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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The information contained in this Annual Report on Form 10-K, including in documents incorporated by reference into this Report, includes some statements that are not purely historical and that are “forward-looking statements.” Such forward-looking statements include, but are not limited to, statements regarding the Company and its management’s expectations, hopes, beliefs, intentions or strategies regarding the future, including its financial condition and results of operations. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in this Annual Report on Form 10-K are based on current expectations and beliefs concerning future developments and the potential effects of our recent acquisition. There can be no assurance that future developments actually affecting the Company will be those anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the parties’ control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements, including the following:
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Our ability to develop and market new products;
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The sufficiency of existing capital resources and the ability to raise additional capital to fund requirements for future operations;
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Uncertainties following any successful acquisition or merger related to the future rate of growth of the acquired business and acceptance of its products and/or services;
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Our ability to attract and retain qualified executives and employees;
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The competitive nature of the engine service market;
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The impact of changes to government regulations and industry standards;
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Our strategic management of investments and acquisitions;
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Vulnerability of our business to general economic downturn; and
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The ability to deliver an adequate rate of growth and manage such growth.
Should one or more of these risks or uncertainties materialize, or should any of the Company’s assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
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PART I
Item 1. Business.
Business Development
History
Clean Transportation Group, Inc. was organized on August 23, 1978 under the laws of the State of Utah as Price Card & Gift, Inc. On May 19, 1988 the company changed its name to Kellard Marble, Inc. and on March 13, 1989, it changed its name to Who's the Greatest. On May 15, 1994, the company changed its name to SwissAmera Enterprises, Inc. and on July 9, 2001 the company again changed its name to Royal Oil & Gas Corp. On June 27, 2008, the company changed its name to Quintana Gold Resources Corp. and, on April 18, 2011, the Company again changed its name to Clean Transportation Group, Inc.
Our initial authorized capitalization was 50,000 shares of common stock and we originally issued 15,000 shares, which shares were subsequently returned to the Company and cancelled. During 1983 and 1984, the Company issued 15,000 shares for cash and services rendered. In May 1988, the Company amended its Articles of Incorporation to change its name to Kellard Marble, Inc. and increase the authorized capitalization to 10,000,000 shares of common stock. The company developed and operated a `Marble Mine' in the Province of British Columbia Canada. Operations on the mine were ceased in late 1988. On March 2, 1989, the company effected a forward split of its issued shares on a forty (40) shares for one (1) share basis, which increased the issued and outstanding shares of common stock to 600,000 shares. On March 13, 1989, the company changed its name to Who's the Greatest. The company planned to acquire the rights to certain syndicated Television Shows, but was not able to raise the necessary funds.
On March 14, 1994, the company changed its name to SwissAmera Enterprises, Inc. and on May 15, 1994, it effected a reverse split of its issued and outstanding shares on a one (1) share for twenty (20) shares basis, which decreased the outstanding common stock to 30,000 shares.
In July 1994, the company issued an aggregate of 920,666 shares of common stock pursuant to Regulation D, Rule 504 of the Securities Act of 1933, as amended (the "Securities Act"). The shares were issued as follows:
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614,000 shares at $ 0.25 per share for cash and a note;
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230,666 shares at $ 0.375 per share for cash;
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40,000 shares at $ 0.375 per share for services rendered; and
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36,000 shares at $ 0.375 per share for a cash advance for the Adams Ranch Oil & Gas Project visibility study.
The company acquired an option to the Adams Ranch situated in the `Medina County, Texas' with the intent to develop and produce the existing oil and gas reserves on the Ranch. The company engaged the services of Tejas Petroleum Engineers, Inc., Dallas Texas' to complete a visibility study on the Adams Ranch Project. Due to the fact that the Oil Reserves were `heavy oils' and could not be recovered through conventional methods, and the Gas Reserves were insufficient, the company decided not to continue with the Project.
On July 22, 1994, the company issued 300,000 shares for an option to acquire a telecommunications company. The shares were held in escrow, which increased the outstanding stock, including the escrowed shares, to 1,250,666.
In 1995, the company issued 4,000 shares of common stock in a private transaction for cash at $2.50 per share, which increased the outstanding stock to 1,254,666 shares.
In 1996, the company elected not to exercise the option given in 1994 and the shares issued in July 1994 and held in escrow were returned to the company's treasury and retired, decreasing the outstanding stock to 954,666 shares.
In 1998, the company issued 70,602 shares of common stock valued at $0.50 per share in exchange for debt, which increased the outstanding stock to 1,025,268 shares.
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In 1999, the company issued 38,646 shares of common stock for cash at $0.70 per share, and 30,000 shares for services rendered valued at $0.70 per share, increasing the total shares outstanding to 1,093,914.
In 2001, the company negotiated the acquisition of certain interests in producing oil and gas properties located in the United States and Canada. Subsequently on July 9, 2001, the company changed its name from SwissAmera Enterprises, Inc. to Royal Oil & Gas Corp. Upon completion of a viability study on the oil and gas interests proposed to be acquired, the company decided not to continue with the acquisition. No stock was issued.
From 1995 to 2005 the company researched several opportunities in the oil and gas Industry, but at all occasions the company was unable to raise the necessary funding due to the fact that the company's stock was not trading on any exchange. Therefore the company decided in 2005 to investigate the possibility of filing a registration statement with the SEC and to seek to have its shares quoted on the OTC Bulletin Board.
On December 31, 2005 the company caused a reverse split of its outstanding common stock on a one share for 10 shares basis, reducing its outstanding stock from 10,939,144 shares to 1,093,952 (adjusted to rounding). All references to common stock have been retroactively restated.
On March 28, 2006 the company issued 16,077,400 shares of common stock at $0.005 per share in payment of a shareholder loan of $80,387 as recorded at December 31, 2005, increasing its issued and outstanding stock to 17,171,352 shares.
On March 31, 2006, the company issued 2,920,156 shares of common stock valued at $0.005 per share in payment of a shareholder loan of $14,601 as recorded on March 31, 2006, increasing its issued and outstanding stock to 20,091,508 shares.
On June 30, 2006 the company issued 2,620,000 of common stock valued at $0.005 per share in payment of a shareholder loan of $13,100 as recorded at June 30, 2006, increasing its issued and outstanding stock to 22,711,508 shares.
On June 26, 2008 the company issued 3,279,360 of common stock valued at $0.025 per share in payment of a shareholder loan of $81,984 as recorded at June 26, 2008, increasing its issued and outstanding stock to 25,990,868 shares.
The company has been inactive with nominal assets and no significant operations since 1995. All shareholders loans accumulated since June 30, 2006 have been paid through the issuance of common stock as of June 26, 2008, valued at par value of $0.05.
On June 27, 2008 the company caused a forward split of its outstanding common stock on a one share for two shares basis, increasing its outstanding stock to 25,990,868.
The company had been inactive with nominal assets and no significant operations since 1995. All shareholders loans have been paid through the issuance of common stock as of June 30, 2006, valued at par value of $0.005.
On May 13, 2011, the Company executed a Definitive Agreement, acquiring 100% of the issued and outstanding shares of Engine Clean Solutions Inc. (“Engine Clean”), a private California company with active revenue generating operations based in California. Accordingly, the Company is no longer considered to be in the development stage.
On May 21, 2011, the Company cancelled 7,657,545 shares of common stock to be returned to the treasury of the Company, which cancellation was done with the agreement of the shareholder.
Effective May 30, 2011 the Company issued 2,500,000 shares of common stock as consideration for the acquisition of 100% of the issued and outstanding stock of Engine Clean Solutions Inc.
On June 23, 2011 the Company issued 5,000,000 shares of common stock valued at $ 0.10 per share for past and future consideration of the Board of Directors and several advisory members.
On June 23, 2011 the Company issued 284,434 shares of common stock valued at $ 0.10 per share to a related party for services rendered.
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As of December 31, 2011 the company has at total of 26,117,767 shares of common stock.
Offices
We are subleasing executive office space at 7810 Marchwood Place, Vancouver BC, Canada V5S 4A6 and our telephone number is (604) 202-3212.
Current Business Activities
By acquiring Engine Clean we have become engaged in the business of offering a full line of automotive maintenance service products to engine manufacturers, distributors, dealers and service centers in the United States and elsewhere. Engine Clean specializes in systems for enhanced cleaning of automotive and truck engines, drive trains, cooling and fuel systems.
Engine Clean, founded in 1991, is based in Los Angeles, California and manufactures service equipment to improve the fuel efficiency, performance, service life, safety, and environmental impact of gasoline and diesel engines. Engine Clean’s customers are diesel engine OEM vendors, manufacturers selling chemicals and equipment to the global automotive aftermarket and commercial transport fleets. OEMs are original equipment manufacturers that design and build automobiles, trucks and agricultural and heavy-duty transport trucks. These vehicles are then serviced by vendors that are authorized distributors appointed by the OEM.
Engine Clean maintains its principal offices at 5112 Heintz Street, Baldwin Park, California, 91706-1819 and its telephone number is (626) 814-3969. Engine Clean maintains a website that can be accessed atwww.engineclean.com andwww.enginecleansales.com
Engine Clean manufactures all of its automotive service equipment that is sold to distributors for fuel system cleaning, diesel fuel system cleaning, coolant exchange, lubrication exchange, differential fluid exchange, power steering fluid exchange, brake bleeding, and tank cleaning. Engine Clean also manufactures a Ford diesel EGR cleaning tool intended for Ford diesel engines.
Engine Clean sells two fuel system cleaning solutions. One is for petrol (with a trade name GX – 301) and one for diesel fuel system cleaning (with a trade name of D-501). It also sells one lubrication cleaning solution under the trade name of EFX-601. The cleaning solutions have been blended for Engine Clean for the past 20 years by a local Southern California chemical vendor. The formulas were derived from US military cleaning solution specifications.
Engine Clean employs a Diesel Fuel Tool connected to an engine with fuel system specific adapters. While the engine is idling, a mixture of cleaning solution and diesel fuel is circulated through the fuel system. This includes the fuel pump, injectors, fuel rails, valves, rings and combustion chamber surfaces. The cleaning solution loosens carbon and other contaminants that are then removed by the Tool’s 5- micron filter or expelled through the exhaust. A 5-micron polypropylene sediment filter traps sediments and other particulate matter, such as dirt, silt, and rust that are in vehicle diesel fuel, lubrication oil, and engine coolant. The 5-micron rating refers to the micron smallest size of particles that are trapped by the polypropylene filter media.
We believe that this treatment can improve engine performance, drivability and fuel economy. Vehicle drivability involves ease of engine starting, engine idling, and engine acceleration without engine roughness, stalling, hesitation or surge. We believe that today’s diesel engines that comply with current Environment Protection Agency (“EPA”) standards are particularly well suited for this treatment, as they use fuel injectors that are prone to failure due to buildup of the contaminants found in diesel fuel. In an article published by the Society of Automotive Engineers (“Deposit Control in Modern Diesel Fuel Injection Systems” – October 10, 2010), it was stated that “modern diesel fuel injection equipment systems are susceptible to the formation of a variety of deposits”, such as in nozzle spray-holes and inside the injector body. This could “lead to increased fuel consumption, loss in power, poor driveabiliy and failure to start.” We believe that our treatment can address some of these issues. We also offer a system for cleaning the fuel tanks of vehicles to remove contaminants that build up over time as they settle out of the fuel in the tank.
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The product line includes cleaning solutions, spare machine parts, and adapter kits to fit new makes and models of automobiles. Engine Clean is currently selling products through distributors in North America, Indonesia, India, South America, Europe and the Middle East. John Deere is distributing the Engine Clean Diesel Fuel Tool in Canada, Germany, and France. Products offered by Engine Clean are outlined below:
The Fuel Tool
Designed and intended to clean components of the fuel intake system, including:
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Air Plenum
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Throttle Body
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Air Bypass Valve
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Ports
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Injectors
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Valves
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Combustion Chambers
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Oxygen Sensors
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Catalytic Converters
The Oil Tool
Designed and intended to perform the following:
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Purges old oil from engine using shop air
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Injects clean oil into oil galleys preventing dry starts
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Eliminates Oil Carryover during oil changes
The Diesel Fuel Tool
Designed and intended to clean the fuel and combustion system including:
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Lines
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Injector Pump
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Fuel Injectors
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Removes Carbon, Gums and Varnish
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Restores Throttle Response
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Restores Fuel Efficiency
Cleaning Solutions
Designed to work with the Oil and Fuel Tools:
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Fuel system cleaner
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Diesel fuel system cleaner
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Oil system cleaner
Fluid Services
The vehicle fluid systems we address:
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Coolant system service
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Power steering service
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Differential Service
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Brake Bleeder Service
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Diesel EGR Service
Diesel Fuel Tank Cleaning Machine
Designed to clean fuel storage tanks:
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Fuel Storage Tank Cleaning Machine
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Vehicle Fuel Tank Cleaning Machine
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Fluid services referenced above refers to the range of fluid exchange service recommend by vehicle manufacturers to maintain vehicle warranties and provide for extended engine life beyond the new car warranty period. They include fuel service, diesel fuel service, engine oil service, differential gear box exchange, coolant exchange, brake system flushing, and power steering service. Engine Clean provides tools and machines that help service technicians perform fluid exchange service according to manufacturer’s specifications.
Engine Clean’s Fuel Tool is designed to clean deposits that accumulate in fuel intake systems. Excessive deposits in the intake fuel system can trigger a malfunction indicator light by an on board diagnostic sensor and cause a vehicle to fail an emissions inspection program. Fuel system intake cleaning is an OEM authorized service and an approved emissions inspection station maintenance procedure for licensed emissions technicians.
The federal government mandates minimum detergent requirements for gasoline to minimize the emissions problems associated with fuel system intake deposits. These detergents are sold to automotive service facilities for fuel system maintenance. A fuel system service using fuel system cleaning and detergents in machines like Engine Clean’s Fuel Tool is intended to cleanse an engine to enable the vehicle to pass an emission inspection retest.
U.S. patents 6,263,889 & 6,298,947 detail how the Oil Tool purges old oil from the engine, injects clean oil into oil galleys, and helps prevent dry starts. Clean Engine has also secured an oil analysis performed by Herguth Laboratories detailing the effective of this service.
Engine Clean`s overall strategy is to first identify targeted OEM manufacturer clients, establish corporate relationships that lead to distributors/dealers, and then implement roll-out plans to the distributor’s service location base. Engine Clean targets OEM manufacturers that have a significant network of service locations for their products. Targeted OEM manufactures include makers of key engine components such as fuel injectors, makers of brand-name engines and companies that sell complete vehicles. Our focus is in the heavy-duty segment, meaning that we will seek out OEMs who specialize in diesel engines. We intend to establish corporate relationships whereby our OEM partners validate the benefits of our products and then recommend their use as part of the normal maintenance cycle of the vehicle. As a consequence, we anticipate that our equipment will be sold into the service locations of the OEM partner. Engine Clean offers adapters that enable its tools to fit a wide range of vehicles. Management believes that fluid exchange and engine cleaning services could create additional revenue opportunities for service locations.
Target Market
Engine Clean‘s specific target market is medium to heavy-duty trucks. We estimate that there are between three and five million medium to heavy-duty trucks in operation in the United States based on available U.S. EPA data. Engine Clean’s customers are the service locations for diesel engine OEM vendors, manufacturers selling chemicals and equipment to the global automotive aftermarket and commercial transport fleets. Engine Clean provides a range of services for both diesel and petrol vehicles.
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Sales and Marketing
Our sales and marketing strategy will consist of several elements. First, we intend to present Engine Clean technology to potential target companies at industry conferences and trade shows. We intend to focus on customers referred to us by independent agents. We also intend to maintain a high public profile through announcements, press releases and advertising. We have forged channel relationships with a major supplier of chemicals to the global automotive industry. The sales team from the chemical vendor introduces us to accounts when there is a need for equipment in addition to the chemicals provided by the vendor. We do not have a written agreement with the chemical vendor; rather our relationship is based on personal relationships between Engine Clean sales and the sales team of the chemical vendor. Our major customer was introduced to us through this chemical supplier. Our relationship with this vendor is at an active stage, with both companies being represented in selected accounts. We intend to develop similar relationships with other vendors of chemicals to the vehicle maintenance market. Two customers represented 79% of our revenues in 2010 (TIG Distribution (John Deere) - 67% and Moc Distribution NE - 12%). Our largest customer in 2009 was TIG Distribution (John Deere) representing approximately 56% of sales. We do not have written agreement with any of our principal customers. We expect this concentration to decrease as our customer base grows. There is no guarantee that our customer base will grow.
Engine Clean plans to expand its business in both North America and the rest of the World as business warrants and funds are available. During 2012, we intend to hire an Executive Vice President of Sales and Marketing. We anticipate looking at candidates that have strong ties to the heavy-duty transportation industry. Subsequently and as funds are available, we plan on adding up to 14 regional sales managers to provide sales coverage in North America. We would expect to add these sales managers over the next four years; six in 2012, two in 2013 and three in each of 2014 and 2015.
Management estimates that our selling and marketing expenses will be approximately $500,000 in 2012, $1.0 million in 2013, and up to $4.0 million by 2015. These projections by management are premised on our ability to secure necessary funding and realize future sales that can support the expenditure. To fund these initial efforts, we will most likely raise funds through the private sale of our securities, although we have not entered into any agreement or arrangement for the possible sale of our securities. There can be no assurance that we will be able raise the necessary funds and/or realize sufficient sales to reach these goals.
Of the $500,000 projected for selling and marketing expenses in 2012, we anticipate $100,000 will be budgeted for advertising, which amount would significantly increase in subsequent year as business warrants. The balance of selling and marketing expenses projected for 2012 would be for hiring up to six new regional sales persons and would include salaries, commissions and travel and entertainment expenses estimated for the new sales persons. Initial marketing activities have commenced and are focused on the U.S. market. However, we will engage in limited marketing activities outside of the U.S. and North America during 2012, which will be limited to attendance at selected trade shows and from leads generated from our web site.
Our overall marketing strategy is to first identify targeted OEM manufacturer clients, establish corporate relationships that lead to distributors/dealers, and then implement direct sales campaigns for dealers identified as potential customers. We plan to target OEMs that have a significant presence in diesel engines, as we believe our products are well-suited to this particular segment. Because fuel injectors are typically sensitive to contaminants and residues found in diesel fuel, it is our belief that diesel engine manufacturers have significant warranty repair costs, which is an incentive for products that clean engine systems. Our target markets are new-car dealerships and after-market automotive service locations with maintenance programs for fluids in various vehicle systems, such as engine oil, braking, cooling, transmission and others. We plan to conduct future advertising programs to market this service.
Engine Clean will routinely sell to customers on credit. Typical terms are 2% - 10, net 30, which means that invoices are due within 30 days, but customers are given a 2% discount if they pay the invoice within 10 days. International sales are conducted via credit card or wire transfer with payment confirmed prior to shipping.
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Trademarks and Copyrights
Engine Clean does not own trademarks or copyrights at this time. In January 2007, Engine Clean released three new products, the Fuel Tool, the Diesel Fuel Tool, and the Oil Tool. These three new products were protected by five Engine Clean U.S. patents: U.S. 5,271,361; 5,833,765; 6,298,947; 6,263,889; and 7,111,651B2. All of these patents have recently expired.
Markets and Competition
Engine Clean operates in a highly competitive marketplace. Our principal competitors include SPX Corporation, Wynn’s Oil, BG Products, Moc Products, Justice Brothers, Bardahl, Kenvo, RTI(Bosch), Motorvac(UView), Flow Dynamics, Granitize, and AEC. Most of our competitors are larger and better financed than Engine Clean and there is no assurance that we can successfully compete with these businesses.
Employees
Engine Clean presently has 5 full time employees, three part-time employees and one consultant. It is anticipated that during the next 12 months, Engine Clean will add approximately 3 new employees for product assembly. Engine Clean employees are not members of any union, nor have they entered into any collective bargaining agreements, nor is it anticipated in the near future. It is believed that Engine Clean’s relationship with its employees is good. CTGI does not have employees other that its directors and officers.
Technical Expertise
Certain Engine Clean customers require specialized adapters for their engines and engine subsystems or their fluid products. Engine Clean has its own machine shop to design, prototype and manufacture custom adapters as needed. Engine Clean manufactures fuel tools, oil tools, diesel fuel tools and cleaning machines from components sourced from third-party vendors. These components are widely available from a number of vendors and we do not anticipate difficulties in securing the raw materials. Engine Clean resells a limited quantity of cleaning solutions, sourced from independent contract manufacturers and packaged under the Engine Clean brand. The raw materials for these solutions are widely available from specialty chemical manufacturers such as Lubrizol. Engine Clean Tools are sold primarily without cleaning solutions so as to avoid conflicts with our current and potential channel partners.
Government Regulation
We believe that Engine Clean’s operations are not materially affected by government regulations and agencies, despite regulations established by such agencies as the California Air Resources Board (“ARB”), the US EPA and environmental agencies in Europe and Asia. As an example, recent stringent regulatory fuel and emissions standards for new diesel vehicles and cleaner diesel fuels sold in North America, have created demand for diesel fuel system cleaning machines, exhaust recirculation cleaning services, and diesel fuel tank cleaning machines. These machines and associated fluids, such as those offered by Engine Clean, are intended to help keep engines operating as close to factory specifications as possible. These new regulations and new generation cleaning equipment are also the basis of many new international standards for greenhouse gas control programs.
Federal Clean Air Acts and California ARB regulations are of such stringency that vehicle manufacturers have adopted high-pressure injection systems to meet emissions standards. Fuel and oil contaminants can cause a variety of injector problems including rough start, poor idle, poor engine performance and fuel efficiency and increased emissions. When injector problems trigger On-Board Diagnostic (“OBD”) fault codes or cause drivability problems, new car dealers must return the vehicles to OEM specifications on the first service visit. If the problem occurs on a second or third visit, the consumer can return the vehicle to the dealer under many state “lemon laws.” We believe these regulations do not materially affect Engine Clean’s business, but rather can create demand for its equipment.
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Facilities and website
Engine Clean maintains its principal offices at 5112 Heintz Street, Baldwin Park, California 91706. The 3 buildings rented by Engine Clean comprise approximately 7,500 square feet for its machine shop, product assembly, shipping and adapter manufacturing, and storage. The facility has approximately 500 square feet of office space. The buildings are rented from the original founder of Engine Clean – The Flynn Family Trust. Rental payments are $4,678 per month.
We currently use as our executive offices the business office of our Secretary and director, Delbert G. Blewett, in Vancouver, BC. We have no written agreement and currently pay no rent for the use of the facilities. We have no current plans to secure additional commercial office space.
Our website address is http://www.ctgi-inc.com. Information on or accessed through our website is not incorporated into this Annual Report on Form 10-K and is not a part of this Form 10-K.
Industry Segments
We operate in a single industry segment, namely Engine Maintenance.
Item 1A. Risk Factors.
This item is not required for a smaller reporting company.
Item 1B. Unresolved Staff Comments.
This item is not required for a smaller reporting company.
Item 2. Description of Property.
Engine Clean maintains its principal offices at 5112 Heintz Street, Baldwin Park, California 91706. The 3 buildings rented by Engine Clean comprise approximately 7,500 square feet for its machine shop, product assembly, shipping and adapter manufacturing, and storage. The facility has approximately 500 square feet of office space. The buildings are rented from the original founder of Engine Clean – The Flynn Family Trust. Rental payments are $4,678 per month.
We currently use as our executive offices the business office of our Secretary and director, Delbert G. Blewett, in Vancouver, BC. We have no written agreement and currently pay no rent for the use of the facilities. We have no current plans to secure additional commercial office space.
Item 3. Legal Proceedings.
There are no material pending legal proceedings to which the company or any subsidiary is a party, or to which any property is subject and, to the best of our knowledge, no such action against us is contemplated or threatened.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
DESCRIPTION OF SECURITIES
Common Stock
We have authorized 200 million shares of common stock, par value $0.001 per share. All shares of common stock have equal rights and privileges with respect to voting, liquidation and dividend rights. Each share of common stock entitles the holder thereof:
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to one non-cumulative vote for each share held of record on all matters submitted to a vote of the stockholders;
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to participate equally and to receive any and all such dividends as may be declared by the board of directors; and
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to participate pro rata in any distribution of assets available for distribution upon liquidation.
Holders of our common stock have no preemptive rights to acquire additional shares of common stock or any other securities. Our common stock is not subject to redemption and carries no subscription or conversion rights.
Preferred Stock
We have authorized 20 million shares of preferred stock, par value $0.001 per share. Our board of directors has the ability to set new classes, series, and other terms and conditions of the preferred shares. Preferred shares may be issued from time-to-time at one or more series in the discretion of the board of directors. The board is authorized to establish the number of shares to be included in each such series and fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof. No shares of preferred stock have been issued as of the date hereof.
Market Price of, and Dividends on, Our Common Equity and Other Stockholder Matters
There is not currently a public trading market for our common stock, although we have made an application to have our shares quoted on the OTC Bulletin Board. The application consists of current corporate information, financial statements and other documents as required by Rule 15c2-11 of the Securities Exchange Act of 1934.
Inclusion on the OTCBB will permit price quotations for our shares to be published by that service. Although we intend to request that an application to the OTCBB be submitted, we do not anticipate a public trading market in our shares in the immediate future. Any future secondary trading of our shares may be subject to certain state imposed restrictions. Except for the application to the OTCBB, there are no plans, proposals, arrangements or understandings with any person concerning the development of a trading market in any of our securities. There can be no assurance that our shares will be accepted for trading on the OTCBB or any other recognized trading market. Also, there can be no assurance that a public trading market will develop following acceptance by the OTCBB or at any other time in the future or, that if such a market does develop, that it can be sustained.
The ability of individual stockholders to trade their shares in a particular state may be subject to various rules and regulations of that state. A number of states require that an issuer's securities be registered in their state or appropriately exempted from registration before the securities are permitted to trade in that state. Presently, we have no plans to register our securities in any particular state.
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Transfer Agent
The Company has designated as its transfer agent, Standard Registrar & Transfer Company, Inc., 12528 South 1840 East, Draper, Utah 84020. As of May 31, 2012 we have 127 stockholders of record of our issued and outstanding common stock based upon a shareholder list provided by our transfer agent.
Penny Stock Rule
It is unlikely that our securities will be listed on any national or regional exchange or The Nasdaq Stock Market in the foreseeable future. Therefore our shares most likely will be subject to the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for broker-dealer transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The SEC generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is:
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registered and traded on a national securities exchange meeting specified criteria set by the SEC;
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authorized for quotation on The Nasdaq Stock Market;
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issued by a registered investment company;
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excluded from the definition on the basis of price (at least $5.00 per share) or the issuer's net tangible assets; or
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exempted from the definition by the SEC.
A broker-dealer who sells penny stocks to a person other than an established customer or accredited investor is subject to additional sales practice requirements. An accredited investor is generally defined as a person with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse.
For transactions covered by these rules, a broker-dealer must make a special suitability determination for the purchase of such securities and must receive the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, a monthly statement must be sent to the client disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealers to trade and/or maintain a market in our common stock and may affect the ability of stockholders to sell their shares.
These requirements may be considered cumbersome by broker-dealers and could impact the willingness of a particular broker-dealer to make a market in our shares, or they could affect the value at which our shares trade. Classification of the shares as penny stocks increases the risk of an investment in our shares.
Rule 144
Rule 144, promulgated under the Securities Act of 1933, is the common means for stockholders to resell restricted securities and for affiliates, to sell their securities, either restricted on non-restricted (control) shares. Rule 144 was amended by the SEC on February 15, 2008. Some of our current outstanding common shares are deemed restricted securities. Those shares not considered restricted securities had restrictions removed pursuant to Rule 144 or other applicable exemption.
Under the amended Rule 144, an affiliate of a company filing reports under the Exchange Act who has held their shares for more than six months, may sell in any three-month period an amount of shares that does not exceed the greater of:
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·
the average weekly trading volume in the common stock, as reported through the automated quotation system of a registered securities association, during the four calendar weeks preceding such sale, or
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1% of the shares then outstanding.
Sales by affiliates under Rule 144 are also subject to certain requirements as to the manner of sale, filing appropriate notice and the availability of current public information about the issuer.
A non-affiliate stockholder of a reporting company who has held their shares for more than six months, may make unlimited resales under Rule 144,provided only that the issuer has available current public information about itself. After a one-year holding period, a non-affiliate may make unlimited sales with no other requirements or limitations.
An important exception to the above described availability of the amended Rule 144 is that Rule 144 is not available for either a reporting or non-reporting shell company, unless the company:
·
has ceased to be a shell company;
·
is subject to the Exchange Act reporting obligations;
·
has filed all required Exchange Act reports during the preceding twelve months; and
·
at least one year has elapsed from the time the company filed with the SEC current Form 10 type information reflecting its status as an entity that is not a shell company.
Because prior to the acquisition of Engine Clean we were classified as a “shell” company, our stockholders who currently hold restricted shares of common stock, will not be able to rely on Rule 144 until one year after we cease to be a shell company and have filed with the SEC adequate information that we are no longer a shell company. The information included in this Form 8-K is intended to be adequate information and, accordingly, our stockholders, both affiliates and non affiliates, will be eligible to use Rule 144 after one year from the filing of this report.
We cannot predict the effect any future sales under Rule 144 may have on the market price of our common stock, if a market for our shares develops, but such sales may have a substantial depressing effect on such market price.
Dividends Policy
We have never declared cash dividends on our common stock, nor do we anticipate paying any dividends on our common stock in the foreseeable future.
Recent Sales of Unregistered Securities
Upon closing the Engine Clean acquisition we issued 2.5 million shares of our common stock to Engine Clean’s two stockholders, Kyung Ae Kim and Robert A. Doty, in exchange for 100% of the outstanding shares of Engine Clean. Also, following the acquisition of Engine Clean, we issued an aggregate of 5.0 million shares of common stock (valued at $0.10 per share) in consideration for services rendered or to be rendered to the following directors and advisors:
·
Dennis dos Santos, President & Director
1,000,000 Shares
·
Delbert G. Blewett, Secretary & Director
500,000 Shares
·
Robert A. Doty, Director
500,000 Shares
·
Vernon L. Lewis, Director
250,000 Shares
·
Link Financial Partners Limited, Advisor
1,250,000 Shares
·
Mertes Man. & Technology Inc., Advisor
1,000,000 Shares
·
Glenn Hunt, Advisor
500,000 Shares
All of the above referenced shares were issued in a private transaction to informed persons pursuant to an exemption from registration provided by Section 4(2) of the Securities Act of 1933.
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INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the provisions of Utah law, the Company has the power to indemnify an individual made a party to a proceeding because they are or were a director of the Company, against liability incurred in the proceeding, provided such individual acted in good faith and in a manner reasonably believed to be in, or not opposed to, the Company’s best interest and, in a criminal proceeding, they had no reasonable cause to believe their conduct was unlawful. Indemnification under this provision is limited to reasonable expenses incurred in connection with the proceeding. The Company must indemnify a director or officer who is successful, on the merits of otherwise, in the defense of any proceeding or in defense of any claim, issue, or matter in the proceeding, to which they are a party to because they are or were a director or officer of the Company, against reasonable expenses incurred by them in connection with the proceeding or claim with respect to which they have been successful. The Company’s Articles of Incorporation empower the board of directors to indemnify officers, directors, agents, or employees against any loss or damage sustained when acting in good faith in the performance of their corporate duties.
The Company may pay for or reimburse reasonable expenses incurred by a director, officer employee, fiduciary or agent who is a party to a proceeding in advance of final disposition of the proceeding, provided the individual furnishes us with a written affirmation that their conduct was in good faith and in a manner reasonably believed to be in, or not opposed to, the Company’s best interest, and undertake to repay the advance if it is ultimately determined that they did not meet such standard of conduct.
Also pursuant to Utah law, a corporation may set forth in its articles of incorporation, by-laws or by resolution, a provision eliminating or limiting in certain circumstances, liability of a director to the corporation or its stockholders for monetary damages for any action taken or any failure to take action as a director. This provision does not eliminate or limit the liability of a director:
i.
for the amount of a financial benefit received by a director to which they are not entitled;
ii.
an intentional infliction of harm on the corporation or its stockholders;
iii.
for liability for a violation relating to the distributions made in violation of Utah law; and
iv.
an intentional violation of criminal law.
The Company By-laws provide for such indemnification. A corporation may not eliminate or limit the liability of a director for any act or omission occurring prior to the date when such provision becomes effective. Utah law also permits a corporation to purchase and maintain liability insurance on behalf of its directors, officers, employees, fiduciaries or agents. The Company currently does not maintain directors’ and officers’ insurance.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, may be permitted to officers, directors or persons controlling our company pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in such Act and is therefore unenforceable.
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Item 6. Selected Financial Data.
This item is not required for a smaller reporting company.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our results of operations and financial condition for the fiscal years ended December 31, 2011 and 2010 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this report.
Forward Looking and Cautionary Statements
This report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will” “should," “expect," "intend," "plan," anticipate," "believe," "estimate," "predict," "potential," "continue," or similar terms, variations of such terms or the negative of such terms. These statements are only predictions and involve known and unknown risks, uncertainties and other factors. Although forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results could differ materially from those anticipated in such statements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
On May 30, 2011, the Company closed the acquisition of Engine Clean Solutions, Inc., a private California corporation (“Engine Clean”) by which Engine Clean became our wholly owned subsidiary.
By acquiring Engine Clean we have become engaged in the business of offering a full line of automotive maintenance service products to engine manufacturers, distributors, dealers and service centers in the United States and elsewhere. Engine Clean specializes in systems for enhanced cleaning of automotive and truck engines, drive trains, cooling and fuel systems.
Engine Clean, founded in 1990, is based in Los Angeles, California and manufactures service equipment to improve the fuel efficiency, performance, service life, safety, and environmental impact of gasoline and diesel engines. Engine Clean’s customers are diesel engine OEM vendors, manufacturers selling chemicals and equipment to the global automotive aftermarket, and commercial transport fleets. Its staff has in the aggregate over 50 years of experience in the automotive arena.
Engine Clean maintains its principal offices at 5112 Heintz Street, Baldwin Park, California, 91706-1819 and its telephone number is (626) 814-3969. Engine Clean maintains a website that can be accessed atwww.engineclean.com andwww.enginecleansales.com
Engine Clean employs a Diesel Fuel Tool connected to an engine with fuel system specific adapters. While the engine is idling, a mixture of cleaning solution and diesel fuel is circulated through the fuel system. This includes the fuel pump, injectors, fuel rails, valves, rings and combustion chamber surfaces. The cleaning solution loosens carbon and other contaminants that are then removed by the Tool’s 5- micron filter or expelled through the exhaust. This treatment improves engine performance, drivability and fuel economy. Modern diesel engines are particularly well suited for this treatment, as they use expensive fuel injectors prone to failure with buildup of the contaminants found in diesel fuel. Engine Clean’s target market ismedium to heavy-duty trucks
Results of Operations
Sales
We derive our revenues primarily from the sales of products to businesses performing engine maintenance. Revenues from sales during the year ended December 31, 2011 were $307,461 compared to $0 for the year ended December 31, 2010. We acquired Engine Clean Solutions on May 30, 2011, recording seven months of revenues of $307,461. The Company had no operations prior to the acquisition, thus the increase in revenues is entirely due to the contribution from Engine Clean Solutions.
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Cost of Goods Sold
Cost of goods sold during the year ended December 31, 2011 was $181,236 compared to $0 for the year ended December 31, 2010. We began consolidating Engine Clean Solutions results in June 2011, with cost of goods sold during the seven months of operations of $181,236.
Operating Expenses
Total operating expenses for the year ended December 31, 2011 were $750,158 compared to $56,699 for the year ended December 31, 2010. The increase of $693,459 is almost entirely due to the operating expenses of Engine Clean Solutions, which we began consolidating in June of 2011. Operating expenses were comprised primarily of general and administrative fees of $730,662. Included in general and administrative fees were one-time expenses totaling $167,500 related to the Acqusition. Board compensation fees were $218,000. Professional fees of $89,753 were incurred during the year, of which $67,853 were related to the Acquisition.
Net Loss
Our net loss for the twelve months ended December 31, 2011 was $644,495 compared to a net loss of $61,356 for the twelve months ended December 31, 2010, an increase of $583,139. The increase is due to general and administrative fees pertaining to becoming a public, operating company and the inclusion of Engine Clean Solutions results beginning in June of 2011. Engine Clean’s loss for the period was $358,372.
Liquidity and Capital Resources
From inception to December 31, 2011, we have incurred an accumulated deficit of $1,387,511. This deficit was incurred through a combination of stock compensation, acquisition expenses, professional fees and expenses supporting our plans to develop our business as well as continued operating losses. Since inception, we have financed our operations primarily through debt and equity financings. We had total current assets as of December 31, 2011 of $385,574 compared to $1,131 in current assets at December 31, 2010. At December 31, 2011, we had current liabilities of $757,688 compared to $149,044 at December 31, 2010.
Expenses incurred during 2010 and a portion of the expenses incurred during 2011 were paid by a stockholder. Because the company has limited cash reserves, we may need to rely on stockholders to pay some expenses until the company becomes profitable.
Our available working capital and capital requirements will depend upon numerous factors, including the sale of our products and services, the timing and cost of expanding into new markets, the cost of developing competitive technologies, the resources that we devote to developing new products and commercializing capabilities, the status of our competitors, our ability to establish collaborative arrangements with other organizations, and our ability to attract and retain key employees.
Inflation
In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.
Off-balance Sheet Arrangements
We have no off-balance sheet arrangements.
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Net Operating Loss
We have accumulated approximately $573,000 of net operating loss carry forwards as of December 31, 2011. Some of this loss carried forward may be offset against future taxable income from the year 2012 through 2031. The use of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. In the event of certain changes in control, there will be an annual limitation on the amount of net operating loss carryforwards that can be used. No tax benefit has been reported in the financial statements for the year ended December 31, 2011 or the year ended December 31, 2010 because it has been fully offset by a valuation reserve. The use of future tax benefit is undeterminable because our current operations are not profitable.
Plan of Operation
The Company recently completed a significant acquisition that is reflected in the accompanying financial statements. The Company is actively pursuing a business model that was changed and expanded in connection with the acquisition of assets. Therefore the significance of these recent acquisitions includes certain factors which represent risks and also require accentuation and explanation.
The current operations of the Company consist of providing equipment and consumables to providers of engine servicing. The Company is focused on providing its products and services to companies in the Heavy duty transportation, automotive and other transportation sectors. The Company intends to grow organically from the expansion of offerings and services to customers, most of whom were acquired as relationships from the acquisitions as well as the acquisition of new business relationships as part of its acquisition strategy.
The financial statements that form part of this annual report include recently acquired assets. The Company has limited operating history with these assets, with management and with the implementation of controls. There can be no assurance that the assets will continue to perform in the manner and to the degree indicated by the financial results reported for the recently completed second quarter.
Recent Accounting Pronouncements
In January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06, Improving Disclosures about Fair Value Measurements, which amends the ASC Topic 820, Fair Value Measurements and Disclosures. ASU No. 2010-06 amends the ASC to require disclosure of transfers into and out of Level 1 and Level 2 fair value measurements, and also requires more detailed disclosure about the activity within Level 3 fair value measurements. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures concerning purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this amendment did not have a material effect on the Company’s consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
This item is not required for a smaller reporting company.
Item 8. Financial Statements and Supplementary Data.
Financial statements for the fiscal years ended December 31, 2011 and 2010 have been examined to the extent indicated in their reports by HJ & Associates, LLC, independent certified public accountants, and have been prepared in accordance with accounting principles generally accepted in the United States of America and pursuant to regulations promulgated by the SEC. The aforementioned financial statements are included herein under Item 15.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
This Item is not applicable.
Item 9A. Controls and Procedures.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our principal executive officer and the principal financial officer (our president), we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective to ensure that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer, recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms relating to our company, particularly during the period when this report was being prepared. Lack of funding and managerial oversight resulted in delinquent filing of both the December 31, 2011 Form 10-K and the March 31, 2012 Form 10-Q.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Clean Transportation Group, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting for our company and its Subsidiary Engine Clean Solutions, Inc. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the company.
Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
Under the supervision and with the participation of our president, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of December 31, 2011, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under this framework, management concluded that our internal control over financial reporting was not effective as of the evaluation date due to the factors stated below.
Management assessed the effectiveness of the Company's internal control over financial reporting as of the evaluation date and identified the following material weaknesses:
19
·
INSUFFICIENT RESOURCES: We have an inadequate number of personnel with requisite expertise in the key functional areas of finance and accounting.
·
LACK OF EXPERTISE: to ensure recognition of material transactions affecting the financial statements, including preparation of those financial statements and related footnotes. We have inexperienced accounting personnel at the subsidiary level, and have been sourcing accounting services from and outside provider that lacks experience.
·
INSUFFICIENT RECORD KEEPING: Failure to record material transactions including liabilities and expenditures incurred on the Company’s behalf; lack of adequate documentation supporting material agreements and arrangements; and inadequate controls over perpetual inventory records to ensure proper inventory calculations. Our accounting system for our subsidiary is insufficient for our needs.
·
INADEQUATE SEGREGATION OF DUTIES: we have a lack of segregation of duties with internal accounting control functions limited to a relatively few individuals. We have insufficient effective oversight over accounting of the Subsidiary.
·
LACK OF AN AUDIT COMMITTEE & OUTSIDE DIRECTORS ON THE COMPANY'S BOARD OF DIRECTORS: We do not have a functioning audit committee or outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.
Management is committed to improving its internal controls and will:
·
continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities
·
increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and
·
may consider appointing outside directors and audit committee members in the future.
Management, including our president, have discussed the material weaknesses noted above with our independent registered public accounting firm. Due to the nature of these material weaknesses, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this annual report.
CHANGES IN INTERNAL CONTROLS
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
The Company will, during upcoming coming Quarter Periods, institute the necessary changes to improve its Internal Controls as best it can. In doing so, will coordinate all accounting and reporting by the Subsidiary to in sync with the Company and to the standards required for a Public Reporting Company.
CEO AND CFO CERTIFICATIONS
Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
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This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.
Item 9B. Other Information.
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
As a result of our acquisition of Engine Clean, two former directors, Fred Hefti and Glen Buckler have resigned and we have added three new directors, Dennis dos Santos, Robert A. Doty and Vernon L. Lewis. Delbert G. Blewett also initially resigned, but was reappointed as a director and corporate secretary. Our current executive officers and directors are as follows:
Name
Age
Position
Dennis dos Santos
52
President, CEO, Chairman and Director
Delbert G. Blewett
78
Secretary and Director
Robert A. Doty
62
Director
Vernon L. Lewis
66
Director
All directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified. There are no agreements with respect to the election of directors. Historically, we have not compensated directors for service on the board of directors or any committee thereof. However following the acquisition, we have issued an aggregate of 2,250,000 shares of our common stock to our four current directors as annual compensation for serving on the board. Directors are also entitled to be reimbursed for expenses incurred for attendance at meetings of the board and any committee thereof. Officers are appointed annually by the board of directors and each executive officer serves at the discretion of the board. We do not have any standing committees or an audit or compensation committee.
No director, person nominated to be a director or executive officer of the company, within the past ten years, nor any control person of the company, within the past five years, has filed any bankruptcy petition, been convicted in or been the subject of any pending criminal proceedings, or is any such person the subject or any order, judgment, or decree involving the violation of any state or federal securities laws.
Currently, there is no arrangement, agreement or understanding between management and non-management stockholders under which non-management stockholders may directly or indirectly participate in or influence the management of our affairs. Present management openly accepts and appreciates any input or suggestions from stockholders. However, the board of directors is elected by the stockholders and the stockholders have the ultimate say in who represents them on the board. There are no agreements or understandings for any officer or director to resign at the request of another person and none of the current offers or directors of are acting on behalf of, or will act at the direction of any other person.
The business experience of each of the persons listed above during the past five years is as follows:
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Dennis dos Santos, P.Eng, President, Chief Executive Officer, Chairman and Director.
Mr. dos Santos became a director, President and Chief Executive Officer on May 30, 2011. Mr. dos Santos has also served on the Board of our subsidiary, Engine Clean, since April 1, 2011 and has more than 20 years of experience in the technology, financial services and transportation industries. Prior to being appointed to our Board, Mr. dos Santos was a director, President and CEO at Digital Fairway Corporation from 2007 to 2009. From 2005 to 2007, Mr. dos Santos was head of research and a member of the executive committee at Northern Securities, a broker-dealer. Previously, Mr. dos Santos was a research analyst for a national brokerage and has more than 10 years in the financial industry. Earlier in his career Mr. dos Santos spent 10 years in the technology sector, during which he led the development of products for a wide range of applications. From 1987 to 1995, he was employed by CP Rail engaged in the development of products for a wide range of technology applications for affiliated companies, including CP’s ocean shipping, trucking, hotel and mining operations. Mr. dos Santos has an undergraduate degree in Computer Engineering from Concordia University in Montreal and an MBA from the University of Pittsburgh. He is a member of the Professional Engineers of Ontario.
Mr. Delbert Blewett B.Sc.Ll.B, Secretary and Director.
Mr. Blewett initially became a director of the Company in May 1995 and served as President until May 30, 2011. He was reappointed to the board on May 31, 2011 as a director and Secretary. Mr. Blewett completed a Bachelor of Science in Agriculture as well as the Bachelor of Laws at the University of Saskatchewan in Canada. He managed his own private law practices for 30 years in the Provinces of Saskatchewan, Alberta and British Columbia, specializing in Business Law. Upon retiring from active law practice in 1994, Mr. Blewett became active in the funding and development of various business ventures. Mr. Blewett is a past member of the Law Society of British Columbia, a non-practicing member of the Law Societies of Alberta and British Columbia. With his legal experience in business law, as well as the development, funding and consulting of various business ventures, Mr. Blewett brings very valuable knowledge, experience and contacts to the Company.
Robert A. (Joe) Doty, Ph.D.
Mr. Doty became a director on May 31, 2011 and, since 2005, has served as President and Chief Executive Officer of our Engine Clean subsidiary. Mr. Doty has more than 30 year’s professional experience in the design, certification, marketing and sales of vehicle emissions testing equipment, diagnostic equipment, fluid exchange equipment, and contractor services to control motor vehicle emissions. He has more than ten years international sales experience in the Asian Pacific region. Mr. Doty also has experience in dealing with legislative and regulatory affairs in North America. Mr. Doty has advanced academic degrees in business and air quality management.
Vernon L. Lewis, Director.
Mr. Lewis became a director of CTGI on May 31, 2011. He has over 30 years of experience in management and sales of construction, forestry, industrial and agricultural equipment. For the past five years he has been employed by Home Depot, a building supply company, as a sales representative. Mr. Lewis is experienced in the field of heavy-duty trucks as well as performance products in the automotive field. Mr. Lewis has been a distributor of automotive products since 1994 and has developed contacts with manufacturers in the heavy trucking industry. Mr. Lewis’ expertise in the automotive industry will complement and enhance the Company and its subsidiary.
We have also appointed Harold Schneider as interim accounting officer, although he is not a director nor does he hold an executive position with the Company.
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Compliance With Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. We believe that these reports were not filed during the fiscal year 2011.
Code of Ethics
CODE OF ETHICS FOR CEO AND SENIOR FINANCIAL OFFICERS
The CEO and all senior financial officers, including the CFO and principal accounting officer, are subject to the following procedures relating to ethical conduct, conflicts of interest and compliance with law:
1.The CEO and all senior financial officers are responsible for full, fair, accurate, timely and understandable disclosure in the periodic reports required to be filed by the Company with the SEC. Accordingly, it is the responsibility of the CEO and each senior financial officer promptly to bring to the attention of the Board of Directors and the Audit Committee, if created, any material information of which he or she may become aware that affects the disclosures made by the Company in its public filings or otherwise assist the Board of Directors and Audit Committee in fulfilling their responsibilities.
2. The CEO and each senior financial officer shall promptly bring to the attention of the Board of Directors and the Audit Committee any information he or she may have concerning (a) significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's financial reporting, disclosures or internal controls. The CEO and each senior financial officer shall promptly bring to the attention of the General Counsel or the CEO and to the Audit Committee any information he or she may have concerning any violation of these procedures, including any actual or apparent conflicts of interest between personal and professional relationships, involving any management or other employees who have a significant role in the Company's financial reporting, disclosures or internal controls.
3. The CEO and each senior financial officer shall promptly bring to the attention of the General Counsel or the CEO and to the Audit Committee any information he or she may have concerning evidence of a material violation of the securities or other laws, rules or regulations applicable to the Company and the operation of its business, by the Company or any agent thereof, or of violation of these procedures.
4. The Board of Directors shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of these procedures by the CEO or the Company's senior financial officers. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to these procedures, and shall include written notices to the individual involved that the Board of Directors has determined that there has been a violation, censure by the Board of Directors, demotion or re-assignment of the individual involved, suspension with or without pay or benefits (as determined by the Board of Directors) and termination of the individual's employment. In determining what action is appropriate in a particular case, the Board of Directors or such designee shall take into account all relevant information, including the nature and severity of the violation, whether the violation was a single occurrence or repeated occurrences, whether the violation appears to have been intentional or inadvertent, whether the individual in question had been advised prior to the violation as to the proper course of action and whether or not the individual in question had committed other violations in the past.
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Item 11. Executive Compensation.
Prior to the acquisition of Engine Clean, we did not have a bonus, profit sharing, or deferred compensation plan for the benefit of employees, officers or directors. We have not paid any salaries or other compensation to our officers, directors or employees for the years ended December 31, 2011 and 2010, except for the stock compensation to directors set forth under the “Compensation of the Board” heading immediately above.
Engine Clean has entered into an agreement with Robert A. Doty to serve as President and Chief Executive Officer of Engine Clean for a term of 36 months. Mr. Doty’s base salary is $100,000 per annum, payable on a semi-monthly basis, subject to annual review. Mr. Doty is also eligible to receive a variable, performance-based bonus pursuant to a schedule to be defined, and may also participate in stock option plans and other benefits when offered, although no such plans have been established. Additionally, Mr. Doty received 500,000 shares for serving on the Company’s Board of Directors. The Board of Directors and Mr. Doty have agreed to defer the effective date of this agreement until a future mutually agreed-upon date.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information as of December 31, 2011 with respect to the beneficial ownership of our common stock, after giving effect to the acquisition of Engine Clean, by (i) each stockholder believed to be the beneficial owner of more than 5% of our common stock, (ii) by each of our directors and executive officers, and (iii) all of our directors and executive officers as a group.
For purposes of the following table, a person is deemed to be the beneficial owner of any shares of common stock (a) over which the person has or shares, directly or indirectly, voting or investment power, or (b) of which the person has a right to acquire beneficial ownership at any time within 60 days after the effective time of the merger. “Voting power” is the power to vote or direct the voting of shares and “investment power” includes the power to dispose or direct the disposition of shares. The number of shares outstanding is 26,117,767. Unless otherwise indicated, the address of each person below will be c/o 7810 Marchwood Place, Vancouver BC, Canada V5S 4A6.
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| | |
Name and Address of BeneficialOwner | Amount and Nature of Beneficial Ownership(1) |
Percent of Class(2) |
5% Beneficial Owners: | | |
Kyung Ae Kim 1701 Playa Vista Drive – Unit 305 Playa Vista, CA 90094 | 1,666,665 | 6.4 % |
Emac Handels AG(3) Churerstrasse 106 Pfaeffikon, 8808 Switzerland | 6,313,801 | 24.2 % |
Rusheen Handels Endereco: Rua 240, No. 303. Quadra 60. Lote 33, Setor Coimbra Goiania- Goias, Brasil | 1,500,000 | 5.74 % |
Fred Hefti 1663 Canford Road Merrit BC, Canada | 1,570,000 | 6.0 % |
Ernst Hiestand 309-641 W. 3rd St. North Vancouver, BC Canada | 1,666,284 | 6.38 % |
Reinhard Hiestand Schuetzenstrasse 22 Pfaeffikon, Switzerland | 1,779,360 | 6.81 % |
Peter Thaler+Thaler Consultants Sommerlistr 3 St Gallen CH-900, Switzerland | 1,528,974 | 5.9 % |
