UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
| (MARK ONE) | |
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended May 31, 2010 | |
| OR | |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT |
| For the transition period from ______________ to ______________ | |
Commission File No. 000-53412
CATALYST GROUP HOLDINGS CORP.
(Exact name of small business issuer as specified in its charter)
| Delaware | 26-3142811 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) |
1739 Creekstone Circle, San Jose, CA 95133
(Address of principal executive offices)
(408) 691-0806
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer o Do not(( check if smaller reporting company) | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of August 3, 2010 there are 1,775,771 shares of the registrant's common stock outstanding.
| PART I Financial Information | ||
| Item 1. | 3 | |
| 3 | ||
| 4 | ||
| 5 | ||
| 6 | ||
| Item 2. | 9 | |
| Item 3. | 11 | |
| Item 4. | 11 | |
| PART II Other Information | ||
| Item 1. | 12 | |
| Item 1A. | 12 | |
| Item 2. | 12 | |
| Item 3. | 12 | |
| Item 4. | 12 | |
| Item 5. | 12 | |
| Item 6. | 13 | |
| 14 | ||
PART I - FINANCIAL INFORMATION
Balance Sheets (unaudited)
| May 31, 2010 | August 31, 2009 | |||||||
| Assets: | ||||||||
| Current Assets | ||||||||
| Cash | $ | 21,907 | $ | - | ||||
| Other Assets | ||||||||
| Goodwill | 288,401 | - | ||||||
| Intangible Assets, net amortization $8,334 | 41,666 | - | ||||||
| Due from Ken Green | - | 15,000 | ||||||
| Total assets | $ | 351,974 | $ | 15,000 | ||||
| Liabilities & Stockholders’ Deficit: | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable | $ | 25,482 | $ | 233 | ||||
| Accrued Liabilities | 5,795 | - | ||||||
| Convertible Debenture | 250,000 | - | ||||||
| Loan payable | 104,170 | - | ||||||
| Total Current Liabilities | 385,447 | 233 | ||||||
| Due to related parties | - | 75,698 | ||||||
| Total liabilities | 385,447 | 75,931 | ||||||
| Stockholders’ Deficit | ||||||||
| Additional paid in capital | 188,389 | 8,759 | ||||||
Common stock $.001 par value, 100,000,000 authorized, 1,775,771 and 1,045,480 issued and outstanding as of May 31, 2010 and August 31, 2009 respectively | 1,776 | 1,045 | ||||||
| Accumulated deficit | (223,638 | ) | (70,735 | ) | ||||
| Total Stockholders Deficit | (33,473 | ) | (60,931 | ) | ||||
| Total Liabilities & Stockholders Deficit | $ | 351,974 | $ | 15,000 | ||||
| Consolidated | Consolidated | REP's | REP's | (Predecessor) | ||||||||||||||||||||
| 3 Months | 9 Months | 3 Months | 9 Months | REP's | Consolidated | |||||||||||||||||||
| Ended | Ended | Ended | Ended | September 1, 2009- | November 17, 2009- | |||||||||||||||||||
| May 31, 2010 | May 31, 2010 | May 31, 2009 | May 31, 2009 | November 16, 2009 | May 31, 2010 | |||||||||||||||||||
| Revenue | $ | 82,851 | $ | 151,013 | $ | 100,149 | $ | 257,307 | $ | 61,018 | $ | 141,366 | ||||||||||||
| General and administrative expenses | (161,761 | ) | (291,678 | ) | (76,975 | ) | (210,683 | ) | (222,729 | ) | (278,175 | ) | ||||||||||||
| Operating income ( loss) | (78,910 | ) | (140,665 | ) | 23,174 | 46,624 | (161,711 | ) | (136,809 | ) | ||||||||||||||
| Interest expense | (8,433 | ) | (12,238 | ) | (342 | ) | (13,632 | ) | (7,758 | ) | (12,238 | ) | ||||||||||||
| Net income (loss) | $ | (87,343 | ) | $ | (152,903 | ) | $ | 22,832 | $ | 32,992 | (169,469 | ) | (149,047 | ) | ||||||||||
| Net loss per common share (basic and diluted) | $ | (0.06 | ) | $ | (0.12 | ) | $ | - | $ | - | $ | - | $ | (0.11 | ) | |||||||||
Weighted Average common shares outstanding (basic and diluted) | 1,545,961 | 1,235,628 | - | - | - | 1,311,879 | ||||||||||||||||||
| (Predecessor) | ||||||||
| Consolidated | REP's | |||||||
| 9 Months | 9 Months | |||||||
| Ending | Ending | |||||||
| May 31, 2010 | May 31, 2009 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | (152,903 | ) | $ | 32,992 | |||
| Adjustments to reconcile net loss | ||||||||
| to net cash provided by operations: | ||||||||
| Related party AR write off | 15,000 | - | ||||||
| Depreciation | 8,334 | - | ||||||
| Shares issued for services | 10,200 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts payable | 31,045 | 29,837 | ||||||
| Prepaid expense | - | 100 | ||||||
| Accounts Receivable | 3,979 | (10,036 | ) | |||||
| Net cash provided (used) by Operating Activities | (84,345 | ) | 52,893 | |||||
| INVESTING ACTIVITIES | ||||||||
| Cash acquired in acquisition | 1,886 | - | ||||||
| Net cash provided by Investing Activities | 1,886 | - | ||||||
| FINANCING ACTIVITIES | ||||||||
| Owners Draw | - | (47,761 | ) | |||||
| Proceeds from loan | 9,904 | - | ||||||
| Payment on loan | - | (5,132 | ) | |||||
| Stock for Cash | 94,462 | - | ||||||
| Net cash provided by Financing Activities | 104,366 | (52,893 | ) | |||||
| Net cash increase for period | 21,907 | - | ||||||
| Cash at beginning of period | - | - | ||||||
| Cash at end of period | $ | 21,907 | $ | - | ||||
| Non-Cash Disclosures | ||||||||
| Reclass A/P related party to contributed capital | $ | 75,698 | $ | - | ||||
| Intangibles acquired by Catalyst | $ | 340,287 | $ | - | ||||
| Acquisitions of REPS through convertible debt | $ | 250,000 | $ | - | ||||
| Loans acquired by catalyst | $ | 94,266 | $ | - | ||||
| Accounts receivable acquired | $ | 3,979 | $ | - | ||||
| SUPPLEMENTAL CASHFLOW DISCLOSURE | ||||||||
| Interest paid | $ | - | $ | - | ||||
| Income taxes paid | $ | - | $ | - | ||||
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Catalyst Group Holdings Corp. ("the Company") was incorporated in Delaware on August 7, 2008 as a blank check development stage company to acquire, through a merger, capital stock exchange, asset or stock acquisition, exchangeable share transaction or other similar business combination one or more domestic or international operating businesses.
Acquisition: On November 16, 2009 the registrant acquired 100% of Real Estate Promotional Services, Inc. (REPS) for $250,000 subject to delivery of audited financial statements and compliance with other conditions set forth in the stock purchase agreement. There was a 6 month convertible note that bears an interest rate of 10% and has a conversion ratio of 1 common share for every $1 outstanding. The note was extended an additional six months with an extended due date of November 16, 2010.
PREDECESSOR
REPS is considered to be the predecessor entity because Catalyst was a development stage enterprise and was much smaller than REPS. These financial statements include the accounts of REPS’. The accompanying financial statements have been prepared to present the statements of financial position of REPS’ and statements of operations and cash flows of REPS’ for inclusion in the Company’s Form S-1/A for purposes of complying with the rules and regulations of the Securities and Exchange Commission as required by S-X Rule 8-02. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America using REPS specific information maintained within its books and records.
Due to the acquisition of Reps, the registrant is no longer a development stage company.
NOTE 2: PURCHASE OF REPS
On November 16, 2009, we purchased REPS in consideration for a convertible debenture for $250,000. The convertible debenture provides for interest at 10% per annum and was due and payable six months from the purchase date. The note was extended an additional six months with an extended due date of November 16, 2010. The debenture may be converted into common shares at $1.00 per share, which represents management’s assertion of the fair value of the stock, at the option of either the Company or Jeff Crowe, the sole shareholder of REPS.
REPS is a printing company that designs and delivers marketing collateral for the real estate industry and individual/small businesses. Our products include postcards, brochures, business cards, and Web site development.
A large percentage of REPS’s revenue comes from real estate agents. REPS intends to diversify its client base to more individuals and small businesses. The sales cycle for REPS is very rapid; most orders are produced and sold in two days.
The acquisition of REPS is accounted for as a purchase and the operations of the company will be consolidated with those of Catalyst as of November 16, 2009. The parties determined that the effective date of the acquisition was November 16, 2009, the date of which Catalyst assumes all the responsibility for any losses or profits that might be incurred during the period.
Catalyst Group Holdings Corp
The $250,000 purchase price was allocated as follows based upon the fair value of the acquired assets, and liabilities assumed as determined by management.
| Cash | $ | 1,886 | ||
| Accounts receivable | 3,979 | |||
| Goodwill | 288,401 | |||
| Intangible assets | 50,000 | |||
| Accrued liabilities | (94,266 | ) | ||
| Total | $ | 250,000 |
The $50,000 of acquired intangible assets (customer list/company name) has a useful life of approximately 3 years. As of May 31, 2010 accumulated amortization for the intangible asset was $8,334.
NOTE 3: RELATED PARTY TRANSACTIONS
Consulting and accounting fees of $49,358 were paid to 2 directors. The amount due to CFGI (a company related to Ken Green) by the Company was $73,859 and $15,000 due from Ken Green at August 31, 2009 were netted and forgiven subsequently and treated as a contribution to capital.
NOTE 4: NOTES PAYABLE
The loan is a business instrument from Opticom Services in San Diego, California. The term of the loan is 10 years beginning in January 2000. The original loan was made to Jeff Crowe, individually, and assumed by the Company in 2007. The loan carries an interest rate of 11.3% with monthly payments of $1,396. The note was deferred and has a balance of $27,260. Payment of $15,000 was made in June/July in full satisfaction of the note.
Through the acquisition of REPS’ Catalyst acquired the following notes:
The REPS purchase $250,000 convertible debenture, which carries interest at 10% per annum and will be due and payable twelve months from the closing date of the transaction. The debenture may be converted into shares of the Company’s common stock at the conversion rate of $1.00 per share, which represents management’s assertion of the fair value of the stock, at the option of either the Company or Jeff Crowe, the sole shareholder of REPS.
The liabilities are business lines of credit from Wells Fargo and Chase which is accessed by a credit card. The credit limit is $79,000, the current interest rates are 6.75% and 19.99%, and balances are $44,216 and $23,616, respectively. There is a business line of credit from Capital One which is accessed by a credit card. The credit limit is $10,000 and the current interest rate is 12.9% and balance $9,078.
NOTE 5: CONVERTIBLE DEBENTURE
Through the acquisition of REPS’ Catalyst acquired the following notes:
The REPS purchase $250,000 convertible debenture, which carries interest at 10% per annum and will be due and payable twelve months from the closing date of the transaction. The debenture may be converted into shares of the Company’s common stock at the conversion rate of $1.00 per share, which represents management’s assertion of the fair value of the stock, at the option of either the Company or Jeff Crowe, the sole shareholder of REPS.
NOTE 6: STOCKHOLDERS' EQUITY
At May 31, 2010, the authorized capital of the Company consists of 100,000,000 shares of common stock with a par value of $.001. At May 31, 2010 there are 1,775,771 shares of common stock outstanding.
During the three months ended February 28, 2010, there were 220,480 shares issued for cash of $35,599.
In May 2010, $58,863 was raised from existing shareholders for 387,202 additional shares to pay company expenses, most of which are filing preparation and consulting. There was 68,000 shares issued during the quarter to a related party for consulting services of $10,200.
55,089Anti-dilution shares were issued to a party who has an agreement with the Company that ensures it will retain 9.57% ownership in the company.
Catalyst Group Holdings Corp
NOTE 7: GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company does not have sufficient working capital for its planned activity, which raises substantial doubt about its ability to continue as a going concern.
Continuation of the company as a going concern is dependent upon obtaining additional working capital and the management of the Company has developed a strategy, which it believes will accomplish this objective through short-term loans from its shareholders and additional equity investments, which will enable the Company to continue operations for the coming year. There can be no assurance that the Company's efforts will be successful. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE 8: SUBSEQUENT EVENTS:
Payment of $15,000 was made in June and July in full satisfaction of the Opticom note.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FORWARD LOOKING STATEMENT NOTICE
Certain statements made in this Quarterly Report on Form 10-Q are "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) in regard to the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Catalyst Group Holdings Corp. I ("we", "us", "our" or the "Company") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. A ssumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.
Catalyst Group Holdings Corp. was incorporated on August 7, 2008 under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions.
For the three months ended May 31, 2010, the consolidated Catalyst Group Holdings Corp. recognized a net loss of $87,343 as compared to Real Estate Promotional Services’ net income of $22,832 the prior year. For the nine months ended May 31, 2010, the consolidated Catalyst Group Holdings Corp. recognized a net loss of $152,903 as compared to Real Estate Promotional Services’ net income of $32,992 the prior year.
One of the Company's current business objective is to locate suitable business combination opportunities.
During the next 12 months we anticipate incurring costs related to:
(i) Filing of Exchange Act reports;
(ii) Officer and director's salaries and rent; and
(iii) Consummating acquisitions.
We believe we will be able to meet these costs through amounts, as necessary, to be loaned by or invested in us by our stockholders, management or other investors. However, no assurance can be given that we will be able to raise additional capital, when needed or at all, or that such capital, if available, will be on acceptable terms. In the absence of obtaining additional financing, the Company may be unable to fund its operations. Accordingly, the Company's financial condition could require that the Company seek the protection of applicable reorganization laws in order to avoid or delay actions by third parties, which could materially adversely affect, interrupt or cause the cessation of the Company's operations. As a result, the Company's independent registered public accounting firm has issued a going concern qualification on the consolidated financial statements of the Company for the quarter ended May 31, 2010.
Prior to consummating another business combination transaction, we do not anticipate:
(i) Any expenditures for research and development;
(ii) Any expenditures or cash receipts for the purchase or sale of any property plant or equipment; or
(iii) Any significant change in the number of employees.
LIQUIDITY AND CAPITAL RESOURCES
While the Company believes that it will succeed in attracting additional capital and generate capital from operations, there can be no assurance that the Company's efforts will be successful. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Management anticipates seeking out a target company through solicitation. Such solicitation may include newspaper or magazine advertisements, mailings and other distributions to law firms, accounting firms, investment bankers, financial advisors and similar persons, the use of one or more World Wide Web sites and similar methods. No estimate can be made as to the number of persons who will be contacted or solicited. Management may engage in such solicitation directly or may employ one or more other entities to conduct or assist in such solicitation. Management and its affiliates will pay referral fees to consultants and others who refer target businesses for mergers into public companies in which management and its affiliates have an interest. Payments are made if a business combination occurs, and may consist of cash or a portion of the stock in the Company retained by management and its affiliates, or both.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our business is not currently subject to market risk. All of our business is currently conducted in US dollars, which is our functional currency. We have no interest bearing debt and are not subject to any interest rate risk.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the "Exchange Act")) that are designed: (i) to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) to ensure that such information is communicated to the management, including our Principal Executive and Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our Principal Executive and Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, and based on that evaluation, our Principal Executive and Financial Officer has concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) are not effective.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors previously disclosed under item 1 of the Company's Registration Statement on Form 10 as filed with the United States Securities and Exchange Commission on September 12, 2008.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
| Exhibit No. | Description | |
| 3.1 | Certificate of Incorporation (1) | |
| 31 | ||
| 32 |
_________
(1) Incorporated by reference to the Registrant's filing of Form 10 as filed with the Securities and Exchange Commission on September 12, 2008
(2) Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CATALYST GROUP HOLDINGS CORP. (Registrant) | |||
| August 4, 2010 | By: | /s/ Kenneth Green | |
| Kenneth Green | |||
| Chief Executive and Financial Officer | |||
| /s/ Lincoln Ong | August 4, 2010 | |
| Lincoln Ong | ||
| Director | ||
| /s/ Bob Bates | August 4, 2010 | |
| Bob Bates | ||
| Director |
14