UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2010
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 333-147979
CASEYCORP ENTERPRISES, INC.
(Exact name of small business issuer as specified in its charter)
Nevada (State of incorporation) | 98-0523910 (IRS Employer ID Number) |
410 Park Avenue, 15th Floor
New York, New York 10022
(Address of principal executive offices)
(888) 251-3422
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 ¨
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 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 | ¨ | Smaller reporting company | x |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of November 19, 2010, there were 45,000,000 shares of registrant’s common stock, par value $0.0001 per share outstanding.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
¨ Yes ¨ No
TABLE OF CONTENTS
Page | ||
PART I | ||
Item 1. | Financial Statements | 3-7 |
Item 2. | Management’s Discussion and Analysis or Plan of Operations | 8 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 9 |
Item 4. | Controls and Procedures | 9 |
PART II | ||
Item 1. | Legal Proceedings | 10 |
Item IA. | Risk Factors | 10 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 10 |
Item 3. | Defaults Upon Senior Securities | 10 |
Item 4. | Removed and Reserved | 10 |
Item 5. | Other Information | 10 |
Item 6. | Exhibits | 10 |
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CASEYCORP ENTERPRISES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, | December 31, | |||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 688,089 | $ | 138,555 | ||||
Accounts receivable | 181,527 | 562,774 | ||||||
Prepaid expenses and other current assets | 4,270 | 3,470 | ||||||
Total current assets | 873,886 | 704,799 | ||||||
Property and equipment - net | 35,912 | 12,884 | ||||||
Security deposits | 10,075 | 10,075 | ||||||
Intangible assets - net | 466,175 | 562,625 | ||||||
Goodwill | 598,200 | 598,200 | ||||||
Total assets | $ | 1,984,248 | $ | 1,888,583 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued liabilities | $ | 99,113 | $ | 31,062 | ||||
Accounts payable - related party | 454,155 | 359,583 | ||||||
Income taxes payable | 92,300 | 84,185 | ||||||
Loan payable, stockholder | - | 68,432 | ||||||
Loan payable | 4,500 | 4,500 | ||||||
Total current liabilities | 650,068 | 547,762 | ||||||
LONG-TERM LIABILITIES | ||||||||
Deferred income taxes | 113,362 | 140,118 | ||||||
Total liabilities | 763,430 | 687,880 | ||||||
COMMITMENTS | ||||||||
STOCKHOLDERS' EQUITY | ||||||||
Preferred stock, $.0001 par value; 5,000,000 shares authorized; none issued and outstanding | - | - | ||||||
Common stock, $.0001 par value; 500,000,000 shares authorized; 45,000,000 issued and outstanding | 4,500 | 4,500 | ||||||
Additional paid-in capital | 1,135,888 | 1,135,888 | ||||||
Retained earnings | 80,430 | 60,315 | ||||||
Total stockholders' equity | 1,220,818 | 1,200,703 | ||||||
Total liabilities and stockholders' equity | $ | 1,984,248 | $ | 1,888,583 |
See Notes to Condensed Consolidated Financial Statements.
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CASEYCORP ENTERPRISES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months | Nine Months | Three Months | Three Months | |||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Revenues | $ | 34,758,074 | $ | 24,875,458 | $ | 8,404,187 | $ | 16,864,690 | ||||||||
Cost of sales | 34,185,971 | 24,635,445 | 8,342,973 | 16,686,188 | ||||||||||||
Gross profit | 572,103 | 240,013 | 61,214 | 178,502 | ||||||||||||
General and administrative expenses | 538,308 | 104,942 | 190,819 | 79,396 | ||||||||||||
Income (loss) from operations | 33,795 | 135,071 | (129,605 | ) | 99,106 | |||||||||||
Interest expense | (270 | ) | (270 | ) | (90 | ) | (90 | ) | ||||||||
Income (loss) before provision of income taxes | 33,525 | 134,801 | (129,695 | ) | 99,016 | |||||||||||
Provision (benefit) for income taxes | 13,410 | 53,920 | (51,878 | ) | 37,714 | |||||||||||
Net income (loss) | $ | 20,115 | $ | 80,881 | $ | (77,817 | ) | $ | 61,302 | |||||||
Basic and diluted income per share: | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||
Weighted average number of shares outstanding | ||||||||||||||||
Basic and diluted | 45,000,000 | 25,379,834 | 45,000,000 | 28,310,440 |
See Notes to Condensed Consolidated Financial Statements.
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CASEYCORP ENTERPRISES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months | Nine Months | |||||||
Ended | Ended | |||||||
September 30, | September 30, | |||||||
2010 | 2009 | |||||||
(Unaudited) | (Unaudited) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 20,115 | $ | 80,881 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Common stock issued for services rendered | - | 250 | ||||||
Depreciation and amortization | 104,014 | - | ||||||
Deferred income taxes | (26,756 | ) | ||||||
(Increase) decrease in operating assets: | ||||||||
Accounts receivable | 381,247 | (643,787 | ) | |||||
Prepaid expenses and other current assets | (800 | ) | (9,400 | ) | ||||
Increase (decrease) in operating liabilities: | ||||||||
Accounts payable | 68,050 | 27,019 | ||||||
Accounts payable - related party | 94,572 | 762,410 | ||||||
Income taxes payable | 8,116 | 53,920 | ||||||
Net cash provided by operating activities | 648,558 | 271,293 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchases of property and equipment | (30,592 | ) | - | |||||
Net cash used in investing activities | (30,592 | ) | - | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Repayment of Loans from Stockholder | (68,432 | ) | - | |||||
Net cash used in financing activities | (68,432 | ) | - | |||||
INCREASE IN CASH | 549,534 | 271,293 | ||||||
CASH - BEGINNING OF PERIOD | 138,555 | - | ||||||
CASH - END OF PERIOD | $ | 688,089 | $ | 271,293 | ||||
Schedule of non-cash investing and financing transactions: | ||||||||
Issuance of common stock for acquisitions of subsidiaries | $ | - | $ | 810,000 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for: | ||||||||
Interest | $ | - | $ | - | ||||
Taxes | $ | 32,000 | $ | - |
See Notes to Condensed Consolidated Financial Statements.
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CASEYCORP ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 – GENERAL
Caseycorp Enterprises, Inc. (the “Company”) was incorporated on February 21, 2007 under the laws of the State of Nevada. The Company originally planned to focus on developing and distributing advanced surveillance and security products. On May 14, 2009, the Company acquired ESM Refiners, Inc. ("ESM") to enter into the business of being a wholesale buyer and seller of gold and diamonds. The Company acts as a middleman aggregating gold and diamonds, which is purchased primarily from retail jewelers (who have purchased gold from customers) and selling it to refiners. On October 2, 2009, the Company acquired all of the outstanding shares of EZSellGold.com, Inc. (“EZS”). EZS is engaged in the business of purchasing gold and diamonds from consumers.
NOTE 2 – BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2010, are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. These unaudited financial statements should be read in conjunction with the audited financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission on April 15, 2010.
The Company has evaluated subsequent events through the date of the filing.
NOTE 3 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
On January 1, 2010, the Company adopted the new provisions of Accounting Standards Update (ASU) No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures about Fair Value Measurements” (“ASU No. 2010-06”). ASU No. 2010-06 provides revised guidance on improving disclosures about valuation techniques and inputs to fair value measurements. The adoption of this standard had no effect on the financial statements of the Company.
In February 2010, the FASB issued Accounting Standards Update No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. This update provides amendments to Topic 855—Subsequent Events to clarify certain recognition and disclosure requirements. The amendments in this update remove the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. The topic now includes the definition of SEC filer but removed the definitions of public entity. All of the amendments in this update are effective upon the issuance of the final update. The adoption of FASB Accounting Standards Update No. 2010-09 did not have an effect on our consolidated financial statements.
In April 2010, the FASB issued Accounting Standards Update 2010-17 (ASU 2010-17), “Revenue Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition.” The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The adoption of the provisions of ASU 2010-17 did not have a material effect on the financial position or results of operations of the Company.
Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying financial statements.
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Substantially all of the Company’s financial instruments, consisting primarily of cash, accounts receivable, accounts payable and accrued expenses and accounts payable – related party are carried at, or approximate, fair value because of their short-term nature.
NOTE 5 – BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted income (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued and outstanding as of September 30, 2010 and 2009.
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NOTE 6 – ACCOUNTS PAYABLE – RELATED PARTY
On May 14, 2009, the Company entered into an exclusive purchasing agreement with Ed & Serge Gold and Diamond, Inc. (“ESGD”), an entity wholly-owned by one of the Company’s stockholders. Under the agreement, ESGD has agreed not to sell any gold and diamonds to any other party other than ESM. ESM retains the right, however, to purchase from other vendors. Under the agreement, ESGD has agreed to invoice the Company at cost plus .05% on daily sales of up to $250,000 and .025% of daily sales over on amounts over $250,000. The agreement is for five years and automatically renews for additional one year periods unless notified by either party. Substantially all of the merchandise purchases that were made by the Company for the nine and three months ended September 30, 2010 and 2009 was from ESGD.
In addition, the Company shares space with ESDG and receives rent from ESDG on a month-to-month basis of $3,000.
At September 30, 2010, the Company owed ESGD $454,155 .
NOTE 7 – LOANS PAYABLE - STOCKHOLDER
Loans payable – stockholder consisted of non-interest bearing advances due on demand.
NOTE 8 – SALES AND MAJOR CUSTOMERS
One customer accounted for 88% and 85% of total revenues for the nine and three months ended September 30, 2010, respectively. At September 30, 2010, one customer accounted for 91% of accounts receivable. Two customers accounted for 98 and 99%, respectively, of total revenues for the nine and three months ended September 30, 2009. At December 31, 2009, these two customers accounted for 58% and 42% of accounts receivable.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
As used in this Form 10-Q, references to the “CaseyCorp,” Company,” “we,” “our” or “us” refer to CaseyCorp Enterprises, Inc. unless the context otherwise indicates.
Forward-Looking Statements
The following discussion should be read in conjunction with our financial statements, which are included elsewhere in this Form 10-Q (the “Report”). This Report 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. The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements include matters relating to the business and financial condition of any company we acquire. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise. 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
The Company originally planned to focus on developing and distributing advanced surveillance and security products. On May 14, 2009, the Company acquired ESM to enter into the business of being a wholesale buyer and seller of gold, diamonds and other precious metals. The Company acts as a middleman aggregating the gold, diamonds and other precious metals, which are purchased primarily from retail jewelers (who have purchased the products from customers) and selling it to refiners at a mark up ranging from .75% to 1.1%. On October 2, 2009, the Company acquired EZS which is engaged in the business of purchasing gold and diamonds from consumers.
Results of Operations
Revenues
Revenues for the nine and three months ended September 30, 2010 were $34,758,074 and $8,404,187, respectively. We sold gold and other precious metals primarily to one refiner which accounted for 88% and 85% of total revenues for the nine and three months ended September 30, 2010. The Company also sold diamonds in the amount of $964,302 and $226,900 to various dealers for the nine and three months ended September 30, 2010. Revenues for the nine and three month periods ended September 30, 2009 were $24,875,458 and $16,864,690, respectively. There were no sales of diamonds in 2009. We sold gold and other precious metals primarily to one refiner which accounted for 98% and 99% of total revenues for the nine and three months ended September 30, 2009. Revenues are down for the quarter due to increased competition in the gold buying market.
Cost of Sales and Gross Profit
Cost of sales for the nine and three months ended September 30, 2010 were $34,185,971 and $8,342,973, respectively. The gross profit for the periods amounted to 1.65 % and .73% of revenue, respectively. Cost of sales for the nine and three month periods ended September 30, 2009 were $24,635,445 and $16,686,188, respectively. The gross profit for the periods was 0.97% and 1.06%, respectively, of revenue. The increase in gross profit percentage in 2010 as compared to 2009 is primarily due to higher gross margins earned on diamond sales. However, the quarter was impacted by the current volatility in gold prices. We committed to several deliveries of gold at prices that were lower than we were able to purchase it.
General and Administrative
General and administrative expenses for the nine and three months ended September 30, 2010 were $538,308 and $190,819, respectively, which is primarily rent, payroll and professional fees. In addition, general and administrative expenses include the amortization of the exclusive purchasing agreement in the amount of $96,450. General and administrative expenses for corresponding period in 2009 were $104,942 and $79,396. As noted above, the Company commenced business in May 2009.
Liquidity and Capital Resources
As of September 30, 2010, we had cash of $688,089.
Cash provided by operating activities amounted to $648,558.
8
Cash used by investing activities amounted to $30,592 and represented the purchase of various property and equipment.
Cash used by financing activities amounted to $68,432 and consisted of the repayment of the stockholder loans.
Management believes that cash on hand, plus anticipated revenue will be sufficient to support our operations for the next twelve months provided that, in the event that the Company shall acquire additional products or subsidiaries, we may require significant amounts of additional capital sooner than that. In such a case, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or convertible debt securities could result in additional dilution to our stockholders. Incurring indebtedness would result in an increase in our fixed obligations and could result in borrowing covenants that would restrict our operations. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. If financing is not available when required or is not available on acceptable terms, we may be unable to develop or enhance our products or services, or, we may potentially not be able to continue business activities. Any of these events could have a material and adverse effect on our business, results of operations and financial condition.
The statement made above relating to the adequacy of our working capital is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act of 1995. The statements that express the “belief,” “anticipation,” “plans,” “expectations,” “will” and similar expressions are intended to identify forward-looking statements.
Critical Accounting Policies and Estimates
Our discussion and analysis of its financial condition and results of operations are based upon its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, income taxes and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
Not required of smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We carried out an evaluation required by Rule 13a-15(b) of the Securities Exchange Act of 1934 or the Exchange Act under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.
Disclosure controls and procedures are designed with the objective of ensuring that (i) information required to be disclosed in an issuer's reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) information is accumulated and communicated to management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
The evaluation of our disclosure controls and procedures included a review of our objectives and processes and effect on the information generated for use in this Report. This type of evaluation is done quarterly so that the conclusions concerning the effectiveness of these controls can be reported in our periodic reports filed with the SEC. We intend to maintain these controls as processes that may be appropriately modified as circumstances warrant.
Based on their evaluation, our Principal Executive Officer and Principal Financial Officer has concluded that our disclosure controls and procedures are effective in timely alerting them to material information which is required to be included in our periodic reports filed with the SEC as of the filing of this Report.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the nine months ended September 30, 2010.
9
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no pending legal proceedings to which the Company is a party or, to the Company’s knowledge, 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 1A. RISKS FACTORS.
Not required of smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Unregistered Sales of Equity Securities
None.
Purchases of equity securities by the issuer and affiliated purchasers
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. REMOVED AND RESERVED.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS.
Exhibit No. | Description | |
31.1 | PEO and PFO certification required under Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | PEO and PFO certification required under Section 906 of the Sarbanes-Oxley Act of 2002 |
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.
CASEYCORP ENTERPRISES, INC. | |||
Dated: November 19, 2010 | Eduard Musheyev | ||
By: | /s/ Eduard Musheyev | ||
Name: | Eduard Musheyev | ||
Title: | President, Chief Executive Officer, and Director | ||
(Principle Executive, Financial and Accounting Officer) |
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