UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2013
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 000-54222
MAKISM 3D CORP.
(Exact name of registrant as specified in its charter)
Nevada 42-1771506
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
26 Broad Street
Cambridge, United Kingdom, CB23 6HJ
(Address of Principal Executive Offices)
011-44-01954-715030
(Registrant's telephone number)
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 whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files) [X] Yes [ ] No
Indicate by checkmark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [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]
Class Outstanding at November 14, 2013
----- --------------------------------
Common stock, par value $.0001 60,000,000
MAKISM 3D CORP.
TABLE OF CONTENTS
Page
Numbers
-------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Balance Sheets 3
Statements of Operations 4
Statement of Stockholders' Deficit 5
Statements of Cash Flows 6
Notes to Financial Statements 7
Item 2. Management's Discussion & Analysis of Financial Condition
& Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
Item 4. Controls and Procedures 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 1A. Risk Factors 14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Mine Safety Disclosures 21
Item 5. Other Information 21
Item 6. Exhibits 22
SIGNATURES 23
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAKISM 3D CORP.
(formerly Advanced Cellular, Inc.)
(A Development Stage Company)
BALANCE SHEETS
September 30, 2013 June 30, 2013
------------------ -------------
(Unaudited) (Audited)
ASSETS
Current Assets:
Prepaid expense $ 320 $ --
-------- --------
Total current assets 320 --
-------- --------
Total assets $ 320 $ --
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 17,450 $ 10,713
Loans payable - director 28,009 21,343
-------- --------
Total current liabilities 45,459 32,056
-------- --------
Total liabilities 45,459 32,056
-------- --------
Stockholder's Deficit:
Preferred stock, 50,000,000 shares authorized,
par value $0.0001, no shares issued and outstanding -- --
Common stock, 100,000,000 shares authorized,
par value $0.0001, 70,000,000 shares issued and outstanding 7,000 7,000
Additional paid in capital 44,250 44,250
Deficit accumulated during the development stage (96,389) (83,306)
-------- --------
Total stockholders' deficit (45,139) (32,056)
-------- --------
Total liabilities and stockholders' deficit $ 320 $ --
======== ========
3
MAKISM 3D CORP.
(formerly Advanced Cellular, Inc.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
Cumulative
May 4, 2010
Three Months Ended Three Months Ended (Inception) to
September 30, 2013 September 30, 2012 September 30, 2013
------------------ ------------------ ------------------
Revenue $ -- $ -- $ --
------------ ------------ ------------
Expenses:
Organization costs -- -- 662
General and administrative 13,083 4,302 95,727
------------ ------------ ------------
Total expenses 13,083 4,302 96,389
------------ ------------ ------------
Loss before income taxes (13,083) (4,302) (96,389)
Provision for Income Taxes -- -- --
------------ ------------ ------------
Net Loss $ (13,083) $ (4,302) $ (96,389)
============ ============ ============
Basic and Diluted
Loss per Common Share a a
============ ============
Weighted Average number of
Common Shares Outstanding 70,000,000 70,000,000
============ ============
----------
a = Less than ($0.01) per share
4
MAKISM 3D CORP.
(formerly Advanced Cellular, Inc.)
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIT
(unaudited)
Deficit
Accumulated
Common Stock Additional Subscribed During the Total
---------------------- Paid in Stock Development Stockholders'
Shares Amount Capital Not Issued Stage Deficit
------ ------ ------- ---------- ----- -------
INCEPTION MAY 4, 2010 -- $ -- $ -- $ -- $ -- $ --
Common stock issued to
directors for cash
($0.002 per share) 50,000,000 5,000 15,000 -- -- 20,000
Net loss for the period -- -- -- -- (662) (662)
---------- ------- -------- -------- --------- --------
BALANCE JUNE 30, 2010 50,000,000 5,000 15,000 -- (662) 19,338
Net loss for the period -- -- -- -- (1,586) (1,586)
---------- ------- -------- -------- --------- --------
BALANCE SEPTEMBER 30, 2010 50,000,000 5,000 15,000 -- (2,248) 17,752
Net loss for the period -- -- -- -- (1,090) (1,090)
---------- ------- -------- -------- --------- --------
BALANCE DECEMBER 31, 2010 50,000,000 5,000 15,000 -- (3,338) 16,662
Net loss for the period -- -- -- -- (7,218) (7,218)
---------- ------- -------- -------- --------- --------
BALANCE MARCH 31, 2011 50,000,000 5,000 15,000 -- (10,556) 9,444
Common stock subscribed for
cash ($0.01 per share), net
of issuance costs -- -- -- 19,672 -- 19,672
Net loss for the period -- -- -- -- (12,537) (12,537)
---------- ------- -------- -------- --------- --------
BALANCE JUNE 30, 2011 50,000,000 5,000 15,000 19,672 (23,093) 16,579
Issuance of subscribed stock 10,000,000 1,000 18,672 (19,672) -- --
Common stock issued for cash
($0.01 per share), net of
issuance costs 10,000,000 1,000 10,578 -- -- 11,578
Net loss for the period -- -- -- -- (32,333) (32,333)
---------- ------- -------- -------- --------- --------
BALANCE JUNE 30, 2012 70,000,000 7,000 44,250 -- (55,426) (4,176)
Net loss for the period -- -- -- -- (27,880) (27,880)
---------- ------- -------- -------- --------- --------
BALANCE JUNE 30, 2013 70,000,000 7,000 44,250 -- (83,306) (32,056)
Net loss for the period -- -- -- -- (13,083) (13,083)
---------- ------- -------- -------- --------- --------
BALANCE SEPTEMBER 30, 2013 70,000,000 $ 7,000 $ 44,250 $ -- $ (96,389) $(45,139)
========== ======= ======== ======== ========= ========
5
MAKISM 3D CORP.
(formerly Advanced Cellular, Inc.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Period
Three Months Ended From May 4, 2010
---------------------------------------- (Inception) to
Sepember 30, 2013 September 30, 2012 September 30, 2013
----------------- ------------------ ------------------
OPERATING ACTIVITIES
Net loss $(13,083) $ (4,302) $(96,389)
Adjustments To Reconcile Net Loss To Net
Cash Used By Operating Activities
(Increase) decrease in prepaid expenses (320) 1,200 (320)
Increase (decrease) in accounts payable 6,737 1,295 17,450
-------- -------- --------
Net cash used by operating activities (6,666) (1,807) (79,259)
-------- -------- --------
INVESTING ACTIVITIES
Net cash used by investing activities -- -- --
-------- -------- --------
FINANCING ACTIVITIES
Proceeds from (repayment of) loans - director 6,666 -- 28,009
Proceeds from the sale of common stock -- -- 51,250
-------- -------- --------
Net cash provided by financing activities 6,666 -- 79,259
-------- -------- --------
Net Increase (Decrease) in Cash -- (1,807) --
Cash, Beginning of Period -- 4,707 --
-------- -------- --------
Cash, End of Period $ -- $ 2,900 $ --
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ -- $ -- $ --
======== ======== ========
Income taxes $ -- $ -- $ --
======== ======== ========
6
MAKISM 3D CORP.
(formerly Advanced Cellular, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2013
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
The Company was incorporated under the laws of the state of Nevada on May 4,
2010. The Company has limited operations, is considered a development stage
company and has not yet realized any revenues from its planned operations.
Subsequent to our incorporation, we have been in the process of establishing
ourselves as a company that will focus its operations on developing and
commercializing a performance management system that will be used by cellular
network operators. We have named our system AdvancedPM.
NOTE 2. BASIS OF PRESENTATION
The accompanying unaudited condensed interim financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America and the rules and regulations of the United States
Securities and Exchange Commission ("SEC") for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
The financial information as of June 30, 2013 is derived from the audited
financial statements presented in the Company's Form 10-K filed with SEC on
September 30, 2013. The unaudited condensed interim financial statements should
be read in conjunction with the Company's Form 10-K, which contains the audited
financial statements and notes thereto.
Certain information or footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted, pursuant to the
rules and regulations of the SEC for interim financial reporting. Accordingly,
they do not include all the information and footnotes necessary for a
comprehensive presentation of financial position, results of operations, or cash
flows. It is management's opinion, however, that all material adjustments
(consisting of normal recurring adjustments) have been made which are necessary
for a fair financial statement presentation. The interim results for the period
ended September 30, 2013 are not necessarily indicative of results for the full
fiscal year.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
DEVELOPMENT STAGE
As a development stage enterprise, the Company discloses the deficit accumulated
during the development stage and the cumulative statements of operations and
cash flows from inception to the current balance sheet date.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
7
EARNINGS PER SHARE
The basic earnings (loss) per share is calculated by dividing our net income
available to common shareholders by the weighted average number of common shares
during the year. The diluted earnings (loss) per share is calculated by dividing
our net loss attributable to common shareholders by the diluted weighted average
number of shares outstanding during the year. The diluted weighted average
number of shares outstanding is the basic weighted number of shares adjusted for
any potentially dilutive debt or equity.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturity of three
months or less when purchased to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments, consisting of
accounts payable and loans from director approximate their fair value due to the
short-term maturity of such instruments. Unless otherwise noted, it is
management's opinion that the Company is not exposed to significant interest,
currency or credit risks arising from these financial instruments.
INCOME TAXES
Deferred tax assets and liabilities are determined based on the differences
between the financial reporting and tax bases of assets and liabilities using
the enacted tax rates and laws that will be in effect when the differences are
expected to reverse. A valuation allowance is established when necessary to
reduce deferred tax assets to the amounts expected to be realized.
The Company accounts for income taxes under the provisions of Financial
Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")
740, "Accounting for Income Taxes. It prescribes a recognition threshold and
measurement attributes for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. As a result,
the Company has applied a more-likely-than-not recognition threshold for all tax
uncertainties. The guidance only allows the recognition of those tax benefits
that have a greater than 50% likelihood of being sustained upon examination by
the various taxing authorities. The Company is subject to taxation in the United
States. All of the Company's tax years since inception remain subject to
examination by Federal and state jurisdictions. The Company did not identify any
uncertain tax positions.
The Company classifies penalties and interest related to unrecognized tax
benefits as income tax expense in the Statements of Operations. As of September
30, 2013 and 2012, the Company had no accrued interest or penalties.
NOTE 4. INCOME TAXES
The Company uses the liability method , where deferred tax assets and
liabilities are determined based on the expected future tax consequences of
temporary differences between the carrying amounts of assets and liabilities for
financial and income tax reporting purposes. Since inception through September
30, 2013, the Company has incurred net losses and, therefore, has no tax
liability. The net deferred tax asset generated by the loss carry-forward has
been fully reserved. The cumulative net operating loss carry-forward as of
September 30, 2013 is $96,389 and will expire 20 years from the date the losses
were incurred.
As of September 30, 2013, deferred tax assets consisted of the following:
Net operating losses (estimated tax rate 34%) $ 32,772
Less: valuation allowance (32,772)
--------
Net deferred tax asset $ --
========
8
NOTE 5. STOCKHOLDER'S DEFICIT
AUTHORIZED
The Company is authorized to issue 100,000,000 shares of $0.0001 par value
common stock and 50,000,000 shares of preferred stock, par value $0.0001. All
common stock shares have equal voting rights, are non-assessable and have one
vote per share. Voting rights are not cumulative and, therefore, the holders of
more than 50% of the common stock could, if they choose to do so, elect all of
the directors of the Company.
ISSUED AND OUTSTANDING
On May 4, 2010, the Company issued 50,000,000 shares of common stock to its
director for cash consideration of $20,000.
In August 2011, the Company issued 20,000,000 shares of common stock for net
proceeds $31,250, of which $19,672 was received during June 2011 and presented
as subscriptions received not issued on the June 30, 2011 balance sheet.
All amount referenced above consider a 5 new for 1 old stock split dated
February 20, 2013.
NOTE 6. RELATED PARTY TRANSACTIONS
The sole officer and director of the Company is involved in other business
activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interests. The Company has not formulated a policy for the resolution
of such conflicts.
To September 30, 2013, the Company's sole officer and director advanced $28,009
to the Company for administrative expenses. These advances are non-interest
bearing and due on demand.
NOTE 7. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has net losses for the
period from inception (May 4, 2010) to September 30, 2013 of $96,389. This
condition raises substantial doubt about the Company's ability to continue as a
going concern. The Company's continuation as a going concern is dependent on its
ability to meet its obligations, to obtain additional financing as may be
required and ultimately to attain profitability. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Management is planning to raise additional funds through debt or equity
offerings. There is no guarantee that the Company will be successful in these
efforts.
NOTE 8. CONCENTRATIONS OF RISKS
The Company's operations are subject to significant risk and uncertainties
including financial, operational, technological, and regulatory risks including
the potential risk of business failure. See Note 7 regarding going concern
matters.
NOTE 9. PROPERTY
The Company does not own or rent any property. We currently maintain our
corporate office at 17- 5348 Vegas Dr., Las Vegas, NV 89108 USA. This location
is a virtual office that we maintain with EastBiz.com, Inc. which provides us
with a mailing address for communications. This service is provided by
EastBiz.com for $99.00 per year, plus we maintain a reserve that Eastbiz.com
will use for payment of postage. This reserve account will be supplemented as
needed. We may terminate the lease arrangement upon 30-days' written notice to
INC Management. Our executive officer, Mr. Karlo Guray does not work from this
location, but operates from his respective residence in Israel at no charge to
us.
9
NOTE 10. SUBSEQUENT EVENT
On October 29, 2013, we entered into a Securities Purchase Agreement (the
"Purchase Agreement") and consummated a closing of a private placement offering
(the "Offering") with an accredited investor (the "Investor") for the issuance
and sale of 1,000,000 shares of common stock of the Company (the "Offering
Shares") at a purchase price of $0.60 per share, for an aggregate consideration
of $600,000, $350,000 of which was due at the closing of the Offering.
On October 29, 2013, the Company entered into and consummated a voluntary share
exchange transaction with Umicron Ltd., a private limited company organized
under the laws of England and Wales ("Umicron"), and the shareholders of Umicron
pursuant to a Stock Exchange Agreement (the "Exchange Agreement") by and among
the Company, Umicron, and the Selling Shareholders.
In accordance with the terms of Exchange Agreement the Registrant issued
30,000,000 shares of its common stock to the Selling Shareholders in exchange
for 100% of the issued and outstanding capital stock of Umicron. As a result of
the Exchange Transaction, the Selling Shareholders acquired approximately 50.67%
of our issued and outstanding common stock, Umicron became our wholly-owned
subsidiary, and the Registrant acquired the business and operations of Umicron.
In addition, on October 29, 2013, the Company's former officer and director,
surrendered 41,000,000 shares of our common stock for cancellation. As such,
immediately prior to the Exchange Transaction and after giving effect to the
foregoing cancellations and issuances pursuant to the private placement offering
described above, the Registrant had 30,000,000 shares of common stock issued and
outstanding. Immediately after the Exchange Transaction, the Registrant had
60,000,000 shares of common stock issued and outstanding.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q contains forward-looking statements within the meaning
of the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995. Reference is made in particular to the description of our plans and
objectives for future operations, assumptions underlying such plans and
objectives, and other forward-looking statements included in this report. Such
statements may be identified by the use of forward-looking terminology such as
"may," "will," "expect," "believe," "estimate," "anticipate," "intend,"
"continue," or similar terms, variations of such terms or the negative of such
terms. Such statements are based on management's current expectations and are
subject to a number of factors and uncertainties, which could cause actual
results to differ materially from those described in the forward-looking
statements. Such statements address future events and conditions concerning,
among others, capital expenditures, earnings, litigation, regulatory matters,
liquidity and capital resources, and accounting matters. Actual results in each
case could differ materially from those anticipated in such statements by reason
of factors such as future economic conditions, changes in consumer demand,
legislative, regulatory and competitive developments in markets in which we
operate, results of litigation, and other circumstances affecting anticipated
revenues and costs, and the risk factors set forth below and in our Annual
Report on Form 10-K filed on September 30, 2013.
As used in this Form 10-Q, "we," "us," and "our" refer to Makism 3D Corp., which
is also sometimes referred to as the "Company."
YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS
The forward-looking statements made in this report on Form 10-Q relate only to
events or information as of the date on which the statements are made in this
report on Form 10-Q. Except as required by law, we undertake no obligation to
update or revise publicly any forward-looking statements, whether as a result of
new information, future events, or otherwise, after the date on which the
statements are made or to reflect the occurrence of unanticipated events. You
should read this report and the documents that we reference in this report,
including documents referenced by incorporation, completely and with the
understanding that our actual future results may be materially different from
what we expect or hope.
OVERVIEW
We are a development stage company that was incorporated under the laws of the
State of Nevada on May 4, 2010. We were initially established for the purpose of
developing and commercializing a performance management system for use by
cellular operators.
On February 20, 2013, we effected a 5 for 1 forward stock split of all of its
issued and outstanding shares of common stock (the "Stock Split"). The Stock
Split increased the number of our issued and outstanding common stock to
70,000,000 shares.
On October 29, 2013 (the "Closing Date"), we entered into and consummated a
voluntary share exchange transaction with Umicron Ltd., a private limited
company organized under the laws of England and Wales ("Umicron"), and the
shareholders of Umicron ("Selling Shareholders") pursuant to a Stock Exchange
Agreement (the "Exchange Agreement") by and among the Company, Umicron, and the
Selling Shareholders.
In accordance with the terms of Exchange Agreement, on the Closing Date, we
issued 30,000,000 shares of our common stock to the Selling Shareholders in
exchange for 100% of the issued and outstanding capital stock of Umicron (the
"Exchange Transaction"). As a result of the Exchange Transaction, the Selling
Shareholders acquired approximately 50.67% of our issued and outstanding common
stock, Umicron became our wholly-owned subsidiary, and we acquired the business
and operations of Umicron.
Umicron is focused on the development of a low cost professional-grade 3D
printer targeted at the home, professional, and educational markets.
As of the date of this Quarterly Report on Form 10-Q, we have generated no
revenue.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2013 TO THE THREE MONTH ENDED
SEPTEMBER 30, 2012
REVENUES
We are in the research and development phase and currently have no customers or
revenues.
11
OPERATING EXPENSES
During the three months ended September 30, 2013, we incurred operating expenses
of $13,083 as compared to operating expenses of $4,302 for the three months
ended September 30, 2012. The increase is attributable to consulting fees
incurred in anticipation of the Company's acquisition of Umicron Ltd.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $6,666 and $1,807 for the three months
ended September 30, 2013 and 2012, respectively. The increase is attributable to
an increase in the Company's net loss as compared to the previous period.
As of September 30, 2013, we had cash on hand of $0 and negative working capital
of $45,139. Cash used in investing activities was $0 and $0 for the three months
ended September 30, 2013 and 2012, respectively.
Cash provided by financing activities was $6,666 and $0 for the three months
ended September 30, 2013 and 2012, respectively. During the three months ended
September 30, 2013, we received cash from a director.
We believe that our cash on hand will not be sufficient to meet our anticipated
cash requirements through the next 12 months. As such, on October 29, 2013, we
entered into a Securities Purchase Agreement (the "Purchase Agreement") and
consummated a closing of a private placement offering (the "Offering") with an
accredited investor (the "Investor") for the issuance and sale of 1,000,000
shares of common stock of the Company (the "Offering Shares") at a purchase
price of $0.60 per share, for an aggregate consideration of $600,000, $350,000
of which was due at the closing of the Offering.
Our current cash requirements are significant and will be used for research and
development, and marketing, and we anticipate generating losses for the
foreseeable future. In order to execute on our business strategy, we will
require additional working capital, commensurate with the operational needs of
our planned marketing, development and production efforts. Our management
anticipates that we should be able to raise sufficient amounts of working
capital through debt or equity offerings, as may be required to meet our
long-term obligations. However, changes in our operating plans, increased
expenses, acquisitions, or other events, may cause us to seek additional equity
or debt financing in the future. We anticipate continued and additional
development and production expenses. Accordingly, while we do not have any
short-term plans to conduct any other debt or equity financings, we may in the
future use debt and equity financing to fund operations, as we look to expand
our asset base and fund development and production of our products. Any such
equity financings could result in dilution to current shareholders, and the
incurrence of indebtedness would result in increased debt service obligations
and could require us to agree to operating and financial covenants that would
restrict our operations.
There are no assurances that we will be able to raise the required working
capital on terms favorable, or that such working capital will be available on
any terms when needed. Any failure to secure additional financing may force us
to modify our business plan. In addition, we cannot be assured of profitability
in the future.
In addition, the terms of the Purchase Agreement contain certain restrictions on
our ability to engage in financing transactions. Specifically, the Purchase
Agreement contains a right of first refusal for the Investor on any future
financing transactions and requires the approval of the Investor for any debt
financings.
OFF-BALANCE SHEET ARRANGEMENTS
None.
SIGNIFICANT ACCOUNTING POLICIES
Our significant accounting policies are described in Note 2 to the financial
statements included in our Annual Report on Form 10-K for the year ended June
30, 2013, which are incorporated by reference herein.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, the Company is not required to provide Part I,
Item 3 disclosure.
12
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with the participation
of our management, including our President (who is our Principal Executive
Officer) and our Treasurer (who is our Principal Financial Officer and Principal
Accounting Officer), of the effectiveness of the design of our disclosure
controls and procedures (as defined by Exchange Act Rules 13a-15(e) or
15d-15(e)) as of September 30, 2013, pursuant to Exchange Act Rule 13a-15. Based
upon that evaluation, our Principal Executive Officer and Principal Financial
Officer concluded that our disclosure controls and procedures were effective as
of September 30, 2013 in ensuring that information required to be disclosed by
us in reports that we file or submit under the Exchange Act is recorded,
processed, summarized, and reported within the time periods specified in the
Securities and Exchange Commission's (the "SEC") rules and forms
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no changes in our internal controls over financial reporting that
occurred during the quarterly period ended September 30, 2013 that have
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting. We believe that a control system, no matter
how well designed and operated, cannot provide absolute assurance that the
objectives of the control system are met, and no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within any company have been detected.
13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A - RISK FACTORS
RISKS RELATING TO OUR COMPANY AND OUR INDUSTRY
WE MAY NOT BE ABLE TO INTRODUCE NEW 3D PRINTING SYSTEMS AND MATERIALS ACCEPTABLE
TO THE MARKET OR TO IMPROVE THE TECHNOLOGY AND SOFTWARE USED IN OUR CURRENT
SYSTEMS.
Our ability to compete in the 3D printing market depends, in large part, on our
success in enhancing our existing product lines and in developing new products.
Even if we successfully enhance existing systems or create new systems, it is
likely that new systems and technologies that we develop will eventually
supplant our existing systems or our competitors will create systems that will
replace ours. The rapid prototyping (RP) industry is subject to rapid and
substantial innovation and technological change. We may be unsuccessful at
enhancing existing systems or developing new systems or materials on a timely
basis, and any of our products may be rendered obsolete or uneconomical by our
or others' technological advances.
IF THE 3D PRINTING MARKET DOES NOT CONTINUE TO ACCEPT OUR SYSTEMS, OUR REVENUES
MAY STAGNATE OR DECLINE.
We plan to derive a substantial portion of our sales from the sale of 3D
printers. If the market for 3D printers declines or if competitors introduce
products that compete successfully against ours, we may not be able to sustain
the sales of those products. If that happens, our revenues may not increase and
could decline.
IF WE ARE UNABLE TO MAINTAIN REVENUES AND GROSS MARGINS FROM SALES OF OUR
EXISTING PRODUCTS, OUR PROFITABILITY WILL BE ADVERSELY AFFECTED.
Our current strategy is to attempt to manage the prices of our 3D printers to
expand the market and increase sales. In conjunction with that strategy, we are
constantly seeking to reduce our direct manufacturing costs as well. Our
engineering and selling, general and administrative expenses, however, generally
do not vary substantially in relation to our sales. Accordingly, if our strategy
is successful and we increase our revenues while maintaining our gross margins,
our operating profits generally will increase faster as a percentage of revenues
than the percentage increase in revenues. Conversely, if our revenues or gross
margins decline, our operating profits generally will decline faster than the
decline in revenues or gross margins. Therefore, declines in our revenues may
lead to disproportionate reductions in our operating profits.
OUR REVENUE AND PROFITABILITY MAY BE NEGATIVELY AFFECTED BY ADVANCES IN
TECHNOLOGY THAT CREATE ALTERNATE FORMS OF 3D PRINTING AND RAPID PROTOTYPING
INDUSTRY.
The multimedia industry in general and the 3D printing and RP industry in
particular continue to undergo significant changes, primarily due to
technological developments. Due to this rapid growth of technology, we cannot
accurately predict the overall effect that such changes may have on the
potential revenue from and profitability of our products. Any future changes in
technology may change the way we operate our business and add unforeseen costs
to our business.
IF ANY OF OUR MANUFACTURING FACILITIES IS DISRUPTED, SALES OF OUR PRODUCTS WILL
BE DISRUPTED, AND WE COULD INCUR UNFORESEEN COSTS.
We manufacture our 3D printers at our facility in Cambridge city centre. If the
operations of this facility is disrupted, we would be unable to fulfill customer
orders for the period of the disruption. We would not be able to recognize
revenue on orders that we could not ship, and we might need to modify our
standard sales terms to secure the commitment of new customers during the period
of the disruption and perhaps longer. Depending on the cause of the disruption,
we could incur significant costs to remedy the disruption and resume product
shipments. Such a disruption could have a material adverse effect on our
revenue, results of operations and earnings.
OUR FAILURE TO EXPAND OUR INTELLECTUAL PROPERTY PORTFOLIO COULD ADVERSELY AFFECT
THE GROWTH OF OUR BUSINESS AND RESULTS OF OPERATIONS.
Expansion of our intellectual property portfolio is one of the available methods
of growing our revenues and our profits. This involves a complex and costly set
of activities with uncertain outcomes. Our ability to obtain patents and other
intellectual property can be adversely affected by insufficient inventiveness of
our employees, by changes in intellectual property laws, treaties, and
14
regulations, and by judicial and administrative interpretations of those laws
treaties and regulations. Our ability to expand our intellectual property
portfolio could also be adversely affected by the lack of valuable intellectual
property for sale or license at affordable prices. There is no assurance that we
will be able to obtain valuable intellectual property in the jurisdictions where
we and our competitors operate or that we will be able to use or license that
intellectual property.
IF WE ARE NOT ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY, WE MAY NOT
BE ABLE TO COMPETE EFFECTIVELY.
Our ability to compete depends in part upon the strength of our proprietary
rights in our technologies, brands and content. Currently, and going forward, we
expect to rely on a combination of U.S. and foreign patents, trademarks, trade
secret laws and license agreements to establish and protect our intellectual
property and proprietary rights. The efforts we have taken and expect to take to
protect our intellectual property and proprietary rights may not be sufficient
or effective at stopping unauthorized use of our intellectual property and
proprietary rights. In addition, effective trademark, patent, copyright and
trade secret protection may not be available or cost-effective in every country
in which our services are made available. There may be instances where we are
not able to fully protect or utilize our intellectual property in a manner that
maximizes competitive advantage. If we are unable to protect our intellectual
property and proprietary rights from unauthorized use, the value of our products
may be reduced, which could negatively impact our business. Our inability to
obtain appropriate protections for our intellectual property may also allow
competitors to enter our markets and produce or sell the same or similar
products. In addition, protecting our intellectual property and other
proprietary rights is expensive and diverts critical managerial resources. We
rely in part on our currently issued patents to support competitive position.
There can be no assurance that some of our patents will not be challenged at a
later date. There can be no guarantee that we will be successful in obtaining
additional patents that we may need at a later date to support certain growth
initiatives. Our ability to defend our patents, if they are challenged, or the
inability to obtain certain patents in the future, could have a material adverse
effect in future periods. If we are otherwise unable to protect our intellectual
property and proprietary rights, our business and financial results could be
adversely affected.
If we are forced to resort to legal proceedings to enforce our intellectual
property rights, the proceedings could be burdensome and expensive. In addition,
our proprietary rights could be at risk if we are unsuccessful in, or cannot
afford to pursue, those proceedings. In addition, the possibility of extensive
delays in the patent issuance process could effectively reduce the term during
which a marketed product is protected by patents.
The intellectual property to support our intermediate and long-term growth plans
continues to be developed and there can be no assurance that we will complete
such process. The addition of intellectual property to support this growth is
particularly dependent on the continued services of our technology team and its
ability to develop additional technologies to support such growth plans. If we
do not have the financial resources to develop the intellectual property to
fully support these growth plans, our ability to develop future products and
refinement of current products could be negatively impacted.
We may also need to obtain licenses to patents or other proprietary rights from
third parties. We may not be able to obtain the licenses required under any
patents or proprietary rights or they may not be available on acceptable terms.
If we do not obtain required licenses, we may encounter delays in product
development or find that the development, manufacture or sale of products
requiring licenses could be foreclosed. We may, from time to time, support and
collaborate in research conducted by universities and governmental research
organizations. We may not be able to acquire exclusive rights to the inventions
or technical information derived from these collaborations, and disputes may
arise over rights in derivative or related research programs conducted by us or
our collaborators.
WE MAY BE SUBJECT TO ALLEGED INFRINGEMENT CLAIMS.
Although we perform extensive patent and trademark searches, we may be subject
to intellectual property infringement claims from individuals, vendors and other
companies who have acquired or developed patents in the fields of 3D printing
for purposes of developing competing products or for the sole purpose of
asserting claims against us. Any claims that our products or processes infringe
the intellectual property rights of others, regardless of the merit or
resolution of such claims, could cause us to incur significant costs in
responding to, defending and resolving such claims, and may prohibit or
otherwise impair our ability to commercialize new or existing products. If we
are unable to effectively defend our processes, our market share, sales and
profitability could be adversely impacted.
AS OUR PATENTS EXPIRE, ADDITIONAL COMPETITORS USING OUR TECHNOLOGY COULD ENTER
THE MARKET, WHICH COULD REQUIRE US TO REDUCE OUR PRICES AND RESULT IN A
REDUCTION OF OUR MARKET SHARE. COMPETITORS' INTRODUCTION OF LOWER QUALITY
PRODUCTS USING OUR TECHNOLOGY COULD ALSO NEGATIVELY AFFECT THE REPUTATION AND
IMAGE OF OUR PRODUCTS IN THE MARKETPLACE.
Upon expiration of our patents, our competitors may introduce products using the
same technology as ours that have lower prices than those for our products. To
compete, we may need to reduce our prices, which would adversely affect our
revenues, margins and profitability. Additionally, the expiration of our patents
could reduce barriers to entry into the market for additive fabrication systems,
which could result in the reduction of our market share and earnings potential.
If competitors using our technology were to introduce products of inferior
quality, our potential customers may view our products negatively, which would
have an adverse effect on our image and reputation and on our ability to compete
with systems using other additive fabrication technologies.
15
OUR OPERATING RESULTS AND FINANCIAL CONDITION MAY FLUCTUATE.
Our operating results and financial condition may fluctuate from
quarter-to-quarter and year-to-year and are likely to continue to vary due to a
number of factors, many of which are not within our control. If our operating
results do not meet the expectations of securities analysts or investors, who
may derive their expectations by extrapolating data from recent historical
operating results, the market price of our common stock will likely decline.
Fluctuations in our operating results and financial condition may be due to a
number of factors, including, but not limited to, those listed below and those
identified throughout this "Risk Factors" section:
* changes in the amount that we spend to develop, acquire or license new
products, technologies or businesses;
* changes in the amount we spend to promote our products and services;
* changes in the cost of satisfying our warranty obligations and
servicing our installed base of systems;
* delays between our expenditures to develop and market new or enhanced
systems and consumables and the generation of sales from those
products;
* development of new competitive systems by others;
* changes in accounting rules and tax laws;
* the geographic distribution of our sales;
* our responses to price competition;
* market acceptance of our products;
* general economic and industry conditions that affect customer demand;
and
* our level of research and development activities.
WE HAVE NO REVENUES AND HAVE INCURRED LOSSES.
We currently have no revenues and we anticipate that our existing cash and cash
equivalents will not be sufficient to fund our longer term business needs and we
will need to generate significant revenue or receive additional investment to
continue operations. Based on our current business plan, we anticipate that we
will continue to incur losses through the year ending December 2013.
OUR AUDITORS HAVE EXPRESSED UNCERTAINTY AS TO OUR ABILITY TO CONTINUE AS A GOING
CONCERN.
Primarily as a result of our recurring losses and our lack of liquidity, we
received a report from our independent auditors that includes an explanatory
paragraph describing the substantial uncertainty as to our ability to continue
as a going concern as of our fiscal year ended June 30, 2013.
IF WE FAIL TO RAISE ADDITIONAL CAPITAL, OUR ABILITY TO IMPLEMENT OUR BUSINESS
MODEL AND STRATEGY COULD BE COMPROMISED.
We have limited capital resources and operations. To date, our operations have
been funded entirely from the proceeds from limited revenues, equity and debt
financings. The Company currently does not have adequate capital or revenue to
meet its current or projected operating expenses. We anticipate needing
substantial additional capital in the near future to develop and market new
products, services and technologies. We currently do not have commitments for
financing to meet our longer term expected needs and we may not be able to
obtain additional financing on terms acceptable to us, or at all. Even if we
obtain financing for our near term operations and product development, we expect
that we will require additional capital beyond the near term. If we are unable
to raise capital when needed, our business, financial condition and results of
operations would be materially adversely affected, and we could be forced to
reduce or discontinue our operations. Debt financing, if obtained, may involve
agreements that include covenants limiting or restricting our ability to take
specific actions, such as incurring additional debt and could increase our
expenses, and would be required to be repaid regardless of its operating
results. Moreover, we may issue equity securities in connection with such debt
financing. Equity financing, even if obtained, could result in ownership and
economic dilution to our existing stockholders and/or require us to grant
certain rights and preferences to new investors. In addition, we may seek
additional capital due to favorable market conditions or strategic
considerations even if we believe we have sufficient funds for our current
operations.
We do not currently have credit facilities or arrangements in place as a source
of funds and there can be no assurance that we will be able to raise sufficient
additional capital or raise such capital on acceptable terms or raise such
capital when we need it. If such capital is not available on satisfactory terms,
or is not available at all, we may be required to delay, scale back or stop the
development of our products and/or cease its operations.
IF WE UNDERESTIMATE OUR OPERATING EXPENSES, WE MAY NOT BE ABLE TO FUND FUTURE
OPERATIONS.
To date, we have devoted substantially all of our efforts to research and
development, infrastructure building and initial marketing activities. There is
no guarantee that our cost estimates or projected sales volumes are accurate and
will be attained. An inability to meet sales volumes as forecast or to achieve
assumed cost figures could have a negative impact on our profitability, cash
flow and survival.
16
We expect our operating expenses to increase in connection with the continued
development of our products and expansion of its marketing activities. We may
also incur costs and expenses that are unexpected, in excess of amounts
anticipated or are otherwise not contemplated or provided for in connection with
our business plan. If these or other costs or expenses are incurred, it could
have a material adverse effect on our financial performance.
WE MAY ACQUIRE OR MAKE INVESTMENTS IN COMPANIES OR TECHNOLOGIES THAT COULD CAUSE
LOSS OF VALUE TO OUR STOCKHOLDERS AND DISRUPTION OF OUR BUSINESS.
Subject to our capital constraints, we intend to explore opportunities to
acquire companies or technologies in the future. Entering into an acquisition
entails many risks, any of which could adversely affect our business, including:
* Failure to integrate the acquired assets and/or companies with our
current business;
* The price we pay may exceed the value we eventually realize;
* Loss of share value to our existing stockholders as a result of
issuing equity securities as part or all of the purchase price;
* Potential loss of key employees from either our current business or
the acquired business;
* Entering into markets in which we have little or no prior experience;
* Diversion of management's attention from other business concerns;
* Assumption of unanticipated liabilities related to the acquired
assets; and
* The business or technologies we acquire or in which we invest may have
limited operating histories, may require substantial working capital,
and may be subject to many of the same risks we are subject to.
SIGNIFICANT CHANGES IN GOVERNMENT REGULATION MAY HINDER SALES.
The production, distribution, sale and marketing of our products are subject to
the rules and regulations of various federal, state and local agencies, various
environmental statutes, and various other federal, state and local statutes and
regulations applicable to the production, transportation, sale, safety, and
advertising of or pertaining to our products. New statutes and regulations may
also be instituted in the future. Compliance with applicable federal and state
regulations is crucial to our success. Although we believe that we are in
compliance with applicable regulations, should the federal government or any
state in which we operate amend its guidelines or impose more stringent
interpretations of current laws or regulations, we may not be able to comply
with these new guidelines. Such regulations could require the reformulation of
certain products to meet new standards, market withdrawal or discontinuation of
certain products we are unable to redesign or reformulate, imposition of
additional record keeping requirements and expanded documentation regarding the
properties of certain products. Failure to comply with applicable requirements
could result in sanctions being imposed on us or the manufacturers of any of our
products, including but not limited to fines, injunctions, product recalls,
seizures and criminal prosecution. Further, if a regulatory authority finds that
a current or future product or production run is not in compliance with any of
these regulations, we may be required to have the packaging of our products
changed which may adversely affecting our financial condition and operations. We
are also unable to predict whether or to what extent a warning under any of
applicable statute would have an impact on costs or sales of our products.
WE FACE STRONG COMPETITION FROM LARGER AND WELL-ESTABLISHED COMPANIES, WHICH
COULD HARM OUR BUSINESS AND ABILITY TO OPERATE PROFITABLY.
Our industry is competitive. There are many different 3D printing and RP
companies in the United Kingdom and North America and our services will not be
unique to their services. Even though the industry is highly fragmented, it has
a number of large and well-established companies, which are profitable and have
developed a brand name. Aggressive marketing tactics implemented by our
competitors could impact our limited financial resources and adversely affect
our ability to compete in our market. Our inability to compete effectively with
larger companies could have a material adverse effect on our business
activities, financial condition and results of operations.
IF WE ARE UNABLE TO RETAIN OUR KEY OPERATING PERSONNEL AND ATTRACT ADDITIONAL
SKILLED OPERATING PERSONNEL, OUR DEVELOPMENT OF NEW PRODUCTS WILL BE DELAYED AND
OUR PERSONNEL COSTS WILL INCREASE.
Our growth plans require us to retain key employees in, and to hire additional
skilled employees to enhance existing products and develop new products. Our
inability to retain and hire key engineers and other employees could delay our
development and introduction of new products, which would adversely affect our
revenues. In addition, a possible shortage of such personnel in our region could
require us to pay more to retain and hire key employees, thereby increasing our
costs.
OUR BUSINESS DEPENDS SUBSTANTIALLY ON THE CONTINUING EFFORTS OF OUR EXECUTIVE
OFFICERS AND OUR BUSINESS MAY BE SEVERELY DISRUPTED IF WE LOSE THEIR SERVICES.
Our future success depends substantially on the continued services of our
executive officers. In particular, our performance depends, in large part, upon
our officers and their existing relationships in the industry. We do not
maintain key man life insurance on any of our executive officers and directors.
If one or more of our executive officers are unable or unwilling to continue in
17
their present positions, we may not be able to replace them readily, if at all.
Therefore, our business may be severely disrupted, and we may incur additional
expenses to recruit and retain new officers. In addition, if any of our
executives joins a competitor or forms a competing company, we may lose some of
our customers.
WE ARE SUBJECT TO NEW CORPORATE GOVERNANCE AND INTERNAL CONTROL REPORTING
REQUIREMENTS, AND OUR COSTS RELATED TO COMPLIANCE WITH, OR OUR FAILURE TO COMPLY
WITH, EXISTING AND FUTURE REQUIREMENTS COULD ADVERSELY AFFECT OUR BUSINESS.
We may face new corporate governance requirements under the Sarbanes-Oxley Act
of 2002, as well as new rules and regulations subsequently adopted by the
Securities and Exchange Commission ("SEC") and the Public Company Accounting
Oversight Board. These laws, rules and regulations continue to evolve and may
become increasingly stringent in the future. In particular, under SEC rules, we
are required to include management's report on internal controls as part of our
annual report, pursuant to Section 404 of the Sarbanes-Oxley Act. The financial
cost of compliance with these laws, rules and regulations is expected to be
substantial. We cannot assure you that we will be able to fully comply with
these laws, rules and regulations that address corporate governance, internal
control reporting and similar matters. Failure to comply with these laws, rules
and regulations could materially adversely affect our reputation, financial
condition and the value of our securities.
RISKS RELATED TO DOING BUSINESS INTERNATIONALLY
OUR INTERNATIONAL OPERATIONS POSE CURRENCY RISKS, WHICH MAY ADVERSELY AFFECT OUR
OPERATING RESULTS.
Our operating results may be affected by volatility in currency exchange rates
and our ability to effectively manage our currency transaction and translation
risks. In general, we conduct our business, earn revenue and incur costs in the
local currency of the country in which we operate, which is pound sterling. As a
result, our international operations present risks from currency exchange rate
fluctuations. The financial condition and results of operations are reported in
the relevant local currency, pound sterling, and then translated to U.S. dollars
at the applicable currency exchange rate for inclusion in our consolidated
financial statements. We do not manage our foreign currency exposure in a manner
that would eliminate the effects of changes in foreign exchange rates.
Therefore, changes in exchange rates between any foreign currencies and the U.S.
dollar will affect the recorded levels of our foreign assets and liabilities, as
well as our revenues, cost of goods sold, and operating margins, and could
result in exchange losses in any given reporting period.
In the future, we may not benefit from favorable exchange rate translation
effects, and unfavorable exchange rate translation effects may harm our
operating results. In addition to currency translation risks, we incur currency
transaction risks whenever we enter into either a purchase or a sale transaction
using a different currency from the currency in which we receive revenues. In
such cases we may suffer an exchange loss because we do not currently engage in
currency swaps or other currency hedging strategies to address this risk.
Given the volatility of exchange rates, we can give no assurance that we will be
able to effectively manage our currency transaction and/or translation risks or
that any volatility in currency exchange rates will not have an adverse effect
on our results of operations.
THE CURRENT ECONOMIC ENVIRONMENT AND UNCERTAINTY IN THE EUROPEAN UNION COULD
MATERIALLY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
The failure of the European Union to stabilize the fiscal condition and
creditworthiness of its member economies, such as Greece, Portugal, Spain,
Ireland, and Italy, could have significant implications on our plans to expand
into the European Union. Certain European Union member states have significant
fiscal obligations, which have caused investor concern over such countries'
ability to continue to service their debt and foster economic growth. Currently,
the European debt crisis has caused liquidity to be less abundant. A weaker
European economy has caused and may continue to cause market participants to
lose confidence in the safety and soundness of European financial institutions
and the stability of European Union member economies, and may likewise affect
other global institutions and the stability of the global financial markets.
In addition, the possible abandonment of the Euro currency by one or more
members of the European Union could materially affect our business in the
future. Despite measures taken by the European Union to provide funding to
certain European Union member states in financial difficulties and by a number
of European countries to stabilize their economies and reduce their debt
burdens, it is possible that the Euro could be abandoned as a currency in the
future by countries that have already adopted its use. This could lead to the
re-introduction of individual currencies in one or more European Union member
states, or in more extreme circumstances, the dissolution of the European Union.
The effects on our business of a potential dissolution of the European Union,
the exit of one or more European Union member states from the European Union or
the abandonment of the Euro as a currency, are impossible to predict with
certainty, and any such events could have a material adverse effect on our
business, trading volumes and results of operations, particularly in the long
term.
18
OUR INTERNATIONAL OPERATIONS SUBJECT US TO RISKS ASSOCIATED WITH THE
LEGISLATIVE, JUDICIAL, ACCOUNTING, REGULATORY, POLITICAL AND ECONOMIC RISKS AND
CONDITIONS SPECIFIC TO THE COUNTRIES OR REGIONS IN WHICH WE OPERATE, WHICH COULD
ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE.
We currently conduct operations in United Kingdom, and plan on expanding our
operations to additional international markets, including the United States,
European Union and China. Our future operating results in international markets
could be negatively affected by a variety of factors, most of which are beyond
our control. These factors include political conditions, including political
instability, economic conditions, legal and regulatory constraints, trade
policies, currency regulations, and other matters in any of the countries or
regions in which we operate, now or in the future.
Moreover, the economies of some of the countries in which we currently have, or
plan to have operations, have in the past suffered from high rates of inflation
and currency devaluations, which, if they occurred again, could adversely affect
our financial performance. Other factors which may impact our operations include
foreign trade, monetary and fiscal policies both of the United States and of
other countries, laws, regulations and other activities of foreign governments,
agencies and similar organizations, and risks associated with having numerous
officers located in countries which have historically been less stable than the
United States. Additional risks inherent in our international operations
generally include, among others, the costs and difficulties of managing
international operations, adverse tax consequences and greater difficulty in
enforcing intellectual property rights in countries other than the United
States.
CURRENT GLOBAL ECONOMIC CONDITIONS MAY ADVERSELY AFFECT OUR INDUSTRY, BUSINESS
AND RESULTS OF OPERATIONS.
The recent disruptions in the current global credit and financial markets has
led to diminished liquidity and credit availability, a decline in consumer
confidence, a decline in economic growth, an increased unemployment rate, and
uncertainty about economic stability. There can be no assurance that there will
not be further deterioration in credit and financial markets and confidence in
economic conditions. These economic uncertainties affect businesses such as ours
in a number of ways, making it difficult to accurately forecast and plan our
future business activities. The current adverse global economic conditions and
tightening of credit in financial markets may lead consumers to postpone
spending. We are unable to predict the likely duration and severity of the
current disruptions in the credit and financial markets and adverse global
economic conditions. If the current uncertain economic conditions continue or
further deteriorate, our business and results of operations could be materially
and adversely affected.
BECAUSE OUR ASSETS ARE LOCATED OUTSIDE OF THE UNITED STATES AND ALL OF OUR
DIRECTORS AND OFFICERS RESIDE OUTSIDE OF THE UNITED STATES, IT MAY BE DIFFICULT
FOR INVESTORS TO ENFORCE THEIR RIGHTS BASED ON UNITED STATES FEDERAL SECURITIES
LAWS OR ANY UNITED STATES COURT JUDGMENTS AGAINST US AND OUR OFFICERS AND
DIRECTORS.
Our operating company and all of our assets are currently located in the United
Kingdom. In addition, all of our current directors and officers reside outside
of the United States. It may therefore be difficult for investors in the United
States to enforce their legal rights based on the civil liability provisions of
the United States federal securities laws against us in the courts of either the
United States or the United Kingdom and, even if civil judgments are obtained in
United States courts, to enforce such judgments in United Kingdom courts.
FAILURE TO COMPLY WITH THE U.S. FOREIGN CORRUPT PRACTICES ACT OR OTHER
APPLICABLE ANTI-CORRUPTION LEGISLATION COULD RESULT IN FINES, CRIMINAL PENALTIES
AND AN ADVERSE EFFECT ON OUR BUSINESS.
We plan to operate in a number of countries throughout the world, including
countries known to have a reputation for corruption. We are committed to doing
business in accordance with applicable anti-corruption laws. We are subject,
however, to the risk that our affiliated entities or our respective officers,
directors, employees and agents may take action determined to be in violation of
such anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of
1977 and the U.K. Bribery Act of 2010, as well as trade sanctions administered
by the Office of Foreign Assets Control and the U.S. Department of Commerce. Any
such violation could result in substantial fines, sanctions, civil and/or
criminal penalties, curtailment of operations in certain jurisdictions, and
might adversely affect our results of operations. In addition, actual or alleged
violations could damage our reputation and ability to do business.
RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES
OUR BOARD OF DIRECTORS DOES NOT INTEND TO DECLARE OR PAY ANY DIVIDENDS TO OUR
STOCKHOLDERS IN THE FORESEEABLE FUTURE.
The declaration, payment and amount of any future dividends will be made at the
discretion of our board of directors, and will depend upon, among other things,
the results of our operations, cash flows and financial condition, operating and
capital requirements, and other factors the board of directors considers
relevant. There is no plan to pay dividends in the foreseeable future, and if
dividends are paid, there can be no assurance with respect to the amount of any
such dividend.
NEVADA LAW AND OUR ARTICLES OF INCORPORATION AUTHORIZE US TO ISSUE SHARES OF
STOCK, WHICH SHARES MAY CAUSE SUBSTANTIAL DILUTION TO OUR EXISTING STOCKHOLDERS
AND/OR HAVE RIGHTS AND PREFERENCES GREATER THAN OUR COMMON STOCK.
19
Pursuant to our Articles of Incorporation, we currently have 100,000,000 shares
of common stock authorized and 50,000,000 shares of preferred stock authorized.
As of the date of this Quarterly Report on Form 10-Q, we have 60,000,000 shares
of common stock issued and outstanding and no shares of preferred stock issued
and outstanding. As a result, our Board of Directors has the ability to issue a
large number of additional shares of common stock without stockholder approval,
which, if issued, could cause substantial dilution to our existing stockholders.
In addition, we may elect to issue preferred stock or other securities in the
future having rights and preferences greater to our common stock. Pending
approval by a majority of our stockholders, our articles of incorporation will
provide that the Board may designate the rights and preferences of preferred
stock without a vote by the stockholders.
A LIMITED PUBLIC TRADING MARKET EXISTS FOR OUR COMMON STOCK, WHICH MAKES IT MORE
DIFFICULT FOR OUR STOCKHOLDERS TO SELL THEIR COMMON STOCK IN THE PUBLIC MARKETS.
Our common stock is not listed on any stock exchange. Although our common stock
is quoted on the OTC Bulletin Board, there is no established public market for
shares of our common stock, and no trades of our common stock have taken place
on the OTC Bulletin Board. No assurance can be given that an active market will
develop or that a stockholder will ever be able to liquidate its shares of
common stock without considerable delay, if at all. Many brokerage firms may not
be willing to effect transactions in the securities. Even if a purchaser finds a
broker willing to effect a transaction in these securities, the combination of
brokerage commissions, state transfer taxes, if any, and any other selling costs
may exceed the selling price. Furthermore, our stock price may be impacted by
factors that are unrelated or disproportionate to our operating performance.
These market fluctuations, as well as general economic, political and market
conditions, such as recessions, lack of available credit, interest rates or
international currency fluctuations may adversely affect the market price and
liquidity of our common stock.
SHARES OF OUR COMMON STOCK THAT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, REGARDLESS OF WHETHER SUCH SHARES ARE RESTRICTED OR
UNRESTRICTED, ARE SUBJECT TO RESALE RESTRICTIONS IMPOSED BY RULE 144, INCLUDING
THOSE SET FORTH IN RULE 144(I) WHICH APPLY TO A "SHELL COMPANY." IN ADDITION,
ANY SHARES OF OUR COMMON STOCK THAT ARE HELD BY AFFILIATES, INCLUDING ANY
RECEIVED IN A REGISTERED OFFERING, WILL BE SUBJECT TO THE RESALE RESTRICTIONS OF
RULE 144(I).
Pursuant to Rule 144 of the Securities Act of 1933, as amended ("Rule 144"), a
"shell company" is defined as a company that has no or nominal operations; and,
either no or nominal assets; assets consisting solely of cash and cash
equivalents; or assets consisting of any amount of cash and cash equivalents and
nominal other assets. As such, we may be deemed a "shell company" pursuant to
Rule 144 prior to the Exchange Transaction, and as such, sales of our securities
pursuant to Rule 144 are not able to be made until a period of at least twelve
months has elapsed from the date on which the Current Report on Form 8-K
reflecting the Company's status as a non-"shell company" was filed. Therefore,
any restricted securities we sell in the future or issue to consultants or
employees, in consideration for services rendered or for any other purpose will
have no liquidity until and unless such securities are registered with the
Commission and/or until a year after the date of the filing of the Current
Report on Form 8-K filed on November 14, 2013 and we have otherwise complied
with the other requirements of Rule 144. As a result, it may be harder for us to
fund our operations and pay our employees and consultants with our securities
instead of cash. Furthermore, it will be harder for us to raise funding through
the sale of debt or equity securities unless we agree to register such
securities with the Commission, which could cause us to expend additional
resources in the future. Our previous status as a "shell company" could prevent
us from raising additional funds, engaging employees and consultants, and using
our securities to pay for any acquisitions (although none are currently
planned), which could cause the value of our securities, if any, to decline in
value or become worthless. Lastly, any shares held by affiliates, including
shares received in any registered offering, will be subject to the resale
restrictions of Rule 144(i).
OUR STOCK IS CATEGORIZED AS A PENNY STOCK. TRADING OF OUR STOCK MAY BE
RESTRICTED BY THE SEC'S PENNY STOCK REGULATIONS WHICH MAY LIMIT A STOCKHOLDER'S
ABILITY TO BUY AND SELL OUR STOCK.
Our stock is categorized as a "penny stock". The SEC has adopted Rule 15g-9
which generally defines "penny stock" to be any equity security that has a
market price (as defined) less than $5.00 per share or an exercise price of less
than $5.00 per share, subject to certain exceptions. Our securities are covered
by the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
accredited investors. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer's
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer's confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
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these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.
FINRA SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S ABILITY TO BUY
AND SELL OUR STOCK.
In addition to the "penny stock" rules described above, the Financial Industry
Regulatory Authority ("FINRA") has adopted rules that require that in
recommending an investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that customer. Prior
to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. The FINRA requirements make it more
difficult for broker-dealers to recommend that their customers buy our common
stock, which may limit your ability to buy and sell our stock and have an
adverse effect on the market for our shares.
WE MAY NOT QUALIFY TO MEET LISTING STANDARDS TO LIST OUR STOCK ON AN EXCHANGE.
The SEC approved listing standards for companies using reverse mergers to list
on an exchange may limit our ability to become listed on an exchange. We would
be considered a reverse merger company (i.e., an operating company that becomes
an Exchange Act reporting company by combining with a shell Exchange Act
reporting company) that cannot apply to list on NYSE, NYSE Amex or Nasdaq until
our stock has traded for at least one year on the U.S. OTC market, a regulated
foreign exchange or another U.S. national securities market following the filing
with the SEC or other regulatory authority of all required information about the
merger, including audited financials. We would be required to maintain a minimum
$4 share price ($2 or $3 for Amex) for at least thirty (30) of the sixty (60)
trading days before our application and the exchange's decision to list. We
would be required to have timely filed all required reports with the SEC (or
other regulatory authority), including at least one annual report with audited
financials for a full fiscal year commencing after filing of the above
information. Although there is an exception for a firm underwritten IPO with
proceeds of at least $40 million, we do not anticipate being in a position to
conduct an IPO in the foreseeable future. In order for the minimum stock price
requirement to not apply, we must satisfy the one year trading requirement and
file at least four (4) annual reports with the SEC after the Exchange
Transaction. To the extent that we cannot qualify for a listing on an exchange,
our ability to raise capital will be diminished.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There are no sales of our securities without registration under the Securities
Act of 1933, as amended, during the three months ended September 30, 2013, that
were not previously disclosed in an Annual Report on Form 10-K, Quarterly Report
on Form 10-Q, or in a Current Report on Form 8-K.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
Exhibit
Number Description
------ -----------
2.1 Stock Exchange Agreement by and among the Company, Umicron and the
Selling Shareholders, dated October 29, 2013 (incorporated by reference
to the registrant's Current Report on Form 8-K filed on November 14,
2013).
3.1 Articles of Incorporation (incorporated by reference to the
registrant's Registration Statement on Form S-1 filed on August 27,
2010).
3.2 Bylaws (incorporated by reference to the registrant's Registration
Statement on Form S-1 filed on August 27, 2010).
10.1 Employment Contract between Umicron and Matthew Lummis, dated October
5, 2013 (incorporated by reference to the registrant's Current Report
on Form 8-K filed on November 14, 2013).
10.2 Employment Contract between Umicron and Luke Ruffell, dated October 5,
2013 (incorporated by reference to the registrant's Current Report on
Form 8-K filed on November 14, 2013).
10.3 Employment Contract between Umicron and Feroz Khan, dated October 5,
2013 (incorporated by reference to the registrant's Current Report on
Form 8-K filed on November 14, 2013).
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act*
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act*
32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act.*
32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act.*
101 Interactive Data File**
----------
* Filed herewith.
** Pursuant to Rule 406T of Regulation S-T, these interactive data files are
deemed not filed or part of a registration statement or prospectus for
purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18
of the Securities Exchange Act of 1934 and otherwise are not subject to
liability.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAKISM 3D CORP.
a Nevada corporation
Dated: November 14, 2013 By: /s/ Matthew Lummis
----------------------------------
Matthew Lummis
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
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