Item 1. Business
On December 28, 2009, we entered into and closed a Share Exchange Agreement with the shareholders (AMP Shareholders) of Advanced Mechanical Products, Inc. (n/k/a AMP Electric Vehicles, Inc.) (AMP) pursuant to which we acquired 100% of the outstanding securities of AMP in exchange for 14,890,904 shares of our common stock. Considering that, following the merger, the AMP Shareholders control the majority of our outstanding voting common stock and we effectively succeeded our otherwise minimal operations to those that are theirs, AMP is considered the accounting acquirer in this reverse-merger transaction. A reverse-merger transaction is considered, and accounted for as, a capital transaction in substance; it is equivalent to the issuance of AMP securities for our net monetary assets, which are de minimus, accompanied by a recapitalization. Accordingly, we have not recognized any goodwill or other intangible assets in connection with this reverse merger transaction. AMP is the surviving and continuing entity and the historical financials following the reverse merger transaction will be those of AMP. We were a "shell company" (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) immediately prior to our acquisition of AMP pursuant to the terms of the Share Exchange Agreement. As a result of such acquisition, our operations our now focused on the design, marketing and sale of modified automobiles with an all electric drivetrain and battery systems. Consequently, we believe that acquisition has caused us to cease to be a shell company as we no longer have nominal operations. The Company formally changed its name to AMP Holding Inc. on May 24, 2010.
Overview
AMP designs, sells and delivers modified automobiles with an all electric drivetrain and battery system that allows the vehicle to perform just like a vehicle with an internal combustion engine (“ICE”), but with no emissions or burning of fossil fuels. Using its drivetrain system, the Company converts an existing vehicle to an all-electric vehicle instead of a vehicle that burns gasoline. AMP’s vision is to engineer electric drivetrains and to be a supplier and integrator for Crossover and SUV sized vehicles. Our vision is to bring electrification to full size mainstream vehicles that are popular with both fleets and consumers. The largest vehicle segment in the U.S. is the SUV segment and we have one of the only electric full size SUV solutions available. This is due to our patent pending, powerful, yet highly efficient electric powertrain. We intend to take advantage of our early mover status and the reputation we have built as a leader in the electrification of larger vehicles, to become a world leader in the emerging Electric Vehicle (EV) marketplace.
Our powertrains encompass the complete motor assemblies, battery packs, computers and software required for vehicle electrification. In addition to designing and manufacturing our powertrains, we convert popular Internal Combustion Engines (ICE) based vehicles to all electric vehicles by replacing the ICE components with our electric powertrain. Our first mainstream conversion is the 2010/2011 GM Chevrolet Equinox. Our immediate target for our conversion services are fleet customers.
AMP’s approach to the commercial market is to provide 100% electric vehicles with industry-leading technology at a low cost level. Leveraging current industry capacity and infrastructure versus designing, engineering, testing and capitalizing an all new vehicle model, as is the approach by many in the industry for many EV companies, AMP has the potential to enhance the business model for electric vehicles. This strategy expands the market opportunity and revenue potential for AMP to include business from OEMs, fleets and previously produced vehicles on the road today. AMP provides the basis for vehicle electrification that meets the same key customer metrics for range and acceleration as smaller EV’s. This results in a unique market opportunity for AMP, one that is greater than most electric vehicle competitors in the market today. By utilizing existing and qualified vehicles, AMP can focus its attention and investment specifically on advanced electric drive train solutions. Further, by using well designed base vehicles, AMP can leverage the safety, handling and amenities invested into many of today’s vehicles while not “reinventing” the base vehicle. The result is a well featured vehicle with the added advantage of a quieter ride and a fraction of the operating and maintenance costs.
Market for Electric Vehicles
Most experts agree that the electric vehicle industry is here to stay and will continue to grow. There are various infrastructure issues that are being slowly resolved, at different levels of aggressiveness depending on country and state and city. These include power stations capacity, battery and charging technology; private investments and government support programs for assistance to overcome these hurdles. Because crude oil is a finite resource, the costs of gasoline will only increase and have a significant impact on demand for EVs. The aforementioned point will lead to a steady increase in the cost of fuel over the next 10 to 15 years which bodes well for alternative propulsion solutions and specifically EV demand. Various companies are poised to launch a number of new “electric” products over the next several years from 100% electric vehicles to hybrid vehicles and from compact vehicles to large commercial vehicles for both retail and fleet customers.
Market Strategy
AMP is targeting the Mid-size utility segment. Most current electric vehicles are grouped in the small car segment, Nissan Leaf, Think, Ford Focus or Mitsubishi i-MiEV, and Volt, or are highly priced, such as the Tesla Roadster or Fisker Karma. Virtually no competitors are entering this large midsize utility/crossover vehicle segment. AMP is able to enter this segment because it has developed the intellectual property (e-motor drivetrain, software and vehicle integration) to provide the power solution for these larger vehicles that consumers want to drive
Research and Development
We conduct all of our research and development in-house at our facilities in Cincinnati, Ohio.
Competition
There are numerous electric vehicle companies and many types of electric vehicles, from 3-wheel mini vehicles to large commercial trucks. All these vehicles are in various stages of development/completion.
Current available all-electric products include Tesla Motors Roadster, a high performance 2-seater sports car priced over $100,000, and the Nissan Leaf, a 5-seater, 4-door hatchback priced in the low $30,000’s. There is also the Chevy Volt, a 4-door hatchback, 4-seater priced at $41,000, which is a hybrid vehicle that uses both gasoline and electricity and therefore, not a pure EV, so it will attract a different type of buyer than our customer base. Selected other projected entries include: Toyota RAV 4 EV, 5-seat CUV, target date 2012; the Tesla Motors Model S, 4-door, 7-seat sedan, target date 2012; the Fisker Automotive, luxury 4-door sedan PHEV, target intro late 2011; Opel Ampera PHEV, shared platform with Chevy Volt, target intro in Europe 2011; Ford Focus EV, based on next generation Focus, target intro 2011; Ford Escape PHEV, based on 5-seater Escape SUV, target intro 2012; Azure Dynamics Ford Tourneo Connect EV, a passenger version of the Transit Connect EV with rear passenger seats, to be used as a taxi and shuttle service vehicle, target intro 2011; Think City EV, a two-seater, currently selling in Europe, target intro in U.S. end of 2011; Mitsubishi iMiev, 5 door, 4 seat hatchback, target intro in U.S. late 2011; CODA sedan EV, 4-door 5 passenger sedan, target intro late 2011/12; and the Chrysler Fiat and NICE e500 Micro-Vett EV, intro in 2012.
Primary fleet EV competitors include Azure Dynamics, Enova, Bright Automotive, and EnVision Motor Company. Azure’s Ford Transit Connect and Enova have focused on specialized, Class 3-5 vehicles (delivery vans and shuttle buses). Bright Automotive will have a 100-mpg plug-in hybrid electric fleet commercial van vehicle and plans to manufacture full-size vans with design, engineering, and supplier sourcing capabilities. Therefore, these companies don’t compete in the same product segments as AMP at this time. However, EnVision builds a 7 passenger wagon, a cargo van and a truck that is currently for sale in Europe and will begin production in the US in the next few months. They use a similar business model to AMP’s and products are priced at around $40,000.
Overseas Electric Vehicles: While there are many overseas electric car companies and vehicles, there are only a few overseas companies that have vehicles that may be slightly closer in size and intent to AMP’s full-size/SUV strategy; however, these vehicles are primarily in the concept or development stage. They include the Volvo V70 PHEV 4-door sedan 5 passenger station wagon, and the Renault Kangoo light commercial EV aimed at business users in Europe. Renault advertises this vehicle as having the same practical functions as the internal combustion-engine version, which is a strategy similar to AMP’s. Chinese companies are also entering the EV market, with primarily smaller vehicles; however, with government mandates and heavy financial subsidies, China will likely enter the EV market very rapidly.
Intellectual Property
The company has multiple pending US patent applications and also plans to pursue appropriate foreign patent protection on those inventions. The company also has five pending trademark applications and two issued trademark registrations in the US with intent to pursue foreign trademark registration as well.
Government Regulation
We are in the business of modifying and selling automobiles and other vehicles, and accordingly we are subject to several laws related to automobile sales and operation.
The United States' laws related to automobile manufacturers regulate registration, safety criteria, type approval, inspection, maintenance, testing, etc. of automobiles. There are also laws regulating noise allowance and vibrations made by vehicles, and environmental laws. Complying with the strict regulation of automobile manufacturing is costly and could significantly affect our ability to become profitable. In addition, failure to comply with these laws could subject our Company to penalties, which could include severe fines or the removal of government approval to do business. Although we fully intend to comply with all applicable rules and regulations, we cannot assure that we will be able to do so.
In general, automobiles are subject to several environmental regulations, including air preservation, noise and vibration control. Accordingly, we are required to limit the air contaminants, noise and vibrations of our vehicles to certain levels. Failure to do so may impose fines or other penalties on the Company.
Number of Employees.
We currently have 33 employees, 27 full time and 6 part-time, of which 4 are administrative, 3 are accounting/finance, 12 are engineering/R&D, 3 are IT, 2 are sales/marketing, and 9 are manufacturing. None of our employees are represented by a labor union. We have not experienced any work stoppages and consider our relations with our employees to be good.
Item 1A.
Item 1A. Risk Factors
Our limited operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance.
We did not begin operations of our business until February 2007. We have a limited operating history and have not generated revenue. As a consequence, it is difficult, if not impossible, to forecast our future results based upon our historical data. Reliance on the historical results may not be representative of the results we will achieve, particularly in our combined form. Because of the uncertainties related to our lack of historical operations, we may be hindered in our ability to anticipate and timely adapt to increases or decreases in revenues or expenses. If we make poor budgetary decisions as a result of unreliable historical data, we could be less profitable or incur losses, which may result in a decline in our stock price.
AMP’s results of operations have not resulted in profitability and we may not be able to achieve profitability going forward.
AMP incurred a net loss amounting to $8,393,058 for the period from inception (February 20, 2007) through December 31, 2010. In addition, as of December 31, 2010, AMP has a working capital deficiency of $331,418. If we incur additional significant operating losses, our stock price, may decline, perhaps significantly.
Our management is developing plans to alleviate the negative trends and conditions described above. Our business plan is speculative and unproven. There is no assurance that we will be successful in executing our business plan or that even if we successfully implement our business plan, that we will be able to curtail our losses now or in the future. Further, as we are a new enterprise, we expect that net losses will continue and our working capital deficiency will exacerbate.
We depend upon key personnel and need additional personnel.
Our success depends on the continuing services of James E. Taylor, CEO and Stephen Burns, our President. The loss of Mr. Taylor or Mr. Burns could have a material and adverse effect on our business operations. Additionally, the success of the Company’s operations will largely depend upon its ability to successfully attract and maintain competent and qualified key management personnel. As with any company with limited resources, there can be no guaranty that the Company will be able to attract such individuals or that the presence of such individuals will necessarily translate into profitability for the Company. Our inability to attract and retain key personnel may materially and adversely affect our business operations.
We must effectively manage the growth of our operations, or our company will suffer.
To manage our growth, we believe we must continue to implement and improve our operational, manufacturing, and research and development departments. We may not have adequately evaluated the costs and risks associated with this expansion, and our systems, procedures, and controls may not be adequate to support our operations. In addition, our management may not be able to achieve the rapid execution necessary to successfully offer our products and services and implement our business plan on a profitable basis. The success of our future operating activities will also depend upon our ability to expand our support system to meet the demands of our growing business. Any failure by our management to effectively anticipate, implement, and manage changes required to sustain our growth would have a material adverse effect on our business, financial condition, and results of operations.
Our business requires substantial capital, and if we are unable to maintain adequate financing sources our profitability and financial condition will suffer and jeopardize our ability to continue operations.
We require substantial capital to support our operations. If we are unable to maintain adequate financing or other sources of capital are not available, we could be forced to suspend, curtail or reduce our operations, which could harm our revenues, profitability, financial condition and business prospects.
We face intense competition which could cause us to lose market share.
In the electric vehicle market in the United States, we compete with large manufacturers, including GM, Tesla and Nissan who have more significant financial resources, established market positions, long-standing relationships with customers and dealers, and who have more significant name recognition, technical, marketing, sales, manufacturing, distribution, financial and other resources than we do. Each of these companies is currently selling a hybrid or electric vehicle or is working to develop, market, and sell advanced technology vehicles in the United States market. The resources available to our competitors to develop new products and introduce them into the marketplace exceed the resources currently available to us. This intense competitive environment may require us to make changes in our products, pricing, licensing, services, distribution, or marketing to develop a market position.
Changes in the market for electric vehicles could cause our products to become obsolete or lose popularity.
The electric vehicle industry is in its infancy and has experienced substantial change in the last few years. To date, demand for and interest in electric vehicles has been sporadic. As a result, growth in the electric vehicle industry depends on many factors, including:
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continued development of product technology;
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the environmental consciousness of customers;
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the ability of electric vehicles to successfully compete with vehicles powered by internal combustion engines;
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limitation of widespread electricity shortages; and
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whether future regulation and legislation requiring increased use of nonpolluting vehicles is enacted.
We cannot assure you that growth in the electric vehicle industry will continue. Our business may suffer if the electric vehicle industry does not grow or grows more slowly than it has in recent years or if we are unable to maintain the pace of industry demands.
We may be unable to keep up with changes in electric vehicle technology and, as a result, may suffer a decline in our competitive position.
Our current products are designed for use with, and are dependent upon, existing electric vehicle technology. As technologies change, we plan to upgrade or adapt our products in order to continue to provide products with the latest technology. However, our products may become obsolete or our research and development efforts may not be sufficient to adapt to changes in or create necessary technology. As a result, our potential inability to adapt and develop the necessary technology may harm our competitive position.
The failure of certain key suppliers to provide us with components could have a severe and negative impact upon our business.
We rely on a small group of suppliers to provide us with components for our products. If these suppliers become unwilling or unable to provide components, there are a limited number of alternative suppliers who could provide them. Changes in business conditions, wars, governmental changes, and other factors beyond our control or which we do not presently anticipate could affect our ability to receive components from our suppliers. Further, it could be difficult to find replacement components if our current suppliers fail to provide the parts needed for these products. A failure by our major suppliers to provide these components could severely restrict our ability to manufacture our products and prevent us from fulfilling customer orders in a timely fashion.
Product liability or other claims could have a material adverse effect on our business.
The risk of product liability claims, product recalls, and associated adverse publicity is inherent in the manufacturing, marketing, and sale of electrical vehicles. Although we have product liability insurance for our consumer products, that insurance may be inadequate to cover all potential product claims. We also carry liability insurance on our automobile products. Any product recall or lawsuit seeking significant monetary damages either in excess of our coverage, or outside of our coverage, may have a material adverse effect on our business and financial condition. We may not be able to secure additional product liability insurance coverage on acceptable terms or at reasonable costs when needed. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product recall could generate substantial negative publicity about our products and business and inhibit or prevent commercialization of other future product candidates. We cannot assure you that such claims and/or recalls will not be made in the future.
We must devote substantial resources to implementing a product distribution network.
Dealers are often hesitant to provide their own financing to contribute to our product distribution network. As a result, we anticipate that we may have to provide financing or other consignment sale arrangements for dealers who would like to participate as our regional distribution centers. The further expansion of our product distribution network will require a significant capital investment and will require extensive amounts of time from our management. A capital investment such as this presents many risks, foremost among them being that we may not realize a significant return on our investment if the network is not profitable. Our inability to collect receivables from dealers could cause us to suffer losses. Lastly, the amount of time that our management will need to devote to this project may divert them from performing other functions necessary to assure the success of our business.
Regulatory requirements may have a negative impact upon our business.
While our products are subject to substantial regulation under federal, state, and local laws, we believe that the products we have sold are materially in compliance with all applicable laws. However, to the extent the laws change, or if we introduce new products in the future, some or all of our products may not comply with applicable federal, state, or local laws. Further, certain federal, state, and local laws and industrial standards currently regulate electrical and electronics equipment. Although standards for electric vehicles are not yet generally available or accepted as industry standards, our products may become subject to federal, state, and local regulation in the future. Compliance with this regulation could be burdensome, time consuming, and expensive.
Our automobile products are subject to environmental and safety compliance with various federal and state regulations, including regulations promulgated by the EPA, NHTSA, and various state boards, and compliance certification is required for each new model year. The cost of these compliance activities and the delays and risks associated with obtaining approval can be substantial. The risks, delays, and expenses incurred in connection with such compliance could be substantial.
Our success is heavily dependent on protecting our intellectual property rights.
We rely on trade secret protections to protect our proprietary technology. Our success will, in part, depend on our ability to obtain trademarks and patents. We presently do not hold patents registered with the United States Patent and Trademark Office. Although we have entered into confidentiality agreements with our employees and consultants, we cannot be certain that others will not gain access to these trade secrets. Others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets.
We may be exposed to liability for infringing intellectual property rights of other companies.
Our success will, in part, depend on our ability to operate without infringing on the proprietary rights of others. Although we have conducted searches and are not aware of any patents and trademarks which our products or their use might infringe, we cannot be certain that infringement has not or will not occur. We could incur substantial costs, in addition to the great amount of time lost, in defending any patent or trademark infringement suits or in asserting any patent or trademark rights, in a suit with another party.
We have not paid dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock
We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if its stock price appreciates.
Our stock price and trading volume may be volatile, which could result in substantial losses for our stockholders.
The equity trading markets may experience periods of volatility, which could result in highly variable and unpredictable pricing of equity securities. The market price of our common stock could change in ways that may or may not be related to our business, our industry or our operating performance and financial condition. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. We have experienced significant volatility in the price of our stock over the past few years. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future. In addition, the stock markets in general can experience considerable price and volume fluctuations.
We have not voluntary implemented various corporate governance measures, in the absence of which, shareholders may have more limited protections against interested director transactions, conflict of interest and similar matters.
Recent Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or the NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors' independence, audit committee oversight, and the adoption of a code of ethics. We intend to adopt certain corporate governance measures such as a code of ethics and establish an Audit Committee, Nominating and Corporate Governance Committee, and Compensation Committee of our board of directors. Prospective investors should bear in mind our current lack of both corporate governance measures in formulating their investment decisions.
We may be exposed to potential risks relating to our internal controls over financial reporting and our ability to have those controls attested to by our independent auditors.
As directed by Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX 404"), the Securities and Exchange Commission adopted rules requiring smaller reporting companies, such as our company, to include a report of management on the company's internal controls over financial reporting in their annual reports for fiscal years ending on or after December 15, 2007. We were required to include the management report in annual reports starting with the year ending December 31, 2009. Previous SEC rules required a non-accelerated filer to include an attestation report in its annual report for years ending on or after June 15, 2010. Section 989G of the Dodd-Frank Act added SOX Section 404(c) to exempt from the attestation requirement smaller issuers that are neither accelerated filers nor large accelerated filers under Rule 12b-2. Under Rule 12b-2, subject to periodic and annual reporting criteria, an “accelerated filer” is an issuer with market value of $75 million, but less than $700 million; a “large accelerated filer” is an issuer with market value of $700 million or greater. As a result, the exemption effectively applies to companies with less than $75 million in market capitalization. Item 9a of this filing, Controls and Procedures, indicates the company’s controls and procedures were not effective.
If a public market for our common stock develops, trading will be limited under the SEC’s penny stock regulations, which will adversely affect the liquidity of our common stock.
The trading price of our common stock is less than $5.00 per share and, as a result, our common stock is considered a "penny stock," and trading in our common stock would be subject to the requirements of Rule 15g-9 under the Exchange Act. Under this rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. Generally, the broker/dealer must make an individualized written suitability determination for the purchaser and receive the purchaser's written consent prior to the transaction.
SEC regulations also require additional disclosure in connection with any trades involving a "penny stock," including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated risks. These requirements severely limit the liquidity of securities in the secondary market because few broker or dealers are likely to undertake these compliance activities. In addition to the applicability of the penny stock rules, other risks associated with trading in penny stocks could also be price fluctuations and the lack of a liquid market. An active and liquid market in our common stock may never develop due to these factors.
Item 1B.
Item 1B. Unresolved Staff Comments
None.
Item 2.
Item 2. Properties
Our principal offices are located at 4540 Alpine Road, Blue Ash, Ohio 45242, which include 3,000 square feet in office space and 12,000 square feet in manufacturing/development space. We pay $8,500 per month in rent and our current lease expires in September of this year. AMP will have to locate a new location for office and manufacturing/development space.
Item 3.
Item 3. Legal Proceedings
We are currently not a party to any legal or administrative proceedings and are not aware of any pending or threatened legal or administrative proceedings against us in all material aspects. We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.
Item 4.
Item 4. (Removed and Reserved)
Not applicable.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock was quoted on the OTCBB and OTCQB under the symbol "TTSO" from July 14, 2009 through May 24, 2010 and then under the symbol “AMPD” from May 24, 2010 to present. The following table sets forth the range of high and low prices per share of our common stock for each period indicated. As there was no trading in 2009, we have only included data for 2010.
Holders of our Common Stock
As of March 29, 2011, there were approximately 118 stockholders of record of our common stock. This number does not include shares held by brokerage clearing houses, depositories or others in unregistered form. The stock transfer agent for our securities is Empire Stock Transfer, Inc., 1859 Whitney Mesa Drive, Henderson, Nevada 89014.
Dividends
The Company has never declared or paid any cash dividends on its common stock. The Company currently intends to retain future earnings, if any, to finance the expansion of its business. As a result, the Company does not anticipate paying any cash dividends in the foreseeable future.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth the aggregate information of our equity compensation plans in effect as of December 31, 2010:
Penny Stock Rules
The Securities and Exchange Commission has also adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).
Our shares constitute penny stock under the Securities and Exchange Act. The shares will remain penny stocks for the foreseeable future. The classification of penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a stockholder to liquidate his or her shares. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in the Company will be subject to Rules 15g-1 through 15g-10 of the Securities and Exchange Act. Rather than creating a need to comply with those rules, some broker-dealers will refuse to attempt to sell penny stock.
The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document, which:
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contains a description of the nature and level of risk in the market for penny stock in both public offerings and secondary trading;
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contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the Securities Act of 1934, as amended;
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contains a brief, clear, narrative description of a dealer market, including "bid" and "ask" price for the penny stock and the significance of the spread between the bid and ask price;
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contains a toll-free telephone number for inquiries on disciplinary actions;
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defines significant terms in the disclosure document or in the conduct of trading penny stocks; and
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contains such other information and is in such form (including language, type, size and format) as the Securities and Exchange Commission shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, to the customer:
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the bid and offer quotations for the penny stock;
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the compensation of the broker-dealer and its salesperson in the transaction;
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the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and
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monthly account statements showing 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 acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling their securities.
Unregistered Sales of Equity Securities
On December 28, 2009, we entered into and closed a Share Exchange Agreement with the AMP Shareholders pursuant to which we acquired 100% of the outstanding securities of AMP in exchange for 14,890,904 shares of our common stock.
On December 28, 2009, the Company entered a Conversion Agreement with Bowden Transportation Ltd. (“Bowden”) pursuant to which Bowden agreed to convert a loan in the amount of $20,000 provided to AMP on December 21, 2009 into 500 shares of Series A Preferred Stock (the “Series A Stock”).
On December 28, 2009, the Company entered a Conversion Agreement with Han Solutions II, LLC (“Han”) pursuant to which Han agreed to convert a loan in the amount of $315,000 provided to AMP from October 28, 2009 through December 21, 2009 into 7,875 shares of Series A Stock.
The Series A Stock is convertible, at any time at the option of the holder, into common shares of the Company based on a conversion price of $4.70588 per share. The Series A Stock has a par value of $0.001 per share. The holders of the Series A Stock are not entitled to convert the Series A Stock and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. The Series A Stock has voting rights on an as converted basis. Holders of the Series A Stock are not entitled to receive dividends and do not hold any liquidation rights.
On December 28, 2009, the Company entered a Conversion Agreement with Ziu Zhang (“Zhang”) pursuant to which Zhang agreed to convert a loan in the amount of $50,000 provided to AMP on November 30, 2009 into 148,932 shares of common stock of the Company.
On December 28, 2009, the Company assumed a Services Agreement entered between AMP and Pharmacy Management Services pursuant to which the Company issued Pharmacy Management Strategies LLC a common stock purchase warrant to acquire 500,000 shares of common stock at $0.40 per share for a term of five years. Half of the shares of common stock issuable under this warrant vested immediately and the balance shall vest one year from the date of the agreement.
On January 15, 2010, the Company entered a Subscription Agreement with Han pursuant to which Han acquired 625 shares of Series A Stock in consideration of $25,000.
On January 13, 2010, the Company entered into a letter agreement with Maggie Moran, a director of the Company, The Company has agreed to pay Ms. Moran $40,000 per year and issue Ms. Moran an option to acquire 325,000 shares of common stock for five years with an exercise price of $0.40 per share. The options vest at 75,000 upon Ms. Moran executing her letter of appointment and 50,000 every six months thereafter.
From January 7, 2010 to March 4, 2010, the Company entered into subscription agreements with various accredited investors pursuant to which the investors purchased 1,042,062 shares of the Company’s common stock for an aggregate purchase price of $340,275.
On March 4, 2010, the Company compensated John Carris Investments LLC, as placement agent (“JCI”), for assisting in the sale of common stock by paying a commission in the aggregate amount of $35,528 and issuing JCI a common stock purchase warrant to purchase 105,704 shares of the Company’s common stock at an exercise price of $0.336 per share.
On March 1, 2010, the Company issued a 6% promissory note in the principal amount of $100,000 (the “March 2010 Note”) to an accredited investor (the “March 2010 Lender”) in consideration of $100,000. In addition to the March 2010 Note, the March 2010 Lender also received a Common Stock Purchase Warrant to acquire 125,006 shares of common stock at an exercise price of $0.40 per share exercisable for a period of three years. The March 2010 Note had an interest rate of 6% per annum and was repaid in the third quarter of 2010.
From March 15, 2010 through October 22, 2010, the Company sold an aggregate of 7,256,000 shares of common stock for an aggregate purchase price of $2,902,400 to accredited investors. The closings occurred on the following dates:
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On March 15, 2010, the Company sold 625,000 shares of common stock for an aggregate consideration of $250,000.
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On April 7, 2010, the Company sold 200,000 shares of common stock for an aggregate consideration of $80,000.
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On April 12, 2010, the Company sold 62,500 shares of common stock for an aggregate consideration of $25,000.
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On April 16, 2010, the Company sold 112,500 shares of common stock for an aggregate consideration of $45,000.
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On April 23, 2010, the Company sold 250,000 shares of common stock for an aggregate consideration of $100,000.
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On May 6, 2010, the Company sold 175,000 shares of common stock for an aggregate consideration of $70,000.
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On May 20, 2010, the Company sold 75,000 shares of common stock for an aggregate consideration of $30,000.
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On May 25, 2010, the Company sold 75,000 shares of common stock for an aggregate consideration of $30,000
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On May 28, 2010, the Company sold 500,000 shares of common stock for an aggregate consideration of $200,000.
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On June 30, 2010, the Company sold 36,000 shares of common stock for an aggregate consideration of $14,400.
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On July 7, 2010, the Company sold 175,000 shares of common stock for an aggregate consideration of $70,000.
•
On July 15, 2010, the Company sold 62,500 shares of common stock for an aggregate consideration of $25,000.
•
On July 22, 2010, the Company sold 1,125,000 shares of common stock for an aggregate consideration of $450,000.
•
On August 12, 2010, the Company sold 1,250,000 shares of common stock for an aggregate consideration of $500,000.
•
On August 27, 2010, the Company sold 375,000 shares of common stock for an aggregate consideration of $150,000.
•
On September 16, 2010, the Company sold 375,000 shares of common stock for an aggregate consideration of $150,000.
•
On September 22, 2010, the Company sold 1,625,000 shares of common stock for an aggregate consideration of $650,000.
•
On October 22, 2010, the Company sold 157,500 shares of common stock for an aggregate consideration of $63,000.
From March 15, 2010 through October 22, 2010, the Company compensated JCI as placement agent for assisting in the sale of common stock by paying it commissions in the aggregate amount of $290,240 and issuing the placement agent a common stock purchase warrants to purchase 725,600 shares of the Company’s common stock at an exercise price of $.40 per share.
On May 28, 2010, the Company assumed a Services Agreement entered between AMP and Mark Valerio pursuant to which the Company issued Mark Valerio an option to purchase 250,000 shares of voting common stock for a term of three years with a per share exercise option price of $0.40. The option shall vest as follows: 100,000 shares as of the date of May 28, 2010 (effective date); 50,000 shares within six months of the effective date; 50,000 shares within 12 months of the effective date; 50,000 shares within 18 months of the effective date.
On May 28, 2010, the Company assumed a Consulting Agreement entered between AMP and Maggie Moran pursuant to which the Company issued Maggie Moran an option to purchase up to 175,000 shares of common stock at an exercise price of $0.40 per share for a term of five years. The options shall vest quarterly in equal installments over a period of two years at a rate of 21,875 shares per quarter. The base consulting fee shall be $40,000 per year paid once per quarter on the first day of each quarter. She will receive reimbursement of reasonable business expenses if approved in advance by AMP’s CFO. Additional compensation shall be paid as follows if Maggie Moran assists in securing financing as defined in the agreement: $750,000 if AMP secures financing of more than $20,000,000 but less than $35,000,000; $1,750,000 if AMP secures financing of more than $35,000,000 but less than $50,000,000; $2,500,000 if AMP secures financing of more than $50,000,000 but less than $75,000,000; $2,500,000 plus a bonus of at least on-half of one percent of the total financing if AMP secures financing of more than $75,000,000.
On May 28, 2010 the Company assumed a Consulting Agreement with Pharmacy Management Strategies, LLC (“Pharmacy”) whereby Pharmacy will provide certain business development related services to the Company. As compensation for providing the services, the Company issued Pharmacy a common stock purchase warrant to acquire 350,000 shares of common stock for a period of five years at an exercise price of $0.40 per share, which will vest quarterly in equal installments over a period of two years at a rate of 43,750 shares of common stock per quarter.
On April 8, 2010, the Company assumed a Consulting Agreement with SynTech Solutions, LLC to add Mr. Dennis H. Davis as a member of its Advisory Board. Members receive $2,500 per meeting, consulting fees of $1,000 per day and a retainer of $1,500 per month. Members will be eligible to participate in AMP’s equity position, details of which are still to be worked out.
On April 8, 2010, the Company assumed a Consulting Agreement with International Energy, LLC to add Dr. William Wylam as a member of its Advisory Board. Members receive $2,500 per meeting, consulting fees of $1,000 per day and a retainer of $1,500 per month. Members will be eligible to participate in AMP’s equity position, details of which are pending.
On June 1, 2010, the Company amended an October, 20, 2009 Services Agreement entered between AMP and CSIR Group, LLC for investor relations services, pursuant to which the Company issued CSIR 240,000 stock purchase warrants with an exercise price of $0.40 per share for a period of five years beginning June 1, 2010. The warrants will vest equally in quarterly installments of 30,000 each. CSIR will be paid a fee of $ 7,500 beginning March 1, 2010 payable on the first day of each month.
On April 28, 2010, the Company assumed a Consulting Agreement entered between AMP and Gavin Scotti, Sr. pursuant to which the Company issued Gavin Scotti, Sr. a common stock purchase warrant to purchase 350,000 shares of common stock for a term of five years with a per share exercise option price of $0.40. The option shall vest equally in quarterly installments of 43,750 shares per quarter over two years. Additional compensation shall be paid if Mr. Scotti, Sr. is instrumental in raising capital through government or private capital as follows: $500,000 for raising up to $10,000,000; $750,000 for raising between $10,000,000 and $35,000,000; $1,000,000 for raising over $35,000,000 in financing.
On May 12, 2010, a Stock Incentive Plan was approved by the Board of Directors.
On August 24, 2010, the Company entered into a letter agreement with Nancy Dunlap, a director of the Company, The Company has agreed to pay Ms. Dunlap $40,000 per year and issue Ms. Dunlap an option to acquire 325,000 shares of common stock for five years with an exercise price of $0.60 per share. The options vest at 75,000 upon Ms. Dunlap executing her letter of appointment and 50,000 every six months thereafter.
On September 28, 2010, the Company assumed a Services Agreement entered between AMP and Ron Sobrero pursuant to which the Company issued Ron Sobrero an option to purchase 100,000 shares of voting common stock for a term of three years with a per share exercise option price of $0.70. The option shall vest as follows: 40,000 shares as of the date of September 28, 2010 (effective date); 20,000 shares within six months of the effective date; 20,000 shares within 12 months of the effective date; 20,000 shares within 18 months of the effective date.
On October 11, 2010, the Company entered into a letter agreement with James E. Taylor, a director of the Company, The Company has agreed to pay Mr. Taylor $40,000 per year and issue Mr. Taylor an option to acquire 325,000 shares of common stock for five years with an exercise price of $0.68 per share. The options vest at 75,000 upon Mr. Taylor executing his letter of appointment and 50,000 every six months thereafter.
On December 8, 2010, Mr. Taylor entered into an employment agreement with the Company pursuant to which he was appointed as the Chief Executive Officer and Vice-Chairman of the Company in consideration of an annual salary of $300,000. Additionally, Mr. Taylor will be eligible for annual bonuses with a target amount of 100% of his salary. The actual amount of any bonus may be more or less than such target and will be determined by the board of directors in its absolute discretion. Half of the bonus may be paid, in the Company’s discretion, in unregistered shares of common stock at a price per share equal to the weighted average closing price per share of the common stock over the twenty most recent trading days prior to such grant. In addition to the salary and any bonus, Mr. Taylor will be entitled to receive health and fringe benefits that are generally available to the Company’s management employees. As additional compensation, the Company granted Mr. Taylor options to acquire 1,200,000 shares of common stock at an exercise price of $0.72 per share for a period of ten years. The Company also provided Mr. Taylor with a common stock purchase warrant to acquire 600,000 shares of common stock exercisable at any time in the five years following the signing of the agreement at an exercise price of $2.00 per share.
On December 8, 2010, Stephen S. Burns entered into an employment agreement with the Company pursuant to which he was appointed as the President of the Company in consideration of an annual salary of $200,000, however, only 50% of the salary ($100,000) will be payable at this time. The remaining 50% of the salary will accrue and be deferred until the board of directors elects to increase the salary to include all or a portion of the deferred salary based on certain events. Additionally, Mr. Burns will be eligible for annual bonuses with a target amount of 100% of his salary. The actual amount of any bonus may be more or less than such target and will be determined by the Board in its absolute discretion. Half of the bonus may be paid, in the Company’s discretion, in unregistered shares of common stock at a price per share equal to the weighted average closing price per share of the common stock over the twenty most recent trading days prior to such grant. In addition to the salary and any bonus, Mr. Burns will be entitled to receive health and fringe benefits that are generally available to the Company’s management employees in accordance with the then existing terms and conditions of the Company’s policies. As additional compensation, the Company granted Mr. Burns options to acquire 300,000 shares of common stock at an exercise price of $0.72 per share for a period of ten years. The Company also provided Mr. Burns with a common stock purchase warrant to acquire 300,000 shares of Common Stock exercisable at any time in the five years following the signing of the agreement at an exercise price of $2.00 per share.
On December 8, 2010, Mr. Paresi entered into a letter agreement with the Company pursuant to which he was appointed as a director of the Company in consideration of an annual fee of $60,000. Additionally, the Company granted Mr. Paresi options to purchase 500,000 shares of the Company’s common stock at $0.72 per share. The options will expire five years from the vesting date with 125,000 options vesting upon the signing of the agreement and 75,000 every six months thereafter for a total of 500,000 shares. In addition, the Company granted Mr. Paresi a common stock purchase warrant to acquire 500,000 shares of common stock exercisable at any time in the five years following the signing of the agreement at an exercise price of $2.00 per share. There is no understanding or arrangement between Mr. Paresi and any other person pursuant to which Mr. Paresi was selected as the Chairman of the Board of Directors of the Company. Mr. Paresi does not have any family relationship with any director, executive officer or person nominated or chosen by us to become the Chairman of the Board of Directors or an executive officer. Since January 1, 2009, Mr. Paresi has not had a direct or indirect material interest in any transaction or proposed transaction, in which the Company was or is a proposed participant exceeding $120,000.
From December 3, 2010 through March 29, 2011, the Company sold an aggregate of 3,364,983 shares of common stock and common stock purchase warrants (the "Warrants") to acquire 1,682,492 shares of common stock of the Company for an aggregate purchase price of $2,018,990 to accredited investors. The Warrants are exercisable for two years at an exercise price of $0.80. The closings occurred on the following dates:
·
On December 3, 2010, the Company sold 586,667 shares of common stock and Warrants to acquire 293,334 shares of common stock for an aggregate consideration of $352,000.
·
On December 17, 2010, the Company sold 483,333 shares of common stock and Warrants to acquire 241,667 shares of common stock for an aggregate consideration of $290,000.
·
On December 31, 2010, the Company sold 500,000 shares of common stock and Warrants to acquire 250,000 shares of common stock for an aggregate consideration of $300,000.
·
On January 26, 2011, the Company sold 436,667 shares of common stock and Warrants to acquire 218,333 shares of common stock for an aggregate consideration of $262,000.
·
On February 17, 2011, the Company sold 208,333 shares of common stock and Warrants to acquire 104,167 shares of common stock for an aggregate consideration of $125,000.
·
On March 1, 2011, the Company sold 158,333 shares of common stock and Warrants to acquire 79,167 shares of common stock for an aggregate consideration of $95,000.
·
On March 3, 2011, the Company sold 208,317 shares of common stock and Warrants to acquire 104,158 shares of common stock for an aggregate consideration of $124,990.
·
On March 16, 2011, the Company sold 133,333 shares of common stock and Warrants to acquire 66,667 shares of common stock for an aggregate consideration of $80,000.
·
On March 28, 2011, the Company sold 350,000 shares of common stock and Warrants to acquire 175,000 shares of common stock for an aggregate consideration of $210,000.
·
On March 29, 2011, the Company sold 300,000 shares of common stock and Warrants to acquire 150,000 shares of common stock for an aggregate consideration of $180,000.
From December 3, 2010 through March 29, 2011, the Company compensated JCI as placement agent for assisting in the sale of the securities by paying it commissions in the aggregate amount of $201,899 and issuing the placement agent common stock purchase warrants to purchase 336,498 shares of the Company's common stock at an exercise price of $.60 per share.
On January 12, 2011, Paul V. Gonzales and the Company entered into an Employment Agreement pursuant to which Mr. Gonzales agreed to serve as the Chief Financial Officer of the Company. Pursuant to the terms of the Employment Agreement, Mr. Gonzales shall receive an annual salary of $150,000. Additionally, Mr. Gonzales will be eligible for annual bonuses with a target amount of 100% of his salary. The actual amount of any bonus may be more or less than such target and will be determined by the CEO of the Company in his discretion pursuant to certain guidelines and parameters set by the Board of Directors. Half of the bonus may be paid, in the CEO’s discretion in unregistered shares of common stock at a price per share equal to the weighted average closing price per share of the common stock over the twenty most recent trading days prior to such grant. In addition to the salary and any bonus, Mr. Gonzales will be entitled to receive health and fringe benefits that are generally available to the Company’s management employees. As additional compensation, the Company granted Mr. Gonzales options to acquire 200,000 shares of common stock at an exercise price of $0.81 per share for a period of ten years.
This issuance of these above securities is exempt from the registration requirements under Rule 4(2) of the Securities Act of 1933, as amended, and/or Rule 506 as promulgated under Regulation D.
Item 6.
Item 6. Selected Financial Data
As a smaller reporting company, we are not required to include disclosure under this item.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
Some of the statements contained in this Form 10-K that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Form 10-K, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:
·
Our ability to attract and retain management;
·
Our ability to raise capital when needed and on acceptable terms and conditions;
·
The intensity of competition;
·
General economic conditions;
·
Changes in regulations;
·
Whether the market for electric vehicles continues to grow, and, if it does, the pace at which it may grow; and
·
Our ability to compete against large competitors in a rapidly changing market for electric vehicles.
All written and oral forward-looking statements made in connection with this Form 10-K that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.
Our Plan of Operation should be read in conjunction with our financial statements included herein.
Overview
On December 28, 2009, we entered into and closed a Share Exchange Agreement with the AMP Shareholders pursuant to which we acquired 100% of the outstanding securities of AMP in exchange for 14,890,904 shares of our common stock. Considering that, following the merger, the AMP Shareholders control the majority of our outstanding voting common stock and we effectively succeeded our otherwise minimal operations to those that are theirs, AMP is considered the accounting acquirer in this reverse-merger transaction. A reverse-merger transaction is considered, and accounted for as, a capital transaction in substance; it is equivalent to the issuance of AMP securities for our net monetary assets, which are deminimus, accompanied by a recapitalization. Accordingly, we have not recognized any goodwill or other intangible assets in connection with this reverse merger transaction. AMP is the surviving and continuing entities and the historical financials following the reverse merger transaction will be those of AMP. We were a "shell company" (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) immediately prior to our acquisition of AMP pursuant to the terms of the Share Exchange Agreement. As a result of such acquisition, our operations our now focused on the design, marketing and sale of modified automobiles with an all electric drivetrain and battery systems. Consequently, we believe that acquisition has caused us to cease to be a shell company as we no longer have nominal operations.
Results of Operations
Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
Revenue. Revenue was $140,707 for the year ended December 31, 2010 and consisted of a limited number of experimental vehicles. We did not generate revenue for the year ended December 31, 2009.
Expenses. Our expenses for the year ended December 31, 2010 were $5,160,270 and included payroll and payroll taxes ($1,327,002), stock based compensation ($1,436,979), batteries, motors and supplies ($719,644) and legal and professional ($370,037). Our expenses for the year ended December 31, 2009 were $1,528,020 and included payroll and payroll taxes ($702,233), batteries, motors and supplies ($301,797) and legal and professional ($136,145). The reason for the increase in comparing the year ended 2010 to 2009 was an increase in activity in developing and promoting our products which included the hiring of additional employees.
Net loss. Net loss for the years ended December 31, 2010 and 2009 were $5,028,106 and $1,524,923, respectively.
Liquidity and Capital Resources
As of December 31, 2010, we had current assets of $453,190 including cash of $385,293 and current liabilities of $784,608. As of December 31, 2009, we had current assets of $13,688 including cash of $0 and current liabilities of $583,406.
Operating Activities
Our operating activities from continuing operations resulted in net cash used by operations of $3,251,514 for the year ended December 31, 2010 compared to net cash used by operations of $1,240,975 for the year ended December 31, 2009. The net cash used by operations for the year ended December 31, 2010 reflects a net loss of $5,028,106 offset by stock based compensation of $1,436,979, depreciation of $40,733, accounts payable, related parties of $144,172, account payables of $131,981, stock issued for legal services of $87,000, an increase in accounts receivable of $58,042, and other minor factors. The net cash used by operations for the year ended December 31, 2009 reflects a net loss of $1,524,923 offset by depreciation of $34,864, customer deposits of $96,000, account payables of $157,736 and other minor factors.
Investing Activities
Our investing activities resulted in a net cash outflow of $26,014 for the year ended December 31, 2010 compared to a net cash inflow of $8,649 for the year ended December 31, 2009. Cash used in investing activities principally represents capital expenditures offset by proceeds from the sale of assets and repayments of an advance to a related party.
Financing Activities
Our financing activities resulted in a cash inflow of $3,662,821 for the year ended December 31, 2010 and $1,174,023 for the year ended December 31, 2009, which principally represents proceeds from the issuance of common stock.
Presently, due to the lack of revenue we are not able to meet our operating and capital expenses. There is doubt about our ability to continue as a going concern, as the continuation of our business is dependent upon successful roll out of our products and maintaining a break even or profitable level of operations. We have incurred operating losses since inception, and this is likely to continue through the fiscal year ending December 31, 2011.
We require funds to enable us to address our minimum current and ongoing expenses, expand marketing and promotion activity connected with the development and marketing of our products and to increase market share. Our cash on hand will not be sufficient to satisfy all of our cash requirements as we continue to progress and expand. We estimate that we will require between $12,000,000 and $15,000,000 to carry out our business plan for the next twelve months. Because we cannot anticipate when we will be able to generate revenues from sales, we will need to raise additional funds to continue to develop our business, respond to competitive pressures and to respond to unanticipated requirements or expenses. If we are not able to generate significant revenues from the sale of our products, we will not be able to maintain our operations or achieve a profitable level of operations.
The financial requirements of our Company will be dependent upon the financial support through credit facilities and additional sales of our equity securities. The issuance of additional equity securities by us may result in a significant dilution in the equity interests of our current shareholders. Should additional financing be needed, there is no assurance that we will be able to obtain further funds required for our continued operations or that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease our operations.
We can give no assurance that we will be successful in implementing any phase, all phases of the proposed business plan, or that we will be able to continue as a going concern.
Credit Facility
Presently we have no revolving Credit Facility established. There is no guarantee that we will be able to enter into an agreement to establish a line of credit or that if we do enter into such agreement that it will be on favorable terms.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Critical Accounting Policies and Estimates
The following accounting principles and practices of AMP are set forth to facilitate the understanding of data presented in the consolidated financial statements:
Nature of operations
A developing stage company, AMP is a technology-driven business that delivers a full-performance, all electric, powertrain for passenger vehicles. Operating with three specific approaches, AMP converts existing internal combustion engine based vehicles to AMP designed and manufactured all electric powertrains, provides original equipment manufacturers (OEM’s) with AMP designed and manufactured modular electric components, and provides electric powertrain engineering and consulting services to end-users. AMP has not recorded significant revenue since inception in February 2007, and is developing its operations through a sale, design and manufacturing facility located in Cincinnati, Ohio.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Property and depreciation
Property and equipment is recorded at cost. Depreciation is provided on the straight-line and accelerated methods over the estimated useful lives of the respective assets.
Advertising
Advertising and public relation costs are charged to operations when incurred. Advertising and public relation expense was approximately $261,000 and $65,000 for the years ended December 31, 2010 and 2009 and $543,000 for the period from inception to December 31, 2010, respectively.
Income taxes
With the consent of its shareholders, at the date of inception, AMP elected under the Internal Revenue Code to be taxed as an S corporation. Since shareholders of an S corporation are taxed on their proportionate share of the Company’s taxable income, an S corporation is generally not subject to either federal or state income taxes at the corporate level. On December 28, 2009 pursuant to the merger transaction with TSO, Inc. the company revoked its election to be taxed as an S-corporation. As minimal activity occurred from the date of this merger to December 31, 2009, no provision or liability for federal or state income taxes has been included in the financial statements. Net operating losses of approximately $3,600,000 are available for carryover to be used against taxable income generated through 2030. TSO had not filed income tax returns during its period as a shell company.
Research and development costs
AMP expenses research and development costs as they are incurred. Research and development expense incurred was approximately $2,620,000 and $1,140,000 for the years ended December 31, 2010 and 2009 and $4,779,000 for the period from inception to December 31, 2010, respectively, consisting of consulting, payroll and payroll taxes, engineering temporaries, purchased supplies, legal fees, parts and small tools.
Subsequent events
The Company evaluates events and transactions occurring subsequent to the date of the financial statements for matters requiring recognition or disclosure in the financial statements. .
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to include disclosure under this item.
Item 8.
Item 8. Financial Statements and Supplementary Data
AMP Holding Inc.
(A Development Stage Company)
Financial Statements
December 31, 2010 and 2009
With Report of Independent Registered
Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
AMP Holding Inc. (A Developing Stage Company)
Cincinnati, Ohio
We have audited the accompanying balance sheets of AMP Holding Inc. (A Developing Stage Company) as of December 31, 2010 and 2009 and the related statements of operations, stockholders’ equity, and cash flows for the years then ended and for the period from inception, February 20, 2007, to December 31, 2010. These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 financial statements referred to above present fairly, in all material respects, the financial position of AMP Holding Inc. as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended and for the period from inception, February 20, 2007, to December 31, 2010 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As described in note 1, the Company has not had significant sales and has negative working capital and stockholder’s deficits, which raise substantial doubt about its ability to continue as a going concern. Management’s plan in regard to this matter is also discussed in note 1. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Cincinnati, Ohio
March 31, 2011
105 east fourth street, suite 1500
cincinnati, ohio 45202
www.cshco.com
p. 513.241.3111
f. 513.241.1212
cincinnati | columbus | dayton | middletown | springfield
AMP Holding Inc.
(A Developing Stage Company)
Balance Sheets
December 31, 2010 and 2009
See accompanying notes to financial statements.
AMP Holding Inc.
(A Developing Stage Company)
Statements of Operations
For the Years Ended December 31, 2010 and 2009
and the Period Form Inception,
February 20, 2007 to December 31, 2010
See accompanying notes to financial statements.
AMP Holding Inc.
(A Developing Stage Company)
Statement of Stockholders’ Equity
Form Inception, February 20, 2007
to December 31, 2010
See accompanying notes to financial statements.
AMP Holding Inc.
(A Developing Stage Company)
Statements of Cash Flows
For the Years Ended December 31, 2009 and 2008
and the Period Form Inception,
February 20, 2007 to December 31, 2010
AMP Holding Inc.
(A Developing Stage Company)
Notes to Financial Statements
December 31, 2010 and 2009
and for the Period From Inception,
February 20, 2007 to December 31, 2010
1.
SUMMARY OF \SIGNIFICANT ACCOUNTING PRINICPLES:
The following accounting principles and practices are set forth to facilitate the understanding of data presented in the financial statements:
Nature of operations
AMP Holding Inc., formerly known as Title Starts Online, Inc. (the Company), incorporated in the State of Nevada in 2007 with $3,100 of capital from the issuance of common shares to the founding shareholder. On August 11, 2008 TSO received a Notice of Effectiveness from the U.S. Securities and Exchange Commission, and on September 18, 2008, the Company closed a public offering in which it accepted subscriptions for an aggregate of 200,000 shares of its common stock, raising $50,000 less offering costs of $46,234. With this limited capital TSO did not commence operations and remained a “shell company” (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended).
On December 28, 2009, the Company entered into and closed a Share Exchange Agreement with the Shareholders of Advanced Mechanical Products, Inc. (n/k/a AMP Electric Vehicles, Inc.) (AMP) pursuant to which the Company acquired 100% of the outstanding securities of AMP in exchange for 14,890,904 shares of TSO common stock. Considering that, following the merger, the AMP Shareholders control the majority of the outstanding voting common stock of the Company, and effectively succeeded TSO’s otherwise minimal operations to those that are AMP. AMP is considered the accounting acquirer in this reverse-merger transaction. A reverse-merger transaction is considered and accounted for as a capital transaction in substance; it is equivalent to the issuance of AMP securities for net monetary assets of the Company, which are deminimus, accompanied by a recapitalization. Accordingly, goodwill or other intangible assets have not been recognized in connection with this reverse merger transaction. AMP is the surviving entity and the historical financials following the reverse merger transaction will be those of AMP. The Company was a shell company immediately prior to the acquisition of AMP pursuant to the terms of the Share Exchange Agreement. As a result of such acquisition, the Company operations are now focused on the design, marketing and sale of modified automobiles with an all electric power train and battery systems. Consequently, we believe that acquisition has caused the Company to cease to be a shell company as it now has operations. The Company formally changed its name to AMP Holding Inc. on May 24, 2010.
AMP, a developing stage company, is a technology-driven business that delivers a full-performance, all electric, powertrain for passenger vehicles. Operating with three specific approaches, the Company converts existing internal combustion engine based vehicles to AMP designed and manufactured all electric powertrains, provides original equipment manufacturers (OEM’s) with AMP designed and manufactured modular electric components, and provides electric powertrain engineering and consulting services to end-users. For the immediate future, the Company is concentrating on the first approach, conversions. The Company has not recorded significant revenue since inception in February 2007, and is developing its operations through a sale, design and manufacturing facility located in Blue Ash, Ohio.
The primary product and service being developed and marketed by the Company is centered on an all electric power train for passenger vehicles. Management believes there are significant opportunities for sales of their products and services and a potential for obtaining sizable market share. Sales of product since the inception of the Company, February 20, 2007, through the date of these financial statements consists of a limited number of experimental vehicles only.
Development stage company
Based on the Company's business plan, it is a development stage company since planned principal operations resulting in revenue have not fully commenced. Accordingly, the Company presents its financial statements in conformity with the accounting principles generally accepted in the United States of America that apply to developing enterprises. As a development stage enterprise, the Company discloses its retained earnings (or deficit accumulated) during the development stage and the cumulative statements of operations and cash flows from commencement of development stage to the current balance sheet date. The development stage began in 2007 when the Company was organized.
AMP Holding Inc.
(A Developing Stage Company)
Notes to Financial Statements
December 31, 2010 and 2009
and for the Period From Inception,
February 20, 2007 to December 31, 2010
Basis of presentation
The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has limited revenues and has negative working capital and stockholders’ deficits. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.
In view of these matters, continuation as a going concern is dependent upon the continued operations of the Company, which in turn is dependent upon the Company's ability to meet its financial requirements, raise additional capital, and the success of its future operations. The financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should the Company not continue as a going concern.
The Company has continued to raise capital since the merger and has raised $1,088,065 less offering costs of $107,699 since December 31, 2010 through the date of these financial statements. Management believes the proceeds from these offerings, future offerings, and the Company’s anticipated revenue provides an opportunity for the Company to continue as a going concern. If additional funding is required, the Company plans to obtain working capital from either equity financing from the sale of common and/or preferred stock.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Financial instruments
The carrying amounts of financial instruments including cash, accounts receivable, cash overdraft, accounts payable and short-term debt approximate fair value because of the relatively short maturity of these instruments.
Property and depreciation
Property and equipment is recorded at cost. Depreciation is provided on the straight-line and accelerated methods over the estimated useful lives of the respective assets.
Capital stock
On April 22, 2010 the directors of the Company approved a forward stock split of the common stock of the company on a 14:1 basis. On May 12, 2010 the stockholders of the Company voted to approve the amendment of the certificate of incorporation resulting in a decrease of the number of shares of Common stock. The Company filed a 14c definitive information statement with the Securities and Exchange Commission and mailed the same to its shareholders. Management filed the certificate of amendment decreasing the authorized shares of common stock with the State of Nevada on September 8, 2010.
The capital stock of the Company is as follows:
Preferred Stock - The Company has authorized 75,000,000 shares of preferred stock with a par value of $.001 per share. These shares may be issued in series with such rights and preferences as may be determined by the Board of Directors. The Series A Stock is convertible, at any time at the option of the holder, into common shares of the Company based on a conversion price of $4.70588 per share. The holders of the Series A Stock are not entitled to convert the Series A Stock and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. The Series A Stock has voting rights on an as converted basis, does not pay dividends, and does not provide any liquidation rights.
AMP Holding Inc.
(A Developing Stage Company)
Notes to Financial Statements
December 31, 2010 and 2009
and for the Period From Inception,
February 20, 2007 to December 31, 2010
Common Stock - The Company has authorized 250,000,000 shares of common stock with a par value of $.001 per share.
Revenue recognition / customer deposits
It is the Company's policy that revenues will be recognized in accordance with SEC Staff Bulletin (SAB) No. 104, "Revenue Recognition". Under SAB 104, product revenues (or service revenues) are recognized when persuasive evidence of an arrangement exists, delivery has occurred (or service has been performed), the sales price is fixed and determinable, and collectability is reasonably assured. Customer deposits include monies from customers to reserve a production slot for conversion of an OEM power train to the AMP all electric power train. The final retail price and delivery date are yet to be determined. Customer deposits are subject to a full refund at the request of the customer.
Advertising
Advertising and public relation costs are charged to operations when incurred. Advertising and public relation expense was approximately $261,000 and $65,000 for the years ended December 31, 2010 and 2009 and $543,000 for the period from inception to December 31, 2010, respectively.
Income taxes
With the consent of its shareholders, at the date of inception, AMP elected under the Internal Revenue Code to be taxed as an S corporation. Since shareholders of an S corporation are taxed on their proportionate share of the Company’s taxable income, an S corporation is generally not subject to either federal or state income taxes at the corporate level. On December 28, 2009 pursuant to the merger transaction with TSO, Inc. the company revoked its election to be taxed as an S-corporation. As no taxable income has occurred from the date of this merger to December 31, 2010 and any deferred tax assets would be fully reserved, no provision or liability for federal or state income taxes has been included in the financial statements. Net operating losses of approximately $3,600,000 are available for carryover to be used against taxable income generated through 2030. TSO had not filed income tax returns during its period as a shell company.
Uncertain tax positions
The Company adopted the provisions of Accounting for Uncertainty in Income Taxes on January 1, 2009. Those provisions clarify the accounting and recognition for income tax positions taken or expected to be taken in the Company’s income tax returns. The Company’s income tax filings are subject to audit by various taxing authorities. The years of filings open to these authorities and available for audit are 2007 - 2009. The Company's policy with regard to interest and penalties is to recognize interest through interest expense and penalties through other expense. In evaluating the Company’s tax provisions and accruals, future taxable income, and the reversal of temporary differences, interpretations and tax planning strategies are considered. The Company believes their estimates are appropriate based on current facts and circumstances.
Research and development costs
The Company expenses research and development costs as they are incurred. Research and development expense incurred was approximately $2,620,000 and $1,140,000 for the years ended December 31, 2010 and 2009, and $4,779,000 for the period from inception to December 31, 2010, respectively, consisting of consulting, payroll, payroll taxes, engineering temporaries, purchased supplies, legal fees, parts and small tools.
Basic loss per share
Basic loss per share is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. At December 31, 2010 and 2009, no stock equivalents were included in the earnings per share computation because their inclusion would be anti-dilutive.
AMP Holding Inc.
(A Developing Stage Company)
Notes to Financial Statements
December 31, 2010 and 2009
and for the Period From Inception,
February 20, 2007 to December 31, 2010
Related party transactions
Certain stockholders and stockholder family members have advanced funds or performed services for the Company. These services are believed to be at market rates for similar services from non-related parties. Related party accounts payable are segregated in the balance sheet. An experimental vehicle was sold to a stockholder in 2010 for $25,000 which also approximates the selling price to non-related parties.
Reclassifications
Certain reclassifications were made to the prior year financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operation or shareholders’ equity.
Subsequent events
The Company evaluates events and transactions occurring subsequent to the date of the financial statements for matters requiring recognition or disclosure in the financial statements.
Between January 1, 2011 and March 29, 2011 the Company entered into subscription agreements with various accredited investors who purchased shares of the Company’s common stock for an aggregate purchase price of $1,088,065 less offering costs of $107,699 plus purchase warrants of 107,699 which are immediately exercisable at $0.60 per share.
On January 12, 2011, the Company entered into an agreement appointing an officer of the Company. The Company has agreed to pay the officer $150,000 per year and issued an option to purchase 200,000 shares of common stock over ten years with an exercise price of $0.81 per share.
2. LONG-TERM DEBT:
Long-term debt consists of a $31,432 note payable to a bank due in monthly installments of $635 including interest at 5.04%, with the final payment due August 2015. The note is secured by equipment which has a net book value of $31,199 at December 31, 2010. Aggregate maturities of long-term debt are as follows:
3. SHAREHOLDER ADVANCES:
Shareholder advances are unsecured, originally due at the earlier of a closing of financing by the Company or November 30, 2011 with interest at 3%.
4. LEASE OBLIGATION:
In December 2009 the Company began leasing operating facilities under an agreement expiring on September 30, 2011. Future annual minimum lease payments under the agreement are $76,500 for the year ending December 31, 2011. Prior to December 2009 the Company leased office/warehouse space under terms of an operating type lease with monthly payments of $1,650.
5. STOCK BASED COMPENSATION:
The Company maintains, as adopted by the board of directors, the 2010 Incentive Stock Plan (the plan) providing for the issuance of up to 2,000,000 options to employees, officers, directors or consultants of the Company. Incentive stock options granted under the plan may only be granted with an exercise price of not less than fair market value of the Company’s common stock on the date of grant (110% of fair market value for incentive stock options granted to principal stockholders). Non-qualified stock options granted under the plan may only be granted with an exercise price of not less than 85% of the fair market value of the Company’s common stock on the date of grant. Awards under the plan may be either vested or unvested options. The unvested options generally vest ratably over eight quarters. The plan provides that unless otherwise determined, each option expires ten years from the date of grant.
AMP Holding Inc.
(A Developing Stage Company)
Notes to Financial Statements
December 31, 2010 and 2009
and for the Period From Inception,
February 20, 2007 to December 31, 2010
In addition to the plan, the Company maintains other stock based compensation arrangements. These arrangements provide for the issuance of warrants and options to purchase common stock of the Company. The terms and awards of the specific arrangements vary.
The fair value of each option award is estimated on the date of grant using a lattice-based option valuation model that uses assumptions concerning expected volatility, expected term, and the expected risk-free rate of return. For the awards granted in 2010 and 2009, the expected volatility was estimated by management as 50% based on a range of forecasted results. The expected term of the awards granted is assumed to be the contract life of the options (two, three, five or 10 years as determined in the specific arrangement). The risk-free rate of return was based on the U.S. Treasury yield curve in effect on the date of grant. The grant-date fair value of the options and warrants granted during 2010 and 2009, ranged from $0.11 to $0.46.
The following table summarizes the number of units and weighted-average exercise price of options granted pursuant to the Plan as of December 31, 2010 and 2009:
The following table summarizes the number of units and weighted-average grant-date fair value of non-vested options in the Plan as of December 31, 2010 and 2009:
The estimated weighted-average remaining term of options outstanding at December 31, 2010 is 71 months. The estimated weighted-average remaining term of options exercisable at December 31, 2010 is 67 months.
AMP Holding Inc.
(A Developing Stage Company)
Notes to Financial Statements
December 31, 2010 and 2009
and for the Period From Inception,
February 20, 2007 to December 31, 2010
The following table summarizes the number of units and weighted-average exercise price of warrants granted pursuant to the Plan as of December 31, 2010 and 2009:
The following table summarizes the number of units and weighted-average grant-date fair value of non-vested warrants in the Plan as of December 31, 2010 and 2009:
The estimated weighted-average remaining term of warrants outstanding at December 31, 2010 and 2009 was 50 and 60 months, respectively. The estimated weighted-average remaining term of warrants exercisable at December 31, 2010 and 2009 was 49 and 60 months, respectively.
Compensation cost charged against income was $1,436,979 and $7,983 for the years ended December 31, 2010 and 2009 and $1,454,719 for the period from inception (February 20, 2007) to December 31, 2010, based upon the fair value of the vested options at the dates of grant. As of December 31, 2010, unrecognized compensation cost of $1,406,423 is related to non-vested awards granted by the Company. This is anticipated to be recognized over an average of three years, through 2013, commensurate with the vesting schedules.
6. RECENT PRONOUNCEMENTS:
On July 1, 2009, the FASB released the Codification becoming the single source of authoritative nongovernmental generally accepted accounting principles (GAAP) in the United States of America. The Codification is a reorganization of current GAAP into a topical format that eliminates the current GAAP hierarchy and establishes two levels of guidance - authoritative and non-authoritative. According to the FASB, all “non-grandfathered, non-SEC accounting literature” that is not included in the Codification would be considered non-authoritative. The FASB has indicated that the Codification does not change current GAAP. Instead, the proposed changes aim to (1) reduce the time and effort it takes for users to research accounting questions and (2) improve the usability of current accounting standards. The Codification is effective for interim and annual periods ending after September 15, 2009.
In December 2007, the FASB issued accounting guidance on Business Combinations defining the acquirer in a business combination as the entity that obtains control of one or more businesses in a business combination and establishes the acquisition date as the date that the acquirer achieves control. Guidance requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date. It also requires the acquirer to recognize contingent consideration at the acquisition date, measured at its fair value at that date. This statement is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The Company adopted this guidance effective January 1, 2009.
AMP Holding Inc.
(A Developing Stage Company)
Notes to Financial Statements
December 31, 2010 and 2009
and for the Period From Inception,
February 20, 2007 to December 31, 2010
In December 2007, the FASB issued accounting guidance on Noncontrolling Interests in Consolidated Financial Statements to improve the relevance, comparability and transparency of the financial information that a reporting entity provides in its consolidated financial statements. This guidance establishes accounting and reporting standards that require the ownership interests in subsidiaries not held by the parent to be clearly identified, labeled and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. It also requires the amount of consolidated net income attributable to the parent and to the non-controlling interest to be clearly identified and presented on the face of the consolidated statement of income. Changes in a parent’s ownership interest while the parent retains its controlling financial interest must be accounted for consistently, and when a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary must be initially measured at fair value. The gain or loss on the deconsolidation of the subsidiary is measured using the fair value of any non-controlling equity investment. This guidance also requires entities to provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. This applies prospectively to all entities that prepare consolidated financial statements and applies prospectively for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company adopted this guidance effective January 1, 2009 and there was no material impact on the Company’s financial statements.
In March 2008, the FASB issued accounting guidance on Disclosures about Derivative Instruments and Hedging Activities, which requires enhanced disclosures about a company’s derivative and hedging activities. This guidance is effective for fiscal years and interim periods beginning after November 15, 2008. The Company adopted this guidance effective January 1, 2009 and there was no material impact on the Company’s financial statements.
In May 2009, the FASB issued accounting guidance that establishes accounting and reporting standards for events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This guidance was effective for fiscal years and interim periods ending after June 15, 2009. The adoption of this guidance did not have any impact on the Company’s financial statements.
In January 2010, the FASB issued new guidance in ASU 820, “Fair Value Measurements and Disclosures”, which requires reporting entities to make new disclosures about recurring or nonrecurring fair value measurements including (i) significant transfers into and out of Level 1 and Level 2 fair value measurements and (ii) information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. This new guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for interim and annual periods beginning after December 15, 2010. There was no material impact on the Company’s financial statements as a result of this pronouncement.
In February 2010, the FASB amended ASU 855, “Subsequent Events-Amendments to Certain Recognition and Disclosure Requirements.” This amends the subtopic that requires an SEC filer to evaluate subsequent events through the date that the financial statements are issued, and no longer requires disclosure of the date through which subsequent events have been evaluated. This alleviates potential conflicts between the Subtopic 855-10 and the SEC’s requirements.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
On March 17, 2010 (the “Dismissal Date”), the Company advised Schumacher & Associates, Inc. (the “Former Auditor”) that it was dismissed as the Company’s independent registered public accounting firm. The decision to dismiss the Former Auditor as the Company’s independent registered public accounting firm was approved by the Company’s Board of Directors on March 17, 2010. Except as noted in the paragraph immediately below, the reports of the Former Auditor on the Company’s consolidated financial statements for the periods commencing November 13, 2007 (inception) (the “Inception Date”) through December 31, 2007 and from the Inception Date through December 31, 2008 did not contain an adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty, audit scope, or accounting principle.
The reports of the Former Auditor on the Company’s consolidated financial statements for the periods commencing on the Inception Date through December 31, 2007 and from the Inception Date through December 31, 2008 contained an explanatory paragraph which noted that there was substantial doubt as to the Company’s ability to continue as a going concern as the Company had negative working capital and stockholders’ deficits.
During the periods commencing on the Inception Date through December 31, 2007 and from the Inception Date through December 31, 2008 and through the Dismissal Date, the Company has not had any disagreements with the Former Auditor on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the Former Auditor’s satisfaction, would have caused them to make reference thereto in their reports on the Company’s consolidated financial statements for such years.
During the period commencing the Inception Date through December 31, 2007, the period commencing the Inception Date through December 31, 2008, and through the Dismissal Date, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.
The Company has requested that Former Auditor furnish it with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the above statements. A copy of this letter is incorporated by reference to this Form 10K as Exhibit 16.1
On March 18, 2010 (the “Engagement Date”), the Company engaged Clark Schaefer Hackett & Company (“New Auditor”) as its independent registered public accounting firm for the Company’s fiscal year ended December 31, 2009. Clark Schaefer Hackett & Company was also engaged to audit the fiscal year ended December 31, 2010. The decision to engage the New Auditor as the Company’s independent registered public accounting firm was approved by the Company’s Board of Directors.
During the two most recent fiscal years and through the Engagement Date, the Company has not consulted with the New Auditor regarding either:
1.
application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report was provided to the Company nor oral advice was provided that the New Auditor concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or
2.
any matter that was either the subject of a disagreement (as defined in Regulation S-K, Item 304(a)(1)(iv) and the related instructions) or reportable event (as defined in Regulation S-K, Item 304(a)(1)(v)).
Item 9A.
Item 9A. Controls and Procedures.
As of the end of the period covered by this Annual Report, our Chief Executive Officer and Chief Financial Officer performed an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on the evaluation and the identification of the material weaknesses in internal control over financial reporting described below, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2010, the Company's disclosure controls and procedures were not effective.
Management's Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our Chief Executive Officer and Chief Financial Officer has conducted an assessment of our internal control over financial reporting as of December 31, 2010. Management's assessment of internal control over financial reporting was conducted using the criteria in Internal Control over Financial Reporting - Guidance for Smaller Public Companies issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. In connection with management's assessment of our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act of 2002, we identified the following material weaknesses in our internal control over financial reporting as of December 31, 2010:
1. The Company has not established adequate financial reporting monitoring activities to mitigate the risk of management override, specifically because there are few employees and only one officer with management functions and therefore there is lack of segregation of duties. In addition, the Company has installed accounting software that does not prevent erroneous or unauthorized changes to previous reporting periods and does not provide an adequate audit trail of entries made in the accounting software. However, although our controls are not effective, these significant weaknesses did not result in any material misstatements in our financial statements.
2. In addition, there is insufficient oversight of accounting principles implementation and insufficient oversight of external audit functions.
3. There is a strong reliance on outside consultants s to review and adjust the annual and quarterly financial statements, to monitor new accounting principles, and to ensure compliance with GAAP and SEC disclosure requirements.
4. There is a strong reliance on the external attorneys to review and edit the annual and quarterly filings and to ensure compliance with SEC disclosure requirements.
Because of the material weaknesses noted above, management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2010, based on Internal Control over Financial Reporting - Guidance for Smaller Public Companies issued by COSO.
Remediation of Material Weaknesses in Internal Control over Financial Reporting
As a small business, without a viable business and revenues, the Company does not have the resources to install a dedicated staff with deep expertise in all facets of SEC disclosure and GAAP compliance. As is the case with many small businesses, the Company will continue to work with its external auditors and attorneys as it relates to new accounting principles and changes to SEC disclosure requirements. The Company has found that this approach worked well in the past and believes it to be the most cost effective solution available for the foreseeable future.
The Company will conduct a review of existing sign-off and review procedures as well as document control protocols for critical accounting spreadsheets. The Company will also increase management's review of key financial documents and records.
As a small business, the Company does not have the resources to fund sufficient staff to ensure a complete segregation of responsibilities within the accounting function. However, Company management does review, and will increase the review of, financial statements on a monthly basis, and the Company's external auditor conducts reviews on a quarterly basis. These actions, in addition to the improvements identified above, will minimize any risk of a potential material misstatement occurring.
On January 12, 2011, Paul V. Gonzales and AMP Holding Inc. entered into an Employment Agreement pursuant to which Mr. Gonzales agreed to serve as the Chief Financial Officer of the Company. Also, on January 12, 2011, Paul J. Wichmann was hired by the Company as Finance Director. Both of these additions to the Company’s staff should help to alleviate various internal control issues.
This Annual Report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules that permit the Company to provide only management's report in this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fourth quarter ended December 31, 2010 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Item 9B. Other Information
None.
PART III
Item 10.
Item 10. Directors and Executive Officers and Corporate Governance
The officers and director of the Company are as follows:
Officers are elected annually by the Board of Directors (subject to the terms of any employment agreement), at its annual meeting, to hold such office until an officer’s successor has been duly appointed and qualified, unless an officer sooner dies, resigns or is removed by the Board.
Our officers and directors have not been the subject of any order, judgment, or decree of any court of competent jurisdiction, or any regulatory agency permanently or temporarily enjoining, barring, suspending or otherwise limiting them from acting as an investment advisor, underwriter, broker or dealer in the securities industry, or as an affiliated person, director or employee of an investment company, bank, savings and loan association, or insurance company or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any securities.
Our officers and directors have not been convicted in any criminal proceeding (excluding traffic violations) and are not the subject of any criminal proceedings which are currently pending.
Background of Executive Officers and Directors
Joseph S. Paresi, Chairman of the Board of Directors
Since 2005, Mr. Paresi has been a partner at L-1 Investment Partners (“L-1”), which manages a fund called Aston Capital Partners LP. L-1 acquired an interest in Viisage Technology Inc. (NSD: VISG) in 2005 and later added two private companies, Securimetrics, Inc. and Integrated Biometric Technology LLC. L-1 then announced its merger with Identix Inc.(NSD: IDNX) which closed in August 2006 (the “Identix Merger”). Upon the closing of the Identix Merger, L-1 created a new parent operating company, L-1 Identity Solutions, Inc. (“L1”), which became listed on the New York Stock Exchange on August 30, 2006 under the symbol ID. Mr. Paresi served as Executive Vice President of L1 and reported directly to the Chairman of the Board of Directors and the CEO of L1. In September 2010, L1 announced its intention to divide the company into two separate entities and to sell its intelligence services business to BAE Systems, Inc. and to sell its technology divisions to the French company, Safran SA. L1 is awaiting final U.S. government approval of the sale, which is anticipated in the first quarter of 2011. Concurrently, Mr. Paresi maintained the positions of chief operating officer and director of Core Software Inc., which specialized in geospatial imagery management. Core Software Inc. shut down its operations in 2008. Since its creation, L1 has acquired 12 additional companies and currently has revenue of over $700,000,000 annually. Additionally, Mr. Paresi was on the board of directors of Rand Worldwide, Inc. (TSX: RND), a company that sold computer added design and manufacturing software (CAD/CAM) and which was sold in 2007. In addition, Mr. Paresi served on the board of QR Sciences Pty Ltd. (ASX: QRS) (“QRS”), which specialized in quantum resonance based explosive detection systems. Mr. Paresi resigned from QRS in 2007 when QRS sold its interest. From 1997 until 2005, Mr. Paresi was a member of the founding team of L-3 Communications Corp (NYSE: LLL) where he held the titles of Corporate Officer, Corporate Vice President of Product Development and President of L-3 Security and Detection Systems. Mr. Paresi has also been a consultant and advisor to ICx Technologies, Inc., which is now part of FLIR Systems, Inc. (NSD: FLIR) and NSM Surveillance, and is currently on the board of directors of the Potomac Institute for Policy Studies in Washington DC. Mr. Paresi Received two Masters Degrees in Electrical Engineering from Manhattan college in 1977 and 1978, respectively, and received an MBA in Finance from Pace University in 1991.
James E. Taylor, CEO and Vice-Chairman of the Board of Directors
Mr. Taylor has three decades of automotive experience in three countries. Most recently, he served as CEO of Hummer during the divesture. Prior to that, he was President of Cadillac, responsible for the product planning, marketing, promotional and sales activities that significantly contributed to Cadillac’s global renaissance. Prior to that, Mr. Taylor was a vehicle line executive for Cadillac, directing the planning, engineering and manufacturing of the award-winning ground up Cadillac CTS, SRX and the STS models, which contributed significantly to the resurgence of Cadillac. Mr. Taylor holds a Bachelors of Science degree in Mechanical Engineering & Management from McMaster University, Ontario, Canada.
Stephen S. Burns, President, Secretary and Director
Mr. Burns is a Co-Founder in AMP and has served as AMP’s CEO since inception. Mr. Burns was appointed as CEO, CFO, Treasurer and Secretary of the Company on December 28, 2009. Mr. Burns had founded several companies, most recently iTookThisOnMyPhone.com, a mobile photo and video-sharing technology company, MobileVoiceControl, Inc. a developer of high-end speech recognition software for smartphones sold to Nuance Communications (NASDAQ:NUAN), Inc. in 2006, AskMeNow [OTC:AKMN] a mobile search and information delivery system sold to Ocean West Holdings in 2005, PocketScript, the leading mobile electronic prescription system in the world which was sold to ZixCorp [NASDAQ:ZIXI] in 2002, Over The Line/AdLink, sold to Gannett Co. Inc. (NYSE:GCI) in 1994 and the design and development of Suspension Parameter Measurement Machines.
Maggie M. Moran, Director
Ms. Moran, from 2006 through 2008, served in the Office of the Governor as Deputy Chief of Staff to Gov. Jon. S. Corzine and from 2005 to 2006 as the Senior Advisor - Director, Executive Search for the then Governor-Elect Jon S. Corzine Transition Team. From 2002 to 2005, Ms. Moran served as the Chief of Staff to the United States Senate, Office of US Senator Jon S. Corzine. Ms. Moran received a BA - Political Science from Douglass College, Rutgers University in 1996 and a Mini MBA Business Essentials Certificate from Graduate School of Business, Rutgers University in 2003. Ms. Moran serves as an Adjunct Professor at the Eagleton Institute of Politics at Rutgers University.
Nancy M. Dunlap, Director
Ms. Dunlap serves as the private counsel and head of the private family office of former New Jersey Governor Jon S. Corzine. Since 1999, Ms Dunlap has overseen all personal investment and legal affairs of Mr. Corzine since he served as CEO of Goldman Sachs. As Mr. Corzine’s manager for his private investments, Nancy has been responsible for all diligence, analysis, and oversight of investment decisions ranging from hedge fund, commercial real estate, and direct private equity and debt investments. Nancy has also been responsible for the corporate and other relationships with financial firms, advisors, and public and private agencies that provide financial and other advisory services to Mr. Corzine and his investment entities. With Mr. Corzine’s appointment as CEO of MF Global in 2010, Nancy will be joining MF Global as a Vice President and Senior Associate to focus on expanding MF Global private client investment and service platform of this leading cash and derivatives broker-dealer. In 2010, Nancy joined the Board of Directors of Equita SIM SpA, an independent financial advisory group based in Milan, Italy. Nancy received a Juries Doctor from St. John’s University School of Law and a Bachelor of Arts from University of Denver. Nancy is a current member of the New York Bar.
Paul V. Gonzales, Chief Financial Officer
Mr. Gonzales is a finance executive with over 30 years experience in financial and operational leadership roles within the automotive industry. From 2009 until 2010, Mr. Gonzales served as the Chief Financial Officer of the General Motors HUMMER Division. From 2008 through 2009, Mr. Gonzales held the position of General Director of Finance and Sales for the General Motors North American Dealer Network Organization representing 6,000 North American Dealerships while managing the treasury functions for GM’s North American International Product Center. From 2007 through 2008, Mr. Gonzales served as the Global and North American Business Lead for General Motors SAP Implementation, and from 2004 until 2007, Mr. Gonzales held the position of General Director of Employment Cost Analysis. From 2002 through 2004, Mr. Gonzales held the position of Finance Director, GM Powertrain Product Development. From 1998 through 2002, Mr. Gonzales was the General Motors Director of North American Manufacturing Finance, and from 1995 through 1998 Mr. Gonzales was General Director of Corporate Accounting. From the years 1993 until 1995, Mr. Gonzales held the position of Director of Material / Production Control and Finance, and from 1989 until 1993, Mr. Gonzales served as Finance Director for New United Manufacturing Inc. (NUMMI). Mr. Gonzales is a Certified Public Accountant, and holds a Bachelor of Science degree in Finance / Accounting from Michigan State University, East Lansing, Michigan.
Family Relationships
There are no family relationships among our directors and executive officers. There is no arrangement or understanding between or among our executive officers and directors pursuant to which any director or officer was or is to be selected as a director or officer.
Involvement in Certain legal Proceedings
To our knowledge, during the last ten years, none of our directors and executive officers has:
·
Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.
·
Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses.
·
Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.
·
Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
·
Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
CORPORATE GOVERNANCE
Committees
We intend to appoint an audit committee. Accordingly, we will designate a director as an "audit committee financial expert", as that term is defined in the rules of the Securities and Exchange Commission.
The Board of Directors does not have a standing nominating committee. Nominations for election to the Board of Directors may be made by the Board of Directors or by any shareholder entitled to vote for the election of directors in accordance with our bylaws and Nevada law.
Meetings may be held from time to time to consider matters for which approval of our Board of Directors is desirable or is required by law.
Code of Ethics
We have not adopted a corporate code of ethics at this time, however we expect to within 90 days of the date hereof.
Compensation of Directors
We have entered into the following arrangements:
On January 13, 2010, the Company entered into a letter agreement with Maggie Moran, a director of the Company, The Company has agreed to pay Ms. Moran $40,000 per year and issue Ms. Moran an option to acquire 325,000 shares of common stock for five years with an exercise price of $0.40 per share. The options vest at 75,000 upon Ms. Moran executing her letter of appointment and 50,000 every six months thereafter.
On August 24, 2010, Ms. Dunlap entered into a letter agreement with the Company pursuant to which she was appointed as a director of the Company in consideration of an annual fee of $40,000. Additionally, the Company granted Ms. Dunlap options to purchase 325,000 shares of the Company’s common stock at $0.60 per share. The options will expire five years from the vesting period with 75,000 options vesting upon the signing of the agreement and 50,000 every six months thereafter for a total of 325,000 shares.
On October 11, 2010, Mr. Taylor entered into a letter agreement with the Company pursuant to which he was appointed as a director of the Company in consideration of an annual fee of $40,000. Additionally, the Company granted Mr. Taylor options to purchase 325,000 shares of the Company’s common stock at $0.68 per share. The options will expire five years from the vesting period with 75,000 options vesting upon the signing of the agreement and 50,000 every six months thereafter for a total of 325,000 shares.
On December 8, 2010, Mr. Paresi entered into a letter agreement with the Company pursuant to which he was appointed as a director of the Company in consideration of an annual fee of $60,000. Additionally, the Company granted Mr. Paresi options to purchase 500,000 shares of the Company’s common stock at $0.72 per share. The options will expire five years from the vesting date with 125,000 options vesting upon the signing of the agreement and 75,000 every six months thereafter for a total of 500,000 shares. In addition, the Company granted Mr. Paresi a common stock purchase warrant to acquire 500,000 shares of common stock exercisable at any time in the five years following the signing of the agreement at an exercise price of $2.00 per share.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and persons who own more than 10% of the issued and outstanding shares of our common stock to file reports of initial ownership of common stock and other equity securities and subsequent changes in that ownership with the SEC. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2010 all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with.
Item 11.
Item 11. Executive Compensation.
The following summary compensation table sets out details of compensation paid to (a) our principal executive officer; (b) each of our two most highly compensated executive officers who served as executive officers during the fiscal year ended December 31, 2010; and (c) up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the fiscal year ended December 31, 2010, except that no disclosure is provided for any named executive officer, other than our principal executive officer, whose total compensation did not exceed $100,000 for the fiscal year ended December 31, 2010:
Summary Compensation Table
(1)
Serve as engineers for Advanced Mechanical Products, Inc., our wholly owned subsidiary.
Employment Agreements
James E. Taylor Employment Agreement
On December 8, 2010, Mr. Taylor entered into an employment agreement with the Company pursuant to which he was appointed as the Chief Executive Officer and Vice-Chairman of the Company in consideration of an annual salary of $300,000. Additionally, Mr. Taylor will be eligible for annual bonuses with a target amount of 100% of his salary. The actual amount of any bonus may be more or less than such target and will be determined by the board of directors in its absolute discretion. Half of the bonus may be paid, in the Company’s discretion, in unregistered shares of common stock at a price per share equal to the weighted average closing price per share of the common stock over the twenty most recent trading days prior to such grant. In addition to the salary and any bonus, Mr. Taylor will be entitled to receive health and fringe benefits that are generally available to the Company’s management employees. As additional compensation, the Company granted Mr. Taylor options to acquire 1,200,000 shares of common stock at an exercise price of $0.72 per share for a period of ten years. The Company also provided Mr. Taylor with a common stock purchase warrant to acquire 600,000 shares of common stock exercisable at any time in the five years following the signing of the agreement at an exercise price of $2.00 per share.
Stephen S. Burns Employment Agreement
On December 8, 2010, Stephen S. Burns entered into an employment agreement with the Company pursuant to which he was appointed as the President of the Company in consideration of an annual salary of $200,000, however, only 50% of the salary ($100,000) will be payable at this time. The remaining 50% of the salary will accrue and be deferred until the board of directors elects to increase the salary to include all or a portion of the deferred salary based on certain events. Additionally, Mr. Burns will be eligible for annual bonuses with a target amount of 100% of his salary. The actual amount of any bonus may be more or less than such target and will be determined by the Board in its absolute discretion. Half of the bonus may be paid, in the Company’s discretion, in unregistered shares of common stock at a price per share equal to the weighted average closing price per share of the common stock over the twenty most recent trading days prior to such grant. In addition to the salary and any bonus, Mr. Burns will be entitled to receive health and fringe benefits that are generally available to the Company’s management employees in accordance with the then existing terms and conditions of the Company’s policies. As additional compensation, the Company granted Mr. Burns options to acquire 300,000 shares of common stock at an exercise price of $0.72 per share for a period of ten years. The Company also provided Mr. Burns with a common stock purchase warrant to acquire 300,000 shares of Common Stock exercisable at any time in the five years following the signing of the agreement at an exercise price of $2.00 per share.
Paul V. Gonzales Employment Agreement
Pursuant to the terms of the Employment Agreement, Mr. Gonzales shall receive an annual salary of $150,000. Additionally, Mr. Gonzales will be eligible for annual bonuses with a target amount of 100% of his salary. The actual amount of any bonus may be more or less than such target and will be determined by the CEO of the Company in his discretion pursuant to certain guidelines and parameters set by the Board of Directors. Half of the bonus may be paid, in the CEO’s discretion in unregistered shares of common stock at a price per share equal to the weighted average closing price per share of the common stock over the twenty most recent trading days prior to such grant. In addition to the salary and any bonus, Mr. Gonzales will be entitled to receive health and fringe benefits that are generally available to the Company’s management employees. As additional compensation, the Company granted Mr. Gonzales options to acquire 200,000 shares of common stock at an exercise price of $0.81 per share for a period of ten years.
The following table sets forth information with respect to the outstanding equity awards of our principal executive officers and principal financial officer during 2010, and each person who served as an executive officer of the Company as of December 31, 2010:
(a)
50,000 options vest every six months from 4/11/2011 to 4/11/2013
(b)
400,000 options vest each year on 12/8/2011 and 12/8/2012
(c)
50,000 options vest every three months from 2/12/2011 to 5/12/2012
(d)
100,000 options vest each year on 12/8/2011 and 12/8/2012
Director Compensation
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information, as of March 29, 2011 with respect to the beneficial ownership of the outstanding common stock by (i) any holder of more than five (5%) percent; (ii) each of the Company’s executive officers and directors; and (iii) the Company’s directors and executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned.
*Executive officer and/or director of the Company.
** Less than 1%
(1)
Except as otherwise indicated, the address of each beneficial owner is c/o Advanced Mechanical Products, Inc., 4540 Alpine Road, Blue Ash, Ohio 45242.
(2)
Applicable percentage ownership is based on 29,534,133 shares of common stock outstanding as of March 29, 2011, together with securities exercisable or convertible into shares of common stock within 60 days of March 29, 2011 for each stockholder. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable or exercisable within 60 days of March 29, 2011 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
Item 13.
Item 13. Certain Relationships and Related Transactions, Director Independence
Transactions with Related Persons
At no time during the last two fiscal years has any executive officer, director or any member of these individuals’ immediate families, any corporation or organization with whom any of these individuals is an affiliate or any trust or estate in which any of these individuals serves as a trustee or in a similar capacity or has a substantial beneficial interest been indebted to the Company or was involved in any transaction in which the amount exceeded $120,000 and such person had a direct or indirect material interest.
Procedures for Approval of Related Party Transactions
Our Board of Directors is charged with reviewing and approving all potential related party transactions. All such related party transactions must then be reported under applicable SEC rules. We have not adopted other procedures for review, or standards for approval, of such transactions, but instead review them on a case-by-case basis.
Director Independence
Board of Directors has determined that Ms. Dunlap, Ms. Moran and Mr. Paresi are each independent directors as of December 31, 2010 based on the definition of independence in the listing standards of the Nasdaq Corporate Governance Rules. The Board of Directors are currently evaluating committee charters with the goal of establishing a Compensation Committee, a Governance and Nominating Committee and an Audit Committee.
Item 14.
Item 14. Principal Accounting Fees and Services.
The total fees charged to the Company for audit fees by Clark Schaefer Hackett & Company, the Company's independent registered public accounting firm, were $51,875 and $11,700 for the years ended December 31, 2010 and 2009, respectively. The Company incurred fees of $8,325 and $3,300 for tax fees for the years ended December 31, 2010 and 2009, respectively. The current policy of the directors, acting as the audit committee, is to approve the appointment of the principal auditing firm and any permissible audit-related services. The audit and audit-related fees were approved by James Taylor, Chief Executive Officer and Vice-Chairman.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules.
The Company’s financial statements filed as part of this report are listed in the Table of Contents and provided in response to Item 8.
Exhibits required by Item 601 of Regulation S-K:
The Company’s financial statements filed as part of this report are listed in the Table of Contents and provided in response to Item 8.
Exhibits required by Item 601 of Regulation S-K:
(1)
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 4, 2010.
(2)
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 4, 2010.
(3)
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 4, 2010.
(4)
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 17, 2010.
(5)
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 18, 2010.
(6)
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 25, 2010
(7)
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 25, 2010
(8)
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 27, 2010
(9)
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 10, 2010
(10)
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 19, 2010
(11)
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 6, 2010
(12)
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 13, 2010
(13)
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 14, 2011
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
In accordance with the Exchange Act, this report has been signed below by the following persons on March 31, 2011, on behalf of the registrant and in the capacities indicated.
Signature
Title
/s/James E. Taylor
Chief Executive Officer and Vice Chairman of the Board of
James E. Taylor
Directors (Principal Executive Officer)
/s/Paul V. Gonzales
Chief Financial Officer (Principal Financial Officer)
Paul V. Gonzales
/s/Joseph S. Paresi
Chairman of the Board of Directors
Joseph S. Paresi
/s/Maggie M. Moran
Director
Maggie M. Moran
/s/Nancy M. Dunlap
Director
Nancy M. Dunlap