UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year endedDecember 31, 2013
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number333-139045
ECOLOGIC TRANSPORTATION, INC.
(Exact name of registrant as specified in its charter)
Nevada | 26-1875304 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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1327 Ocean Avenue, Suite B, Santa Monica, California | 90401 |
(Address of principal executive offices) | (Zip Code) |
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Registrant's telephone number, including area code: | 310-899-3900 |
Securities registered pursuant to Section 12(b) of the Act:
N/A | N/A |
Title of Each Class | Name of Each Exchange On Which Registered |
Securities registered pursuant to Section 12(g) of the Act:
N/A
(Title of class)
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. | Yes¨ Noþ | |||||
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. | Yes¨ Noþ | |||||
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days. | Yesþ No¨ | |||||
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registration statement was required to submit and post such files). | Yesþ No¨ | |||||
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. | Yes¨ Noþ | |||||
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. | ||||||
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | Yes¨ Noþ | |||||
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The aggregate market value of Common Stock held by non-affiliates of the Registrant as of June 30, 2013 was $2,408,520 based on a closing price of $0.12 for the Common Stock on June 30, 2013, the last business day of the registrant’s most recently completed second fiscal quarter. For purposes of this computation, all executive officers and directors have been deemed to be affiliates. Such determination should not be deemed to be an admission that such executive officers and directors are, in fact, affiliates of the Registrant.
Indicate the number of shares outstanding of each of the registrant’s
classes of common stock as of the latest practicable date.
26,884,740 Common Shares issued and outstanding as of April 1, 2014.
2
PART I
ITEM 1. | BUSINESS |
This annual report contains forward-looking statements. These statements relate to future events or the Company’s future financial performance. In some cases, forward-looking statements can be identified by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause the Company’s or its industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
The Company’s financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States Dollars and all references to “common shares” refer to the common shares in the Company’s capital stock.
As used in this annual report, the terms "we", "us", "our" and "Ecologic" mean Ecologic Transportation, Inc. and the Company’s wholly-owned subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc., unless otherwise indicated.
Corporate Overview
The Company’s principal executive office is located at 1327 Ocean Avenue, Suite B, Santa Monica, California, 90401. The Company’s telephone number is 310-899-3900.
The Company’s website iswww.ecologictransportation.com.
The Company’s common stock is quoted on the OTC Bulletin Board and the OTCQB under the symbol “EGCT”.
Corporate History
Ecologic Transportation, Inc. (the “Company”) was incorporated in the State of Nevada on September 30, 2005 under the name Heritage Explorations Inc. On June 20, 2008, the Company merged with its wholly owned subsidiary and changed its name to USR Technology, Inc. (“USR”). On June 26, 2008, USR, engaged primarily in the provision of international drilling services, began trading its common stock under the symbol “USRT”.
On July 2, 2009, USR entered into an Agreement and Plan of Merger, whereby USR's wholly owned subsidiary, Ecological Acquisition Corp., was merged into Ecologic Sciences, Inc. (the “Merger”). As a result of, and upon the closing of, the Merger:
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USR issued 17,559,486 restricted shares, or 75.85%, of its common stock to the former shareholders of Ecologic Sciences, Inc.
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USR became the sole shareholder of Ecologic Sciences, Inc, the surviving entity.
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USR changed its name to Ecologic Transportation, Inc. (“EGCT”)
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EGCT (the “Company”) effected a two (2) old for one (1) new reverse stock split of its issued and outstanding common stock. As a result, the Company’s authorized capital decreased from 150,000,000 shares of common stock with a par value of $0.001 to 75,000,000 shares of common stock with a par value of $0.001, and the Company’s issued and outstanding shares decreased from 15,020,017 shares of common stock to 7,510,000 shares of common stock;
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certain of the Company’s pre-closing stockholders canceled 2,000,002 pre-consolidated shares of the Company’s common stock for no consideration for the purpose of making the Company’s capitalization more attractive to future equity investors; and
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certain affiliates of the Company cancelled an aggregate of $108,500 of debt at no consideration.
The name change and forward stock split became effective upon the Over-the-Counter Bulletin Board issuance of the stock trading symbol “EGCT” on June 11, 2009, CUSIP number 27888B 105. In addition, a change in control of the Company resulted from the issuance of the 17,559,486 shares to the former shareholders of Ecologic Sciences, Inc. As a result, the Merger was deemed to be a reverse acquisition for accounting purposes, and Ecologic Sciences, Inc., the acquired entity, is regarded as the predecessor entity as of July 2, 2009. Starting with the periodic report for the quarter ended September 30, 2009, the Company has filed quarterly and annual reports based on the December 31st fiscal year end of Ecologic Sciences, Inc.
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Prior to the Merger, the Company was focused on the drilling services sector of the oil and gas industry. As of the closing date of the Merger on July 2, 2009, the Company became a development stage company in the business of environmental transportation, and was originally structured with three operating subsidiaries under the parent company, Ecologic Transportation, Inc.:
1. | Ecologic Car Rentals, Inc., a Nevada Corporation |
2. | Ecologic Products, Inc., a Nevada Corporation |
3. | Ecologic Systems, Inc., a Nevada Corporation |
The subsidiary companies Ecologic Products, Inc. and Ecologic Systems, Inc. were created to provide an infrastructure and support for Ecologic Car Rentals, Inc, the Company’s primary operations. This infrastructure also intended to provide distribution channels for its environmental products.
Change in infrastructure:
Through the Company’s subsidiary, Ecologic Systems, Inc. (“EcoSys”), the Company intended to develop and manage the “greening” of gas stations along with retrofitting them with alternative energy options and solutions. To build this infrastructure, the Company intended to provide turnkey management, installation, and integration of equipment procurement, equipment installation, contracting, fuel, and regulatory tax incentive and grant subsidization proposals.
On May 13, 2011, EcoSys presented a proposed transaction to the Company’s Board of Directors in which EcoSys would spin out of the Company, and merge with a newly formed company, thereby facilitating EcoSys’ desire to pursue the alternative retail fuel network. The Board requested that further information be presented, with a focus on the financials of the proposed business transaction.
In October, 2011, EcoSys met with Amazonas Florestal, Inc. (“Amazonas”), a corporation headquartered in Florida, and a mutual Non-Disclosure Agreement was executed. After the two companies completed due diligence in January, 2012, it became apparent to the EcoSys management that there existed a viable opportunity to enhance shareholder value by combining EcoSys with Amazonas.
The Company’s Board of Directors continues to support the overall business thesis of EcoSys, but was faced with the reality that the lack of development in the alternative fuel retail market was incompatible with the Company’s cash flow requirements. The Company, as the parent of EcoSys, had been unable to raise sufficient working capital to fully exploit and grow the business of EcoSys due to a number of factors, which, in the opinion of the Company’s management, included:
a.
unfavorable market conditions in the development of retail environmental fuel operations;
b.
a lack of consumer demand of multiple alternative fuels options in the environmental transportation marketplace;
c.
the inconsistent and sometimes contradictory regulatory policies at the local, state and Federal levels regarding alternative fuels;
d.
a reduced government incentive in the form of tax credits and grants to help develop the developing alternative fuel retail market;
e.
the uncertainty of consumer acceptance and commercial adoption in the volumes needed to effectuate the commercialization of the EcoSys business model; and
f.
the uncertain and fluctuating position of car manufacturers regarding what type of alternative fuel vehicles they were going to produce.
The Company’s Board of Directors, therefore, made the strategic decision to focus the majority of its resources and time on the development of its environmental car rental business, and on March 16, 2012, entered into a Share Exchange Agreement and Plan of Merger with Amazonas and EcoSys (the “Share Exchange”). The following actions were taken pursuant to the unanimous written consent of the Board of Directors of the Company on March 15, 2012, in lieu of a special meeting of the stockholders:
a.
EcoSys acquired 100% of the issued and outstanding shares of common stock of Amazonas; and
b.
The Amazonas shareholders (“Amazonas Shareholders”) cancelled 100% (20,000,000 shares) of Amazonas common stock to its treasury; and
c.
EcoSys issued 70,000,000 shares of its common stock (97% of the total issued and outstanding shares), to the Amazonas Shareholders; and
d.
EcoSys issued 60,000,000 shares of its common stock to certain non-affiliates, in connection with the conversion of debt in the amount of $60,000(1); and
e.
As a result of the anti-dilution provision, EcoSys issued 2,020,618 additional shares of common stock to the Company(1), thereby increasing the Company’s holdings in EcoSys to a total of 4,020,618 shares of common stock; or 3% of the total issued and outstanding shares (the “EGCT Shares”); and
f.
A change in controlling entity occurred whereby 97% of EcoSys’ common stock is owned by the Amazonas Shareholders, and 3% of EcoSys’ common stock is owned by the Company (the sole shareholder of EcoSys’ common stock at the Closing Date); and
g.
Amazonas became a wholly owned subsidiary of EcoSys; and
h.
EcoSys changed its name from Ecologic Systems, Inc. to Amazonas Florestal, Ltd. (“AZFL”).
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(1)
Prior to the Closing Date, EcoSys introduced the Amazonas management to the holder of its sixty thousand dollar ($60,000) convertible note in order to have non-affiliate parties associated with Amazonas acquire all or a portion of the note. EcoSys assisted in the facilitation of the acquisition of the note as part of its negotiations with Amazonas regarding the Share Exchange Agreement. The terms of the convertible note allow for the conversion of the debt into common stock at par value. On March 26, 2012, the debt was converted, and an additional sixty million (60,000,000) shares were issued to the note holders. The issuance of common stock pursuant to the terms of the convertible note, affected the total number of EcoSys’ issued and outstanding shares, and triggered an anti-dilution provision as it pertains to the EGCT shares. As a result, an additional 2,020,618 shares were issued to the Company, thereby increasing the EGCT shares to 3%, pursuant to the anti-dilution provision.
As a further condition of the Share Exchange, the officers and directors of EcoSys resigned and Michael Ibar was appointed to serve as a Director and also as the CEO and President of AZFL. Mr. Edward W. Withrow III was also appointed to serve as Director, but resigned his position in March 2013. Mr. Withrow’s resignation did not involve any disagreement with AZFL.
As a result of the Share Exchange, Amazonas became a wholly owned subsidiary of AZFL (formerly EcoSys), the Company owns three percent (3%) of the AZFL outstanding capital stock (the EGCT shares), and the Amazonas Shareholders own ninety-seven percent (97%) of the AZFL outstanding capital stock. For a period of one hundred and eighty (180) days after the Closing, the EGCT Shares were subject to an anti-dilution provision, which protected the three (3%) percent ownership of the issued and outstanding capital stock of AZFL owned by the Company.
On April 19, 2012, AZFL effectuated a 3 for 1 forward stock split, which increased the EGCT shares to 12,061,854 shares of AZFL common stock.
It is intended that the Share Exchange will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and that the Share Exchange shall be a plan of reorganization for purposes of Section 368(a) of the Code. AZFL agreed to cause to register the EGCT shares by filing a Form S-1 with respect to the registration for resale (the “Registration”) by December 31, 2012. The date by which the Form S-1 was to be filed was extended by mutual agreement to January 31, 2013. However, as of the filing of this Annual Report, AZFL has not, to the Company’s knowledge, caused to register the EGCT shares by filing a Form S-1, and is in default of its agreement with the Company. Subsequent to the date upon which the Registration becomes effective, the Board of Directors of the Company shall distribute the EGCT shares to its shareholders through a dividend on a pro rata basis in proportion to their holdings in the Company at the Closing Date. The Company has requested that AZFL complete the registration so the stock distribution can be completed.
Current Business
The Company continues to focus on the development of its environmental transportation business through its two operating subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc.
Ecologic Car Rentals, Inc.
The Company’s primary focus is to develop an environmental car rental operation through its subsidiary, Ecologic Car Rentals, Inc. The Company is currently pursuing viable opportunities within the car rental industry to develop and establish its own brand as a premier “green” car rental company, offering environmentally-friendly vehicles.
Currently, the Company intends to rent only environmentally friendly vehicles in the compact, full-size and sport-utility vehicle classes. The Company intends to rent cars on daily, multi-day, weekly and monthly basis. The Company expects that its primary source of revenue will consist of “base time and mileage” car rental fees which can include daily rates including mileage. The Company expects to also charge an additional fee for one-way rentals to and from specific locations. In addition to rental fees, the Company intends to sell other optional products to the Company’s customers, such as collision or loss damage waivers, supplemental liability insurance, personal effects coverage and gasoline.
The Company intends to have its car rental customers make rental reservations either via the Company’s website, www.ecologictransportation.com, at the Company’s proposed partners’ websites, at the rental counter at any of the Company’s proposed locations, by phone, through online travel websites that the Company intends to partner with, or through a corporate account program in place with their employers.
The Company plans to acquire existing profitable independent car rental operations on a multi-regional basis and convert their operations to an Ecologic platform. The Company has identified certain independent car rental operations that would provide a multi-regional presence, and that can be used as a platform to become the only large “green” independent car rental operation in the U.S.
The Company will incrementally replace the fleets with environmental vehicles over a 12 – 24 month period. The Company’s strategy is to co-brand with the acquisitions for a limited period of time, ultimately completing the rebranding transition to “green” outlets as “Ecologic Car Rentals”.
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On August 2, 2012 the Company entered into a 120-day Letter of Intent (“LOI”) to acquire all of the issued and outstanding shares of ACE Rent A Car, Inc. (“ACE”), an Indiana corporation. A second letter of intent (the “Second LOI”) was entered into between the Company and ACE effective December 1, 2012 and expired on January 31, 2013. Although the Company and ACE have not formally extended the Second LOI, they are currently actively engaged in due diligence. Concurrently with the due diligence process, the Company has been actively seeking primarily equity-based financial support to effect the ACE acquisition. The Company is currently working with financial institutions to secure a combined debt-equity structure offering that will enable the Company to complete its proposed acquisition. ACE is under no obligation, neither verbally nor contractually, to sell ACE to the Company. The Company’s management and ACE are continuing discussions, and ACE is awaiting the Company’s revised acquisition proposal. There can, however, be no guarantee that satisfactory financing arrangements will be secured to complete the acquisition.
Ecologic Products, Inc.
The Company is developing ecologically friendly products through its subsidiary, Ecologic Products, Inc. Initially, the Company’s product line will be focused on transportation and its ancillary markets. In anticipation of the Company’s first rental car location, and need for environmentally friendly car cleaning (one of the most important aspects of a car rental operation), the Company developed Ecologic Shine®, a device and system for near-waterless car washing that delivers cleaning comparable to normal washing without the use of any harmful chemicals. The Ecologic Shine® products and services are:
Ÿ | Good for the environment | Ÿ | Good for the customer |
Ÿ | Good for the vehicle | Ÿ | Good for the bottom line |
On September 24, 2009, through its wholly owned subsidiary Ecologic Products, Inc., the Company entered into a service agreement with Park ‘N Fly Inc., a national off-airport parking company (“Park ‘N Fly”). Pursuant to the terms of the service agreement, the Company agreed to provide car wash services using the Company’s 100% organic, near-waterless cleaning products, known as Ecologic Shine®,for a test marketing period of three years at certain Park ‘N Fly locations. The Company opened in Atlanta, Georgia, on October 19, 2009, San Diego, California, on November 16, 2009, and Los Angeles, California, in December 2009. An additional location was opened in Houston, Texas, on March 24, 2010. Having not met expectations, the Houston location was subsequently closed on June 30, 2010 upon mutual agreement by Park ‘N Fly and the Company.
Management evaluated the results of operations during the test period since 2009, and determined that a continued collaboration with Park ‘N Fly would not be in the Company’s best interest as a viable profit center. In September 2012, the testing sites in Atlanta ceased operations. As of December 1, 2012, the Park ‘N Fly Agreement expired, and operations ceased in Los Angeles and San Diego. The Company is not pursuing any arrangements with Park ‘N Fly in the future.
The Company is currently pursuing wholesale distribution opportunities for the Ecologic Shine®product, including the product placement into major retail automotive chains.
Sales, Marketing, and Advertising
The Company’s primary marketing objective is to convey to its customers and to consumers in general that it is the only transportation company committed to the environment. The Company is seeking to appeal to eco-conscious customers by emphasizing the interrelated environmental and economic benefits of renting the Company’s environmentally-friendly cars, using the Company’s infrastructure, and purchasing the Company’s environmental products.
The Company intends to:
Ÿ | exploit the differentiation of Ecologic Car Rentals from other car rental company brands. |
Ÿ | use direct sales and education to state and municipal government agencies, universities, and corporations committed to environmental efforts. |
Ÿ | capitalize on public relations opportunities available to an all environmental transportation company. |
Ÿ | employ strategic use of electronic and internet distribution, employing state of the art technology to target retail customers seeking “green” transportation, including direct marketing and affinity programs. |
Other than as disclosed above, the Company’s current sales, marketing, and advertising efforts are minimal due to the Company’s size and limited financial resources.
Business Strategy
The Company believes that the growth in demand for environmentally friendly cars, and the increase in major automakers’ production of new eco-friendly car models, has created a unique opportunity for an environmentally-friendly transportation company. The Company intends to execute a comprehensive business strategy, which capitalizes on this unique opportunity. Its business model supports growth, while holding true to its planet-friendly mission.
The Company plans to acquire existing profitable independent car rental operations on a multi-regional basis and convert their operations to an Ecologic platform. The Company has identified certain independent car rental operations that would provide a multi-regional presence, and can be used as a platform to become the only large “green” independent car rental operation in the U.S.
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The Company will incrementally replace the existing fleets of the acquired companies with environmental vehicles over a 12 – 24 month period. The Company’s strategy is to co-brand with the acquisitions for a limited period of time, ultimately completing the rebranding transition to “green” outlets as “Ecologic Car Rentals”.
The Company anticipates that a growing demand for eco-friendly transportation will enable it to expand its initial fleet and increase its rental locations. Further, the Company expects that as costs of gasoline and prices continue to rise, demand for an environmentally-friendly, higher mile per gallon rental cars will increase, and the Company intends to be poised for this demand.
The Company also intends to market its fleet to state and local governments, as well as environmentally conscious organizations. The Company’s business will continue to grow as more and more manufacturers make more hybrids, electric, CNG and other environmental vehicles, which the Company expects will enable it to expand its product offering, and capitalize on its position as the prime mover in the market.
The Company’s intended strategy will be a multi-pronged approach:
1.
Identify acquisition targets for roll up;
2.
Increase its business to expand acquisitions while “greening” the acquisitions; and
3.
Develop new facilities that will also be a platform for the Company’s subsidiary, Ecologic Products,Inc.
The execution of the Company’s business strategy will be contingent upon and require significant financing. There can be no assurance that such financing will become available or, if it does, that it will be offered to the Company on favorable terms. The Company’s ultimate goal is to achieve a national presence in the car rental industry.
Facilities
The Company’s principal executive office is located at 1327 Ocean Avenue, Suite B, Santa Monica, California, 90401. The Company’s telephone number is 310-899-3900, and fax number (888) 899-1433.
The Company’s website is www.ecologictransportation.com.
Employees
As of December 31, 2013, the Company had no employees, excluding the Company’s directors and executive officers. The Company currently has no employees, excluding the Company’s directors and executive officers.
Principal Supplier
KO Manufacturing, Inc.
Ecologic Shine® products are manufactured for Ecologic Shine® by KO Manufacturing. Founded in 1976, KO Manufacturing is headquartered in Springfield, MO.
Competition
For waterless car cleaning services, there are three primary competitors:
Ÿ | ProntoWashis a company based in Argentina with franchises in the United States. All product and delivery systems are manufactured in Argentina, making it costly to import to the U.S. |
Ÿ | GeoWashis a 100% franchised company with global franchisees. |
Ÿ | EcoWashis a 100% franchised company owned and operated in Australia with a third party product supplier. |
Dependence on a Few or Major Customers
The Company was had one major customer during the year. In 2013, 100% of sales were attributable to test marketing of the Company’s product to a major retail automotive chain.
Government Regulation
The Company’s operations will be subject to various federal, state and local laws, regulations, and controls including the leasing and sale of used cars, licensing, charge card operations, reservation policies, privacy and personal data protection, environmental protection, labor matters, insurance, prices, and advertising. The Company believes it is in compliance with any such regulations affecting the Company’s business.
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Intellectual Property
The Company has filed a trademark application with the US office of Trademarks to trademark the name “Ecologic Transportation, Inc.” and the following logo for the Company:
On August 17, 2010, the United States Patent and Trademark Office registered a Service Mark consisting of the words Ecologic Shine® as illustrated below:
Seasonality
There is seasonality only in the car rental sector of the Company. The car rental industry tends to be seasonal. The third quarter, during the peak summer months of July and August, has traditionally been the strongest quarter of the year in terms of numbers of rentals and rental rates.
Research and Development
During the last two years, the Company has not spent any funds on research and development.
Reports to Security Holders
The Company is not required to deliver an annual report to its stockholders, but will voluntarily send an annual report, together with the Company’s annual consolidated audited financial statements upon request. The Company is required to file annual, quarterly and current reports, proxy statements, and other information with the Securities and Exchange Commission. The Company’s Securities and Exchange Commission filings are available to the public over the Internet at the SEC's website athttp://www.sec.gov.
The public may read and copy any materials filed by the Company with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Company is an electronic filer. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Internet address of the site ishttp://www.sec.gov.
ITEM 1A. | RISK FACTORS |
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
ITEM 2. | PROPERTIES |
The Company’s corporate headquarters are located at 1327 Ocean Avenue Suite B, Santa Monica, California 90401. The Company leases its headquarters on a month to month basis (suites B and M) for rent in the amount of $5,600 per month.
The Company believes its current premises are adequate for the Company’s current operations and the Company does not anticipate that it will require any additional premises in the foreseeable future. When and if the Company requires additional space, the Company intends to move at that time. The Company does not foresee any significant difficulties in obtaining any required facilities. The Company currently does not rent or own any real property.
ITEM 3. | LEGAL PROCEEDINGS |
The Company knows of no material existing or pending legal proceedings against it, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of the Company’s directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to the Company.
ITEM 4. | MINE SAFETY STANDARDS |
Not applicable.
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PART II
ITEM 5. | MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS |
In the United States, the Company’s common shares are traded on the OTC Quotation Board “OTCQB – U.S. Registered” under the symbol “EGCT.”The following table sets forth the high and low bid prices for its common stock per quarter as reported by the OTCQB. These prices represent quotations between dealers without adjustment for retail mark-up, markdown or commission and may not represent actual transactions.
The high and low prices of the Company’s common shares for the periods indicated below are as follows:
The Company’s common stock is subject to rules adopted by the Commission regulating broker dealer practices in connection with transactions in “penny stocks.” Those disclosure rules applicable to “penny stocks” require a broker dealer, prior to a transaction in a “penny stock” not otherwise exempt from the rules, to deliver a standardized list disclosure document prepared by the Securities and Exchange Commission. That disclosure document advises an investor that investment in “penny stocks” can be very risky and that the investor’s salesperson or broker is not an impartial advisor but rather paid to sell the shares. The disclosure contains further warnings for the investor to exercise caution in connection with an investment in “penny stocks,” to independently investigate the security, as well as the salesperson with whom the investor is working and to understand the risky nature of an investment in this security. The broker dealer must also provide the customer with certain other information and must make a special written determination that the “penny stock” is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Further, the rules require that, following the proposed transaction, the broker provide the customer with monthly account statements containing market information about the prices of the securities.
Record Holders
The Company’s common shares are issued in registered form. Island Stock Transfer, 100 Second Avenue South, Suite 705S, St. Petersburg, FL, 33701 (Telephone 727-289-0010, Facsimile 727-289-0069) is the registrar and transfer agent for the Company’s common shares.
On, December 31, 2013, the shareholders' list of the Company’s common shares pursuant to Island Stock Transfer showed 89 registered shareholders and 27,584,740 shares outstanding. The total number of shares outstanding stated in the Island Stock Transfer list of 27,584,740 does not include 1) 50,000 shares recorded by the Company but not yet issued to a consultant for services provided in 2013; and 2) a certificate issued in error for 750,000 which is to be cancelled.
Dividends
The Company has not declared any dividends on its common stock since the Company’s inception on December 16, 2008. There is no restriction in the Company’s Articles of Incorporation and Bylaws that will limit the Company’s ability to pay dividends on its common stock. However, the Company does not anticipate declaring and paying dividends to its shareholders in the near future.
Equity Compensation Plan Information
On June 30, 2010, the Company, under its 2009 Stock Option Plan, granted qualified stock options to purchase 435,000 shares of its common stock for five years at $0.473 per share. Of the total options granted, 240,000 were granted to three members of the Board of Directors, 120,000 of which vested on July 2, 2010, and 120,000 of which vested on July 2, 2011. In addition, 195,000 were granted to four consultants, all of which vested on July 2, 2010. The options were valued using the Black-Scholes valuation method at $0.13 per share or $56,550. The full amount was amortized during 2010 and 2011. The Company used the following assumptions in valuing the options: expected volatility 33%; expected term 5 years; expected dividend yield 0%, and risk-free interest rate of 1.49%.
9
On April 19, 2011 the Board of Directors, under the Company’s 2009 Stock Option Plan, granted qualified stock options to its Former Chief Executive Officer and its Chairman of the Board (“Ten Percent Holders”) to purchase 1,750,000 shares of its common stock for five years at $0.32 per share, qualified stock options to five of its employees (“Employee Options”) to purchase 775,000 shares of its common stock for ten years at $0.32, and qualified stock options to four of its directors (“Directors Options”) to purchase 500,000 shares of its common stock for ten years at $0.32, for a total grant of 3,025,000 stock options. Of the total options granted, 1,000,000 were granted to the Company’s Former Chief Executive Officer, which vested quarterly over a 12 month period at 250,000 shares per quarter. Of the total options granted, 750,000 were granted to the Company’s Chairman of the Board which vested quarterly over a 12 month period at 187,500 shares per quarter. Of the total options granted, 775,000 were granted to five employees, which vested quarterly over a 12 month period at 193,750 shares per quarter. Of the total options granted, 500,000 were granted to three directors which vested up to 450,000 at any time after the date of grant and 50,000 were granted to one director which vested up to 50,000 at any time after the date of grant. The value of the options for the Ten Percent Holders, using the Black-Scholes valuation method is $0.27 per share or $472,500. The 775,000 Employee Options and 500,000 Directors Options were valued at $0.30 per share or $382,500. The Company used the following assumptions in valuing the options: expected volatility 120%; expected term 5 years for the Ten Percent Holders and 10 years for the Employee Options and the Directors Options; expected dividend yield 0%, and risk-free interest rate of 1.97%. At April 19, 2011, the Company expensed $150,000 in stock option compensation for the 500,000 options vested any time after the date of grant, and recorded $705,000 of deferred stock option compensation for the balance of the options granted, for a total value of the options granted of$855,000. The Company has fully expensed $855,000 in stock option compensation in 2011 and 2012.
On November 1, 2011, the Company entered into an employment agreement with its Chief Executive Officer, under which the Company granted qualified stock options to purchase 1,500,000 shares of its common stock for five years at an option price of $0.20 per share. The options vest quarterly over a three (3) year period at 125,000 shares per quarter. The options have been valued using the Black-Scholes valuation method at $0.12 per share or $180,000. The Company used the following assumptions in valuing the options: expected volatility 254%; expected term 5 years; expected dividend yield 0%, and risk-free interest rate of .90%. The Company has recorded a total of $180,000 of deferred stock option compensation, of which $60,000 was expensed in 2011, and $60,000 has been expensed during the current year for the 500,000 options vested during the current year. There remains deferred stock option compensation in the amount of $60,000 as of December 31, 2013.
On July 23, 2012, the Company entered into a no-fault Settlement Agreement and Mutual Release to settle all disputes between the Company and its former Chief Executive Officer, Mr. William Plamondon, its former Corporate Secretary, Ms. Erin Davis, and Mr. Plamondon’s business advisory company, R.I. Heller & Co., LLC. Pursuant to the Settlement Agreement, all stock options previously granted to Mr. Plamondon and Ms. Davis were cancelled. As a result, the 1,000,000 options granted to Mr. Plamondon valued at $270,000, and the 250,000 options granted to Ms. Davis valued at $75,000, which were fully vested at the date of the Settlement Agreement were cancelled.
During the years ended December 31, 2013 and 2012, respectively, the Company expensed a total of $60,000and $412,500 in stock option compensation. There remained $60,000and $120,000 in deferred stock option compensation at December 31, 2013 and 2012, respectively.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
The Company did not purchase any of its shares of common stock or other securities during the year ended December 31, 2013.
Recent Sales of Unregistered Securities
The following represents all unregistered securities issued by the registrant during the current period, including sales of reacquired securities, as well as new issues, securities issued in exchange for property, services, or other securities, and new securities resulting from the modification of outstanding securities:
On November 14, 2013, the Company issued 50,000 shares of its restricted common stock for cash in the amount of $5. The shares were valued at $3,500, which has been expensed in the current year and $3,495 has been recorded as additional paid in capital.
On December 17, 2013, the Company issued 60,000 shares of its restricted common stock for services rendered to the Company. The shares were valued at $6,000, which has been expensed in the current year, and $5,980 has been recorded as additional paid in capital.
Exemption From Registration. The shares of Common Stock referenced herein were issued in reliance upon an exemption from registration afforded either under Section 4(2) of the Securities Act for transactions by an issuer not involving a public offering, or Regulation D promulgated thereunder, or Regulation S for offers and sales of securities outside the U.S.
ITEM 6. | SELECTED FINANCIAL DATA |
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
10
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Forward-Looking Statements
This annual report contains forward-looking statements. These statements relate to future events or the Company’s future financial performance. In some cases, forward-looking statements can be identified by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause the Company’s or the Company’s industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
The Company’s consolidated audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with the Company’s consolidated audited financial statements and the related notes for the years ended December 31, 2013 and 2012 that appear elsewhere in this annual report.
As used in this annual report and unless otherwise indicated, the terms “we”, “us”, “our”, “our company” and “Ecologic” refer to Ecologic Transportation, Inc., and its subsidiaries, unless otherwise indicated.
Corporate History
The Company was incorporated in the State of Nevada on September 30, 2005 under the name Heritage Explorations Inc. On June 20, 2008, the Company merged with its wholly owned subsidiary and changed its name to USR Technology, Inc. (“USR”). On June 26, 2008, USR, engaged primarily in the provision of international drilling services, began trading its common stock under the symbol “USRT”.
On April 26, 2009, the Company entered into an agreement and plan of merger, as amended, with Ecologic Sciences, Inc. (formerly, Ecologic Transportation, Inc.), a private Nevada corporation, and Ecological Acquisition Corp., a private Nevada corporation and wholly-owned subsidiary of the Company. Ecological Acquisition Corp. was formed by the Company for the purpose of acquiring all of the outstanding shares of Ecologic Sciences, Inc. Pursuant to the agreement and plan of merger, as amended, Ecologic Sciences, Inc. was to be merged with and into Ecological Acquisition Corp., with Ecologic Sciences, Inc. continuing after the merger as a wholly-owned subsidiary of the Company.
On July 2, 2009, the Company’s wholly-owned subsidiary Ecological Acquisition Corp. was merged into Ecologic Sciences, Inc. with Ecologic Sciences, Inc. being the sole surviving entity under the name “Ecologic Sciences, Inc.” and the Company being the sole shareholder of the surviving entity. Upon closing of the agreement and plan of merger on July 2, 2009, the Company issued 17,559,486 shares of its common stock to the former shareholders of Ecologic Sciences, Inc. in consideration for the acquisition of all of the issued and outstanding common shares in the capital of Ecologic Sciences, Inc. As of the closing date, the former shareholders of Ecologic Sciences, Inc. held approximately 75.85% of the issued and outstanding common shares of the Company.
Prior to the Merger, the Company was focused on the drilling services sector of the oil and gas industry. As of the closing date of the Merger on July 2, 2009, the Company became a development stage company in the business of environmental transportation, and was originally structured with three operating subsidiaries under the parent company, Ecologic Transportation, Inc.:
1. | Ecologic Car Rentals, Inc., a Nevada Corporation |
2. | Ecologic Products, Inc., a Nevada Corporation |
3. | Ecologic Systems, Inc., a Nevada Corporation |
The subsidiary companies Ecologic Products, Inc. and Ecologic Systems, Inc. were created to provide an infrastructure and support for Ecologic Car Rentals, Inc., the Company’s primary operations and distribution channels for its environmental products.
Change in infrastructure:
Through the Company’s subsidiary, Ecologic Systems, Inc. (“EcoSys”), the Company intended to develop and manage the “greening” of gas stations along with retrofitting them with alternative energy options and solutions. To build this infrastructure, the Company intended to provide turnkey management, installation, and integration of equipment procurement, equipment installation, contracting, fuel, and regulatory tax incentive and grant subsidization proposals.
11
The Company’s Board of Directors made the strategic decision to focus the majority of its resources and time on the development of its environmental car rental business, and on March 16, 2012, entered into a Share Exchange Agreement and Plan of Merger with Amazonas Florestal, Inc. (“Amazonas”) and EcoSys (the “Share Exchange”). As a result of the Share Exchange, 97% of EcoSys’ common stock was owned by the Amazonas shareholders (“Amazonas Shareholders”), 3% of EcoSys’ common stock was owned by the Company (the “EGCT Shares”), and a change in control took place whereby Amazonas became a wholly owned subsidiary of EcoSys. On April 11, 2012, EcoSys changed its name to Amazonas Florestal, Ltd. (“AZFL”). For a period of one hundred and eighty (180) days after the closing, the EGCT Shares were subject to an anti-dilution provision, which protected the three (3%) percent ownership of the issued and outstanding capital stock of AZFL owned by the Company.
Prior to the Share Exchange, EcoSys introduced the Amazonas management to the holder of its sixty thousand dollar ($60,000) convertible note in order to have non-affiliate parties associated with Amazonas acquire all or a portion of the note. EcoSys assisted in the facilitation of the acquisition of the note as part of its negotiations with Amazonas regarding the Share Exchange. The terms of the convertible note allowed for the conversion of the debt into common stock at par value. On March 26, 2012, the debt was converted, and an additional sixty million (60,000,000) shares were issued to the note holders. The issuance of common stock pursuant to the terms of the convertible note, affected the total number of AZFL’s issued and outstanding shares, and triggered an anti-dilution provision as it pertains to the shares of the EGCT shares. As a result, an additional 2,020,618 shares were issued to the Company, thereby increasing the Company’s ownership of AZFL to 3%.
On April 19, 2012, AZFL effectuated a 3 for 1 forward stock split, which increased the Company’s holding to 12,061,854 shares of AZFL common stock.
As of December 31, 2013, the Company held 12,061,854 shares of AZFL common stock (the EGCT shares). Management’s intent is to distribute the EGCT shares in the form of a dividend, to the Company’s shareholders of record on March 16, 2012 (the effective date of the Merger), once AZFL has filed an S1 Registration and registers the AZFL Shares. The date by which the Form S1 was to be filed was extended by mutual agreement to January 31, 2013. However, AZFL has not, to the Company’s knowledge, caused to register the EGCT shares by filing a Form S1, and is in default of its agreement with the Company. The Company has requested that AZFL complete the registration so the stock distribution can be completed.
Current Business
The Company continues to focus on the development of its environmental transportation business through its two operating subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc.
Ecologic Car Rentals, Inc.
The Company’s primary focus is to develop an environmental car rental operation through its subsidiary, Ecologic Car Rentals, Inc. The Company is currently pursuing viable opportunities within the car rental industry to develop and establish its own brand as a premier “green” car rental company, offering environmentally-friendly vehicles.
The Company plans to acquire existing profitable independent car rental operations on a multi-regional basis and convert their operations to an Ecologic platform. The Company has identified certain independent car rental operations that would provide a multi-regional presence, and that can be used as a platform to become the only large “green” independent car rental operation in the U.S.
The Company will incrementally replace the fleets with environmental vehicles over a 12–24 month period. The Company’s strategy is to co-brand with the acquisitions for a limited period of time, ultimately completing the rebranding transition to “green” outlets as “Ecologic Car Rentals”.
Currently, the Company intends to rent only environmentally friendly vehicles in the compact, full-size and sport-utility vehicle classes. The Company intends to rent cars on daily, multi-day, weekly and monthly basis. The Company expects that its primary source of revenue will consist of “base time and mileage” car rental fees which can include daily rates including mileage. The Company expects to also charge an additional fee for one-way rentals to and from specific locations. In addition to rental fees, the Company intends to sell other optional products to the Company’s customers, such as collision or loss damage waivers, supplemental liability insurance, personal effects coverage and gasoline.
The Company intends to have its car rental customers make rental reservations either via the Company’s website, www.ecologictransportation.com, at the Company’s proposed partners’ websites, at the rental counter at any of the Company’s proposed locations, by phone, through online travel websites that the Company intends to partner with, or through a corporate account program in place with their employers.
On August 2, 2012 the Company entered into a 120-day Letter of Intent (“LOI”) to acquire all of the issued and outstanding shares of ACE Rent A Car, Inc. (“ACE”), an Indiana corporation. A second letter of intent (the “Second LOI”) was entered into between the Company and ACE effective December 1, 2012 and expired on January 31, 2013. Although the Company and ACE have not formally extended the Second LOI, they are currently actively engaged in due diligence. Concurrently with the due diligence process, the Company has been actively seeking primarily equity-based financial support to effect the ACE acquisition. The Company is currently working with financial institutions to secure a combined debt-equity structure offering that will enable the Company to complete its proposed acquisition. ACE is under no obligation, neither verbally nor contractually, to sell ACE to the Company. The Company’s management and ACE are continuing discussions, and ACE is awaiting the Company’s revised acquisition proposal. There can be no guarantee that satisfactory financing arrangements will be secured to complete the acquisition.
12
As of December 31, 2013, the Company’s primary operations in the car rental business are still in the development stage.
Ecologic Products, Inc.
The Company is developing ecologically friendly products through its subsidiary, Ecologic Products, Inc. Initially, the Company’s product line will be focused on transportation and its ancillary markets. In anticipation of the Company’s first rental car location, and need for environmentally friendly car cleaning (one of the most important aspects of a car rental operation), the Company developed Ecologic Shine®, a device and system for near-waterless car washing that delivers cleaning comparable to normal washing without the use of any harmful chemicals. The Ecologic Shine® products and services are:
Ÿ | Good for the environment | Ÿ | Good for the customer |
Ÿ | Good for the vehicle | Ÿ | Good for the bottom line |
The Company is currently pursuing wholesale distribution opportunities for the Ecologic Shine®product line and continues to seek test marketing of its products through major consumer and automotive retail chains, such as auto supply stores, convenience stores and gas stations, and other retail stores that would carry car wash products. The Company is currently working with a car wash specialist to help develop the strategic plan for retail distribution and the economic modeling of the Ecologic Shine® retail proposition.
The Company’s management has scheduled a meeting in the United Kingdom with the head of the International operating division of a Chinese industrial company, to conduct an in-person demonstration of the Ecologic Shine® product. This meeting is a follow up to the Company’s Chairman and CEO’s meetings in Beijing and Shenzhen, China, in 2012. The Chinese counterparts to the Company’s meetings showed great interest in the Ecologic Shine® waterless car wash product and requested additional information. The Company followed up with two additional meetings that have led to the upcoming in-person demonstration in the United Kingdom. The Company believes that China’s need for environmentally sustainable solutions to its business, coupled with the low cost of labor, make China a unique opportunity for Ecologic Shine®.
Results of Operations
The following summary of the Company’s results of operations should be read in conjunction with the Company’s consolidated audited financial statements for the years ended December 31, 2013 and 2012, which are included herein.
| For the Year Ended |
| December 16, 2008 (inception) to |
| |||||
| December 31, 2013 |
| December 31, 2012 |
| December 31, 2013 |
| |||
Revenue | $ | 206 |
| $ | 1,666 |
| $ | 1,872 |
|
|
|
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|
|
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|
|
|
Cost of Sales | $ | 170 |
| $ | 852 |
| $ | 1,022 |
|
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|
Gross profit | $ | 36 |
| $ | 814 |
| $ | 850 |
|
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|
General and administrative expenses | $ | 1,455,966 |
| $ | 1,688,650 |
| $ | 9,026,805 |
|
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|
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|
Interest expense | $ | (86,825 | ) | $ | (91,392 | ) | $ | (348,021 | ) |
|
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Interest income | $ | 8 |
| $ | 40 |
| $ | 203 |
|
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|
Loss on EV Transportation, Inc. settlement | $ | –– |
| $ | (350,000 | ) | $ | (350,000 | ) |
|
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Loss from continuing operations | $ | (1,542,747 | ) | $ | (2,129,188 | ) | $ | (9,723,773 | ) |
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Loss from discontinued operations, net of tax | $ | (4,010 | ) | $ | (9,038 | ) | $ | (82,697 | ) |
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Net loss | $ | (1,546,757 | ) | $ | (2,138,226 | ) | $ | (9,806,470 | ) |
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Loss on foreign currency exchange | $ | –– |
| $ | (351 | ) | $ | (351 | ) |
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Unrealized gain on securities | $ | 108,577 |
| $ | –– |
| $ | 108,577 |
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Net comprehensive income (loss) | $ | 108,577 |
| $ | (351 | ) | $ | 108,206 |
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Net loss and comprehensive loss | $ | (1,438,200 | ) | $ | (2,138,577 | ) | $ | (9,698,264 | ) |
13
Revenue
For the years ending December 31, 2013 and 2012, revenue from continuing operations in the amount of $206 and $1,666, respectively, consisted of limited sales of the Ecologic Shine® car washing products to certain automotive retail facilities for test marketing use.
For the years ended December 31, 2013 and 2012, revenue from discontinued operations in the amount of $0 and $369,452, respectively, consisted of limited levels of car washing sales from its car washing operations in Atlanta, Los Angeles and San Diego. On December 1, 2012, all car washing operations were discontinued.
As a development stage company, the Company has not yet launched its major business activity, which is car rental.
Cost of sales
For the years ending December 31, 2013 and 2012, cost of sales from continuing operations in the amount of $170 and $852, respectively, consisted of manufacturing, packaging and shipping costs of the Ecologic Shine® car washing products sold to certain automotive retail facilities for test marketing use.
For the years ended December 31, 2013 and 2012, costs of sales from discontinued operations in the amount of $0 and $359,275, respectively, consisted ofmanufacturing, packaging and shipping costs of limited levels of car washing products, and direct labor costs associated with its car washing operations in Atlanta, Los Angeles and San Diego. On December 1, 2012, all car washing operations were discontinued.
As a development stage company, the Company has not yet launched its major business activity, which is car rental.
General and Administrative Expenses
| For the year ended |
|
|
| |||||
| December 31, |
|
|
| |||||
| 2013 |
| 2012 |
| Variance |
| |||
Amortization of stock options granted | $ | 60,000 |
| $ | 412,500 |
| $ | (352,500 | ) |
Stock compensation/amortization of deferred stock compensation |
| 129,500 |
|
| 492,125 |
|
| (362,625 | ) |
Legal, accounting and professional fees |
| 65,685 |
|
| 106,069 |
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| (40,384 | ) |
Management consulting services |
| 462,500 |
|
| 419,166 |
|
| 43,334 |
|
Other outside services |
| 650,000 |
|
| 117,000 |
|
| 533,000 |
|
Office supplies and miscellaneous expenses |
| 28,281 |
|
| 82.040 |
|
| (53,759 | ) |
Rent expense |
| 60,000 |
|
| 59,750 |
|
| 250 |
|
Total general and administrative expenses | $ | 1,455,966 |
| $ | 1,688,650 |
| $ | (232,684 | ) |
General and administrative expenses from continuing operations in the amount of $1,455,966 for the year ended December 31, 2013, were comprised of $189,500 of amortization of stock compensation, $65,685 of legal and accounting fees, $1,112,500 of management and consulting fees, and $88,281 of rent, office overhead and other general and administrative expenses.
General and administrative expenses from continuing operations in the amount of $1,688,650 for the year ended December 31, 2012, were comprised of $904,625 in amortization of stock compensation, $106,069 of legal and accounting fees, $536,166 of management and consulting fees, and $141,790 of rent, office overhead and other general and administrative expenses.
General and administrative expenses from continuing operations for the year ended December 31, 2013 were $1,455,966as compared to $1,688,650for the year ended December 31, 2012, which resulted in a decrease in general and administrative expenses for the current period of $232,684.
Significant changes in general and administrative expenses of $232,684 for continuing operations during the years 2013 compared to 2012 were attributable to the following items:
·
a decrease in amortization of stock options of $352,500, primarily due to the grant of stock options to directors in the prior year, resulting in amortization of $352,500, versus none in the current period;
·
a decrease in amortization of deferred stock compensation of $362,625, primarily due to certain stock compensation fully expensed in the current year of $129,500, compared to $376,500 in the prior year; and certain deferred compensation fully amortized in the prior year, resulting in only five months of amortization in the prior year of $115,625, compared to no amortization in the current year;
·
a decrease in legal, accounting and professional fees of $40,384, primarily due to a reduction in general legal fees of $11,344; a reduction in accounting fees of $8,430 due to the Company’s change in auditor; and a decrease in general accounting services of $20,610 resulting from a reduction in work load;
14
·
an increase in management consulting fees of $43,334 primarily due an increase of $75,833 in executive management fees pursuant to an employment agreement commencing November 1, 2011, resulting in $250,000 of expense in the current period versus $174,166 for the same period in 2012, and a decrease in miscellaneous management fees of $32,500 resulting from a reduction in staff;
·
an increase decrease in other outside services of $533,000 primarily due to an increase of $560,000 resulting from $650,000 in consulting and advisory services provided to the Company in the current year, compared to $90,000 for the prior year;and a decrease in miscellaneous one-time fees of $27,000 in the prior year compared to none in the current year; and
·
a decrease in other general and administrative expenses of $53,509 due to an decrease in travel of $8,841, a decrease in filing fees of $11,946, and a decrease in other general office expenses of $32,722.
General and administrative expenses for both 2013 and 2012 were incurred primarily for the purpose of advancing the Company closer to its goal of financing and operating an environment-friendly car rental business.
Net Loss
During the year ended December 31, 2013, the Company incurred a net loss from continuing operations of $1,542,747 compared with a net loss from continuing operations of $2,129,188 for the year ended December 31, 2012. The decrease in net loss of $586,441 is attributable to a decrease in revenue of $1,460, a decrease in cost of goods sold of $682, a decrease in general and administrative expenses of $232,684, a decrease in stock compensation expense of $350,000, a decrease in interest income of $32, and a decrease in interest expense of $4,567.
Liquidity and Capital Resources
Working capital |
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|
|
|
| |||
| December 31, 2013 |
| December 31, 2012 |
| Increase (decrease) |
| |||
Current assets | $ | –– |
| $ | 23,387 |
| $ | (23,387 | ) |
Current liabilities |
| 2,878,014 |
|
| 2,301,910 |
|
| 576,104 |
|
Working capital (deficit) | $ | (2,878,014 | ) | $ | (2,278,523 | ) | $ | (599,491 | ) |
As of December 31, 2013, the Company had cash in the amount of $0, compared to $23,387 as of December 31, 2012.
The Company had a working capital deficit of $2,878,014 as of December 31, 2013, compared to a working capital deficit of $2,278,523 at December 31, 2012. The increase in working capital deficit of $599,491 is primarily attributable to a decrease in cash of $23,387; an increase in accounts payable and accrued expenses of $25,260; an increase in related party payable of $273,772; a decrease in short term convertible notes payable of $848,136; and a decrease in other short term notes payable of $27,000.
Cash Flows | For the year ended |
| ||||
| December 31, 2013 |
| December 31, 2012 |
| ||
Net cash (used in) operating activities | $ | (64,380 | ) | $ | (208,390 | ) |
Net cash provided by investing activities |
| –– |
|
| (3,025 | ) |
Net cash provided by financing activities |
| 40,479 |
|
| 136,424 |
|
Net cash used in continuing operations |
| (23,901 | ) |
| (74,991 | ) |
Net cash provided by discontinued operations |
| 514 |
|
| 68,828 |
|
Net increase (decrease) in cash | $ | (23,387 | ) | $ | (6,163 | ) |
Cash Flows from Operating Activities
During the year ended December 31, 2013, the Company used $64,380 of cash flow for operating activities, compared with $208,390 for the year ended December 31, 2012. The decrease in cash used for operating activities of $144,010 is primarily attributable to a reduction in the net loss from operations of $586,792, a decrease in stock compensation of $350,000, a decrease in stock option amortization of $683,025, an increase in accruals converted to related party loans of $457,900, an increase in depreciation of $200, a decrease in bad debt expense of $350, a decrease in foreign currency loss, an decrease in accounts receivable of $50, an increase in other assets of $294, an increase in accounts payable and accrued expenses of $430,192, and a decrease in related party payables of $297,104.
Cash Flows from Investing Activities
During the year ended December 31, 2013 the Company used $0 of cash flow for investing activities, compared with $3,025 for the year ended December 31, 2012. The decrease in cash used for investing activities of $3,025 is attributable to the decrease in the purchase of office equipment.
15
Cash Flows from Financing Activities
During the year ended December 31, 2013, the Company was provided with $40,479 of cash flow from financing activities compared with $136,424 during the year ended December 31, 2012. The decrease in cash flows provided from financing activities of $95,945 is attributable to an increase in related party loans of $95,870, and a decrease in the proceeds from the sale of capital stock of $75.
As at December 31, 2013, affiliates and related parties are due a total of $2,119,396, which is comprised of loans to the Company of $1,785,505, accrued interest of $136,731, unpaid compensation of $151,755, and unpaid reimbursable expenses of $45,405. During the year ended December 31, 2013, loans to the Company increased by $1,007,546, accrued interest increased by $64,956, unpaid compensation decreased by $307,767 and reimbursable expenses increased by $33,996. The loans bear interest at the rate of 5% and 7% per annum, are unsecured, are payable one year from demand or by November 15, 2015, and are convertible into the Company’s common stock at a price of $0.07 to $0.08 per share.
The Company’s principal sources of funds have been from sales of the Company’s common stock and loans from related parties.
Future Financings
The Company has suffered recurring losses from operations. The continuation of the Company’s operations is dependent upon the Company’s attaining and maintaining profitable operations and raising additional capital as needed. The Company anticipates that it will have to raise additional funds through private placements of the Company’s equity securities and/or debt financing to complete its business plan.
The Company will require additional financing in order to enable the Company to proceed with the Company’s plan of operations, as discussed above, including approximately $2,000,000 over the next 12 months to pay for the Company’s ongoing expenses. These cash requirements include working capital, selling, general and administrative expenses, expansion of Ecologic Shine®, and the pursuit of acquisitions. These cash requirements are in excess of the Company’s current cash and working capital resources. Accordingly, the Company will require additional financing in order to continue operations and to repay the Company’s liabilities. There is no assurance that any party will advance additional funds to the Company in order to enable the Company to sustain its plan of operations or to repay the Company’s liabilities. There is no assurance that the financing will be completed as planned or at all. If the Company is unable to secure adequate capital to continue the Company’s planned operations, the Company’s shareholders may lose some or all of their investment and the Company’s business may fail.
The Company anticipates continuing to rely on equity sales of the Company’s common stock in order to continue to fund the Company’s business operations. Issuances of additional shares will result in dilution to the Company’s existing stockholders. There is no assurance that the Company will achieve any additional sales of its equity securities or arrange for debt or other financing to fund the Company’s planned business activities.
Personnel
As of December 31, 2013, the Company had no employees, excluding its directors and executive officers. Currently, the Company has no employees excludingits directors and executive officers.
Contractual Obligations
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
Going Concern
The Company has incurred losses since inception resulting in an accumulated deficit of $9,806,470, and further losses are anticipated in the development of its business. The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, which may not be available at commercially reasonable terms There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations and the Company may cease operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
The consolidated audited financial statements included with this annual report have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that the Company’s assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the consolidated audited financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
Off-Balance Sheet Arrangements
The Company has no 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 is material to stockholders.
16
Critical Accounting Policies
The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. The Company believes that understanding the basis and nature of the estimates and assumptions involved with the following aspects of the Company’s financial statements is critical to an understanding of the Company’s financial statements.
Net Income (Loss) Per Common Share
The Company computes earnings per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net earnings (loss) per common share is computed by dividing netincome (loss) by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the period. Dilutive common stock equivalents consist of shares issuable upon conversion of convertible preferred shares and the exercise of the Company’s stock options and warrants.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Estimates that are critical to the accompanying consolidated financial statements include the, estimates related to asset impairments of long lived assets and investments, classification of expenditures as either an asset or an expense, valuation of deferred tax assets, and the likelihood of loss contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and assumptions are revised periodically and the effects of revisions are reflected in the financial statements in the period it is determined to be necessary. Actual results could differ from these estimates.
Revenue Recognition
Revenue is recognized when all applicable recognition criteria have been met, which generally include (a) persuasive evidence of an existing arrangement; (b) fixed or determinable price; (c) delivery has occurred or service has been rendered; and (d) collectability of the sales price is reasonably assured.
The Company’s revenue stream is from Ecologic Shine®, the initial product being marketed through the Company’s subsidiary Ecologic Products, Inc. Through the Company’s agreement with Park ‘N Fly, Ecologic Shine® was tested at three Park ‘N Fly locations from September 24, 2009 to December 1, 2012. Revenue was recognized at the point of sale. Ecologic Products, Inc. invoiced Park ‘N Fly every two weeks for the total car washes sold, and Park ‘N Fly paid the invoice within two weeks of receipt. As of December 1, 2012, the Park ‘N Fly Agreement expired, and the operations at all locations discontinued.
The Company has made limited sales to certain retail automobile maintenance chains for the purpose of product testing.
Stock Based Compensation
The Company records stock-based compensation in accordance with ASC 718, Share-Based Payments, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Recent Accounting Pronouncements
The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (“FASB”), the US Securities and Exchange Commission (“SEC”), and the Emerging Issues Task Force (“EITF”), to determine the impact of new pronouncements on US GAAP and the impact on the Company. The Company has recently adopted the following new accounting standards:
Adopted:
Effective January 2012, the Company adopted ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 represents the converged guidance of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on fair value measurement. A variety of measures are included in the update intended to either clarify existing fair value measurement requirements, change particular principles requirements for measuring fair value or for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend to change the application of existing requirements under Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements. ASU 2011-04 was effective for interim and annual periods beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.
17
Effective January 2012, the Company adopted ASU No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05). ASU 2011-05 is intended to increase the prominence of items reported in other comprehensive income and to facilitate convergence of accounting guidance in this area with that of the IASB. The amendments require that all non-owner changes in shareholders’ equity be presented in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12 defers the provisions of ASU 2011-05 that require the presentation of reclassification adjustments on the face of both the statement of income and statement of other comprehensive income. Amendments under ASU 2011-05 that were not deferred under ASU 2011-12 will be applied retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.
Not Yet Adopted:
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive (ASU 2013-02). This guidance is the culmination of the FASB’s deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The Company is evaluating the effect, if any, the adoption of ASU 2013-02 will have on its consolidated financial statements.
In April 2013, the FASB issued ASU No. 2013-07, Presentation of Financial Statements (Top 205): Liquidation Basis of Accounting. The objective of ASU No. 2013-07 is to clarify when an entity should apply the liquidation basis of accounting and to provide principles for the measurement of assets and liabilities under the liquidation basis of accounting, as well as any required disclosures. The amendments in this standard is effective prospectively for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. The Company is evaluating the effect, if any, adoption of ASU No. 2013-07 will have on its consolidated financial statements.
In July 2013, the FASB issued ASU No 2013-11, Presentation of an Unrecognized Tax Benefit When Net Operating Loss Carryforward Exists. The objective of ASU 2013-11 is to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits, and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, and interim reporting periods therein. Early adoption is permitted. The Company is evaluating the effect, if any, adoption of ASU No. 2013-11 will have on its consolidated financial statements
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
18
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
The Company’s consolidated audited financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
The following consolidated audited financial statements are filed as part of this annual report:
19
SEALE AND BEERS, CPAs
PCAOB & CPAB REGISTERED AUDITORS
www.sealebeers.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Ecologic Transportation, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of Ecologic Transportation, Inc. (A Development Stage Company) as of December 31, 2013, and the related statements of income, stockholders’ equity (deficit), and cash flows for the year ended December 31, 2013. Ecologic Transportation, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits. The cumulative statements of operations, changes in stockholders’ deficit and cash flows for the period from December 16, 2008 (date of inception) to December 31, 2012 were audited by other auditors whose reports dated April 1, 2013 and March 27, 2012 on those statements included an explanatory paragraph describing conditions that raised substantial doubt about the Company’s ability to continue as a going concern.
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, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position ofEcologic Transportation, Inc. (A Development Stage Company) as of December 31, 2013, and the related statements of income, stockholders’ equity (deficit), and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses since inception resulting in an accumulated deficit, and a working capital deficit, and further losses are anticipated in the development of its business, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Seale and Beers, CPAs
Seale and Beers, CPAs
Las Vegas, Nevada
April 12, 2014
50 S. Jones Blvd. Suite 202 Las Vegas, NV 89107 Phone: (888)727-8251 Fax: (888)782-2351
F-1
The accompanying notes are an integral part of these consolidated financial statements
F-2
The accompanying notes are an integral part of these consolidated financial statements
F-3
The accompanying notes are an integral part of these consolidated financial statements
F-4
ECOLOGIC TRANSPORTATION, INC. | |||||||||
(A DEVELOPMENT STAGE COMPANY) | |||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
|
| Cumulative from |
| ||||||
|
| December 16, 2008 |
| ||||||
| For the year ended |
| (inception) to |
| |||||
| December 31, 2013 |
| December 31, 2012 |
| December 31, 2013 |
| |||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net loss | $ | (1,546,757 | ) | $ | (2,138,577 | ) | $ | (9,806,821 | ) |
Net loss from discontinued operations |
| 4,010 |
|
| 9,038 |
|
| 82,697 |
|
Net loss from continuing operations |
| (1,542,747 | ) |
| (2,129,538 | ) |
| (9,724,124 | ) |
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
Stock compensation/amortization of deferred compensation |
| 221,500 |
|
| 904,525 |
|
| 3,876,755 |
|
Stock issued for EV Transportation, Inc settlement |
| –– |
|
| 350,000 |
|
| 350,000 |
|
Accruals converted to related party loans |
| 652,067 |
|
| 194,167 |
|
| 1,544,734 |
|
Depreciation |
| 600 |
|
| 400 |
|
| 1,000 |
|
Bad debt expense |
| –– |
|
| 350 |
|
| 350 |
|
Loss on foreign currency exchange |
| –– |
|
| 351 |
|
| 351 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
| –– |
|
(Increase) decrease in accounts receivable |
| –– |
|
| (50 | ) |
| 15,936 |
|
(Increase) decrease in other assets |
| 800 |
|
| 1,094 |
|
| (4,063 | ) |
Increase in accounts payable, accrued expenses, accrued interest, deferred compensation |
| 562,171 |
|
| 131,979 |
|
| 1,200,000 |
|
Increase in due to related parties |
| 41,229 |
|
| 338,333 |
|
| 960,561 |
|
Net cash used in operating activities |
| (64,380 | ) |
| (208,390 | ) |
| (1,778,500 | ) |
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities: |
|
|
|
|
|
|
|
|
|
Cash received in reverse merger |
| –– |
|
| –– |
|
| 10,448 |
|
Purchase of equipment |
| –– |
|
| (3,025 | ) |
| (3,025 | ) |
Net cash (used in) provided by investing activities |
| –– |
|
| (3,025 | ) |
| 7,423 |
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from related party loans |
| 40,479 |
|
| 136,349 |
|
| 892,555 |
|
Proceeds from notes payable |
| –– |
|
| –– |
|
| 284,500 |
|
Contributed capital |
| –– |
|
| –– |
|
| 710 |
|
Issuance of capital stock for cash |
| –– |
|
| 75 |
|
| 522,885 |
|
Common stock subscriptions received |
| –– |
|
| –– |
|
| 6,049 |
|
Net cash provided by financing activities |
| 40,479 |
|
| 136,424 |
|
| 1,706,699 |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in continuing operations |
| (23,901 | ) |
| (74,991 | ) |
| (64,378 | ) |
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
| 514 |
|
| 68,828 |
|
| 64,978 |
|
Net cash used in investing activities |
| –– |
|
| –– |
|
| (600 | ) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by discontinued operations |
| 514 |
|
| 68,828 |
|
| 64,378 |
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash |
| (23,387 | ) |
| (6,163 | ) |
| –– |
|
|
|
|
|
|
|
|
|
|
|
Cash – beginning of period |
| 23,387 |
|
| 29,550 |
|
| –– |
|
|
|
|
|
|
|
|
|
|
|
Cash – end of period | $ | –– |
| $ | 23,387 |
| $ | –– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH ACTIVITIES |
|
|
|
|
|
|
|
|
|
Recapitalization for reverse acquisition | $ | –– |
| $ | –– |
| $ | (31,908 | ) |
Conversion of related party payable to note payable | $ | 652,067 |
| $ | 194,167 |
| $ | 1,514,734 |
|
Conversion of debt into common stock | $ | –– |
| $ | 637,125 |
| $ | 637,125 |
|
Cancellation of debt | $ | –– |
| $ | 847,142 |
| $ | 847,142 |
|
Restricted stock issued in settlement | $ | –– |
| $ | 350,000 |
| $ | 350,000 |
|
Common stock subscriptions receivable | $ | 5 |
| $ | –– |
| $ | 6,054 |
|
Reduction in equity due to spin–off | $ | –– |
| $ | (60,000 | ) | $ | (60,000 | ) |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
|
Interest paid | $ | –– |
| $ | 28,033 |
| $ | 28,033 |
|
Income taxes paid | $ | –– |
| $ | –– |
| $ | –– |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements
F-5
ECOLOGIC TRANSPORTATION, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013 and 2012
NOTE 1. OVERVIEW
Ecologic Transportation, Inc. (the “Company”) was incorporated in the State of Nevada on September 30, 2005, under the name Heritage Explorations Inc. On June 20, 2008, the Company merged with its wholly owned subsidiary and changed its name to USR Technology, Inc. (“USR”). On June 26, 2008, USR, engaged primarily in the provision of international drilling services, began trading its common stock under the symbol “USRT”.
On April 26, 2009, the Company entered into an agreement and plan of merger, as amended, with Ecologic Sciences, Inc. (formerly, Ecologic Transportation, Inc.), a private Nevada corporation, and Ecological Acquisition Corp., a private Nevada corporation and wholly-owned subsidiary of the Company. Ecological Acquisition Corp. was formed by the Company for the purpose of acquiring all of the outstanding shares of Ecologic Sciences, Inc. Pursuant to the agreement and plan of merger, as amended, Ecologic Sciences, Inc. was to be merged with and into Ecological Acquisition Corp., with Ecologic Sciences, Inc. continuing after the merger as a wholly-owned subsidiary of the Company.
On July 2, 2009, the Company’s wholly-owned subsidiary Ecological Acquisition Corp. was merged into Ecologic Sciences, Inc. with Ecologic Sciences, Inc. being the sole surviving entity under the name “Ecologic Sciences, Inc.” and the Company being the sole shareholder of the surviving entity. Upon closing of the agreement and plan of merger on July 2, 2009, the Company issued 17,559,486 shares of its common stock to the former shareholders of Ecologic Sciences, Inc. in consideration for the acquisition of all of the issued and outstanding common shares in the capital of Ecologic Sciences, Inc. As of the closing date, the former shareholders of Ecologic Sciences, Inc. held approximately 75.85% of the issued and outstanding common shares of the Company.
Prior to the Merger, the Company was focused on the drilling services sector of the oil and gas industry. As of the closing date of the Merger on July 2, 2009, the Company became a development stage company in the business of environmental transportation, and was originally structured with three operating subsidiaries under the parent company, Ecologic Transportation, Inc.:
1. | Ecologic Car Rentals, Inc., a Nevada Corporation |
2. | Ecologic Products, Inc., a Nevada Corporation |
3. | Ecologic Systems, Inc., a Nevada Corporation |
The subsidiary companies Ecologic Products, Inc. and Ecologic Systems, Inc. were created to provide an infrastructure and support for Ecologic Car Rentals, Inc., the Company’s primary operations and distribution channels for its environmental products.
Change in infrastructure:
Through the Company’s subsidiary, Ecologic Systems, Inc. (“EcoSys”), the Company intended to develop and manage the “greening” of gas stations along with retrofitting them with alternative energy options and solutions. To build this infrastructure, the Company intended to provide turnkey management, installation, and integration of equipment procurement, equipment installation, contracting, fuel, and regulatory tax incentive and grant subsidization proposals.
The Company’s Board of Directors made the strategic decision to focus the majority of its resources and time on the development of its environmental car rental business, and on March 16, 2012, entered into a Share Exchange Agreement and Plan of Merger with Amazonas Florestal, Inc. (“Amazonas”) and EcoSys (the “Share Exchange”). As a result of the Share Exchange, 97% of EcoSys’ common stock was owned by the Amazonas shareholders (“Amazonas Shareholders”), 3% of EcoSys’ common stock was owned by the Company (the “EGCT Shares”), and a change in control took place whereby Amazonas became a wholly owned subsidiary of EcoSys. On April 11, 2012, EcoSys changed its name to Amazonas Florestal, Ltd. (“AZFL”). For a period of one hundred and eighty (180) days after the closing, the EGCT Shares were subject to an anti-dilution provision, which protected the three (3%) percent ownership of the issued and outstanding capital stock of AZFL owned by the Company.
Prior to the Share Exchange, EcoSys introduced the Amazonas management to the holder of its sixty thousand dollar ($60,000) convertible note in order to have non-affiliate parties associated with Amazonas acquire all or a portion of the note. EcoSys assisted in the facilitation of the acquisition of the note as part of its negotiations with Amazonas regarding the Share Exchange. The terms of the convertible note allowed for the conversion of the debt into common stock at par value. On March 26, 2012, the debt was converted, and an additional sixty million (60,000,000) shares were issued to the note holders. The issuance of common stock pursuant to the terms of the convertible note, affected the total number of AZFL’s issued and outstanding shares, and triggered an anti-dilution provision as it pertains to the EGCT shares. As a result, an additional 2,020,618 shares were issued to the Company, thereby increasing the Company’s ownership of AZFL shares to 3%.
On April 19, 2012, AZFL effectuated a 3 for 1 forward stock split, which increased the Company’s holding to 12,061,854 shares of AZFL common stock.
F-6
As of December 31, 2013, the Company held 12,061,854 shares of AZFL common stock (the EGCT shares). Management’s intent is to distribute the EGCT shares in the form of a dividend, to the Company’s shareholders of record on March 16, 2012 (the effective date of the Merger), once AZFL has filed an S1 Registration and registers the AZFL Shares. The date by which the Form S1 was to be filed was extended by mutual agreement to January 31, 2013. However, AZFL has not, to the Company’s knowledge, caused to register the EGCT shares by filing a Form S1, and is in default of its agreement with the Company. The Company has requested that AZFL complete the registration so the stock distribution can be completed.
Current Business
The Company continues to focus on the development of its environmental transportation business through its two operating subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc.
Through the Company’s two operating subsidiaries, the Company intends to provide distribution channels for its environmental products, and implement certain internal product requirements in order to establish it as a “green” company throughout its operations.
Ecologic Car Rentals, Inc.
The Company’s primary focus is to develop an environmental car rental operation through its subsidiary, Ecologic Car Rentals, Inc. The Company is currently pursuing viable opportunities within the car rental industry to develop and establish its own brand as a premier “green” car rental company, offering environmentally-friendly vehicles.
The Company plans to acquire existing profitable independent car rental operations on a multi-regional basis and convert their operations to an Ecologic platform. The Company has identified certain independent car rental operations that would provide a multi-regional presence, and that can be used as a platform to become the only large “green” independent car rental operation in the U.S. The Company will incrementally replace the fleets with environmental vehicles over a 12–24 month period. The Company’s strategy is to co-brand with the acquisitions for a limited period of time, ultimately completing the rebranding transition to “green” outlets as “Ecologic Car Rentals”.
Currently, the Company intends to rent only environmentally friendly vehicles in the compact, full-size and sport-utility vehicle classes. The Company intends to rent cars on daily, multi-day, weekly and monthly basis. The Company expects that its primary source of revenue will consist of “base time and mileage” car rental fees which can include daily rates including mileage. The Company expects to also charge an additional fee for one-way rentals to and from specific locations. In addition to rental fees, the Company intends to sell other optional products to the Company’s customers, such as collision or loss damage waivers, supplemental liability insurance, personal effects coverage and gasoline.
The Company intends to have its car rental customers make rental reservations either via the Company’s website, www.ecologictransportation.com, at the Company’s proposed partners’ websites, at the rental counter at any of the Company’s proposed locations, by phone, through online travel websites that the Company intends to partner with, or through a corporate account program in place with their employers.
On August 2, 2012 the Company entered into a 120-day Letter of Intent (“LOI”) to acquire all of the issued and outstanding shares of ACE Rent A Car, Inc. (“ACE”), an Indiana corporation. A second letter of intent (the “Second LOI”) was entered into between the Company and ACE effective December 1, 2012 and expired on January 31, 2013. Although the Company and ACE have not formally extended the Second LOI, they are currently actively engaged in due diligence. Concurrently with the due diligence process, the Company has been actively seeking primarily equity-based financial support to effect the ACE acquisition. The Company is currently working with financial institutions to secure a combined debt-equity structure offering that will enable the Company to complete its proposed acquisition. ACE is under no obligation, neither verbally nor contractually, to sell ACE to the Company. The Company’s management and ACE are continuing discussions, and ACE is awaiting the Company’s revised acquisition proposal. There can be no guarantee that satisfactory financing arrangements will be secured to complete the acquisition.
Ecologic Products, Inc.
The Company is developing ecologically friendly products through its subsidiary, Ecologic Products, Inc. Initially, the Company’s product line will be focused on transportation and its ancillary markets. In anticipation of the Company’s first rental car location, and need for environmentally friendly car cleaning (one of the most important aspects of a car rental operation), the Company developed Ecologic Shine®, a device and system for near-waterless car washing that delivers cleaning comparable to normal washing without the use of any harmful chemicals.
In 2009, the Company launched Ecologic Shine® in collaboration with Park ‘N Fly, an airport parking chain with prominent locations in 15 airport markets, and established test market operations in Atlanta, San Diego and Los Angeles. Management evaluated the results of operations during the 3-year test period between 2009 and 2012, and determined that a continued collaboration with Park ‘N Fly would not be in the Company’s best interest as a viable profit center. In September, 2012, the testing sites in Atlanta ceased operations. The Park ‘N Fly Agreement expired on December 1, 2012, and operations ceased in Los Angeles and San Diego. The Company is not pursuing any arrangements with Park ‘N Fly in the future.
F-7
The Company is currently pursuing wholesale distribution opportunities for the Ecologic Shine®product line and continues to seek test marketing of its products through major consumer and automotive retail chains, such as auto supply stores, convenience stores and gas stations, and other retail stores that would carry car wash products. The Company is currently working with a car wash specialist to help develop the strategic plan for retail distribution and the economic modeling of the Ecologic Shine® retail proposition.
The Company’s management has scheduled a meeting in the United Kingdom with the head of the International operating division of a Chinese industrial company, to conduct an in-person demonstration of the Ecologic Shine® product. This meeting is a follow up to the Company’s Chairman and CEO’s meetings in Beijing and Shenzhen, China, in 2012. The Chinese counterparts to the Company’s management showed great interest in the Ecologic Shine® waterless car wash product and requested additional information. The Company followed up with two additional meetings that have led to the upcoming in-person demonstration in the United Kingdom. The Company believes that China’s need for environmentally sustainable solutions to its business, coupled with the low cost of labor, make China a unique opportunity for Ecologic Shine®.
Going Concern
The Company has incurred losses since inception resulting in an accumulated deficit of $9,806,470, and a working capital deficit of $2,878,014, and further losses are anticipated in the development of its business. The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, which may not be available at commercially reasonable terms There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations and the Company may cease operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
The consolidated financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue as a going concern.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: This summary of significant accounting policies is presented to assist in understanding the Company’s financial statements. These accounting policies conform to accounting principles, generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements.
The Company’s fiscal year end is December 31.
Development Stage Company: The Company is a development stage company as defined by ASC 915-10-05, “Development Stage Entity.” The Company is still devoting substantially all of its efforts on establishing the business, and its planned principal operations, namely its car rental operations, have not commenced. All losses accumulated since inception have been considered as part of the Company’s development stage activities.
Cash and Cash Equivalents:The Company considers cash in banks, deposits in transit, and highly-liquid debt instruments purchased with original maturities of three months or less to be cash and cash equivalents. As of December 31, 2013 and 2012, the Company had no cash equivalents.
Property and Equipment: Property and equipment is carried at the cost of acquisition or construction and depreciated over the estimated useful lives of the assets. Costs associated with repairs and maintenance are expensed as incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency of the Company’s property and equipment are capitalized and depreciated over the remaining life of the related asset. Gains and losses on dispositions of equipment are reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are 5 to 7 years.
Net Income (Loss) Per Common Share: The Company calculates net income (loss) per share as required by ASC 450-10, "Earnings per Share." Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During the periods when anti-dilutive, common stock equivalents, if any, are not considered in the computation.
Income Taxes:The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized.
F-8
As a result of the implementation of certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax positions, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. The Company adopted the provisions of ASC 740 as of January 1, 2006, and have analyzed filing positions in each of the federal and state jurisdictions where the Company is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company has identified the U.S. federal as its "major" tax jurisdiction. Generally, the Company remains subject to Internal Revenue Service examination of its 2007 through 2013 U.S. federal income tax returns. However, the Company has certain tax attribute carryforwards which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized.
The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to the Company’s financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740. In addition, the Company did not record a cumulative effect adjustment related to the adoption of ASC 740. The Company’s policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes.
Use of Estimates:The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Estimates that are critical to the accompanying consolidated financial statements include the, estimates related to asset impairments of long lived assets and investments, classification of expenditures as either an asset or an expense, valuation of deferred tax assets, and the likelihood of loss contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and assumptions are revised periodically and the effects of revisions are reflected in the financial statements in the period it is determined to be necessary. Actual results could differ from these estimates.
Revenue Recognition:Revenue is recognized when all applicable recognition criteria have been met, which generally include (a) persuasive evidence of an existing arrangement; (b) fixed or determinable price; (c) delivery has occurred or service has been rendered; and (d) collectability of the sales price is reasonably assured.
The Company’s revenue stream is from Ecologic Shine®, the initial product being marketed through the Company’s subsidiary Ecologic Products, Inc. Through the Company’s agreement with Park ‘N Fly, Ecologic Shine® was tested at three Park ‘N Fly locations from September 24, 2009 to December 1, 2012. Revenue was recognized at the point of sale. Ecologic Products, Inc. invoiced Park ‘N Fly every two weeks for the total car washes sold, and Park ‘N Fly paid the invoice within two weeks of receipt. As of December 1, 2012, the Park ‘N Fly Agreement expired, and the operations at all locations discontinued
The Company has made limited sales to certain retail automobile maintenance chains for the purpose of product testing.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of:In accordance with ASC 350-30, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. The Company currently believes there is no impairment of its long-lived assets. There can be no assurance, however, that market conditions will not change or demand for the Company’s products under development will continue. Either of these could result in future impairment of long-lived assets.
Stock Based Compensation:The Company records stock-based compensation in accordance with ASC 718, Share-Based Payments, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Fair Value Measurements:When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. The Company uses the following three levels of inputs in determining the fair value of its assets and liabilities, focusing on the most observable inputs when available:
Ÿ | Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
Ÿ | Level 2 | Quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. |
Ÿ | Level 3 | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable. |
F-9
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.
Investments in securities: Investments in securities are accounted for using the equity method if the investment provides the Company the ability to exercise significant influence, but not control, over an investee. Significant influence is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee between 20% and 50%, although other factors, such as representation on the investee's Board of Directors, are considered in determining whether the equity method is appropriate. All other equity investments, which consist of investments for which the Company does not possess the ability to exercise significant influence, are accounted for under the mark to market method. Under the mark to market method of accounting, investments are marked to market, with unrealized gains and losses being excluded from earnings and reflected as a component of other comprehensive income.
Recent Accounting Pronouncements: The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (“FASB”), the US Securities and Exchange Commission (“SEC”), and the Emerging Issues Task Force (“EITF”), to determine the impact of new pronouncements on US GAAP and the impact on the Company. The Company has recently adopted the following new accounting standards:
Adopted:
Effective January 2012, the Company adopted ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 represents the converged guidance of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on fair value measurement. A variety of measures are included in the update intended to either clarify existing fair value measurement requirements, change particular principles requirements for measuring fair value or for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend to change the application of existing requirements under Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements. ASU 2011-04 was effective for interim and annual periods beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.
Effective January 2012, the Company adopted ASU No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05). ASU 2011-05 is intended to increase the prominence of items reported in other comprehensive income and to facilitate convergence of accounting guidance in this area with that of the IASB. The amendments require that all non-owner changes in shareholders’ equity be presented in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12 defers the provisions of ASU 2011-05 that require the presentation of reclassification adjustments on the face of both the statement of income and statement of other comprehensive income. Amendments under ASU 2011-05 that were not deferred under ASU 2011-12 will be applied retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.
Not Yet Adopted:
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive (ASU 2013-02). This guidance is the culmination of the FASB’s deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The Company is evaluating the effect, if any, the adoption of ASU 2013-02 will have on its consolidated financial statements.
In April 2013, the FASB issued ASU No. 2013-07, Presentation of Financial Statements (Top 205): Liquidation Basis of Accounting. The objective of ASU No. 2013-07 is to clarify when an entity should apply the liquidation basis of accounting and to provide principles for the measurement of assets and liabilities under the liquidation basis of accounting, as well as any required disclosures. The amendments in this standard is effective prospectively for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. The Company is evaluating the effect, if any, adoption of ASU No. 2013-07 will have on its consolidated financial statements.
F-10
In July 2013, the FASB issued ASU No 2013-11, Presentation of an Unrecognized Tax Benefit When Net Operating Loss Carryforward Exists. The objective of ASU 2013-11 is to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits, and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, and interim reporting periods therein. Early adoption is permitted. The Company is evaluating the effect, if any, adoption of ASU No. 2013-11 will have on its consolidated financial statements
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.
NOTE 3: INVESTMENT IN SECURITIES
Amazonas Florestal, Ltd. (formerly Ecologic Systems, Inc.)
On March 16, 2012, Ecologic Systems, Inc. (“EcoSys”), a wholly-owned subsidiary of the Company with two million (2,000,000) issued and outstanding shares of common stock, entered into a Share Exchange Agreement and Plan of Merger with Amazonas Florestal, Inc., resulting in, among other things, a change in control of EcoSys, whereby EcoSys was no longer a subsidiary of the Company. On April 11, 2012, EcoSys changed its name to Amazonas Florestal, Ltd. (“AZFL”), and Amazonas Florestal, Inc. became a wholly owned subsidiary of AZFL. Included in the Share Exchange was the condition that for a period of one hundred and eighty (180) days after the Closing, the shares of AZFL held by the Company would be subject to an anti-dilution provision that protected the Company’s three percent (3%) ownership. As a result, on March 16, 2012, an additional 2,020,618 shares of AZFL common stock was issued to the Company, thereby increasing the Company’s holdings to 4,020,618 shares, and maintaining the Company’s 3% ownership.
On April 19, 2012, AZFL effectuated a 3 for 1 forward stock split, which increased the Company’s holding to 12,061,854 shares of AZFL common stock.
As of December 31, 2013 and 2012, the Company held 12,061,854 shares of AZFL common stock (the “AZFL Shares”) with a fair value of $120,619 and $12,062, respectively. Management’s intent is to distribute the AZFL Shares in the form of a dividend, to the Company’s shareholders of record on March 16, 2012 (the effective date of the Merger), once AZFL has filed an S1 Registration and registers the AZFL Shares. The date by which the Form S1 was to be filed was extended by mutual agreement to January 31, 2013. However, AZFL has not, to the Company’s knowledge, caused to register the EGCT shares by filing a Form S1, and is in default of its agreement with the Company. The Company has requested that AZFL complete the registration so the stock distribution can be completed.
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
| December 31, 2013 |
| December 31, 2012 |
| ||
Office equipment | $ | 3,025 |
| $ | 3,025 |
|
Accumulated depreciation |
| (1,000 | ) |
| (400 | ) |
Property and equipment, net | $ | 2,025 |
| $ | 2,625 |
|
Depreciation expense totaled $1,000 and $400 for the years ended December 31, 2013 and 2012, respectively.
NOTE 5. NOTES AND LOANS PAYABLE
Notes and loans payable consists of the following:
| December 31, 2013 |
| December 31, 2012 |
| ||
Skyy Holdings, Ltd. | $ | 185,411 |
| $ | 160,411 |
|
Prominence Capital LLC |
| 30,512 |
|
| 28,512 |
|
Matrix Advisors LLC |
| 500,000 |
|
| –– |
|
Total notes and loans payable | $ | 715,923 |
| $ | 188,923 |
|
On January 24, 2011, Skyy Holdings, Ltd. loaned the Company $100,000 evidenced by a Promissory Note bearing interest at the rate of 15%, with principal and interest payable 45 days from the date of issue, and thereafter at a rate of 25% per annum. As of December 31, 2013, the note remains outstanding and no demand has been made for repayment. Accrued interest at December 31, 2013 and, 2012 was $85,411 and $60,411, respectively.
On March 29, 2011, Prominence Capital LLC loaned the Company $25,000 evidenced by a Promissory Note bearing interest at the rate of 8% per annum with the principal balance due on demand. As of December 31, 2013, the note remains outstanding, and no demand has been made for repayment. Accrued interest at December 31, 2013 and, 2012 was $5,512 and $3,512, respectively.
F-11
On December 31, 2013, the Company issued a Convertible Promissory Note to Matrix Advisors, LLC, in the principal amount of $500,000 for advisory services rendered to the Company. The note bears interest at a rate of 5% per annum, is due within 2 years, and is convertible into the Company’s common stock at a price of $0.25 per share. As of December 31, 2013, no interest has been accrued.
Accrued interest on notes and loans payable at December 31, 2013 and 2012 was $90,923 and $63,923, respectively.
NOTE 6. RELATED PARTY TRANSACTIONS
On October 12, 2009, the Company entered into a consulting agreement with Huntington Chase, Ltd., a Nevada corporation, wherein Edward W. Withrow III, the Company’s Chairman, owns a majority control. The consulting agreement provides for Huntington Chase, Ltd. to perform certain advisory functions, and to be paid $15,000 per month for a period of 3 years until October 12, 2012. A modification to the consulting agreement was made on October 12, 2012, to extend the term for an additional three years. The total consulting fees owing under this agreement at December 31, 2013 and 2012, are $692,500 and $512,500, respectively. Of the total consulting fees owing, $692,500 and $197,500 was converted to a loan payable at December 31, 2013 and 2012, respectively. The loan bears interest at a rate of seven percent (7%) per annum, is due upon demand, and is convertible into the Company’s common stock at a strike price of $0.07 per share. In addition, as of December 31, 2013 and 2012, respectively, $0 and $315,000 in consulting fees is recorded as accrued compensation. Accrued interest at December 31, 2013 and 2012 was $51,204 and $31,932, respectively. On December 31, 2013, the note in its entirety, including accrued interest of $51,204, was assigned to Huntington Chase Financial Group. All other terms and of the original note, as modified, remain the same.
On November 1, 2011, the Company entered into an employment agreement with William B. Nesbitt, for his services as President and Chief Executive Officer of the Company. The initial term of the Agreement was for a period of twelve (12) months, and is automatically renewed annually unless terminated by either party. The Agreement provides for initial compensation of $10,000 per month for the first nine months, increasing to $20,833 effective August 1, 2012, having reached certain goals of the Company. In addition, the Agreement provides for expense reimbursements, an initial Stock Option grant of 1,500,000 shares of the Company’s common stock, and annual performance options. Any unpaid compensation shall be converted to a Senior Note Payable on a monthly basis, accruing interest at a rate of five percent (5%) per annum, and convertible into the Company’s common stock at a price of $0.07 per share. As of December 31, 2013 and 2012, respectively, accrued compensation in the amount of $454,166 and $204,166, has been converted to a Senior Note Payable, and is included in loans to the Company. Accrued interest at December 31, 2013 and 2012 was $20,813 and $4,849, respectively.
On November 15, 2013, the Company issued a Convertible Promissory Note in the amount of $150,000 to John Ogden, a director of the Company, for consulting services rendered to the Company. The note bears interest at a rate of five percent (5%) per annum, matures on November 15, 2015, and is convertible into the Company’s common stock at a price of $0.08 per share. Accrued interest at December 31, 2013 was $945.
On November 15, 2013, the Company issued a Convertible Promissory Note in the amount of $72,067 to Call Bucci, the Company’s chief financial officer, for unpaid compensation. The note bears interest at a rate of five percent (5%) per annum, matures on November 15, 2015, and is convertible into the Company’s common stock at a price of $0.08 per share. Accrued interest at December 31, 2013 was $454.
Related party transactions consists of the following:
| December 31, 2013 |
| December 31, 2012 |
| ||
Loans to the Company | $ | 1,785,505 |
| $ | 777,959 |
|
Accrued interest |
| 136,731 |
|
| 71,775 |
|
Total related party loans |
| 1,922,236 |
|
| 849,734 |
|
Accrued compensation |
| 151,755 |
|
| 459,522 |
|
Reimbursable expenses |
| 45,405 |
|
| 11,410 |
|
Total related party payable |
| 197,160 |
|
| 470,932 |
|
Total related party transactions | $ | 2,119,396 |
| $ | 1,320,666 |
|
Related party loans consist of the following convertible notes payable at December 31, 2013:
Related Party |
| Principal |
| Annual Interest Rate |
| Accrued Interest |
| Conversion Price |
| Term/Due |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntington Chase Financial Group |
| $ | 1,060,272 |
| 7% |
| $ | $105,065 |
| $0.07 |
| Demand |
|
William Nesbitt |
|
| 454,166 |
| 5% |
|
| 20,813 |
| $0.07 |
| Demand |
|
John Ogden |
|
| 150,000 |
| 5% |
|
| 945 |
| $0.08 |
| 11/15/15 |
|
Calli Bucci/MJ Management LLC |
|
| 72,067 |
| 5% |
|
| 454 |
| $0.08 |
| 11/15/15 |
|
Total |
| $ | 1,736,505 |
|
|
| $ | 127,277 |
|
|
|
|
|
F-12
All outstanding related party notes payable bear interest at the rate of 5% to 7% per annum, are due and payable within one (1) year of receipt of written demand or by November 15, 2015, and are convertible into the Company’s common stock at a price of $0.07 to $0.08 per share.
As at December 31, 2013 and 2012, respectively, affiliates and related parties are due a total of $2,119.396 and $1,320,666, which is comprised of loans to the Company of $1,785,505 and $777,959, accrued interest of $136,731 and $71,775, accrued compensation of $151,755 and $459,522, and reimbursable expenses of $45,405 and $11,410, for a total increase of $798,380.
The Company’s increase in loans to the Company of $1,007,546 is due to an increase in cash loans from Huntington Chase Financial Group of $40,479, and an increase in unpaid compensation converted to notes payable of $967,067.
The Company’s decrease in unpaid compensation of $307,767 is due to a net increase in accrued compensation of$259,300 payable to Huntington Chase, Ltd., The Kasper Group, Ltd. and MJ Management, LLC, all related party creditors, and a net decrease of $567,067 in unpaid compensation converted into notes payable.
The Company’s reimbursable expenses increased by $33,996 and $6,832 during the years ended December 31, 2013 and 2012, respectively.
During the years ended December 31, 2013 and 2012, respectively, $64,956 and $58,878 of interest was accrued. As of December 31, 2013 and 2012, accrued interest payable to related parties was $136,731 and $71,775, respectively.
NOTE 7. COMMITMENTS AND CONTINGENCIES
Matrix Advisors, LLC a New York Limited Liability Company (“Matrix”) signed a consulting agreement with the Company effective October 1, 2009. The consulting agreement provides for Matrix Advisors to deliver advisory services to the Company for a period of three years (36 months) for a fee of $10,000 per month and options to purchase 2,287,547 shares exercisable at $0.25 per share for a term of three (3) years from September 1, 2009. The vesting period for the options ended on September 1, 2010. The Matrix consulting agreement expired September 1, 2012. As of December 31, 2013 and 2012, the Company has accrued $370,000 in consulting fees owed under this agreement.
On May 18, 2010, the Company entered into an Independent Consulting Agreement (“Consulting Agreement”) with Prominence Capital, LLC (“Prominence”) to represent the Company in investor communications and public relations for a term of two years (24 months) commencing May 18, 2010. As remuneration for the services, the Company issued 1,000,000 restricted shares of the Company’s common stock to Prominence, valued at $0.45 per share. The Company recorded deferred compensation valued at $450,000, which was amortized over 24 months, and has been fully expensed as of December 31, 2012. The Prominence Consulting Agreement expired on May 18, 2012.
On August 2, 2011, the Company entered into a Consulting Agreement with Kunin Business Consulting for Mr. Kunin’s services. On September 30, 2011, the Company executed a Convertible Promissory Note (the “Note”) in the amount of $144,500 in favor of Mr. Kunin for services rendered. The Note bore interest at 7% per annum and included a provision to convert the Note into shares of the Company’s common stock at a price of $0.32 per share. The Company received a Notice to Convert from Mr. Kunin on January 31, 2012, requesting that the Note in the amount of $144,500, plus accrued interest in the amount of $3,409, be converted to shares of the Company’s common stock. Accordingly, the Company issued 462,214 restricted shares of common stock at a price of $0.32 per share, representing payment in full of the Note payable, plus accrued interest. The Consulting Agreement terminated due to Mr. Kunin’s death in October 2012.
On April 2, 2012, the Company and Edward W. Withrow III, the Company’s Chairman and Founder, entered into a Settlement Agreement and Mutual Release with EV Transportation, Inc., a Nevada corporation (“EV”). The Settlement resolved any disputes between the Company, Mr. Withrow and EV. In connection with the settlement, 1,250,000 shares of the Company’s common stock, valued at $350,000, were issued to designees of EV. All other terms and conditions of the Settlement are confidential.
On June 20, 2012, the Company entered into a consulting agreement with Capital Group Communications, Inc. (“CGC”), a California corporation, for certain consulting services rendered to the Company. The CGC agreement is for a term of 12 months beginning June 20, 2012, and includes compensation for services rendered in the form of 350,000 non-refundable restricted shares of the Company’s common stock, valued at $112,000. On December 15, 2012, 250,000 shares were issued to CGC, and the remaining 100,000 shares were issued December 17, 2013.
On July 5, 2012, the Company entered into a Consulting Agreement with Greg Suess for advisory services provided to the Company in connection with the no-fault Settlement Agreement and Mutual Release entered into on July 23, 2012. As compensation for services rendered, Mr. Suess was afforded the opportunity to purchase 75,000 restricted shares of the Company’s common stock at a price of $0.001 per share. Mr. Suess purchased the shares on July 24, 2012 for $75 cash.
On July 5, 2012, the Company entered into a Consulting Agreement with NUF Enterprises LLC (“NUF”), a Texas limited liability company, for advisory services provided to the Company in connection with the no-fault Settlement Agreement and Mutual Release entered into on July 23, 2012. As compensation for services rendered, NUF was afforded the opportunity to purchase 75,000 restricted shares of the Company’s common stock at a price of $0.001 per share.
F-13
On July 23, 2012, the Company, entered into a no-fault Settlement Agreement and Mutual Release effective July 20, 2012 (the “Agreement”) to settle all disputes between the Company and William N. Plamondon, III, the Company’s former Director, President and Chief Executive Officer, Erin Davis, Mr. Plamondon’s wife and the Company’s former Secretary, and R.I. Heller & Co., the corporation controlled by Mr. Plamondon. Pursuant to the Agreement, 1) 3,559,750 shares of the Company’s common stock owned by Mr. Plamondon and Ms. Davis, collectively, were cancelled; 2) Mr. Plamondon and Ms. Davis retained 1,000,000 shares and 500,000 shares, respectively; 3) all of the Company’s indebtedness for the services of Mr. Plamondon, in the amount of $847,142 was cancelled; and 4) all stock options awarded to Mr. Plamondon, Ms. Davis and their related parties were cancelled. All other terms of the Settlement Agreement are confidential.
On August 2, 2012 the Company entered into a 120-day Letter of Intent (“LOI”) to acquire all of the issued and outstanding shares of ACE Rent A Car, Inc. (“ACE”), an Indiana corporation. A second letter of intent (the “Second LOI” was entered into between the Company and ACE effective December 1, 2012 and expired on January 31, 2013. Although the Company and ACE have not formally extended the Second LOI, they are currently actively engaged in due diligence. Concurrently with the due diligence process, the Company has been actively seeking primarily equity-based financial support to effect the ACE acquisition. The Company is currently working with financial institutions to secure a combined debt-equity structure offering that will enable the Company to complete its proposed acquisition. ACE is under no obligation, neither verbally nor contractually, to sell ACE to the Company. The Company’s management and ACE are continuing discussions, and ACE is awaiting the Company’s revised acquisition proposal. There can be no guarantee that satisfactory financing arrangements will be secured to complete the acquisition.
On September 5, 2012, the Company entered into a consulting agreement with NUWA Group, LLC (“NUWA”), a California corporation, for certain consulting services to be provided to the Company. The NUWA agreement is for a term of 12 months beginning September 5, 2012, and includes compensation for such services in the form of 750,000 shares of non-refundable restricted shares of the Company’s common stock, valued at $180,000, which were issued in full on September 11, 2012. During the years ended December 31, 2013 and 2012, respectively, $90,000 and $60,000 of deferred compensation was expensed. There remained $30,000 and $120,000 in deferred compensation at December 31, 2013 and 2012, respectively.
On September 12, 2012, the Company retained the services of Wellington Shields & Co., LLC (“Wellington”) for the acquisition financing related to the purchase of ACE Rent A Car. The proposed financing was to be used primarily to complete the proposed acquisition of ACE. The Engagement Letter dated September 12, 2012, provided for an initial fee of $25,000 fee for Wellington to represent the Company to lenders to secure financing for the purchase of ACE. In addition, the Company engaged Wellington to represent the Company in a $30,000,000 equity financing, which was contingent upon the completion of the ACE acquisition. Wellington has been unable to secure satisfactory financing for the acquisition of ACE, and the contingent equity financing, and the Company’s agreement with Wellington has been terminated. There are no further obligations between the Company and Wellington.
NOTE 8. COMMON STOCK
The total number of authorized shares of common stock that may be issued by the Company is 100,000,000 with a par value of $0.001 per share.
On January 30, 2012, William B. Nesbitt, the Company’s Chief Executive Officer, was granted the right to purchase 500,000 shares of common stock at par value of $0.001 for his contribution to the Company prior to executing an employment agreement with the Company. Mr. Nesbitt elected to purchase the shares and, as a result, 500,000 restricted shares of the Company’s common stock were issued for $500 cash. The shares were valued at $75,000, which has been expensed in the current year, and $74,500 has been recorded as additional paid in capital.
On January 30, 2012, two Directors of the Company received the right to purchase 250,000 each shares of common stock at par value of $0.001 for their services over and above their roles as Directors of the Company. Both Directors elected to purchase the shares and, as a result, a total of 500,000 restricted shares of the Company’s common stock were issued. The shares were valued at $75,000, which has been expensed in the current year, and $74,500 has been recorded as additional paid in capital.
On January 30, 2012, 50,000 restricted shares of the Company’s common stock were issued to a consultant in exchange for services. The shares were valued at $7,500, which has been expensed in the current year, and $7,450 has been recorded as additional paid in capital.
On January 31, 2012, the former Chief Financial Officer, Norman A. Kunin, converted his debt in the amount of $147,909 into 462,214 restricted shares of the Company’s common stock at $0.32 per share. As a result, $147,447 has been recorded as additional paid in capital.
On June 5, 2012, the Chief Financial Officer, Calli Bucci, converted her debt in the amount of $68,000 into 212,500 restricted shares of the Company’s common stock at $0.32 per share. As a result, $67,788 has been recorded as additional paid in capital.
On June 18, 2012, 1,250,000 restricted shares of the Company’s common stock were issued EV Transportation, Inc., a Nevada corporation, in connection with a Settlement Agreement and Mutual Release entered into on April 2, 2012. The shares were valued at $350,000, which has been expensed in the current year, and $348,750 has been recorded as additional paid in capital.
F-14
On June 20, 2012, the Company authorized 350,000 shares of its restricted common stock to be issued to a consultant for services rendered to the Company, pursuant to the Consulting Agreement dated June 20, 2012. The shares were valued at $112,000, and were fully expensed in 2012. As of December 31, 2012, 250,000 shares were issued, $79,750 was recorded as paid in capital, and $32,000 was accrued for the 100,000 unissued shares. On December 17, 2013, the remaining 100,000 shares were issued. As a result, $31,900 was recorded as additional paid in capital.
On June 27, 2012, The Kasper Group converted its debt in the amount of $424,624 into 1,326,952 shares of the Company’s common stock at $0.32 per share. As a result, $423,297 has been recorded as additional paid in capital.
On July 5, 2012, the Company issued 150,000 shares of its restricted common stock to two consultants in exchange for services rendered to the Company. The shares were valued at $33,000, which has been expensed in the current year, and $32,925 has been recorded as paid in capital. In addition, one shareholder paid $75 to purchase his shares at a par value of $0.001, pursuant to his Consulting Agreement.
In August 2012, Mr. William Plamondon and Ms. Erin Davis returned 3,559,750 shares of the Company’s restricted common stock to the treasury, pursuant to the Settlement Agreement and Mutual Release dated July 23, 2012. As a result, $3,560 has been recorded to additional paid in capital.
On September 5, 2012, the Company issued 750,000 shares of its restricted common stock for services rendered to the Company, pursuant to a Consulting Agreement dated September 5, 2012. The shares were valued at $180,000, which has been recorded as deferred compensation, and will be amortized over a twelve month period. As a result, $179,250 has been recorded to additional paid in capital. As of December 31, 2013, a total of $120,000 has been expensed, and $60,000 will be expensed over the next 5 months.
On September 18, 2012, the Company issued 50,000 shares of its restricted common stock to one consultant in exchange for services rendered to the Company. The shares were valued at $16,000, which has been expensed in the current year, and $15,950 has been recorded as additional paid in capital.
On November 14, 2013, the Company issued 50,000 shares of its restricted common stock for cash in the amount of $5. The shares were valued at $3,500, which has been expensed in the current year and $3,495 has been recorded as additional paid in capital.
On December 17, 2013, the Company issued 60,000 shares of its restricted common stock for services rendered to the Company. The shares were valued at $6,000, which has been expensed in the current year, and $5,980 has been recorded as additional paid in capital.
During the years ended December 31, 2013 and 2012, respectively, a total of $120,000 and $115,625 in deferred stock compensation was expensed. Deferred stock compensation in the amount of $0 and $120,000 remains as of December 31, 2013 and 2012, respectively.
As of December 31, 2013 and 2012, the Company had 26,884,740 and 26,674,740 shares of common stock issued and outstanding.
NOTE 9. WARRANTS AND OPTIONS
As of December 31, 2013 and 2012, the Company has no warrants and 5,997,547 options issued and outstanding.
On November 1, 2011,the Company entered into an employment agreement with its Chief Executive Officer,under which the Company granted qualified stock options to purchase 1,500,000 shares of its common stock for 5 years at an option price of $0.20 per share. The options vest quarterly over a three (3) year period at 125,000 shares per quarter. The options have been valued using the Black-Scholes valuation method at $0.12 per share or $180,000. The Company used the following assumptions in valuing the options: expected volatility 254%; expected term 5 years; expected dividend yield 0%, and risk-free interest rate of .90%. The Company has recorded a total of $180,000 of deferred stock option compensation, of which $60,000 and $60,000 was expensed during the years ended December 31, 2013 and 2012, respectively. There remained deferred stock option compensation in the amount of $60,000 and $120,000 as of December 31, 2013 and 2012, respectively.
F-15
During the years ended December 31, 2013 and 2012, respectively, the Company expensed a total of $60,000 and $487,500 in stock option compensation. There remained $60,000 and $120,000 in deferred stock option compensation at December 31, 2013 and 2012, respectively.
Outstanding and Exercisable Options |
|
|
|
| ||||||||
|
|
|
|
| Remaining |
| Exercise Price |
|
|
| ||
|
| Number of |
|
| Contractual Life |
| times Number |
| Weighted Average |
| ||
Exercise Price |
| Shares |
|
| (in years) |
| of Shares |
| Exercise Price |
| ||
$0.250 |
| 2,287,547 |
|
| 0.75 |
| $ | 571,887 |
|
| $0.25 |
|
$0.473 |
| 435,000 |
|
| 1.50 |
|
| 205,755 |
|
| $0.37 |
|
$0.320 |
| 750,000 |
|
| 2.25 |
|
| 240,000 |
|
| $0.35 |
|
$0.320 |
| 1,025,000 |
|
| 7.25 |
|
| 328,000 |
|
| $0.35 |
|
$0.200 |
| 1,500,000 |
|
| 3.00 |
|
| 300,000 |
|
| $0.31 |
|
|
| 5,997,547 |
|
|
|
| $ | 1,645,642 |
|
| $0.31 |
|
Options Activity | Number |
| Weighted Average |
| |
| Of Shares |
| Exercise Price |
| |
Outstanding at December 31, 2012 | 5,997,547 |
|
| $0.31 |
|
Issued | –– |
|
| –– |
|
Exercised | –– |
|
| –– |
|
Expired / Cancelled | –– |
|
| –– |
|
Outstanding at December 31, 2013 | 5,997,547 |
|
| $0.31 |
|
NOTE 10. DISCONTINUED OPERATIONS
On December 1, 2012, the Company discontinued all operations related to the former activities involving the three year test market with Park N Fly, Inc. for the Company’s car wash product and system, Ecologic Shine®. The 3-year test market with Park N Fly resulted in an accumulated deficit of $87,830 through December 31, 2013. In addition, certain advances were made to Ecologic Products, Inc. for the purpose of overhead expenses that were not directly attributable to the Park N Fly segment of operations. As a result, additional cash funds are required the in order to satisfy the accounts payable remaining. As of December 31, 2013 and 2012, the Company had the following assets and liabilities relating to its discontinued operations:
| December 31, 2013 |
| December 31, 2012 |
| ||
Assets |
|
|
|
|
|
|
Intercompany advances | $ | 67,169 |
| $ | 71,789 |
|
|
|
|
|
|
|
|
Liabilities and accumulated deficit |
|
|
|
|
|
|
Accounts payable and accrued expenses | $ | 154,999 |
| $ | 150,476 |
|
Accumulated deficit |
| (87,830 | ) |
| (78,687 | ) |
Total liabilities and accumulated deficit | $ | 67,169 |
| $ | 71,789 |
|
The results of discontinued operations are summarized as follows:
| For the year ended December 31, 2013 |
| Cumulative from September 1, 2009 to December 31, 2013 |
| ||
Revenue | $ | –– |
| $ | 1,192,191 |
|
Cost of goods sold |
| –– |
|
| 1,168,796 |
|
Gross profit |
| –– |
|
| 23,395 |
|
General and administrative expenses |
| –– |
|
| (91,200 | ) |
Interest expense |
| (4,010 | ) |
| (20,325 | ) |
Gain on sale of equipment |
| –– |
|
| 300 |
|
Net loss from discontinued operations | $ | (4,010 | ) | $ | (87,830 | ) |
NOTE 11. INCOME TAXES
Temporary differences are differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is recorded when the ultimate realization of a deferred tax as the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2013 and 2012, are presented below:
F-16
| December 31, 2013 |
| December 31, 2012 |
| ||
Deferred tax assets: |
|
|
|
|
|
|
Continuing operations: |
|
|
|
|
|
|
Net operating loss carry forwards | $ | 3,219,000 |
| $ | 2,717,000 |
|
Less valuation allowance |
| (3,219,000 | ) |
| (2,717,000 | ) |
Net deferred tax asset - continuing operations | $ | –– |
| $ | –– |
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
Net operating loss carry forwards | $ | 27,000 |
| $ | 24,000 |
|
Less valuation allowance |
| (27,000 | ) |
| (24,000 | ) |
Net deferred tax asset - discontinued operations | $ | –– |
| $ | –– |
|
A reconciliation of income taxes computed at the US federal statutory income tax rate to the change in valuation allowance is as follows:
| Year ended |
| Year ended |
| ||
| December 31, 2013 |
| December 31, 2012 |
| ||
Income (Loss) Before Taxes: |
|
|
|
|
|
|
Continuing operations | $ | (1,542,747 | ) | $ | (2,129,188 | ) |
Discontinued operations |
| (4,010 | ) |
| (9,038 | ) |
Total Income (loss) before taxes |
| (1,546,757 | ) |
| (2,138,226 | ) |
Statutory rate |
| 34% |
|
| 34% |
|
|
|
|
|
|
|
|
Computed expected tax payable (recovery) | $ | 489,000 |
| $ | 727,000 |
|
Non-recognizable income |
| 37,000 |
|
| –– |
|
Non-deductible expenses |
| –– |
|
| –– |
|
Change in valuation allowance |
| (526,000 | ) |
| (727,000 | ) |
Reported income taxes | $ | –– |
| $ | –– |
|
At this time, the Company is unable to determine if it will be able to benefit from its deferred tax asset. There are limitations on the utilization of net operating loss carry forwards, including a requirement that losses be offset against future taxable income, if any. In addition, there are limitations imposed by certain transactions which are deemed to be ownership changes. Accordingly, a valuation allowance has been established for the entire deferred tax asset. The increase in the valuation allowance for continuing operations was approximately $526,000 and $727,000 for the years ended December 31, 2013 and 2012, respectively.
As of December 31, 2013, the Company had cumulative net operating loss carryforwards of approximately $9,547,000, and $7,492,000 for federal and state income tax purposes, respectively, which begin to expire in the year 01/01/2029. Section 382 of the Internal Revenue Code of 1986 provides for an annual limitation of approximately $67,000 on the utilization of net operating loss carryforwards as the company underwent an ownership change in 2008, as defined in Section 382. This limitation has been reflected in the US federal and state net operating loss carryforwards. The Company has elected to forgo any carryback of its net operating losses.
The Company adopted uncertain tax position in accordance with ASC 740 on January 1, 2007, and has not recognized any material increase in the liability for unrecognized income tax benefits as a result of the implementation. The Company estimates that the unrecognized tax benefit will not change within the next twelve months. The Company will continue to classify income tax penalties and interest, if any, as part of interest and other expenses in its consolidated statements of operations. The Company has incurred no interest or penalties as of December 31, 2013 and 2012.
The amount of income taxes the Company pays is subject to ongoing examinations by federal and state tax authorities. To date, there have been no reviews performed by federal or state tax authorities on any of the Company’s previously filed returns. The Company’s 2008 and later tax returns are still subject to examination.
NOTE 12. SUBSEQUENT EVENTS
During the period January 1, 2014 through March 15, 2014, the Company decreased its loans from related parties by $120,967, from a total of $2,119,396 at December 31, 2013 to $1,998,429 at March 15, 2014. The decrease represents a net decrease in convertible notes payable of $155,000 resulting from an increase in compensation converted to notes payable in the amount of $45,000, and a decrease from the assignment of $200,000 in convertible notes payable to non-related third parties; an increase in accrued compensation owed to related parties in the amount of $8,000; an increase in reimbursable expenses of $9,409; and an increase in accrued interest of $16,623. The loans bear interest at the rates of 5 to 7 percent per annum, are unsecured, are payable upon demand or by November 15, 2015, and are convertible into the Company’s common stock at a price of $0.07 to $0.08 per share.
* * * * *
F-17
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
Effective May 23, 2013, Anton & Chia, LLP (“ANC”) no longer acted as the Company’s independent registered public accounting firm, pursuant to a mutually agreed upon decision made by the Company’s Audit Committee and ANC, which was approved by the Company’s Board of Directors.
The reports of ANC regarding the Company’s financial statements for the fiscal year ended December 31, 2012 did not contain any adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit report of ANC on the Company’s financial statements for fiscal year ended December 31, 2012 contained an explanatory paragraph which noted that there was substantial doubt about the Company’s ability to continue as a going concern.
During the year ended December 31, 2012, and during the period from December 31, 2012 to May 23, 2013, the date of dismissal, (i) there were no disagreements with ANC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of ANC would have caused it to make reference to such disagreement in its reports; and (ii) there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
The Company has provided ANC with a copy of the foregoing disclosures and requested that ANC furnish the Company with a letter addressed to the SEC stating whether or not it agrees with the above statements. A copy of such letter is filed as Exhibit 16.4 to the Company’s Current Report on Form 8-K filed June 10, 2013.
The Company received communications on April 10, 2014, from ANC, wherein ANC has made certain claims with regards to their independence pertaining to the Company’s audit engagement with them for the December 31, 2012 fiscal year end. The Company is in disagreement with ANC, and is disputing their claim, but has removed their audit opinion from this filing until such time as this dispute is resolved by legal authority.
Effective May 24, 2013, the Board of Directors of the Company engaged Seale & Beers, CPAs (“S&B”) as its independent registered public accounting firm to audit the Company’s financial statements for the fiscal year ending December 31, 2013.
During each of the Company’s two most recent fiscal years and through the interim periods preceding the engagement of S&B, the Company (a) has not engaged S&B as either the principal accountant to audit the Company’s financial statements, or as an independent accountant to audit a significant subsidiary of the Company and on whom the principal accountant is expected to express reliance in its report; and (b) has not consulted with S&B regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and no written report or oral advice was provided to the Company by S&B concluding there was an important factor to be considered by the Company in reaching a decision as to an accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable event, as that term is described in Item 304(a)(1)(v) of Regulation S-K.
ITEM 9A. | CONTROLS AND PROCEDURES |
Management’s Report on Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed under theSecurities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s president, chief executive officer and chief financial officer to allow for timely decisions regarding required disclosure. In designing and evaluating the Company’s disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Company’s management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are 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.
As of December 31, 2013, the end of the Company’s fiscal year covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s president, chief executive officer and chief financial officer of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, the Company’s president, chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this annual report.
21
Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of the Company’s control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States. The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) inInternal Control-Integrated Framework. The Company’smanagement has concluded that, as of December 31, 2013, the Company’s internal control over financial reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Company generally accepted accounting principles. The Company’s management reviewed the results of their assessment with the Company’s Board of Directors.
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 of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Inherent limitations on effectiveness of controls
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are 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.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal controls over financial reporting that occurred during the year ended December 31, 2013 that have materially or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
ITEM 9B. | OTHER INFORMATION |
None
PART III
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Identification of Directors and Executive Officers
The following table represents the directors and executive officers of the Company as of December 31, 2013:
22
Term of Office
The Board of Directors elects officers and their terms of office are at the discretion of the Board of Directors. Each officer serves until the earlier occurrence of the election of his or her successor at the next meeting of stockholders, death, resignation or removal by the Board of Directors. At the present time, members of the board of directors are not compensated for their services to the board. Each Director shall hold office until the next annual meeting of stockholders and until his/her successor shall have been duly elected and qualified.
Background and Business Experience
The following is a brief account of the education and business experience of each director and executive officer during at least the past five years, indicating each person's principal occupation during the period, and the name and principal business of the organization by which he was employed.
William B. Nesbitt, President, Chief Executive Officer and Director
Mr. Nesbitt is a graduated from Cornell University with a BS degree in Hotel and Service Industry Management from the School of Hotel Administration. He started a car rental company in New York City called Olin’s Rent A Car which grew into a major presence in New York and subsequently opened branches in Florida to utilize its off season fleet and serve its vacationing New York customers. Olin’s strategy was as a market niche company avoiding the airports and focusing on local neighborhoods and businesses.
Mr. Nesbitt left Olin’s for an opportunity to work for Walter Wriston at Citibank where he participated in the development of the Automatic Teller Machine and a major reduction on branch cost and footprint, with a very substantial increase in customer convenience and deposits.
Mr. Nesbitt rejoined his old company in Florida which had changed its name to Alamo Rent A Car. He was initially responsible for branches and for fleet utilization. He developed a capacity planning system to help predict the numbers of reservations, pricing potential and no show expectations. This allowed the company to achieve fleet utilization far above the competition. He later led the expansion of Alamo across the country and into foreign markets. With expansion complete, Bill focused on marketing and sales to major wholesale suppliers and partners such as the airlines, travel consortiums, cruise lines and large corporations.
Since the sale of Alamo, Mr. Nesbitt has focused on several successful company startup and acquisition projects as well as developing customer loyalty retail marketing programs for Harley Davidson dealerships and marine products companies.
Mr. Nesbitt comes to the Company with 40+ years of experience not only in the car rental business, but wide experience in company building, corporate expansion and controls. The Company looks forward to his contributions to the Company’s efforts to build and maintain a world class environmental transportation business.
Calli Bucci, Secretary and Chief Financial Officer
Ms. Bucci has over 25 years experience in the field of finance and business management. Prior to holding the position of interim Chief Financial Officer at Ecologic Transportation, Ms. Bucci has been Controller of the Company since January 2010, and was responsible for general ledger, quarterly certified reviews, annual audits, preparation for SEC filings, customer billing and invoicing, multi-state payroll, licenses and consolidated corporate income taxes.
Before joining the Company, Ms. Bucci held the position of Chief Financial Officer at InstaSave, Inc., a promotional incentive company, from December 2007, where she was responsible for financial reporting, capital structure strategy and modeling, financial transactions with consumers, consumer product goods companies and retailers, investor relations, audits, payroll and corporate income taxes.
In addition to her public accounting background, Ms. Bucci held the position of Manager/Senior Accountant at Gelfand Rennert & Feldman, a division of PriceWaterhouseCoopers, where she was responsible for all financial transactions for high net worth clientele, was liaison for annual audits, general ledger reviews and annual tax preparation.
Ms. Bucci held the position of Director of Accounting and Contract Administration at Intercontinental Releasing Corporation (IRC), a Los Angeles based Motion Picture Distribution Company. Ms. Bucci was responsible for all functions within the company’s accounting department, from financial statements and forecasting, to annual audits and corporate taxes. During her tenure with IRC, Ms. Bucci also designed and implemented a custom computerized availabilities system for the film rights of over 35 film properties distributed to foreign territories throughout the world. She was also responsible for the administration and facilitation of all client contracts, dealing heavily in foreign currencies and international import regulations.
Ms. Bucci attended the University of California at Berkley, majoring in Accounting.
23
Edward W. Withrow III, Chairman of the Board of Directors
Mr. Withrow has over 20 years of experience as a financier, wherein he has developed an expertise in finding small undervalued and under-funded companies and creating value with them. In 1992 Mr. Withrow created Box Office Partners I, II, & III, a series of funds that provided off-balance sheet financing for foreign film distributors. In 1994 Mr. Withrow became a pioneer in the development of sell-thru educational entertainment video into grocery stores chains which led to the creation of Family Store Entertainment, LLC an educational entertainment company involved in production, licensing, acquisition and distribution of children’s entertainment. In 1998 Mr. Withrow co-founded Simplyfamily.com an Internet based an integrated affinity community.
In 2000, Mr. Withrow founded Huntington Chase Financial Group, LLC and Huntington Chase, Ltd. to engage in venture capital and merchant banking activities. From 2000 until the present, Mr. Withrow acquired, restructured, merged, created and was a senior advisor to 10 companies. From 2002 to 2004, Mr. Withrow was the CEO of Reward Enterprises, Inc., a public company and early adopter of VOIP telecommunications in the international market with operations in North Africa and India. In 2003 to 2004 Mr. Withrow founded Symphony Card, LLC a stored value debit card targeting the West African nation of Nigeria in partnership with Fountain Trust Bank, PLC.
From 2004 to 2005, Mr. Withrow became the CEO of Addison-Davis Diagnostics, Ltd, a leading edge point-of-care diagnostic company. From 2005 to present, Mr. Withrow co-founded Eaton Scientific Systems, Ltd., a biotechnology company and co-authored a patent pending non-hormonal treatment for women in menopause and post cancer treatments. From 2006 to present, Mr. Withrow was a co-founder of Montecito Bio Sciences, Ltd. an innovative diagnostic company. He is the author of several patents in the life sciences space. In 2006 Mr. Withrow became a Managing Director of Orient Financial Group, Ltd a Hong Kong registered financial advisory firm headquartered in Hong Kong with representative offices in Geneva, Delhi and Los Angeles.
Mr. Withrow co-founded Save the Company’s Children a non-profit organization that assisted in fundraising activities for charities that focused on child abuse and since 1999 has been actively involved with Planet Hope a non-profit organization that helps homeless mothers and their children.
John L. Ogden, Director
Mr. Ogden has more than 30 years’ experience in energy corporate finance, international negotiations, corporate and asset acquisition, business development and energy company management. Since 1995 he has been a principal and managing director of Wood Roberts, LLC, an energy corporate financial advisory firm based in Houston, Texas. Between 1985 and 1995, he managed an independent corporate financial consulting business specializing in domestic and international energy issues, providing M&A advice, and strategic corporate financial consulting services. Mr. Ogden graduated from the University of Leeds, England, with a Bachelor of Laws (honors) and is qualified as a Barrister-at-Law in England.
Edward W. Withrow Jr., Director
Mr. Withrow earned his Master’s in Business Administration from Harvard University, with a concentration in Investment Banking. He has a bachelor’s degree in Business, with a concentration in Finance and Accounting, from the University of Colorado. He served twenty-four years on active duty in the U.S. Navy as a professional logistician, retiring with the rank of Captain. He spent approximately 20 years as a financial professional with Drexel Burnham Lambert, Paine Webber, Merrill Lynch and Wells Fargo.
Mr. Withrow has been very active in civic leadership for the past 20 years serving in a number of elected and appointed positions, including Mayor of Alameda, California. He is currently serving as the regionally elected President of the Governing Board of The Peralta Colleges, an institution consisting of 2,000 faculty and staff and approximately 30,000 students.
Dr. Martin A. Blake, MBA, BSc, Director
Dr. Blake is a sustainability expert with over 25 years experience developing strategic plans and influencing high profile stakeholders within governments, NGOs as well as the postal, construction, healthcare, oil and gas and charity sectors.
From 2004 to the present, Dr. Blake has been the Head of CSR, Sustainability and Social Policy for the Royal Mail Group plc, London, UK’s postal service company and largest single employer, with more than 195,000 employees, 14,000 retail outlets and a fleet of 35,000 vehicles.
From 2001 to 2004, Dr. Blake was Director of Change, Performance and Risk Management of local authority proving public services for Suffolk Coastal District Council, Suffolk, UK. He successfully designed and directed the implementation of a major transformational change management program.
Since 1988, Dr. Blake has also held the positions of Interim Managing Director of InterVest Group (BVI) Limited, Bahrain, an international financial services and venture capital provider and Director of Community Infrastructure Development for Saudi Arabian Oil Company, KSA, Saudi Arabia, the largest oil producing, refining and shipping company in the world.
24
Family Relationships
There are no family relationships among its directors or executive officers, with the exception of the following:
Mr. Edward W. Withrow, Jr. is the father of Mr. Edward W. Withrow III.
Involvement in Certain Legal Proceedings
The Company’s directors, executive officers and control persons have not been involved in any of the following events during the past five years:
1.
any 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;
2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
3.
being 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; or
4.
being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Audit Committee and Audit Committee Financial Expert
Currently the Company’s audit committee consists of John L. Ogden and Edward W. Withrow Jr. John L. Ogden is chair of the audit committee. The Company currently does not have nominating, compensation committees or committees performing similar functions. There has not been any defined policy or procedure requirements for shareholders to submit recommendations or nomination for directors.
During the calendar year 2013, aside from quarterly review teleconferences, there were no meetings held by this committee. The business of the audit committee was conducted though these teleconferences and by resolutions consented to in writing by all the members and filed with the minutes of the proceedings of the audit committee. Audit Committee meetings were held in conjunction with Board of Director’s meetings.
Code of Ethics
The Company has adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-K of the Securities Exchange Act of 1934. The Code of Ethics applies to directors and senior officers, such as the principal executive officer, principal financial officer, controller, and persons performing similar functions.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of change in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company under Rule 16a-3(e) during the year ended December 31, 2013, Forms 5 and any amendments thereto furnished to the Company with respect to the year ended December 31, 2013, and the representations made by the reporting persons to the Company, the Company believes that during the year ended December 31, 2013, its executive officers and directors and all persons who own more than ten percent of a registered class of the Company’s equity securities complied with all Section 16(a) filing requirements.
ITEM 11. | EXECUTIVE COMPENSATION |
Summary Compensation Table
The table below summarizes the compensation paid by the Company to the following persons:
(a)
its principal executive officer;
(b)
each of the Company’s two most highly compensated executive officers who were serving as executive officers at the end of the years ended December 31, 2013 and 2012; 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 the Company’s executive officer at the end of the years ended December 31, 2013 and 2012.
No disclosure is provided for any named executive officer, other than the Company’s principal executive officers, whose total compensation did not exceed $100,000 for the respective fiscal year:
25
(1) | Pursuant to Mr. Nesbitt’s employment agreement, he was granted 1,500,000 options, with a total value of $180,000. As of December 31, 2013, $120,000 was vested. In addition, during 2013, Mr. Nesbitt was granted the right to purchase 500,000 shares of the Company’s common stock, with a total value of $75,000. As of December 31, 2013, $454,167 of Mr. Nesbitt’s salary was converted into a convertible note payable, due upon demand, accruing interest at 5% per annum, and convertible into the Company’s common stock at $0.07 per share. |
|
|
(2) | Mr. Withrow was granted 750,000 options on April 19, 2011, with a total value of $202,500, of which $101,250 vested during 2012, and $101,250 vested during 2013. In addition, pursuant to the Company’s consulting agreement with Huntington Chase Financial Group, for services provided by Mr. Withrow, $180,000 in consulting fees has been expensed in 2012 and 2013. As of December 31, 2013, $692,500 in consulting fees owed under this agreement has been converted into a convertible note payable, due upon demand, accruing interest at 7% per annum, and convertible into the Company’s common stock at $0.07 per share. |
|
|
(3) | During 2012, Mr. Ogden was granted the right to purchase 250,000 shares of the Company’s common stock, with a total value of $37,500. In addition, Mr. Ogden provided consulting services to the Company through November 15, 2013, exclusive of his position as a member of the board of directors, for a consulting fee of $150,000. On November 15, 2013, the consulting fee of $150,000 was converted into a convertible note payable, maturing November 15, 2015, accruing interest at 5% per annum, and convertible into the Company’s common stock at $0.08 per share. |
|
|
(4) | On April 19, 2011, Ms. Bucci was granted 50,000 options, with a total value of $15,000, of which $7,500 vested in 2012. In addition, on November 15, 2013, $72,067 in compensation owed to Ms. Bucci was converted into a convertible note payable, maturing November 15, 2015, accruing interest at 5% per annum, and convertible into the Company’s common stock at $0.08 per share. |
Employment Contracts and Termination of Employment and Change in Control Arrangements
On October 12, 2009 the Company entered into a consulting agreement with Huntington Chase, Ltd., a Nevada corporation wherein Edward W. Withrow III, the Company’s chairman, owns a majority control. The consulting agreement provides for Huntington Chase, Ltd. to perform certain advisory functions, and to be paid $15,000 per month for a period of three years until October 12, 2012. On October 12, 2012, a modification to the consulting agreement was made to extend the term for an additional three years.
On August 2, 2011, the Company entered into a Consulting Agreement with Kunin Business Consulting for Mr. Kunin’s services. The Consulting Agreement terminated due to Mr. Kunin’s death in October 2012.
On November 1, 2011, the Company entered into an employment agreement with William B. Nesbitt, for his services as President and Chief Executive Officer of the Company. The initial term of the Agreement was for a period of twelve (12) months, and is automatically renewed annually unless terminated by either party. The Agreement provides for initial compensation of $10,000 per month for the first nine months, increasing to $20,833 effective August 1, 2012, having reached certain goals of the Company. In addition, the Agreement provides for expense reimbursements, an initial Stock Option grant of 1,500,000 shares of the Company’s common stock, and annual performance options.
On July 23, 2012, the Company, entered into a no-fault Settlement Agreement and Mutual Release effective July 20, 2012 (the “Agreement”) to settle all disputes between the Company and William N. Plamondon, III, the Company’s former Director, President and Chief Executive Officer, Erin Davis, Mr. Plamondon’s wife and the Company’s former Secretary, and R.I. Heller & Co., the corporation controlled by Mr. Plamondon. Pursuant to the Agreement, 1) 3,559,750 shares of the Company’s common stock owned by Mr. Plamondon and Ms. Davis, collectively, were cancelled; 2) Mr. Plamondon and Ms. Davis retained 1,000,000 shares and 500,000 shares, respectively; 3) all of the Company’s indebtedness for the services of Mr. Plamondon, in the amount of $847,142 was cancelled; and 4) all stock options awarded to Mr. Plamondon, Ms. Davis and their related parties were cancelled. All other terms of the Settlement Agreement are confidential.
There are no other employment contracts, compensatory plans or arrangements, including payments to be received from the Company with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company, or its subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company, except for the Employment Agreement effective November 1, 2011 between the Company and William B. Nesbitt and the consulting agreement dated October 21, 2009 between the Company and Huntington Chase, Ltd.
There are no agreements or understandings for any executive officer to resign at the request of another person. None of the Company’s executive officers acts or will act on behalf of or at the direction of any other person.
Equity Compensation Plan
In September, 2009, the Company adopted the approved the 2009 Stock Option Plan ("the 2009 Plan"), wherein 20,000,000 restricted shares of common stock were reserved for issuance. The 2009 Plan is intended to assist the Company in securing and retaining key employees, directors and consultants by allowing them to participate in the Company's ownership and growth through the grant of incentive and non-qualified options. Under the 2009 Plan, the Company may grant incentive stock options only to key employees and employee directors, or the Company may grant non-qualified options to employees, officers, directors and consultants. Subject to the provisions of the 2009 Plan, the board of directors will determine who shall receive options, the number of shares of common stock that may be purchased under the options. As of December 31, 2013, the Company has granted options to purchase a total of 5,997,547 restricted shares of the Company’s common stock.
Stock Options/SAR Grants
No options were granted to the Company’s directors and officers during the years ended December 31, 2013 and 2012.
Aggregated Option Exercised in Last Fiscal Year and Fiscal Year-End Values
There were no options exercised during the Company’s fiscal years ended December 31, 2013 or 2012, by any officer or director of the Company.
Outstanding Equity Awards at Fiscal Year End
Name |
| Number of Options Granted |
| Number of Options Unexercisable |
| Number of Options Exercisable |
| Exercise Price |
| Expiration Date |
Matrix Advisors, LLC |
| 2,287,547 |
|
|
| 2,287,547 |
| $0.250 |
| 10/1/2014 |
John Ogden |
| 80,000 |
|
|
| 80,000 |
| $0.473 |
| 6/30/2015 |
Edward W. Withrow Jr. |
| 80,000 |
|
|
| 80,000 |
| $0.473 |
| 6/30/2015 |
Shelley Meyers |
| 80,000 |
|
|
| 80,000 |
| $0.473 |
| 6/30/2015 |
Myles Lambert |
| 60,000 |
|
|
| 60,000 |
| $0.473 |
| 6/30/2015 |
Paul Christensen |
| 50,000 |
|
|
| 50,000 |
| $0.473 |
| 6/30/2015 |
Allen Scott |
| 35,000 |
|
|
| 35,000 |
| $0.473 |
| 6/30/2015 |
Norman Kunin |
| 50,000 |
|
|
| 50,000 |
| $0.473 |
| 6/30/2015 |
Edward W. Withrow III |
| 750,000 |
|
|
| 750,000 |
| $0.320 |
| 4/19/2016 |
William B. Nesbitt |
| 1,500,000 |
| 500,000 |
| 1,000,000 |
| $0.200 |
| 11/1/2016 |
Kyle Withrow |
| 250,000 |
|
|
| 250,000 |
| $0.320 |
| 4/19/2021 |
John Ogden |
| 150,000 |
|
|
| 150,000 |
| $0.320 |
| 4/19/2021 |
Edward W. Withrow Jr. |
| 150,000 |
|
|
| 150,000 |
| $0.320 |
| 4/19/2021 |
Shelley Meyers |
| 150,000 |
|
|
| 150,000 |
| $0.320 |
| 4/19/2021 |
Myles Lambert |
| 100,000 |
|
|
| 100,000 |
| $0.320 |
| 4/19/2021 |
Paul Christensen |
| 100,000 |
|
|
| 100,000 |
| $0.320 |
| 4/19/2021 |
Calli Bucci |
| 50,000 |
|
|
| 50,000 |
| $0.320 |
| 4/19/2021 |
Martin Blake |
| 50,000 |
|
|
| 50,000 |
| $0.320 |
| 4/19/2021 |
Rodolfo Madrigal |
| 25,000 |
|
|
| 25,000 |
| $0.320 |
| 4/19/2021 |
|
| 5,997,547 |
| 500,000 |
| 5,497,547 |
|
|
|
|
On October 1, 2009, the Company entered into a consulting agreement for services under which the Company issued options to purchase 2,287,547 shares of its common stock for an option price of $0.25. The options vested on September 1, 2010. The options are exercisable for a period of three years after the vesting date. The Company has valued the options utilizing the Black-Scholes Valuation at $989,645 and for accounting purposes has amortized the option value over the eleven month period commencing with the date of issuance and ending when the options vest. The full amount was amortized during 2009 and 2010. Assumptions used in valuing the options: expected term is 3.67 years, expected volatility is 33%, risk-free interest rate is 2.00%, and dividend yield is 0.00%.
On June 30, 2010, the Company, under its 2009 Stock Option Plan, granted qualified stock options to purchase 435,000 shares of its common stock for five years at $0.473 per share. Of the total options granted, 240,000 were granted to three members of the Board of Directors, 120,000 of which vested on July 2, 2010, and 120,000 of which vested on July 2, 2011. In addition, 195,000 were granted to four consultants, all of which vested on July 2, 2010. The options were valued using the Black-Scholes valuation method at $0.13 per share or $56,550. The full amount was amortized during 2010 and 2011. The Company used the following assumptions in valuing the options: expected volatility 33%; expected term 5 years; expected dividend yield 0%, and risk-free interest rate of 1.49%.
27
On April 19, 2011 the Board of Directors, under the Company’s 2009 Stock Option Plan, granted qualified stock options to its Former Chief Executive Officer and its Chairman of the Board (“Ten Percent Holders”) to purchase 1,750,000 shares of its common stock for five years at $0.32 per share, qualified stock options to five of its employees (“Employee Options”) to purchase 775,000 shares of its common stock for ten years at $0.32, and qualified stock options to four of its directors (“Directors Options”) to purchase 500,000 shares of its common stock for ten years at $0.32, for a total grant of 3,025,000 stock options. Of the total options granted, 1,000,000 were granted to the Company’s Former Chief Executive Officer, which vested quarterly over a 12 month period at 250,000 shares per quarter. Of the total options granted, 750,000 were granted to the Company’s Chairman of the Board which vested quarterly over a 12 month period at 187,500 shares per quarter. Of the total options granted, 775,000 were granted to five employees, which vested quarterly over a 12 month period at 193,750 shares per quarter. Of the total options granted, 500,000 were granted to three directors which vested up to 450,000 at any time after the date of grant and 50,000 were granted to one director which vests up to 50,000 at any time after the date of grant. The value of the options for the Ten Percent Holders, using the Black-Scholes valuation method is $0.27 per share or $472,500. The 775,000 Employee Options and 500,000 Directors Options were valued at $0.30 per share or $382,500. The Company used the following assumptions in valuing the options: expected volatility 120%; expected term 5 years for the Ten Percent Holders and 10 years for the Employee Options and the Directors Options; expected dividend yield 0%, and risk-free interest rate of 1.97%. At April 19, 2011, the Company expensed $150,000 in stock option compensation for the 500,000 options vested any time after the date of grant, and recorded $705,000 of deferred stock option compensation for the balance of the options granted, for a total value of the options granted of $855,000. The Company fully expensed $855,000 in stock option compensation in 2011 and 2012.
On November 1, 2011, the Company entered into an employment agreement with its Chief Executive Officer, under which the Company granted qualified stock options to purchase 1,500,000 shares of its common stock for five years at an option price of $0.20 per share. The options vest quarterly over a three (3) year period at 125,000 shares per quarter. The options have been valued using the Black-Scholes valuation method at $0.12 per share or $180,000. The Company used the following assumptions in valuing the options: expected volatility 254%; expected term 5 years; expected dividend yield 0%, and risk-free interest rate of .90%. The Company has recorded a total of $180,000 of deferred stock option compensation, of which $60,000 and $60,000 was expensed during the years ended December 31, 2013 and 2012, respectively. There remained deferred stock option compensation in the amount of $60,000 and $120,000 as of December 31, 2013 and 2012, respectively.
On July 23, 2012, the Company entered into a no-fault Settlement Agreement and Mutual Release to settle all disputes between the Company and its former Chief Executive Officer, Mr. William Plamondon, its former Corporate Secretary, Ms. Erin Davis, and Mr. Plamondon’s business advisory company, R.I. Heller & Co., LLC. Pursuant to the Settlement Agreement, all stock options previously granted to Mr. Plamondon and Ms. Davis were cancelled. As a result, the 1,000,000 options granted to Mr. Plamondon valued at $270,000, and the 250,000 options granted to Ms. Davis valued at $75,000, which were fully vested at the date of the Settlement Agreement were cancelled.
During the years ended December 31, 2013 and 2012, respectively, the Company expensed a total of $60,000 and $487,500 in stock option compensation. There remained $60,000 and $120,000 in deferred stock option compensation at December 31, 2013 and 2012, respectively.
Compensation of Directors
The Company reimburses its directors for expenses incurred in connection with attending board meetings. The Company has not paid any director's fees or other cash compensation for services rendered as a director since the Company’s inception to December 31, 2013.
The Company has no formal plan for compensating its directors for their service in their capacity as directors. However, the Company’s directors and certain officers have received stock options to purchase common shares under the Company’s 2009 Stock Option Plan, and may receive additional stock options at the discretion of the Company’s board of directors or (as to future stock options) a compensation committee which may be established under the Plan in the future. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Company’s board of directors. The Company’s board of directors may award special remuneration to any director undertaking any special services on the Company’s behalf other than services ordinarily required of a director. No director received and/or accrued any compensation for their services as a director, including committee participation and/or special assignments.
On January 30, 2012, certain directors of the Company were awarded the opportunity to purchase shares of the Company’s common stock at $0.001 per share as consideration for their performance over and above their duties as directors. As a result, Mr. William Nesbitt purchased 500,000 shares of the Company’s common stock for $500 cash, Mr. John Ogden purchased 250,000 shares of the Company’s common stock for $250 cash, and Mr. Edward W. Withrow Jr. purchased 250,000 shares of the Company’s common stock for $250 cash. As a result, $75,000 in stock compensation was expensed for the 500,000 shares issued to Mr. Nesbitt, $37,500 in stock compensation was expensed for the 250,000 shares issued to Mr. Ogden, and $37,500 in stock compensation was expensed for the 250,000 shares issued to Mr. Withrow Jr.
28
Pension, Retirement or Similar Benefit Plans
As of December 31, 2013, the Company had no pension plans or compensatory plans or other arrangements which provide compensation in the event of termination of employment or change in control of us. There are no arrangements or plans in which the Company provides pension, retirement or similar benefits for directors or executive officers. The Company has no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to its directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.
The Company’s directors and certain officers have received stock options under the Company’s 2009 Stock Option Plan and may receive additional stock options at the discretion of the Company’s board of directors under the Plan in the future.
Compensation Committee
The Company currently does not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The following table sets forth, as of December 31, 2013, certain information with respect to the beneficial ownership of the Company’s common stock by each stockholder known by the Company to be the beneficial owner of more than 5% of the Company’s common stock and by each of the Company’s current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership[1] | Percentage of Shares of Common Stock[1] | ||
Edward W. Withrow III | 3,613,741 | [2] | 12.70% | |
750,000 | [3] | ESOP | ||
Palisades Management, LLC | 1,700,000 |
| 6.32% | |
|
|
| ||
Maria K Sandoval | 1,000,000 | [2] | 3.72% | |
|
|
| ||
William B. Nesbitt | 750,000 |
| 2.79% | |
1,500,000 | [4] | ESOP | ||
John L. Ogden | 727,500 |
| 2.71% | |
230,000 | [3] | ESOP | ||
Edward W. Withrow Jr. | 300,000 |
| 1.12% | |
230,000 | [3] | ESOP | ||
Calli Bucci | 212,500 |
| 0.79% | |
50,000 | [3] | ESOP | ||
Martin Blake | 50,000 | [3] | ESOP | |
|
|
| ||
Total | 8,203,741 |
| 30.51% | |
2,810,000 |
| ESOP | ||
| ||||
[1] | Based upon 26,884,740 shares issued and outstanding at March 31, 2014. The number and percentage of shares beneficially owned is determined under rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. | |||
[2] | 5% shareholder M. Katsuka Sandoval by marriage to Edward W. Withrow III | |||
[3] | Stock options granted under 2009 ESOP, fully vested | |||
[4] | Stock options granted under 2009 ESOP, 1,000,000 vested | |||
|
|
|
|
|
| Directors and officers as a group (5 shareholders) | 5,503,741 |
| 20.47% |
| More than 5% ownership (2 shareholders) | 2,700,000 |
| 10.04% |
| Total | 8,203,741 |
| 30.51% |
29
Changes in Control
The Company is unaware of any contract or other arrangement or provisions of the Company’s Articles or Bylaws the operation of which may at a subsequent date result in a change of control of the Company. There are not any provisions in the Company’s Articles or Bylaws, the operation of which would delay, defer, or prevent a change in control of the Company.
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Related Party Transactions
None of the directors or executive officers of the Company, nor any person who owned of record or was known to own beneficially more than 5% of the Company’s outstanding shares of its Common Stock, nor any associate or affiliate of such persons or companies, has any material interest, direct or indirect, in any transaction that has occurred during the year ended December 31, 2013, or in any proposed transaction, which has materially affected or will affect the Company, with the exception of the following:
On October 12, 2009, the Company entered into a consulting agreement with Huntington Chase, Ltd., a Nevada corporation, wherein Edward W. Withrow III, the Company’s Chairman, owns a majority control. The consulting agreement provides for Huntington Chase, Ltd. to perform certain advisory functions, and to be paid $15,000 per month for a period of 3 years until October 12, 2012. A modification to the consulting agreement was made on October 12, 2012, to extend the term for an additional three years. The total consulting fees owing under this agreement at December 31, 2013 of $692,500 was converted to a convertible note payable at December 31, 2013. The loan bears interest at a rate of seven percent (7%) per annum, is due upon demand, and is convertible into the Company’s common stock at a strike price of $0.07 per share. Accrued interest at December 31, 2013 was $51,204. On December 31, 2013, the note in its entirety, including accrued interest of $51,204, was assigned to Huntington Chase Financial Group, a company controlled by Mr. Withrow.
On November 1, 2011, the Company entered into an employment agreement with William B. Nesbitt, for his services as President and Chief Executive Officer of the Company. The initial term of the Agreement was for a period of twelve (12) months, and is automatically renewed annually unless terminated by either party. The Agreement provides for initial compensation of $10,000 per month for the first nine months, increasing to $20,833 effective August 1, 2012. In addition, the Agreement provides for expense reimbursements, an initial Stock Option grant of 1,500,000 shares of the Company’s common stock, and annual performance options. As of December 31, 2013, accrued compensation in the amount of $454,166, has been converted to a senior convertible note payable, accruing interest at a rate of five percent (5%) per annum, and is convertible into the Company’s common stock at a price of $0.07 per share. Accrued interest at December 31, 2013 was $20,813.
On November 15, 2013, the Company issued a Convertible Promissory Note in the amount of $150,000 to John Ogden, a director of the Company, for consulting services rendered to the Company. The note bears interest at a rate of five percent (5%) per annum, matures on November 15, 2015, and is convertible into the Company’s common stock at a price of $0.08 per share. Accrued interest at December 31, 2013 was $945.
On November 15, 2013, the Company issued a Convertible Promissory Note in the amount of $72,067 to Call Bucci, the Company’s chief financial officer, for unpaid compensation. The note bears interest at a rate of five percent (5%) per annum, matures on November 15, 2015, and is convertible into the Company’s common stock at a price of $0.08 per share. Accrued interest at December 31, 2013 was $454.
All outstanding related party notes payable bear interest at the rate of 5% to 7% per annum, are due and payable within one (1) year of receipt of written demand or by November 15, 2015, and are convertible into the Company’s common stock at a price of $0.07 to $0.08 per share.
As at December 31, 2013, affiliates and related parties are due a total of $2,119.396, which is comprised of loans to the Company of $1,785,505, accrued interest of $136,731, accrued compensation of $151,755, and reimbursable expenses of $45,405.
The loans to the Company during 2013 increased by $1,007,546, due to an increase in cash loans from Huntington Chase Financial Group of $40,479, and an increase in unpaid compensation converted to notes payable of $967,067.
The Company’s unpaid compensation decreased by $307,767, due to a net increase in accrued compensation of$259,300 payable to Huntington Chase, Ltd., The Kasper Group, Ltd. and MJ Management, LLC, all related party creditors, and a net decrease of $567,067 in unpaid compensation converted into notes payable.
The Company’s reimbursable expenses increased by $33,996 during the year ended December 31, 2013.
During the year ended December 31, 2013, $64,956 of interest was accrued. As of December 31, 2013, accrued interest payable to related parties was $136,731.
30
Director Independence
For purposes of determining director independence, the Company have applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTCQB on which shares of Common Stock are quoted does not have any director independence requirements. The NASDAQ definition of “Independent Officer” means a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company's Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
The Company currently acts with five directors, consisting of John L. Ogden, William B. Nesbitt, Edward W. Withrow III, Edward W. Withrow Jr., and Dr. Martin A. Blake. The Company has determined that Dr. Martin A. Blake is an “independent director” as defined in NASDAQ Marketplace Rule 4200(a)(15).
ITEM 14. | PRINCIPAL ACCOUNTANTS FEES AND SERVICES |
The aggregate fees billed or to be billed for the most recently completed fiscal years ended December 31, 2013 and 2012, for professional services rendered by the principal accountant for the audit of the Company’s annual financial statements and review of the financial statements included in the Company’s quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
| Year Ended December 31, | ||
| 2013 |
| 2012 |
Audit Fees | 14,250 |
| 34,830 |
Audit Related Fees | 190 |
| 0 |
Tax Fees | - |
| - |
All Other Fees | 0 |
| 0 |
Total | 14,440 |
| 34.830 |
The Company’s board of directors pre-approves all services provided by the Company’s independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
The Company’s board of directors has considered the nature and amount of fees billed by the Company’s independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining the Company’s independent auditors’ independence.
31
PART IV
ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
Exhibits required by Item 601 of Regulation S-B
Exhibit Number | Description | Filing Reference |
(2) | Plan of Purchase, Sale, Reorganization, Arrangement, Liquidation or Succession |
|
2.1 | Letter of Intent between the Company and ACE Rent A Car, Inc. dated August 2, 2012 | Filed with the SEC on November 19, 2012 as part of the Company’s Quarterly Report on Form 10-Q |
(3) | Articles of Incorporation and Bylaws |
|
3.1 | Articles of Incorporation | Filed with the SEC on November 30, 2006 as part of the Company’s registration statement on form SB-2 |
3.2 | Bylaws | Filed with the SEC on November 30, 2006 as part of the Company’s registration statement on form SB-2 |
3.3 | Certificate of Change filed with the Secretary of State of Nevada on April 2, 2008 | Filed with the SEC on April 21, 2008 as part of the Company’s Current Report on Form 8-K |
3.4 | Articles of Merger | Filed with the SEC on June 26, 2008 as part of the Company’s Current Report on Form 8-K |
3.5 | Certificate of Change filed with the Secretary of State of Nevada on August 29, 2008 with respect to the reverse stock split | Filed with the SEC on September 17, 2008 as part of the Company’s Current Report on Form 8-K |
3.6 | Articles of Merger | Filed with the SEC on June 11, 2009 as part of the Company’s Current Report on Form 8-K |
3.7 | Certificate of Change filed with the Secretary of State of Nevada on May 15, 2009 with respect to the reverse stock split | Filed with the SEC on June 11, 2009 as part of the Company’s Current Report on Form 8-K |
3.8 | Articles of Merger filed with the Secretary of State of Nevada on June 2, 2009 with respect to the merger between the Company’s wholly owned subsidiary, Ecological Acquisition Corp. and Ecologic Sciences, Inc. | Filed with the SEC on July 9, 2009 as part of the Company’s Current Report on Form 8-K |
3.9 | Certificate of Change filed with the Secretary of State of Nevada on May 15, 2009, effective June 9, 2009 with respect to the merger between the Company’s wholly owned subsidiary, Ecological Acquisition Corp., and Ecologic Sciences, Inc. | Filed with the SEC on July 9, 2009 as part of the Company’s Current Report on Form 8-K |
(10) | Material Contracts |
|
10.1 | Agreement and Plan of Merger dated April 26, 2009 | Filed with the SEC on April 30, 2009 as part of the Company’s Current Report on Form 8-K |
10.2 | Employment agreement dated January 30, 2009 between the Company and Mr. Plamondon | Filed with the SEC on July 9, 2009 as part of the Company’s Current Report on Form 8-K |
10.3 | Agreement dated April 28, 2009 between the Company and Audio Eye, Inc. | Filed with the SEC on July 9, 2009as part of the Company’s Current Report on Form 8-K |
10.4 | Agreement dated May 15, 2009 between the Company and Audio Eye, Inc. | Filed with the SEC on July 9, 2009 as part of the Company’s Current Report on Form 8-K |
10.5 | Employment agreement dated June 29, 2009 between the Company and Mr. Keppler. | Filed with the SEC on July 9, 2009 as part of the Company’s Current Report on Form 8-K |
10.6 | Memorandum of Understanding dated May 12, 2009 between the Company and Green Solutions & Technologies, LLC | Filed with the SEC on July 9, 2009 as part of the Company’s Current Report on Form 8-K |
10.7 | Form of Debt Settlement Subscription Agreement dated July 1, 2009 between the Company and John L. Ogden | Filed with the SEC on July 9, 2009 as part of the Company’s Current Report on Form 8-K |
10.8 | Service Agreement dated September 24, 2009 between Ecologic Products, Inc. and Park ‘N Fly Inc. | Filed with the SEC on September 29, 2009 as part of the Company’s Current Report on Form 8-K |
10.9 | Agreement dated September 29, 2009 between the Company and North Sea Securities LP. | Filed with the SEC on April 14, 2010 as part of the Company’s Annual Report on Form 10-K |
10.10 | Consulting Agreement with Matrix Advisors, LLC dated October 1, 2009 | Filed with the SEC on April 14, 2010 as part of the Company’s Annual Report on Form 10-K |
10.11 | Consulting Agreement with Huntington Chase Ltd. for Advisory Services dated October 12, 2009 | Filed with the SEC on April 14, 2010 as part of the Company’s Annual Report on Form 10-K |
10.12 | Advisory Agreement for Executive Services of Norman A. Kunin dated as of January 1, 2010 | Filed with the SEC on August 16, 2010 as part of the Company’s Current Quarterly Report on Form 10-Q |
10.13 | Independent Consulting Agreement between the Company and Prominence Capital, LLC effective as of April 5, 2010 | Filed with the SEC on August 16, 2010 as part of the Company’s Current Quarterly Report on Form 10-Q |
10.14 | Agreement dated November 23, 2010 with BMO Capital Markets | Filed with the SEC on April 16, 2012 as part of the Company’s Annual Report on Form 10-K |
10.15 | Independent Consulting Agreement between the Company and Oracle Capital Partners, LLC effective as of April 1, 2011. | Filed with the SEC on August 15, 2011 as part of the Company’s Current Quarterly Report on Form 10-Q |
10.16 | Placement Agent Agreement between the Company and View Trade Securities, Inc. effective as of April 12, 2011 | Filed with the SEC on August 15, 2011 as part of the Company’s Current Quarterly Report on Form 10-Q |
10.17 | Employment Agreement between the Company and William B. Nesbitt effective as of November 1, 2011 | Filed with the SEC on April 16, 2012 as part of the Company’s Annual Report on Form 10-K |
10.18 | Share Exchange Agreement and Plan of Merger dated March 16, 2012 | Filed with the SEC on March 22, 2012 as part of the Company’s Current Report on Form 8-K |
10.19 | Consulting Agreement between the Company and Greg Suess dated July 5, 2012 | Filed with the SEC on November 19, 2012 as part of the Company’s Quarterly Report on Form 10-Q |
10.20 | Consulting Agreement between the Company and NUF Enterprises LLC dated July 5, 2012 | Filed with the SEC on November 19, 2012 as part of the Company’s Quarterly Report on Form 10-Q |
10.21 | Engagement Letter between the Company and Wellington Shields & Co., LLC dated September 12, 2012 | Filed with the SEC on November 19, 2012 as part of the Company’s Quarterly Report on Form 10-Q |
10.22 | Engagement Letter between the Company and Wellington Shields & Co., LLC dated September 12, 2012 | Filed with the SEC on November 19, 2012 as part of the Company’s Quarterly Report on Form 10-Q |
10.23 | Modification Agreement between the Company and Huntington Chase Financial Group dated October 12, 2012 | Filed with the SEC on April 1, 2013 as part of the Company’s Annual Report on Form 10-K |
(16) | Auditors Letters |
|
16.4 | Letter dated June 7, 2013 from Anton & Chia LLC | Filed with the SEC on June 10, 2013 as part of the Company’s Current Report on Form 8-K |
(21) | Subsidiaries of the Registrant |
|
21.1 | Ecologic Car Rentals, Inc. Ecologic Products, Inc. |
|
(23) | Consents |
|
Filed herewith. | ||
(31) | Section 302 Certifications |
|
Filed herewith. | ||
Filed herewith. | ||
(32) | Section 906 Certifications |
|
Filed herewith. | ||
Filed herewith. | ||
(101) | Interactive Data Files |
|
101.INS** | XBRL Instance Document |
|
101.SCH** | XBRL Taxonomy Extension Schema Document |
|
101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document |
|
101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document |
|
101.LAB** | XBRL Taxonomy Extension Label Linkbase Document |
|
101.PRE** | XBRL Taxonomy Extension Presentation Linkbase Document |
|
*
Filed herewith.
**
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
32
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ECOLOGIC TRANSPORTATION, INC. |
|
|
|
|
Dated: April 15, 2014 | /s/ William B. Nesbitt |
| William B. Nesbitt |
| President, Chief Executive Officer, and Director |
|
|
|
|
Dated: April 15, 2014 | /s/ Calli R. Bucci |
| Calli R. Bucci |
| Chief Financial Officer, Secretary |
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| ECOLOGIC TRANSPORTATION, INC. |
|
|
|
|
Dated: April 15, 2014 | /s/ William B. Nesbitt |
| William B. Nesbitt |
| President, Chief Executive Officer, and Director |
|
|
|
|
Dated: April 15, 2014 | /s/ Calli R. Bucci |
| Calli R. Bucci |
| Chief Financial Officer, Secretary |
|
|
|
|
Dated: April 15, 2014 | /s/ Edward W. Withrow III |
| Edward W. Withrow III |
| Director |
|
|
|
|
Dated: April 15, 2014 | /s/ John L. Ogden |
| John L. Ogden |
| Director |
|
|
|
|
Dated: April 15, 2014 | /s/ Edward W. Withrow Jr. |
| Edward W. Withrow Jr. |
| Director |
|
|
|
|
Dated: April 15, 2014 | /s/ Martin A. Blake |
| Martin A. Blake |
| Director |
33