SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D)
of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) May 15, 2006
RPM ADVANTAGE, INC.
(formerly Communitronics of America, Inc.)
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
87-0285684
(IRS Employer Identification Number)
31847 State Hwy 249, Pinehurst, Texas 77362
(Address of principal executive offices)
David R. Pressler, President
RPM Advantage, Inc.
31847 State Hwy 249, Pinehurst, Texas 77362
(Name and address of agent for service)
(281) 252-9311
(Telephone number, including area code of agent for service)
SECTION 2 FINANCIAL INFORMATION
ITEM 2.02 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
Effective May 15, 2006, RPM Advantage, Inc. (formerly
Communitronics of America, Inc.), a Nevada corporation
(the Company) entered into an Definitive Purchase and
Sale Agreement and Plan of Reorganization (the Agreement)
with Buchanan Electric, Inc. a Massachusettes corporation
(Buchanan) and James Buchanan, the sole security holder
of Buchanan Electric, Inc. (Shareholder).
Upon the terms and subject to the conditions of the Agreement,
RPM will exchange one million (1,000,000) shares of RPM restricted
common stock for all of the outstanding common stock of Buchanan.
The Company will acquire all of the issued and outstanding equity
interest of Buchanan, making Buchanan a wholly-owned subsidiary
of the Company. The aggregate value of the trasaction is seventeen
million dollars ($17,000,000) of RPM Advantage common stock and the
assumption of three million, three hundred thousand($3,300,000)
in debt.
The Financials of Buchanan Electric were audited and the merger
will be filed in the state of the Nevada. The name will remain
RPM Advantage, Inc. (NV). The combine company will have revenues
exceeding sixteen million ($16,000,000) per year and operate out
of RPM's new corporate headquarters in Houston Texas and Buchanan's
Offices in Uxbridge, MA.
SECTION 9 FINANCIAL STATEMENTS AND EXHIBITS
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Financial Statements
Toussaint & Associates
Certified Public Accountants
James E Buchanan Electric, Inc.
740 Quaker Highway
Uxbridge, MA 01569
Independent Auditors Report
We have audited the accompanying consolidated balance sheets of
James E. Buchanan Electric, Inc. & Subsidiaries as of December
31, 2004 & 2005 respectively and the related consolidated
Balance Sheet, Income Statement, and Statement of Cash Flows
for the years then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of James
E. Buchanan Electric, Inc. & Subsidiaries as of December 31, 2004
and 2005, and the results of its operations and its cash flows for
the years ended December 31, 2004 and 2005 in conformity with
generally accepted accounting principles.
April 20, 2006
325 Saint Paul Street, Suite 550, Dallas, Texas 75201
(214) 564-2795 fax (972) 421-1737
James E. Buchanan Electric, Inc.
And Subsidiaries
Balance Sheet
Assets 12/31/2004 12/31/2005
Assets:
Cash & Cash Equivalent 167,472 23,266
Contract Receivables 1,697,563 2,449,181
Costs & estimated net earnings in excess
of billings on uncompleted contracts 1,687,914 2,548,345
Retainage 321,637 634,387
Due from insurance company 15,000 -
Employee advance 10,249 5,728
Inventory 629,956 766,895
Prepaid expenses 14,771 31,303
Property & Equipment net of Depreciation 530,236 451,486
($446,518 for 2004 & $404,559 for 2005)
Goodwill, net of Accumulated ($10,028) 99,914 167,356
SBA loan fees, net of accumulated
amortization ($3,565) - 39,216
Total current assets $ 5,174,712 $ 7,117,163
Total assets $ 5,174,712 $ 7,117,163
Liabilities and Stockholders' Equity
Liabilities:
Notes payable line of credit 1,383,873 1,789,693
Current maturities of long-term debt 231,510 338,091
Account payable 1,000,880 1,426,945
Accrued expenses 219,577 292,603
Employer simple match 52,709 75,683
Billings in excess of costs and estimated
earnings on uncompleted contracts 112,875 143,163
Notes payable stockholder-demand 40,000 100,000
Notes payable stockholder-current 5,048 5,319
Long term debt, net of current maturites 636,158 1,254,048
Note payable-stockholder, net of current
maturities 48,238 42,919
Note payable former Aculan stockholder 14,247 14,247
Total liabilities $3,745,115 $5,482,711
Equity:
Common stock, no par value authorized
500,000 shares 300,000 issued and O/S 1,000 1,000
Retained earnings 1,428,597 1,633,452
Total shareholders' equity $1,429,597 $1,634,452
Total liabilities and shareholders'
equity $5,174,712 $7,117,163
James E. Buchanan Electric, Inc.
And Subsidiaries
Income Statement
12/31/2004 12/31/2005
Revenues:
Sales 10,018,663 13,908,635
Other Income - -
Total Revenues 10,018,663 13,908,635
Cost of Goods Sold 5,615,926 8,747,538
Gross Profit 4,402,737 5,161,097
Expenses:
Operating Expenses, including
interest expenses
of $100,628 & $249,260
respectively 3,609,944 4,993,379
Other Expenses - -
Total Expenses 3,609,944 4,993,379
Net Income 792,793 167,718
Other Income/Expenses:
Loss of disposition of vehicles,
net (167) -
Gain from disposition of
vehicles & computers, net - 49,808
Interest income 249 1,086
82 50,894
Net income before taxes 792,875 218,612
State Taxes 9,623 149
Net income 783,252 218,463
Retained Earnings - beginning 724,671 1,428,597
Distributions (79,326) (13,608)
Retained Earnings - ending 1,428,597 1,633,452
James E. Buchanan Electric, Inc.
And Subsidiaries
Statement of Cash Flows
12/31/2004 12/31/2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income 783,252 218,463
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 131,297 101,822
Gain from disposition of vehicles & computers,
net - (49,808)
Non cash donation 183 -
Loss on disposition of motor vehicle 167 -
Net change in certain current assets and
certain current liabilities (1,601,650) (1,506,126)
NET CASH PROVIDED BY OPERATING ACTIVITIES (686,751) (1,235,649)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property & equipment (255,029) (96,750)
Proceeds from disposition of motor vehicles
& computers 29,212 127,051
Acquisition of goodwill (48,800) (66,605)
NET CASH USED BY INVESTING ACTIVITIES (274,617) (36,304)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Banknorth term financing 588,000 1,000,000
Proceeds from vehicle & computer notes, non
banks & banks 79,780 -
Proceeds from lines of credit, net of repayments
banks, non banks 710,027 405,820
Proceeds from short term shareholder loan - 300,000
Proceeds from capital lease & computer
financing, non bank - 62,631
Payments on various bank termfinancing (116,244) (226,557)
Payments on vehicle & computer financings,
capitalized leases,
bank, non bank (104,494) (111,873)
Payments on short-term shareholder loan - (240,000)
SBA loan fees - (43,618)
Payments on notes payable stockholder (4,790) (5,048)
NET CASH USED IN FINANCING ACTIVITIES 1,152,279 1,141,355
DISTRBUTIONS TO SHAREHOLDERS, NET (79,326) (13,608)
INCREASE IN CASH 111,585 -
DECREASE IN CASH - (144,206)
CASH - BEGINNING OF YEAR 55,887 167,472
CASH - END OF YEAR 167,472 23,266
Net change in certain current assets and
certain current liabilities:
Increase in contract receivables, net (943,364) (751,618)
Increase in cost & estimated earnings in excess
of billings on uncompleted contracts (1,452,829) (860,431)
Decrease in retainage 90,709 -
Increase in retainage - (312,750)
Increase in due from insurance company (15,000) -
Decrease in due from insurance company - 15,000
Increase in employee advance (10,114) -
Decrease in employee advance - 4,521
Increase in inventories (157,360) (136,939)
Decrease in prepaid expenses 8,620 -
Increase in prepaid expenses - (16,532)
Increase in accounts payable 723,709 426,065
Increase in accrued payroll 106,854 16,603
Increase in accrued & withheld payroll taxes 22,525 -
Decrease in accrued & withheld payroll taxes - (16,385)
Decrease in accrued expenses (22,645) -
Increase in accrued expenses - 60,410
Decrease in simple withholdings (1,656) -
Increase in state sales tax payable 8,118 12,668
Increase in employer simple match 25,503 22,974
Increase in billings in excess of costs &
estimatedearnings on uncompleted contracts 15,280 30,288
Net change (1,601,650) (1,506,126)
Supplemental disclosures of cash flows information:
Cash paid during the year for:
Interest 101,593 232,164
Taxes 2,307 6,867
JAMES E. BUCHANAN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005 AND 2004
(See Independent Accountants Audit Report)
1.Summary of significant accounting policies and business operations:
Business operations:
James E. Buchanan Electric, Inc. is a residential and commercial
electrical contractor. Construction is generally preformed under
fixed price contracts. The Company operates primarily in
Massachusetts and Rhode Island.
Operating thru its division Aculan, the Company is a voice/data
cabling installer, installing copper and fiber optic networks
on Government, non profit, schools, military and corporate
customers. The division operates primarily throughout Massachusetts
and Rhode Island.
Operating thru its division Prime Systems and Buchanan Fire
and Control, the Company engages in the sales and installation
of fire alarm systems for both residential and commercial real
estate projects. The division operates primarily throughout
Massachusetts and Rhode Island.
Operating thru its division Corporate Communications Services,
the Company is engaged in sales, service and installation of
voice data equipment, PBX key voice and mail systems throughout
New England.
Operating thru its division One Connection, the Company is engaged
in sales, service and installation of home theatre and home
wireless networks. The division operates primarily throughout New
England.
Accounting Estimates:
Management uses estimates and assumptions in preparing these
financial statements in accordance with generally accepted
accounting principles. Those estimates and assumptions affect
the reported amounts of assets and liabilities, and the reported
revenues and expenses. Actual results could vary from the
estimates that were used.
Compensated Absences:
Due to the Companys inability to reasonably estimate the amount
due for compensated absences no provision is made in these
financial statements.
JAMES E. BUCHANAN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005 AND 2004
(See Independent Accountants Audit Report)
1.Summary of significant accounting policies and business
operations (continued):
Amortization of Goodwill:
The Company amortizes goodwill over an estimated useful
life of 15 years on a straight line basis.
Income Taxes:
The Company with the consent of its shareholder has
elected under the Internal Revenue Code t be an S Corporation.
The Subsidiaries have elected to be taxed as a qualified Subchapter
S Subsidiaries. In lieu of corporate income taxes, the shareholders
of an S Corporation are taxed on their proportion share of the
company and its Subsidiaries consolidated taxable income. Therefore,
no provision or liability for Federal income taxes has been included
in these financial statements. The Commonwealth of Massachusetts
partially taxes S Corporations at the corporate level if their sales
are more than six million dollars. The provision for Massachusettss
income taxes for the years ended December 31, 2005 and 2004 were
$ 149 and $9,623 respectively.
Revenue and cost recognition:
For the calendar years ended December 31, 2005 and 2004 the
Company recognized revenues from fixed-price and modified fixed
contracts, which are more than 5% complete, on the percentage-of
completion method. The percentage of costs incurred to date to
estimate total costs are managements best available measure of
progress on the contracts. Because of inherent uncertainties in
estimating costs, it is at least reasonably possible that the
estimating will change within the near term.
Contract costs include all direct material and labor costs
and those indirect costs related to contract performances, such as
indirect labor, supplies, tools, repairs and depreciation. Selling,
general and administrative costs are charged to expense as incurred.
Provisions for estimated losses on uncompleted contracts are
made in the period in which such losses are determined. Changes in
the job performance, job conditions, contract penalty provisions claims,
change orders and settlements are accounted for as changes in
estimates in the current period.
JAMES E. BUCHANAN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005 AND 2004
(See Independent Accountants Audit Report)
1. Summary of significant accounting policies and business
operations (continued):
Accounts Receivable:
Trade accounts receivable are recorded net of an allowance
for expected losses. The allowance is estimated from historical
performance and projections of trends. Bad debt expense for the
years ended December 31, 2005 and 2004 were $ 108,402 and $18,948
respectively.
Inventory:
Inventory at December 31, 2005 and 2004 primarily consists
of materials awaiting installation or allocation to a specific
contract or job.
2005 2004
Unbilled or allocated materials $ 766,895 $ 629,956
Advertising:
Advertising costs are expensed as incurred. Advertising
expense amounted to $197,856 and $93,444 for the years ended
December 31, 2005 and 2004 respectively.
Property and equipment:
Property and equipment are recorded at cost. Depreciation
of property and equipment is provided utilizing both straight line
and accelerated methods over the estimated useful lives of the respective
assets. The costs of maintenance and repairs are charged to operations
as incurred.
The estimated use full lives of property and equipment are
as follows:
Equipment 7
Furniture 7
Computers 5
Computer software 5
Motor vehicle 5
Leasehold improvements 39
JAMES E. BUCHANAN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005 AND 2004
(See Independent Accountants Audit Report)
1. Summary of significant accounting policies and business operations
(continued):
The Asset, Costs and estimated earnings in excess of
billings on uncompleted Contracts, represents revenues recognized in
excess of amount billed. The Liability, Billings in excess if costs
and estimated earnings on uncompleted Contracts represents billings
in excess of revenues recognized.
2.Contract receivables: 2005 2004
Contract receivables consist of:
Completed contracts $152,294 $ 246,844
Contracts in progress 2,296,887 1,450,719
2,449,181 1,697,563
Costs, estimated earnings and billings
on uncompleted Contracts are summarized
as follows:
Costs incurred on uncompleted contracts 8,544,757 $ 5,694,765
Estimated earnings 4,921,846 3,586,494
13,466,603 9,281,259
Billings thru December 31, 2005 and 2004 11,061,421 7,706,220
$ 2,405,182 $ 1,575,039
Included in the accompanying balance sheet
under the following caption:
Costs and estimated earnings in excess of
billings on completed contracts $2,548,345 $ 1,687,914
Billings in the excess of costs and estimated
earnings on uncompleted contracts (143,163) (112,875)
$2,405,182 $ 1,575,039
JAMES E. BUCHANAN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005 AND 2004
(See Independent Accountants Audit Report)
3. Lines of credit:
Banknorth:
On June 2, 2005 James E. Buchanan Electric, Inc. and its subsidiaries
Aculan, Inc. refinanced their outstanding lines of credit with Banknorth.
The Company currently has a demand revolving line of credit of credit
subject to a maximum borrowing of $2,000,000. The loan requires monthly
payments of interest only. Interest is computed at the Wall Street Journal
prime rate plus 1%. As of December 31, 2005 the rate was 8.25%.
The maximum advances outstanding under such lines during the periods ending
December 31, 2005 and 2004 were $ 1,863,306 and $1,289,249 respectively.
The lines of credit are collateralized by a first security interest in all
assets of Company and its Subsidiaries in addition, the note has been
guaranteed by a Trust holding real estate leased by the Corporation and
its Subsidiaries and owned by the sole stockholder and his spouse.
The sole stockholder has also guaranteed the notes of the Company and
the note is cross-collateralized between the Company and its Subsidiaries.
Outstanding balance at December 31, 2005 and 2004 were $ 1,703,306
and $ 1,289,249
MBNA America formerly Textron Financial:
The Company has a revolving line of credit from MBNA America currently
subject to a maximum borrowing of $50,000. The loan requires monthly
payments of 2% of the outstanding balance plus accrued interest. Interest
is at the prime rate of interest plus 6%. As of December 31, 2005 the
rate was 13.99%.
The Maximum advance outstanding under such line during the periods ended
December 31, 2005 and 2004 were $ 43,184 and $49,490.
JAMES E. BUCHANAN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005 AND 2004
(See Independent Accountants Audit Report)
3. Lines of Credit (continued):
The line of credit is unsecured, but it is personally guaranteed by the sole
stockholder. The outstanding balance as of December 31, 2005 and 2004 were
$ 40,038 & 42,244 respectively.
American Express Centurion Bank:
The Company has a revolving line of credit from American Express Small
Business Services currently subject to a maximum borrowing of $70,000.The
loan requires monthly payments of 1/36 of the outstanding principle balance
plus interest. Interest is computed at the prime rate of interest plus
1.95%. As of December 31, 2005 the rate was 7.49%.
The maximum advance outstanding under such line during the periods ended
December 31, 2005 and 2004 was $ 53,877 and $64,302 respectively.
The line of credit is unsecured, but the sole stockholder is jointly and
severally responsible along with the corporation for repayment of all credit
on the account.
The outstanding balances as of December 31, 2005 and 2004 were $46,349 &
$52,380 respectively.
Total outstanding lines of credit on December 31, 2005 and 2004 were
$1,789,693 and $1,383,873 respectively.
JAMES E. BUCHANAN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005 AND 2004
(See Independent Accountants Audit Report)
4. Long term debt:
Long-term debt at December 31, 2005 consists of the following:
On June 2, 2005 the Company and its Subsidiary Aculan, Inc. refinanced and
termed out a portion of their existing lines of credit. The note, to
Banknorth, is payable in monthly installments of $15,392 including interest.
Interest is computed at a fixed rate of 7.50% for seven years. The final
payment is due June 2012. This note is collateralized by a lien in all
assets of the Company and its Subsidiaries. In addition the note has been
guaranteed by a Trust holding real estate leased by the Corporation and
Subsidiaries and owned by the sole stockholder and his spouse. The sole
stockholder has also guaranteed the note of the Company and the note is
cross-collateralized between the Company and its Subsidiaries.
$ 944,904
The note to Banknorth is payable in monthly installments of $8,923 including
interest. Interest is computed at a fixed rate of 6.96% for four years.
The final payment is due June 2009. The note is collateralized by a first
lien on all assets of the Company, and has been personally guaranteed by the
sole stockholder of the Company, the Companys Subsidiary, Aculan, Inc. and
a Trust owned by the sole stockholder and his spouse.
$331,223
In April 20, 2004 a newly formed Subsidiary of the Company, Corporate
Communications Service Company, Inc., received financing for the
acquisitions of certain assets of Corporate Communications Services Inc.
This debt is payable in monthly installments of $2,700 a month including
interest. Interest is computed at fixed rate of 6.4% for five years.
The final payment is due April 2009.
$ 87,766
JAMES E. BUCHANAN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005 AND 2004
(See Independent Accountants Audit Report)
4. Long term debt (continued):
This note is collateralized by a lien in all assets of Corporate Communications
Services Company Inc. In addition the note has been guaranteed by the Company
and its Subsidiary Aculan, Inc., a Trust holding real estate leased by the
Company and its Subsidiaries and owned by the sole stockholder and his wife,
and the sole stockholder.
$ 96,872
Installment notes to various banks, GMAC and Dell financing, payable in monthly
installments totaling $6,022 including interest. The interest rates for these
notes range from 0% to 18.99%. The twelve notes are secured by motor vehicles,
equipment and two are personally guaranteed by the sole stockholder of the
Corporation. The final payments are May 2005, October 2005, April 2006, March
2007, February 2008, September 2008, November 2008, and May 2009.
$ 79,657
Capital leases, the Company leases two pieces of equipment under a 60 and 36
month respectively non cancelable, $ 1 purchase price lease agreements.
These leases are payable in monthly installments totaling $1,474 including
interest. The interest rates on these notes are 9.925% & 25.837% respectfully.
The final payments are due April 2008 and April 2010.
$ 51,717
Less current portion: ( 338,091 )
$ 1,254,048
Maturities of long-term debt are as follows:
Year ending
December 31 Amount
2007 307,250
2008 301,802
2009 226,489
2010 161,924
2011 171,320
Thereafter 85,263
--------------
$1,254,048
JAMES E. BUCHANAN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005 AND 2004
(See Independent Accountants Audit Report)
5. Note payable - former Aculan shareholder:
On January 1, 2003, with its acquisition of the Subsidiary,
The Company assumed the debt owed to the former shareholders of Aculan
Inc. The notes arose from acquisition of Aculans outstanding stock.
The Company has since ceased making payments on these notes. A former
shareholder of the corporation has since filed suit against the Company
for resumption of note payments, back wages, wrongful termination and
breach of contract.
The Company believes that given the resignation of the plaintiff and
Other factors that it will prevail on its defense on this litigation.
At this time, the Companys Attorney has not stated whether the Company
will prevail or not, on what monetary damages can be expected.
$ 14,247
6. Lease commitments:
The Company and Subsidiaries lease their Uxbridge facility from the
sole stockholder and his spouse under a 5 year operating lease commencing
August, 2002 and January 2003, respectively. The leases require minimum
lease (MLP) of $6,000 monthly. The Company and its Subsidiaries are
responsible for insurance for insurance, repairs, maintenance, utilities
and any increase in real estate taxes over and above the amount of such
taxes assessed for the tax year, in which the leases commence.
JAMES E. BUCHANAN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005 AND 2004
(See Independent Accountants Audit Report)
6. Lease commitments (continued):
Rent expense included in the results of operations for
the periods ended
December 31, 2005 and 2004 was $ 72,000 and $72,000
respectively.
Year ending
December 31 Amount
2006 132,000
2007 132,000
2008 132,000
2009 132,000
2010 132,000
-------------
$660,000
Operating lease agreements:
The Company leases a photocopier under a 60 month operating lease
agreement calling for monthly payments of $200.
The Company leases a copier under a 48 month operating lease
agreement calling For monthly payments for $163.
The Company and its Subsidiaries lease eighteen motor vehicles
under a non cancelable minimum lease term of 367 days and thereafter
the lease term is renewed monthly. The total monthly lease payments
are $16,952.
The Company leases certain computer equipment from Dell under a 48
month operating lease agreement calling for monthly payments of
$1,417.
JAMES E. BUCHANAN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005 AND 2004
(See Independent Accountants Audit Report)
6. Lease commitments (continued):
The future minimum lease payments are as follows:
Year ending
December Amount
2006 54,743
2007 19,508
2008 17,004
2009 11,336
-----------
$102,591
7. Business combination/goodwill:
On January 1, 2005 the company liquidated and merged all of the wholly
owned Subsidiaries into the parent Company.
On October 1, 2003 the sole shareholder of the corporation acquired
a 60% interest in another corporation. Subsequently on December 17,
2004 the sole stockholder acquired the remaining balance of the shares
of One Connection, Inc. in exchange for an option to purchase 150
shares of James E. Buchanan Electric, Inc at a price of $5 per share.
On December 31, 2004 One Connection, Inc. was liquidated and all assets
and liabilities were assumed by the sole stockholder of the company.
On January 1, 2005, in exchange for the issuance of additional 100,000
shares of stock, the Company received from the sole stockholder all the
assets and assumed all liabilities of One Connection, Inc. The
transaction is being accounted for under the purchase method of
accounting. The purchase method treats a business combination as the
acquisition or purchase of an enterprise by another. The acquiring
Company records its acquisition on the basis of Fair Market Value of
the assets less liabilities assumed the difference is allocated to
goodwill. The assets acquired liabilities assumed resulting goodwill
is:
Assets acquired $ 126,047
Liabilities (192,652)
Resulting goodwill $ _66,608_
JAMES E. BUCHANAN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005 AND 2004
(See Independent Accountants Audit Report)
8. Related party transaction:
During the year 2005 the Company and its Subsidiaries have made advances
and received monies from the sole stockholder of the corporation. These
advances and repayments have been classified as net distributions for the
calendar year ended December 31, 2005 and charged against retained earnings.
The two notes payable to the sole shareholder consists of the following:
An unsecured demand note payable with no provisions for interest. This
note was repaid in January of 2006
$ 100,000_
An unsecured promissory note dated June 17, 2003; the note requires monthly
payments of $644 including interest at the rate of 5.25% and matures on
July 2013. For the years ended December 31, 2005 and 2004 the Company has
made interest payments of $ 2,677 and $2,935 and principal payments of
$ 5,048 and $4,790 respectively.
Balance of note payable at December 31, 2005 $ 48,238
Less current portion ( 5,319)
--------------
42,919
Maturities of shareholder debt as follows:
Year ending
December 31 Amount
2006 $ 5,605
2007 5,907
2006 6,224
2007 6,559
2008 6,912
Thereafter 11,712
------------
42,919
JAMES E. BUCHANAN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005 AND 2004
(See Independent Accountants Audit Report)
8. Related party transactions (continued):
On December 31, 2004 One Connection, Inc. was liquidated and all assets
and liabilities were assumed by the sole stockholders of the Company.
9. Simple IRA:
In 1998 the Company established a simple IRA plan. This simple IRA maximizes
the employees contribution at 100% of the wages to 10,000 per year. The
employer match is the lesser of 100% of the employees contribution or 3% of
the employees wages. For the years ended December 31, 2005 and 2004 the
employers match was $ 75,683 and $52,709.
In connection with prevailing wage jobs, the company initiated a Company 401K
plan.
For the year 2006, the Company established a Safe Harbor 401K plan for all
employees and has integrated this with the prevailing wage 401K plan. A safe
Harbor allows employees to defer a certain amount of compensation annually as
detailed by the Internal Revenue Code. The Company will match 100% of the first
3% and 1% of the next two 2% of eligible wages.
SIGNATURE
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 hereunto duly authorized.
RPM ADVANTAGE, INC.
By: David R. Pressler
David R. Pressler, President
Date: August 15, 2006