UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 31, 2012
or
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________________ to ______________________________________
Commission File Number: 1-3477
CATALYST RESOURCE GROUP, INC.
(Exact name of registrant as specified in its charter)
Florida 82-0190257
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer identification Number)
| 17011 Beach Blvd., Suite 1230, Huntington Beach, CA 92647 |
| (Address of principal executive offices) (Zip Code) |
| 714-843-5455 |
| (Registrant's telephone number, including area code) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Non-accelerated filer ☐ | Smaller reporting company ☑ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of May 18, 2012, there were 457,120,574 shares of the issuer's non-assessable Common Stock, $.001 par value per share, (including 20,867,000 shares to be cancelled) and 9,958 shares of the issuer's Class B assessable Common Stock, $.001 par value, issued and outstanding.
CATALYST RESOURCE GROUP, INC.
(Formerly JEANTEX GROUP, INC.)
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 1- Financial Statements – Unaudited
Balance Sheets as of March 31, 2012 (Unaudited) and December 31, 2011
Statements of Operations for the Three Months Ended March 31, 2012 and 2011 and the period from January 1, 2007 (Inception) to March 31, 2012 (Unaudited
Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011 and the period from January 1, 2007 (Inception) to March 31, 2012 (Unaudited
Notes to Unaudited Financial Statements
Item 2 -Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3- Quantitative and Qualitative Disclosures about Market Risk
Item 4- Controls and Procedures
PART II - OTHER INFORMATION
Item 1- Legal Proceedings
Item 2- Unregistered Sales of Equity Securities and Use of Proceeds
Item 3- Defaults Upon Senior Securities
Item 4- Submission of Matters to a Vote of Security Holders
Item 5- Other Information
Item 6- Exhibits
SIGNATURES
CERTIFICATIONS
| CATALYST RESOURCE GROUP, INC | ||||
| FORMERLY JEANTEX GROUP, INC | ||||
| (DEVELOPMENT STAGE COMPANY) | ||||
| CONSOLIDATED BALANCE SHEETS | ||||
| (unaudited) | ||||
| March 31, | December 31, | |||
| 2012 | 2011 | |||
| ASSETS: | ||||
| Current Assets: | ||||
| Cash | $ | (0) | $ | 0 |
| TOTAL ASSETS | $ | (0) | $ | 0 |
| LIABILITIES AND STOCKHOLDERS' DEFICIT: | ||||
| Current Liabilities: | ||||
| Accounts payable and accrued expense | $ | 204,417 | $ | 204,669 |
| Interest payable | 241,414 | 281,649 | ||
| Notes payable | 275,000 | 355,040 | ||
| Convertible promissory note, net of discount $37,000 and $7,886 respectively | 29,114 | 82,011 | ||
| Payables to related parties | 118,103 | 114,063 | ||
| Derivative Liability | 28,886 | 173,944 | ||
| Total Current Liabilities | $ | 896,934 | $ | 1,211,377 |
| Stockholders' Deficit: | ||||
| Common stock, non-assessable, $0.001 par value, 999,990,000 shares authorized, 432,120,574 and 255,657,250 share sissued and outstanding, respectively | $ | 432,122 | $ | 255,659 |
| Class B Common stock, assessable, $0.001 par value 10,000 shares authorized, 9,958 shares issued and outstanding | 10 | 10 | ||
| Additional paid in capital | 17,027,439 | 16,839,161 | ||
| Accumulated deficit prior to development stage | (16,770,000) | (16,770,000) | ||
| Accumulated deficit during development stage | (1,586,505) | (1,536,206) | ||
| Total Stockholders' Deficit | $ | (896,934) | $ | (1,211,377) |
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 0 | $ | 0 |
| The accompanying notes are an integral part of these financial statements. | ||||
| CATALYST RESOURCE GROUP, INC | |||||||
| FORMERLY JEANTEX GROUP, INC | |||||||
| (DEVELOPMENT STAGE COMPANY) | |||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
| FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011 AND THE PERIOD | |||||||
| FROM RE-ENTERING THE DEVELOPMENT STAGE, JANUARY 1, 2007, TO MARCH 31, 2011 | |||||||
| (unaudited) | |||||||
| From Re-entering of | |||||||
| Development Stage | |||||||
| January 1, 2007 to | |||||||
| 2012 | 2011 | March 31, 2012 | |||||
| NET SALES | $ | - | $ | - | $ | - | |
| COST OF GOODS SOLD | - | - | - | ||||
| GROSS PROFIT | - | - | - | ||||
| OPERATING EXPENSES: | |||||||
| General and administration | 5,202 | 20,037 | 421,031 | ||||
| Bad Debts | - | 617,336 | |||||
| Total Operating Expenses | 5,202 | 20,037 | 1,038,367 | ||||
| Income(Loss) from Operations | (5,202) | (20,037) | (1,038,367) | ||||
| OTHER INCOME (EXPENSES) | |||||||
| Interest expense | (55,791) | (39,745) | (529,147) | ||||
| Change in fair value of derivative | 10,694 | (3,516) | (36,776) | ||||
| Other Income | - | - | 17,784 | ||||
| Total other income (expense) | (45,097) | (43,261) | (548,139) | ||||
| NET INCOME(LOSS) | $ | (50,299) | $ | (63,298) | $ | (1,586,506) | |
| Weighted average number of Class A shares outstanding-basic and diluted | 344,325,603 | 101,995,073 | |||||
| Basic and diluted net loss per share-Class A | $ | (0.00) | $ | (0.00) | |||
| The accompanying notes are an integral part of these financial statements. | |||||||
| CATALYST RESOURCE GROUP, INC | ||||||
| FORMERLY JEANTEX GROUP, INC | ||||||
| (DEVELOPMENT STAGE COMPANY) | ||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
| FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011 | ||||||
| AND THE PERIOD FROM RE-ENTERING THE DEVELOPMENT STAGE, JANUARY 1, 2007 TO MARCH 31, 2012 | ||||||
| (unaudited) | ||||||
| Period From | ||||||
| January 1, 2007 | ||||||
| (re-entering | ||||||
| development stage) to | ||||||
| 2012 | 2011 | March 31, 2012 | ||||
| Cash Flows From Operating Activities: | ||||||
| Net loss | $ | (50,299) | $ | (63,298) | $ | (1,586,506) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
| Gain on Conversion Note | - | 617,336 | ||||
| Imputed interest charged to equity | 966 | 926 | 15,857 | |||
| Amortization of Discount | 43,262 | 25,239 | 242,048 | |||
| Issuance of shares for consulting services | - | 135,000 | ||||
| Changes in fair value of derivative liability | (10,694) | 3,516 | 36,776 | |||
| Changes in assets and liabilities: | ||||||
| Decrease in deposits and prepaid expenses | - | - | 46,816 | |||
| Increase(decrease) in accounts payable | (337) | 8,588 | (1,187) | |||
| Increase in accrued expenses | 14,603 | 13,697 | 218,009 | |||
| Total adjustments | 47,800 | 51,966 | 1,310,655 | |||
| Net cash used in operating activities | (2,500) | (11,332) | (275,851) | |||
| Cash Flow From Financing Activities: | ||||||
| Proceeds from notes - related parties | 4,040 | 150,500 | ||||
| Payment of Notes- related parties | - | (63,000) | (189,126) | |||
| Proceeds from notes | - | 80,000 | 254,440 | |||
| Payment on notes | (1,540) | (6,540) | ||||
| Payments of lines of credit | - | - | (1,270) | |||
| Stock issued for cash | - | - | 62,600 | |||
| Net cash provided by financing activities | 2,500 | 17,000 | 270,604 | |||
| Increase(decrease) in cash | 0 | 5,668 | (5,247) | |||
| Cash - Beginning of period | - | 180 | 5,247 | |||
| Cash - End of period | $ | 0 | $ | 5,848 | $ | 0 |
| Supplemental Cash Flow Information: | ||||||
| Interest paid | $ | - | $ | $ | 19,177 | |
| Taxes paid | $ | - | $ | - | $ | - |
| Non-cash investing and financing activities: | ||||||
| Debt Discount | $ | 1,840 | 44,090 | $ | 259,396 | |
| Relief of derivative liability due to conversion | $ | 98,000 | 37,000 | $ | 185,000 | |
| The accompanying notes are an integral part of these financial statements. | ||||||
Catalyst Resource Group, Inc.
(Formerly Jeantex Group, Inc.)
Notes to Unaudited Consolidated Financial Statements
March 31, 2012
1. BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to interim financial statements. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows at March 31, 2012 and for all the periods presented have been made.
The financial information included in this quarterly report should be read in conjunction with the consolidated financial statements and related notes thereto in our Form 10-K for the year ended December 31, 2011.
The results of operations for the three months ended March 31, 2012 are not necessarily indicative of the results to be expected for the full year ending December 31, 2012.
Development Stage Company
The Company has not earned significant revenue from planned principal operations since 2006. Accordingly, effective January 1, 2007, the Company's activities have been accounted for as those of a "Development Stage Enterprise" as set forth in FASB Pronouncements. Among the disclosures required are that the Company's financial statements be identified as those of a development stage company, and that the statements of operations, stockholders' equity (deficit) and cash flows disclose activity since the date of the Company's inception of development stage.
2. GOING CONCERN
The Company's consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has accumulated deficits of $18,356,056 at March 30, 2012. At March 31, 2012, the Company’s current liabilities exceeded its current assets by $896,934. In view of the matters described above, 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.
3. NOTES PAYABLE
At March 30, 2012 and December 31, 2011, notes payable consisted of the following:
| March 31, 2012 | December 31, 2011 | |||
| Note Payable to ex-president of the Company, unsecured, 8% interest matured September 2006 | $ | 250,000 | $ | 250,000 |
| Note Payable due to individual, unsecured, 8% interest due on demand | - | 50,000 | ||
| Note Payable due to individual, unsecured, 8% interest due on demand | 25,000 | 25,000 | ||
| Note Payable due to individual, unsecured, 8% interest due on demand | - | 10,500 | ||
| Note Payable due to individual, unsecured, 8% interest due on demand | - | 7,000 | ||
| Note Payable due to individual, unsecured, 8% interest due on demand | - | 11,000 | ||
| Note Payable due to individual, unsecured, 8% interest due on demand | - | 1,540 | ||
| $ | 275,000 | $ | 355,040 |
Total interest expense for the three months ended March 31, 2012 and 2011 was $55,791 and $39,745 respectively.
4. PAYABLES TO RELATED PARTIES
At March 31, 2012 and December 31, 2011, notes payable to related parties consisted of the following:
| March 31, 2012 | December 31, 2011 | |||
| Note Payable to PHI Group, Inc. related by ownership, unsecured,
8% interest, due on demand matured September 2006 |
$ | 85,780 | $ | 85,780 |
| Short-term loan from officer, unsecured, interest free, due on demand | 32,323 | 28,283 | ||
| $ | 118,103 | $ | 114,063 |
Imputed interest on the interest free short-term loan from officer in the amount of $ 966 and $3,604 were included as an increase to additional paid in capital at March 31, 2012 and December 31, 2011, respectively
5. CONVERTIBLE PROMISSORY NOTES
The Company has issued a number of convertible promissory notes to Asher Enterprises, Inc. (“Asher”) since May 2010. These notes are due and payable nine months following issuance dates with interest of 8% per annum. These notes are convertible at the election of Asher from time to time after the issuance date, at 39% discount to the average of the lowest closing bid prices for the Company’s common stock during the ten trading day period ending on the latest complete trading prior to the conversion date. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 22% per annum and the notes become immediately due and payable. Should that occur, the Company is liable to pay Asher 150% of the then outstanding principal and interest. The note agreements contain covenants requiring Asher’s written consent for certain activities not in existence or not committed to by the Company on the issue date of the notes, as follows: dividend distributions in cash or shares, stock repurchases, borrowings, sale of assets, certain advances and loans in excess of $45,000, and certain guarantees to third-party liabilities. Outstanding note principal and interest amounts accrued thereon can be converted in whole, or in part, at any time by Asher after the issuance dates into an equivalent of the Company’s common stock determined by the discount rates mentioned in the notes.
Additionally, the notes contain a reset provision to the exercise price and conversion price if the Company issues equity or other derivatives at a price less than the exercise price set forth in such warrants and notes. This ratchet provision results in a derivative liability in our financial statements.
The value of the derivative liability at March 31, 2012 is $28,886.
All note conversions were within the terms of the agreements.
| 6/30/2011 | Additions | Conversions | 9/30/2011 | Additions | Conversions | 12/31/2011 | Additions | Conversions | 3/31/2012 | ||
| Asher Enterprise | 120,000 | 65,000 | 34,000 | 151,000 | 16,000 | 135,000 | 98,000 | 37,000 | |||
| Discount on Asher Note | -99,830 | -65,000 | -52,058 | -112,772 | -59,783 | -52,989 | -45,103 | (7,886) |
6. DERIVATIVE
The Company’s Convertible 8% Notes issued to Asher Enterprise, Inc. contain a conversion features that allow for conversion into shares at a price discounted from the market price. For each particular note, this amount is set at a fixed percentage of the average of the three lowest closing bid prices over the last 10 days. Additionally, the notes contain a reset provision to the exercise price and conversion price if the Company issues equity or other derivatives at a price less than the exercise price set forth in such warrants and notes. This ratchet provision results in a derivative liability in our financial statements.
We valued the conversion features in its convertible notes using a binomial lattice valuation model. The lattice model values the embedded derivatives based on a probability-weighted discounted cash flow model. This model is based on future projections of the five primary alternatives possible for settlement of the features included within the embedded derivatives, which are: (i) payments are made in cash, (ii) payments are made in stock, (iii) the holder exercises its right to convert the notes, (iv) we exercise our right to convert the notes, and (v) we default on the notes. We use the model to analyze the underlying economic factors that influence which of these events will occur, when they are likely to occur, and the price of its common stock and specific terms of the notes, such as interest rate and conversion price, that will be in effect when they occur. Based on the analysis of these factors, we use the model to develop a set of potential scenarios. Probabilities of each scenario occurring during the remaining term of the notes are determined based on management's projections. These probabilities are used to create a cash flow projection over the term of the notes and determine the probability that the projected cash flow will be achieved. A discounted weighted average cash flow for each scenario is then calculated and compared to the discounted cash flow of the notes without the compound embedded derivative in order to determine a value for the compound embedded derivative.
| Roll-forward of Derivative Net Liabilities | |
| Derivative balance at 12.31.2010 | $ 40,205 |
| Derivative balance at issuance (January 11, 2011) | $ 40,666 |
| Derivative balance at issuance (March 10, 2011) | $ 39,035 |
| Change due to Mark to Market | $ 3,516 |
| Conversion of Note | $ (44,102) |
| Derivative balance at 03.31.2011 | $ 79,320 |
| Derivative balance at issuance (April 15, 2011) | $ 39,658 |
| Change due to Mark to Market | $ 20,562 |
| Derivative balance at 06.30.2011 | $ 139,540 |
| Derivative balance at issuance (July 1, 2011) | $ 48,760 |
| Derivative balance at issuance (July 29, 2011) | $ 45,346 |
| Change due to Mark to Market | $ 78,471 |
| Conversion of Note | $ (58,559) |
| Derivative balance at 09.30.2011 | $ 253,558 |
| Change due to Mark to Market | (59,653) |
| Conversion of Note | $ (19,960) |
| Derivative balance at 12.31.2011 | $ 173,944 |
| Change due to Mark to Market | (10,694) |
| Conversion of Note | (134,363) |
| Derivative balance at 03.31.2012 | $ 28,886 |
During the first quarter, the remaining $30,000 principal of the convertible notes issued in March 10, 2011 has been converted into 7,853,538 shares of non-assessable common stock of the Company, which extinguished the derivative liability resulting in a credit to paid-in capital of $55,017.
The $40,000 principal of the convertible notes issued in April 05, 2011 has been converted into 14,138,272 shares of non-assessable common stock of the Company, which extinguished the derivative liability resulting in a credit to paid-in capital of $28,832.
The $28,000 principal of the $32,500 convertible notes issued in July 07, 2011 has been converted into 24,428,904 shares of non-assessable common stock of the Company, which extinguished the derivative liability resulting in a credit to paid-in capital of $34,126.
The fair value of the derivative liability at March 31, 2012 and December 31, 2011 is $28,886 and $173,944 respectively
7. FAIR VALUE ACCOUNTING
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes the financial assets and liabilities measured at fair value, on a recurring basis as of March 31, 2012:
| Carrying | Fair Value Measurements Using | |||||||||||||||||||
| Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
| Derivative liabilities | $ | 28,886 | $ | - | $ | - | $ | 28,886 | $ | 28,886 | ||||||||||
| Totals | $ | - | $ | - | $ | 28,886 | $ | 28,886 | ||||||||||||
Level 3 Valuation Techniques
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Our Level 3 liabilities consist of the derivative liabilities associated with certain preferred stock issuances and freestanding warrants that contain down round provisions.
8. RECLASSIFICATION
For comparative purposes, prior period’s consolidated financial statements have been reclassified to conform with report classifications of the current period.
9. STOCKHOLDERS' EQUITY
Pursuant to the amendment of the Articles of Incorporation of the Company as filed with the Secretary of State, Florida, on October 1, 2003, the authorized common stock has been divided into two classes known as Common Stock (previously known as Class A Common Stock) and Class B assessable common stock.
Common Stock
On January 16, 2012, Asher Enterprises, Inc. converted $10,000 principal amount of the Convertible Promissory Note dated March 10, 2011 into 1,785,714 shares of common stock of the Company.
On February 10, 2012, a creditor of the Company converted $50,000 principal amount of a convertible note dated March 1, 2007 and $40,000 accrued interest thereof into 90,000,000 shares of common stock of the Company.
Also on February 10, 2012, another creditor of the Company converted $28,500 principal amount of convertible promissory notes dated June 14, 2006 and $11,552.51 accrued interest and penalty thereof into 40,052,510 shares of common stock of the Company.
On February 13, 2012, Asher Enterprises, Inc. converted $8,000 principal amount of the Convertible Promissory Note dated March 10, 2011 into 2,580,645 shares of common stock of the Company.
On February 28, 2012, Asher Enterprises, Inc. converted $12,000 principal amount of the Convertible Promissory Note dated March 10, 2011, together with $1,600 accrued and unpaid interest thereto, totaling $13,600 into 3,487,179 shares of common stock of the Company.
On March 01, 2012, Asher Enterprises, Inc. converted $15,000 principal amount of the Convertible Promissory Note dated April 5, 2011 into 3,488,372 shares of common stock of the Company.
On March 07, 2012, Asher Enterprises, Inc. converted $12,000 principal amount of the Convertible Promissory Note dated April 5, 2011 into 12,121,212 shares of common stock of the Company.
On March 08, 2012, Asher Enterprises, Inc. converted $25,000 principal amount of the Convertible Promissory Note dated April 5, 2011 into 10,640,000 shares of common stock of the Company.
On March 15, 2012, Asher Enterprises, Inc. converted $16,000 principal amount of the Convertible Promissory Note dated April 5, 2011 into 12,307,692 shares of common stock of the Company.
At March 31, 2012, the Company has authorized for issue 999,990,000 shares of non-assessable Common Stock with a par value of $0.001. Common Stock issued and outstanding of 432,120,574 shares is fully paid and non-assessable.
Class B Common Stock
At December 31, 2011, the Company has authorized for issue, 10,000 shares of Class B Common Stock with a par value of $0.001. Class B Common Stock issued and outstanding of 9,958 shares is assessable, provided however, that any assessments levied upon Class B shares are considered as contributions to capital and must be repaid from net profits before dividends are declared or paid to any Common Stock or Class B Common Stock shareholders. Class B capital assessments can be levied at any time by the Board of Directors at their discretion. Shareholders who fail to pay assessments levied on their Class B shares lose ownership of the shares and the shares are returned to the treasury.
Preferred Stock
The Company has 200,000,000 shares of authorized Preferred Stock, with a par value of $0.001. As of the date of this report, the Company has not issued any Preferred Stock.
NOTE 10- CONTRACTS AND COMMITMENTS
Effective March 3, 2012, the Company signed an Asset Purchase Agreement (the “Agreement”) with Lao Minerals Mining, Inc. (“LMM”), a Nevada corporation, for the purpose of acquiring 80% interest of LLM’s equity ownership in gold concessions known as San 8 and San 60 areas of the Somsanouk Village (Phosang Noi), Sanakham District, Vientiane Province, Laos People’s Democratic Republic. According to the Asset Purchase Agreement, which was set to close on April 16, 2012, upon the Closing Date of this Agreement, the Company would pay an Exclusive Partner Fee (“EPF”) of $500,000 to LMM for bringing the concessions to the Company. The Agreement would remain non-exclusive until such time that the initial $200,000 would be paid to LMM by the Company. The concessions would become exclusive to the Company once this initial payment is transacted. The EPF would be non-refundable, however it might be recouped by the Company through mining revenue before LMM would be entitled to its share of the mining profits. In the event the Company terminated this Agreement or their exploration activities before the EPF would have been paid in full, the balance would be due within thirty (30) days of the Company’s termination notice to LMM. In consideration for the EPF, LMM would not, without the Company’s consent, allow any party other than LMM and the Mining Unit of the Ministry of Defense of Laos (“MUMD”) to be involved in the development of the concessions unless the Company did not exercise its option to proceed to the Mining Stage.
Payment terms: Payment of $200,000 upon the Closing Date of the Asset Purchase Agreement. Once all necessary closing deliveries had been provided to the Company by LMM, the remaining $300,000 would be paid in $100,000 monthly installments over the following 3 months. In addition, the Company would commit to sole-fund a minimum amount of $2,000,000 in exploration activities over a 2-year period upon the Closing Date of this Agreement, with a minimum of $1,000,000 for exploration activities within 1 year. The Company would prepare and submit an approvable Bankable Feasibility Study (“BFS”) to LMM within thirty (30) months following the Closing Date of this Agreement. LMM would submit the BFS to the relevant government authorities for approval. If in the Company’s opinion the BFS indicated that a commercially viable mining operation could be
established on the Concession, then the Company would solely fund all mining activities. If the Decision to Mine had been reached, the BFS approved and the Mining License had been granted, the Company would pay LMM a Mining Execution Fee (“MEF”) of $3,000,000 which would give the Company an 80% interest in LMM’s shares and LMM would maintain 20% interest of its shares. The MEF would be paid from the initial $3,000,000 in gross revenues earned from the extraction and sale of any of the minerals from the concessions, less the recoupable upfront payment and the MUMD shares. For avoidance of doubt, the Company’s shares and LMM’s shares would mean that the net revenues received from sales of all minerals extracted from the concession would be split between the Company (80%) and LMM (20%), net of the normal pre-mining cost recovery process.
On March 16, 2012, LMM and the Company signed an addendum (“Addendum A” to the afore-mentioned Asset Purchase Agreement to clarify the definitions and meanings of the “Acquired Assets”, “Concession”, “Exploration Rights”, “Title to the Acquired Assets”, and “Performance” previously stated in the Asset Purchase Agreement.
NOTE 11- SUBSEQUENT EVENT
On April 9, 2012, the Company and Laos Minerals Mining, Inc. signed an Agreement for Termination of Asset Purchase Agreement to terminate the afore-mentioned Asset Purchase Agreement between Laos Minerals Mining, Inc. and the Company in its entirety effective April 9, 2012 due to certain technical reasons and indemnify each other from and against any and all claims, demands, damages, arising or relating to this Termination Agreement.
On April 13, 2012, the Company issued a seventh Convertible Promissory Note to Asher for $15,000 under similar terms and conditions as contained in the previous convertible promissory notes.
On April 17, 2012, the Company received a notice of default by Asher Enterprises, Inc. with respect to the outstanding balances convertible promissory notes dated June 17, 2011 and August 1, 2011 between the Company and Asher Enterprises, Inc. due to the delay of Company’s filing of Form 10 K for the fiscal year ended December 31, 2011.
On April 18, 2012, the Company issued 25,000,000 shares of restricted common stock of the Company to an accredited investor for $25,000.00.
Item 2. Management's Discussion and Analysis
Forward Looking Information
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" from liability for forward-looking statements. Certain information included in this Form 10-Q and other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by or on behalf of the Company) are forward-looking statements. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions that are not statements of historical facts. This document and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. The words "believe," "expect," "anticipate," "intends," "estimates," "forecast," "project" and similar expressions identify forward-looking statements.
Such forward-looking statements involve important risks and uncertainties, many of which will be beyond the control of the Company. These risks and uncertainties could significantly affect anticipated results in the future, both short-term and long-term, and accordingly, such results may differ from those expressed in forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, changes in external competitive market factors or in the Company's internal budgeting process which might impact trends in the Company's results of operations, unanticipated working capital or other cash requirements, changes in the Company's business strategy or an inability to execute its strategy due to unanticipated change in the industries in which it operates, and various competitive factors that may prevent the Company from competing successfully in the marketplace. Although we believe that these assumptions were reasonable when made, these statements are not guarantees of future performance and are subject to certain risks and uncertainties, some of which are beyond our control, and are difficult to predict. Actual results could differ materially from those expressed in forward-looking statements.
Readers are cautioned not to place undue reliance on any forward-looking statements, which reflect management's view only as of the date of this report. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequence events or circumstances. Readers are also encouraged to review the Company's publicly available filings with the Securities and Exchange Commission.
Company Background
Catalyst Resource Group, Inc., formerly Jeantex Group, Inc., (the "Company") is a Florida corporation, originally incorporated as an Idaho corporation on August 23, 1947 as Western Silver Lead Corporation. Western Silver Lead Corporation (“WSL”) was organized to explore for, acquire and develop mineral properties in the state of Idaho and the western United States. During the first several years WSL's activities have been confined to annual assessment and maintenance work on its Idaho mineral properties and other general and administrative functions. As of September 30, 2000, no proven or probable reserves had been established at any of WSL's mineral properties. On November 1, 2001, WSL entered into an Asset Purchase Agreement to transfer all of its interest in its properties to WSL, LLC, an entity controlled by its former president and director, who is the father of the president and director of WSL at that time. On August 16, 2002, WSL’s shareholders ratified this agreement. On September 24, 2003 the parent Western Silver-Lead Corporation, an Idaho corporation, merged into the wholly-owned subsidiary Western Silver-Lead Corporation, a Florida corporation, whereby each shareholder of the Idaho corporation’s Class A and Class B common stock, par value $0.001, received one share of common stock and Class B common stock, respectively, par value $0.001, of the Florida corporation. The merger was between the parent and the subsidiary corporation and the subsidiary became a surviving corporation.
On September 29, 2003 the Company entered into an Agreement of Merger with Lexor International, Inc, ("Lexor") a Maryland corporation. Pursuant to the Merger Agreement, the Company issued 10,867,000 shares of its Class A common stock to Lexor's shareholders in exchange for all issued and outstanding shares of the Lexor's common stock. On October 1, 2003, the Company changed its name to Lexor Holdings, Inc. On October 3, 2003 the board of directors of the Company resigned and Christopher Long was appointed as the new president of the Company.
On March 31, 2005 Company entered into a Rescission Agreement with Lexor International, Inc., which terminated the merger agreement. Terms of the Rescission Agreement called for the cancellation of 10,867,000 shares of its Class A common stock issued to Christopher Long and Ha Nguyen, the spouse of Christopher Long, the return of all its pre-merger assets, assumption of any and all liabilities associated with to the pedicure spa business by Lexor International, Inc. The spa business was considered to be discontinued operations of Jeantex Group, Inc.
On June 22, 2005, the Company entered into a Stock Purchase Agreement with Jeantex, Inc., a California corporation. On June 29, 2005, the transaction contemplated in the Stock Purchase Agreement was completed and a Closing Memorandum was executed by all parties. The Company agreed to issue 20,000,000 shares of its Class A common stock to Jeantex, Inc.'s shareholder in exchange for 100% of the issued and outstanding equity interest of Jeantex, Inc. and issue 36,350,000 shares of its Class A common stock for consulting and reorganization expenses in connection with this transaction. On June 29, 2005 the board of director of the Company approved resolutions to the stock transfer agent to issue shares to Jeantex pursuant to the Agreement. The shares of Lexor Holdings, Inc. common stock to be issued shall be restricted pursuant to Rule 144.
On December 20, 2005, the Company entered into a Stock Purchase Agreement with Yves Castaldi Corporation, a California corporation. Pursuant to the terms of the Agreement, Jeantex Group, Inc. has agreed to acquire 51% of the total issued and outstanding equity interests of Castaldi (10,408 shares of the common stock) in exchange for the payment of $650,000 in cash ($50,000 paid on December 29, 2005 and an executed promissory note for the remaining $600,000 of which $300,000 is to be used for working capital) and the issuance of 10,000,000 newly-issued shares of Jeantex Group, Inc. common stock. The 10,000,000 shares of Jeantex restricted common stock will be vested on a pro-rata basis, based on a minimum of $10,000,000 in revenues and between $2.5 and $3.0 million in net profit to be generated by Yves Castaldi Corporation in the next 12 months. The closing of this acquisition occurred December 30, 2005. In June 2006, this Stock Purchase Agreement was amended whereby the Company has agreed to reduce its stake in Castaldi from 51% to 20% of the total issue and outstanding number of shares of Castaldi. Castaldi has agreed to retain only 4,000,000 of the 10,000,000 shares originally issued to it pursuant to the Agreement and will also retain $226,650 paid to Castaldi by the Company as consideration for the Company's 20% stake in Castaldi. The four million (4,000,000) shares of common stock retained by Castaldi will be vested on a pro-rata basis based on Yves Castaldi Corporation's projected revenues of $10,000,000 and net profits of $2,000,000 in the next twenty-four months commencing July 1, 2006. In the event said target revenues and profitability are not reached within said twenty-four months, the amount of vested shares shall be adjusted accordingly on a pro-rata basis. The remaining 6,000,000 shares will be surrendered by Castaldi.
As a result of Yves Castaldi Corp.’s filing for Chapter 11 protection with the United States Bankruptcy Court of the Central District of California and naming the Company as a creditor during the fourth quarter of Fiscal Year 2006, the Company has written off its cash investments in Yves Castaldi Corp. and will reclaim all the 10,000,000 shares that were issued to Yves Castaldi Corp.
During the fourth quarter of Fiscal Year 2006, Jeantex, Inc. discontinued its private label manufacturing business and began seeking an acquisition opportunity in another industry.
On April 05, 2010, the Company changed its name to Catalyst Resource Group, Inc. to reflect its new intended scope of business.
On May 5, 2011, the Company entered into a Business Cooperation Agreement with Rerun Recovery, Inc., a Nevada corporation, to utilize the proprietary pre-treatment and separation technologies owned by Rerun Recovery to process and sell platinum group metals (PGMs) and gold from a mine in Alaska and one in Oregon to industrial and private users. The Company will share 70% net profits of the processed minerals from these mines with Rerun Recovery. According to the Business Cooperation Agreement, the Company is responsible for the costs of the operations of the mines and for building new processing facilities. On October 24, 2011, the Company issued 150,000,000 shares of restricted common stock to Rerun Recovery, Inc. and its designees pursuant to the referenced Business Cooperation Agreement.
The Company will also continue to investigate potential targets for acquisition and/or strategic alliance.
Results of Operations
Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011
Revenues:
The Company had no revenue for the quarters ended March 31, 2012 or 2011.
Operating Expenses:
The Company incurred total operating expenses of $5,202 for the quarter ended March 31, 2012 as compared to $20,037 for the same quarter in 2011. The operating expenses consisted of general and administration expenses. The decrease is primarily due to the decrease in professional fees.
Loss from operations:
The Company had losses from operations of $5,202 for the quarter ended March 31, 2012 as compared to a loss from operations of $20,037 for the same quarter in 2011. This decrease of loss was due to the decrease in general and administration expense of $14,835 in the quarter ended March 31, 2012.
Other Income (Expenses):
The Company incurred $ 55,791 in interest expense for the quarter ended March 31, 2012 as compared to $39,745 in interest expense for the quarter ended March 31, 2011.
Net loss:
The Company had a net loss of $50,299 for the quarter ended March 31, 2012 as compared to a net loss of $63,298 in the same quarter in 2011. The net loss based on the basic and diluted weighted average number of common shares outstanding for the quarters ended March 31, 2012 and 2011 was $0.00 for both periods.
Liquidity and Capital Resources
At March 31, 2012, the Company had $0 in cash. The Company used $2,500 for operating activities during the three-month period ended March 31, 2012 compared to $11,332 for the same quarter in 2011.
The use of cash in operating activities in 2012 and 2011 were due to the change in value and amortization of derivatives.
In financing activities, the Company obtained $0 from proceeds on notes during the three-month period ended March 31, 2012 compare to $80,000 from proceeds on notes from related party during the three-month period ended March 31, 2011.
The Company has incurred an accumulated deficit as of March 31, 2012 of $18,356,056.
The future of the Company is dependent on its ability to generate cash from future acquisition of a business. There can be no assurance that the Company will be able to implement its current plan.
Item 3. Quantitative and Qualitative Disclosure about Market Risks
None
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation, under the supervision and with the participation of the Company’s management, was carried out including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, the disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management, including the principal executive officer and principal financial officer, does not expect that its disclosure controls and procedures or its internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are 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. Due to 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, have been detected. To address the material weaknesses, management performed additional analysis and other post-closing procedures in an effort to ensure its consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Management’s Report on Internal Control Over Financial Reporting.
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended. Management assessed the effectiveness of its internal control over financial reporting as of March 31, 2012. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses were identified.
1. As of March 31, 2012, the Company’s control over financial reporting was not effective. Specifically, a formally adopted a written code of business conduct and ethics that governs to the Company’s employees, officers and directors was not in place. Additionally, management has not developed and effectively communicated to its employees its accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.
2. As of March 31, 2012, the Company’s control over financial statement disclosure was not effective. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.
Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of March 31, 2012, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.
Changes in Internal Controls
There was no change in our internal control over financial reporting that occurred during this fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER MATTERS
None
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Christopher Long vs. Jeantex Group, Inc. et al., Case Number 07CC02012
On January 22, 2007, Christopher Long, former President and CEO of the Company, filed a claim with the Superior Court of California, County of Orange, Central Justice Center, against the Company and Henry Fahman, Interim President of the Company, for a total of $250,000 and accrued interest at 8% per annum in connection with the promissory note dated March 31, 2005 which was made to Christopher Long as a part of the Rescission Agreement between the Company and Lexor International, Inc. The Company and Christopher Long entered into a Compromise Settlement Agreement and Mutual Release on January 11, 2008 whereby the Company and Christopher Long agreed to allow a stipulation to be entered in favor of Christopher Long in the amount of $250,000 plus interest accruing at a rate of 8% per annum. These amounts have been recorded in the books of the Company.
Item 2. Unregistered Sales of Equity and Use of Proceeds
None, except as may be disclosed elsewhere in this report
Item 3. Default upon senior Securities
None, except as may be disclosed elsewhere in this report
Item 4. Submission of matters to a vote of security holders
None, except as may be disclosed elsewhere in this report
Item 5. Other information
None
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
Index to Exhibits.
31.1 Certification of the Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certification of the Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
32.1 Certification of the Principal Executive Officer of the Registrant, pursuant Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of the Principal Financial Officer of the Registrant, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CATALYST RESOURCE GROUP, INC.
Formerly JEANTEX GROUP, INC.
(Registrant)
Date: May 23, 2012
By: /s/ Henry D. Fahman
Henry D. Fahman
Interim President and Chief Financial Officer
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Henry D. Fahman, Interim Principal Executive Officer of Catalyst Resource
Group, Inc. certify that:
1. I have reviewed this quarterly report on Form 10-Q of Catalyst Resource Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
small business issuer and have:
a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material information relating to the small business
issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b) evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the small business issuer's internal
control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business
issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the small business issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officers and I have disclosed,
based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and
the audit committee of small business issuer's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's internal control over financial reporting.
Date: May 23, 2012
CATALYST RESOURCE GROUP, INC.
By: /s/ Henry D. Fahman
Henry D. Fahman
Interim President
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Henry D. Fahman, Principal Financial Officer of Catalyst Resource Group, Inc. certify that:
1. I have reviewed this quarterly report on Form 10-Q of CATALYST RESOURCE GROUP, INC.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the year covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the years presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the year in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the year covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors;
(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
Date: May 23, 2012
CATALYST RESOURCE GROUP, INC.
By: /s/ Henry D. Fahman
Henry D. Fahman
Interim Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTIONS 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACTS OF 2002
In connection with the Quarterly Report of Catalyst Resource Group, Inc. (the "Company") on Form 10-Q for the quarter ending March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Henry D. Fahman, Interim President of the Company, certifies to the best of his knowledge, pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 23, 2012
CATALYST RESOURCE GROUP, INC.
By: /s/ Henry D. Fahman
Henry D. Fahman
Interim President
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTIONS 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACTS OF 2002
In connection with the Quarterly Report of Catalyst Resource Group, Inc. (the "Company") on Form 10-Q for the quarter ending March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Henry D. Fahman, Interim Chief Financial Officer of the Company, certifies to the best of his knowledge, pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 23, 2012
CATALYST RESOURCE GROUP, INC.
By: /s/ Henry D. Fahman
Henry D. Fahman
Interim Chief Financial Officer
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PAYABLES TO RELATED PARTIES
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Mar. 31, 2012
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| PAYABLES TO RELATED PARTIES |
PAYABLES TO RELATED PARTIES
At March 31, 2012 and December 31, 2011, notes payable to related parties consisted of the following:
Imputed interest on the interest free short-term loan from officer in the amount of $ 966 and $3,604 were included as an increase to additional paid in capital at March 31, 2012 and December 31, 2011, respectively |