U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2005
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number: ________________
RECLAMATION CONSULTING AND APPLICATIONS, INC.
(Formerly, Recycling Centers of America, INC.)
(Name of Small business Issuer as specified in its Charter)
Colorado
(State or other jurisdiction of Incorporation or organization
58-2222646
(IRS Employer Identification No.)
23832 Rockfield Boulevard, Suite 275
Lake Forest, California 92630
(Address of Principal Executive Offices)
(949) 609-0590
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days:
Yes [X] No [ ]
As of March 31, 2005, Reclamation Consulting and Applications, Inc. had
28,823,751 shares of Common Stock Outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
======================================================================
RECLAMATION CONSULTING AND APPLICATIONS, INC.
TABLE OF CONTENTS
Report on Form 10-QSB
For quarter ended
MARCH 31, 2005
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet at March 31, 2005 (Unaudited) F-1
Statements of Operations for the Three Months and Nine
Months ended March 31, 2005 and 2004 (Unaudited) F-2
Statements of Cash Flows for the Nine Months ended
March 31, 2004 and 2005 (Unaudited) F-3
Notes to the Consolidated Financial Statements F-4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 2
Item 3. Controls and Procedures. 3
PART II OTHER INFORMATION
Item 1. Legal Proceedings 4
Item 2. Changes in Securities 4
Item 3. Defaults upon Senior Securities 4
Item 4. Submission of Matters to Vote of Security Holders 4
Item 5. Other Information 4
Item 6. Exhibits and Reports on Form 8-K 4
Signatures 4
==========================================================================
RECLAMATION CONSULTING AND APPLICATIONS, INC.
BALANCE SHEET
MARCH 31, 2005
(Unaudited)
ASSETS
CURRENT ASSETS:
Accounts receivable $ 9,596
Notes recivable 51,834
Inventory 44,096
Prepaid expense 2,519
Advances to officers 58,652
Employee advances 22,635
---------
Total current assets 189,331
PROPERTY AND EQUIPMENT, net 55,168
OTHER ASSETS:
Deposits 14,993
---------
$ 259,492
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 219,681
Accrued expenses 408,994
Customer deposit 5,490
Note payable - related parties 546,819
Convertible loans 50,104
Convertible debentures 55,850
---------
Total current liabilities $ 1,286,937
COMMIMENTS $ CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common stock, $.01 par value;
Authorized shares 75,000,000,
28,823,751 shares issued and outstanding 288,238
Additional paid in capital 12,166,480
Treasury stock (15,000)
Shares to be issued 127,156
Prepaid Consulting (83,375)
Accumulated deficit (13,510,945)
-----------
Total stockholders' Deficit (1,027,446)
------------
$ 259,492
============
The accompanying notes are an integral part of these financial statements.
F-1
RECLAMATION CONSULTING AND APPLICATIONS, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED MARCH 31, 2005 AND 2004
(Unaudited)
<table>
<caption>
<s> <c> <c>
Three Months Nine Months
Ended March 31, Ended March 31,
2005 2004 2005 2004
---------- ---------- --------- ---------
Net revenue $ 11,413 $ 116,481 $ 173,581 162,011
Cost of revenue 15,254 55,226 92,240 87,293
---------- ---------- --------- ---------
Gross Profit (loss) (3,842) 61,255 81,341 74,718
Operating expenses
Bad debt 958,968 - 1,067,678 1,057
General & Administrative expenses 807,927 180,638 1,378,125 1,351,410
---------- ---------- ---------- ---------
Total operating expenses 1,766,895 180,638 2,445,803 1,352,467
---------- ---------- --------- ---------
Loss from operations (1,770,736) (119,383) (2,364,462) (1,277,749)
Non-operating income (expense):
Interest Income 20,365 29,166 60,491 29,166
Interest expense (21,758) (2,936) (71,681) (33,126)
Loss on settlement of debts (21,975) - (21,975) (585,224)
Litigation Settlement - (128,000) - (128,000)
Loss on disposal of asset - - - (22,692)
---------- ---------- --------- ---------
Total non-operating income (expense) (23,368) (101,770) (33,165) (739,876)
---------- ---------- --------- ---------
Loss before income tax (1,794,105) (221,153) (2,397,627) (2,017,625)
Provision for income tax - - 800 800
---------- ---------- ---------- ----------
Net loss $(1,794,105) $ (221,153) $ (2,397,627)$(2,017,625)
========== ========== =========== ===========
Basic and diluted weighted
average shares outstanding* 28,232,118 23,426,637 26,926,496 22,677,919
========== ========== ========== ==========
Basic and diluted net
loss per share $ (0.06) $ (0.01) $ (0.09) $ (0.09)
========== ========== ========== ==========
*Weighted average number of shares used to compute basic and diluted loss per
share is the same in these financial statements since the effect of dilutive
securities is anti-dilutive.
The accompany notes are an integral part of these financial statements.
</table>
F-2
RECLAMATION CONSULTING AND APPLICATIONS, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED MARCH 31, 2005 and 2004
(Unaudited)
<table>
<caption>
<s> <c> <c>
2005 2004
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,398,427) $(2,018,425)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 4,276 4,110
Issuance of shares for services and compensation 686,432 518,413
Issuance of shares for interest expense 1,900 -
Bad debts 1,067,678 -
Loss on conversion of debts 21,975 -
Loss on settlement of debts - 585,224
Options issue for compensation - -
Loss on disposal of fixed assets - 22,692
(Increase)/decrease in current assets:
Accounts receivable (51,014) (112,780)
Note receivable (159,064) (561,577)
Inventory (44,096) 36,908
Prepaid expenses (2,519) -
Other Receivable - (29,000)
Employee advances (64,334) 1,790
Other assets (14,993) 897
(Decrease) in current liabilities:
Accounts payable and accrued expenses 44,482 70,181
Customer deposit (2,052) 10,638
------- -------
Total adjustments 1,488,672 547,496
------- -------
Net cash used in operating activities (909,755) (1,470,929)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of equipment (2,600) (1,217)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of note payable 235,500 215,268
Payments on note payable (32,445) (195,707)
Proceeds from loan 354,501 15,000
Payment of loans (132,500) (10,000)
Receipt of cash for shares to be issued 110,156 78,900
Issuance of common stock for cash 376,100 1,368,985
--------- ----------
Net cash provided by financing activities 911,312 1,472,446
--------- ----------
NET INCRASE IN CASH & CASH EQUIVALENTS (1,043) 300
CASH & CASH EQUIVALENTS, BEGINNING BALANCE 1,043 -
--------- -------
CASH & CASH EQUIVALENTS, ENDING BALANCE $ 0 $ 300
========= =======
The accompanying notes are an integral part of these financial statements.
</table>
<page>F-3
RECLAMATION CONSULTING AND APPLICATIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATIONS AND DESCRIPTION OF BUSINESS
Reclamation Consulting and Applications, Inc. (formerly, Recycling Centers of
America, Inc.) (the "Company") is a Colorado corporation, originally formed in
1976 under the name of Vac-Tech Systems, Inc. The Company changed its name to
Recycling Centers of America on March 26, 1999. On January 16, 2002, an article
of amendment was filed to change the name of corporation to Reclamation
Consulting and Applications, Inc.
Presently, the Company's primary business is the production and sale of the
Alderox(R) line of products including ASA-12(R), KR-7(R), TSR(R), and ASA
Cleaners. ASA-12(R) is an asphalt release agent, KR7(R) is a concrete release
agent and TSR(R) was specifically designed as a non-stick coating for the oil
sands industry.
The Company also has an exclusive distributorship agreement with Topia Energy,
Inc. Under the agreement, the Company markets the sale of BioDiesel Driven
biodiesel fuel. This agreement appoints the Company as the worldwide exclusive
distributor of Topia Energy, Inc.,s biodiesel within the marine industry. The
Company also markets Topia Energy, Inc.,s biodiesel outside of the marine
industry under a registered commission protected account basis. There are no
geographical or time limitations on this exclusive agreement.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed interim financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission for the presentation of interim financial information, but
do not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. The audited financial
statements for the year ended June 30, 2004 were filed on October 1, 2004 with
the Securities and Exchange Commission and is hereby referenced. In the opinion
of management, all adjustments considered necessary for a fair presentation have
been included. Operating results for the nine month period ended March 31, 2005
are not necessarily indicative of the results that may be expected for the year
ended June 30, 2005.
<Page>F-4
3. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
4. NEW ACCOUNTING PRONOUNCEMENTS
In November 2004, the FASB has issued FASB Statement No. 151, "Inventory Costs,
an Amendment of ARB No. 43, Chapter 4" ("FAS No. 151"). The amendments made by
FAS No. 151 are intended to improve financial reporting by clarifying that
abnormal amounts of idle facility expense, freight, handling costs, and wasted
materials (spoilage) should be recognized as current-period charges and by
requiring the allocation of fixed production overheads to inventory based on the
normal capacity of the production facilities.
The guidance is effective for inventory costs incurred during fiscal years
beginning after June 15, 2005. Earlier application is permitted for inventory
costs incurred during fiscal years beginning after November 23, 2004. The
provisions of FAS No. 151 will be applied prospectively. The Company does not
expect the adoption of FAS No. 151 to have a material impact on its consolidated
financial position, results of operations or cash flows.
In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment,
an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires
companies to recognize in the statement of operations the grant- date fair value
of stock options and other equity-based compensation issued to employees. FAS
No. 123R is effective beginning in the Company's second quarter of fiscal 2006.
The Company is in process of evaluating the impact of this pronouncement on its
financial statements.
In December 2004, the FASB issued SFAS Statement No. 153, "Exchanges of
Nonmonetary Assets." The Statement is an amendment of APB Opinion No. 29 to
eliminate the exception for nonmonetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of nonmonetary assets
that do not have commercial substance. The Company believes that the adoption
of this standard will have no material impact on its financial statements.
<page>F-5
In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and its
Application to Certain Investments." The EITF reached a consensus about the
criteria that should be used to determine when an investment is considered
impaired, whether that impairment is other-than-temporary, and the measurement
of an impairment loss and how that criteria should be applied to investments
accounted for under SFAS No. 115, "ACCOUNTING IN CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES." EITF 03-01 also included accounting considerations
subsequent to the recognition of an other-than-temporary impairment and requires
certain disclosures about unrealized losses that have not been recognized as
other-than-temporary impairments. Additionally, EITF 03-01 includes new
disclosure requirements for investments that are deemed to be temporarily
impaired. In September 2004, the Financial Accounting Standards Board (FASB)
delayed the accounting provisions of EITF 03-01; however the disclosure
requirements remain effective for annual reports ending after June 15, 2004. The
Company will evaluate the impact of EITF 03-01 once final guidance is issued.
5. NOTES RECEIVABLE
The Company has a note receivable of $ 51,834 due from North American Systems,
Inc. (NASI) a former distributor of the Company,s Alderox(R) line of products.
This receivable has been secured through inventory of NASI. The Company wrote-
off receivables from NASI amounting to $958,968 during the period ended March
31, 2005. The Company bought back the fixed assets sold to NASI in September
2002 at $44,902. These assets have been recorded at the net book value as on
March 31, 2005.
6. ADVANCES TO OFFICERS
Some officers of the Company borrowed money amounting to $58,652. These are non
interest bearing and due on demand.
7. ACCRUED EXPENSES
The following is the composition of accrued expenses as of March 31, 2005.
Payroll tax liability $ 238,105
Accrued interest 52,766
Accrued vacation 32,516
Accrued taxes 2,400
Others 83,207
-----------
Total $ 408,994
===========
<page>F-6
8. NOTES PAYABLE - RELATED PARTIES
Notes payable consist of the following at March 31, 2005:
Note payable bearing interest rate of 10%,
unsecured, payable on November 30, 2005 $20,000
Note payable bearing interest rate of 15%,
unsecured, payable on September 17, 2005 $125,000
Note payable bearing interest rate of 15%,
Secured by assets of the Company
payable on April 22, 2005 $20,000
Note payable bearing interest rate of 15%,
unsecured, payable on October 29, 2005 $50,000
Note payable bearing interest rate of 10%,
unsecured, payable on September 8, 2005 $5,112
Note payable bearing interest rate of 10%,
unsecured, payable on December 31, 2005 $104,705
Note payable to related party - stockholder
bearing interest rate of 0%,
unsecured, payable on January 1, 2005 $24,000
Note payable to related party - stockholder
bearing interest rate of 0%,
unsecured, payable on January 21, 2005 $7,500
Note payable to related party - stockholder
bearing interest rate of 10%,
unsecured, payable on March 10, 2005 $10,000
Note payable to related party - stockholder
bearing interest rate of 10%,
unsecured, payable on March 14, 2005 $10,000
<page>F-7
Note payable to related party - stockholder
bearing interest rate of 0%,
unsecured, payable on April 1, 2005 $30,500
Note payable to related party - stockholder
bearing interest rate of 10%,
unsecured, payable on March 10, 2005 $50,000
Note payable to related party - stockholder
bearing interest rate of 0%,
unsecured, payable on June 1, 2005 $20,000
Note payable to related party - stockholder
bearing interest rate of 15%,
unsecured, payable on September 30, 2005 $20,000
Note payable to related party - stockholder
bearing interest rate of 10%,
secured by the assets of the Company,
payable on March 10, 2006 $50,001
-----------
Total notes payable to related parties $546,819
===========
Interest expense for related parties for notes and loans payable for the period
ended March 31, 2005 and 2004 amounted to $4,621 and $2,936 respectively.
9. CONVERTIBLE LOANS-SHAREHOLDERS
The Company has convertible loans outstanding at March 31, 2005 totaling
$50,104. The loans are convertible to stock at the price of $ 0.40 or $ 0.45.
The investor has an option to convert their loan, or any portion, of to the
restricted capital stock of the Company at price per the agreement and receiving
one share, up front at inception of the loan, for each dollar invested. Interest
will accumulate at rate of 10% per annum until conversion date and paid semi
annually over the term of the agreement leaving the initial loan until
expiration of the agreement convertible to Company,s restricted capital stock
per the agreement or principal returned with the last interest payment. Loan can
be converted at any time within the 3 year loan period.
10. CONVERTIBLE DEBENTURES
The Company, through a 506 D Securities Offerings, solicited investment funds.
The Convertible Debentures bear interest at ten percent (10%) per annum payable
annually and are convertible into restricted common shares of the Company at
$0.40 per share. The Company has the right to change the conversion price of the
debentures. The Debentures are unsecured and are due and payable by December 31,
2005. The convertible debenture outstanding amounted to $55,850 at March 31,
2005.
<page>F-8
11. COMMITMENTS
The Company entered into an employment agreement with an individual to act as
the President on January 6, 2005. This agreement has the same terms as the past
agreement and expires January 6, 2010. Under the agreement, during the first
twelve months of employment, the Company agrees to compensate Employee (from the
commencement of this agreement) at the rate of not less than $135,200 per year
base compensation for the first year of employment. Thereafter, Employee,s
annual compensation shall be increased by 20% on each anniversary date of this
agreement, provided that the Company reaches a minimum net profit of $250,000.
In no event shall Employee,s minimum base compensation be reduced below $135,200
per year. Such compensation shall be payable monthly or on such more frequent
basis as the Company may establish. The agreement shall have an initial five-
year term, which shall be automatically renewed each year thereafter unless the
Company, upon thirty (30) days prior notice notifies Employee of its intent not
to renew the Agreement. Notwithstanding the foregoing, the Company or the
Employee may at any time terminate this Agreement and the employment
relationship on thirty (30) days prior notice to the other, with the
consequences hereinafter set forth.
The option to purchase 1,500,000 shares of common restricted stock in the
Company has been granted in Employee,s name. All options shall expire 5-years
from the vesting date. 1,500,000 of these options have been carried over from
Employee,s previous Employment Agreement with the Company.
Additional stock options shall be granted to Employee each year following the
above schedule on the anniversary date of this Agreement, the amount and price
of which to be determined solely by the Company.
The Company entered into an employment agreement with an individual to act as
the Chief Financial Officer on January 6, 2005. This agreement has the same
terms as the past agreement and expires January 6, 2010. Under the agreement,
during the first twelve months of employment, the Company agrees to compensate
Employee (from the commencement of this agreement) at the rate of not less than
$135,200 per year base compensation for the first year of employment.
Thereafter, Employee,s annual compensation shall be increased by 20% on each
anniversary date of this agreement, provided that the Company reaches a minimum
net profit of $250,000. In no event shall Employee,s minimum base compensation
be reduced below $135,200 per year. Such compensation shall be payable monthly
or on such more frequent basis as the Company may establish. The agreement shall
have an initial five-year term, which shall be automatically renewed each year
thereafter unless the Company, upon thirty (30) days prior notice notifies
Employee of its intent not to renew the Agreement. Notwithstanding the
foregoing, the Company or the Employee may at any time terminate this Agreement
and the employment relationship on thirty (30) days prior notice to the other,
with the consequences hereinafter set forth.
<page>F-9
]
The option to purchase 1,500,000 shares of common restricted stock in the
Company has been granted in Employee,s name. All options shall expire 5-years
from the vesting date. 1,500,000 of these options have been carried over from
Employee,s previous Employment Agreement with the Company.
Additional stock options shall be granted to Employee each year following the
above schedule on the anniversary date of this Agreement, the amount and price
of which to be determined solely by the Company.
12. NET LOSS PER SHARE
Net loss per share is calculated in accordance with the Statement of financial
accounting standards No. 128 (SFAS No. 128), "Earnings per share". Basic net
loss per share is based upon the weighted average number of common shares
outstanding. Diluted net loss per share is based on the assumption that all
dilutive convertible shares and stock options were converted or exercised.
Dilution is computed by applying the treasury stock method. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the period.
Weighted average number of shares used to compute basic and diluted loss per
share is the same in this financial statement since the effect of dilutive
securities is anti-dilutive.
13. STOCKHOLDERS' DEFICIT
Common Stock:
During the period ended March 31, 2005, the Company issued 1,497,163 shares of
common stock for cash amounting $376,100.
During the period ended March 31, 2005, the Company issued 1,158,968 shares of
common stock for services amounting $271,753. The Company recorded $83,375
prepaid consulting for this issuance.
During the period ended March 31, 2005, the Company cancelled 62,500 shares
amounting $625.
During the period ended March 31, 2005, the Company issued 5,000 shares of
common stock towards payment of interest expense on the notes amounting to $
1,900.
During the period ended March 31, 2005, the Company issued 732,500 shares of
common stock in settlement of debts amounting to $146,500. A loss on conversion
of $21,975 was incurred in this conversion of debts to equity.
<page>F-10
Shares to be issued:
During the period ended March 31, 2005, the Company received $110,156 for
492,267 shares to be issued.
During the period ended March 31, 2005, the Company commits to issue 70,000
shares of common stock for services and compensation amounting to $17,000.
Stock Options:
During the period ended March 31, 2005, the Company granted 2,120,000 stock
options to non-employees with an exercise price of $0.25 per share. These
options are vested immediately and the Company recorded a $414,679 expense in
relation for the option grant.
During the period ended March 31, 2005, the Company granted 2,740,000 stock
options to employees with an exercise price of $0.25 per share. These options
are vested immediately.
In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock Based
Compensation-Transition and Disclosure". SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock Based Compensation", to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used, on reported
results.
The following table illustrates the effect on net loss per share if the Company
had applied the fair value recognition provisions of SFAS 123 to stock-based
employee compensation.
Net loss:
As reported $(2,398,427)
Deduct: Total stock-based
employee compensation expense
determined under fair value
based method for all awards 526,761
--------------
Pro forma $(2,925,188)
=============
Basic and diluted net loss per share:
As reported $ (0.09)
==============
Pro forma $ (0.10)
==============
The above pro forma effects of applying SFAS 123 are not necessarily
representative of the impact on reported net loss for future years.
<page>F-11
14. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The Company prepares its statements of cash flows using the indirect method as
defined under the Financial Accounting Standard No. 95.
The Company paid income tax $ 0 for each nine month period ended March 31, 2005
and 2004. Interest expenses of $76,702 and $33,127 was paid during the nine
month period ended March 31, 2005 and 2004, respectively.
Supplemental disclosure of non-cash investing and financing activities:
The cash flow statements do not include following non-cash investing and
financing activities:
During the period ended March 31, 2005, the Company issued 1,158,968 shares of
common stock for services amounting $271,153.
During the period ended March 31, 2005, the Company cancelled 62,500 shares.
During the period ended March 31, 2005, the Company issued 5,000 shares of
common stock towards payment of interest expense on the notes amounting to $
1,900.
15. RELATED PARTY TRANSACTIONS
Certain of the Company's major shareholders have loaned money to the Company at
various times. The notes payable to the related parties have been presented in
Note 8. Interest expense for related parties for the period ended March 31, 2005
and 2004 amounted to $31,682 and $12,521 respectively.
During the period ended March 31, 2005, the Company settled debt to a related
party for $146,500 and agreed to issue 732,500 shares towards the settlement.
16. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. This basis of accounting contemplates
the recovery of the Company's assets and the satisfaction of its liabilities in
the normal course of business. Through March 31, 2005, the Company had incurred
cumulative losses of $13,510,945 including net losses of $2,398,427 for the nine
month period ended March 31, 2005. The continuing losses have adversely affected
the liquidity of the Company.
In view of the matters described in the preceding paragraph, recoverability of a
major portion of the recorded asset amounts shown in the accompanying balance
sheet is dependent upon continued operations of the Company, which in turn is
dependent upon the Company,s ability to raise additional capital, obtain
financing and to succeed in its future operations. The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern.
Management has taken the following steps to revise its operating and financial
requirements, which it believes are sufficient to provide the Company with the
ability to continue as a going concern. Management devoted considerable effort
during the period ended March 31, 2005, towards (i) obtaining additional equity
financing and (ii) evaluation and reorganization of its distribution and
marketing methods.
<page>F-12
Item 2. Managements Discussion and Analysis
Our primary business is production and sale of Alderox(R) ASA-12(R), KR-7(R),
TSR(R), applicator systems and Alderox(R) cleaners. ASA-12(R) is an asphalt
release agent that was developed by the Company in response to the industry's
need for an effective, economical and environmentally friendly product. KR-7(R)
is a concrete release agent that was also developed by the company in response
to industry,s need for an effective, economical and environmentally friendly
product. Alderox(R) TSR-(R) was specifically designed as a non-stick agent for
use in the tar sands industry. Alderox(R) Cleaner-7 and Cleaners were
specifically developed for the removal of used Alderox(R) ASA-12(R) and
Alderox(R) KR-7(R).
Additionally, under an exclusive distributorship agreement with Topia Energy,
Inc., the Company also markets the sale of BioDiesel Driven biodiesel fuel. This
agreement appoints the Company as the worldwide exclusive distributor of Topia
Energy, Inc.,s biodiesel within the marine industry. The Company also markets
Topia Energy, Inc,s biodiesel outside of the marine industry under a registered
commission protected account basis. There are no geographical or time
limitations on this exclusive agreement.
The Company markets in eleven United States territories for the sales of
Alderox(R) products. The Company also has an exclusive distributorship
Agreement with Canadian Release Agents, Inc. as the exclusive distributor of
Alderox(R) in Canada within the asphalt and concrete industries. The Company
also has an exclusive distributorship Agreement with AURTECH as the exclusive
distributor of Alderox(R) in India within the asphalt and concrete industries.
The Company also has an exclusive distributorship Agreement with ITA Asphalt
Limited as the exclusive distributor of the Republic of Ireland and the United
Kingdom within the asphalt and concrete industries.
Current Alderox(R) distributors have also expressed interest in the sale of
biodiesel. Many of the Alderox(R) end users are also major diesel fuel
consumers.
Three Month Statement of Operations:
The Company has incurred losses of $1,794,105 for the three months ended March
31, 2005 as compared to a net loss of $221,153 for the three months ended March
31, 2004. These are primarily non cash losses.
The Cost of goods sold represents one hundred thirty four percent (134%) of net
revenue for the three months ending March 31, 2005. The cost of sales for the
three months ending March 31, 2004 was forty seven percent (47%) of net revenue.
Revenues for both of the three periods were derived from the sales of the
Alderox(R) line of products.
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Operating expenses consist primarily of general and administrative expenses. For
the three months ended March 31, 2005 operating expenses totaled $1,766,895 as
compared to $180,368 for the three months ended March 31, 2004. The increase in
general and administrative expenses is mainly due to stock issuances for
consulting fees and the write off of bad debt of $958,968 from North American
Systems, Inc.
During the nine months ended March 31, 2005 the Company recognized a $21,975
loss on the settlement of debts.
Interest expense increased during the three months ended March 31, 2005 by
$18,822 over the same period in 2004.
Liquidity and Capital Resources
As of March 31, 2005 the Company had no cash and cash equivalents as compared to
cash and cash equivalents of $300 as of March 31, 2004. At March 31, 2005, the
Company had a working capital deficit (total current liabilities in excess of
total current assets) of $1,097,607 as compared to a working capital deficit of
$435,308 as of March 31, 2004.
The principal use of cash for the three months ended March 31, 2005 and 2004 was
to fund the net loss from operations.
The Company received cash from issuance of notes amounting to $160,501 during
the three month period ending March 31, 2005.
The management of the Company is endeavoring to cover operating expenses in
excess of revenues of the Company until adequate sales are generated, through
private sale of additional shares. There is no assurance of success in such
placement. Management projects that the Company may become profitable and begin
to generate sufficient cash flow to meet its monthly operating expenses sometime
during the forth quarter of the current fiscal year, but cannot guarantee this
result.
ITEM 3. Controls and Procedures
a) Evaluation of Disclosure Controls and Procedures. Our Chief Executive
Officer, and Chief Financial Officer, have performed an evaluation of the
Company's disclosure controls and procedures, as that term is defined in
Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as of March 31, 2005 and each has concluded that such disclosure
controls and procedures are effective to ensure that information required to
be disclosed in our periodic reports filed under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified by the
Securities and Exchange Commission's rules and forms.
(b) Changes in Internal Controls. There were no changes in the Company's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation.
Code of Ethics:
We intend to adopt a code of ethics in 2004 that applies to our principle
executive officer, principal financial officer, principle accounting officer or
controller, other persons performing similar functions. We intend to post the
text of our code of ethics on our website in connection with our "Investor
Relations" materials. In addition, we intend to promptly disclose (1) the
nature of any amendment to our code of ethics that applies to our principle
executive officer principal financial officer, principle accounting officer or
controller, other persons performing similar functions (2) the nature of any
wavier, including an implicit wavier, from a provision of our code of ethics
that is granted to one of these specific officers, the name of such person who
is granted the waiver and the date of the waiver on our web site in the future.
We do not currently have a code of ethics as this is a new regulatory
requirement and we are examining the various form and contents of other
companies written code of ethics, discussing the merits and meaning of a code of
ethics to determine the best form for our Company.
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PART II --- OTHER INFORMATION
Item 1. Legal Proceedings.
Nothing to report
Item 2. Changes in Securities.
Nothing to Report
Item 3. Defaults Upon Senior Securities.
Nothing to Report
Item 4. Submission of Matters to a Vote of Security Holders.
Nothing to Report
Item 5. Other Information.
Nothing to Report
Item 6. Exhibits and Reports on Form 8-K
Index to Exhibits
(i) Exhibits
EXHIBIT
NUMBER DESCRIPTION
- ------ -------------
31.1 Amended Rule 13a-14(a) Certification of Gordon W. Davies.
31.2 Amended Rule 13a-14(a) Certification of Michael C. Davies.
32.1 Amended Certification Pursuant to 18 U.S.C. Section 1350 of
Gordon W. Davies
32.2 Amended Certification Pursuant to 18 U.S.C. Section 1350 of
Michael C. Davies.
(ii) Reports on Form 8-K
On July 8, 2002, Reclamation Consulting and Applications, Inc. appointed new
independent accountants. File No. 000-29881 and Accession Number
0001091818-02-000345, are incorporated herein by reference.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this amended report to be signed on its behalf by the undersigned, thereunto
duly authorized.
RECLAMATION CONSULTING AND APPLICATIONS, INC.
Date: June 14, 2005
/s/ Gordon W. Davies
---------------------
Gordon W. Davies,
President
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