Attached files
| file | filename |
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| EX-32.1 - CERTIFICATION - American Retail Group, Inc. | f10k2010a1ex32i_resource.htm |
| EX-31.1 - CERTIFICATION - American Retail Group, Inc. | f10k2010a1ex31i_resource.htm |
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 2010
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
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RESOURCE ACQUISITION GROUP, INC.
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||
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(Exact name of registrant as specified in its charter)
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Nevada
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000-53244
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13-1869744
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(State or other jurisdiction of incorporation or organization)
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(Commission File Number)
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(I.R.S. Employer Identification Number)
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2770 S. Maryland Pkwy, Ste 314
Las Vegas, Nevada 89109
(Address of principal executive offices, including zip code)(702) 731-3535
(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
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 for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ No o
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 (§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 o No o
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or 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. (Check one):
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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o
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Smaller reporting company
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þ
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of June 30, 2010, the last day of the registrant’s second fiscal quarter, was $5,745.
The number of shares of Common Stock, $0.001 par value, outstanding on March 31, 2011, was 20,801,603 shares.
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A is being filed to amend our annual report on Form 10-K for the fiscal year ended December 31, 2010, as filed with the Securities and Exchange Commission on February 9, 2011, to revise certifications pursuant to the Sarbanes-Oxley Act of 2002 as Exhibits 31.1 and 32.1.
PART I
ITEM 9A(T). CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The evaluation of our disclosure controls and procedures included a review of their objectives and design, our implementation of them and their effect on the information generated for use in this Form 10-K/A. In the course of the controls evaluation, we reviewed any data errors or control problems that we had identified and sought to confirm that appropriate corrective actions, including process improvements, were being undertaken. This type of evaluation is performed on a quarterly basis so that the conclusions of management, including our Chief Executive Officer and Chief Financial Officer, concerning the effectiveness of the disclosure controls can be reported in our periodic reports on Form 10-K and Form 10-Q. Many of the components of our disclosure controls and procedures are also evaluated on an ongoing basis. The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures and to modify them as necessary. The Company’s Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Sec. 240.13a-15(e) or 240.15d-15(e)) as of December 31, 2010. In the course of that evaluation, they determined that that there is limited segregation of duties amongst the Company’s employees with respect to the Company’s preparation and review of the Company’s financial statements. This material weakness is a result of the Company’s limited number of employees. This material weakness may affect management’s ability to effectively review and analyze elements of the financial statement closing process and prepare financial statements in accordance with U.S. GAAP. Based on their evaluation of these controls and procedures required by paragraph (b) of Sec. 240.13a-15 or 240.15d-15, the Company’s Chief Executive Officer and Chief Financial Officer found the Company’s disclosure controls and procedures to be ineffective.
EVALUATION OF INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness in the Company’s internal control over financial reporting exists in that there is limited segregation of duties amongst the Company’s employees with respect to the Company’s preparation and review of the Company’s financial statements. This material weakness is a result of the Company’s limited number of employees. This material weakness may affect management’s ability to effectively review and analyze elements of the financial statement closing process and prepare financial statements in accordance with U.S. GAAP.
-1-
Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010. In making this assessment, management used the framework set forth in the report entitled “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a Company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of the Company have concluded, as of the end of the fiscal year covered by this Annual Report on Form 10-K/A, due to a lack of segregation of duties that our internal control over financial reporting has not been effective. However, at this time, our resources and size prevent us from being able to employ sufficient resources to enable us to have adequate segregation of duties within our internal control system. The Company intends to remedy the material weakness by hiring additional employees and reallocating duties, including responsibilities for financial reporting, among the Company’s employees as soon as the Company has the financial resources to do so. Management is required to apply judgment in evaluating the cost-benefit relationship of possible changes in our disclosure controls and procedures.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm because as a smaller reporting company we are not subject to Section 404(b) of the Sarbanes-Oxley Act of 2002.
CHANGES IN INTERNAL CONTROLS
Management of the Company has evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, any change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal year covered by this Annual Report on Form 10-K. There was no change in the Company’s internal control over financial reporting identified in that evaluation that occurred during the fourth quarter of the fiscal year covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting, other than what has been reported above.
PART IV
ITEM 15. EXHIBITS
Exhibits
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Exhibit No.
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Description
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31.1
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Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herein.
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32.1
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Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herein.
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-2-
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 31, 2011
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Resource Acquisition Group, Inc.
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By:
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/s/ Soledad Bayazit
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Soledad Bayazit
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Chief Executive Officer, Chief Financial Officer and Director
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In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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Signature
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Date
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/s/ Soledad Bayazit
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March 31, 2011
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Soledad Bayazit
Chief Executive Officer, Chief Financial Officer and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)
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/s/ Vassili Oxenuk
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March 31, 2011
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Vassili Oxenuk
Director
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/s/ Artur Januszewski
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March 31, 2011
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Artur Januszewski
Director
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-3-
RESOURCE ACQUISITION GROUP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
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PAGE(S)
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||||
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AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
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||||
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Report of Independent Registered Public Accounting Firm
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F-2
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|||
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Consolidated Balance Sheets as of December 31, 2010 and 2009
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F-3
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Consolidated Statements of Operations for the years ended
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||||
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December 31, 2010 and 2009
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F-4
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Consolidated Statements of Changes in Stockholders’ (Deficit) for the
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Years ended December 31, 2010 and 2009
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F-5
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Consolidated Statements of Cash Flow for the years ended December 31,
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2010 and 2009
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F-6
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Notes to Consolidated Financial Statements
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F-7-F-10
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F-1
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Paritz & Company, P.A.
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15 Warren Street, Suite 25
Hackensack, New Jersey 07601
(201)342-7753
Fax: (201) 342-7598
E-Mail: paritz @paritz.com
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Certified Public Accountants
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Resource Acquisition Group, Inc.
We have audited the accompanying consolidated balance sheets of Resource Acquisition Group, Inc. as of December 31, 2010 and 2009 and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Resource Acquisition Group, Inc. as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
.As discussed in Note 1, the accompanying financial statements have been prepared assuming the Company will continue as a going concern. The ability of the Company to continue as a going concern and to emerge from the development stage is dependent upon its successful execution of its plan of operations and ability to raise additional financing. There is no guarantee that the Company will be able to raise additional capital or sell any of its products or services at a profit. The Company did not generate any revenue during the years ended December 31, 2010 and 2009. In addition, as of December 31, 2010 the Company has a stockholders’ deficit and negative working capital of $105,772. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Hackensack, New Jersey
February 8, 2011
F-2
RESOURCE ACQUISITION GROUP, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2010 AND 2009
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December 31,
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December 31,
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|||||||
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2010
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2009
|
|||||||
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CURRENT ASSETS:
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||||||||
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Cash and cash equivalents
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$
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10,919
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$
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4,051
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||||
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TOTAL CURRENT ASSETS AND TOTAL ASSETS:
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$
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10,919
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$
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4,051
|
||||
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LIABILITIES AND STOCKHOLDERS (DEFICIT)
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||||||||
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CURRENT LIABILITIES:
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||||||||
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Accounts payable and accrued expenses
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$
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16,691
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$
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121,588
|
||||
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Notes Payable - officer
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100,000
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55,500
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||||||
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Total current liabilities
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116,691
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177,088
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||||||
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Total liabilities
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116,691
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177,088
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||||||
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STOCKHOLDERS' (DEFICIT)
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||||||||
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Preferred stock, $.001 par value, 10,000,000 shares authorized;
|
||||||||
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-0- shares issued and outstanding
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-
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-
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||||||
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Common stock, $.001 par value, 200,000,000 shares authorized;
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||||||||
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801,603 and 101,924 shares issued and outstanding at December 31, 2010 and December 31, 2009 respectively
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||||||||
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802
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102
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|||||||
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Additional paid-in capital
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230,712
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151,853
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||||||
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Accumulated deficit
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(337,286
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)
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(324,992
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)
|
||||
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Total stockholders' (deficit)
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(105,772
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)
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(173,037
|
)
|
||||
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TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)
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$
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10,919
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$
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4,051
|
||||
The accompanying notes are an integral part of these consolidated financial statements
F-3
RESOURCE ACQUISITION GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
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Year Ended
|
Year Ended
|
|||||||
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Dec. 31, 2010
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Dec. 31, 2009
|
|||||||
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OPERATING EXPENSES:
|
||||||||
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General and administrative expenses
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1,278
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898
|
||||||
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Officer's salaries
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20,000
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15,000
|
||||||
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Professional fees
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11,064
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26,873
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||||||
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Total operating expenses
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32,342
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42,771
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||||||
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(LOSS) FROM OPERATIONS
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(32,342
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)
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(42,771
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)
|
||||
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OTHER INCOME (EXPENSE)
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||||||||
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Forgiveness of accrued salary - officer
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31,460
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-
|
||||||
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Interest expense
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(11,412
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)
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(8,641
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)
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||||
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Note default fee - related party
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-
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(5,000
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)
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|||||
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TOTAL OTHER INCOME (EXPENSE)
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20,048
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(13,641
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)
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|||||
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LOSS FROM CONTINUING OPERATIONS
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(12,294
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)
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(56,412
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)
|
||||
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LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX
|
-
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(18,205
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)
|
|||||
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NET GAIN ON DISPOSITION OF SUBSIDIARY, NET OF TAX
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-
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192,788
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||||||
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NET INCOME(LOSS)
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(12,294
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)
|
118,171
|
|||||
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Basic and Diluted income (loss) per common share
|
||||||||
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From continuing operations
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(0.12
|
)
|
(1.05
|
)
|
||||
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Discontinued operations
|
-
|
(0.34
|
)
|
|||||
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Gain on disposition of subsidiary
|
-
|
3.59
|
||||||
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TOTAL BASIC INCOME (LOSS) PER COMMON SHARE
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$
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(0.12
|
)
|
$
|
2.20
|
|||
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WEIGHTED AVERAGE SHARES OUTSTANDING
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103,841
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53,653
|
||||||
The accompanying notes are an integral part of these consolidated financial statements
F-4
RESOURCE ACQUISITION GROUP, INC.
(CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
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Common Stock
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Preferred Stock
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Additional
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Liability for
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Accumulated
|
||||||||||||||||||||||||||||
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Shares
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Amount
|
Shares
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Amount
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Paid - In Capital
|
stock to be issued
|
Deficit
|
Total
|
|||||||||||||||||||||||||
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Balance, December 31, 2008
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62,596
|
63
|
-
|
$
|
-
|
$
|
73,237
|
$
|
-
|
$
|
(443,163
|
)
|
$
|
(369,863
|
)
|
|||||||||||||||||
|
Common stock issued for redemption of notes payable
|
39,328
|
39
|
78,616
|
78,655
|
||||||||||||||||||||||||||||
|
Net loss for the Year ended December 31, 2009
|
-
|
-
|
-
|
118,171
|
118,171
|
|||||||||||||||||||||||||||
|
Balance, December 31, 2009
|
101,924
|
102
|
-
|
$
|
-
|
151,853
|
$
|
-
|
$
|
(324,992
|
)
|
$
|
(173,037
|
)
|
||||||||||||||||||
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Common stock issued in exchange of accrued salary, interest and fees
|
699,679
|
700
|
78,859
|
79,559
|
||||||||||||||||||||||||||||
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Net loss for the Year ended December 31, 2009
|
-
|
-
|
-
|
(12,294
|
)
|
(12,294
|
)
|
|||||||||||||||||||||||||
|
Balance, December 31, 2010
|
801,603
|
802
|
-
|
$
|
-
|
230,712
|
$
|
-
|
$
|
(337,286
|
)
|
$
|
(105,772
|
)
|
||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-5
RESOURCE ACQUISITION GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Year Ended
|
Year Ended
|
|||||||
|
December 31, 2010
|
December 31, 2009
|
|||||||
|
CASH FLOW FROM OPERATING ACTIVITIES
|
||||||||
|
Net (loss)
|
$
|
(12,294
|
)
|
$
|
118,171
|
|||
|
Adjustments to reconcile net loss to net cash
|
||||||||
|
(used in) operating activities:
|
||||||||
|
Gain on disposition of subsidiary
|
-
|
(192,788
|
)
|
|||||
|
Forgiveness of accrued salary
|
(31,460
|
)
|
-
|
|||||
|
Changes in assets and liabilities
|
||||||||
|
Increase (Decrease) in accounts payable and accrued expenses
|
(5,290
|
)
|
16,262
|
|||||
|
Increase in accrued interest
|
11,412
|
16,846
|
||||||
|
Net cash used in operating activities
|
(37,632
|
)
|
(41,509
|
)
|
||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Net cash used in investing activities
|
-
|
-
|
||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Proceeds from loan and note payable
|
44,500
|
40,000
|
||||||
|
Net cash provided by financing activities
|
44,500
|
40,000
|
||||||
|
NET INCREASE (DECREASE) IN CASH
|
||||||||
|
AND CASH EQUIVALENTS
|
6,868
|
(1,509
|
)
|
|||||
|
CASH AND CASH EQUIVALENTS -
|
||||||||
|
BEGINNING OF YEAR / PERIOD
|
4,051
|
5,560
|
||||||
|
CASH AND CASH EQUIVALENTS - END OF
|
||||||||
|
YEAR / PERIOD
|
$
|
10,919
|
$
|
4,051
|
||||
|
SUPPLEMENTAL DISCLOSURE OF NONCASH
|
||||||||
|
FINANCING ACTIVITIES:
|
||||||||
|
Stock issued for redemption of notes, accrued interest and fees
|
-
|
78,655
|
||||||
|
Stock issued for redemption of accrued salary, accrued interest and fees
|
78,559
|
-
|
||||||
The accompanying notes are an integral part of these consolidated financial statements
F-6
RESOURCE ACQUISITION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
|
NOTE 1-
|
Provision For Income Taxes
|
We intend to attempt to raise additional debt and/or equity financing to sustain our operations. The Company's future cash requirements will depend on many factors, including continued scientific progress in our research and development programs, the time and costs involved in obtaining regulatory approvals, the costs involved in filing, prosecuting and enforcing patents, competing technological and market development and the cost of product commercialization. We do not expect to generate a positive cash flow from operations at least until the commercial launch of our first product and possibly later given the expected spending for research and development programs and the cost of commercializing product candidates. Accordingly, we will require external financing to sustain our operations, perhaps for a significant period of time. Successful future operations are subject to a number of technical and business risks, including our continued ability to obtain future funding, satisfactory product development, regulatory approvals and market acceptance for our products.
Going Concern
As shown in the accompanying consolidated financial statements, the Company incurred substantial net losses for the years ended December 31, 2010 and 2009, and has no revenue stream to support itself. In addition, at December 31, 2010, the Company had a stockholders’ deficit and negative working capital of $105,772.These factors, among others raise substantial doubt about the Company’s ability to continue as a going concern.
The Company’s future success is dependent upon, among other things its ability to raise additional capital or to secure a future business combination. There is no guarantee that the Company will be able to raise enough capital or generate revenues to sustain its operations. Management believes they can raise the appropriate funds needed to support their business plan and acquire an operating, cash flow positive company.
The financial statements do not include any adjustments relating to the recoverability or classification of recorded assets and liabilities that might result should the Company be unable to continue as a going concern.
Recapitalization
Through a series of agreements entered into in September, 2009 which were authorized by written consent of the shareholders, the Company:
1. Changed its name from DK Investors, Inc. to Resource Acquisition Group, Inc.
2. Authorized a reverse stock split of 200 to 1 on its outstanding common stock.
3. Amended it Articles of Incorporation to increase its authorized common stock from 40,000,000 to 200,000,000 shares.
4. Spun-off its operating subsidiary (SGK Nanostructures, Inc.) to its shareholders on a pro-rata basis.
5. Changed its state of incorporation from New York to Nevada.
The spin-off referred to above, conveyed the Company’s business activities and technology in nanotechnology and certain liabilities to SGK. The net effect was the transfer of liabilities in excess of assets of $192,788. The results of operations of the nanotechnology business are classified as discontinued operations on the accompanying statement of operations.
F-7
RESOURCE ACQUISITION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2010 AND 2009
|
NOTE 2-
|
Provision For Income Taxes
|
Basis of Presentation
The accompanying consolidated financial statements included herein have been prepared in conformity with accounting principles generally accepted in the United States of America.
Subsequent events have been evaluated through the issuance date of these financial statements.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments and other short-term investments with an initial maturity of three months or less to be cash and cash equivalents. At December 31, 2010 and 2009, the Company maintained cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation up to $250,000 and $100,000, respectively.
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed on the straight-line method over the estimated useful asset lives, which range from three to five years. Repairs and maintenance are charged to expense as incurred.
Fair Value of Financial Instruments and Fair Value Measurements
We measure our financial assets and liabilities in accordance with generally accepted accounting principles. For certain of our financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities, and Notes payable to our officer, the carrying amounts approximate fair value due to their short maturities.
Effective January 1, 2008, we adopted accounting guidance for financial assets and liabilities. The adoption did not have a material impact on our results of operations, financial position or liquidity. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
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Level 1:
|
Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
|
Level 2:
|
Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
|
|
Level 3:
|
Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.
|
F-8
RESOURCE ACQUISITION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2010 AND 2009
Income Taxes
We account for income taxes in accordance with authoritative guidance, in which, we record a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and when temporary differences become deductible. We consider, among other available information, uncertainties surrounding the recoverability of deferred tax assets, scheduled reversals of deferred tax liabilities, projected future taxable income, and other matters in making this assessment.
Loss Per Share of Common Stock
Basic net loss per share attributable to common stockholders is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period, including common stock equivalents, such as conversions, exercise or contingent exercise of securities. Diluted earnings per share gives effect to all dilutive potential common shares outstanding during the period.
|
NOTE 3-
|
Commitments
|
At the present time the Company pays no rent and operates from the office of its President, John Leo.
The Company has two employees both of whom are executive officers. The Company compensates these officers and stockholders under employment agreements with an initial five year term ending October 14, 2010. Base salaries under the agreements are $10,000 each per year.
|
NOTE 4-
|
Notes Payable
|
|
As of December 31, notes payable consisted of the following:
|
||||||||
|
2010
|
2009
|
|||||||
|
Unsecured notes payable to an officer / shareholder at
|
||||||||
|
at 4%. Proceeds of the notes were used for general
|
||||||||
|
working capital and to provide the Company with
|
||||||||
|
short term liquidity and to pay overdue bills.
|
||||||||
|
The due date for the notes have been extended by the
|
||||||||
|
officer to March 31, 2011.
|
100,000
|
55,000
|
||||||
|
NOTE 5-
|
Stockholders Equity
|
On December 31, 2010 the Company issued 699,679 shares of common stock in exchange for $31,460 of accrued salary, $30,000 of accrued default fees, and a retroactively reduction in the interest rate on the notes payable referred to in note 4 from 15% to 4% (which amounted to $18,099) to an officer and majority shareholder of the Company.
F-9
RESOURCE ACQUISITION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2010 AND 2009
|
NOTE 6-
|
Provision For Income Taxes
|
Deferred income taxes will be determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes will be measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s consolidated tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.
At December 31, 2010 and 2009, deferred tax assets consist of the following:
|
2010
|
2009
|
|||||||
|
Deferred taxes due to net operating loss carryforwards
|
166,880
|
162,577
|
||||||
|
Less: Valuation allowance
|
(166,880
|
)
|
(162,577
|
)
|
||||
|
Net deferred tax assets
|
-
|
-
|
||||||
At December 31, 2010 and 2009, the Company had deficits accumulated in the approximate amounts of $327,286 and $324,992 available to offset future taxable income, if any through 2028. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.
|
NOTE 7-
|
Related Party Transactions
|
Mr. John Leo, President, Corporate Secretary and a shareholder of the Company, holds our notes payable with a total outstanding balance of $100,000 and $55,500 at December 31, 2010 and 2009, respectively.
|
NOTE 8-
|
Legal Proceedings
|
The Company was named as a defendant in an adversary proceeding in a bankruptcy proceeding (In Re Nanodynamics, Inc., BK NO. 09-13438-MJK) entitled, Wallach, as Trustee v. SGK Nanostructures Inc., Adv. No. 10-01007-MJK, in the United States Bankruptcy Court for the Western District of New York. The plaintiff trustee sought to hold the Company liable under a promissory note in the amount of $110,000 executed by the Company’s formerly wholly-owned subsidiary, SGK. On August 5, 2010, the complaint against the Company was dismissed with prejudice.
F-10