ITEM 1. BUSINESS - OVERVIEW OF OUR COMPANY
Service Team Inc. (the “Company”) was incorporated pursuant to the laws of the State of Nevada on June 6, 2011. The Company was organized to comply with the warranty obligations of electronic devices manufactured by companies outside of the United States. The business proved to be unprofitable and the Company discontinued its warranty and repair operations. On June 5, 2013, Service Team Inc. acquired 100 percent of the outstanding stock of Trade Leasing, Inc. for 4,000,000 shares of its common stock. Trade Leasing, Inc., a California corporation, was incorporated on November 1, 2011, and commenced business January 1, 2013. Trade Leasing, Inc. is principally involved in the manufacturing, maintenance and repair of truck bodies. Service Team Inc. and Trade Leasing Inc. have not been involved in a bankruptcy, receivership or any similar proceeding. The acquisition of Trade Leasing Inc. is a major change in the operations of Service Team Inc. Trade Leasing is operated as a separate division of Service Team Inc.
Trade Leasing Division. This division is involved in the manufacture and repair of truck bodies. The company manufactures truck bodies that are attached to a truck chassis which consists of an engine, drive train, a frame with wheels, and in some cases, a cab. The truck chassis is manufactured by third parties that are major automotive or truck companies. These companies do not typically build specialized truck bodies. The company is also involved in other products used by the trucking industry. The company operates a complete manufacturing and repair facility in South Gate, California. The facility manufactures both custom and standard production truck bodies in approximately 70 different models designed to fill the specialized demands of the user. The vans are available for hauling dry freight or refrigerated freight. The refrigerated vans are built with two to four inches of foam insulating that is sprayed in place for hauling refrigerated products such as meats, vegetables, flowers and similar products. The Company installs different types of cooling systems in the trucks. This varies from motor driven units installed outside the van body or refrigeration units driven off the engine of the truck. Some refrigerated trucks use a system called “cold plate” where a large metal plate is cooled by power while the truck is parked. The power is then unplugged and the truck will stay cool for many hours. The Company’s customers are auto dealers and users of trucks; such as dairies, food distributors and local delivery. The company has approximately 400 customers. One customer, South Bay Ford, represented more than 10% of sales in the last 12 months. The company is not dependent on a few major customers. Trade Leasing purchases raw materials from approximately 25 suppliers. There are several hundred similar suppliers of comparable materials in the local area. Trade Leasing Inc. purchases refrigeration units from Thermoking Corporation, a division of United Technologies and Carrier Corporation, a division of Ingersol Rand Corporation. The two companies represent more than 80% of the refrigeration unit market. There are several other manufactures of refrigeration units that represent a small part of the market. Trade Leasing Inc. employs 31 factory workers and four management personnel. The management personnel make all of the sales and manage the factory. The company has all of the government licenses necessary to conduct its business. These include nine different city, county and state licenses covering vehicle transportation, air quality, hazard waste (Paint), land or building use, and sales tax.
Leasing Division
Service Team Inc. is in the process of organizing a division to finance the leasing of vehicles. The Company has many customers of its manufacturing division that are potential customers of a leasing operation.
Acquisition of Trade Leasing, Inc.
On June 5, 2013, Service Team Inc. completed a Stock Exchange Agreement with Hallmark Holdings Inc. Pursuant to the Stock Exchange Agreement, Service Team Inc. acquired 100 percent of the shares of Trade Leasing, Inc., a California corporation. This transaction gave Service Team Inc. ownership of the business operations which included furniture, manufacturing equipment, vehicles and other assets in exchange for 4,000,000 common shares of Service Team Inc.
This acquisition was accounted for as an acquisition by entities under common control due to the fact that both Service Team, Inc. and Trade Leasing, Inc. were and continue to be commonly held by Hallmark Venture Group, Inc., and its affiliates. The ownership structure of the Company did not change as a result nor did any of its officers change positions.
As the assets acquired were from an entity under common control, the assets from Trade Leasing, Inc. have been combined at historical cost for all periods presented, with no step-up in basis. See Note 3 for further information.
ITEM 1A.
ITEM 1A. RISK FACTORS
As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information..
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 2.
ITEM 2. PROPERTIES
Service Team Inc. leases a manufacturing facility at 10633 Ruchti Road, South Gate, California 90280 on a year-to-year basis for $7,000 per month. The location consists of three acres of land with two buildings-a fabrication building of 6,000 square feet and a final assembly building of 12,000 square feet. The final assembly building includes a large spray booth capable of accommodating large trucks and office space for four offices.
Our principal executive offices are located at 18482 Park Villa Place, Villa Park, California 92861.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock was approved for listing on the OTC Bulletin Board under the symbol SVTE on October 9, 2012. As of November 21, 2014, there were 85 active shareholders and the total shares outstanding of 12,485,647. The transfer agent for our common stock is Holladay Stock Transfer, Inc. 2939 N. 67th Place Scottsdale, Arizona 85251.
The following table shows the reported high and low closing bid quotations per share for our common stock based on information provided by the OTC Bulletin Board for the periods indicated. Quotations reflect inter-dealer prices, without markup, markdown or commissions and may not represent actual transactions.
Trades in our common stock may be subject to Rule 15g-9 under the Exchange Act, which imposes requirements on broker-dealers who sell securities subject to the rule to persons other than established customers and accredited investors. For transactions covered by the rule, broker-dealers must make a special suitability determination for purchasers of the securities and receive the purchaser’s written agreement to the transaction before the sale.
Our shares are subject to rules applicable to “penny stock” which pertain to any equity security with a market price less than $5.00 per share or an exercise price of less than $5.00 per share. Penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. A broker-dealer must also provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer, and sales person in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in our shares.
Dividend Policy
We have not paid or declared any cash dividends on our common stock in the past and do not foresee doing so in the foreseeable future. We intend to retain any future earnings for the operation and expansion of our business. Any decision as to future payment of dividends will depend on the available earnings, the capital requirements of our Company, our general financial condition and other factors deemed pertinent by our Board of Directors.
Sales of Unregistered Securities
From the inception (June 6, 2011) to August 31, 2011, the Company sold 6,000,000 shares to the organizers of the Company for $29,027. In the fiscal year ended August 31, 2012 the company sold 1,707,500 shares to various individuals for $168,806. In the fiscal year ended August 31, 2013 the Company then sold 359,814 shares to various individuals for $171,576. In the fiscal year ended August 31, 2014 the Company then sold 118,333 shares to various individuals for $34,750.
Securities authorized for issuance under equity compensation plans
The Company has not reserved any securities for issuance under equity compensation plans.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
Service Team Inc. (the “Company”) was incorporated pursuant to the laws of the State of Nevada on June 6, 2011. The Company was organized to comply with the warranty obligations of electronic devices manufactured by companies outside of the United States. The business proved to be unprofitable and the Company discontinued its warranty and repair operations. On June 5, 2013, Service Team Inc. acquired 100 percent of the outstanding stock of Trade Leasing, Inc. for 4,000,000 shares of its common stock. Trade Leasing, Inc., a California corporation, was incorporated on November 1, 2011, and commenced business January 1, 2013. Trade Leasing, Inc. is principally involved in the manufacturing, maintenance and repair of truck bodies. Service Team Inc. and Trade Leasing Inc. have not been involved in a bankruptcy, receivership or any similar proceeding. The acquisition of Trade Leasing Inc. is a major change in the operations of Service Team Inc.
Results of Operations
The Company had sales of $1,334,127 for the fiscal year ended August 31, 2014, compared to $1,017,446 during the fiscal year ended August 31, 2013, an increase of $316,681 or 31% due to the first 12 month period of operations for the Company. All of the sales are generated by Trade Leasing, Inc. The Service Products Division has no sales.
Cost of sales increased $177,519, from $919,185 to $1,096,704 from 2013 to 2014 which was due to the additional months of operations during fiscal year 2014.
Gross margin increased by $128,531 from $108,892 to $237,423 from 2013 to 2014 primarily due to the additional months of operation during 2014.
Operating and other expenses decreased by $685,399 from $828,157 to $142,758 from 2013 to 2014 primarily due to a lack of stock based compensation expense during the 2014 fiscal year.
The above changes resulted in net income of $74,356 during the 2014 fiscal year compared to a net loss of $753,579 during the 2013 fiscal year, an increase in profitability of $827,935 primarily driven by lower stock based compensation during the 2014 fiscal year and as well as fewer operating expenses from the Service Products Division in 2014 compared to 2013.
Liquidity and Capital Resources
As of August 31, 2014, we had assets of $212,124 including current assets of $193,483. We have related party promissory notes of $27,158, accrued payroll costs of $56,403, accrued interest of $3,987, contingent liabilities of $54,100, and accounts payable of $172,117. Our major shareholder, Hallmark Venture Group, Inc., is owed $27,158. The amount owed Hallmark Venture Group, Inc. is included in the notes payable. Hallmark Venture Group, Inc. is prepared to advance us additional funds as needed. There is no firm payback date. It is to be repaid when we have funds available. Accrued expenses are for work performed by employees during the organizational stage of the Company. There is no firm date which these are to be paid. It is to be repaid when we have funds available. We have raised $225,026 from the sale of our common stock during the fiscal years ended August 31, 2014 and 2013 years combined. We believe our ability to achieve commercial success and continued growth will be dependent upon our continued access to capital either through additional sale of our equity or cash generated from operations. We will seek to obtain additional working capital through the sale of our securities. We will attempt to obtain additional capital through bank lines of credit; however, we have no agreements or understandings with third parties at this time. Management believes that the acquisition of Trade Leasing, Inc. adds sales of more than one million dollars per year and a projected profit of more than one hundred thousand dollars.
The acquisition of Trade Leasing, Inc. adds sales of approximately $1,300,000 per year and a projected profit of more than $100,000.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our consolidated financial statements for the fiscal years ended August 31, 2014 and 2013 are attached hereto.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Service Team Inc.
We have audited the accompanying consolidated balance sheets of Service Team Inc. as of August 31, 2014 and 2013, and the related consolidated statements of operations, changes in shareholders' 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 consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated 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 audits 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Service Team Inc. as of August 31, 2014 and 2013, and the results of its operations, changes in shareholders' deficit and cash flows for the period described above in conformity with accounting principles generally accepted in the United States of America.
/s/ M&K CPAS, PLLC
www.mkacpas.com
Houston, Texas
December 1, 2014
SERVICE TEAM INC
CONSOLIDATED BALANCE SHEETS
AS OF AUGUST 31, 2014 AND AUGUST 31, 2013
The accompanying notes are an integral part of these consolidated financial statements.
SERVICE TEAM INC.
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE FISCAL
YEARS ENDING AUGUST 31, 2014 AND 2013
The accompanying notes are an integral part of these financial statements
SERVICE TEAM INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS DEFICIT FOR THE YEARS
ENDED AUGUST 31, 2014 AND 2013
The accompanying notes are an integral part of these consolidated financial statements.
SERVICE TEAM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED AUGUST 31, 2014 AND 2013
The accompanying notes are an integral part of these consolidated financial statements.
SERVICE TEAM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2014 AND 2013
NOTE 1 - ORGANIZATION
Organization
Service Team Inc. (the “Company”) was incorporated pursuant to the laws of the State of Nevada on June 6, 2011. The Company was organized to comply with the warranty obligations of electronic devices manufactured by companies outside of the United States. The business proved to be unprofitable and the Company discontinued its warranty and repair operations. On June 5, 2013, Service Team Inc. acquired 100 percent of the outstanding stock of Trade Leasing, Inc. for 4,000,000 shares of its common stock. Trade Leasing, Inc., a California corporation, was incorporated on November 1, 2011, and commenced business January 1, 2013. Trade Leasing, Inc. is principally involved in the manufacturing, maintenance and repair of truck bodies. Service Team Inc. and Trade Leasing Inc. have not been involved in a bankruptcy, receivership or any similar proceeding. The acquisition of Trade Leasing Inc. is a major change in the operations of Service Team Inc. Trade Leasing is operated as a separate division of Service Team Inc.
The Company has established a fiscal year end of August 31.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements presented in this report are the combined financial reports of Trade Leasing, Inc. and Service Team Inc.
The Company maintains its accounting records on an accrual basis in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).
The consolidated financial statements present the Balance Sheet, Statements of Operations, Shareholders’ Deficit and Cash Flows of the Company. These consolidated financial statements are presented in United States dollars. The accompanying audited, consolidated financial statements have been prepared in accordance with the instructions to Form 10-K. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Service Team Inc. and Trade Leasing, Inc. both of which are under common control and ownership. The condensed consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. All significant inter-company transactions have been eliminated in the preparation of these financial statements.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash and Equivalents
Cash and equivalents include investments with initial maturities of three months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. There were no cash equivalents at August 31, 2014 or August 31, 2013.
Concentration of Credit Risk
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, are cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of FDIC insurance limits.
Accounts Receivable
All accounts receivable are due thirty (30) days from the date billed. If the funds are not received within thirty (30) days the customer is contacted to arrange payment. The Company uses the allowance method to account for uncollectable accounts receivable. All accounts were considered collectable at period end and no allowance for bad debts was considered necessary. The allowance for doubtful accounts as of August 31, 2014 and August 31, 2013 was $2,802 and $5,961, respectively.
Accounts Receivable and Revenue Concentrations
The Company’s wholly owned subsidiary, Trade Leasing, Inc., has more than 400 customers. One customer South Bay Ford represents about 20% and 12% of the total sales and 36% and 36% of total receivables during and as of the years ended August 31, 2014 and 2013, respectively.
Inventory
The Company does not own inventory; therefore, there was no inventory on hand at August 31, 2014.
Property and Equipment
Equipment, vehicles and furniture, which are recorded at cost, consist primarily of fabrication equipment and is depreciated using the straight-line method over the estimated useful lives of the related assets (generally fifteen years or less). Costs incurred for maintenance and repairs are expensed as incurred and expenditures for major replacements and improvements are capitalized and depreciated over their estimated remaining useful lives. There was depreciation expense of $303 and $0 during the fiscal years ended August 31, 2014 or August 31, 2013.
Net property and equipment were as follows at August 31, 2014 and August 31, 2013:
Lease Commitments
Service Team Inc. leases a manufacturing facility at 10633 Ruchti Road, South Gate, California 90280 on a year-to-year basis for $7,000 per month. The location consists of three acres of land with two buildings a fabrication building of 6,000 square feet and a final assembly building of 12,000 square feet. The final assembly building includes a large spray booth capable of accommodating large trucks and office space for four offices.
Our principal executive offices are located in 600 square feet in a building at 18482 Park Villa Place, Villa Park, California 92861. The space is furnished by Hallmark Venture Group, Inc., a related party, at no charge. As a result of this contribution of office space, $0 and $6,000 of imputed rent expense was recorded for the fiscal years ended August 31, 2014 and 2013, respectively.
Beneficial Conversion Features
From time to time, the Company may issue convertible notes that may contain an imbedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.
Fair Value of Financial Instruments
The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820 on June 6, 2011. Under this FASB, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.
The Company has various financial instruments that must be measured under the new fair value standard including: cash, convertible notes payable, accrued expenses, promissory notes payable, accounts receivable and accounts payable. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The fair value of the Company’s cash is based on quoted prices and therefore classified as Level 1.
Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.
Cash, accounts receivable, accounts payable, promissory notes and accrued expenses reported on the balance sheet are estimated by management to approximate fair market value due to their short term nature.
The following table presents assets and liabilities that were measured and recognized at fair value as of August 31, 2014 on a recurring basis:
The following table presents assets and liabilities that were measured and recognized at fair value as of August 31, 2013 on a recurring basis:
Income Taxes
In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that some portion 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 during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on the level of historical operating results and the uncertainty of the economic conditions, the Company has recorded a full valuation allowance against its deferred tax assets at August 31, 2014 and 2013 where it cannot conclude that it is more likely than not that those assets will be realized.
Revenue Recognition
Trade Leasing Division
The Trade Leasing Division receives orders from customers to build or repair truck bodies. The company builds the requested product. At the completion of the product the truck is delivered to the customer. If the customer accepts the product Trade Leasing Inc. issues an invoice to the customer for the job. The invoice is entered into our accounting system and is recognized as revenue at that time.
In the Trade Leasing Division we use the completed contract method for truck bodies built, which typically have construction periods of 15 days or less. Contracts are considered complete when title has passed, the customer has accepted the product and we do not retain risks or rewards of ownership of the truck bodies. Losses are accrued if manufacturing costs are expected to exceed manufacturing contract revenue. Manufacturing expenses are primarily composed of aluminum cost, which is the largest component of our raw materials cost and the cost of labor.
As described above, in accordance with the requirements of ASC 605-10-599, the Company recognizes revenue when (1) persuasive evidence of an arrangement exists (contracts); (2) delivery has occurred; (3) the seller’s price is fixed or determinable (per the customer’s contract); and (4) collectability is reasonably assured (based upon our credit policy).
Share Based Expenses
The Company accounts for the issuance of equity instruments to acquire goods and/or services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more readily determinable. The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of standards issued by the FASB. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.
Stock Based Compensation
In December of 2004, the FASB issued a standard which applies to transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity may incur for goods or services that are based on the fair value of those equity instruments. For any unvested portion of previously issued and outstanding awards, compensation expense is required to be recorded based on the previously disclosed methodology and amounts. Prior periods presented are not required to be restated. We adopted the standard as of inception. The Company has not issued any stock options to its Board of Directors and officers as compensation for their services. If options are granted, they will be accounted for at a fair value as required by the FASB ASC 718.
Net Income (Loss) Per Share
The Company adopted the standard issued by the FASB, which requires presentation of basic earnings or loss per share and diluted earnings or loss per share. Basic income (loss) per share (“Basic EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share (“Diluted EPS”) are similarly calculated using the treasury stock method except that the denominator is increased to reflect the potential dilution that would occur if dilutive securities at the end of the applicable period were exercised. As of August 31, 2014 and 2013, because the Company does not have any potentially dilutive securities, there was no difference between the basic and diluted net income (loss) per share.
Recent Accounting Pronouncements
In June 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-12, Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The new guidance requires that share-based compensation that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards and that could be achieved after an employee completes the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation costs should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a material impact on our financial position or results of operations.
In June 2014, the FASB issued ASU No. 2014-10: Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements of development stage entities. The amendments in this update remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting by eliminating the cost and complexity associated with providing that information. The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public companies, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The adoption of ASU 2014-10 is not expected to have a material impact on our financial position or results of operations.
In July 2013, the FASB issued ASU No. 2013-11: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The new guidance requires that unrecognized tax benefits be presented on a net basis with the deferred tax assets for such carryforwards. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2013. We do not expect the adoption of the new provisions to have a material impact on our financial condition or results of operations.
In February 2013, FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:
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Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and
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Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.
The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 did not have a material impact on our financial position or results of operations.
In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 did not have a material impact on our financial position or results of operations.
NOTE 3 - ACQUISITIONS
Stock Exchange Agreement - Trade Leasing, Inc.
On June 5, 2013, Service Team Inc. completed a Stock Exchange Agreement with Hallmark Venture Group, Inc. Pursuant to the Stock Exchange Agreement, Service Team Inc. acquired 100 percent of the shares of Trade Leasing, Inc., a California corporation. This transaction gave Service Team Inc. ownership of the business operations which included furniture, manufacturing equipment, vehicles and other assets in exchange for 4,000,000 common shares of Service Team Inc.
The company manufactures truck bodies that are attached to a truck chassis which consists of an engine, drive train, a frame with wheels, and in some cases, a cab. The truck chassis is manufactured by third parties that are major automotive or truck companies. These companies do not typically build specialized truck bodies. The company is also involved in other products used by the trucking industry. The company operates a complete manufacturing and repair facility in South Gate, California. The facility manufactures both custom and standard production truck bodies in approximately 70 different models designed to fill the specialized demands of the user. The vans are available for hauling dry freight or refrigerated freight. The refrigerated vans are built with two to four inches of foam insulating that is sprayed in place for hauling refrigerated products such as meats, vegetables, flowers and similar products. The Company installs different types of cooling systems in the trucks. This varies from motor driven units installed outside the van body or refrigeration units driven off the engine of the truck. Some refrigerated trucks use a system called “cold plate” where a large metal plate is cooled by power while the truck is parked. The power is then unplugged and the truck will stay cool for many hours. The Company’s customers are auto dealers and users of trucks; such as dairies, food distributors and local delivery.
This acquisition was accounted for as an acquisition by entities under common control due to the fact that both Service Team, Inc. and Trade Leasing, Inc. were and continue to be commonly held by Hallmark Venture Group, Inc., and its affiliates. The ownership structure of the Company did not change as a result nor did any of its officers change positions.
As the assets acquired were from an entity under common control, the assets from Trade Leasing, Inc. have been combined at historical cost for all periods presented, with no step-up in basis. See below for the recognition entry for the stock issued for the acquisition:
NOTE 4 - CAPITAL STOCK
The Company’s authorized capital is 74,000,000 common shares with a par value of $0.001 per share and 100,000 preferred shares with a par value of $0.001 per share.
During the fiscal year ended August 31, 2013 the company sold 359,814 shares to various individuals for cash of $171,576. An additional cash amount of $28,700 was received from the stock receivable at August 31, 2012.
On April 16, 2013, the Company granted 300,000 restricted shares to Newport Capital Consultants for consulting services to be performed over the two year period beginning on that date. As there were no claw-back provisions on the shares, the Company expensed fully the fair value of the shares on the Agreement date valued at $195,000 based upon the closing market price on the date of grant. In addition, 300,000 trading shares were contributed by U.S. Affiliated, Inc. which was accounted for as a capital contribution of shares which were transferred to Newport Capital Consultants as additional stock compensation expense of $195,000 based upon the closing market price on the date of grant.
On May 31, 2013, the Company issued 4,000,000 shares to Hallmark Venture Group, Inc. as consideration its interest in the 25,000 shares of Trade Leasing, Inc., on June 5, 2013; the shares were booked at par value issuance cost, prepaid deposits of $9,000 were recognized, with an increase to additional paid in capital of $5,000 due to treatment requirements for stock granted for an acquisition of an entity under common control. The transaction was accounted for as an acquisition of entity under common control which requires booking the transaction at historical cost.
During the fiscal year ended August 31, 2013, $6,000 of rent expense was imputed from a lease note with related party Hallmark Venture Group, Inc. based upon the calculated fair value of the space provided at no cost to the Company.
During the fiscal year ended August 31, 2013, $28,000 of capital was contributed by Hallmark Venture Group, Inc., in payment of lease expenses for Trade Leasing, Inc.
During the six months ended February 28, 2014 the Company sold 63,333 shares for $25,000 of cash from an unrelated investor.
During the three months ended May 31, 2014 the Company sold 55,000 shares for $9,750 of cash from three unrelated investors.
During the twelve months ended August 31, 2014, $10,716 of interest expense was imputed from a promissory note with related party Hallmark Venture Group, Inc. based upon the average balance during the period at an interest rate of 10 percent.
No preferred shares have been issued.
As of August 31, 2014 and August 31, 2013, the Company has not granted any stock options.
Stock Based Compensation
We have accounted for stock based compensation under the provisions of FASB Accounting Standards codification (ASC) 718-10-55. (Prior authoritative literature: FASB Statement 123 (R), Share-based payment.) This statement requires us to record any expense associated with the fair value of stock based compensation. Determining fair value requires input of highly subjective assumptions, including the expected price volatility. Changes in these assumptions can materially affect the fair value estimate.
NOTE 5 - DEBT TRANSACTIONS
Convertible Note Payable
On June 21, 2013, for value received, the Company gave a convertible promissory note to Howard Nunn, Jr., in the original principal amount of $23,003 (the “Nunn Note”). The Nunn Note has a maturity date of September 30, 2013, and principle and accrued interest at the rate of twelve percent (12%). The Note holder has an option to convert the Note into Common Stock at the price of $0.50 per share. During 2014, the Company borrowed an additional $9,155 from Howard Nunn under the same note and repaid $5,000.
On August 10, 2014, Hallmark Venture Group, Inc. acquired the Note, with principal of $27,158 and accrued interest of $3,987, to Howard Nunn, Jr. for 80,000 shares of Service Team Inc. Common Stock owned by Hallmark Venture Group, Inc. The Note was then canceled and the amounts due on the Note were added to the amounts due Hallmark Venture Group, Inc. The option to convert to shares was voided.
The Company evaluated the Nunn Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.75 below the market price on June 21, 2013 of $1.25 provided a value of $23,003; which was recorded as an increase to additional paid in capital and a reduction of debt due to the discount. The discount was amortized accordingly to the effective interest method over the term of the convertible note in the amounts of $6,833 and $16,170 for the fiscal years ended August 31, 2014 and 2013. As of August 31, 2013, the remaining debt discount balance was $6,833. Accrued interest was $0 and $537 as of August 31, 2014 and 2013, respectively.
Promissory Note - Related Party
On August 25, 2011, the Company entered into a loan agreement with Hallmark Venture Group, Inc., with no maturity date or interest rate. During the fiscal years ended August 31, 2014 and August 31, 2013, the Company has received funds of $5,280 and $141,493, respectively, and repaid funds of $205,279 and $48,258, respectively. During the fiscal years ended August 31, 2014 and August 31, 2013, the Company has imputed interest at a reasonable rate of 10 percent totaling $10,716 and $15,338, respectively.
NOTE 6 - RELATED PARTY TRANSACTIONS
Promissory Note - Related Party
On August 25, 2011, the Company entered into a loan agreement with Hallmark Venture Group, Inc., with no maturity date or interest rate. During the fiscal years ended August 31, 2014 and August 31, 2013, the Company has received funds of $5,280 and $141,493, respectively, and repaid funds of $205,279 and $48,258, respectively. During the fiscal years ended August 31, 2014 and August 31, 2013, the Company has imputed interest at a reasonable rate of 10 percent totaling $10,716 and $15,338, respectively.
On August 10, 2014, Hallmark Venture Group, Inc. acquired the Note, with principal of $27,158 and accrued interest of $3,987, to Howard Nunn, Jr. for 80,000 shares of Service Team Inc. Common Stock owned by Hallmark Venture Group, Inc. The Note was then canceled and the amounts due on the Note were added to the amounts due Hallmark Venture Group, Inc. The option to convert to shares was voided.
Common Stock Transactions
On May 31, 2013, the Company issued 4,000,000 shares to Hallmark Venture Group, Inc. as consideration its interest in the 25,000 shares of Trade Leasing, Inc., on June 5, 2013; the shares were booked at par value issuance cost, prepaid deposits of $9,000 were recognized, with an increase to additional paid in capital of $5,000 due to treatment requirements for stock granted for an acquisition of an entity under common control. The transaction was accounted for as an acquisition of entity under common control which requires booking the transaction at historical cost.
During the fiscal year ended August 31, 2013, $28,000 of capital was contributed by Hallmark Venture Group, Inc., in payment of lease expenses for Trade Leasing, Inc.
Lease Commitments
Our principal executive offices are located in 600 square feet in a building at 18482 Park Villa Place, Villa Park, California 92861. The space is furnished by Hallmark Venture Group, Inc., a related party, at no charge. As a result of this contribution of office space, $0 and $6,000 of imputed rent expense was recorded for the fiscal years ended August 31, 2014 and 2013, respectively.
NOTE 7 - INCOME TAXES
The Company accounts for income taxes under standards issued by the FASB. Under those standards, deferred tax assets and liabilities are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be realized through future operations.
No provision for federal income taxes has been recorded due to the net operating loss carry forwards totaling approximately $548,338 as of August 31, 2014 that will be offset against future taxable income. The available net operating loss carry forwards of approximately $548,338 will expire in various years through 2032. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the future tax loss carry forwards.
The actual income tax provisions differ from the expected amounts calculated by applying the statutory income tax rate to the Company’s loss before income taxes. The components of these differences are as follows at August 31, 2014 and August 31, 2013:
NOTE 8 - COMMITMENTS AND CONTINGENCIES
None
Operating Leases
Service Team Inc. leases a manufacturing facility at 10633 Ruchti Road, South Gate, California 90280 on a year-to-year basis for $7,000 per month. The location consists of three acres of land with two buildings-a fabrication building of 6,000 square feet and a final assembly building of 12,000 square feet. The final assembly building includes a large spray booth capable of accommodating large trucks and office space for four offices. The minimum lease payments required over the next 12 months is $84,000.
Our principal executive offices are located in 600 square feet in a building at 18482 Park Villa Place, Villa Park, California 92861. The space is furnished by Hallmark Venture Group, Inc., a related party, at no charge. As a result of this contribution of office space, $0 and $6,000 of imputed rent expense was recorded for the fiscal years ended August 31, 2014 and 2013, respectively.
NOTE 9 - SEGMENT REPORTING
Our operations are managed through two operating segments, as shown below. We disclose the results of each of our operating segments in accordance with ASC 280, Segment Reporting. Each of the operating segments is managed under a common structure chaired by our Chief Executive Officer and discrete financial information for both of the segments is available. Our Chief Executive Officer uses the operating results of each of the two operating segments for performance evaluation and resource allocation and, as such, is the chief operating decision maker. The activities of each of our segments from which they earn revenues and incur expenses are described below:
-
The Trade Leasing segment is involved in the manufacture and repair of truck bodies.
-
The Service Products segment specializes in electronics service, repair and sales.
Summarized financial information concerning reportable segments is shown in the following table for the fiscal years ended:
NOTE 10 - SUBSEQUENT EVENTS
There were no subsequent events through the date that the financial statements were issued.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure.
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, our management, with the participation of our president (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer) evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being August 31, 2014.
Based on this evaluation, these officers concluded that, as of August 31, 2014, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission. The conclusion that our disclosure controls and procedures were not effective was due to the presence of material weaknesses in internal control over financial reporting as identified below under the heading “Management’s Report on Internal Control over Financial Reporting.” Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, an issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s board of directors, management and other personnel, 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 and includes those policies and procedures that:
(1)
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; and
(2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer.
Under the supervision of our president, being our principal executive officer, and our chief financial officer, being our principal financial officer and principal accounting officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of August 31, 2014 using the criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, our management concluded our internal control over financial reporting was not effective as at August 31, 2014.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of our internal control over financial reporting as of August 31, 2014, we determined that there were control deficiencies that constituted material weaknesses which are indicative of many small companies with small staff, such as:
(1)
inadequate segregation of duties and effective risk assessment; and
(2)
insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both generally accepted accounting principles in the United States and guidelines of the Securities and Exchange Commission.
(3)
inadequate closing process to ensure all material misstatements are corrected in the financial statements. This was evidenced by the fact that there were audit adjustments and restatements of the financial statements.
These control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements could not have been prevented or detected on a timely basis. As a result of the material weaknesses described above, we concluded that we did not maintain effective internal control over financial reporting as of August 31, 2014, based on criteria established in Internal Control Integrated Framework issued by COSO. Our management is currently evaluating remediation plans for the above deficiencies. During the period covered by this annual report on Form 10-K, we have not been able to remediate the weaknesses described above. However, we plan to take steps to enhance and improve the design of our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Directors and Executive Officers
The following table sets forth the names of the members of the Company’s Board of Directors, Executive Officers, and the position with the Company held by each.
Name
Position
Carlos Arreola
President, Director, Chief Executive Officer
Robert L. Cashman
Vice President, Secretary, Director
Chief Financial Officer, and Chief Accounting Officer
Each director is elected to hold office for a one-year period or until the next annual meeting of shareholders and until his/her successor has been qualified and elected following the one-year of service. The Officers serve at the discretion of the Company’s directors. There are no understandings between any of the directors or officers of the Company or any other person pursuant to which any officer or director was or is to be selected as an officer or director.
Management’s Biographies
The following is a brief account of business experience for each director and executive officer of the Company.
CARLOS ARREOLA, PRESIDENT, DIRECTOR, CHIEF EXECUTIVE OFFICER
Mr. Carlos Arreola, President of Service Team Inc., brings a wealth of experience in the repair and maintenance of televisions and similar appliances. A brief summary of his work history is as follows:
1979-1986
RCA Corporation, worked as a repair technician on RCA’s televisions and similar small appliances.
1986-1992
General Electric Small Appliance Repair Division, RCA Corp Repair Division was acquired by General Electric. Mr. Arreola was employed by General Electric as a Supervisor in Small Appliance Repair and ultimately became the leader of the San Diego repair center.
1992-2008
General Electronics, Manager/Owner. Started a television repair business in San Diego, California.
2008-2011
Orbital Enterprises, Inc. Mr. Arreola sold his company, General Electronics, to Orbital Enterprises, Inc. and became manager of the Service and Repair Department of Orbital Enterprises, Inc.
2011-Present
Service Team Inc. Mr. Arreola became Chief Executive Officer of Service Team Inc., a new company organized by Mr. Arreola and Mr. Robert Cashman’s company, Hallmark Venture Group, Inc. Mr. Arreola is responsible for all aspects of the company.
Mr. Arreola has received extensive training in the repair and maintenance of electronic devices. He has received a degree from the Electronic Technical Institute and has specialized training in digital micro processing from the General Electric Institute and Colman College. Mr. Arreola also holds a theological degree from Christian Services Training Institution.
ROBERT L. CASHMAN-VICE PRESIDENT, SECRETARY, DIRECTOR, CHIEF FINANCIAL OFFICER, CHIEF ACCOUNTING OFFICER
Mr. Robert L. Cashman has a diverse background and brings a wealth of experience to the Service Team Inc. organization. A brief outline of his employment background is as follows:
1956-1960
Management Trainee/Field Representative, Aetna Casualty & Surety Company (first job out of college). Worked in various departments in the insurance company.
1960-1972
President/Owner, Security Plus Life Insurance Company. Organized Security Plus Life Insurance Company. The company wrote credit life and disability insurance on various types of loans.
1972-1982
ITT Corporation. Sold Security Plus Life Insurance Company to ITT and worked for ITT in their Acquisition Department involved in numerous acquisitions and public offerings.
1982-1992
President/Owner, Pacific Envelope Company. Manufacturer and printer of envelopes and publisher of weekly newspapers. Sold the company in 1992.
1992-2005
President, Owner, Charleston Group. Business consulting firm. Consulting on all types of business issues.
2005-Present
President, Hallmark Venture Group, Inc. Business consulting and venture capital firm.
Mr. Cashman has received some prestigious awards from the business community including membership in the Young Presidents Organization, and the INC Magazine Hall of Fame.
Mr. Cashman has also received numerous awards for his continued involvement in civic activities including a member of the Orange County Airport Commission (24 years), operators of the John Wayne Airport, serving on the Governing Board of the local and national YMCA (12 years), and a long term involvement with the Boy Scouts of America on both the local and national basis. He currently serves on the City of Anaheim’s Work Force Development Board, the city agency that allocates federal funding for educational programs in the city. Mr. Cashman served as an aviation officer (pilot) in the Korean War, owns and flies his own airplane and serves on the boards of several aviation organizations. He is a graduate of the University of California, Los Angeles (UCLA).
Legal Proceedings
In February, 2013, an employee of Service Team Inc. sold 50,000 shares of Service Team Inc. stock to a resident of Colorado. In the opinion of the state of Colorado, the employee was acting as an unlicensed broker and the stock had not been registered with the state of Colorado. This was the only sale of stock to a resident of Colorado. Service Team Inc. rescinded the sale and refunded the money to the purchaser. On July 31, 2014 the State of Colorado issued a Consent Cease and Desist Order concerning, Service Team, Inc., Mr. Cashman and Mr. Arreola to cease and desist from engaging in offering or selling unregistered securities in or from the State of Colorado or offering to sell or selling any security in or from the State of Colorado unless in compliance with or not in violation of any provision of the Colorado Securities Act.
CORPORATE GOVERNANCE
Director Independence
At the present time, we have two directors who are both “insiders.” Director, Carlos Arreola, also serves as President, CEO and Director, Robert L. Cashman, also serves as Vice President, Secretary, and Chief Financial Officer. We are currently recruiting outside directors who have some knowledge of our business. New directors are nominated by either of the present directors and voted on by the Board of Directors. Each director is elected to hold office for a one year period or until the next Annual Meeting of Shareholders and until his/her successor has been qualified and elected following the one year of service. We have not adopted a formal code of ethics as we only have two officers and directors and will adopt a code of ethics when we have appointed independent directors. The Officers serve at the discretion of the Company’s directors. There are no understandings between any of the directors or officers of the Company or any other person pursuant to which any officer or director was or is to be selected as an officer or director. Robert L. Cashman serves as Chairman and Secretary of the Board.
Carlos Arreola, the Company’s Chief Executive Officer, serves as a member of the Board.
The Board of Directors has held five Special Directors’ Meetings since the inception of the Company. All the directors attended all of the meetings. It is a policy of the Company that all Board Members attend all Board Meetings and the Annual Meeting.
Committees
At the present time, the Board of Directors serves as an Audit Committee, Nominating Committee and Compensation Committee. None of these committees have had any meetings since the inception of the Company. It is planned that as we add independent Board Members we will activate these committees.
NOMINATING COMMITTEE: Director Carlos Arreola and Director Robert L. Cashman participate in consideration of director nominees. At the present time Service Team is too small to warrant a Nominating Committee.
AUDIT COMMITTEE: Due to only having two directors, we do not have a separate Audit Committee or a Financial Expert as defined in Rule S-K, Rule 407. The Board of Directors serves as the Audit Committee.
COMPENSATION COMMITTEE: The Board of Directors acts as the Compensation Committee. The directors feel Service Team is too small to have a Compensation Committee at this time. As additional directors are appointed, a formal Compensation Committee will be established.
SHAREHOLDER COMMUNICATIONS: Shareholders may send written communications on the Company’s web site: www.serviceteam.com
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Service Team Inc. has made no provisions for paying cash or non-cash compensation to its officers and directors. No salaries are being paid at the present time to our officers and directors and none have been paid or owed from inception to date. At present we do not have a stock incentive plan in place. We have not granted any options to our officers and directors.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth the beneficial ownership of common stock of the Company by the officers and directors, as a group.
** Robert L. Cashman is a beneficial owner of Hallmark Venture Group, Inc.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Transactions with Related Persons.
On June 5, 2013, Service Team Inc. entered into an agreement with Hallmark Venture Group, Inc. to exchange 4,000,000 shares of Service Team Inc. Common stock for 25,000 shares (100 %) of the stock of Trade Leasing Inc.
Robert L. Cashman, Secretary and Chief Financial Officer of Service Team Inc., is the beneficial owner of Hallmark Venture Group Inc.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Audit Fees. The aggregate fees billed by M&K CPAS, PLLC for professional services rendered for the audit of our annual financial statements included in our Annual Report on Form 10-K and the reviews of the financial statements included in our quarterly reports on Form 10-Q totaled $16,500 for the fiscal year ended August 31, 2014, and $15,500 for the fiscal year ended August 31, 2013.
Audit-Related Fees. The aggregate fees billed by our independent accounting firm related to assurance and related services totaled $0 for the fiscal year ended August 31, 2014, and $0 for the fiscal year ended August 31, 2013.
Tax Fees. The aggregate fees billed by our independent accounting firm for professional services rendered for tax compliance, tax advice and tax planning totaled $0 for the fiscal years ended August 31, 2014 and 2013.
All Other Fees. The aggregate of all other fees for services provided by our independent accounting firm were $0 for the fiscal year ended August 31, 2014 and $0 for the fiscal year ended August 31, 2013.
PART IV
ITEM 15.
ITEM 15. EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES.
The following documents are filed as part of this report:
1. Consolidated Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
2. Consolidated Financial Statement Schedules
None.
3. Exhibits
3.1
Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s registration statement on Form S-1 filed on November 29, 2011).
3.2
Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s registration statement on Form S-1 filed on November 29, 2011).
10.3 Agreement Between Trade Leasing and Service Team Inc. filed on Form 8-K June 15, 2013
31.1
Certification of Principal Executive Officer pursuant to Rule 13a-14(a).*
31.2
Certification of Principal Financial Officer pursuant to Rule 13a-14(a).*
32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.*
32.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.*
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at August 31, 2014 and August 31, 2013, (ii) the Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended August 31, 2014 and 2013, (iii) the Consolidated Statements of Stockholders’ Equity for the years ended August 31, 2014 and 2013, (iv) Statements of Consolidated Cash Flows for the years ended August 31, 2014 and 2013 and (v) the notes to the Consolidated Financial Statements. *
* Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SERVICE TEAM INC
Date: December 1, 2014
By:
/s/ Carlos Arreola
President, Chief Executive Officer
Pursuant to the requirements of 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.
SIGNATURE
TITLE
DATE
/s/ Carlos Arreola
President, Chief Executive Officer
December 1, 2014
Carlos Arreola
(principal executive officer)
/s/ Robert L Cashman
Vice President, Secretary, Chief Financial Officer, Chief Accounting Officer
December 1, 2014
Robert L. Cashman