UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
(Mark one)
[X] Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act
of 1934
For the quarterly period ending March 31, 2005
[_] Transition Report Under Section 13 or 15(d) of The Securities Exchange Act
of 1934
For the transition period from ______________ to _____________
Mortgage Assistance Center Corporation
(Exact name of small business issuer as specified in its charter)
Florida 06-1413994
- ------------------------ ------------------------
(State of incorporation) (IRS Employer ID Number)
2614 Main St., Dallas, TX 75226
-------------------------------
(Address of principal executive offices)
(214) 670-0005
--------------
(Issuer's telephone number)
Securities registered under Section 12 (b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock - $0.001 par value
Check whether the issuer has (1) filed all reports required to be files by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period the Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS Check whether the registrant filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
As of March 31, 2005, there were 664,603 shares of Common Stock issued and
outstanding.
Transitional Small Business Disclosure Format : Yes No X
--- ---
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MORTGAGE ASSISTANCE CENTER CORPORATION
(FORMERLY SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.)
FINANCIAL STATEMENTS
AND
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
MARCH 31, 2005
Mortgage Assistance Center Corporation
(Formerly Safe Alternatives Corporation of America, Inc.)
Table of Contents
Page
----
Report of Independent Registered Public Accounting Firm......................F-2
Financial Statements
Balance Sheets
as of March 31, 2005 and December 31, 2004...........................F-4
Statements of Operations and Comprehensive Loss
for the three months ended March 31, 2005 and 2004...................F-5
Statements of Cash Flows
for the three months ended March 31, 2005 and 2004....................F-6
Notes to Financial Statements...........................................F-7
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Mortgage Assistance Center Corporation
Dallas, Texas
We have reviewed the accompanying balance sheets of Mortgage Assistance Center
Corporation (formerly Safe Alternatives Corporation of America, Inc.) (a Florida
corporation) as of March 31, 2005 and the statements of operations and
comprehensive loss, and cash flows for the three-months ended March 31, 2005.
These interim financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim financial statements for them to be in
conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has no viable operations or significant assets
and is dependent upon significant shareholders to provide sufficient working
capital to maintain the integrity of the corporate entity. These circumstances
create substantial doubt about the Company's ability to continue as a going
concern and are discussed in Note 3. The financial statements do not contain any
adjustments that might result from the outcome of these uncertainties.
The December 31, 2004 financial statements of Mortgage Assistance Center
Corporation were audited by us and we expressed an unqualified opinion in our
report dated March 28, 2005, but we have not performed any auditing procedures
since that date.
F-2
The March 31, 2004 financial statements of Mortgage Assistance Center
Corporation were reviewed by other accountants whose report dated May 24, 2004,
stated that they were not aware of any material modifications that should be
made to those statements in order for them to be in conformity with generally
accepted accounting principles.
Sutton Robinson Freeman & Co., P.C.
Certified Public Accountants
Tulsa, Oklahoma
May 16, 2005
F-3
Mortgage Assistance Center Corporation
(Formerly Safe Alternatives Corporation of America, Inc.)
Balance Sheets
March 31, 2005 (Unaudited) and December 31, 2004 (Audited)
ASSETS
March 31, December 31,
2005 2004
(unaudited) (audited)
------------ ------------
Current Assets
Cash on hand and in bank $ -- $ --
------------ ------------
Total current assets -- --
------------ ------------
Total Assets $ -- $ --
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable-trade $ 27,027 $ 25,871
Advances from affiliate 49,770 42,860
Accrued interest payable -- --
------------ ------------
Total current liabilities 76,797 68,731
------------ ------------
Commitments and contingencies
Stockholders' Equity (Deficit)
Common stock - $.001 par value,
50,000,000 shares authorized,
664,603 shares issued and outstanding 665 665
Additional paid in capital 23,727,231 23,727,231
Accumulated deficit (23,806,852) (23,798,786)
------------ ------------
(78,956) (70,890)
Subscriptions issuable 2,160 2,160
Treasury stock - at cost (47 shares) (1) (1)
------------ ------------
Total stockholders' equity (deficit) (76,797) (68,731)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ -- $ --
============ ============
The accompanying notes are an integral part of these financial statements
F-4
Mortgage Assistance Center Corporation
(Formerly Safe Alternatives Corporation of America, Inc.)
Statements of Operations and Comprehensive Loss
Three-Months Ended March 2005 and 2004
(Unaudited)
Three Three
Months Ended Months Ended
March 31, March 31,
2005 2004
------------ ------------
Revenues $ -- $ --
------------ ------------
Operating Expenses
General and administrative expenses 6,910 10,010
Interest expense 1,156 --
Compensation expense related to
common stock issuances at less
than "fair value" -- 838,736
Depreciation and amortization -- --
------------ ------------
Total operating expenses 8,066 848,746
------------ ------------
Operating loss (8,066) (848,746)
Other income (expense):
Forgiveness of debt -- --
Settlement of judgment -- --
------------ ------------
Loss before provision for income taxes (8,066) (848,746)
Income tax benefit (expense) -- --
------------ ------------
Net Loss (8,066) (848,746)
Other comprehensive income -- --
------------ ------------
Comprehensive Loss $ (8,066) $ (848,746)
============ ============
Net loss per weighted-average share
of common stock outstanding, calculated
on Net Loss - basic and fully diluted $ (0.01) $ (1.28)
============ ============
Weighted-average number of shares of
common stock outstanding 664,603 664,603
============ ============
The accompanying notes are an integral part of these financial statements
F-5
Mortgage Assistance Center Corporation
(Formerly Safe Alternatives Corporation of America, Inc.)
Statements of Cash Flows
Three Months Ended March 31, 2005 and 2004
(Unaudited)
Three-Months Ended Three-Months Ended
March 31, 2005 March 31, 2004
------------------ ------------------
Cash Flows from Operating Activities
Net loss for the period $ (8,066) $ (848,746)
Adjustments to reconcile net loss to net cash
provided by operating expenses
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 1,156 (1,121)
Accrued interest payable -- --
------------------ ------------------
Net cash used in operating activities (6,910) (2,659)
------------------ ------------------
Cash Flows from Investing Activities -- --
------------------ ------------------
Cash Flows from Financing Activities
Cash advanced by affiliate to support operations 6,910 2,659
Cash used to pay convertible debt -- --
------------------ ------------------
Net cash provided by financing activities 6,910 2,659
------------------ ------------------
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 accompanying notes are an integral part of these financial statements
F-6
Mortgage Assistance Center Corporation
(Formerly Safe Alternatives Corporation of America, Inc.)
Notes to Financial Statements
March 31, 2005
(Unaudited)
Note 1 - Organization and Description of Business
----------------------------------------
Mortgage Assistance Center Corporation (formerly Safe Alternatives
Corporation of America, Inc.) (the "Company" or "MAC") 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, 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).
Pursuant to a Majority Shareholder Consent, on May 14, 2004, the
Company's Board of Directors authorized a change in the Company name to
Mortgage Assistance Center Corporation. The Company's Articles of
Incorporation were amended on December 22, 2004 and will become
effective January 17, 2005. The change in corporate name was made in
connection with the requirement of a Letter of Intent executed between
the Company and an affiliated entity, in which certain reorganizational
steps were undertaken prior to the completion of a business combination
transaction more fully described in Note 3.
On September 17, 2002, the Board of Directors of the Company agreed to
sell, as of June 30, 2002, 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:
F-7
Mortgage Assistance Center Corporation
(Formerly Safe Alternatives Corporation of America, Inc.)
Notes to Financial Statements
March 31, 2005
(Unaudited)
Note 1 - Organization and Description of Business (continued)
----------------------------------------
(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 2 - 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.
F-8
Mortgage Assistance Center Corporation
(Formerly Safe Alternatives Corporation of America, Inc.)
Notes to Financial Statements
March 31, 2005
(Unaudited)
Note 2 - 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, 2004. 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, 2005.
Note 3 - Going Concern Uncertainty
-------------------------
Since July 1, 2002, the Company has had no assets or revenues 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 having no assets, several
liabilities and no operations, the Company's auditors have issued an
audit opinion on the accompanying financial statements which includes a
statement describing the Company's going concern status. This means, in
the auditors' opinion, substantial doubt about the Company's ability to
continue as a going concern existed 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:
F-9
Mortgage Assistance Center Corporation
(Formerly Safe Alternatives Corporation of America, Inc.)
Notes to Financial Statements
March 31, 2005
(Unaudited)
Note 3 - Going Concern Uncertainty (continued)
-------------------------
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. to 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. Authorize 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.
In May 2004, a majority shareholder action approved the reverse stock
split and the reduction in the authorized number of common shares.
A Business Combination Agreement (the "Agreement") was entered into the
10th day of May, 2005 between Mortgage Assistance Center Corporation
(MACC) and Mortgage Assistance Corporation (MAC), and the MAC selling
Shareholders, ("Sellers") whereby the Company will issue shares to
Sellers in exchange for their shares of MAC.
Under the terms of the Agreement, the Company and Sellers agreed to
exchange shares whereby the Company will acquire all of the issued and
outstanding stock of MAC. The Company will issue Company shares to
Sellers in exchange for their MAC shares. The Company will issue One
and six tenths (1.6) share of Company common stock ("Exchange Shares")
for each single (1) share of Sellers' MAC stock. The Company will
acquire One Hundred (100%) percent of the issued and outstanding stock
of MAC and issue Sellers a total of Twelve Million (12,000,000) shares
Company common stock in exchange for Seven Million Five Hundred
Thousand (7,500,000) MAC shares. The shares will be issued from the
Company's treasury pursuant to the securities transaction exemption
afforded by Section 4 (2) and Regulation D Rule 506 of the Securities
Act of 1933, as amended. The shares will be restricted securities
bearing the Company's standard restrictive legend. As of May 10, 2005
Ninety-two (92%) of the Sellers had agreed to the Business Combination
Agreement.
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 upon additional funds loaned
by management and/or significant stockholders to preserve the integrity
of the corporate entity during this time. In the event the Company is
unable to acquire advances from management and/or significant
stockholders, the Company's continued existence as a going concern
would be jeopardized.
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.
F-10
Mortgage Assistance Center Corporation
(Formerly Safe Alternatives Corporation of America, Inc.)
Notes to Financial Statements
March 31, 2005
(Unaudited)
Note 4 - Summary of Significant Accounting Policies
------------------------------------------
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.
Income Taxes:
The Company uses the asset and liability method of accounting for
income taxes. At March 31, 2005 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, 2005, the deferred tax asset related to the Company's
net operating loss carryforward was 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 change in control involving 50 percentage points or more of the
issued and outstanding securities of the Company during the year 2000.
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 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 December 31, 2004 and 2003, respectively, the Company had
no outstanding stock warrants, options or convertible securities which
could be considered as dilutive for purposes of the loss per share
calculation.
In November 2004, a one-for-two hundred fifty (1:250) reverse stock
split was effected. Accordingly, all historical weighted average share
and per share amounts have been restated to reflect the stock split.
F-11
Mortgage Assistance Center Corporation
(Formerly Safe Alternatives Corporation of America, Inc.)
Notes to Financial Statements
March 31, 2005
(Unaudited)
Note 5 - Fair Value of Financial Instruments
-----------------------------------
The carrying amounts of cash, accounts receivable, accounts payable and
notes payable, as applicable, approximate 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.
Note 6 - Advances from Affiliates
------------------------
During the year ended December 31, 2004, in anticipation of the reverse
acquisition transaction discussed in previous footnotes, Mortgage
Assistance Corporation ("MAC") paid additional expenses on behalf of
the Company of approximately $43,000. MAC paid expenses of
approximately $7,000 during the three months ended March 31, 2005.
These advances are unsecured and are repayable upon demand.
Note 7 - Income Taxes
------------
The components of income tax (benefit) expense, on continuing
operations, for the three-months ended March 31, 2005 and 2004,
respectively, are as follows:
Three-Months Ended Three-MonthsEnded
March 31, 2005 March 31, 2004
------------------ ------------------
Federal:
Current $ -- $ --
Deferred -- --
------------------ ------------------
-- --
------------------ ------------------
State:
Current -- --
Deferred -- --
------------------ ------------------
Total $ -- $ --
================== ==================
F-12
Mortgage Assistance Center Corporation
(Formerly Safe Alternatives Corporation of America, Inc.)
Notes to Financial Statements
March 31, 2005
(Unaudited)
Note 7 - Income Taxes (continued)
------------
As of March 31, 2005 the Company had a net operating loss carryforward
of approximately $9,300,000 to offset future taxable income. Subject to
current regulations, this carryforward will begin to expire in 2007. 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 periods ended March 31, 2005
and 2004, respectively, differed from the statutory tax rate of 34.0%
as follows:
Three-Months Three-Months
Ended Ended
March 31, March 31,
2005 2004
------------ ------------
Statutory rate applied to income
before income taxes $ (2,740) $ (288,570)
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
2,740 3,400
------------ ------------
Income tax expense $ -- $ --
============ ============
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 the following deferred tax assets and liabilities as of March
31, 2005 and December 31, 2004, respectively:
F-13
Mortgage Assistance Center Corporation
(Formerly Safe Alternatives Corporation of America, Inc.)
Notes to Financial Statements
March 31, 2005
(Unaudited)
Note 7 - Income Taxes (continued)
------------
March 31, March 31,
2005 2004
----------- -----------
Deferred tax assets
Net operating loss carryforwards $ 3,177,200 $ 3,174,500
Less valuation allowance (3,177,200) (3,174,500)
----------- -----------
Net Deferred Tax Asset $ -- $ --
=========== ===========
During the years ended December 31, 2004 and 2003, the reserve for the
deferred tax asset did not significantly change.
Note 8 - Common Stock Transactions
-------------------------
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 pre-split 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 had
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. The transaction was valued at approximately $8,500,
which equaled the common stock's par value of $.0001 per share, and
these shares were 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 as approximately $847,200, 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.
On May 14, 2004, the Stockholders approved an amendment to the
Company's Articles of Incorporation which increased the par value of
each share of common stock from $0.0001 per share to $0.001 per share
and decreased the number of authorized common shares from 175,000,000
shares to 50,000,000 shares. The stockholders also approved a
one-for-two hundred fifty (1:250) reverse stock split. Pursuant to
authorization by the Board of Directors, the reverse stock split became
effective for stockholders of record as of November 22, 2004. Stock
certificates representing pre-split denominations may be exchanged for
stock certificates representing the post-split denominations, at the
election of stockholders, as mandatory certificate exchange is not
required.
F-14
Mortgage Assistance Center Corporation
(Formerly Safe Alternatives Corporation of America, Inc.)
Notes to Financial Statements
March 31, 2005
(Unaudited)
Note 8 - Common Stock Transactions (continued)
-------------------------
Common stock and additional paid-in capital at March 31, 2005 and
December 31, 2004 have been restated to reflect this split. The number
of common shares issued at March 31, 2005 and December 31, 2004, after
giving effect to the split, was determined to be 664,603 (165,853,058
shares issued before the split), including 1191 shares estimated to be
issued to fractional stockholders.
The effect of the reverse stock split has been reflected as of January
1, 2004 in the balance sheet, but activity for 2004 and prior periods
has not been restated in those statements. All references to the number
of common shares and per share amounts elsewhere in the financial
statements and related footnotes have been restated as appropriate to
reflect the effect of the reverse split for all periods presented.
Note 9 - Treasury Stock
--------------
Treasury stock represents 47 shares (11,682 before reverse stock
split), 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.
F-15
Item 2. Management's Discussion and Analysis or Plan of Operation
The Company had no business operations during 2004 and the first quarter of
2005.
The Company's future operating results may be affected by a number of factors,
including general economic conditions and the business combination transaction
with Mortgage Assistance Corporation (MAC). The Company's business combination
with MAC will cause substantial dilution of the current shareholders' interest
in the Company.
The report of the Company's independent auditor contains a paragraph as to the
Company's ability to continue as a going concern. Among the factors cited by the
auditors as raising substantial doubt as to the Company's ability to continue as
a going concern are: (i) the Company has incurred recurring operating losses;
and, (ii) the Company has a working capital deficiency.
The Company has been financing its operations through capital contributions by
MAC, which aggregated approximately $49,770 for the three months ending March
31, 2005.
It is the intent of management and significant stockholders to provide
sufficient working capital to preserve the integrity of the corporate entity,
however, there are no commitments to provide additional funds have been made by
management or other stockholders. There can be no assurance that any additional
funds will be available to the Company to allow it to cover its expenses.
The Company may seek to compensate providers of services by issuances of stock
in lieu of cash.
FORWARD-LOOKING STATEMENTS:
We have included forward-looking statements in this report. For this purpose,
any statements contained in this report that are not statements of historical
fact may be deemed to be forward looking statements. Without limiting the
foregoing, words such as "may", "will", "expect", "believe", "anticipate",
"estimate", "plan" or "continue" or the negative or other variations thereof or
comparable terminology are intended to identify forward-looking statements.
These statements by their nature involve substantial risks and uncertainties,
and actual results may differ materially depending on a variety of factors.
Factors that might cause forward-looking statements to differ materially from
actual results include, among other things, overall economic and business
conditions, demand for the Company's products, competitive factors in the
industries in which we compete or intend to compete, and other uncertainties of
our future acquisition plans.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
The Company does not issue or invest in financial instruments or their
derivatives for trading or speculative purposes. The operations of the Company
are conducted primarily in the United States, and, are not subject to material
foreign currency exchange risk. Although the Company has outstanding debt and
related interest expense, market risk of interest rate exposure in the United
States is currently not material.
Item 3. Controls and Procedures
As of the end of the reporting period, March 31, 2005, we carried out an
evaluation, under the supervision and with the participation of our management,
including the Company's Chairman and Chief Executive Officer and the Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Rule 13a-15(e) of the Securities
Exchange Act of 1934 (the "Exchange Act"), which disclosure controls and
procedures are designed to insure that information required to be disclosed by a
company in the reports that it files under the Exchange Act is recorded,
processed, summarized and reported within required time periods specified by the
SEC's rules and forms. Based upon that evaluation, the Chairman and the Chief
Financial Officer concluded that our disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company required to be included in the Company's period SEC filings.
(b) Changes in Internal Control.
Subsequent to the date of such evaluation as described in subparagraph(a)above,
there were no changes in our internal controls or other factors that could
significantly affect these controls, including any corrective action with regard
to significant deficiencies and material weaknesses.
(c) Limitations.
Our management, including our Principal Executive Officer and Principal
Financial Officer, does not expect that our disclosure controls or internal
controls over financial reporting will prevent all errors or all instances of
fraud. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control system's objectives
will be met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within our company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Controls can also be circumvented by the individual acts of
some persons, by collusion of two or more people, or by management override of
the controls. The design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and any design may not
succeed in achieving its stated goals under all potential future conditions.
Over time, controls may become inadequate because of changes in conditions or
deterioration in the degree of compliance with policies or procedures. Because
of the inherent limitation of a cost-effective control system, misstatements due
to error or fraud may occur and not be detected.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of the security holders, through the
solicitation of proxies or otherwise, during the first quarter of the fiscal
year covered by this report.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit No. Exhibit Name
31 Chief Executive and Financial Officer-Section 302
Certification pursuant to Sarbanes-Oxley Act.
32 Chief Executive and Financial Officer-Section 906
Certification pursuant to Sarbanes-Oxley Act.
b) Reports on Form 8-K. We filed one report on Form 8-K on January 7, 2005
reporting Items 8.01 and 9.01.
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.
May 18, 2005 MORTGAGE ASSISTANCE
CENTER CORPORATION
/s/ Dale Hensel
--------------------------------
By: Dale Hensel
Title: President, CEO, CFO