Company’s outstanding Series A Convertible Preferred Stock. In the event of any liquidation, dissolution or winding up of the Company, either voluntarily or involuntarily, the holders of Series B Preferred shall have preference to any distribution of the assets of the Company to the holders of common stock of the Company, after the holders of the Series A Preferred. At any time after the two-year anniversary from the date of purchase, the Company has the right to redeem all of the issued and outstanding shares of Series B Preferred at a redemption price equal to the original issue price of said shares or convert all the issued and outstanding shares of Series B Preferred into the Company’s common stock at the them applicable conversion rate.
As a result of this creation of the Series B Preferred to Bonnie Septimus, the conversion price for the Series A Preferred and the exercise price of the Company’s outstanding 96,000 warrants was reduced from $0.50 to $0.25 per share.
On October 23, 2007 and October 24, 2007, three noteholders holding an aggregate of $600,000 outstanding principal amounts due to them from the Company extended the maturity date of their outstanding Secured Promissory Notes to January 31, 2008. As additional consideration for the extension, the Company agreed to pay each noteholder one percent of the principal amount of the note held by such noteholder. As of November 8, 2007, the Company had three such Secured Promissory Notes, representing an aggregate principal amount of $600,000 outstanding.
On October 25, 2007 the Company sold 50 shares of Series A Convertible Preferred stock for $50,000.
Item 2. Management’s Discussion and Analysis or Plan of Operations.
As used in this Form 10-QSB, references to the “Sentra,” “Company,” ”we,” “our” or “us” refer to Sentra Consulting Corp., unless the context otherwise indicates.
This Management’s Discussion and Analysis or Plan of Operations should be read in conjunction with the financial statements and the notes thereto.
Forward-Looking Statements
This Quarterly Report on Form 10-QSB contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Overview
We were incorporated on July 6, 2006 under the laws of the state of Nevada with the primary objective of becoming involved in the consulting business. We are a development stage company and have not generated any revenue to date. We currently have no employees other than our officers, who are also our directors.
Although our initial intention was to focus on becoming involved in business consulting, on June 21, 2007, we entered into a non-binding letter of intent (the “Letter of Intent”) to acquire all the membership interests of Karat Platinum, LLC (“Karat Platinum”), a company which manufactures and sells a platinum alloy and platinum jewelry. If we consummate such acquisition, we will then be involved in the business of Karat Platinum and cease our plans to become involved in business consulting. If we do not consummate such acquisition, we will continue with our plans to engage in business consulting.
Pursuant to the Letter of Intent, as amended, we would purchase all the outstanding membership interests of Karat Platinum from its members. In consideration therefore, we would issue to the members of Karat Platinum 30,000,000 shares of our common stock and 800,000 common stock purchase warrants to a previous lender of Karat Platinum. The warrants provide the holder thereof the right to purchase one share of common stock of the Company for $0.01 and expire 10 years after the issuance thereof. The closing of the transaction contemplated by the Letter of Intent is subject to the satisfaction of certain conditions, including without limitation, the execution of a mutually acceptable definitive agreement, the consent from the lenders to Karat Platinum of the transaction with the Company and/or the release of the collateral of Karat Platinum satisfactory to the Company, the completion of the due diligence investigation of both parties, the making of loans by the Company to Karat Platinum in an amount of not less than $1,000,000, the delivery of any required consents from third parties and the delivery of audited financial statements of Karat Platinum. If there is a closing, each of the Company and Karat Platinum will have the right to appoint 2 members to the Board of Directors of the Company and said members shall appoint a fifth member.
Pursuant to the terms of the Letter of Intent, as amended on October 25, 2007, Karat Platinum agreed that it will not directly or indirectly solicit, negotiate, or accept any offer from a third party to acquire any of Karat Platinum’s assets or securities until January 31, 2008.
To raise the funds required to make such loans and to advance Karat Platinum funds needed for their current operations, between June 22, 2007 and July 10, 2007, we raised $960,000 through the issuance of secured promissory notes, which was subsequently loaned to Karat Platinum, as described below. These promissory notes were secured by all of the assets of Karat Platinum. As addition consideration, we issued an aggregate of 96,000 stock purchase warrants to such noteholders.
On October 8, 2007, the Company issued a promissory note to Bonnie Septimus, the Company’s Treasurer, Secretary and a director, in consideration for loans made and to be made by Ms. Septimus to the Company of up to an aggregate of $1,500,000. As of November 14, 2007, Bonnie Septimus had advanced an aggregate of $800,000 to the Company. Proceeds from the loans made by Bonnie Septimus to the Company have been used to satisfy and cancel four Secured Promissory Notes issued by the Company in the aggregate amount of $360,000 and to make additional loans to Karat Platinum. Pursuant to the promissory note, at any time, Bonnie Septimus has the right to convert all or any portion of the outstanding principal amount and accrued interest thereon into shares of the Company’s Series B Convertible Preferred Stock (the “Series B Preferred”).
On October 23, 2007 and October 24, 2007, three noteholders, holding an aggregate of $600,000 outstanding principal amounts due to them from the Company, extended the maturity date of their outstanding Secured Promissory Notes to January 31, 2008. As additional consideration for the extension, the Company agreed to pay each noteholder one percent of the principal amount of the note held by such noteholder. As of November 14, 2007, the Company had three such Secured Promissory Notes, representing an aggregate principal amount of $600,000 outstanding.
In addition, between August 20, 2007 to October 29, 2007, the Company accepted subscriptions for Series A Convertible Preferred Stock (“Series A Preferred”) from 4 accredited investors, for an aggregate of 1,050 shares of Series A Preferred stock. The purchase price paid to the Company for such shares was $1,000 per share, amounting in the aggregate to $1,050,000. As a result of the issuance of the Series B Preferred to Bonnie Septimus, the conversion price for the Series A Preferred and the exercise price of the Company’s outstanding 96,000 warrants described above was reduced from $0.50 to $0.25 per share.
As disclosed in the Company’s Current Reports on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on June 28, 2007, July 2, 2007, July 17, 2007, August 24, 2007, and October 29, 2007, respectively, we have been using the proceeds raised from the issuance of the promissory notes, warrants, Series A Preferred stock, and loans from Bonnie Septimus, discussed herein, for the purpose of making the series of loans to Karat Platinum. As of September 30, 2007, the Company had loaned Karat Platinum an aggregate of $1,960,000. Thereafter, between October 9, 2007 and November 8, 2007, we loaned an additional $295,000 to Karat Platinum. Accordingly, as of November 14, 2007, the Company loaned Karat Platinum an aggregate of $2,255,000.
Plan of Operation
We have not had any revenues since our inception on July 6, 2006. Within the next twelve months, we intend to focus on completing acquisition of Karat Platinum. If we do not consummate such acquisition, then we will proceed with our plans to become engaged in business consulting.
Liquidity and Capital Resources
As of September 30, 2007, we had $25,045 in cash. During the quarter ended September 30, 2007, the Company had loaned Karat Platinum an aggregate of $1,360,000. If we close the transaction with Karat Platinum, we expect to incur a minimum of $6,000,000 in expenses over the next twelve months of operations, as said amount is the current operating expenses of Karat Platinum. We anticipate that these expenses will consist of operating, administrative and professional expenses in running Karat Platinum’s business.
If we are unable to close the transaction with Karat Platinum, we expect to incur a minimum of $50,000 in expenses during the next twelve months of operations. We estimate that this will be comprised of the following expenses: $3,000 in website development; and $20,000 in other marketing expenses. Additionally, $27,000 will be needed for general overhead expenses such as for salaries, corporate legal and accounting fees, office overhead and general working capital.
Over the next twelve months, we will also be required to repay at least $600,000, excluding interest, to the holders of promissory notes that we have previously issued. In addition, as of November 14, 2007, we owe $800,000, excluding interest, to Bonnie Septimus, an officer and director of the Company, for loans issued to the Company. Such amount will be due and payable within twelve months, unless such debt is converted into shares of Series B Preferred stock, as discussed above.
We will have to raise funds to pay for our expenses. We may have to borrow money from shareholders or issue debt or equity or enter into an arrangement with a bank or third party. The Company currently has no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. There can be no assurance that additional capital will be available to us. Our inability to raise funds will have a severe negative impact on our ability to remain a viable company.
Going Concern Consideration
The Company is a development stage company and has not commenced planned principal operations. The Company had no revenues and incurred a net loss of $118,144 for the quarter ended September 30, 2007 and a net loss of $165,061 for the period July 6, 2006 (inception) to September 30, 2007. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The financial statements contained herein for the period ending September 30, 2007, have been prepared on a “going concern” basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the reasons discussed herein and in the footnotes to our financial statements included herein, there is a significant risk that we will be unable to continue as a going concern. Our audited financial statements included in our Registration Statement on Form SB-2 (Registration No. 333-144943) for the period ending December 31, 2006, contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 3. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the United States Securities and Exchange Commission. Our principal executive and financial officers have reviewed the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) within the end of the period covered by this Quarterly Report on Form 10-QSB and have concluded that the disclosure controls and procedures are effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported in a timely manner. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the last day they were evaluated by our principal executive and financial officers.
Changes in Internal Controls over Financial Reporting
There have been no changes in the Company's internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Other than as previously disclosed in the Company’s Current Reports on Form 8-K dated August 24, 2007 and October 29, 2007, there have been no additional unregistered sales of equity securities during the quarter ended September 30, 2007.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
There was no matter submitted to a vote of security holders during the fiscal quarter ended September 30, 2007.
Item 5. Other Information.
None.
Item 6. Exhibits
Exhibit No. | | Description |
| | | |
| 31.1 | | Rule 13a-14(a)/15d14(a) Certification of Philip Septimus (Attached Hereto) |
| | | |
| 31.2 | | Rule 13a-14(a)/15d14(a) Certification of Bonnie Septimus (Attached Hereto) |
| | | |
| 32.1 | | Section 1350 Certifications (Attached Hereto) |
SIGNATURES
In accordance with to requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 14, 2007
| SENTRA CONSULTING CORP. |
| | |
| By: | /s/ Philip Septimus |
| | |
| Name: | Philip Septimus |
| Title: | President and Director |
| | (Principal Executive Officer) |
| | |
| By: | /s/ Bonnie Septimus |
| | |
| Name: | Bonnie Septimus |
| Title: | Treasurer, Secretary, and Director (Principal Financial and Accounting Officer) |
