UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
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(Mark one)
X Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
- ------- Act of 1934
For the quarterly period ended March 31, 2004
Transition Report Under Section 13 or 15(d) of the Securities Exchange
- ------- Act of 1934
For the transition period from ______________ to _____________
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Commission File Number: 000-21627
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Safe Alternatives Corporation of America, Inc.
(Exact name of small business issuer as specified in its charter)
Florida 06-1413994
(State of incorporation) (IRS Employer ID Number)
2614 Main Street, Dallas TX 75226
(Address of principal executive offices)
(214) 670-0005
(Issuer's telephone number)
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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
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State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: May 24, 2004: 165,853,058
Transitional Small Business Disclosure Format (check one): YES NO X
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Safe Alternatives Corporation of America, Inc.
Form 10-QSB for the Quarter ended March 31, 2004
Table of Contents
Page
----
Part I - Financial Information
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 12
Item 3 Controls and Procedures 13
Part II - Other Information
Item 1 Legal Proceedings 13
Item 2 Changes in Securities 13
Item 3 Defaults Upon Senior Securities 13
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8-K 14
Signatures 14
2
PART I
Item 1 - Financial Statements
Safe Alternatives Corporation of America, Inc.
Balance Sheet
March 31, 2004 and 2003
(Unaudited)
March 31, March 31,
2004 2003
------------ ------------
ASSETS
------
Current Assets
Cash on hand and in bank $ -- $ --
------------ ------------
Total current assets -- --
------------ ------------
TOTAL ASSETS $ -- $ --
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable - trade $ 806 $ 18,560
Advances from affiliate 2,659 --
Accrued interest payable -- 7,591
------------ ------------
Total current liabilities 3,465 26,151
------------ ------------
Commitments and contingencies
Convertible notes payable -- 25,000
------------ ------------
Stockholders' Equity (Deficit)
Common stock - $0.0001 par value
175,000,000 shares authorized
165,853,058 shares issued and outstanding 16,585 8,113
Additional paid-in capital 23,711,311 22,806,382
Accumulated deficit (23,733,520) (22,867,805)
------------ ------------
(5,624) (53,310)
Subscriptions issuable 2,160 2,160
Treasury stock - at cost (11,682 shares) (1) (1)
------------ ------------
Total stockholders' equity (deficit) (3,465) (51,151)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ -- $ --
============ ============
The financial information presented herein has been prepared by
management without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
3
Safe Alternatives Corporation of America, Inc.
Statements of Operations and Comprehensive Loss
Three months ended March 31, 2004 and 2003
(Unaudited)
Three months Three months
ended ended
March 31, March 31,
2004 2003
------------- -------------
Revenuest $ -- $ --
------------- -------------
Operating expenses
General and administrative expenses 10,010 2,487
Interest expense -- 375
Compensation expense related to
common stock issuances at less
than "fair value" 838,736 --
Depreciation and amortization -- --
------------- -------------
Total operating expenses 848,746 2,487
------------- -------------
Loss before provision for income taxes (848,746) (2,487)
Income tax benefit (expense) -- --
------------- -------------
Net Loss (848,746) (2,487)
Other comprehensive income -- --
------------- -------------
Comprehensive Loss $ (848,746) $ (2,487)
============= =============
Net loss per weighted-average share
of common stock outstanding,
calculated on Net Loss - basic and fully diluted $ (0.01) nil
============= =============
Weighted-average number of shares
of common stock outstanding 165,853,058 165,853,058
============= =============
The financial information presented herein has been prepared by
management without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
4
Safe Alternatives Corporation of America, Inc.
Statements of Cash Flows
Three months ended March 31, 2004 and 2003
(Unaudited)
Three months Three months
ended ended
March 31, March 31,
2004 2003
------------ ------------
Cash Flows from Operating Activities
Net loss for the period $ (848,746) $ (2,487)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation -- --
Professional fees paid with common stock 8,472 --
Compensation expense related to common
stock issuances at less than "fair value" 838,736 --
Increase (Decrease) in
Accounts payable - trade (1,121) (2,379)
------------ ------------
Net cash used in operating activities (2,659) (4,491)
------------ ------------
Cash Flows from Investing Activities -- --
------------ ------------
Cash Flows from Financing Activities
Cash advanced by affiliate to support operations 2,659 --
Cash contributed to support operations -- 4,491
------------ ------------
Net cash provided by financing activities 2,659 4,491
------------ ------------
Increase (Decrease) in Cash -- --
Cash at beginning of period -- --
------------ ------------
Cash at end of period $ -- $ --
============ ============
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid for the period $ -- $ --
============ ============
Income taxes paid for the period $ -- $ --
============ ============
The financial information presented herein has been prepared by
management without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
5
Safe Alternatives Corporation of America, Inc.
Notes to Financial Statements
NOTE A - Organization and Description of Business
Safe Alternatives Corporation of America, Inc. (Company) was organized in 1976,
under the name Knight Airlines, Inc., to engage in the commuter airline
business. In October 1978, the Company completed an initial public offering of
its Common Stock in Florida, pursuant to an exemption from registration under
Regulation A promulgated under the Securities Act of 1933, as amended. The
Company operated as a commuter airline from its inception through April 1983,
when it ceased operations and all of the assets of the Company were sold to
satisfy all outstanding indebtedness. From April 1983, through September 1995,
the Company was dormant. In May 1994, the name of the Company was changed to
Portsmouth Corporation.
On September 15, 1995, pursuant to the terms of an Asset Purchase Agreement and
Plan of Reorganization dated as of August 21, 1995 (the "Agreement") between
Safe Alternatives Corporation of America, Inc., a Delaware corporation
("SAC-Delaware") and the Company, the Company purchased the business (the
"Business"), including, without limitation, all of the assets of SAC-Delaware,
and assumed all of the liabilities of SAC-Delaware (the "Reorganization"), and
commenced operations. Prior to the Reorganization, the Company had no meaningful
operations. On March 4, 1996, the Company changed its name to Safe Alternatives
Corporation of America, Inc. (a Florida corporation).
On September 17, 2002, the Board of Directors of the Company agreed to sell, as
of June 30, 2002, of all of the Company's assets to Environmental Alternatives,
Inc. ("EAI"), a privately held Vermont corporation, in exchange for EAI's
assumption of and agreement to indemnify and hold the Company harmless from
paying any and all claims, causes of action, or other liabilities, including but
not limited to interest, costs, expenses, disbursements and attorneys' fees,
that could, may or does attach to the Company as of June 30, 2002 as a result
of, or is in any way related to any of the Company's obligations to its
creditors and all adverse judgments entered against the Company except any
obligations to the following: (A) Continental Stock Transfer and Trust Company,
the Company's independent stock transfer agent; (B) Green, Holman, Frenia &
Company, L.L.P., the Company's former independent auditors; (C) Arab Commerce
Bank, a holder of a 6% Convertible Note; and (D) any settlement amounts due upon
the completion of a merger or other combination between the Company and another
company. Except as provided above, the agreement to assume the Company's
liabilities and to indemnify and hold the Company harmless from paying the same
is unlimited as to amount or as to time. A copy of the Agreement was filed by
the Company as an exhibit in a Current Report on Form 8-K as of September 17,
2002. Since July 1, 2002, the Company has had no assets or operating activities.
NOTE B - Preparation of Financial Statements
The Company follows the accrual basis of accounting in accordance with
accounting principles generally accepted in the United States of America and has
a year-end of December 31.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Management further acknowledges that it is solely responsible for adopting sound
accounting practices, establishing and maintaining a system of internal
accounting control and preventing and detecting fraud. The Company's system of
internal accounting control is designed to assure, among other items, that 1)
recorded transactions are valid; 2) valid transactions are recorded; and 3)
transactions are recorded in the proper period in a timely manner to produce
financial statements which present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods being
presented.
(Remainder of this page left blank intentionally)
6
Safe Alternatives Corporation of America, Inc.
Notes to Financial Statements - Continued
NOTE B - Preparation of Financial Statements - Continued
During interim periods, the Company follows the accounting policies set forth in
its annual audited financial statements filed with the U. S. Securities and
Exchange Commission on its Annual Report on Form 10-KSB for the year ended
December 31, 2003. The information presented within these interim financial
statements may not include all disclosures required by generally accepted
accounting principles and the users of financial information provided for
interim periods should refer to the annual financial information and footnotes
when reviewing the interim financial results presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the U. S. Securities and Exchange Commission's
instructions for Form 10-QSB, are unaudited and contain all material
adjustments, consisting only of normal recurring adjustments necessary to
present fairly the financial condition, results of operations and cash flows of
the Company for the respective interim periods presented. The current period
results of operations are not necessarily indicative of results which ultimately
will be reported for the full fiscal year ending December 31, 2004.
NOTE C - Going Concern Uncertainty
As of July 1, 2002, the Company has no assets or operations and intends to seek
a suitable business combination transaction through either a purchase or merger.
The Company's continued existence is dependent upon its ability to generate
sufficient cash flows from operations to support its daily operations as well as
provide sufficient resources to retire existing liabilities and obligations on a
timely basis. Additionally, as a result of our having no assets, several
liabilities and no operations, our auditors have issued an audit opinion on our
accompanying financial statements which includes a statement describing our
going concern status. This means, in our auditor's opinion, substantial doubt
about our ability to continue as a going concern exists at the date of their
opinion.
On May 14, 2004, the Company's President, Dale Hensel, executed a Letter of
Intent with Mortgage Assistance Corporation, a Texas corporation controlled by
Mr. Hensel, whereby subject to the approval of the Company's shareholders,
Mortgage Assistance Corporation offered to be acquired by the Company on the
following terms and conditions: SACA board will call a special shareholder
meeting or obtain a majority shareholder consent in lieu of a special meeting
according to the Florida Business Corporation Statutes and recommend and approve
the following actions:
1. Effect a reverse split of the Company's common shares on a One for Two
Hundred Fifty (1:250) basis;
2. Effect a corporate name change from Safe Alternatives Corporation of
America, Inc. Mortgage Assistance Corporation;
3. Change the authorized number of common stock shares to be issued from
175,000,000 to 50,000,000 shares;
4. Authorized a business combination whereby the Company will exchange
12,000,000 post reverse split common shares for all of the issued and
outstanding common stock of Mortgage Assistance Corporation; and
5. Any such further recommendations as may be considered reasonable and
in the best interest of the shareholders.
While the Company is of the opinion that good faith estimates of the Company's
ability to secure additional capital in the future to reach our goals have been
made, there is no guarantee that the Company will receive sufficient funding to
sustain operations or implement any future business plan steps.
If no additional operating capital is received during the next twelve months,
the Company will be forced to rely on existing cash in the bank and upon
additional funds loaned by management and/or significant stockholders to
preserve the integrity of the corporate entity at this time. In the event the
Company is unable to acquire advances from management and/or significant
stockholders, the Company's ongoing operations would be negatively impacted.
7
Safe Alternatives Corporation of America, Inc.
Notes to Financial Statements - Continued
NOTE C- Going Concern Uncertainty - Continued
It is the intent of management and significant stockholders to provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity. However, no formal commitments or arrangements to advance
or loan funds to the Company or repay any such advances or loans exist. There is
no legal obligation for either management or significant stockholders to provide
additional future funding.
NOTE D - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
For Statement of Cash Flows purposes, the Company considers all cash on
hand and in banks, including accounts in book overdraft positions,
certificates of deposit and other highly-liquid investments with maturities
of three months or less, when purchased, to be cash and cash equivalents.
2. Income Taxes
------------
The Company uses the asset and liability method of accounting for income
taxes. At March 31, 2004 and 2003, respectively, the deferred tax asset and
deferred tax liability accounts, as recorded when material to the financial
statements, are entirely the result of temporary differences. Temporary
differences represent differences in the recognition of assets and
liabilities for tax and financial reporting purposes, primarily accumulated
depreciation and amortization, allowance for doubtful accounts and vacation
accruals.
As of March 31, 2004 and 2003, the deferred tax asset related to the
Company's net operating loss carryforward is fully reserved. Due to the
provisions of Internal Revenue Code Section 338, the Company may have
limited net operating loss carryforwards available to offset financial
statement or tax return taxable income in future periods as a result of a
Fiscal 2000 change in control involving 50 percentage points or more of the
issued and outstanding securities of the Company.
3. Income (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. The calculation of fully diluted earnings (loss) per share
assumes the dilutive effect of the exercise of outstanding options and
warrants, using the treasury stock method, at either the beginning of the
respective period presented or the date of issuance, whichever is later. As
of March 31, 2004 and 2003, respectively, the Company has no outstanding
stock warrants, options or convertible securities which could be considered
as dilutive for purposes of the loss per share calculation.
NOTE E - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Interest rate risk is the risk that the Company's earnings are subject to
fluctuations in interest rates on either investments or on debt and is fully
dependent upon the volatility of these rates. The Company does not use
derivative instruments to moderate its exposure to interest rate risk, if any.
Financial risk is the risk that the Company's earnings are subject to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the volatility of these rates. The company does not use derivative
instruments to moderate its exposure to financial risk, if any.
8
Safe Alternatives Corporation of America, Inc.
Notes to Financial Statements - Continued
NOTE F - Convertible Notes Payable
On March 10, 1998, the Company entered into an Agency Agreement with Alexander
Wescott & Co., Inc. (AWC) for the offer and sale of 6% Convertible Notes, with
maximum gross proceeds not to exceed $1,000,000.
In March and April 1998, the Company issued its 6% Convertible Notes (the
"Notes") in the aggregate principal amount of $726,500 in a private placement
under Rule 505 of Regulation D. The Notes bear interest at 6.0% per annum,
payable semi-annually in arrears, in cash or, at the Company's option, in shares
of Common Stock of the Company. The notes mature on the earlier of (i) the first
anniversary of the initial closing of the proposed offer (April 10, 1999), and
(ii) a sale of all or substantially all of the Company's assets or a merger,
acquisition or consolidation in which the Company is not the surviving
corporation. The notes rank senior to all other indebtedness of the Company now
or hereafter existing, other than indebtedness to banks, in terms of priority
and security.
The Notes were convertible into shares of Common Stock at the option of the
holder at any time following the earlier of (i) 90 days after the filing of a
registration statement with the U. S. Securities and Exchange Commission (SEC)
covering the shares to be received upon conversion or (ii) the date the SEC
declares such registration statement effective. The conversion price per share
is the lesser of (i) 70% of the average closing bid price per share of Common
Stock for the five trading days prior to the conversion date or (ii) $0.25. Upon
conversion, any accrued and unpaid interest is waived by the holder. The Company
had the option to repurchase the Notes from the holder prior to registration of
the underlying shares at a premium of 10% over the purchase price of the Notes.
The Company agreed to file a registration statement with the SEC not later than
June 3, 1998, and use its best efforts to have the registration statement
declared effective not later than July 3, 1998. Through June 30, 2002, the
Company made no payments on these notes; had not repurchased any of these Notes,
and was in default with regard to its registration obligation
AWC received a commission of 10% plus 3% non-accountable expense reimbursement
on the gross proceeds raised. In addition, AWC was issued warrants exercisable
for 400,000 shares of Common Stock at an exercise price of $0.30 per share,
expiring June 28, 2003. On September 30, 2002, the Company and AWC reached a
settlement agreement whereby AWC agreed to cancel the outstanding warrant in
exchange for 800,000 shares of restricted, unregistered shares of the Company's
common stock.
As of December 31, 2001 two note holders with notes totaling $50,000 notified
the Company that they have written off the balances owed to them by the Company
and therefore have discharged the Company from any further liability. As a
result the Company recognized a $56,000 forgiveness of debt income as of
December 31, 2001, which includes $6,000 of accrued interest.
During 2002, all but one (1) of the Holders of the foregoing Convertible Notes,
totaling approximately $651,500, agreed to release all obligations under the
Convertible Notes, including accrued interest of approximately $157,273, in
exchange for the issuance of an aggregate of 21,303,264 shares of restricted,
unregistered shares of the Company's common stock.
During the quarter ended June 30, 2003, the Company exercised it's option to
repurchase the remaining outstanding Convertible Note from the Noteholder with a
cash payment aggregating approximately $35,389, which included $25,000 in
principal, the stated 10% repurchase premium and all accrued, but unpaid,
interest.
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9
Safe Alternatives Corporation of America, Inc.
Notes to Financial Statements - Continued
NOTE G - Advances from Affilates
During 2003, an affiliate of the Company made unsecured advances of
approximately $70,700 to support operations and provide working capital. At
December 31, 2003, the affiliate contributed these advances as additional
paid-in capital.
During the three months ended March 31,2004, in anticipation of the reverse
acquisition transaction discussed in previous footnotes, Mortgage Assistance
Corporation advanced to or paid expenses on behalf of the Company of
approximately $2,660. These advances are unsecured and are repayable upon
demand.
NOTE H - Income Taxes
The components of income tax (benefit) expense, on continuing operations, for
the three months ended March 31, 2004 and 2003, respectively, are as follows:
March 31, March 31,
2004 2003
--------- ---------
Federal:
Current $ -- $ --
Deferred -- --
--------- ---------
-- --
--------- ---------
State:
Current -- --
Deferred -- --
--------- ---------
-- --
--------- ---------
Total $ -- $ --
========= =========
As of March 31, 2004, the Company had a net operating loss carryforward of
approximately $9,500,000 to offset future taxable income. If the reverse
acquisition transaction discussed previously occurs, the usage of the Company's
net operating loss carryforward will be severely limited. The amount and
availability of the net operating loss carryforwards may be subject to
limitations set forth by Section 338 of the Internal Revenue Code. Factors such
as the number of shares ultimately issued within a three year look-back period;
whether there is a deemed more than 50 percent change in control; the applicable
long-term tax exempt bond rate; continuity of historical business; and
subsequent income of the Company all enter into the annual computation of
allowable annual utilization of the carryforwards.
The Company's income tax expense for the three months ended March 31, 2004 and
2003, respectively, differed from the statutory tax rate of 34.0% as follows:
Three months Three months
ended ended
March 31, March 31,
2004 2003
------------ ------------
Statutory rate applied to income before income taxes $ (288,570) $ (800)
Increase (decrease) in income taxes resulting from:
State income taxes -- --
Non-deductible compensation expense related
to common stock issued at less than "fair value" 285,170 --
Other, including reserve for deferred tax asset and
application of net operating loss carryforward 3,400 800
------------ ------------
Income tax expense $ -- $ --
============ ============
10
Safe Alternatives Corporation of America, Inc.
Notes to Financial Statements - Continued
NOTE H - Income Taxes - Continued
Temporary differences, consisting primarily of statutory deferrals of expenses
for organizational costs and statutory differences in the depreciable lives for
property and equipment, between the financial statement carrying amounts and tax
bases of assets and liabilities give rise to deferred tax assets and liabilities
as of March 31, 2004 and 2003, respectively:
March 31, December 31,
2004 2003
------------ ------------
Deferred tax assets
Net operating loss carryforwards $ 3,230,000 $ 3,230,000
Less valuation allowance (3,230,000) (3,230,000)
------------ ------------
Net Deferred Tax Asset $ -- $ --
============ ============
During the years ended December 31, 2003 and 2002, respectively, the reserve for
the deferred current tax asset did not significantly change.
NOTE I - Common Stock Transactions
During the year ended December 31, 2002, the Company issued an aggregate
21,303,264 shares of restricted, unregistered shares of the Company's common
stock in settlement of approximately $651,000 in face amount of 6.0% Convertible
Notes and accrued interest of approximately $157,273.
During the year ended December 31, 2002, the Company issued 448,101 shares of
restricted, unregistered common stock to various unsecured creditors in exchange
for their release of any further claims related to trade accounts payable. These
transactions were valued at approximately $448,100, including a "fair value"
adjustment of approximately $410,597 for shares issued at less than the "fair
value" of the shares based on the valuation established by equivalent
transactions on equivalent dates.
Effective September 30, 2002, the Company issued 800,000 shares of restricted,
unregistered common stock in exchange for the retirement of an outstanding
warrant to purchase up to 400,000 shares of the Company's common stock at a
price of $0.30 per share, expiring June 28, 2003. This transaction was valued at
approximately $80, which approximates the "fair value" of the Company's common
stock on the date of the transaction.
During July 2002, in order to facilitate the Company's merger or other business
combination transaction with another company, the Company issued a total of
84,720,733 shares of the Company's unregistered, restricted common stock to be
held in escrow for the benefit of the Company's merger or combination partner.
No value has been assigned to this issuance pending the consummation of a
business combination transaction. On March 9, 2004, the Company's Board of
Directors authorized the issuance of these shares held in escrow to the
Company's legal counsel, Loper & Seymour, P.A. of St. Paul, Minnesota for legal
services and said transaction is valued at approximately $8,470, which equals
the common stock's par value of $.0001 per share, and these shares are deemed
fully paid and non-assessable. Pursuant to Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation", the imputed fair
value of this transaction was calculated using the discounted closing quoted
stock price on March 9, 2004. The differential between the imputed fair value
and the agreed-upon value of the services provided, approximately $838,700, was
recorded as "compensation expense related to common stock issuances at less than
"fair value" upon exercise of outstanding stock options in the accompanying
statement of operations.
NOTE J - Treasury Stock
Treasury stock represents 11,682 shares (recorded at cost) being held in trust
to be used for future issuance to employees, investors, and other potential
funding sources. As the Company directly benefits from the sales of the shares
in the trust, these shares have been recorded as treasury stock.
11
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
(1) Caution Regarding Forward-Looking Information
Certain statements contained in this quarterly filing, including, without
limitation, statements containing the words "believes", "anticipates", "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the ability
of the Company to sustain, manage or forecast its growth; the ability of the
Company to successfully make and integrate acquisitions; raw material costs and
availability; new product development and introduction; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating results;
changes in business strategy or development plans; business disruptions; the
ability to attract and retain qualified personnel; the ability to protect
technology; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-QSB and investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
(2) Results of Operations, Liquidity and Capital Resources
As of July 1, 2002, the Company has no assets or operations and intends to seek
a suitable business combination transaction through either a purchase or merger.
The Company does not expect to generate any meaningful revenue or incur
operating expenses for purposes other than fulfilling the obligations of a
reporting company under the Securities Exchange Act of 1934 unless and until
such time that the Company begins meaningful operations.
On May 14, 2004, the Company's President, Dale Hensel, executed a Letter of
Intent with Mortgage Assistance Corporation, a Texas corporation controlled by
Mr. Hensel, whereby subject to the approval of the Company's shareholders,
Mortgage Assistance Corporation offered to be acquired by the Company on the
following terms and conditions: SACA board will call a special shareholder
meeting or obtain a majority shareholder consent in lieu of a special meeting
according to the Florida Business Corporation Statutes and recommend and approve
the following actions:
1. Effect a reverse split of the Company's common shares on a One for Two
Hundred Fifty (1:250) basis;
2. Effect a corporate name change from Safe Alternatives Corporation of
America, Inc. Mortgage Assistance Corporation;
3. Change the authorized number of common stock shares to be issued from
175,000,000 to 50,000,000 shares;
4. Authorized a business combination whereby the Company will exchange
12,000,000 post reverse split common shares for all of the issued and
outstanding common stock of Mortgage Assistance Corporation; and
5. Any such further recommendations as may be considered reasonable and
in the best interest of the shareholders.
It is the intent of management and significant stockholders to provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity. However, there is no legal obligation for either
management or significant stockholders to provide additional future funding.
Should this pledge fail to provide financing, the Company has not identified any
alternative sources. Consequently, there is substantial doubt about the
Company's ability to continue as a going concern.
The Company's need for capital may change dramatically as a result of any
business acquisition or combination transaction. There can be no assurance that
the Company will identify any such business, product, technology or company
12
suitable for acquisition in the future. Further, there can be no assurance that
the Company would be successful in consummating any acquisition on favorable
terms or that it will be able to profitably manage the business, product,
technology or company it acquires.
Item 3 - Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, within the 90 days prior to
the filing date of this report, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's
President, Chief Executive and Chief Financial Officer. Based upon that
evaluation, the Company's President, Chief Executive and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective.
There have been no significant changes in the Company's internal controls or in
other factors, which could significantly affect internal controls subsequent to
the date the Company carried out its evaluation.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in Company reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in Company reports filed under the Exchange Act is
accumulated and communicated to management, including the Company's Chief
Executive and Chief Financial Officer as appropriate, to allow timely decisions
regarding required disclosure.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
During July 2002, in order to facilitate the Company's merger or other
business combination transaction with another company, the Company issued a
total of 84,720,733 shares of the Company's unregistered, restricted common
stock to be held in escrow for the benefit of the Company's merger or
combination partner. No value has been assigned to this issuance pending
the consummation of a business combination transaction.
On March 9, 2004, the Company's Board of Directors authorized the issuance
of these shares held in escrow to the Company's legal counsel, Loper &
Seymour, P.A. of St. Paul, Minnesota for legal services and said
transaction is valued at approximately $8,470, which equals the common
stock's par value of $.0001 per share, and these shares are deemed fully
paid and non-assessable. Pursuant to Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation", the imputed
fair value of this transaction was calculated using the discounted closing
quoted stock price on March 9, 2004. The differential between the imputed
fair value and the agreed-upon value of the services provided,
approximately $838,700, was recorded as "compensation expense related to
common stock issuances at less than "fair value" upon exercise of
outstanding stock options in the accompanying statement of operations.
Item 3 - Defaults upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
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Item 6 - Exhibits and Reports on Form 8-K
Exhibits
--------
31.1 Certification pursuant to Section 302 of Sarbanes-Oxley Act of
2002
32.1 Certification pursuant to Section 906 of Sarbanes-Oxley Act of
2002.
Reports on Form 8-K
-------------------
March 19, 2004 Disclosure of a change in the Company's Board of
Directors and Management
May 19, 2004 Disclosure of a Letter of Intent for the Company to
acquire Mortgage Assistance Corporation in a reverse
acquisition transaction contingent on defined due
diligence and corporate actions.
- --------------------------------------------------------------------------------
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Safe Alternatives Corporation of America, Inc.
Dated: May 24, 2004 /s/ Dale Hensel
------------ ----------------------------------
Dale Hensel
President, Chief Executive Officer,
Chief Financial Officer,and Director
14