UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to _________________
Commission file number 0-28555
KORE HOLDINGS, INC.
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(Exact name of small business issuer as specified in its charter)
NEVADA 86-0960464
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
41667 Yosemite Pines Dr., Oakhurst CA 93644
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(Address of principal executive offices)
(559) 692-2474
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 4,919,422 Common Shares $0.001 par
value as of March 31, 2005.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
The information required by Item 310(b) of Regulation S-B is attached hereto as
Exhibit One.
Item 2. Management's Discussion and Analysis or Plan of Operation.
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND
NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.
THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, AND THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING, BUT NOT LIMITED TO COMPETITION AND OVERALL MARKET AND ECONOMIC
CONDITIONS.
RESULTS OF CONTINUING OPERATIONS
Six Months Ended
March 31
2005 2004
Revenue $ 201,741 $ 1,212,216
Cost of revenue - 670,592
------------------------------
Gross profit 201,741 541,624
Operating expenses 242,799 369,060
-------------------------------
Income (Loss) from
continuing operations (41,058) 172,564
Income from discontinued
Operations 32,318 -
-------------------------------
Net income (loss) $ (8,740) $ 172,564
Gross profit margin 100% 45%
Income (Loss) per share from
continuing operations $ (0.01) $ 0.04
Income (Loss) per share from
discontinued operations $ 0.01 $ 0.04
Weighted average number of
common shares outstanding 4,919,4 22 4,469,422
For the six months ended March 31, 2005, the Company generated $201,714 of
revenue, $(41,058) of net loss from continuing operations, one time income from
discontinued operations of $32,318, a net loss of $(8,740) and $(0.01) in net
loss per weighted average common share based upon a weighted average of
4,919,422 common shares outstanding. All of the Company's revenue for this
period was from its mortgage business.
For the six months ended March 31, 2004, the Company generated $1,212,216 of
revenue, $541,624 of gross profit, $172,564 of net income, and $0.04 in earnings
per weighted average common share based upon a weighted average of 4,469,422
common shares outstanding.. All of the Company's revenue for this period was
from its mortgage business.
Revenue for the six months ended March 31, 2005, decreased $1,010,475,622 from
the same period last year. Cost of revenue for the six months ended March 31,
2005, decreased $670,592 from the same period last year. Operating expenses for
the six months ended March 31, 2005, decreased $126,261 from the same period
last year. Income from continuing operations for the six months ended March 31,
2005, decreased $213,622 from the same period last year. In the six months ended
March 31, 2005, income from discontinued operations increased 32,318 from the
same period last year. In the six months ended March 31, 2005, net income
decreased $184,304.
Three Months Ended
March 31
2005 2004
Revenue $ 201,724 $ 600,044
Cost of revenue - 529,198
---------------------------
Gross profit 201,724 300,508
Operating expenses 194,213 163,177
---------------------------
Income (loss) from
continuing operations 7,538 137,331
Income from discontinued
Operations 32,318 -
---------------------------
Net income (loss) $ 39,846 $ 137,331
Gross profit margin 100% 50%
Income (Loss) per share from
continuing operations $ 0.01 $ 0.03
Income (Loss) per share from
discontinued operations $ 0.01 $ 0.03
Number of common shares
Outstanding 4,919,422 4,919,422
For the three months ended March 31, 2005, the Company generated $201,724, of
revenue, $3,980 of net income from continuing operations, one time income from
discontinued operations of $32,318, net income of $39,846 and $0.01 in earnings
per fully diluted common share based upon 4,919,422 fully diluted common shares
outstanding. All of the Company's revenue for this period was from its mortgage
business.
For the three months ended March 31, 2004, the Company generated $600,044 of
revenue, $300,508 of gross profit, $137,331 of net income, and $0.03 in earnings
per fully diluted common share based upon 4,919,422 fully diluted common shares
out standing. All of the Company's revenue for this period was from its mortgage
business.
Revenue for the three months ended March 31, 200, decreased $398,320 from the
same period last year. Cost of revenue for the three months ended March 31,
2005, decreased $529,198 from the same period last year. Operating expenses for
the three months ended March 31, 2005, increased $31,036 from the same period
last year. Income from continuing operations for the three months ended March
31, 2005, decreased $129,739 from the same period last year. In the three months
ended March 31, 2005, income from discontinued operations increased 32,318 from
the same period last year. In the three months ended March 31, 2005, net income
decreased $97,485.
MANAGEMENT'S DISCUSSION
The Company attributes the decrease in revenue, operating expenses and income
from continuing operations for the for the six and three months ended March 31,
2005, to discontinuation of its mortgage business in California. The decrease in
cost of revenue is due to the discontinuation of its mortgage business in
California and the fact that its secondary lender for its mortgage business in
the Washington D.C. area pays all of the cost of revenue.
Item 3. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). This term refers to the controls and procedures of a company that are
designed to ensure that information required to be disclosed by a company in the
reports that it files under the Exchange Act is recorded, processed, summarized,
and reported within the required time periods. Our Chief Executive Officer and
our Chief Financial Officer have evaluated the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this annual
report. They have concluded that, as of that date, our disclosure controls and
procedures were effective at ensuring that required information will be
disclosed on a timely basis in our reports filed under the Exchange Act.
(b) Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the period
covered by this report that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
There are no pending or threatened legal proceedings against the Company or any
of its subsidiaries.
Item 2. Changes in Securities.
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders.
NONE
Item 5. Other Information.
The Company is still in the due diligence phase of the purchase of the Franklin
Hydro facility located in Malone New York.
The Company's purchase of Tract #4 of the Fiatt Coal Mine in Fulton County,
Illinois is in escrow subject to the satisfaction of certain contingencies by
the seller. There can be no guarantee that the contingencies will be satisfied
or that the closing of the purchase will be finalized. The purchase of
additional coal tracts pursuant to existing options is contingent upon
satisfaction of the escrow by the seller to the satisfaction of the Company.
Item 6. Exhibits and Reports on Form 8-K.
INDEX TO EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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1 KORE HOLDINGS, INC. AND SUBSIDIARIES FINANCIAL STATEMENTS
31.01 Section 302 Certifications
32.01 Section 906 Certifications
On May 30, 2002, the Company filed a Form 8-K to report the acquisition of First
Washington Financial Corporation.
On January 18, 2005, the Company filled an Amended Form 8-K amending its Form
8-K filed on May 30, 2002, to report the acquisition of First Washington
Financial Corporation.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KORE HOLDINGS. INC.
(Registrant)
Date May 23, 2005 /s/Denis C. Tseklenis
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Denis C. Tseklenis
Chief Executive Officer
Chairman of the Board
KORE HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY VOLT INC. AND SUBSIDIARIES)
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
===============================================================================
KORE HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY VOLT INC. AND SUBSIDIARIES)
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED):
BALANCE SHEET AS OF MARCH 31, 2005 (UNAUDITED)
STATEMENTS OF INCOME (OPERATIONS) FOR THE SIX AND THREE MONTHS ENDED MARCH 31,
2005 AND 2004 (UNAUDITED)
STATEMENTS OF CASH FLOWS FOR SIX MONTHS ENDED
MARCH 31, 2005 AND 2004 (UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
KORE HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY VOLT INC. AND SUBSIDIARIES)
BALANCE SHEET
MARCH 31, 2005
ASSETS
(UNAUDITED)
MARCH 31
2005
---------------------
CURRENT ASSETS
Cash and cash equivalents $ 39,448
Commissions receivable 300
Prepaid expenses and other assets 1,575
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Total current assets 41,323
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PROPERTY AND EQUIPMENT - Net 5,740,128
OTHER ASSETS
Land and coal reserves 14,045,079
Restricted cash 234,240
Goodwill 2,827,572
Licenses, net of amortization 358,334
---------------------
17,465,225
---------------------
TOTAL ASSETS $ 23,246,676
=====================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 27,949
Due to officer 24,400
------------------------
Total current liabilities 52,349
------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Class A Preferred Stock, $.001 par value,
10,000,000 shares authorized at
March 31, 2005 and 1,000,000 issued and
outstanding at March 31, 2005 1,000
Class B Preferred Stock , no par value,
90,000,000 shares authorized at March
31, 2005, and 13,635,999shares issued
and outstanding at March 31, 2005 -
First Washington Class A Preferred Stock,
no par value, 500,000 shares authorized
at March 31, 2005 and 500,000 shares issued
and outstanding at March 31, 2005 -
Common stock, $.001 par value 400,000,000
shares authorized at March 31, 2005
and 4,919,422 shares issued and outstanding
at March 31, 2005 4,919
Additional paid-in capital 28,138,326
Accumulated deficit (4,949,918)
------------------------
Total stockholders' equity (deficit) 23,194,327
------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 23,246,676
========================
See accompanying notes to condensed consolidated financial
statements.
KORE HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY VOLT INC. AND SUBSIDIARIES)
STATEMENTS OF INCOME (OPERATIONS)
SIX MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2005 AND 2004
SIX MONTHS THREE MONTHS
2005 2004 2005 2004
OPERATING REVENUE $ 201,741 $ 1,212,216 $ 201,741 $ 600,044
COST OF OPERATIONS - 670,592 - 299,536
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GROSS PROFIT 201,741 541,624 201,741 300,508
OPERATING EXPENSES
General and
administrative 184,603 354,595 168,217 155,895
Depreciation 58,196 14,465 25,996 7,282
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Total operating expenses 242,799 369,060 194,213 163,177
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INCOME (LOSS) BEFORE
INCOME TAXES (41,058) 172,564 7,528 137,331
Provision for income taxes - - - -
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INCOME (LOSS) FROM
CONTINUING OPERATIONS (41,058) 172,564 7,528 137,331
Income from discontinued operations
(net of income taxes) 32,318 - 32,318 -
----------------------------------------------------------
NET INCOME (LOSS) $ (8,740) $ 172,564 $ 39,846 $ 137,331
==========================================================
BASIC AND DILUTED INCOME
(LOSS) PER SHARE
Basic from continuing
operations $ (0.01) $ 0.04 $ 0.01 $ 0.03
==========================================================
Diluted from continuing
operations $ (0.01) $ 0.04 $ 0.01 $ 0.03
==========================================================
Basic from discontinued
operations $ 0.01 $ 0.04 $ 0.01 $ 0.03
==========================================================
Diluted from discontinued
operations $ 0.01 $ 0.04 $ 0.01 $ 0.03
==========================================================
WEIGHTED AVERAGE NUMBER OF BASIC COMMON
SHARES OUTSTANDING 4,919,422 4,469,422 4,919,422 4,919,422
==========================================================
WEIGHTED AVERAGE NUMBER OF DILUTED COMMON
SHARES OUTSTANDING 4,919,422 4,469,422 4,919,422 4,919,422
==========================================================
The accompanying notes are an integral part of the condensed consolidated
financial statements.
KORE HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY VOLT INC. AND SUBSIDIARIES)
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
MARCH 31, 2005 AND 2004
2005 2004
---------------------------------
CASH FLOW FROM OPERATING ACTIVITIES
Continuing Operations:
Net income (loss) $ (41,058) $ 172,564
----------------------------------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 60,196 14,465
Changes in assets and liabilities
(Increase) decrease in commissions
receivable 47,574 (57,978)
(Increase) in prepaid assets (1,575) -
(Decrease) in accounts payable
and accrued liabilities (33,889) (2,681)
----------------------------------
Total adjustments 72,306 (46,194)
----------------------------------
Net cash provided by operating
activities - continuing
operations 31,248 126,370
----------------------------------
Discontinued Operations:
Income from discontinued operations 32,318 -
Impairment of goodwill 31,840 -
------------------------------------
Net cash provided by operating
activities - discontinued operations 64,158 -
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Advance receivable, net - 4,500
Capital expenditures (6,543) -
-----------------------------------
Net cash provided by (used in)
investing activities (6,543) 4,500
------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contributions of equity - 143,500
Dividends distribution, net (346,658) -
Due to officer 24,400 -
------------------------------------
Net cash provided by (used in)
financing activities (322,258) 143,500
------------------------------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (233,395) 274,370
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 272,843 249,993
-------------------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 39,448 $ 524,363
=====================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest paid $ 4,340 $ -
=====================================
SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION:
Preferred stock issued for land
and coal reserves $ 14,045,079 $ -
====================================
The accompanying notes are an integral part of the
condensed financial statements.
KORE HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY VOLT INC. AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2005 AND 2004
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION
The condensed consolidated unaudited interim financial statements included
herein have been prepared, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. The consolidated financial statements
and notes are presented as permitted on Form 10-QSB and do not contain
information included in the Company's annual consolidated statements and notes.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. The results for the
six months ended March 31, 2005 may not be indicative of the results for the
entire year.
The Company on October 16, 2004, changed its name to Kore Holdings, Inc. The
Company, at that time, increased its authorized common stock shares to
400,000,000 and its preferred stock to 100,000,000.
These statements reflect all adjustments, consisting of normal recurring
adjustments which, in the opinion of management, are necessary for fair
presentation of the information contained herein.
Kore Holdings, Inc. and Subsidiaries is a power provider and marketer of
alternative energy and financial services. The Company is in the initial stages
of implementing its business plan.
On May 17, 2002, the Company acquired First Washington Financial Corporation, a
company which provides financial services in Bethesda, Maryland ("First
Washington"). First Washington, is a mortgage company whose emphasis lies in
residential mortgages in the greater Washington D.C. service area. The
combination was treated as a purchase with First Washington becoming a wholly
owned subsidiary of Volt, Inc. Volt, Inc. recognized an intangible asset
(goodwill) which represented the amount of value received over the net assets
acquired.
KORE HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY VOLT INC. AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
The operations of First Washington were included in the consolidated statements
of income for the year ended September 30, 2002 from the date of inception May
17, 2002 to September 30, 2002. There was no predecessor entity of First
Washington. The fair value of the transaction was recorded based on the number
of shares issued to First Washington (2,000,000) at the fair value of the stock
of Volt on the date of acquisition net of a discount since the stock issued in
the acquisition was restricted stock ($1.50). The cost of the net assets
purchased and liabilities assumed approximated zero, however, the value of
$3,000,000 was based on the mortgage company's future earnings. The Company
acquired Opportunity Knocks, LLC. during the third fiscal quarter of 2002 to
rehab HUD homes and other properties in Washington, D.C., Maryland and Virginia
under the HUD Gift Program. This acquisition was done simultaneously with the
acquisition of First Washington, and Opportunity Knocks is a wholly owned
subsidiary of the Company.
In fiscal 2003, the Company expanded its financial services business, and
brought in two businesses, that operationally failed to meet the Company's
business model. Subsequent to these agreements being in force, the Company spun
them out. Additionally, the Washington Metropolitan Area market had not met
Company expectations, so the Company's subsidiary First Washington acquired
Yosemite Brokerage, Inc. in Oakhurst, California, a few miles from the Company's
headquarters. The Company had issued Preferred Stock Class B, which has been
cancelled by the Company.
In July 2003 (effective August 1, 2003), First Washington acquired Yosemite
Brokerage, Inc. ("Yosemite"), a California corporation for 500,000 shares of
First Washington Class A Preferred Stock. The acquisition was recorded for
accounting purposes as a purchase acquisition. The Company valued this
transaction at $200,000 ($.40 per share), which included the recognition of
$31,840 in goodwill.
The Company has three other power related wholly-owned subsidiaries, Sun Volt,
Inc., Sun Electronics, Inc. and Arcadian Renewable Power, Inc. Arcadian
Renewable Power, Inc. is the corporation that holds the Altamont Wind Farm in
the Altamont Pass in Livermore, California.
KORE HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY VOLT INC. AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The condensed consolidated balance sheet for March 31, 2005 and condensed
consolidated statements of income and cash flows for the six months ended March
31, 2005 includes Kore Holdings, Inc. and its wholly-owned subsidiaries.
Intercompany transactions and balances have been eliminated in consolidation.
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 disclosures of contingent assets and liabilities at the date of
the 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 or cash
equivalents.
The Company maintains cash and cash equivalent balances at several financial
institutions which are insured by the Federal Deposit Insurance Corporation up
to $100,000.
The Company has $234,240 in restricted cash that is expected to be received in
the next two years.
KORE HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY VOLT INC. AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed primarily
using the straight-line method over the estimated useful life of the assets.
Furniture and fixtures 5-7 years
Office and computer equipment 3-5 years
Wind Farm 40 years
Revenue Recognition
For the Company's power division, sold merchandise and revenue was recorded
under the accrual method of accounting.
For the Company's financial services division, they record commission income
upon the closing of their respective transactions.
Advertising
Advertising costs are typically expensed as incurred. Advertising expense was
approximately $181 and $10,720 for the six months ending March 31, 2005 and
2004, respectively.
Income Taxes
The income tax benefit is computed on the pretax loss based on the current tax
law. Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates.
KORE HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY VOLT INC. AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments
The carrying amount reported in the condensed consolidated balance sheet for
cash and cash equivalents, advances receivable, commissions receivable, accounts
payable and accrued expenses approximate fair value because of the immediate or
short-term maturity of these financial instruments.
Earnings (Loss) Per Share of Common Stock
Historical net income (loss) per common share is computed using the weighted
average number of common shares outstanding. Diluted earnings per share (EPS)
includes additional dilution from common stock equivalents, such as stock
issuable pursuant to the exercise of stock options and warrants.
The following is a reconciliation of the computation for basic and diluted EPS:
2005 2004
Net income loss $ (8,740) $ 172,564
Weighted-average common shares
outstanding
Basic 4,919,422 4,469,422
Weighted average common stock
equivalents
Stock options - -
Warrants - -
------------------------
Weighted-average common
shares outatanding
Diluted 4,919,422 4,469,422
========================
The Company has no potentially dilutive securities, such as options or
warrants currently issued and outstanding.
KORE HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY VOLT INC. AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements
In June 2001, the FASB issued Statement No. 142 "Goodwill and Other Intangible
Assets". This statement addresses financial accounting and reporting for
acquired goodwill and other intangible assets and supersedes APB Opinion No. 17,
Intangible Assets. It addresses how intangible assets that are acquired
individually or with a group of other assets (but not those acquired in a
business combination) should be accounted for in financial statements upon their
acquisition. This statement also addresses how goodwill and other intangible
assets should be accounted for after they have been initially recognized in the
financial statements. This statement has been considered when determining
impairment of goodwill in certain transactions. During fiscal 2004, the Company
recognized $31,840 of goodwill acquired in the Yosemite transaction. There was
an impairment of goodwill during the six months ended March 31, 2005 of $31,840
upon the disposition.
On October 3, 2001, the FASB issued Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
144"), that is applicable to financial statements issued for fiscal years
beginning after December 15, 2001. The FASB's new rules on asset impairment
supersede SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," and portions of Accounting Principles
Board Opinion 30, "Reporting the Results of Operations." This Standard provides
a single accounting model for long-lived assets to be disposed of and
significantly changes the criteria that would have to be met to classify an
asset as held-for-sale. Classification as held-for- sale is an important
distinction since such assets are not depreciated and are stated at the lower of
fair value and carrying amount. This Standard also requires expected future
operating losses from discontinued operations to be displayed in the period (s)
in which the losses are incurred, rather than as of the measurement date as
presently required.
KORE HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY VOLT INC. AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements
On December 16, 2004, the Financial Accounting Standards Board ("FASB")
published Statement of Financial Accounting Standards No. 123 (Revised 2004),
Share-Based Payment ("SFAS 123R"). SFAS 123R requires that compensation cost
related to share-based payment transactions be recognized in the financial
statements. Share-based payment transactions within the scope of SFAS 123R
include stock options, restricted stock plans, performance-based awards, stock
appreciation rights, and employee share purchase plans. The provisions of SFAS
123R are effective for small business issuers as of the first interim period
that begins after December 15, 2005. Accordingly, the Company will implement the
revised standard in the fourth quarter of fiscal year 2005. Currently, the
Company accounts for its share-based payment transactions under the provisions
of APB 25, which does not necessarily require the recognition of compensation
cost in the financial statements. Management is assessing the implications of
this revised standard, which may materially impact the Company's results of
operations in the fourth quarter of fiscal year 2005 and thereafter.
Reclassifications
Certain amounts for the six months ended March 31, 2004 have been reclassified
to conform with the presentation of the March 31, 2005 amounts. The
reclassifications have no effect on net income for the six months ended March
31, 2004.
KORE HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY VOLT INC. AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 3- PROPERTY AND EQUIPMENT
Property and equipment consist of the following at March 31,
2005:
Wind Farm $5,700,000
Furniture and fixtures 8,001
Computer and office equipment 84,459
Less: accumulated depreciation __ (52,332)
Net book value $5,740,128
Depreciation expense for the six months ended March 31, 2005 and 2004 was
$10,196 and $14,565, respectively. There is no depreciation recognized on the
Wind Farm as it is non operational until placed in service.
The Company upon acquisition of the Wind Farm, has classified this asset under
property and equipment. The Wind Farm consists of hundreds of nonoperational
turbines located in California. The Company has received independent valuations
on the Wind Farm that have valued it in excess of $14,000,000. The Company would
need to spend in excess of $5,000,000 to bring these assets into operational
use, at which time the Company would depreciate them over their estimated useful
life of 40 years. Consequently, there is no depreciation recognized on the Wind
Farm for the six months ended March 31, 2005 and 2004.
NOTE 4- INTANGIBLE ASSET
The Company in November 2003 issued 1,000 shares of its common stock valued at
$500,000 for exclusive rights to distribute generators in northern California,
Hawaii and other agreed territories. Additionally, the Company received the
non-exclusive rights to acquire the generators at prevailing wholesale prices
for distribution and the non-exclusive license to use the name, trademark and
trade names of the manufacturer or distributor of the power generators. The
license agreements are being amortized over the five year life. Amortization
charged to expense for the six months ended March 31, 2005 was $50,000.
KORE HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY VOLT INC. AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 5- LAND AND COAL RESERVES
The Company acquired coal tract #4 of the Fiatt coal mine in Fulton County,
Illinois. The tract consists of approximately 100 acres of land and surface area
with a tonnage of 4,356,000 tons of coal fines having a thickness of a 50 foot
average using 200 pounds/sht tn and which are certified and appraised at
$69,696,020. The Company issued 13,635,999 shares of its Class B convertible
preferred stock valued at $14,045,079.
NOTE 6- STOCKHOLDERS' EQUITY
Common and Preferred Stock
On January 1, 2003, the Company issued a board resolution for the authorization
of a new class of preferred stock, Class B Preferred Stock, no par value. The
Company authorized the issuance of 125,000 shares of Class B Preferred Stock. On
December 1, 2004 the Company authorized an additional 89,875,000 shares of its
Class B Preferred Stock.
On July 1, 2003, First Washington issued a board resolution for the
authorization of a new class of preferred stock, Class A Preferred Stock, no par
value. First Washington authorized the issuance of 500,000 shares of Class A
Preferred Stock.
In July 2003 (effective August 1, 2003), First Washington issued 500,000 shares
of the Class A Preferred Stock, to acquire Yosemite Brokerage, Inc.
("Yosemite"). The acquisition was recorded for accounting purposes as a purchase
acquisition. The transaction was valued at $200,000 ($.40 per share), which
included goodwill of $31,840. As of January 1, 2005, the companies mutually
agreed to rescind the agreement. All assets and liabilities were distributed to
the owner and the shares were cancelled.
In November 2003, the Company issued 1,000,000 shares of common stock for an
intangible asset (see Note 4). The value for the asset was $500,000.
The Company issued 13,635,999 shares of its Class B convertible preferred stock
valued at $14,045,079.
KORE HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY VOLT INC. AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 7- RELATED PARTY TRANSACTIONS
Yosemite Brokerage, rents space from its officer. The lease commenced February
1, 2000 and runs through January 31, 2005. The monthly rents commenced at $5,600
per month and calls for increase annually up to 3%. Rent expense for the six
months ended March 31, 2005 and 2004 was $16,800 and $33,600, respectively. This
agreement terminated January 1, 2005.
NOTE 8- 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 March 31, 2005 and 2004, deferred tax assets consist of the following:
2005 2004
Net operating loss carryforwards $ 530,640 $ 139,963
Less: valuation allowance (530,640) (139,963)
--------------------------------
$ -0- $ -0-
=================================
At March 31, 2005 and 2004, the Company had federal net operating loss
carryforwards in the approximate amounts of $1,608,000 and $424,129,
respectively, available to offset future taxable income. 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.