Entrex Carbon Market, Inc

What they do

Through UHF Logistics Limited, a Hong Kong corporation, the company controls Shenzhen Rui Pu Da Electronic Technology Company Ltd (RPD), a Chinese limited liability company that develops, produces and sells UHF RFID hardware including readers, antennas and tags. RPD integrates off-the-shelf RFID solutions under service contracts for clients in supply chain management, parkade management, cigarette industry logistics, pig breeding, and anti-theft and secured access applications in China. The company was a public shell from its 2005 incorporation until the August 10, 2010 closing of the share exchange, and it describes itself as still in an early execution stage with only small revenues.

Revenue drivers

• RFID hardware sales — RPD develops, produces and sells UHF RFID readers, antennas and tags. The current quarter's reported orders were mostly tags, indicating hardware sales are the principal source of revenue.
• Smart logistics/power-meter projects — Orders tied to a Henan Electric Power Company tender for its subsidiary Henan Electric Power Measurement Center (HEPMC) for a smart 3D logistics warehouse project, using RFID tags embedded in individual power meters.
• Service contracts from RPD and DDCT — The company states RPD integrates solutions to service contracts acquired by RPD and related company Shenzhen DDCT Communication Technology Co for varied end markets.

Recent performance

In the latest reported quarter, RPD received a purchase order for RMB1.03 million (approximately US$155,600), primarily for UHF RFID tags, plus three other purchase orders totaling RMB515,200 (approximately US$77,831). The company says those orders primarily related to a Henan Electric Power Company tender for its subsidiary HEPMC for a smart 3D logistics warehouse project. It characterizes revenue achieved to date as small and says it remains a development-stage company. No revenue or earnings figures for the quarter are provided in the excerpts.

Strategy

Management's stated plan is to acquire private companies based and operating in China and support them with administrative, legal, accounting and marketing assistance, and to provide capital to further their business plans. It intends to investigate RFID opportunities in China and describes the HEPMC order as an example of the smart RFID-enabled meter application in the power industry. The company plans to retain one full-time sales and marketing coordinator within six months for business development, marketing and promotion of the China projects. It says it does not plan to significantly change employee numbers over the next 12 months.

Risks

• Need for additional financing — At February 28, 2010 the company had $191,699 cash, had accumulated a deficit of $763,052, had not earned revenues at that date, and said it could only continue operations for six months without additional funding.
• No committed financing — Management states it has no arrangements in place for future equity financing, though the most likely source of funds is the sale of additional common stock.
• Development-stage operations — The company was a shell with no earned revenues as of the 10-K and states that even with initial RFID revenue it remains a development-stage company in the early execution stage of its China RFID plan.
• Investment Company Act exposure — The 10-K warns the company could be deemed an investment company if more than 40% of assets (excluding U.S. government securities and cash items) are held in investment securities, which would be costly and could make its business plan difficult to execute.

Outlook

Management expects to incur about $50,000 of costs over the next 12 months, comprising $20,000 in marketing and $30,000 in general administrative costs, plus an additional $10,000 in professional fees, for total expenditures of about $60,000. It states it does not have sufficient funds on hand to undertake intended business operations and will need additional funding in the near future. The company plans to retain one full-time sales and marketing coordinator within six months and otherwise has no plans to significantly change employee numbers.