Attached files
file | filename |
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EX-10.1 - CATALYST GROUP HOLDINGS CORP. | ex10-1.htm |
EX-10.2 - CATALYST GROUP HOLDINGS CORP. | ex10-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 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): January 15,
2010
CATALYST
GROUP HOLDINGS CORP.
(Exact
Name of Registrant as Specified in Its Charter)
POP
STARZ VENTURES 3, INC.
(Former
Name of Registrant)
Delaware
(State or
Other Jurisdiction of Incorporation)
000-53412
|
26-3142811
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
1739
Creekstone Circle
San
Jose, CA
|
95133
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
(408)
691-0806
(Registrant’s
Telephone Number, Including Area Code)
(Former
Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General
Instruction A.2. below):
o Written communications pursuant
to Rule 425 under the Securities Act (17 CFR
230.425)
|
o Soliciting material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
o Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
o Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
Section
1 – Registrant’s Business Operations
Item
1.01 Entry into a Material Definitive Agreement
On
November 6, 2009 we entered into an agreement with Real Estate Promotional
Services, Inc., (“REPS”) a recently formed Florida corporation (the “Agreement”)
whereby we agreed to purchase all of the issued and outstanding shares of common
stock of REPS in consideration for the issuance of a convertible debenture in
the amount of $250,000. The convertible debenture provides for interest at the
rate of 10% per annum and will be due and payable six months from the closing
date of the transaction. The debenture may be converted into shares of the
Company’s common stock at the conversion rate of $1.00 per share at the option
of either the Company or Jeff Crowe, the sole shareholder of REPS. The
historical operations of the company were conducted in a sole-proprietorship
called REPS.
Prior to
the execution of the Agreement, there was no pre-existing relationship between
any officer or director of the Company or any officer, director or shareholder
of REPS.
FORWARD-LOOKING
INFORMATION
The
statements contained in this Form 8-K that are not historical fact are
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995), within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. The forward-looking statements contained herein are
based on current expectations that involve a number of risks and uncertainties.
These statements can be identified by the use of forward-looking terminology
such as “believes,” “expects,” “may,” “will,” “should,” or “anticipates,” or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy that involve risks and uncertainties. The Company wishes
to caution the reader that its forward-looking statements that are not
historical facts are only predictions. No assurances can be given that the
future results indicated, whether expressed or implied, will be achieved. While
sometimes presented with numerical specificity, these projections and other
forward-looking statements are based upon a variety of assumptions relating to
the business of the Company, which, although considered reasonable by the
Company, may not be realized. Because of the number and range of assumptions
underlying the Company’s projections and forward-looking statements, many of
which are subject to significant uncertainties and contingencies that are beyond
the reasonable control of the Company, some of the assumptions inevitably will
not materialize, and unanticipated events and circumstances may occur subsequent
to the date of this report. These forward-looking statements are based on
current expectations and the Company assumes no obligation to update this
information. Therefore, the actual experience of the Company and the results
achieved during the period covered by any particular projections or
forward-looking statements may differ substantially from those projected.
Consequently, the inclusion of projections and other forward-looking statements
should not be regarded as a representation by the Company or any other person
that these estimates and projections will be realized. The Company’s actual
results may vary materially. There can be no assurance that any of these
expectations will be realized or that any of the forward-looking statements
contained herein will prove to be accurate.
Section
9 – Financial Statements and Exhibits
We
are in the process of filing an S1; expanded financial statements will be
provided in that filing which is anticipated to be in approximately 30
days.
Item
9.01 Financial Statements and Exhibits
Exhibit 10.1 Purchase & Share Exchange
Agreement
Exhibit 10.2 Convertible Debenture
2
LEVY
& ASSOCIATES
2101
NW CORPORATE BLVD. #317
BOCA
RATON, FL 33431
(561)
998-7770
AUDITOR’S
REPORT
TO THE
OWNERS
REPS
GRAPHIC DESIGN AND PRINTING
We have
audited the accompanying balance sheet of REPS GRAPHIC DESIGN AND PRINTING as of
December 31, 2007 and 2008, and the related statements of revenues and expenses,
changes in retained earnings, and cash flows for the years then
ended. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatements. 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 REPS GRAPHIC DESIGN AND PRINTING as
of December 31, 2007 and 2008 and the results of its operation and its cash flow
for the period then ended in conformity with generally accepted accounting
principles.
Respectfully
submitted,
Levy
& Associates
January
18, 2010
3
REPS
GRAPHIC DESIGN AND PRINTING
BALANCE
SHEET
AS
OF DECEMBER 31, 2008 AND 2007
2008 |
2007
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
|
$ | 8,274 | $ | (4,636 | ) | |||
Trade
Receivables
|
8,252 | 4,618 | ||||||
Total
current assets
|
16,526 | (18 | ) | |||||
TRADE
ASSETS
|
$ | 16,526 | $ | (18 | ) | |||
LIABILITIES
AND OWNER'S EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Sales
Tax Payable
|
$ | 179 | $ | 236 | ||||
Wells
Fargo Payable
|
7,605 | 1,938 | ||||||
Total
current liabilities
|
7,784 | 2,174 | ||||||
LONG-TERM
LIABILITIES
|
||||||||
Opticom
Services
|
15,765 | 29,850 | ||||||
Total
long-term liabilities
|
15,765 | 29,850 | ||||||
OWNER'S
EQUITY
|
||||||||
Owner's
Equity
|
$ | (32,042 | ) | $ | 33,928 | |||
Net
Income
|
25,019 | (65,970 | ) | |||||
Total
owner's equity
|
(7,023 | ) | (32,042 | ) | ||||
TOTAL
LIABILITIES AND OWNER'S EQUITY
|
$ | 16,526 | $ | (18 | ) |
See
accompanying notes and auditors' report.
4
REPS
GRAPHIC DESIGN AND PRINTING
STATEMENT
OF OPERATIONS AND OWNER’S EQUITY
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
2008
|
2007 | |||||||
REVENUES
|
$ | 404,551 | $ | 503,124 | ||||
COST
OF GOODS SOLD
|
(56,972 | ) | (200,932 | ) | ||||
GROSS
PROFIT
|
347,579 | 302,192 | ||||||
OPERATING
EXPENSES:
|
||||||||
Automobile
Expense
|
233 | – | ||||||
Bad
Debt Expense
|
– | 300 | ||||||
Computer
Expense
|
4,050 | 3,791 | ||||||
Donations
|
1,207 | 704 | ||||||
Dues
and Subscriptions
|
2,817 | 6,951 | ||||||
Equipment
Rental
|
21,188 | 21,891 | ||||||
Insurance
|
5,339 | 4,395 | ||||||
Interest
|
23,291 | 20,332 | ||||||
Miscellaneous
|
188 | 13 | ||||||
Office
Expense
|
45,078 | 63,205 | ||||||
Postage
and Courier
|
10,336 | 13,754 | ||||||
Professional
Fees
|
3,538 | 2,904 | ||||||
Rent
|
14,513 | 14,948 | ||||||
Repairs
& Maintenance
|
43 | 231 | ||||||
Salaries
& Payroll Taxes
|
183,186 | 177,211 | ||||||
Supplies
|
1,014 | 18,207 | ||||||
Taxes
& Licenses
|
809 | 15,452 | ||||||
Telephone
|
3,335 | 1,627 | ||||||
Travel
|
36 | 367 | ||||||
Utilities
|
2,359 | 1,879 | ||||||
Total
Operating Expenses
|
322,560 | 368,162 | ||||||
INCOME
FROM OPERATIONS
|
25,019 | (65,970 | ) | |||||
OWNER'S
EQUITY, BEGINNING OF YEAR
|
(32,042 | ) | 33,928 | |||||
OWNER'S
EQUITY, END OF YEAR
|
$ | (7,023 | ) | $ | (32,042 | ) |
See
accompanying notes and auditors' report.
5
REPS
GRAPHIC DESIGN AND PRINTING
STATEMENT
OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
|
2008
|
2007 | ||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
Income (Loss)
|
$ | 25,019 | $ | (65,970 | ) | |||
Adjustments
to reconcile net income to total cash
|
||||||||
provided
by operating activities
|
||||||||
Decrease
(Increase) in:
|
||||||||
Accounts
Receivable
|
(3,634 | ) | 4,548 | |||||
Note
Receivable
|
– | 300 | ||||||
(Decrease)
Increase in:
|
||||||||
Sales
Tax Payable
|
(57 | ) | 9 | |||||
Lines
of credit borrowed, net of repayments
|
5,667 | 1,938 | ||||||
Net
cash provided by operating activities
|
26,995 | (59,175 | ) | |||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
– | – | |||||||
Net
cash used by investing activities
|
– | – | ||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Long-term
note net borrowing (repayments)
|
(14,085 | ) | 29,850 | |||||
Owner’s
distributions
|
– | (2,685 | ) | |||||
Net
cash used by financing activities
|
(14,085 | ) | 27,165 | |||||
NET
INCREASE / (DECREASE) IN CASH
|
12,910 | (32,010 | ) | |||||
CASH,
BEGINNING OF YEAR
|
(4,636 | ) | 27,374 | |||||
CASH,
END OF PERIOD
|
8,274 | (4,636 | ) | |||||
Supplemental
data:
|
||||||||
Interest
Paid
|
23,291 | 20,332 |
See
accompanying notes and auditors' report.
6
REPS
GRAPHIC DESIGN AND PRINTING
NOTES TO
FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
1. Nature
of Operations and Significant Policies
Nature of
Operations — REPS GRAPHIC DESIGN AND PRINTING (the
“Company”)
Real
Estate Promotional Services (REPS) is a Campbell, California, based company that
consults, designs, and delivers marketing collateral for the real estate
industry and individual/small businesses. The products include post cards,
glossy brochures, creative design and mailing services that promote the listing
property, real estate agent, small business or individual.
REPS
focuses on a local region. It consults designs and delivers real estate
marketing collateral and consulting to promote real estate agents and their
listed properties and help sell homes, as well as related industries like
mortgage and title company representatives who also need to promote themselves.
Recognizing similar needs of individuals and small business; REPS also services
this customer base as a small portion of the overall business. REPS was started
in 1998 by Jeff Crowe and is operated as sole proprietorship.
Use
of Estimates — Management uses estimates in preparing these financial
statements in accordance with Generally Accepted Accounting Principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenues
and expenses. Actual results could vary from the estimates that were
used.
Cash —
Cash consists of a bank checking account.
Accounts
Receivables — Accounts receivable are recorded when invoices are issued
and are presented in the balance sheet net of the allowance for doubtful
accounts. Accounts receivables are written off when they are determined to be
uncollectible. The Company considers accounts receivable to be fully
collectible; accordingly, no allowance for doubtful accounts is
required.
Income Taxes
— The Company is a sole proprietorship and taxed on the owner’s
individual tax return. As such, no provision for income taxes has been
accrued.
Revenue and Cost
Recognition — The Company recognizes revenues based on an accrual basis
in accordance with GAAP. Revenue is recognized when earned and shipment and
invoices have been executed. Selling, general, and administrative costs are
charged to expenses as incurred.
2. Current
and Long Term Debt
Current
Liability
The
current liability is a business line of credit from Wells Fargo which is
accessed by a credit card. The credit limit is $45,000 and the current interest
rate is 6.75%.
Long
Term Debt
The
long-term loan is a business instrument from Opticom Services in San Diego,
California. The term of the loan is 10 years beginning in January
2000. The loan was originally made to Jeff Crowe, individually, and
assumed by the Company in 2007. The loan carries an interest rate of 11.32% with
monthly payments of $1,395.68.
3. Concentration
of Credit Risk
The
Company maintains cash deposits in a commercial bank account, which at times may
exceed the amount covered by the insurance provided by the U. S. Federal Deposit
Insurance Corporation (FDIC). The Company has not experienced any losses in such
accounts and believes that there is no significant risk with respect to these
deposits.
4. Commitments
The
Company subleases office space from Campbell Express of the rate of $1,050 per
month. This sublease is a month-to-month arrangement with no written rental
agreement.
5. Subsequent
Event
Subsequent
to the date of these financial statements, the Company formed a Florida
corporation named Real Estate Promotional Services, Inc. (REPS) and transferred
all of its assets into this corporation. On November 6, 2009, this new entity
entered into an agreement with Catalyst Group Holdings Corp. (Catalyst) wherein
Catalyst agreed to purchase all of the issued and outstanding shares of common
stock of REPS for a convertible debenture in the amount of $250,000. The
convertible debenture provides for interest at the rate of 10% per annum and
will be due and payable six months from the closing date. The debenture may be
converted into shares of Catalyst’s common stock at the conversion rate of $1.00
per share at the option of either Catalyst or Jeff Crowe, the sole shareholder
of REPS.
7
REPS
GRAPHIC DESIGN AND PRINTING
BALANCE
SHEET
AS
OF SEPTEMBER 30, 2009
ASSETS
|
||||
CURRENT
ASSETS:
|
||||
Cash
|
$ | 9,233 | ||
Trade
Receivables
|
9,180 | |||
Total
current assets
|
18,413 | |||
TRADE
ASSETS
|
$ | 18,413 | ||
LIABILITIES
AND OWNER'S EQUITY
|
||||
CURRENT
LIABILITIES:
|
||||
Sales
Tax Payable
|
$ | 1,280 | ||
Wells
Fargo Payable
|
44,219 | |||
Total
current liabilities
|
45,499 | |||
LONG-TERM
LIABILITIES
|
||||
Opticom
Services
|
4,109 | |||
Total
long-term liabilities
|
4,109 | |||
OWNER'S
EQUITY
|
||||
Owner's
Equity
|
$ | (7,023 | ) | |
Net
Income
|
(24,172 | ) | ||
Total
owner's equity
|
(31,195 | ) | ||
TOTAL
LIABILITIES AND OWNER'S EQUITY
|
$ | 18,413 |
See
accompanying notes and auditors’ report.
8
REPS
GRAPHIC DESIGN AND PRINTING
STATEMENT
OF OPERATIONS AND OWNER’S EQUITY
FOR
THE PERIOD ENDED SEPTEMBER 30, 2009
REVENUES
|
$ | 240,144 | ||
COST
OF GOODS SOLD
|
(26,890 | ) | ||
GROSS
PROFIT
|
213,254 | |||
OPERATING
EXPENSES:
|
||||
Automobile
Expense
|
272 | |||
Computer
Expense
|
1,600 | |||
Donations
|
823 | |||
Dues
and Subscriptions
|
183 | |||
Equipment
Rental
|
12,956 | |||
Insurance
|
1,182 | |||
Interest
|
30,540 | |||
Miscellaneous
|
10,048 | |||
Office
Expense
|
25,499 | |||
Postage
and Courier
|
2,049 | |||
Professional
Fees
|
906 | |||
Rent
|
9,511 | |||
Repairs
& Maintenance
|
20 | |||
Salaries
& Payroll Taxes
|
136,730 | |||
Taxes
& Licenses
|
381 | |||
Telephone
|
2,708 | |||
Utilities
|
2,018 | |||
Total
Operating Expenses
|
237,426 | |||
INCOME
FROM OPERATIONS
|
(24,172 | ) | ||
OWNER'S
EQUITY, BEGINNING OF YEAR
|
(7,023 | ) | ||
OWNER'S
EQUITY, END OF YEAR
|
$ | (31,195 | ) |
See
accompanying notes and auditors’ report.
9
REPS
GRAPHIC DESIGN AND PRINTING
STATEMENT
OF CASH FLOWS
FOR
THE PERIOD ENDED SEPTEMBER 30, 2009
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||
Net
Income (Loss)
|
$ | (24,172 | ) | |
Adjustments
to reconcile net income to total cash
|
||||
provided
by operating activities
|
||||
Decrease
(Increase) in:
|
||||
Accounts
Receivable
|
(928 | ) | ||
(Decrease)
Increase in:
|
||||
Sales
Tax Payable
|
1,101 | |||
Lines
of credit borrowed, net of repayments
|
36,314 | |||
Net
cash provided by operating activities
|
12,615 | |||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||
|
– | |||
Net
cash used by investing activities
|
– | |||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||
Long-term
note net borrowing (repayments)
|
(11,656 | ) | ||
Net
cash used by financing activities
|
(11,656 | |||
NET
INCREASE / (DECREASE) IN CASH
|
959 | |||
CASH,
BEGINNING OF YEAR
|
8,274 | |||
CASH,
END OF PERIOD
|
9,233 | |||
Supplemental
data:
|
||||
Interest
Paid
|
30,540 |
See
accompanying notes and auditors’ report.
10
REPS
GRAPHIC DESIGN AND PRINTING
STATEMENT
OF CASH FLOWS
FOR THE
PERIOD ENDED SEPTEMBER 30, 2009
1. Nature
of Operations and Significant Policies
Nature of
Operations — REPS GRAPHIC DESIGN AND PRINTING (the
"Company")
Real
Estate Promotional Services (REPS) is a Campbell, California, based company that
consults, designs, and delivers marketing collateral for the real estate
industry and individual/small businesses. The products include post cards,
glossy brochures, creative design and mailing services that promote the listing
property, real estate agent, small business or individual.
REPS
focuses on a local region. It consults designs and delivers real estate
marketing collateral and consulting to promote real estate agents and their
listed properties and help sell homes, as well as related industries like
mortgage and title company representatives who also need to promote themselves.
Recognizing similar needs of individuals and small businesses, REPS also
services this customer base as a small portion of the overall
business. REPS was started in 1998 by Jeff Crowe and is operated as a
sole proprietorship.
Use of
Estimates — Management uses estimates in preparing these financial
statements in accordance with Generally Accepted Accounting Principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenues
and expenses. Actual results could vary from the estimates that were
used.
Cash —
Cash consists of a bank checking account.
Accounts
Receivables — Accounts receivable are recorded when invoices are issued
and are presented in the balance sheet net of the allowance for doubtful
accounts. Accounts receivables are written off when they are determined to be
uncollectible. The Company considers accounts receivable to be fully
collectible; accordingly, no allowance for doubtful accounts is
required.
Income
Taxes — The Company is a sole proprietorship and taxed on the owner's
individual tax return. As such, no provision for income taxes has been
accrued.
Revenue and Cost
Recognition — The Company recognizes revenues based on an accrual basis
in accordance with GAAP. Revenue is recognized when earned and shipment and
invoices have been executed. Selling, general, and administrative costs are
charged to expenses as incurred.
2. Current
and Long Term Debt
Current
Liability
The
current liability is a business line of credit from Wells Fargo which is
accessed by a credit card. The credit limit is $45,000 and the current interest
rate is 6.75%.
Long
Term Debt
The
long-term loan is a business instrument from Opticom Services in San Diego,
California. The term of the loan is 10 years beginning in January
2000. The original loan was made to Jeff Crowe, individually, and
assumed by the Company in 2007. The loan carries an interest rate of 11.32% with
monthly payments of $1,395.68.
3. Concentration
of Credit Risk
The
Company maintains cash deposits in a commercial bank account, which at times may
exceed the amount covered by the insurance provided by the U. S. Federal Deposit
Insurance Corporation (FDIC). The Company has not experienced any losses in such
accounts and believes that here is no significant risk with respect to these
deposits.
4. Commitments
The
Company subleases office space from Campbell Express of the rate of $1,050 per
month. This sublease is a month-to-month arrangement with no written rental
agreement.
5. Subsequent
Event
Subsequent
to the date of these financial statements, the Company formed a Florida
corporation named Real Estate Promotional Services, Inc. (REPS) and transferred
all of its assets into this corporation. On November 6, 2009, this new entity
entered into an agreement with Catalyst Group Holdings Corp. (Catalyst) where
Catalyst agreed to purchase all of the issued and outstanding shares of common
stock of REPS for a convertible debenture in the amount of $250,000. The
convertible debenture provides for interest at the rate of 10% per annum and
will be due and payable six months from the closing date. The debenture may be
converted into shares of Catalyst's common stock at the conversion rate of $1.00
per share at the option of either Catalyst or Jeff Crowe, the sole shareholder
of REPS.
11
Pro-forma financial statements
8/31/2009
|
9/30/2009
|
|||||||||||
Catalyst
|
Rep's
Web
|
Proforma
|
||||||||||
Assets
|
||||||||||||
Cash
|
- | 9,233 | 9,233 | |||||||||
Accounts
Receivable
|
9,180 | 9,180 | ||||||||||
Due
from related parties
|
15,000 | - | 15,000 | |||||||||
Total
assets
|
15,000 | 18,413 | 33,413 | |||||||||
Liabilities
|
||||||||||||
Accounts
Payable
|
233 | 1,280 | 1,513 | |||||||||
Loan
payable
|
48,328 | 48,328 | ||||||||||
Due
to related parties
|
75,698 | - | 75,698 | |||||||||
Total
liabilities
|
75,931 | 49,608 | 125,539 | |||||||||
Additional
paid in capital
|
8,759 | 8,759 | ||||||||||
Common
stock
|
1,045 | 1,045 | ||||||||||
Retained
earnings
|
(70,735 | ) | (31,195 | ) | (101,930 | ) | ||||||
Total
Equity
|
(60,931 | ) | (31,195 | ) | (92,126 | ) | ||||||
Total
Liabilities & Equity
|
15,000 | 18,413 | 33,413 | |||||||||
Revenues
|
240,144 | 240,144 | ||||||||||
Cost
of Sales
|
- | (26,890 | ) | (26,890 | ) | |||||||
Gross
profit
|
213,254 | 213,254 | ||||||||||
G
& A
|
(67,881 | ) | (237,427 | ) | (305,308 | ) | ||||||
Net
income
|
(67,881 | ) | (24,173 | ) | (92,054 | ) |
12
REAL
ESTATE PROMOTIONAL SERVICES, INC.
The
Company
Real
Estate Promotional Services (REPS) is a Campbell, CA based company that
consults, designs and delivers marketing collateral for the real estate industry
and individual/small businesses. The products include post cards,
glossy brochures, creative design and mailing services that promote the listing
property, real estate agent, small business or individual.
REPS
focuses on a local region. It consults, designs and delivers real estate
marketing collateral and consulting to promote real estate agents and their
listed properties and help sell homes, as well as related industries like
mortgage and title company representatives who also need to promote
themselves. Recognizing similar needs of individuals and small
businesses, REPS also services this customer base as a small portion of the
overall business. REPS was started in 1998 by Jeff Crowe.
Relevant
Events and Acquisition
REPS was
launched with equipment, supplies and a contract with Cornish & Carey’s for
immediate business, allowing it to become profitable in its second year of
operation, 1999. In 2000, REPS acquired the design and print business
from a high-end collateral competitor in south San Jose, Opticom,
Inc. REPS purchased the piece of Opticom’s business for
$15,000. The client list that came with the purchase was for
Opticom’s high-end “showcase” customers and added this product segment to the
company portfolio.
The
Opportunity
Real
Estate
REPS is
uniquely positioned as the only marketing company solely focused on providing
individualized products and services to real estate agents and small/individual
businesses in its region. The local opportunity is over 20,000 real estate
agents in the San Francisco bay area and the Sacramento area that list houses
and use printed and web collateral to sell their
listings. Additionally, individuals that create their own business
need similar services and products as real estate agents.
Non- Real Estate
Opportunities: Individuals and Small Businesses
Individuals
starting small businesses see a similar scenario. In good economic
times, people feel OK to branch out on their own, and hence need a way to cost
effectively create an identity and marketing collateral for themselves. In tough
times with people losing their regular jobs, many will start consulting or start
a side business to try and bring in income. Again here, they will
need the same marketing materials.
In
Silicon Valley alone, there are over a hundred filings of “DBAs” per week where
people must publicly state they are going into business for
themselves. These filings are in local newspapers and some specific
newspapers focused on business in the area (i.e. Silicon Valley Business
Journal). This provides REPS with instant, continual flow of leads
every week.
These
customers typically need to get themselves established and presentable as a
business, so they will need an identity (logo, font and color scheme), business
cards, letterhead and envelopes. Some need a basic web
site.
Each
opportunity for these types of customers represents a potential of $399 to $599
per transaction, depending on the services they decide to use.
Business
Model
The
business model that has been used by REPS thus far has been to get new customers
by word of mouth, little to moderate promotion and through the purchase of
Opticom’s (formerly a full-service real estate marketing firm) collateral
business. The sales cycle is very short and decisions are made by
agents immediately.
For real
estate customers, the agent picks out a product and provides some vital
information. REPS faxes or emails a “proof” to the agent for approval
or changes. Upon acceptance, the job is printed and
delivered. Their credit card is billed upon completion of the job for
immediate payment and revenue is recognized.
For small
businesses or individuals there a very similar process is used, which is quick
turn, small print runs and creative design work.
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Sales
Cycle and Order Process Cycle
The sales
cycle for a collateral product is very short and many customers repeat
business. The effective pricing allows agents to “try them out” with
little monetary risk, typically about $100.
The order
process cycle is relatively quick, depending on the agent’s needs and
urgency. A product turnaround is promised in two to three days, but
REPS frequently completes jobs within 24 hours. An expedite fee is
charged for same day orders.
Products
and Services
REPS’
products are marketing services and collateral design to help real estate agents
sell their services and listed homes. All products and services are designed to
save agents’ time and ease their mind about marketing homes. Similar
products are offered to individuals and small businesses to promote their
businesses and products.
Post cards – “Just
Listed” or “Just Sold” cards are common for real estate and promoting a new
business for small businesses
Brochures – black and
white or color brochures combining text, graphics and images on light-weight or
heavy stock paper
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Showcase – high-gloss
paper, high-quality brochure that contain multiple color photos and information
for high-end homes or products
Web site development
– small, personal web sites for agents or individuals
Most of
the services REPS provides are, or can be, included in the price of the
delivered products, such as delivery, design services, consulting and
photography of high-end homes. These services can be purchased without being
tied to a specific product.
Mailing
services
REPS has
direct mail capability, as well as a bulk mail indicia, so customers do not need
to get their own bulk permit. Direct mail minimum is 200 pieces and
the capability is up to 20,000 for a fast turnaround. Larger orders
can be accommodated, but will require additional time. REPS has
mailing software to manage mailing lists, clean up addresses and sort for the
lowest postage. Additionally, barcoding capability is available to
reduce postage to the lowest possible rate.
Consulting
services
These
services help agents determine which product(s) are best for their approach to
selling a listed home. Also, other selling tactics and strategies are
offered.
Design
services
The
design services are included in the development of marketing collateral, some
customers may want services for their non-real estate needs, such as personal
signs or cards. Design services are charged by the hour.
Photography
service
Photographs
can be taken of a house for use in a flyer or showcase, via digital camera or
standard film camera. This service can be available for small
businesses as well for person head-shot or product imaging.
Delivery
For
printing and delivery outside of the local area, REPS has contracted with
Kinko’s for printing and delivery for basic flyers. This allows REPS
to service customers with the same turnaround anywhere in the
country.
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Customer
Segments, Buyer Decision Making Issues
REPS’
customer base can be divided in six segments:
·
|
Real
Estate Agents
|
·
|
Real
Estate Companies
|
·
|
Mortgage
Companies
|
·
|
Title
Companies
|
·
|
Individuals
operating a business
|
·
|
Small
businesses
|
Real
estate agents are REPS primary clients and represents 80% of its total business
today, with a growth plan to expand to individuals and small businesses and
balance the customer base. Real estate and related segments have very specific
needs in terms of the quality of the products and places a lot of value on their
time. Agents indicate they prefer to devote their energy to make contacts and
sell homes instead of developing marketing pieces for which they don’t have the
necessary equipment or time. At current REPS price levels, this customer segment
shows very low price sensitivity usually ordering the most expensive and best
quality products. Agents expect superior customer service like being able to
place orders via phone or fax and have the products available within a short
period. Once agents work with a reliable company, they demonstrate high loyalty
and are very unlikely to switch suppliers. Higher quality products and time
saving are the two main needs that REPS has been trying to satisfy during the
past three years.
Secondary
customers are mortgage and title companies and agents. These customer segments
share some of the real estate agent segment requirements in terms of high
quality products but are more price-sensitive and usually place large orders but
the purchase frequency rate is lower.
The
growth to include individuals and small businesses will diversify the customer
base and will leverage the current core competency and skill
set. Additionally, the average sale target for the new segments will
be $450, rather than the >$200 in the real estate segments.
Target
Market and Size
95% of
active agents use marketing collateral, like that produced by
REPS. In Silicon Valley, agents use REPS an in-office service or
themselves.
Customers
typically order from REPS more than once, but about 17% of the customers are the
“regulars,” that bring all their business there. These 100 or so
customers account for about 60% of the current year’s revenue.
A realtor
will have from one to twenty listings actively managed at any given
time. Gaining all the business from a single agent can be lucrative,
from $100 to $5,000 per year.
REPS | Print Shops | Agents | |
Time saving | Y | ? | N |
Low cost | Y | N | Y |
Reliability | Y | Y | ? |
Flexibility | Y | ? | ? |
High quality | Y | Y | ? |
Full service | Y | ? | N |
Ease of doing business | Y | ? | ? |
Competitive
Advantage
Their
small size provides them with three competitive advantages over their two main
competitors (agents doing it themselves and existing print shops)
1.
|
Ease
of doing business – small business and limited number of customers that
provide the majority of orders.
|
2.
|
Flexibility
– a small business can be flexible with variations and last minute
changes. Also, their wide variety of printers allow small jobs,
where their competition has larger scale
printers.
|
3.
|
Lower
cost, competitive prices - Due to REPS efficient equipment, the cost of
producing the marketing pieces is relatively low which allow it to price
its products lower than competitors or to have better
margins.
|
16
Marketing and Growth
Plan
With
REPS’ design and print process in a very efficient state, their process
capability (equipment and office space) can accommodate twice the current
business. With the fixed and overhead costs in place, the variable
costs to fill up the capacity is marginal, which is the labor required to design
and deliver.
Scalable
and Reproducible Process – Key to Success
Ensure
current process is scalable and easily reproducible. With the
ordering/approval and design processes in an efficient state, if an employee is
sick or out on vacation, business operations can continue
effectively. New innovations in printer/copiers, investing in new
lease agreements will expand capabilities or further improve efficiency, such as
variable data to individualize printed marketing material merging mailing lists,
as well as faster printing. With lease agreements including
consumable inks and maintenance, the COGS for print jobs is only the
paper.
Making
the process easily reproducible will enable quick launching of new office
operations when expanding to new cities.
Marketing
Budget
The
budget will be distributed between some direct mail campaign, presentations and
customer visits.
Marketing
expenses will be considerably increased. The marketing campaign will consist
mainly of direct mail and presentation to agents. Additionally, it could include
presentations on trade shows. The distribution of the costs will be the
following:
·
|
Direct
mail campaign. REPS is planning to send at least 10,000 pieces of mail at
$1/piece. It will be sent to agents in the Bay Area and
Sacramento.
|
·
|
Sales
presentation to agents. REPS will conduct at least two presentations per
week during the year.
|
Management
Team
Jeff
Crowe - Owner/founder
David Ho
– Founding employee and operations manager
Douglas
Crowe – Founding partner/Graphic Design
Cameron
T. Brett – Business Operations Manager
Risk factors
The
following is a summary of certain material risks facing our business that should
be carefully considered along with the other information contained or
incorporated by reference in this prospectus. If any other material risks of
which we are unaware later occur or become material, our business, financial
condition, and operating results could be materially harmed.
Risks
Related to our Business
Our
revenues and profitability are heavily dependent on prevailing prices for our
products and raw materials; if we are unable to pass cost increases along to our
customers our margins and operating income may decrease.
As a
producer, our revenue, gross margins and cash flow from operations are
substantially dependent on the prevailing prices we receive for our products and
the cost of our raw materials, neither of which we control. The factors
influencing the sales price of printed materials include the supply price of
paper and demand of our products and competition.
The price
of paper, our principal raw material, is subject to market volatility as a
result of numerous factors including, but not limited to, general economic
conditions, weather, transportation delays and other uncertainties that are
beyond our control. Due to such market volatility, we generally do not, nor do
we expect to, have long-term contracts with our suppliers. As a result, we
cannot assure you that the necessary raw materials will continue to be available
to us at prices currently in effect or acceptable to us. In the event raw
material prices increase materially, we may not be able to adjust our product
prices, especially in the short-term, to recover such cost
increases. If we are not able to effectively pass these cost
increases along to our customers, our margins will decrease and our operating
income will suffer accordingly.
17
Our
inability to continue to market our existing products and develop new products
to satisfy our consumers’ changing preferences and internet use could materially
adversely affect our operations and revenues.
The
printing industry is subject to changing consumer preferences and increase in
use of internet marketing, and shifts in consumer preferences may adversely
affect us if we misjudge such preferences. In addition, sales are substantially
dependent upon awareness and market acceptance of our products and brand by our
targeted consumers. We may be unable to achieve volume growth through
product and packaging initiatives. We also may be unable to penetrate new
markets. If our revenues decline, our business, financial condition and results
of operations will be adversely affected.
18
Economic
conditions have had and may continue to have an adverse effect on consumer
spending on our products.
The
worldwide economy is currently undergoing significant turmoil. The adverse
effect of a sustained international economic downturn, including sustained
periods of decreased consumer spending, high unemployment levels, or declining
consumer or business confidence, along with continued volatility and disruption
in the credit, capital and real estate markets, will likely result in reduced
demand for our products as consumers turn to cheaper substitute goods or
forego certain purchases altogether. To the extent the international
economic downturn continues or worsens, we could experience a further reduction
in sales volume, and if our operating costs and expenses are not reduced
accordingly, it would adversely affect our revenues and results of
operations.
Our
success depends substantially on the continued retention of certain key
personnel and our ability to hire and retain qualified personnel in the future
to support our growth.
If one or
more of our senior executives or other key personnel are unable or unwilling to
continue in their present positions, we may not be able to replace them easily
or at all, and our business may be disrupted and our financial condition and
results of operations may be materially and adversely affected. While we depend
on the abilities and participation of our current management team generally, we
have a particular reliance upon Mr. Jeffrey Crowe, Chief Executive Officer of
Rep’s Web. The loss of the services of Mr. Crowe for any reason could
significantly impact our business and results of operations. Competition for
senior management is intense and the pool of qualified candidates is very
limited. Accordingly, we cannot guaranty that the services of our
senior executives and other key personnel will continue to be available to us,
or that we will be able to find a suitable replacement for them if they were to
leave.
The relative lack of public company
experience of our management team may put us at a competitive
disadvantage.
Our management team lacks
public company experience, which could impair our ability to comply with legal
and regulatory requirements such as those imposed by the Sarbanes-Oxley Act of
2002 (“Sarbanes-Oxley”). Aside from our contract SEC Accountant, Bob Bates, the
individuals who now constitute our senior management have never had
responsibility for managing a publicly traded company. Such responsibilities
include complying with federal securities laws and making required disclosures
on a timely basis. Our senior management may not be able to implement programs
and policies in an effective and timely manner that adequately respond to the
increased legal, regulatory and reporting requirements associated with being a
publicly traded company. Our failure to comply with all applicable requirements
could lead to the imposition of fines and penalties and distract our management
from attending to the growth of our business.
We
may not have adequate or effective internal accounting controls.
We are
constantly striving to improve our internal accounting controls. We hope to
develop an adequate internal accounting control to budget, forecast, manage and
allocate our funds and account for them. There is no guarantee, however, that
any such improvements will be adequate or successful or that such improvements
will be carried out on a timely basis. Rep’s Web has historically had a basic,
loosely controlled bookkeeping system. As a result of these factors, we may
experience difficulty in establishing accounting and financial controls,
collecting financial data, budgeting, managing our funds and preparing financial
statements, books of account and corporate records and instituting business
practices that meet GAAP and SEC standards.
Rules
adopted by the Securities and Exchange Commission (the “SEC”) pursuant to
Section 404 of Sarbanes-Oxley require annual assessment of our internal control
over financial reporting, and attestation of this assessment by the Company’s
independent registered public accountants. The requirement that management
perform an assessment of internal controls over financial reporting first
applied to our Annual Report on Form 10-K for the fiscal year ending August 31,
2009 and the attestation requirement of management’s assessment by our
independent registered public accountants will first apply to our Annual Report
on Form 10-K for the fiscal year ending August 31, 2010. The standards that must
be met for management to assess the internal control over financial reporting as
effective are relatively new and complex, and require significant documentation,
testing and possible remediation to meet the detailed standards. Our lack of
budget to cover the costs associated with Section 404 implementation may cause
us to declare an adverse opinion on the controls audit. If, in the future,
management identifies one or more material weaknesses in our internal controls
over financial reporting, or our external auditors are unable to attest that our
management’s report is fairly stated or to express an opinion on the
effectiveness of our internal controls, this could result in a loss of investor
confidence in our financial reports, have an adverse effect on our stock price
and/or subject us to sanctions or investigation by regulatory
authorities.
19
Our operating
history may not serve as an adequate basis to judge our future prospects and
results of operations.
Although
Rep’s Web revenues have grown since its inception, we cannot guaranty that we
will maintain profitability or that we will not incur net losses in the future.
We will continue to encounter risks and difficulties including the potential
failure to:
•
|
obtain
sufficient working capital to support our
expansion;
|
•
|
expand
our product offerings and maintain the high quality of our
products;
|
•
|
manage
our expanding operations and continue to fill customers’ orders on
time;
|
•
|
maintain
adequate control of our expenses allowing us to realize anticipated
revenue growth;
|
•
|
implement
our product development, marketing, sales, and acquisition strategies and
adapt and modify them as
needed;
|
•
|
anticipate
and adapt to changing conditions in the industry resulting from changes in
mergers and acquisitions involving our competitors, technological
developments and other significant competitive and market
dynamics.
|
If we are
not successful in addressing any or all of the foregoing risks, our business may
be materially and adversely affected.
We
will encounter substantial competition in our business and any failure to
compete effectively could adversely affect our results of
operations.
There are
currently a number of well-established companies producing products that compete
directly with our product offerings, and some of those competitors have
significantly more financial and other resources than we possess. We anticipate
that our competitors will continue to improve their products and to introduce
new products with competitive price and performance characteristics. Aggressive
marketing or pricing by our competitors or the entrance of new competitors into
our markets could have a material adverse effect on our business, results of
operations and financial condition.
We
may not be able to successfully introduce new products, which could decrease our
profitability.
Our
future business and financial performance depends, in part, on our ability to
successfully respond to consumer preference by introducing new products and
improving existing products. We incur significant development and marketing
costs in connection with the introduction of new products. Successfully
launching and selling new products puts pressure on our sales and marketing
resources, and we may fail to invest sufficient funds in order to market and
sell a new product effectively. If we are not successful in marketing
and selling new products, our results of operations could be materially
adversely affected.
We may need additional capital to
fund our future operations and, if it is not available when needed, we may need
to reduce our planned development and marketing efforts, which may reduce our
sales revenues.
We
believe that our existing working capital, along with cash from operations, will
allow us to meet our working capital requirements for 2010. However,
if cash from future operations is insufficient, or if cash is used for other
currently unanticipated uses, we may need additional capital from outside
sources. Our ability to raise capital in the future will depend on a number of
factors, including our financial condition and results of operations and the
conditions in the relevant financial markets. We cannot assure you that
additional capital, if required, will be available on acceptable terms, or at
all. If we are unable to obtain financing on a timely basis and on acceptable
terms, we may be required to reduce the scope of our planned expansions, product
development and marketing efforts, and in turn our financial position,
competitive position, growth and profitability may be adversely
affected.
To the
extent that we do raise additional capital through the sale of equity or
convertible debt securities, the issuance of such securities would result in
dilution of the shares held by existing stockholders and could provide
purchasers certain rights, preferences and privileges senior to our Common
Stock.
20
We may not be
able to effectively control and manage our growthin order to meet
demand, and a failure to do so could adversely affect our operations and
financial condition.
If our
business and markets continue to grow and develop, it will be necessary for us
to finance and manage our growth effectively in order to meet demand. In
addition, we may face challenges in expanding our current facilities,
integrating acquired businesses with our own, and managing expanding product
offerings. We may not respond quickly enough to the increased demands caused by
such growth on our existing management, workforce and facilities. Failure to
effectively deal with such increased demands could interrupt or adversely affect
our operations and cause production backlogs, longer product development time
frames and administrative inefficiencies.
Our
business and results may be subject to disruption from work stoppages, terrorism
or natural disasters.
Our
operations may be subject to disruption for a variety of reasons, including work
stoppages, acts of war, terrorism, pandemics, fire, earthquake, flooding or
other natural disasters. If a major natural disaster were to occur in either of
the regions where our facilities or main offices are located, our facilities or
offices could be damaged or destroyed. Such a disruption could result in the
temporary or permanent loss of critical data, suspension of operations, delays
in shipments of product, and disruption of business generally, which would
adversely affect our revenue and results of operations.
Critical Success
Factors
A key to
success will be REPS ability to execute on the marketing promotion to gain
market share in the bay area and expand in major cities across the
US. During the growth phase, REPS needs to build on a model that is
very open, but difficult to duplicate, where customer service, flexibility and
the fastest turnaround delivery are a given.
Additionally,
the financial ability to implement marketing and growth plans is critical to
expand the proven process to service a large customer base.
21
SIGNATURES
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.
Catalyst Group Holdings Corp. | |||
Date:
January 22, 2010
|
By:
|
/s/ Kenneth Green | |
Kenneth Green | |||
Chief Executive Officer | |||
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