Welcome To The HemaCare HUB On AGORACOM

Providing customized delivery of blood products and services Since 1978.



posted on Mar 18, 2010 12:12PM



Annual Report


Safe Harbor Act Disclaimer for Forward-Looking Statements

Certain statements in this document may contain words such as "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "projects," "plans," "targets" and other similar language and are considered forward-looking statements. These statements are based on management's current expectations, estimates, forecasts and projections about the success of its container terminal operations, its newly developed container and trailer flooring products, as well as certain other composite based flooring products in various stages of development. These forward-looking statements are subject to important assumptions, risks and uncertainties which are difficult to predict and therefore the actual results may be materially different from those discussed.



The Company operates in two reportable business segments; Container Terminal, and EKO-FLOR. The Container Terminal operations are organized as Conforce 1 Container Terminals, Inc., which is a 50.1% owned subsidiary of the Company. The remaining 49.9% is owned by Marino Kulas, Conforce International, Inc President & CEO. The Conforce 1 subsidiary is responsible for all container terminal operations. EKO-FLOR is organized as Conforce Container Corporation ("CCC"), a 100% owned subsidiary of the Company. The CCC subsidiary is responsible for the development, manufacturing and marketing of the Company's EKO-FLOR products. Operations for CCC during the reportable periods to date have been limited to research and development as the product is in the testing stages. Its EKO-FLOR products have evolved systematically with various refinements, as previously noted, based on industry standards and various feedback received. Accordingly, though in the development stage and having generated no revenue to date, Conforce has informed shipping lines and leasing companies of its product, EKO-FLOR, and the Company is optimistic about its prospects due to the fact that it is being tested in various ocean-going trials and receipt of the Sea Box, Inc. purchase order.

An advisory agreement between Worldwide Associates, Inc. ("Advisor") and Conforce is in place and as such, Advisor has and continues to provide the Company with advisory services as it relates to general business items such as sales, marketing, financing, infrastructure enhancements and public company management. Alexander P. Haig, Managing Director of Advisor has attended customer meetings with executives from Conforce, including various meetings held in Hamburg, Germany in December 2008. Pursuant to the agreement, Advisor is to provide Conforce consultation services and advice regarding general corporate strategy, new business development, potential acquisitions or partnerships and financial strategies. The term of the agreement is in effect until April 2, 2010 and is renewable upon mutual agreement by the parties for addition one-year periods. The agreement may be terminated by either party upon 90 days written notice to the other party. Conforce agrees to compensate Advisor for its services by distributing to Advisor one percent (1%) of all gross revenues derived from transactions in which Advisor's involvement or introduction results in the sale of services or products of Conforce, including EKO-FLOR. Conforce will reimburse Advisor for any extraordinary expenses and Advisor agrees not to disclose any confidential or proprietary information owned by, or received by or on behalf of Conforce. To date, no fees have been paid by Conforce to Advisor under this agreement.

Regarding the revenues generated by the terminal operations, the Company reports revenues as a result of lifting and handling containers that are stored in the Company's container depot. Storage charges typically do not apply as the Company performs these services for only empty containers. In the event that a container loaded with goods is stored at the terminal, then a nominal daily storage rate is charged. These handling and lifting services are performed by the Company and are not sub-contracted to any third parties. Regarding the revenues generated by transportation services in the operations of the Container Terminal division, the Company provides sub-contracted transportation services for containers arriving or departing to and from Canadian rail yards. Such sub-contracted services are arranged by the Company at the request of its shipping line customers and are facilitated through the use of local transportation companies. The Company charges a surcharge for arranging such shipments and is paid directly by the shipping lines. In turn, the Company pays the sub-contracted transportation companies.

The principal challenges related to the terminal business are customer retention in a competitive environment and decreasing container traffic as a result of the global economic downturn which has adversely affected storage and transportation services required by international shipping lines. With respect to the latter, the economy has caused terminal operators to aggressively reduce rates in an attempt to increase traffic. This strategy is advantageous to terminals who may offset the reduced margins with increased revenue from ancillary services such as long-haul transport. For Conforce, reducing its rates cannot be offset and will lead to reduced gross margin. The Company is currently estimating that revenues in the terminal operations division will decrease by approximately 30% in 2009 while gross margin will be reduced by approximately 5%.

In addition to unsolicited rate reductions by terminal operators, shipping lines have also requested rate reductions citing the global economy as the reason. The Company will be forced to temporarily reduce such rates in order to retain the business.

Another challenge faced by the terminal is its geographic location. Being closer to major rail yards such as Canadian National (CN) and Canadian Pacific (CP) railways is an advantage. Of the four competitors described on page 9 of this document, Conforce is the furthest from the major railways. More specifically, the Conforce terminal is located approximately 50 kilometers from CN whereas the Coyote terminal is approximately 8 kilometers from CN and 3 kilometers from CP.

For the year ended March 31, 2009, the Company's Container Terminal business segment had revenues of $1,553,540 with net income of $12,897. For the same period, the Company's EKO-FLOR business segment had revenues of $346,211 and a net loss of $391,127.


In 2009, the Company's primary focus will be on the commercialization of EKO-FLOR. With the introduction of EKO-FLOR revenues as a result of ms-1 panel orders, the reliance on the container terminal will decrease. Accordingly, the Company intends to pursue opportunities as they relate to three EKO-FLOR products (as described below). While the container terminal is expected to continue to provide revenues and moderate earnings, if any at all, growth in the terminal operations is not expected. Expansion for Conforce is expected to come from EKO-FLOR ms-1 in 2009 and cs-4 in 2010, where the Company believes that notwithstanding the current economic slowdown, significant growth potential exists due to the pressing need for composite flooring within the industry. Should the container industry in 2010 collectively produce one half of its 2007 new build volume of 3.9 million twenty foot equivalent containers, the Company would still experience significant growth assuming it is able to meet expectations of orders totaling approximately 60,000 units or approximately 2% of global new build volume.

EKO-FLOR cs-4: Trial product will be shipped to customers in or around October 2009. Trial completion times may range from 60 - 120 days depending on sea routes and frequency selected by trial customers, in their sole discretion. Conforce estimates that most trials will be completed in the fourth quarter of calendar 2009. The EKO-FLOR cs-4 panels are currently being produced at Conforce's own development center in Concord, Ontario.

EKO-FLOR xts: In the third quarter of calendar 2009, the Company intends to introduce EKO-FLOR xts to the North American highway trailer industry. The Company will offer a modified version of its cs-4 container panel in order to commence actual over-the-road testing by industry participants. The Company expects that over-the-road EKO-FLOR xts testing will commence in or around September 2009.

Provided that the aforementioned trials are successfully completed and that the outcome is positive, the Company expects that it will secure EKO-FLOR cs-4 and EKO-FLOR xts orders for 2010. It is the belief of management that Conforce will receive such orders, however, there is no assurance that it will secure these orders or generate any sales revenue at all. Provided that EKO-FLOR cs-4 volume commitments are secured and that such commitments are in-line with Conforce expectations of 60,000 - 80,000 TEU for calendar 2010, then the Company will begin the process of formalizing the details of a financial offering intended to adequately capitalize the establishment of a company owned facility in Asia. As such, the Company would require financing of 8 - 10 million USD. Currently, there is no such financing arrangement in place, nor are there any preliminary or final term sheets or agreements in support of such financing. If and when it receives such written orders, the Company will explore various financing alternatives including private placements, public offerings and debt financings. The final details pertaining to such financing will depend upon prevailing market and economic conditions. However, there are no guarantees that the Company will be able to obtain such funding under reasonable terms, if at all.

EKO-FLOR ms-1: In 2010, the Company also expects, as a result of the Sea Box, Inc. purchase order, to receive equivalent orders to those received in 2009 for EKO-FLOR ms-1, a variation of the cs-4 flooring panel designed for use as load bearing shelving panels in special application military containers. The Company is currently producing the ms-1 panels at a sub-contracted facility in Quebec, Canada. It is the belief of management that Conforce will receive these orders, however, there is no assurance that it will secure such orders or generate any sales revenue at all.

The Company intends to apply for listing on the OTC Bulletin Board at such time as its Forms 10 and 211 reach the no-comment stage by the appropriate regulatory agencies, however, there is no guarantee that the Company's application for listing will be accepted.



The Company intends to raise, either through an Initial Public Offering of its securities or a Private Placement, the capital required for the establishment and operation of a multi-line EKO-FLOR manufacturing facility in Asia, which is currently estimated to be between $8 million and $10 million. The Company will make the decision in terms of its production expansion into Asia at such time as the trials of EKO-FLOR cs-4 are completed (currently projected to be completed in or around December 2009) and if it has received a firm commitment(s) from shipping line(s) and/or leasing companies for the production of EKO-FLOR cs-4.

The Company does not currently have any outstanding lines of credit or letters of credit. Conforce does have a business development loan through a government sponsored program in the amount of CDN $250,000 (USD $218,766)-payable over 10 years (due January 2019) bearing a rate of interest of prime + 3%. The agreement calls for monthly payments of $2,303 including principal and interest. The balance outstanding as at March 31, 2009 was $195,713. The current portion of this balance as at March 31, 2009 was $17,785 and the long term portion was $177,928 as described in Note 9 of the financial Statements. The loan was made through the small business development loan program (SBL) and is limited in its use to the purchases of equipment. Funds from the loan have been used to finance a portion of the production equipment in the Company's new development and production facility in Concord, Ontario and such equipment has been used as collateral for the loan. Under the rules governing SBL's, in the event the Company defaults on the loan, the Company is only responsible for repayment of an amount equal to 25% of the total funds advanced.

The Company does not have any agreements in place to fund the operations for the next 12 months. Conforce is attempting to secure additional funding in the amount of approximately $500,000, by way of non-interest bearing, non-callable (for 10 years) loans from certain minority founding shareholders. Such loans will be made to the Company from the proceeds of private transactions with accredited investors involving the sale of Conforce common stock. To date, the shareholder loans have been oral. At present, the Company intends to enter into additional oral agreements pertaining to future shareholder loans. Proceeds from these transactions will be used to fund any and all costs associated with the production of trial product. It is important to note that should the outcome of trials be favorable, the Company will be required to raise significant additional capital for purposes of establishing an EKO-FLOR manufacturing facility in China. Such capital requirement is currently estimated to be $ 8 million to $10 million. The Company had received loans, pursuant to oral agreements, from Marino Kulas, CEO and related parties, equal to $567,633 as at March 31, 2009.

Investing activities for the year ended March 31, 2009 included purchases of equipment such as a pultrusion line, two dies and ancillary equipment for the Company's production and development centre totaling $623,595. Financing for the purchase of this equipment was provided by related party loans payable , cash receipts from terminal operations as well as the Small Business Development bank loan.




The Company had gross revenues of $1,899,751 with a net loss of $378,230 for the year ended March 31, 2009, compared with sales of $2,364,335 with a net loss of $147,178 for the year ended March 31, 2008. The decrease in sales was due primarily to the downturn in the global economy and consequent decreased demand for transportation services and container operations. Revenues for the Terminal division for the year ended March 31, 2009 decreased by 34.3%. The decrease in revenues from the Terminal division was partially offset by $346,211 in revenue generated from the EKO-FLOR division.

During the year ended March 31, 2008, the Container Terminal division was the only revenue generating operation of the Company; however, during the year ended March 31, 2009, the Company reported revenues from the sale of EKO-FLOR ms-1 military panels beginning in January 2009. Revenues of EKO-FLOR ms-1 for the period January 1, 2009 to March 31, 2009 were $346,211.

The results from operations of the Container Terminal division are as follows:

For the year ended March 31, 2009 the Company had revenues of $1,553,540 with net income of $12,897, compared with revenues of $2,364,335 with net income of $101,882 for the year ended March 31, 2008.

The results from operations of the EKO-FLOR division are as follows:

For the year ended March 31, 2009 the Company had revenues of $346,211 with net loss of $391,127, compared with no income and a net loss of $249,060 for the year ended March 31, 2008.

The results of consolidated operations are as follows:

For the year ended March 31, 2009, the Company had consolidated revenues of $1,899,751 with a net loss of $378,230 compared with consolidated revenues of $2,364,335 and a net loss of $147,178 for the year ended March 31, 2008.

The Company had cost of revenues of $1,197,954 for the year ended March 31, 2009, compared with cost of revenues of $1,274,111 for the year ended March 31, 2008, a decrease in the cost of revenues from the prior period of $76,157. The decrease in cost of revenues was attributable to a decrease in transportation costs within the Terminal division, offset with the increase in cost of products from the manufacturing of the EKO-FLOR product during the year

Cost of revenues as a percentage of sales was 63.1% for the year ended March 31, 2009, compared with 53.9% for the year ended March 31, 2008. This increase is almost entirely attributable to the manufacturing costs associated with the EKO-FLOR products that required 100% outsourcing. Being the first manufacturing run of this product the cost of manufacturing will improve with future orders.

The Company had gross profit of $701,797 for the year ended March 31, 2009, compared with gross profit of $1,090,224 for the year ended March 31, 2008, a significant decrease in gross profit of $388,427 or 35% over the prior period. The decrease was due to the introduction of the EKO-FLOR product as mentioned above.

The Company had combined administrative $820,805, research and development $44,094, depreciation $147,165 and other expenses of $12,408 for a total of $1,024,472 for the year ended March 31, 2009, compared to combined administrative $758,316, research and development $178,125, depreciation $29,673 and other expenses of $71,620 for a total of $1,037,734 for the year ended March 31, 2008, a decrease in expenses of $13,262 or 1% from the prior period. Administration costs increased with the additional focus and consequent allocation of resources to the EKO-FLOR product. The research and development costs on the EKO-FLOR product decreased as a result of the finalization of the development and re-focus on marketing efforts during the year.

The Company's research and development costs include the creation of architectural drawings as they relate to panel specifications, the creation of dies, the manufacturing of test panels, the creation of specific panel testing equipment, costs relating to independent certification testing, consulting costs associated with utilizing process experts and engineers and costs associated with the setup of the research and production center. The Company anticipates that research and development costs will increase in fiscal 2010 as a result of final preparations for the production of trial product, as well as costs associated with the development of the highway trailer product.

The Company further anticipates that ongoing research and development costs will stabilize after fiscal 2010 and be maintained at a rate proportional to sales.

The Minority Interest in consolidated subsidiaries was $12,855 for the year ended March 31, 2009 compared with $101,475 for the year ended March 31, 2008. This amount portrays the 49.9% minority interest in Conforce 1 Container Terminals, Inc., and decreased due to the decline in container terminal business during the year.


The Company has not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future affect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.



The Company had Accounts payable of $400,016 at March 31, 2009 compared to $296,897 at March 31, 2008, an increase of $103,119.

The Company had related party loans payable to Marino Kulas, CEO, of $527,957 and a related party loan of $39,676 for a total of $567,633 as at March 31, 2009 compared with related party loans payable to the CEO of $426,347 as at March 31, 2008.

The amounts due to shareholder and amounts due to related party are unsecured, non-interest bearing with no specific terms of repayment. The amounts due to related parties arise from cash advances the shareholder and other related parties made to the Company for the purchase of machinery and equipment, primarily relating to the development of the composite flooring product and to fund ongoing operating activities.

The loans have been advanced at different increments depending on the needs of the Company and repayment is not expected to occur until 2012. Given the long term nature of these loans, each time an amount is advanced by the shareholder or related party, a fair value calculation has been recorded with the discount on the loan being charged to contributed surplus. The discount to fair value assumes repayment will be made on March 31, 2012 with imputed interest charged at rates between 6.5% and 10%. Imputed interest was $30,010 (2008: $24,599)

New Message
Please login to post a reply