UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 2008
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 814-00717
UNITED ECOENERGY CORP.
(Exact Name of Registrant as Specified in Its Charter)
NEVADA 84-1517723
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1365 N. Courtenay Parkway, Suite A,
Merritt Island, FL 32953
(Address of Principal Executive Offices) (Zip Code)
(321)-452-9091
(Registrants Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $.001 par value
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
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 [ ] No [X]
Note: Checking the box above will not relieve any registrant required to
file reports pursuant to Section 13 or 15(d) of the Exchange Act from their
obligation under those Sections.
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 past 90 days. Yes [X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Rule 405 of Regulation S-K (?229.405 of this chapter) is not contained herein
and will not be contained, to the best of registrants knowledge, in definitive
proxy or other information incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K [ ]
Indicate by check mark whether the Registrant is a large accelerated
filer,an accelerated filer, or a non-accelerated filer. See definition of
?accelerated filer and large accelerated filer? in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer { } Accelerated filer { } Non-accelerated filer [X ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X ]
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was last sold or the average bid and asked price of such common equity,
as of the last business day of the registrants most recently completed second
fiscal quarter.
$ 553,599
The number of shares of the Registrants Common Stock, $0.001 par
value, outstanding as of March 21, 2009, was 34,710,537 shares.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and
the part of the Form 10-K (e.g. Part I, Part II, etc.) into which the document
is incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b)
or (c) under the Securities Act of 1933. The listed documents should be
clearlydescribed for identification purposes (e.g., annual report to security
holders for fiscal year ended December 24, 1980).
None.
TABLE OF CONTENTS
PART I
Item 1. Business............................................. 1
Item 1A Risk Factors ........................................ 11
Item 1B Unresolved Staff Comments ........................... 14
Item 2. Properties .......................................... 14
Item 3. Legal Proceedings.................................... 14
Item 4. Submission of Matters to a Vote of Security Holders.. 14
PART II
Item 5. Market for Registrant?s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities ......................................... 15
Item 6. Selected Financial Data............................. 16
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 16
Item 7A. Quantitative and Qualitative Disclosure about
Market Risk.......................................... 19
Item 8 Financial Statements and Supplementary Data.......... 19
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure .............. 19
Item 9A(T). Controls and Procedures........................... 19
Item 9B. Other Information.................................... 20
PART III
Item 10 Directors, Executive Officers and Corporate
Governance .......................................... 20
Item 11. Executive Compensation............................... 24
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters........... 27
Item 13. Certain Relationships and Related Transactions and
Director Independence ............................... 30
Item 14. Principal Accountant Fees and Services............... 32
Item 15. Exhibits, Financial Statement Schedules.............. 33
Index to Financial Statements....................................... 34
Financial Statements............................................... F-1
Signatures.......................................................... 35
FORWARD LOOKING STATEMENTS
This annual report on Form 10-K contains forward-looking statements that
involve risks and uncertainties, as well as assumptions that, if they never
materialize or prove incorrect, could cause the results of the Company to
differ materially from those expressed or implied by such forward-looking
statements. All statements other than statements of historical fact are
statements that could be deemed forward-looking statements, including any
projections of revenue, expenses, earnings or losses from operations or
investments, or other financial items; any statements of the plans, strategies
and objectives of management for future operations; any statements of
expectation or belief; and any statements of assumptions underlying any of
the foregoing. The risks, uncertainties and assumptions referred to above
include risks that are described from time to time in our Securities and
Exchange Commission, or the SEC, reports filed before this report.
The forward-looking statements included in this annual report represent our
estimates as of the date of this annual report. We specifically disclaim any
obligation to update these forward-looking statements in the future. Some of
the statements in this annual report constitute forward-looking statements,
which relate to future events or our future performance or financial condition.
Such forward-looking statements contained in this annual report involve risks
and uncertainties.
We use words such as anticipates, believes, expects, future, intends and
similar expressions to identify forward-looking statements. Our actual results
could differ materially from those projected in the forward-looking statements
for any reason. We caution you that forward-looking statements of this type
are subject to uncertainties and risks, many of which cannot be predicted or
quantified.
The following analysis of our financial condition and results of operations
should be read in conjunction with our financial statements and the related
notes thereto contained elsewhere in this Form 10-K, as well as the risk
factors included in this Form 10-K under Item 1A.
PART I
Item 1. Business.
General development of business
The Company was incorporated under the Nevada General Corporation Law in
February 1997 as MNS Eagle Equity Group III, Inc., and was a development stage
company through the end of 2005, and until the Company changed its business
model with the election to be treated as a business development company on
February 28, 2006. On February 21, 2006, the Company changed its corporate
name to United EcoEnergy Corp., to reflect its new business model and plan.
On February 21, 2006, our then sole shareholder sold 284,689 pre-split common
shares (28,468,900 post-split) representing 100 percent of the pre-split
outstanding stock of the Company at the time, resulting in a change of control
of the Company. Of these shares, 26,968,900 post-split common shares,
representing 94.7 percent of the outstanding shares, were purchased by
Enterprise Partners, LLC, 1,100,000 shares were purchased by Peachtree
Consultants, LLC, and 4,000,000 shares were purchased by Fairmont East Finance,
Ltd. These entities are not related, affiliates or controlled entities.
Effective February 27, 2006, the Company implemented a 100 for 1 forward split
of our outstanding common shares. As a result of the forward split, there
were 28,468,900 common shares then outstanding. This forward split has been
reflected retroactively on our financial statements
On February 27, 2006, the Company filed a Certificate of Designations for
Series A Convertible Preferred Stock with the Nevada Secretary of State and
the Board of Directors authorized the issuance of 1 million shares of Series A
Convertible Preferred Stock to Enterprise Partners, LLC, our then majority
shareholder, in exchange for the cancellation of $60,000 in loans for funds
advanced to the Company by Enterprise Partners LLC to pay off debts of the
Company and for initial working capital. The Series A Convertible Preferred
Stock automatically converted into common stock effective March 21, 2008, with
the issuance of 4,000,000 shares of common stock of the Company for the Series A
Convertible Preferred Stock, and there are no Series A Convertible Preferred
Stock shares remaining issued and outstanding after that date.
Operating Activities
As of December 31, 2008, our operating activities have involved identifying
suitable portfolio investments, negotiating investment terms, entering into
investment agreements and undertaking due diligence. We also completed
additional fund raising activities to support our portfolio investment
activities through a Regulation E offering. We filed a Form 1-E notice and
offering circular with the SEC in December 2007, which became effective in
January 2008 and sold a total of 1,928,898 common shares for net proceeds to
the Company of $470,189 through October 31, 2008. That offering has now
terminated, but the Company filed a new Regulation E notice in November, 2008
to raise additional capital for its portfolio investment activities. Under
Regulation E, a business development company can offer and sell up to $5,000,000
in value of its stock in any consecutive, rolling 12 month period so long as the
provisions of Regulation E are met. No additional funds were raised during the
period ended December 31, 2008 under the Regulation E Notice filed in November,
2008.
As a result of these activities, our investment advisor, United EcoEnergy
Advisors, LLC, recommended to our Investment Committee that the Company
undertake portfolio investments in City 24/7, LLC and Shelby Super Cars, Inc.
The Investment Committee of the Board of Directors met to consider each of
these separate investment recommendations, and after considering the
companies, their operations, business model and other relevant factors,
approved the recommendation of the investment advisor for approval by the
entire Board of Directors. At subsequent meetings of the Board of Directors,
both of these investment recommendations were approved.
The Company entered into an investment agreement to acquire a 22.5 percent
ownership interest in City 24/7 LLC for $750,000. City 24/7 has partnered
with a Fortune 100 telecommunications company to launch a new information
system built to reinvigorate the existing payphone structure. The completely
interactive "Super Booth" will broadcast locally relevant information and
advertising in targeted locations across the country, starting in New York
City. While the due diligence process continued, the Company advanced a
loan of $100,000 to City 24/2, LLC in September 2008 and another $150,000 in
October, 2008. Both loans were due in December, 2008, bear interest at 12
percent per annum, and are secured by the assets of City 24/7, LLC. In November,
2008, the loans were extended to March 31, 2009. As a result of the significant
downturn in the U.S. economy, which has affected the business model of City
24/7, LLC, the Company has determined not to complete the proposed portfolio
investment, and has given notice to City 24/7 LLC that the two loans, totaling
$250,000, plus accrued interest, are now due and payable. The loans are secured
by a pledge of all of the assets of City 24/7, LLC.
The Company also has entered into an agreement to acquire an up to 35 percent
stake in Shelby Super Cars, Inc (SSC). SSC, an all-American auto manufacturer
based in West Richland, Washington, has solidified its place in history with
the production of the Ultimate Aero Supercar currently holding the Guinness
World Record title of the Fastest Production Car in the World, Additionally,
SSC is working on the Ultimate Aero EV, a 100% Green Supercar which it hopes
will set the benchmark for the world?s fastest electric car. UEEC will be
investing $1 million of its stock in SSC in exchange for 5% of SSC?s shares at
the closing of the investment agreement, 25% of SSC?s shares in exchange for
investing $5,000,000 and another, up to 5% of SSC?s shares when the $5 million
investment is completed. The first share exchange is expected to close in April,
2009.
Financial information about market segments.
The Company does not currently have any significant portfolio investments and
therefore has no market segment information. All material information regarding
the activities of the Company is reflected in the financial statements included
in this report.
Narrative description of business.
As a Business Development Company, or BDC, under the 1940 Act, the business
model of the Company is to locate, invest in and provide management assistance
to small public and private companies to enable those companies to undertake
their own business plans and models.
We are not limited, as a BDC, to seeking portfolio investments in
a particular market segment, and intend to seek investment in companies
operating in a wide category of markets and business segments, including the
alternative energy markets as well as medical devices and related markets.
In connection with our BDC election, the Company has adopted Corporate
Governance resolutions and intends to operate as a closed-end management
investment company as a business development company (a BDC).
INVESTMENT STRATEGY
We have conducted limited operations to date. Under the BDC election,
we have been organized to provide investors with the opportunity to
participate, with a modest amount in venture capital, in investments that
are generally not available to the public and that typically require
substantially larger financial commitments. In addition, we will provide
professional management and administration that might otherwise be
unavailable to investors if they were to engage directly in venture capital
investing. We have decided to be regulated as a business development
company under the 1940 Act, and will operate as a non-diversified company
as that term is defined in Section 5(b)(2) of the 1940 Act. We will, at
all times, conduct our business so as to retain our status as a BDC. We
may not change the nature of our business so as to cease to be, or withdraw
our election as, a BDC without the approval of the holders of a majority of
our outstanding voting stock as defined under the 1940 Act.
As a business development company, we are required to invest at least 70%
of our total assets in qualifying assets, which, generally, are securities
of private companies or securities of public companies whose securities are
not eligible for purchase on margin (which includes many companies with
thinly traded securities that are quoted in the pink sheets or the NASD
Electronic Quotation Service.) We must also offer to provide significant
managerial assistance to these portfolio companies. Qualifying assets may
also include:
* cash,
* cash equivalents,
* U.S. Government securities, or
* high-quality debt investments maturing in one year or less from the
date of investment.
We may invest a portion of the remaining 30% of our total assets in debt
and/or equity securities of companies that may be larger or more stabilized
than target portfolio companies.
Nature of a BDC
The 1940 Act defines a BDC as a closed-end management investment company
that provides small businesses that qualify as an eligible portfolio
company with investment capital and also significant managerial assistance.
A BDC is required under the 1940 Act to invest at least 70% of its total
assets in qualifying assets consisting of eligible portfolio companies as
defined in the 1940 Act and certain other assets including cash and cash
equivalents.
An eligible portfolio company generally is a United States company that is
not an investment company and that:
* does not have a class of securities registered on an exchange or
included in the Federal Reserve Board's over-the-counter margin list;
* is actively controlled by a BDC and has an affiliate of a BDC on its
board of directors; or
* meets such other criteria as may be established by the SEC.
Control under the 1940 Act is presumed to exist where a BDC owns more than
25% of the outstanding voting securities of the eligible portfolio company.
We may or may not control our portfolio companies. An example of an
eligible portfolio company is a new start up company or a privately owned
company that has not yet gone public by selling its shares in the open
market and has not applied to have its shares listed on a nationally
recognized exchange such as the NYSE, the American Stock Exchange, National
Association of Securities Dealers' Automated Quotation System, or the
National Market System. An eligible portfolio company can also be one
which is subject to filing, has filed, or has recently emerged from
reorganization protection under Chapter 11 of the Bankruptcy Act.
A BDC may invest the remaining 30% of its total assets in non-qualifying
assets, including companies that are not eligible portfolio companies. The
foregoing percentages will be determined, in the case of financings in
which a BDC commits to provide financing prior to funding the commitment,
by the Amount of the BDC's total assets represented by the value of the
maximum amount of securities to be issued by the borrower or lessee to the
BDC pursuant to such commitment. As a BDC, we must invest at least 70% of
our total assets in qualifying assets but may invest more in such
qualifying assets.
Primary Strategy
We have significant relative flexibility in selecting and structuring
our investments. We are not subject to many of the regulatory
limitations that govern traditional lending institutions such as banks.
We will seek to structure our investments so as to take into account the
uncertain and potentially variable financial performance of our portfolio
companies. This should enable our portfolio companies to retain access to
committed capital at different stages in their development and eliminate
some of the uncertainty surrounding their capital allocation decisions.
We will calculate rates of return on invested capital based on a
combination of up-front commitment fees, current and deferred interest
rates and residual values, which may take the form of common stock,
warrants, equity appreciation rights or future contract payments. We
believe that this flexible approach to structuring investments will
facilitate positive, long-term relationships with our portfolio companies
and enable us to become a preferred source of capital to them. We also
believe our approach should enable debt financing to develop into a viable
alternative capital source for funding the growth of target companies that
wish to avoid the dilutive effects of equity financings for existing equity
holders.
Longer Investment Horizon
We are not subject to periodic capital return requirements. These
requirements, which are standard for most private equity and venture
capital funds, typically require that these funds return to investors the
initial capital investment after a pre-agreed time, together with any
capital gains on such capital investment. These provisions often force such
funds to seek the return of their investments in portfolio companies
through mergers, public equity offerings or other liquidity events more
quickly than they otherwise might, which can result in a lower overall
return to investors and adversely affect the ultimate viability of the
affected portfolio companies. Because we may invest in the same portfolio
companies as these funds, we are subject to these risks if these funds
demand a return on their investments in the portfolio companies. We
believe that our flexibility to take a longer-term view should help us to
maximize returns on our invested capital while still meeting the needs of
our portfolio companies.
Established Deal Sourcing Network
We believe that, through our management and directors, we have solid
contacts and sources from which to generate investment opportunities. These
contacts and sources include:
* public and private companies,
* investment bankers,
* attorneys,
* accountants,
* consultants, and
* commercial bankers.
However, we cannot assure you that such relationships will lead to the
origination of equity, debt or other investments.
Investment Criteria
As a matter of policy, we will not purchase or sell real estate or
interests in real estate or real estate investment trusts except that we
may:
* purchase and sell real estate or interests in real estate in
connection with the orderly liquidation of investments, or in
connection with foreclosure on collateral;
* own the securities of companies that are in the business of buying,
selling or developing real estate; or
* finance the purchase of real estate by our portfolio companies.
We will limit our investments in more traditional securities (stock and
debt instruments) and will not, as a matter of policy:
* sell securities short except with regard to managing the risks
associated with publicly-traded securities issued by our portfolio
companies; or
* purchase securities on margin (except to the extent that we may
purchase securities with borrowed money); or
* engage in the purchase or sale of commodities or commodity
contracts, including futures contracts except where necessary in
working out distressed loans or similar investment situations or in
hedging the risks associated with interest rate fluctuations, and, in
such cases, only after all necessary registrations or exemptions from
registration with the Commodity Futures Trading Commission have been
obtained.
Prospective Portfolio Company Characteristics. We have identified several
criteria that we believe will prove important in seeking our investment
objective with respect to target companies. These criteria will provide
general guidelines for our investment decisions; however, we caution
readers that not all of these criteria will be met by each prospective
portfolio company in which we choose to invest.
Experienced Management. We will generally require that our portfolio
companies have an experienced president or management team. We will also
require the portfolio companies to have in place proper incentives to
induce management to succeed and to act in concert with our interests as
investors, including having significant equity interests. We intend to
provide assistance in this area either supervising management or providing
management for our portfolio companies.
Products or Services. We will seek companies that are involved in products
or services that do not require significant additional capital or research
expenditures. In general, we will seek target companies that make
innovative use of proven technologies or methods.
Proprietary Advantage. We expect to favor companies that can demonstrate
some kind of proprietary sustainable advantage with respect to their
competition. Proprietary advantages include, but are not limited to:
* patents or trade secrets with respect to owning or manufacturing its
products, and
* a demonstrable and sustainable marketing advantage over its
competition.
Marketing strategies impose unusual burdens on management to be
continuously ahead of its competition, either through some kind of
technological advantage or by being continuously more creative than its
competition.
Profitable or Nearly Profitable Operations Based on Cash Flow from
Operations.
We will focus on target companies that are profitable or nearly profitable
on an operating cash flow basis. Typically, we would not expect to invest
in start-up companies unless there is a clear exit strategy in place.
Potential for Future Growth
We will generally require that a prospective target company, in addition to
generating sufficient cash flow to cover its operating costs and service
its debt, demonstrate an ability to increase its revenues and operating
cash flow over time. The anticipated growth rate of a prospective target
company will be a key factor in determining the value that we ascribe to
any warrants or other equity securities that we may acquire in connection
with an investment in debt securities.
Exit Strategy
Prior to making an investment in a portfolio company, we will analyze the
potential for that company to increase the liquidity of its common equity
through a future event that would enable us to realize appreciation, if
any, in the value of our equity interest. Liquidity events may include:
* an initial public offering,
* a private sale of our equity interest to a third party,
* a merger or an acquisition of the portfolio company, or
* a purchase of our equity position by the portfolio company or one of
its stockholders.
We may acquire warrants to purchase equity securities and/or convertible
preferred stock of the eligible portfolio companies in connection with
providing financing. The terms of the warrants, including the expiration
date, exercise price and terms of the equity security for which the warrant
may be exercised, will be negotiated individually with each eligible
portfolio company, and will likely be affected by the price and terms of
securities issued by the eligible portfolio company to other venture
capitalists and other holders. We anticipate that most warrants will be
for a term of five to ten years, and will have an exercise price based upon
the price at which the eligible portfolio company most recently issued
equity securities or, if a new equity offering is imminent, the proposed
offering price of the equity securities. The equity securities for which
the warrant will be exercised generally will be common stock, of which
there may be one or more classes, or convertible preferred stock.
Substantially all the warrants and underlying equity securities will be
restricted securities under the 1933 Act at the time of the issuance. We
will generally negotiate for registration rights with the issuer that may
provide:
* piggyback registration rights, which will permit us under certain
circumstances, to include some or all of the securities owned by us in
a registration statement filed by the eligible portfolio company, or
* in some circumstances, "demand" registration rights permitting us,
under certain circumstances, to require the eligible portfolio company
to register securities under the 1933 Act, in some cases at our expense.
We will generally negotiate net issuance provisions in the warrants, which
will allow us to receive upon exercise of the warrant without payment of
any cash a net amount of shares determined by the increase in the value of
the issuer's stock above the exercise price stated in the warrant.
Liquidation Value of Assets
Although we do not intend to operate as an asset based lender, the
prospective liquidation value of the assets, if any, collateralizing any
debt securities that we hold will be an important factor in our credit
analysis. We will emphasize both tangible assets, such as:
* accounts receivable,
* inventory, and
* equipment,
and intangible assets, such as:
* intellectual property,
* customer lists,
* networks, and
* databases.
Investment Process
Due Diligence. If a target company generally meets the characteristics
described above, we will perform initial due diligence, including:
* company and technology assessments,
* existing management team,
* market analysis,
* competitive analysis,
* evaluation of management, risk analysis and transaction size,
* pricing, and
* structure analysis.
Much of this work will be done by management and by our investment adviser,
United EcoEnergy Investment Advisors, LLC. The criteria delineated
above provide general parameters for our investment decisions. We intend to
pursue an investment strategy by further imposing such criteria and reviews
that best insures the value of our investments. As unique circumstances may
arise or be uncovered, not all of such criteria will be followed in each
instance but the process provides a guideline by which investments can be
prudently made and managed. Upon successful completion of the preliminary
evaluation, we will decide whether to deliver a non-binding letter of intent
and move forward towards the completion of a transaction.
In our review of the management team, we look at the following:
* Interviews with management and significant shareholders, including
any financial or strategic sponsor;
* Review of financing history;
* Review of management's track record with respect to:
o product development and marketing,
o mergers and acquisitions,
o alliances,
o collaborations,
o research and development outsourcing and other
strategic activities;
* Assessment of competition; and
* Review of exit strategies.
In our review of the financial conditions, we look at the following:
* Evaluation of future financing needs and plans;
* Detailed analysis of financial performance;
* Development of pro forma financial projections; and
* Review of assets and liabilities, including contingent liabilities,
if any, and legal and regulatory risks.
In our review of the products and services of the portfolio company, we
look at the following:
* Evaluation of intellectual property position;
* Review of existing customer or similar agreements and arrangements;
* Analysis of core technology;
* Assessment of collaborations;
* Review of sales and marketing procedures; and
* Assessment of market and growth potential.
Upon completion of these analyses, we will conduct on-site visits with the
target company's management team. Also, in cases in which a target company
is at a mature stage of development and if other matters exist that warrant
such an evaluation, we will obtain an independent appraisal of the target
company.
Ongoing Relationships with Portfolio Companies
Monitoring.
We will continuously monitor our portfolio companies in order
to determine whether they are meeting our financing criteria and their
respective business plans. We may decline to make additional investments
in portfolio companies that do not continue to meet our financing criteria.
However, we may choose to make additional investments in portfolio
companies that do not do so, but we believe that we will nevertheless
perform well in the future.
We will monitor the financial trends of each portfolio company to assess
the appropriate course of action for each company and to evaluate overall
portfolio quality. Our management team and consulting professionals, who
are well known by our management team, will closely monitor the status and
performance of each individual company on at least a quarterly and, in some
cases, a monthly basis.
We will use several methods of evaluating and monitoring the performance
and fair value of our debt and equity positions, including but not limited
to the following:
* Assessment of business development success, including product
development, financings, profitability and the portfolio company's
overall adherence to its business plan;
* Periodic and regular contact with portfolio company management to
discuss financial position, requirements and accomplishments;
* Periodic and regular formal update interviews with portfolio company
management and, if appropriate, the financial or strategic sponsor;
* Attendance at and participation in board meetings;
* Review of monthly and quarterly financial statements and financial
projections for portfolio companies.
Managerial Assistance.
As a business development company, we will offer, and in many cases may provide,
significant managerial assistance to our portfolio companies. This assistance
will typically involve:
* monitoring the operations of our portfolio companies,
* participating in their board and management meetings,
* consulting with and advising their officers,
* providing other organizational and financial guidance, and
* placing a representative on the Board of Directors or other governing
body of each portfolio company.
Diversification
As a BDC, we must invest at least 70% of our total assets in qualifying
assets consisting of investments in eligible portfolio companies and
certain other assets including cash and cash equivalents. In order to
receive favorable pass-through tax treatment on any distributions to our
shareholders, we intend to diversify our pool of investments in such a
manner so as to qualify as a diversified closed end management investment
company. However, because of the limited size of the funding which is
likely to be available to us, we will likely be classified as a non-
diversified closed end investment company under the 1940 Act. Until we
qualify as a registered investment company, we will not be subject to the
diversification requirements applicable to RICs under the Internal Revenue
Code. Therefore, we will not receive favorable pass through tax treatment
on distributions to our shareholders. In the future, we will seek to
increase the diversification of our portfolio so as to make it possible to
meet the RIC diversification requirements, as described below. We cannot
assure you, however, that we will ever be able to meet those requirements.
To qualify as a RIC, we must meet the issuer diversification standards
under the Internal Revenue Code that require that, at the close of each
quarter of our taxable year,
* not more than 25% of the market value of our total assets is
invested in the securities of a single issuer, and
* at least 50% of the market value of our total assets is represented
by cash, cash items, government securities, securities of other RICs,
and other securities.
Each investment in these other securities is limited so that not more than
5% of the market value of our total assets is invested in the securities of
a single issuer and we do not own more than 10% of the outstanding voting
securities of a single issuer. For purposes of the diversification
requirements under the Internal Revenue Code, the percentage of our total
assets invested in securities of a portfolio company will be deemed to
refer, in the case of financings in which we commit to provide financing
prior to funding the commitment, to the amount of our total assets
represented by the value of the securities issued by the eligible portfolio
company to us at the time each portion of the commitment is funded.
Investment Amounts
The amount of funds committed to a portfolio company and the ownership
percentage received will vary depending on the maturity of the portfolio
company, the quality and completeness of the portfolio company's management
team, the perceived business opportunity, the capital required compared to
existing capital, and the potential return. Although investment amounts
will vary considerably, we expect that the average investment, including
follow-on investments, will be between $250,000 and $5,000,000.
Competition
Our primary competitors which are able to provide financing to target
companies, will include private equity and venture capital funds, other equity
and non-equity based investment funds and investment banks and other sources
of financing, including additional financial services companies such as
commercial banks and specialty finance companies. Many of these entities have
substantially greater financial and managerial resources than we will have.
We believe that our competitive advantage with regard to quality target
companies relates to our ability to negotiate flexible terms and to complete
our review process on a timely basis. We cannot assure you that we will be
successful in implementing our strategies.
Financial information about geographic areas.
The Company has not engaged in any activities, and has no customers or
portfolio investments, outside of the United States. As a BDC, our
investment portfolio is limited to U.S. companies, although a portfolio
company in which we invest could have operations in both the U.S. and outside
the U.S.
Item 1A. Risk Factors.
THE COMPANY HAS LIMITED RESOURCES AND NO PRESENT SOURCE OF REVENUES
The Company has limited resources and has had no revenues to date. In addition,
the Company will not achieve any revenues until, at the earliest, the
consummation of a Portfolio Investment. Moreover, there can be no assurance
that any Portfolio Investment, at the time of the Company's consummation of an
investment, or at any time thereafter, will provide any material revenues from
its operations or operate on a profitable basis.
THE COMPANY MAY NEED ADDITIONAL FINANCING IN ORDER TO EXECUTE ITS BUSINESS
PLAN
The Company has had minimal revenues to date and will be entirely
dependent upon its limited available financial resources. The Company
cannot ascertain with any degree of certainty the capital requirements for
the execution of its business plan. In the event that the Company's limited
financial resources prove to be insufficient to implement the Company's
business plan, the Company may be required to seek additional financing.
ADDITIONAL FINANCING MAY NOT BE AVAILABLE TO THE COMPANY IF NEEDED
There can be no assurance that additional financing, if needed, will be
available on acceptable terms, or at all. To the extent that additional
financing proves to be unavailable when needed, the Company would, in all
likelihood, be compelled to abandon plans for a Portfolio Investment, and
would have minimal capital remaining to pursue other Portfolio Companies.
The failure by the Company to secure additional financing, if needed, could
also have a material adverse effect on the continued development or growth
of the Portfolio Company. The Company has no arrangements with any bank or
financial institution to secure additional financing and there can be no
assurance that any such arrangement, if required or otherwise sought, would
be available on terms deemed to be commercially acceptable and in the best
interests of the Company.
THE COMPANY MAY NOT BE ABLE TO BORROW FUNDS IF NEEDED
There currently are no limitations on the Company's ability to borrow funds
to increase the amount of capital available to the Company to effect a
Portfolio Investment, other than the general limitation of the ratio
between debt and equity imposed on all BDCs by the 1940 Act. Moreover, the
limited resources of the Company and lack of operating history will make it
difficult to borrow funds. The amount and nature of any borrowings by the
Company will depend on numerous considerations, including the Company's
capital requirements, the Company's perceived ability to meet debt service
on any such borrowings and the then prevailing conditions in the financial
markets, as well as general economic conditions. There can be no assurance
that debt financing, if required or sought, would be available on terms
deemed to be commercially acceptable by and in the best interests of the
Company. The inability of the Company to borrow funds required to effect or
facilitate an investment, or to provide funds for an additional infusion of
capital into a Portfolio Company, may have a material adverse effect on the
Company's financial condition and future prospects. Additionally, to the
extent that debt financing ultimately proves to be available, any
borrowings may subject the Company to various risks traditionally
associated with indebtedness, including the risks of interest rate
fluctuations and insufficiency of cash flow to pay principal and interest.
Furthermore, a Portfolio Company may have already incurred borrowings and,
therefore, all the risks inherent thereto.
THE COMPANY IS UNABLE TO ASCERTAIN RISKS RELATING TO THE INDUSTRY AND
NATURE OF UNIDENTIFIED PORTFOLIO INVESTMENT TARGETS
The Company has not yet selected any particular Portfolio Company in which to
concentrate its investment efforts. The directors and executive officers of the
Company have had contact or discussions with several entities or representatives
of entities regarding consummation of a Portfolio Investment, but have not yet
successfully completed an investment. Accordingly, there is no basis to evaluate
the possible merits or risks of a Portfolio Investment, and therefore risks of a
currently unascertainable nature may arise when a specific Portfolio Company is
chosen. For example, to the extent that the Company effects an investment in a
financially unstable company or an entity in its early stage of development or
growth (including entities without established records of revenues or income),
the Company will become subject to numerous risks inherent in the business and
operations of financially unstable and early stage or potential emerging growth
companies. In addition, to the extent that the Company effects an investment in
an entity in an industry characterized by a high level of risk, the Company will
become subject to the currently unascertainable risks of that industry. Although
management will endeavor to evaluate the risks inherent in a particular
Portfolio Company, there can be no assurance that the Company will properly
ascertain or assess all such risks.
SUCCESS OF THE COMPANY'S BUSINESS PLAN DEPENDS IN LARGE PART UPON THE
CONSUMMATION OF A PORTFOLIO INVESTMENT
The success of the Company's proposed plan of operation will depend to a
great extent on locating and consummating an investment in a Portfolio
Company. Subsequent to any investment, the Company's success will depend
greatly on the operations, financial condition, and management of the
identified Portfolio Company. While management intends to seek an
investment in a company that has an established operating history, it
cannot assure that the Company will successfully locate candidates meeting
such criteria. In the event the Company completes an investment, the
success of the Company's operations may be dependent upon management of the
Portfolio Company and numerous other factors beyond the Company's control.
THE COMPANY DEPENDS UPON ITS EXECUTIVE OFFICERS AND DIRECTORS
The ability of the Company to successfully effect a Portfolio Investment
will be dependent upon the efforts of its executive officers and directors,
as well as its ability to attract additional directors and executive
officers. The Company has not entered into employment agreements or other
understandings with any officer or director concerning compensation or
obtained any "key man" life insurance on his or her life.
THERE EXIST RISKS TO STOCKHOLDERS RELATING TO DILUTION: AUTHORIZATION OF
ADDITIONAL SECURITIES AND REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING
A PORTFOLIO INVESTMENT
To the extent that additional shares of Common Stock are issued, the
Company's stockholders would experience dilution of their respective
ownership interests in the Company. Additionally, if the Company issues a
substantial number of shares of Common Stock in connection with or
following a Portfolio Investment, a change in control of the Company may
occur which may affect, among other things, the Company's ability to
utilize net operating loss carry forwards, if any. Furthermore, the
issuance of a substantial number of shares of Common Stock may adversely
affect prevailing market prices, if any, for the Common Stock and could
impair the Company's ability to raise additional capital through the sale
of its equity securities. The Company may use consultants and other third
parties providing goods and services, including assistance in the
identification and evaluation of potential Portfolio Companies. These
consultants or third parties may be paid in cash, stock, options or other
securities of the Company, and the consultants or third parties may be
Placement Agents or their affiliates.
THE COMPANY EXPECTS TO PAY NO CASH DIVIDENDS
The Company does not expect to pay dividends prior to the consummation of a
Portfolio Investment. The payment of dividends after consummating any such
investment will be contingent upon the Company's revenues and earnings, if
any, capital requirements, and general financial condition subsequent to
consummation of an investment. The payment of any dividends subsequent to
an investment will be within the discretion of the Company's then Board of
Directors. The Company presently intends to retain all earnings, if any,
for use in the Company's business operations and accordingly, the Board
does not anticipate declaring any dividends in the foreseeable future.
THE COMPANY IS AUTHORIZED TO ISSUE PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance
of 5,000,000 shares of preferred stock (the "Preferred Stock"), with such
designations, powers, preferences, rights, qualifications, limitations and
restrictions of such series as the Board of Directors, subject to the laws
of the State of Nevada, may determine from time to time. Accordingly, the
Board of Directors is empowered, without stockholder approval, to issue
Preferred Stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or other rights of the
holders of Common Stock. In addition, the Preferred Stock could be utilized,
under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company. As of the date of this report,
the Company has no outstanding shares of Preferred Stock.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
The Company neither owns nor leases any significant real estate or
other properties at the present time. The Company requires minimal office
space and the Company has subleased space for corporate and administrative
purposes in Cocoa, Florida from CF Consulting, LLC., an independent
consultant to the Company by which our contract CFO, Robert Hipple,
is employed, for $550 per month commencing in March, 2008 for a two year
term. This arrangement will continue until the Company raises funding and
determines that more extensive office space is necessary for its
operations.
Item 3. Legal Proceedings
There are no legal proceedings pending, or to the best knowledge of management,
threatened against the Company. There were no legal proceedings previously
pending which were resolved during the fourth quarter of the fiscal year ended
December 31, 2008.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders of the Company during
the fourth quarter of the fiscal year, ended December 31, 2008.
PART II
Item 5. Market for Registrant?s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
(a) Market information. The common shares of the Company have been admitted
for trading on the NASD OTC Bulletin Board under the symbol UEEC. There has been
only limited, sporadic trading activity to date. As a result, no information
regarding high and low sales prices or high and low bid information for the
common shares is available or provided in this report.
(b) Holders. As of March 15, 2009, there were approximately 95 holders of
record of our common stock.
(c) Dividends. The Company has not paid any dividends to date, has not yet
generated earnings sufficient to pay dividends, and currently does not intend
to pay dividends in the foreseeable future.
(d) Securities authorized for issuance under equity compensation plans.
Although the Company has two authorized equity compensation plans approved by
its shareholders in 1997, before it elected to be treated as a business
development company, no stock options, grants, warrants or other awards have
ever been made under the plans. The By-laws of the Company prohibit
the grant or award of any such options, grants, warrants or other awards so
long as the Company maintains its election to be treated as a business
development company. Under the rules regulating a business development
company under the Investment Company Act of 1940, the Company may not issue or
award any such options, grants, warrants or other incentive compensation
awards because it also has a capital gains based incentive in effect with its
investment adviser, United EcoEnergy Advisers, LLC.
The following table sets forth, as of the year ended December 31,
2008, certain information with respect to the compensation plans and individual
compensation arrangements to which the Company is a party, if any, under which
any equity securities of the Company are authorized for issuance.
Plan category Number of securities Weighted average Number of securities
to be issued upon exercise price of remaining available
exercise of outstanding options, for future issuance
outstanding options, warrants and rights under equity
warrants and rights compensation plans
(a) (b) (c)
- ------------------------------------------------------------------------------
Equity compensation
plans approved by
security holders
1997 EMPLOYEE STOCK
COMPENSATION PLAN -0- N/A 1,000,000
1997 COMPENSATORY STOCK
OPTION PLAN -0- N/A 1,500,000
Equity compensation plans
not approved by
security holders
NONE N/A N/A N/A
- ------------------------------------------------------------------------------
Total -0-
Item 6. Selected Financial Data.
The Company was in a development stage through the end of 2005 and had no
income or assets during the period from its incorporation in 1997 through the
end of 2005. Therefore, the information required by Item 301 of Regulation S-K
is omitted for that period as not material.
During 2006 through 2008, after the election to be treated as a BDC, the Company
has had no revenues, income from continuing operations, and similar items, and
has not had any accounting changes, or business combinations or dispositions.
The net loss, net loss per common share, net asset values, net asset value per
common share, and related financial data as a BDC are provided in the financial
statements included in this report
Item 7. Management Discussion and Analysis of Financial Condition and Results
of Operations.
We have elected to be treated as a business development company under the 1940
Act. Accordingly, we are required to comply with certain regulatory
requirements. For instance, we generally have to invest at least 70% of our
total assets in qualifying assets, including securities of private or thinly
traded public U.S. companies, cash, cash equivalents, U.S. government
securities and high-quality debt investments that mature in one year or less.
We will typically invest under normal circumstances, at least 80 percent of
net assets in qualifying portfolio companies.
We expect to invest in growing companies, many of which have relatively short
or no operating histories. These companies are and will be subject to all the
business risks and uncertainties associated with any new business enterprise,
including the risk that these companies may not reach their investment
objective and the value of our investment in them may decline substantially or
fall to zero. As of December 31, 2008, we had not yet made any portfolio or
other investments.
Results of Operations
During the year ended December 31, 2008, the Company made considerable efforts
to carry out its business plan as a Business Development Company. These
efforts included both business development and financing activities. Through
the end of the fiscal year, the Company incurred over $720,000 in expenses in
connection with its Business Development Company operations, most of which
related to investigation and negotiating acquisition terms for several
acquisitions in 2007, which were ultimately not completed, and investigating
and conducting due diligence on the two currently proposed portfolio
acquisitions, and negotiating and entering into acquisition agreements.
Critical Accounting Policies
In determining the fair value of our investments, the Audit Committee will
consider valuations from an independent valuation firm, as needed, from our
Investment Committee, our investment adviser and from management
Results of Operations
Financial Highlights
Financial highlights of the Company for the fiscal year ending December 31,
2008 are included in Footnote 6 to our Financial Statements.
Investment Activity
We engaged in one portfolio investment during the year ended December 31, 2008,
represented by the total of $250,000 in secured short term loans to City 24/7,
LLC, which are now due.
Long-Term Portfolio Investments
There were no long-term portfolio investments made during the twelve months
ended December 31, 2008.
Investment Income
We expect to generate revenue in the form of interest income on the debt
securities that we own, dividend income on any common or preferred stock that
we own, and capital gains or losses on any debt or equity securities that we
acquire in portfolio companies and subsequently sell. Our investments, if in
the form of debt securities, will typically have a term of one to ten years
and bear interest at a fixed or floating rate. To the extent achievable, we
will seek to collateralize our investments by obtaining security interests in
our portfolio companies? assets. We also may acquire minority or majority
equity interests in our portfolio companies, which may pay cash or in-kind
dividends on a recurring or other negotiated basis. In addition, we may earn
revenue in other forms including commitment, origination, structuring or due
diligence fees, management fees and consultation fees, which will be
recognized as earned. We earned interest income during the year ended
December 31, 2008 in the amount of $8,190 in interest accrued on the short
Term loans to City 24/7, LLC.
Operating Expenses
Operating expenses for the years ended December 31, 2008 and 2007 are broken
down as follows:
2008 2007
---------- -----------
Consulting expenses $ 166,896 $ 202,500
Rent 7,372 5,400
Audit fees 10,749 11,082
Legal fees 15,000 --
Offering expenses 62,738 --
Other expenses:
Bank fees 490 197
Filing fees - 325
Interest 7,966 5,467
Office supplies 812 52
Licenses and permits 500 --
Miscellaneous 784 67
Postage and delivery 490 264
Public relations 1,075 --
Registered agent 270 135
Printing 51 37
Travel 7,236 1,095
Transfer agent 2,450 1,644
-------- --------
Total operating expense 284,879 228,265
The consulting expenses were paid or due to CF Consulting, LLC, pursuant to a
consulting agreement with CF Consulting, LLC, under which Robert Hipple served
as our CFO and Chief Compliance Officer, for a monthly fee of $6,250, for
services of our CEO and President, Kelly T. Hickel, at the rate of $5,000
per month, and for other consulting. The Company entered into an Administration
Agreement on September 1, 2008 with Enterprise Administration, LLC, to provide
executive officers, managers, administrative services and related services on
an actual cost basis. Under that Administration Agreement, commencing on
September 1, 2008, the Company receives the services of Mr. Hickel as President
and CEO through The Turnaround Group, LLC; of CF Consulting, LLC to provide
financial and compliance services; and the services of Tower 1 Consultants,
LLC to provide Adam Mayblum as Director of Business Development, Patrick
Donelan as Director of Corporate Finance, and also to provide a contract
Director of Mergers and Acquisitions for the Company. Mr. Mayblum, who is a
director of the Company and Chair of the Investment Committee of the Company,
also controls, along with Mr. Donelan, our investment advisor, United
EcoEnergy Investment Advisors, LLC, as well as Enterprise Administration, LLC.
Mr. Mayblum and Mr. Donelan also control Enterprise Partners, LLC, which with
them, holds a majority of our common stock outstanding. The Company has paid a
total of $79,046 during the year ended December 31, 2008 to Enterprise
Administration, LLC for services provided and expenses paid on behalf of the
Company by Enterprise Administration, LLC, for which it was billed on a monthly
basis for actual costs incurred in the prior month. The Administration
Agreement has a two year term ending August 31, 2010 but may be cancelled on 60
days notice by either the Administrator or by the Board of Directors of the
Company.
Rent expense represents rent paid or due to CF Consulting, LLC for sub-leasing
office space, telephone, office equipment and related office services. The
remaining expenses were paid or due to non-affiliated parties, including $10,749
and $11,082 in professional fees of our independent audit firm for audit
services in the periods ended December 31, 2008 and 2007, respectively; $15,000
in legal fees paid in 2008 in connection with our fund-raising activities; and
$62,738 in offering expenses, including placement agents fees and expenses.
Net Investment Income, Net Unrealized Appreciation and Net Increase in
Stockholders Equity Resulting from Operations
Our net investment income totaled $0 for the year ended December 31, 2007
compared to $0 for the year ended December 31, 2006. Net unrealized
appreciation totaled $0 for the year ended December 31, 2007 compared to $0
or the year ended December 31, 2006.
Financial Condition, Liquidity and Capital Resources
Our liquidity and capital resources were generated initially from an advance
of $60,000 by our then majority shareholder, Enterprise Partners, LLC, which
was later paid by the issuance of 1 million shares of Series A Convertible
Preferred Stock. We also undertook an exempt offering of our common shares
pursuant to a Form 1-E Application and Notice filed with the SEC on June 19,
2006, and accepted subscriptions for a total of 312,739 common shares,
representing $92,366 in additional working capital during 2006. We sold no
additional shares during the year ended December 31, 2007 but borrowed a total
of $80,000 in short term loans from shareholders during the year. We issued an
additional 1,928,898 common shares during 2008 for net proceeds of $497,522,
and borrowed $25,000 on a short term note from Leaddog Capital, LP.
Going Concern
The Company?s ability to continue as a going concern remains dependent upon
successful operation under our business plan, obtaining additional capital
and financing, and acquiring suitable portfolio investment companies. The
Company currently has no revenue and minimal cash reserves. These factors,
among others, raise substantial doubt about its ability to continue as a
going concern.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
We are subject to financial market risks, including changes in interest rates,
equity price risk and some of the loans in our portfolio may have floating
rates in the future. We may hedge against interest rate fluctuations by using
standard hedging instruments such as futures, options and forward contracts
subject to the requirements of the 1940 Act. While hedging activities may
insulate us against adverse changes in interest rates, they may also limit our
ability to participate in the benefits of higher interest rates with respect
to our portfolio of investments. During the twelve months ended December 31,
2008 we did not engage in any hedging activities.
Since the Company to date has had no significant operations, the
information and disclosures required by Item 305 of Regulation S-K are
omitted as not material.
Item 8. Financial Statements and Supplementary Data.
See the index to the financial statements of the Company on page 34.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
Item 9A(T). Controls and Procedures.
Within 90 days prior to the filing of this Form 10-K, an evaluation was
carried out by our CEO and consulting CFO as of the end of the reporting period
covered by this report, of the effectiveness of our disclosure controls and
procedures. Disclosure controls and procedures are procedures that are designed
with the objective of ensuring that information required to be disclosed in our
reports filed under the Securities Exchange Act of 1934, such as this Form 10-K
is recorded, processed, summarized and reported within the time period specified
in the Securities and Exchange Commission's rules and forms. Based on that
evaluation, our management concluded that, as of December 31, 2008, and as of
the date that the evaluation of the effectiveness of our disclosure controls and
procedures was completed, our disclosure controls and procedures were effective
to satisfy the objectives for which they are intended.
There were no changes in our internal control over financial reporting
identified in connection with the evaluation performed that occurred during
the fiscal year covered by this report that has materially affected or is
reasonably likely to materially affect, our internal control over financial
reporting.
Management's Annual Report on Internal Control over Financial Reporting.
We are responsible for establishing and maintaining adequate internal control
over financial reporting. Our internal control over financial reporting is a
process to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of the Company's financial
statements for external reporting purposes in accordance with United States
generally accepted accounting principles.
We assessed the effectiveness of the Company's internal control over
financial reporting as of December 31, 2008 based on the framework in
?Internal Control Over Financial Reporting ? Guidance for Smaller Public
Companies? issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on that assessment, we determined that, as of
December 31, 2008, the Company's internal control over financial reporting is
effective, based on those criteria.
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 temporary rules of
the Securities and Exchange Commission that permit the Company to provide
only management's report in this annual report.
Item 9B. Other Information.
None
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
IDENTIFICATION OF DIRECTORS and EXECUTIVE OFFICERS
The persons who served as directors and executive officers of the Company
through the period ending December 31, 2008 covered by this report, their ages
and positions held in the Company, are listed below.
Name Age Position
Kelly T. Hickel 66 Chairman, CEO, Director
Adam Mayblum 43 Director
Alec Hoke 42 Director
John Paul DeVito 53 Director
Richard P. Rifenburgh 77 Director
Michael Wiechnik 62 Director
Boris Rubishevsky 58 Director
At a Special Meeting of the Board of Directors of the Company held on
June 26, 2008, the Company increased the size of its Board of Directors from
five to seven. The following new directors were then appointed to fill existing
and new vacancies on the Board of Directors resulting from the expansion of the
size of the Board:
Kelly T. Hickel
Richard P. Rifenburgh
Boris Rubishevsky
Michael R. Wiechnik
Mr. Hickel also was elected as Chairman.
KELLY T. HICKEL was appointed as Chairman of Paradise Music &
Entertainment, Inc. (PDSE.pk) in February 2001 until he resigned in June 2006.
Previously, Mr. Hickel was the turn-around President of Miniscribe Corp., a
troubled Fortune 500 disk drive manufacturer, from 1989 to 1990. Mr. Hickel
helped conduct a 363B sale to Maxtor from bankruptcy and supported the estate
as it returned $900 million to its stakeholders including 41% of the value to
the public shareholders. He was the President of the Maxwell Technology
Information Systems Group from 1993 until 1997, during which, Maxwell was the
9th best performing stock on NASDAQ and the #1 performing stock in California
in 1996. Mr. Hickel was, recently, Chairman and Chief Restructuring Office of
The Tyree Company in Farmingdale, New York. He is Managing Director of The
Turnaround Group, LLC and Strategic Growth Associates, a Denver-based advisory
firm, CEO of Environmental Testing Laboratories, Inc. and Chairman of the
Advisory Committee for Leaddog Capital Partners, Inc. Mr. Hickel has arranged
a number of private and public company financings and financial restructuring
over the years. Mr. Hickel is a graduate of Indiana University, with a
Bachelors of Science, and has attended coursework at Columbia University.
RICHARD P. RIFENBURGH has served as Chairman of the Board of Moval Management
Corporation since 1968. Moval Management Corporation is a management
Consulting firm that specializes in restoring companies in financial distress.
From February 1989 until May 1991 Mr. Rifenburgh served as Chairman of the
Board and Chief Executive Officer of Miniscribe Corporation, a publicly-held
holding company and manufacturer of computer disc drives. From 1987 to 1990
he was a General Partner at Hambrecht and Quist Venture Partners, a venture
capital organization. From 1988 to 1990 he was Chairman of the Board and
Chief Executive Officer of Ironstone Group, Inc., and a publicly-held
company. From1996 to 2002 he served on the Board of Directors of Tristar
Corporation, a publicly-held manufacturer of cosmetics and fragrances that
filed for bankruptcy in 2001. From 1992 to 2001 Mr. Rifenburgh served as a
director of Concurrent Computer Corporation, which is a publicly reporting
company.
BORIS RUBISHEVSKY has over thirty years of business experience ranging
from corporate management and mergers and acquisitions, to business
development, sales and marketing. He has held several Board of Director
positions. Most recently, Mr. Rubizhevsky founded NexGen Security
Corporation, a consulting firm specializing in homeland security, biological
and environmental products and technologies. He actively works with firms in
Germany and the former Soviet Union on the development of new technologies
for homeland security and life science applications.
Prior to this, in 1992 Mr. Rubizhevsky co-founded Isonics Corporation
(NASDAQ: ISON), a diversified international company with offices in the
United States, Germany and Russia and businesses in life science, semi-
conductor wafer services and homeland security products. Mr. Rubizhevsky
was with Isonics for fifteen years, playing a key role in its growth
and development. He originally started the company to pursue life science
opportunities based on products developed by the Russian nuclear industry.
He identified expansion opportunities, leveraging Isonics? technology and
expertise into homeland security and biotech applications as well as
identifying capital funding sources, including the company?s initial public
offering and follow-on secondary equity and debt offerings.
Before founding Isonics, Mr. Rubizhevsky spent more than ten years with
General Electric Company in a number of international sales and marketing
managerial positions. These positions were based both in the US and abroad.
Mr. Rubizhevsky holds a B.S. degree in engineering from the Stevens Institute
of Technology. He is fluent in the Russian language and culture.
MICHAEL WIECHNIK launched his career with the State of New Jersey n 1973 in the
Governor?s Office/ Parole Board, responsible for developing programs and
administrative policies and procedures for the newly created, full time
paroling authority. In 1976 the State of New Jersey elevated the Division of
Correction and Parole to cabinet level status by establishing the Department of
Corrections (DOC). Mr. Wiechnik was tapped to create a computerized management
information system that would standardize and automate the calculation of
inmate sentences and post each inmate?s information monthly.
Mr. Wiechnik has held several key leadership positions including Chief of the
Bureau of Correctional Systems, Chief of the Bureau of Classification and
Identification Services, Inmate Disciplinary Hearing Officer, Capital Planner,
Supervisor of Capital Planning Construction and Facility Maintenance,
Supervising Administrative Analyst/Office of Employee Relations and
Administrative Analyst1. Currently Mr. Wiechnik is the driving force behind
?Clean Energy? initiatives for the DOC; planning distributive (electric)
generation projects utilizing renewable and sustainable alternative energy
sources. Mr. Wiechnick received a Bachelor of Arts degree in Psychology from
the College of New Jersey (formerly Trenton State College).
Adam Mayblum, age 42, co-founded United EcoEnergy Advisors, LLC and is a
principal and founder of Enterprise Partners, LLC, the former majority
shareholder of the Company. Prior to founding Enterprise Partners, LLC, he
had 17 years of experience in the financial markets as a top retail producer
specializing in Public Venture Capital. In 1998 Mr. Mayblum left his position
as Branch Manager of HJ Meyers in NY to become a Managing Director of The May
Davis Group, specializing in PIPES (Private Investments in Public Equity). In
2002, Mr. Mayblum took a position as the Managing Director of the Private
Equities Group of Joseph Stevens & Company where he successfully completed
numerous financings and advised many companies on changes in the regulatory
environment and the impact those changes have on their ability to raise
capital in the public and private markets. He graduated from Emory University
in 1987 with a BBA in Management. Mr. Mayblum is also a managing director and
one-third owner of United EcoEnergy Advisers, LLC, the Company investment
adviser, and also serves as a director of American Development & Investment
Fund, Inc., a BDC focused on markets other than alternative energy.
Alec Hoke is a senior vice president of Summit Brokerage Services in Boca
Raton, Florida. Prior to that he was a senior vice president at First Union
Securities until it merged with Wachovia Securities. He has extensive
experience in venture capital as well as specialized industry analysis. Alec
expanded his knowledge into stock market related work with several venture
capital and investment banking firms, specializing in start-up financing. Mr.
Hoke started his investment career with Massachusetts Mutual Life Insurance
Company where he developed skills in estate planning and needs analysis to
manage risk. He is a native of Princeton, New Jersey. He attended Rutgers
University on a football scholarship, where he was an All-American linebacker
and earned his degree in Management.
John DeVito is currently Director of Business Development for Bon-Trade
Solutions, Inc., and has worked in the securities and investment banking
industry for thirty years. He has served as COO of May Davis Group, Inc.;
CEO of EastBrokers International, Inc., a broker Dealer specializing in
emerging markets in Central and Eastern Europe; and Vice President of JB
Oxford & Company, Inc. He has also worked with PaineWebber Incorporated and
Smith Barney Harris Upham & Co. He holds a BA in Psychology from New York
University and a Diploma in Financial Planning, also from New York
University. He currently holds Series 4, 7, 24, 27, 54, 55, 63 and 65
licenses from the NASD, Inc.
The Company currently maintains separate committees of the Board. As a
result of the appointment of new directors, the Committee?s of the Board are:
Audit Committee:
Richard P. Rifenburgh, Chair
John Paul DeVito
Kelley T. Hickel
Governance and Nominating Committee:
Richard P. Rifenburgh, Chair
Alec Hoke
John Paul DeVito
Compensation Committee:
Richard P. Rifenburgh, Chair
Kelly T. Hickel
Boris Rubizhevsky
Investment Committee
Adam Mayblum, Chair
John Paul DeVito
Alec Hoke
Boris Rubizhevsky
Michael R. Wiechnik
POTENTIAL CONFLICTS OF INTEREST
For all periods subsequent to the Company election to operate as a BDC
on February 26, 2006, the Company is required to and will maintain a Board of
Directors made up of a majority of independent directors, and will operate
within the rules and requirements of a BDC under the 1940 Act. The Company
has adopted a Conflicts of Interest Policy which is designed to prevent any
real or potential conflicts of interest for its directors and officers. The
Company is not aware of any conflicts of interest, actual or potential,
between its intended plan of operations and any director or officer of the
Company, or any company in which that officer or director is an officer or
director. There are no known interlocking directorships among the officers or
directors of the Company which could create potential conflicts of interest.
As required by the applicable BDC rules, the Company will hold an Annual
Meeting of Shareholders as soon as possible after the filing of this report in
order to elect its Board of Directors and to conduct such other business as
might be required. No date has been set yet for the Annual Meeting, but it is
expected that the Annual Meeting will be held in June, 2008.
SIGNIFICANT EMPLOYEES
None, other than the sole officer of the Company listed above, who acts as
an officer pursuant to a consulting agreement.
COMMITTEES AND BOARD MEETINGS
The Company has adopted charters for its Audit Committee, Investment
Committee, Compensation Committee and Governance and Nominating Committee,
which it submitted for approval by its shareholders at the Annual Meeting of
Shareholders, held on July 31, 2006. Following approval of the charters,
members of the Board of Directors elected at the Annual Meeting were
appointed to each of the Committees, as follows:
AUDIT COMMITTEE
The Audit Committee is made up entirely of independent, non-affiliated
Directors.
COMPENSATION COMMITTEE
The Compensation Committee is made up entirely of independent, non-
interested Directors.
GOVERNANCE AND NOMINATING COMMITTEE
The Governance and Nominating Committee is made up of entirely of independent,
non-interested Directors.
INVESTMENT COMMITTEE
The Investment Committee is made up of both independent, non-
interested Directors and interested directors.
CODE OF ETHICS
The Company has adopted a Code of Ethics that applies to all of its
directors, officers and employees performing financial functions for the
Company, including its chief executive officer, chief financial officer,
controller and any person performing similar functions.
EXCLUSION of DIRECTOR LIABILITY
Pursuant to the General Corporation Law of Nevada, the Company
Certificate of Incorporation excludes personal liability on the part of its
directors to the Company for monetary damages based upon any violation of their
fiduciary duties as directors, except as to liability for any acts or omissions
which involve intentional misconduct, fraud or a knowing violation of law or
for improper payment of dividends. This exclusion of liability does not limit
any right which a director may have to be indemnified and does not affect any
director's liability under federal or applicable state securities laws.
Item 11. Executive Compensation.
CASH and OTHER COMPENSATION
For the years ended December 31, 2007 and 2006 and through the date of
this report, the Company has not paid any executive officers or directors any
cash and cash equivalent compensation directly. Mr. Mackey, as President and
CEO, and Mr. Hipple, as CFO, served in those capacities on a contract basis,
through consulting agreements, Mr. Mackey through a direct agreement and Mr.
Hipple through a consulting agreement with CF Consulting, LLC. The Company has
incurred a liability to Mr. Mackey in the total amount of $57,500 in 2007
through this consulting arrangement, of which $22,500 is still owed, as a
part of the settlement with Mr. Mackey on his resignation in October, 2007.
This amount is payable by agreement when the Company has secure an additional
$500,000 in capital funding. The Company also has incurred a liability to CF
Consulting, LLC in a total amount of $140,000 in consulting fees under
its agreement in 2007. Enterprise Partners, LLC has paid a total of $ 97,500
in consulting fees owed to Mr. Mackey and CF Consulting LLC during 2007, and
this liability is now included in the $ 187,500 due to affiliate on the
Company?s balance sheet as of December 31, 2007
The Company has no other agreement or understanding, express or implied, with
any director or executive officer concerning employment or cash or other
compensation for services. Any new compensation arrangements with any officer
or director of the Company will be adopted and approved by the independent
Compensation Committee.
COMPENSATION PURSUANT to PLANS
For the years ended December 31, 2007 and 2006 and through the date of
this report, no director or executive officer has received compensation from
the Company pursuant to any compensatory or benefit plan. There is no plan or
understanding, express or implied, to pay any compensation to any director or
executive officer pursuant to any compensatory or benefit plan of the Company.
The Company currently has in place an employee stock compensation plan
and compensatory stock option plan. There are no other compensatory or benefit
plans, such as retirement or pension plans, in effect.
COMPENSATION of DIRECTORS and EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation
of the Company Chairman of the Board, Chief Executive Officer and its other
most highly compensated executive officers for the fiscal years ended
December 31, 2008, 2007 and 2006.
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------ --------------------------------
AWARDS PAYOUTS
--------------------- ---------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP
ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS
COMP.
POSITION YEAR<F1>($)<F2> ($) ($) ($) (#) ($) ($)
- ---------------------------------------------------------------------------------------------------
Stephen M. Siedow 2008 $ -0- None None None None None $
- -0-
Former Chairman, 2007 $ -0- None None None None None $
- -0-
President/CFO 2006 $ -0- None 8,120 None None
None $ -0-
William K. Mackey 2008 $ -0- None None None None None $
- -0-
Former Chairman/ 2007 $ -0- None 57,500 None None None $
- -0-
President 2006 NA NA 75,000 NA NA NA
NA
Kelly T. Hickel 2008 $ -0- None 20,000 None None None
None
Chairman/CEO 2007 $ -0- None None None None None $ -0-
President/CFO 2006 $ -0- None None None None None $
- -0-
Mr. Mackey was due the sum of $7,500 per month under a consulting agreement with the
Company.
This amount had been paid during 2006 and 2007 by Enterprise Partners, LLC and is
reflected as
part of the amount due affiliate on the Company?s books. Mr. Mackey resigned in September,
2007
and agreed to defer the balance due him of $22,500 until such time as the Company raised a
cumulative net amount of $500,000.
Mr. Hickel is employed by The Turnaround Group, LLC which has a consulting agreement with
the
Administrator for the Company to provide various services for an amount equal to $5,000 per
month in 2008.
OPTION/SAR GRANTS
No individual grants of stock options, whether or not in tandem with
stock appreciation rights ("SARs") and freestanding SARs, have been made to
any executive officer or any director during the year ended December 31, 2007.
Accordingly, no stock options were exercised by any of the officers or
directors in fiscal 2007.
EMPLOYEE STOCK COMPENSATION PLAN
The Company adopted the 1997 Employee Stock Compensation Plan for
employees, officers, directors of the Company and advisors to the Company (the
ESC Plan). The Company reserved a maximum of 1,000,000 common shares to be
issued upon any grant of awards under the ESC Plan. Employees will recognize
taxable income upon the grant of common stock equal to the fair market value
of the common stock on the date of the grant and the Company will recognize a
compensating deduction for compensation expense at such time. The ESC Plan is
administered by the Compensation Committee of the Board of Directors. No
shares have been awarded or currently are anticipated to be awarded under the
ESC Plan, and the By-laws of the Company prohibit the issue of any such awards
So long as the Company has an investment adviser agreement providing for
compensation based in part on capital appreciation, in order to conform to the
applicable limits under the 1940 Act relating to stock benefit plans of a BDC.
The Company currently maintains an investment adviser agreement with American
Development & Investment Advisers, LLC containing such a compensation
arrangement.
COMPENSATORY STOCK OPTION PLAN
The Company adopted the 1997 Compensatory Stock Option Plan for
officers, employees, directors and advisors (the CSO Plan). The Company has
reserved a maximum of 1,500,000 Common Shares to be issued upon the exercise of
options granted under the CSO Plan. The CSO Plan will not qualify as an
incentive stock option plan under Section 422 of the Internal Revenue Code of
1986, as amended. Options are granted under the CSO Plan at exercise prices
be determined by the Compensation Committee of the Board of Directors.
With respect to options granted pursuant to the CSO Plan, optionees will not
recognize taxable income upon the grant of options granted at or in excess of
fair market value. However, optionees will realize income at the time of
exercising an option to the extent the market price of the common stock at that
time exceeds the option exercise price, and the Company must recognize a
compensation expense in an amount equal to any taxable income realized by an
optionee as a result of exercising the option. The CSO Plan will is
administered by the Compensation Committee of the Board of Directors. No
options have been granted or currently are anticipated to be granted under the
CSO Plan and the By-laws of the Company prohibit the issue of any such awards
so long as the Company has an investment adviser agreement providing for
compensation based in part on capital appreciation, in order to conform to the
applicable limits under the 1940 Act relating to stock benefit plans of a BDC.
The Company currently maintains an investment adviser agreement with United
EcoEnergy Advisors, LLC containing such a compensation arrangement.
COMPENSATION OF DIRECTORS
The Company has no standard arrangements in place or currently
contemplated to compensate the Company directors for their service as directors
or as members of any committee of directors. Any compensation to directors
will be determined and approved by the Company Compensation Committee.
EMPLOYMENT CONTRACTS
No person has entered into any employment or similar contract with the
Company, other than the consulting agreement already discussed with CF
Consulting, LLC. It is anticipated that the Company may enter into employment
or similar contracts in connection with its activities as a BDC, and any such
contracts will be approved by the independent Compensation Committee of the
Company.
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
BENEFICIAL OWNERSHIP
The following table sets forth, as of the end of the reporting period
covered by this report, and as of the date of this report, the stock ownership
of each executive officer and director of the Company, of all executive
officers and directors of the Company as a group, and of each person known by
the Company to be a beneficial owner of 5% or more of its common stock. Except
as otherwise noted, each person listed below is the sole beneficial owner of
the shares and has sole investment and voting power as to such shares. No
person listed below has any option, warrant or other right to acquire
additional securities of the Company, except as may be otherwise noted.
The following parties are officers, directors, or known holders of more
than 5% of the issuer?s common stock as of the date of this Offering Circular,
based on 34,710,537 shares of common stock outstanding:
Name and address Position Shares Percent
Kelly T. Hickel(1) CEO, Director -- --
1002 Creek Court
Longmont, CO
Adam Mayblum (2)(4)(7) Director 10,579,150(2) 30.5
50 Andrew Lane
New Rochelle, NY 10804
Alec Hoke Director 20,000 --
721 Carriage Hill Lane
Boca Raton, FL 33486
John Paul DeVito Director 20,000 --
1201 Hardscrabble Road
Chappaqua, NY 10514
Richard P. Rifenburgh Director 20,000 --
2637 E. Atlantic Blvd.
# 133
Pompano Beach, FL 33062
Boris Rubizhevsky Director 20,000 --
10 Blackledge Court
Closter, NJ 07624
Michael R. Weichnik Director 20,000 --
*All directors & officers 11,419,150 32.9
as a group (4 persons)
Enterprise Partners, LLC(4)(7) 6,515,760 18.8
50 Andrew Lane
New Rochelle, NY 10804
Patrick Donelan(3)(4)(7) 10,579,150(3) 30.5
3570 Lakeview Drive
Delray Beach, FL 33445
Roadrunner Capital Group, LLC (4) 940,000 2.7
48 Wall Street, Suite 1100
New York, NY 10005
Leaddog Capital, L.P. (5) 2,100,000 6.0
48 Wall Street, Suite 1100
New York, NY 10005
Albert Wardi (7) 1,500,000 4.3
48 Wall Street, Suite 1100
New York, NY 10005
Chris Messalas (4)(5)(6) 3,100,000 8.9
48 Wall Street, Suite 1100
New York, NY 10005
(1) Mr. Hickel is a principal officer of FSR, Inc., which owns
1,057,000 shares of the common stock, representing 3.0 percent of
the shares outstanding. Mr. Hickel is not an owner or beneficiary
of FSR, Inc., directly or indirectly, and disclaims all beneficial
interest in the shares owned by FSR, Inc.
(2) Adam Mayblum owns or controls a total of 7,321,270 shares of Common
Stock, either directly or as custodian for his minor children, and
also is a 50 percent owner of Enterprise Partners, LLC, which owns
6,515,760 shares of common stock and is therefore considered the
beneficial owner of 3,257,880 common shares held by it. Adam
Mayblum has registered his Financial Industry Regulatory Authority
(?FINRA?) series 7, 24 and 63 licenses with Wilmington Capital
Securities, LLC (?Wilmington?) a broker-dealer whose main office is
located in Garden City, New York.
(3) Patrick Donelan, owns or controls a total of 7,321,270 shares of
Common Stock, either directly or as custodian for his minor
children, and also is a 50 percent owner of Enterprise Partners,
LLC, which owns 6,515,760 shares of common stock and is therefore
considered the beneficial owner of 3,257,880 common shares held by
it.
(4) Adam Mayblum, Patrick Donelan and Enterprise Partners, LLC entered
into an Option Agreement dated December 11, 2007, for the sale of
up to 6,915,760 shares of UEEC Common Stock to Roadrunner Capital
Group, LLC (?Roadrunner?). Chris Messalas is the sole Managing
Member of Roadrunner.
(5) Roadrunner is a New Jersey limited liability company. Chris
Messalas is the sole managing member of Roadrunner and is deemed
to have the right to direct the voting and dispositive control
over the UEEC Common Stock that Roadrunner owns. Mr. Messalas has
registered his FINRA series 7, 24 and 63 licenses with
Wilmington. If Wilmington acts as a placement agent in this
Offering, Wilmington and Mr. Messalas may receive fees based on
the amount of capital they raise in the Offering. Pursuant to an
Option Agreement with Adam Mayblum, Patrick Donelan and
Enterprise Partners, LLC, Roadrunner has the right to purchase up
to an additional 5,915,760 shares of United EcoEnergy Corp. Common
Stock at an exercise price of $.00079 per share, but Roadrunner
is restricted from exercising that portion of the Option, which when
added to the sum ?beneficially owned,? (as such term is defined
under Section 13(d) and Rule 13d-3 of the Securities Exchange
Act of 1934, as amended, (the ?1934 Act?)), by Roadrunner and its
affiliates, would exceed 9.5% of the number of shares of Common
Stock outstanding on the date of exercise, as determined in
accordance with Rule 13d-1(j) of the 1934 Act. The Options if not
exercised, expire at 5:00 p.m. Eastern Time on June 1, 2010.
(6) Leaddog Capital, L.P. is a Delaware limited partnership. Chris
Messalas is the Chief Executive Officer, President and a
Director of Leaddog Capital Partners, Inc. which is the
general partner of Leaddog Capital, L.P., and therefore, Mr.
Messalas is deemed to have the right to direct the voting
and dispositive control over the UEEC Common Stock that
Leaddog Capital, L.P. owns. Adam Mayblum, Patrick Donelan and
Enterprise Partners, LLC entered into an Option Agreement
dated December 11, 2007, for the sale of up to 2,000,000 shares
of UEEC Common Stock to Leaddog Capital L.P. at an exercise
price of $.00079 per share. LeadDog Capital L.P. exercised its
option to purchase all 2,000,000 shares of Common Stock.
(7) Adam Mayblum, Patrick Donelan and Enterprise Partners, LLC have
entered into an Option Agreement dated December 11, 2007, for
the sale of up to 2,500,000 shares of UEEC Common Stock to
Albert Wardi at an exercise price of $.00079 per share. Mr.
Wardi has exercised his Option in part and has received
1,500,000 shares of UEEC Common Stock. Mr. Wardi is a
registered representative and currently holds FINRA Series 7,
24 and 63 licenses that are registered with Carlton Capital,
Inc. Chris Messalas is the Chief Executive Officer, President
and sole Director of The Carlton Companies, Inc., which is the
parent company of Carlton Capital, Inc.
Item 13. Certain Relationships and Related Transactions and Director
Independence.
No officer, director or employee of the Company has received a salary of
$60,000 or more in 2008 or 2007. Management personnel are provided to the
Company under the Administration Agreement, which provides for payments of
$5,000 per month to The Turnaround Group, LLC which provides Kelly T. Hickel as
President and CEO, and payments of $5,000 each to Adam Mayblum and Patrick
Donelan for services as Director of Business Development and Director of
Finance, respectively. CF Consulting, LLC also receive monthly payments of
$6,250 to provide services as CFO and Chief Compliance Manager for the Company,
and has designated Robert Hipple to provide these services. Mr. Hipple is not
an officer, director or employee of the Company. CF Consulting, LLC also has
received payments totaling $7,372 and $5,400, for 2008 and 2007, respectively,
in rent for office space and other services under a sub-lease agreement, at the
rate of $550 per month. There were no other transactions, or series of
transactions, for the years ended December 31, 2008 or 2007, nor are there any
currently proposed transactions, or series of transactions, to which the Company
is a party, in which the amount exceeds $60,000, and in which, to the knowledge
of the Company any director, executive officer, nominee, five percent or greater
shareholder, or any member of the immediate family of any of the foregoing
persons, have or will have any direct or indirect material interest.
The Company has entered into an investment advisory agreement with United
EcoEnergy Advisors, LLC, which is owned equally by Adam Mayblum and Patrick
Donelan and in which William Mackey, our former CEO and President, had a one-
third interest until October, 2007. Under the terms of the Agreement, the
Advisor will provide investment advice and assistance to the Company with
respect to locating, reviewing and investing in suitable portfolio investments
by the Company recommended by the Investment Committee and will assist the
Investment Committee in determining the value of its portfolio investments
from time to time as required for reporting purposes.
The Company has agreed to pay, and the Advisor has agreed to accept, as
compensation for the services to be provided by the Advisor, a base management
fee (Base Management Fee) and an incentive fee (Incentive Fee).
(a) Base Management Fee.
(i) For services rendered during the period from the effective date
of the election under Section 54(a) of the 1940 Act (the Effective Date)
through the end of the reported second full fiscal quarter of the Company
thereafter, the Base Management Fee is payable monthly in advance, and is
calculated at an annual rate of 2.00% of the value of the total assets of the
Company, less the cash proceeds and cash equivalent investments from equity
investors that are not invested in debt or equity securities of portfolio
companies in accordance with the investment objectives of the Company (the
Gross Invested Assets), valued as of the end of each preceding month during
the period.
(ii) For services rendered after the end of the reported second full
fiscal quarter of the Company following the Effective Date, the Base Management
Fee is payable quarterly in arrears, and is calculated at an annual rate of
2.00% of the average value of the total assets of the Company, including
investments made with proceeds of borrowings, less any uninvested cash or cash
equivalents resulting from borrowings (the Gross Assets), valued as of the end
of the two most recently completed calendar quarters, and appropriately
adjusted for any share issuances or repurchases during the current calendar
quarter.
(iii) Base Management Fees payable for any partial month or quarter
will be appropriately prorated.
(b) The Incentive Fee consists of two parts, as follows:
(i) One part will be calculated and payable quarterly in arrears
based on the pre-Incentive Fee net investment income for the immediately
preceding calendar quarter. For this purpose, pre-Incentive Fee net investment
income means interest income, dividend income and any other income (including
any other fees, such as commitment, origination, structuring, diligence,
consulting fees that the Corporation receives from portfolio companies, but
excluding fees for providing managerial assistance) accrued by the Company
during the calendar quarter, minus the operating expenses of the Company for
the quarter (including the Base Management Fee, and any interest expense and
dividends paid on any issued and outstanding preferred stock, but excluding
the Incentive Fee). Pre-Incentive Fee net investment income includes, in the
case of investments with a deferred interest feature (such as original issue
discount, debt instruments with payment-in-kind interest and zero coupon
securities), accrued income that the Company has not yet received in cash and
includes the proportionate share of the portfolio companies net income
allocable to equity holdings that has not been distributed as dividends.
Pre-Incentive Fee net investment income does not include any realized capital
gains, realized capital losses or unrealized capital appreciation or
depreciation. Pre-Incentive Fee net investment income, expressed as a rate of
return on the value of the Corporations net assets at the end of the
immediately preceding calendar quarter, will be compared to a hurdle rate of
1.75% per quarter (7% annualized). The Company will pay the Adviser an
Incentive Fee with respect to the pre-Incentive Fee net investment income in
each calendar quarter as follows: (1) no Incentive Fee in any calendar quarter
in which the pre-Incentive Fee net investment income does not exceed the hurdle
rate; (2) 100% of the pre-Incentive Fee net investment income with respect to
that portion of such pre-Incentive Fee net investment income, if any, that
exceeds the hurdle rate but is less than 2.1875% in any calendar quarter (8.75%
annualized); and (3) 20% of the amount of the pre-Incentive Fee net investment
income, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized).
These calculations will be appropriately pro-rated for any period of less than
three months and adjusted for any share issuances or repurchases during the
current quarter.
(ii) The second part of the Incentive Fee (the Capital Gains Fee)will
be determined and payable in arrears as of the end of each fiscal year (or upon
termination of this Agreement as set forth below), commencing on March 31, 2009,
and will equal 20.0% of the realized capital gains of the Company for the 2008
calendar year, if any, computed net of all realized capital losses and
unrealized capital depreciation at the end of such year; provided that the
Capital Gains Fee determined as of March 31, 2009 will be calculated for a
period of shorter than twelve calendar months to take into account any net
realized capital gains, if any, computed net of all realized capital losses and
unrealized capital depreciation for the period ending March 31, 2009. The amount
of capital gains used to determine the Capital Gains Fee shall be calculated at
the end of each applicable year by subtracting the sum of the Cumulative
Aggregate Realized Capital Losses and Aggregate Unrealized Capital Depreciation
of the Company from the Cumulative Aggregate Realized Capital Gains. If this
number is positive at the end of such year, then the Capital Gains Fee for such
year is equal to 20.0% of such amount, less the aggregate amount of any Capital
Gains Fees paid in all prior years. In the event that the Agreement terminates
as of a date that is not a calendar year end, the termination date is treated
as though it were a calendar year end for purposes of calculating and paying a
Capital Gains Fee.
A copy of the Amended Investment Advisor Agreement with United EcoEnergy
Advisors LLC is attached to the Proxy Statement filed with the SEC on June 19,
2006 as Appendix C
No advisory fees were paid or accrued during the year ended December 31,
2008.
The Company entered into an Administration Agreement with Enterprise
Administration, LLC, an affiliated company, under which Enterprise
Administration, LLC will provide administration services to the Company,
including appropriate officers, consultants, and related administration
expenses, at cost to the Company, in lieu of the Company incurring such costs
directly. Enterprise Administration, LLC thereafter entered into a sub-
administration agreement with The Turnaround Group, LLC pursuant to which Kelly
T. Hickel serves as our CEO, President and a member of our Board of Directors,
calling for monthly consulting payments of $5,000. Enterprise Administration,
LLC also entered into a sub-administration agreement with CF Consulting, LLC,
an unaffiliated party, for the provision of principal financial officer and
corporate counsel consulting services to the Company, for a monthly consulting
fee of $6,250, pursuant to which Robert Hipple serves as our principal
financial officer, corporate counsel and chief compliance officer. Mr. Hipple
is not an officer director or employee of the Company. In addition, Enterprise
Partners, LLC signed a sub-administration agreement with Tower I Consultants,
LLC under which Tower I provides representatives to serve as, Director of
Business Development, Director of Corporate Finance and Director of Mergers,
Acquisitions & Integration, for a total monthly consulting fee of $15,000.
Tower I Consultants, LLC is owned equally by Adam Mayblum and Patrick Donelan,
who are also more than 10 percent shareholders of the Company, and also are the
owners of Enterprise Administration, LLC and United EcoEnergy Advisors, LLC, our
investment adviser. Mr. Mayblum and Mr. Donelan serve as representatives of
Tower I Consultants under the sub-administration agreement between Enterprise
Administration and Tower I Consultants, and are entitled to receive $5,000 each
as consulting services under that sub-administration agreement.
Item 14. Principal Accounting Fees and Services.
AUDIT FEES
The aggregate fees billed for each of the fiscal years ended December 31,
2008 and 2007 for professional services rendered by our principal accountant
for the audit of the registrant's annual financial statements and review of the
financial statements included in the registrant's previously filed Forms 10-Q
or services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal years, were
$10,749 and $11,082, respectively.
AUDIT RELATED FEES
None
TAX FEES
None
ALL OTHER FEES
None
PRE-APPROVAL POLICIES AND PROCEDURES
The Company Board of Director policy is to pre-approve all audit and
permissible non-audit services to be provided by the independent registered
public accounting firm. These services may include audit services, audit-
related services, tax services and other services. Pre-approval is generally
provided for up top one year and any pre-approval is detailed as to the
particular service or category of services and is generally subject to a
specific budget. The independent registered public accounting firm and
management are required to report periodically to the Audit Committee of the
Board of Directors regarding the extent of services provided by the
independent registered public accounting firm in accordance with this pre-
approval, and the fees for the services performed to date. The Audit Committee
of the Board of Directors may also pre-approve particular services in a case-
by-case basis. For all periods after the Company election to be treated as a
BDC, all of these functions are undertaken by the independent Audit Committee.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
The following exhibits are filed with this report, except those
indicated as having previously been filed with the Securities and Exchange
Commission and are incorporated by reference to another report, registration
statement or form. As to any shareholder of record requesting a copy of this
report, the Company will furnish any exhibit indicated in the list below as
filed with this report upon payment to the Company of its expenses in
furnishing the information. Any references to the "the Company" means
United EcoEnergy Corp. and its predecessor by name change, MSN Eagle Equity
Group III, Inc.
Reference
1A.1 Amended Designation of Preferences for Series A Convertible
Preferred Stock........................................................ 1
3.1 Certificate of Incorporation of the Company as filed with the
Nevada Secretary of State on February 28, 1997 ........................ 2
3.4 Bylaws of the Company ................................................. 3
4.1 Specimen common stock certificate...................................... 2
10.1 1997 Compensatory Stock Option Plan of the Company..................... 2
10.2 1997 Employee Stock Compensation Plan of the Company................... 2
31 Certification of the Chief Executive and Financial Officer filed
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.............. 4
32 Certification of the Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 ...................... 4
Reference
1 Filed as an exhibit to the Proxy Statement dated July 21, 2006
2 Filed as an exhibit to the Registration Statement on Form 10SB-12G (File
No. 0-27781) of the Registrant and incorporated by reference.
3 Filed as an exhibit to the annual report filed on Form 10-K with the SEC
on March 14, 2007 for the year ended December 31, 2006.
4 Filed herewith as an exhibit.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm............ F-1
Balance Sheets as of December 31, 2008 and 2007.................... F-2
Statements of Operations for the years ended December 31, 2008
and 2007....................................................... F-3
Statements of Changes in Stockholders' Equity (Deficit) for the
Years ended December 31, 2008 and 2007......................... F-4
Statements of Cash Flows for the years ended December 31, 2008 and
2007........................................................... F-5
Notes to Financial Statements ..................................... F-6
FINANCIAL INFORMATION
Item 1. Financial Statements.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of United EcoEnergy Corp.
We have audited the accompanying balance sheets of United EcoEnergy Corp. as
of December 31, 2008 and 2007, and the related statements of operations,
changes in stockholders? equity (deficit), and cash flows for the years then
ended. These financial statements are the responsibility of the company?s
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The
company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
company?s internal control over financial reporting. Accordingly, we express
no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of United EcoEnergy Corp.
as of December 31, 2008 and 2007, and the results of its operations and its
cash flows for the years 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 8 to the
financial statements, the Company has suffered recurring operating losses
which raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Berman Hopkins Wright & LaHam, CPAs and Associates, LLP
April 11, 2009
Winter Park, Florida
UNITED ECOENERGY CORP.
BALANCE SHEETS
December 31, December 31,
2008 2007
--------------- -----------------
Assets:
Cash and cash equivalents $ 383 $ 31
Due from affiliate 3,550 20,800
Rent deposit - 972
Accrued interest 8,190 -
----------- ------------
Total Current Assets 12,123 21,803
Other Assets:
Investments in Portfolio Companies 250,000 -
----------- ------------
Total Assets $ 262,123 21,803
=========== ============
Liabilities and Stockholders?
Equity (Deficit)
Accounts payable $ 25,698 $ 37,826
Due to affiliate 175,781 187,500
Accrued interest 13,433 5,467
Short term loans 43,865 80,000
---------- ------------
Total Short term Liabilities 258,777 310,793
Long term Liabilities: - -
---------- ------------
Total Liabilities 258,777 310,793
----------- ------------
Commitments and contingencies
Stockholders? Equity (Deficit):
Common stock, par value $0.001
authorized 150,000,000 shares,
issued 34,710,537 shares at
December 31, 2008 and 28,781,639
Shares at December 31, 2007 34,710 28,782
Convertible preferred stock, par value
$0.001, authorized 1,000,000 shares,
issued 0 and 1,000,000 shares at
December 31, 2008 and 2007,
respectively - 1,000
Additional paid-in capital 690,839 126,742
Accumulated deficit (722,203) (445,514)
----------- ------------
Total Stockholder?s (Deficit): 3,346 (288,990)
----------- ------------
Total Liabilities and
Stockholders? Equity (Deficit): $ 262,123 $ 21,803
========== ===========
Net Asset value per common share $ (0.00010) $ (0.01004)
The accompanying notes are an integral part of these financial statements.
UNITED ECOENERGY CORP.
SCHEDULE OF INVESTMENTS
December 31, 2008
Portfolio Industry Amount Cost Fair % of
Investments or Number Value Net assets
- ------------------- --------- ----------- -------- --------- -----------
City 24/7, LLC Internet 2 notes $250,000 $258,190 -
-------- --------- -----------
Total $250,000 $258,190 -
======== ========= ===========
The accompanying notes are an integral part of these financial statements.
UNITED ECOENERGY CORP.
STATEMENTS OF OPERATIONS
For the years ended December 31,
2008 2007
---------- ----------
Investment income:
Interest income $ 8,190 $ -
Dividend income - -
Other income - -
---------- ----------
Total income 8,190 -
Operating expenses:
Investment advisory fees
Base fee - -
Incentive fee - -
Capital gains fee - -
---------- ----------
Total investment
advisory fees - -
General & administrative:
Consulting expenses 166,896 202,500
Rent expense 7,372 5,400
Professional fees 25,749 11,082
Transfer agent 2,450 1,644
Offering expenses 62,738 -
Other expenses 19,674 7,639
---------- ----------
Total operating costs 284,879 228,265
---------- ----------
Net investment loss (276,689) (228,265)
---------- ----------
Net realized income from
disposal of investments - -
Net unrealized appreciation
in investments - -
---------- ----------
Net decrease in stockholders?
equity resulting from
operations $(276,689) $ (228,265)
=========== ===========
Basic and diluted net decrease
in stockholders? equity per
common share resulting from
operations $ (0.0082) $ (0.0079)
=========== ==========
Weighted number of common shares
outstanding-basic 33,660,768 28,781,639
============= ===========
Weighted number of common shares
outstanding-diluted 33,660,768 41,781,639
============= ===========
The accompanying notes are an integral part of these financial statements.
UNITED ECOENERGY CORP.
STATEMENT OF CHANGES IN STOCKHOLDERS? EQUITY (DEFICIT)
FOR THE YEARS ENDED
DECEMBER 31, 2008 AND 2007
Additional
Shares Par Value Paid-in Accumulated
Common Preferred Common Preferred Capital Deficit Total
--------- --------- --------- --------- -------- -------- ------
- --
<c>
Balance at
December 31, 2006 28,781,639 1,000,000 $ 28,782 $ 1,000 $126,742 $(217,249) $
(60,725)
========== ========= ========= ======= ========= =========
========
Net loss - - - - - (228,265)
(228,265)
---------- --------- ---------- ------- --------- --------- -----
- ---
Balance at
December 31, 2007 28,781,639 1,000,000 $ 28,782 $ 1,000 $126,742 $(445,514)
$(288,990)
---------- --------- ---------- ------- --------- --------- -----
- ---
Conversion of
preferred stock 4,000,000(1,000,000) 4,000 (1,000) (3,000) -
- -
Shares issued for
Cash 1,928,898 - 1,928 - 567,097 -
569,025
Net loss - - - - - (276,689)
(276,689)
---------- --------- ---------- ------- --------- --------- -----
- ---
Balance at
December 31, 2008 34,710,537 - $ 34,710 $ - $690,839 $(722,203) $
3,346
======= ======= ======== ===== ====== ======= ======
UNITED ECOENERGY CORP.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31, 2008 and 2007
For the years ended December 31,
2008 2007
----------------- ----------------
Cash flows from operating activities:
Net decrease in stockholders? equity
from operations $ (276,689) $ (228,265)
Adjustments to reconcile net decrease
in stockholders? equity from
operations to net cash used
by operating activities:
Accrued interest due (8,190) -
Decrease in accounts payable (12,128) (35,160)
Due to affiliate (11,719) 97,500
Deposits 972 -
Due from affiliate 17,250 (14,000)
Accrued interest 7,966 5,467
Short term loans (250,000) -
----------- ----------
Net cash used by operating activities (532,538) (104,138)
----------- ----------
Cash flow from financing activities:
Net proceeds from issuance of common
stock 569,025 -
Net proceeds from loans 25,000 80,000
Payment of loans (61,135) -
----------- ----------
Net cash provided by financing
activities 532,890 80,000
----------- ----------
Net increase (decrease)in cash 352 (24,138)
Cash, beginning of period 31 24,169
----------- ---------
Cash, end of period $ 383 $ 31
=========== ==========
The accompanying notes are an integral part of these financial statements.
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 and 2007
Note 1. Organization and Financial Statement Presentation
United EcoEnergy Corp. (United EcoEnergy or Company), a Nevada corporation,
was organized on February 28, 1997 and is a closed-end investment company that
filed an election to be treated as a business development company (BDC) under
the Investment Company Act of 1940, (the 1940 Act) in February 2006. Prior to
the election to be treated as a BDC, the Company had been a development stage
company and had not engaged in any operating business activity. As a result of
the election to be treated as a BDC under the 1940 Act and the commencement of
its operations as a BDC, the Company was no longer a shell company and filed
the necessary information regarding the change of its status in its Form 10-K
report for the year ended December 31, 2005.
As a BDC, the company is subject to the filing requirements of the Securities
Exchange Act of 1934 and has elected to be subject to Sections 55 to 65 of
the 1940 Act, which apply only to BDCs. The Company is not a registered
investment company under the 1940 Act, however, and is not required to file
the semi-annual and annual reports required to be filed by registered
investment companies under Section 30 of the 1940 Act. As a BDC, the
Company also is not eligible to file its periodic reports under the 1934 Act
as a small business issuer, and therefore files its periodic reports on
applicable Forms 10-Q and 10-K, rather than Forms 10-KSB or 10-QSB. As a BDC,
the Company also is subject to the normal financial reporting requirements of
Regulation S-X issued by the SEC, but is not subject to Section 6 of
Regulation S-X, which provides specific rules for financial reporting of
registered investment companies.
The original focus of the Company was primarily on investments in alternative
energy companies, including bio-fuel companies. Changes in the alternative
energy market and the inability to locate or close on suitable portfolio
investments in this market has lead the Company to re-think its market focus,
a process which is on-going. At December 31, 2008, the Company had no net
assets invested in alternative energy companies and $250,000 in short term
secured loans to other portfolio companies.
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for
financial information and the instructions to Form 10-K, including Regulation
S-X. As a BDC, and therefore as a non-registered investment company, the
Company is subject to the normal financial reporting rules of Regulation S-X,
as adopted by the SEC, in accordance with Regulation S-X 5.01. It is
specifically not subject to Section 6 of Regulation S-X, governing the
financial reporting of registered investment companies. The accompanying
financial reports have been prepared in accordance with the requirements of
Regulation S-X, as explained and interpreted in the Audit and Accounting Guide
for Investment Companies of the American Institute of Certified Public
Accountants (May 1, 2008)(the Audit Guide).
A total of 1,928,898 common shares were issued during the year ending December
31, 2008 for total net proceeds, after offering expenses, of $497,522.
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 and 2007
Note 2. Significant Accounting Policies
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles (GAAP) requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reported period. Changes in the economic environment,
financial markets and any other parameters used in determining these
estimates could cause actual results to differ.
The following are significant accounting policies consistently applied by the
Company and are based on Chapter 7 of the Audit Guide, as modified by
Appendix A thereof:
Investments:
(a) Security transactions are recorded on a trade-date basis.
(b) Valuation:
(1) Investments for which market quotations are readily available are valued
at such market quotations.
(2) Short-term investments which mature in 60 days or less, such as U.S.
Treasury bills, are valued at amortized cost, which approximates market value.
The amortized cost method involves valuing a security at its cost on the date
of purchase and thereafter assuming a constant amortization to maturity of the
difference between the principal amount due at maturity and cost. Short-term
securities which mature in more than 60 days are valued at current market
quotations by an independent pricing service or at the mean between the bid
and ask prices obtained from at least two brokers or dealers (if available, or
otherwise by a principal market maker or a primary market dealer). Investments
in money market mutual funds are valued at their net asset value as of the
close of business on the day of valuation.
(3) It is expected that most of the investments in the Company?s portfolio
will not have readily available market values. Debt and equity securities
whose market prices are not readily available are valued at fair value, with
the assistance of an independent valuation service, using a valuation policy
and a consistently applied valuation process which is under the
direction of our board of directors.
The factors that may be taken into account in fairly valuing investments
include, as relevant, the portfolio company ability to make payments, its
estimated earnings and projected discounted cash flows, the nature and
realizable value of any collateral, the financial environment in which the
portfolio company operates, comparisons to securities of similar publicly
traded companies and other relevant factors. Due to the inherent uncertainty
of determining the fair value of investments that do not have a readily
available market value, the fair value of these investments may differ
significantly from the values that would have been used had a ready market
existed for such investments, and any such differences could be material.
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 and 2007
Note 2. Significant Accounting Policies (continued)
As part of the fair valuation process, the Audit Committee of the Company
will review the preliminary evaluations prepared by the Investment Advisor
engaged by the Board of Directors, as well as managements valuation
recommendations and the recommendations of the Investment Committee.
Management and the Investment Advisor will respond to the preliminary
evaluation to reflect comments provided by the Audit Committee. The Audit
Committee will review the final valuation report and managements valuation
recommendations and make a recommendation to the Board of Directors based
on its analysis of the methodologies employed and the various valuation
factors as well as factors that the Investment Advisor and management may
not have included in their evaluation processes. The Board of Directors
then will evaluate the Audit Committee recommendations and undertake a
similar analysis to determine the fair value of each investment in
the portfolio in good faith.
(c) Realized gains or losses on the sale of investments are calculated using
the specific identification method.
(d) Interest income, adjusted for amortization of premium and accretion of
discount, is recorded on an accrual basis.
(e) Dividend income is recorded on the ex-dividend date.
(f) Loan origination, facility, commitment, consent and other advance fees
received by us on loan agreements or other investments are accreted into
income over the term of the loan.
Federal and State Income Taxes:
The Company has not elected to be treated as, and is not, a regulated
investment company and does not presently intend to comply with the
requirements of the Internal Revenue Code of 1986 (the Code), applicable
to regulated investment companies. A regulated investment company is
required to distribute at least 90% of its investment company taxable
income to shareholders, which the Company does not expect to do for the
foreseeable future. Therefore, the Company must make appropriate provision
for income taxes in accordance with SFAS 109, Accounting for Income Taxes,
using the liability method, which requires the recognition of deferred assets
and liabilities for the expected future tax consequences of temporary
differences between carry amounts and tax basis of assets and
liabilities. At December 31, 2008, the Company has approximately $722,000
of net operating loss carry-forwards available to affect future taxable
income and has established a valuation allowance equal to the tax benefit of
the net operating loss carry-forwards as realization of the asset is not
assured. The net operating loss carry-forwards may be limited under the
change of control provisions of the Internal revenue Code, Section 382.
The Company applies the provisions of FASB, Interpretation No. 48, or FIN 48,
?Accounting for Uncertainty in Income Taxes ? an Interpretation of FASB
Statement 109.? FIN 48 prescribes a recognition threshold and a measurement
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 and 2007
Note 2. Significant Accounting Policies (continued)
attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more likely than not to be sustained
upon examination by taxing authorities. The amount recognized is measured as
the largest amount of benefit that has a greater than 50% likelihood of being
realized upon ultimate settlement.
When applicable, the Company will include interest and penalties related to
uncertain tax positions in income tax expense.
Dividends and Distributions:
Dividends and distributions to common stockholders will be recorded on the
ex-dividend date. The amount, if any, to be paid as a dividend will be
approved by the board of directors each quarter and will be generally based
upon management?s estimates of our earnings for the quarter and our investment
needs. Net realized capital gains, if any, will be reviewed at least
annually as part of any distribution determination.
Cash and Equivalents:
For purposes of the statement of cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents.
Concentrations of Credit Risk:
Financial instruments which potentially expose the Company to concentrations of
credit risk consist principally of cash which is insured by the FDIC up to
balances of $250,000. The Company maintains its cash in a bank deposit account
which, at times, may exceed federally insured limits. At December 31, 2008, the
Company deposits exceeded FDIC insured limits by $2,674,405. The Company has not
experienced any losses in such accounts and believes it is not exposed to any
significant credit risk on cash and cash equivalents.
Offering Costs:
Offering costs are expensed as incurred.
Consolidation:
As an investment company, the Company will only consolidate subsidiaries which
are also investment companies. At December 31, 2008, the Company did not have
any consolidated subsidiaries.
Financial instruments:
The fair values of all financial instruments approximate their carrying values.
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 and 2007
Note 2. Significant Accounting Policies (continued)
Recent Accounting Pronouncements
In September 2006, the FASB issued FAS No. 157, Fair Value Measurements, which
establishes a framework for reporting fair value and expands disclosure about
fair value measurements. FAS 157 was effective for our 2008 fiscal year. The
adoption of this statement did not have a material effect on the Company's
financial statements.
In February 2007, the FASB issued FAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities Including an Amendment of FASB
Statement No. 115. FAS 159 permits entities to choose to measure many financial
instruments and certain other items at fair value. FAS 159 was effective for
our 2008 fiscal year. The adoption of this statement did not have a material
effect on the Company's financial statements.
In December, 2007, the FASB issued FAS No. 141(R), Business Combinations,
and SFAS No. 160, Accounting and Reporting of Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51. FAS No. 141(R)
is required to be adopted concurrently with SFAS No. 160. These standards are
effective for fiscal years beginning after December 15, 2008 and will apply
prospectively to business combinations completed on or after that date.
Early adoption is prohibited. FAS 141(R) requires changes in accounting for
acquisitions and FAS 160 will change the accounting for minority interests.
The adoption of this statement is not expected to have a material effect on the
Company's financial statements.
In May 2008, the FASB issued FAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles". FAS No. 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States. It is effective 60 days following the SEC's approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, "The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles". The adoption of this statement is not expected to have a material
effect on the Company's financial statements.
Note 3. Portfolio Investments
As required by the 1940 Act, we will classify our investments by level of
control. As defined in the 1940 Act, control investments are those where there
is the ability or power to exercise a controlling influence over the management
or policies of a company. Control is generally viewed to exist when a
company or individual owns 25% or more of the voting securities of an investee
company. Affiliated investments and affiliated companies are defined by a
lesser degree of influence and are deemed to exist through ownership of an
amount greater than 5% but less than 25% of the voting securities of the
investee company. The Company currently has no controlled or affiliated
investments.
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 and 2007
Note 3. Portfolio Investments(continued)
The Company entered into an investment agreement to acquire a 22.5 percent
ownership interest in City 24/7 LLC for $750,000. City 24/7 has partnered with a
Fortune 100 telecommunications company to launch a new information system built
to reinvigorate the existing payphone structure. The completely interactive
"Super Booth" will broadcast locally relevant information and advertising in
targeted locations across the country, starting in New York City. While the due
diligence process continued, the Company advanced a loan of $100,000 to City
24/2, LLC in September 2008 and another $150,000 in October, 2008. Both loans
were due in December, 2008, bear interest at 12 percent per annum, and are
secured by the assets of City 24/7, LLC. In November, 2008, the loans were
extended to March 31, 2009. As a result of the significant downturn in the U.S.
economy, which has affected the business model of City 24/7, LLC, the Company
has determined not to complete the proposed portfolio investment, and has given
notice to City 24/7 LLC that the two loans, totaling $250,000, plus accrued
interest, are now due and payable. The loans are secured by a pledge of all of
the assets of City 24/7, LLC. Accrued interest receivable on the loans totaled
$8,190 at December 31, 2008.
Note 4. Related Party Agreements and Transactions.
Investment Advisory Agreement
The Company has entered into an Investment Advisory Agreement with United
EcoEnergy Advisors, LLC (the Investment Advisor) under which the Investment
Advisor, subject to the overall supervision of the board of directors of the
Company, will provide investment advisory services to the Company. United
EcoEnergy Advisors, LLC is owned equally by Patrick Donelan and Adam Mayblum.
Mr. Mayblum and Mr. Donelan are also the equal owners of Enterprise Partners,
LLC, which holds 6,515,760 shares of our common stock, representing
approximately 18.8 percent of the common shares outstanding. Mr. Mayblum also
serves as a director of the Company.
For providing these services the Investment Advisor will receive a fee from the
Company, consisting of two components--a base management fee and an incentive
fee. The base management fee will be calculated at an annual rate of 2.00
percent on the gross assets of the Company (including amounts borrowed). The
base management fee is payable quarterly in arrears based on the average value
of the Company?s gross assets at the end of the two most recently completed
calendar quarters and appropriately adjusted for any share issuances or
repurchases during the current calendar quarter. Base management fees for any
partial month or quarter will be appropriately pro-rated.
The Incentive Fee consists of two parts, as follows:
(i) One part will be calculated and payable quarterly in arrears
based on the pre-Incentive Fee net investment income for the immediately
preceding calendar quarter. For this purpose, pre-Incentive Fee net
investment income means interest income, dividend income and any other income
(including any other fees, such as commitment, origination, structuring,
diligence, consulting fees that the Corporation receives from portfolio
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 and 2007
Note 4. Related Party Agreements and Transactions (Continued)
companies, but excluding fees for providing managerial assistance) accrued by
the Company during the calendar quarter, minus the operating expenses of the
Company for the quarter (including the Base Management Fee, and any interest
expense and dividends paid on any issued and outstanding preferred stock,
but excluding the Incentive Fee). Pre-Incentive Fee net investment income
includes, in the case of investments with a deferred interest feature (such
as original issue discount, debt instruments with payment-in-kind interest
and zero coupon securities), accrued income that the Company has not yet
received in cash and includes the proportionate share of the portfolio
companies net income allocable to equity holdings that has not been
distributed as dividends. Pre-Incentive Fee net investment income does not
include any realized capital gains, realized capital losses or unrealized
capital appreciation or depreciation. Pre-Incentive Fee net investment
income, expressed as a rate of return on the value of the Corporations net
assets at the end of the immediately preceding calendar quarter, will
be compared to a hurdle rate of 1.75% per quarter (7% annualized). The
Company will pay the Adviser an Incentive Fee with respect to the pre-
Incentive Fee net investment income in each calendar quarter as follows:
(1) no Incentive Fee in any calendar quarter in which the pre-Incentive Fee
net investment income does not exceed the hurdle rate; (2) 100% of the pre-
Incentive Fee net investment income with respect to that portion of such pre-
Incentive Fee net investment income, if any, that exceeds the hurdle rate but
is less than 2.1875% in any calendar quarter (8.75% annualized); and (3) 20%
of the amount of the pre-Incentive Fee net investment income, if any, that
exceeds 2.1875% in any calendar quarter (8.75% annualized). These calculations
will be appropriately pro-rated for any period of less than three months and
adjusted for any share issuances or repurchases during the current quarter.
(ii) The second part of the Incentive Fee (the Capital Gains Fee)
will be determined and payable in arrears as of the end of each fiscal year
(or upon termination of this Agreement as set forth below), commencing on
March 31, 2009, and will equal 20.0% of the realized capital gains of the
Company for the 2008 calendar year, if any, computed net of all realized
capital losses and unrealized capital depreciation at the end of such year;
provided that the Capital Gains Fee determined as of March 31, 2009 will be
calculated for a period of shorter than twelve calendar months to take into
account any net realized capital gains, if any, computed net of all realized
capital losses and unrealized capital depreciation for the period ending
March 31, 2009. The amount of capital gains used to determine the Capital
Gains Fee shall be calculated at the end of each applicable year by
subtracting the sum of the Cumulative Aggregate Realized Capital Losses and
Aggregate Unrealized Capital Depreciation of the Company from the Cumulative
Aggregate Realized Capital Gains. If this number is positive at the end of
such year, then the Capital Gains Fee for such year is equal to 20.0% of such
amount, less the aggregate amount of any Capital Gains Fees paid in all prior
years. In the event that the Agreement terminates as of a date that is not a
calendar year end, the termination date is treated as though it were a
calendar year end for purposes of calculating and paying a Capital Gains Fee.
No investment advisory fees have been accrued for the year ended December 31,
2008.
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 and 2007
Note 4. Related Party Agreements and Transactions (Continued)
On April 1, 2006, the Company entered into a Consulting Agreement with
William Mackey, our former President and CEO, to cover his services until
suchtime as the Company completed its first portfolio investment in the
alternative energy market and appoints a permanent CEO. Under the terms
of the Consulting Agreement, Mr. Mackey was entitled to an initial
signing amount of $22,500 and thereafter to a monthly consulting fee of
$7,500, payable on the 15th of each month. Enterprise Partners has paid
the accrued amounts due to Mr. Mackey through July, 2007, and the total
accrued balance at September 30, 2007 of $142,500 is reflected as accrued
amounts due to affiliate. The amounts due are non-interest bearing and
payable on demand. In October, 2007, Mr. Mackey resigned as Chairman and
CEO of the Company and his consulting agreement was terminated. A
balance of $22,500 is due to Mr. Mackey under his Consulting Agreement
through October, 2007, and Mr. Mackey has agreed to defer payment of the
amount due until the Company has received an additional $500,000 in
capital contributions. The $22,500 due to Mr. Mackey is included in
accounts payable.
The total balance of $175,781 due to affiliates at December 31, 2008
Represents $142,500 paid by Enterprise Partners, LLC to Mr. Mackey and $57,500
paid for consulting services to the Company, less payments of $24,219 made by
the Company to Enterprise Partners during 2008. The amounts due affiliate are
non-interest bearing and due on demand.
Amounts due from affiliate totaling $3,550 at December 31, 2008
represent short-term, non-interest bearing advances to an affiliated
company.
Managerial Assistance
As a business development company, we will offer, and provide upon request,
managerial assistance to certain of our portfolio companies. This assistance
could involve monitoring the operations of our portfolio companies,
participating in board and management meetings, consulting with and advising
officers of portfolio companies and providing other organizational and
financial guidance. The Company expects to receive fee income for providing
these services.
Note 5. Stockholders? Equity (Deficit).
The following table reflects the changes in the stockholders? equity
(deficit) of the Company from December 31, 2006 to December 31, 2008:
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 and 2007
Note 5. Stockholders? Equity (Deficit) (Continued)
<Table>
<Caption> Additional
Shares Par Value Paid-in Accumulated
Common Preferred Common Preferred Capital Deficit Total
--------- --------- --------- --------- -------- -------- ------
- --
<c>
Balance 12/31/2006 28,781,639 1,000,000 $ 28,782 $ 1,000 $126,742 $(217,249) $
(60,725)
========== ========= ========= ======= ========= =========
========
Net loss - - - - - (228,265)
(228,265)
---------- --------- ---------- ------- --------- --------- -----
- ---
Balance 12/312007 28,781,639 1,000,000 $ 28,782 $ 1,000 $126,742 $(445,514)
$(288,990)
========== ========= ========= ======= ========= =========
========
Conversion of
preferred stock 4,000,000(1,000,000) 4,000 (1,000) (3,000) -
- -
Shares issued for
Cash 1,928,898 - 1,928 - 567,097 -
569,025
Net loss - - - - - (276,689)
(276,689)
---------- --------- ---------- ------- --------- --------- -----
- ---
Balance at
December 31, 2008 34,710,537 - $ 34,710 $ - $690,839 $(722,203) $
3,346
======= ======= ======== ===== ====== ======= ======
</Table>
Note 6 FINANCIAL HIGHLIGHTS
Financial Highlights
The following is a schedule of financial highlights for the years ended
December 31, 2008 and December 31, 2007:
CHANGES IN NET ASSET VALUE
For the For the
twelve months twelve months
ended ended
December 31, 2008 December 31, 2007
---------------- -----------------
Net asset value at
beginning of period (1) $ (0.01004) $ (0.00211)
Proceeds from common stock 0.01811 -
Net investment income (0.00797) (0.00793)
Net unrealized appreciation - -
------------- --------------
Net asset value, end of period (2) $ (0.00010) $ (0.01004)
Financial highlights as of December 31, 2008 and December 31, 2007 are
based on 34,710,537 and 28,781,639 common shares outstanding, respectively.
(2) Total return based on net asset value is based upon the change in net
asset value per share between the opening and ending net asset values per
share in each period. The total return is not annualized.
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 and 2007
Note 7. OTHER MATTERS
On February 1, 2007, the Company borrowed the sum of $50,000 from an existing
minority shareholder for a six month term with interest due at maturity at the
rate of 9 percent per year. The Company also issued a warrant to purchase
12,000 shares of common stock at an exercise price of $0.40 per share for a
period of two years. Principal payments totaling $35,000 were made on the note
during 2008. The note, which has a current balance of $15,000, was subsequently
renewed for additional six month terms and is due August 1, 2009.
On March 27, 2007, the Company borrowed the sum of $30,000, $15,000 each from
two unrelated parties for a six month term with interest due at maturity at the
rate of 9 percent per year. The Company also issued a warrant to purchase 3,000
shares of common stock to each of the parties at an exercise price of $0.40 per
share for a period of two years. Principal payments were made on these notes in
the total amount of $26,135 during 2008. The notes, with a current total
principal balance of $3,865, were subsequently renewed for additional six month
terms and are due August 1, 2009.
In February, 2008, the Company borrowed the sum of $25,000 from Leaddog Capital,
LP for a for a twelve month term with interest due at maturity at the rate of 10
percent per annum. The note was extended for an additional six month term and
is due August 15, 2009.
A total of $13,433 in interest has been accrued on the above loans as of
December 31, 2008.
The borrowed funds were used as general working capital for the Company.
Note 8. Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company?s financial position
and operating results raise substantial doubt about the Company?s ability
to continue as a going concern, as reflected by the accumulated deficit of
$722,203 and recurring net losses. The ability of the Company to continue as a
going concern is dependent upon acquiring suitable portfolio investments and
obtaining additional capital and financing. Management?s plan in this regard
is to acquire portfolio investment operating entities and secure financing
and operating capital. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.
SIGNATURES
In accordance with section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this Report on Form 10-K to be signed on its behalf
by the undersigned, thereto duly authorized individual.
Date: April 14, 2009
United EcoEnergy Corp.
/s/ Kelly T. Hickel
By....................................
Kelly T. Hickel
Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Name Title Date
/s/ Kelly T. Hickel Director April 14, 2009
/s/ Adam Mayblum Director April 14, 2009
............................
Adam Mayblum
/s/ Alec Hoke Director April 14, 2009
............................
Alec Hoke
/s/ John Paul DeVito Director April 14, 2009
............................
John Paul DeVito
/s/ Richard P. Rifenburgh Director April 14, 2009
............................
Richard P. Rifenburgh
/s/ Boris Rubizhesky Director April 14, 2009
............................
Boris Rubizhesky
/s/ Michael Wiechnik Director April 14, 2009
............................
Michael Wiechnik
ii
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