We will
also incorporate the latest battery, motor and software advances available at
the time. We intend to be maintain several relationships with various
suppliers and will not be locked into any one battery, motor, software or
electronics vendor. To the greatest extent possible, we will use
components that are being mass produced. We believe this will enable
us to offer vehicles at mass produced pricing. The first application
of our Powertrain is for the 2007, 2008, and 2009 General Motors Saturn
Sky.
Market for Electric
Vehicles
The market
for electric vehicles represents a narrow but rapidly growing sector
in the overall vehicle market. Currently the most
productive market for electric vehicles is
fleet operators, consisting of organizations that
operates many vehicles from a central location
include delivery operations, taxis, police and other
government offices, the military, resorts,
municipal bus lines and rental car agencies.
The consumer market for electric
vehicles is still relatively small due to high prices and lack of
electric vehicle infrastructure, however we believe this market is growing and
is expected to continue to grow as the technology and price of electric vehicles
improve.
Marketing
We break
down our customers into two categories: Internet Sales and Distribution Network
Sales. Internet sales are a primary method of sales used by most
electric car companies today. Secondly, AMP is seeking to create a
distribution channel through existing Saturn dealerships. We are
seeking to utilize the dealers as “converters” of Saturn product to all electric
vehicles. Similarly to how the dealer would enlist a local “low ride”
or “hot rod” conversion shop to add value to their dealership, they become
distributors of our customization to an all electric vehicle. This
prevents them from being inhibited in their dealer relationship with the
manufacturer. The dealer network pricing would be higher than the
internet pricing. We would potentially stop selling online if the
dealer network began driving the business. We
plan to emphasize the following selling points:
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avoiding
the fluctuation in fuel prices;
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saving the globe from carbon dioxide and global warming;
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the
familiarity of the converted
vehicle;
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assisting
the country in breaking its dependence on foreign oil;
and
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Favorable social supports in laws, taxes, and subsidies
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Research and Development
We conduct
all of our research and development in-house at our facilities in Cincinnati,
Ohio.
Competition
We expect
that the electric car industry will compete on quality, price, performance and
early to market status. Today, Tesla Automotive, an Original
Equipment Manufacturer (OEM), is the only manufacturer of an all electric
vehicle. Tesla currently has a vehicle based on the Lotus Elise frame and is
using the AC Propulsion components to create an all electric vehicle. Tesla
vehicle costs approximately $125,000 with accessories. It is a two seat vehicle
that is very small and meets only minimal safety standards within the automotive
industry, not even including a passenger side air bag. The second
largest competitors are mostly two stage vehicles such as the General Motors
Volt. This vehicle consists of 26 kilowatt power pack that will allow it to run
for 40 miles on an all electric system. As the battery pack discharges, a
gasoline based two cycle motor engages and charges the battery pack. This means
there is still a gas tank and ICE in the vehicle. Tesla and General
Motors are larger and better capitalized and will be able to take advantage of
opportunities that the Company will not be able to pursue. Further,
there are other smaller competitors that are seeking to enter the electric car
company industry.
Intellectual
Property
We have
not applied
for or received patent protection in
the US or any other country, and, as a result, there is a
distinct risk that we will not be able to
adequately protect our intellectual
property rights in these countries.
Government
Regulation
We are in the business of modifying
and selling automobiles and other
vehicles, and accordingly we are subject to several laws
related to automobile sales and operation.
The
United States' laws related to automobile manufacturers
regulate registration,
safety criteria, type approval, inspection, maintenance, testing, etc.
of automobiles. There are also laws regulating noise allowance and
vibrations made
by vehicles, and environmental laws.
Complying with the strict regulation of automobile manufacturing is
costly and could significantly
affect our ability to become
profitable. In addition, failure to comply with
these laws could subject our Company to
penalties, which could include severe fines or the removal
of government approval to do business. Although we fully intend to
comply with all applicable rules and regulations, we
cannot assure that we will be able to do so.
In
general, automobiles are subject to several
environmental regulations,
including air preservation, noise and vibration
control. Accordingly, we are required to limit the air
contaminants, noise and vibrations of our vehicles to
certain levels. Failure to do so
may impose fines or other penalties on the Company.
Legal
Proceedings
We are
currently not a party to any legal or administrative proceedings and are not
aware of any pending or threatened legal or administrative proceedings against
us in all material aspects. We may from time to time become a party to various
legal or administrative proceedings arising in the ordinary course of our
business.
Number of
Employees
We we
have 15
employees including 11 full time employees of which seven are engaged
in engineering
and four sales/administration and four part time
employee.
Property
Our
principal offices are located at 4540 Alpine Road, Blue Ash, Ohio 45242, which
include 3,000
square feet in office space and 12,000 square feet in manufacturing/development
space. We pay $8500
per month in rent and our lease is for two years. We expect that this facility
will provide adequate space for the next two years.
RISK
FACTORS
Our limited operating history makes
it difficult for us to evaluate our future business prospects and make decisions
based on those estimates of our future performance.
We did
not begin operations of our business until February 2007. We have a
limited operating history and have not generated revenue. As a
consequence, it is difficult, if not impossible, to forecast our future results
based upon our historical data. Reliance on the historical results may not
be representative of the results we will achieve, particularly in our combined
form. Because of the uncertainties related to our lack of historical
operations, we may be hindered in our ability to anticipate and timely adapt to
increases or decreases in revenues or expenses. If we make poor budgetary
decisions as a result of unreliable historical data, we could be less profitable
or incur losses, which may result in a decline in our stock
price.
AMP’s
results of operations have not resulted in profitability and we may not be able
to achieve profitability going forward.
AMP
incurred a net loss amounting to $2,703,686 for the period from inception
(February 20, 2007) through September 30, 2009. In addition, as of
September 30, 2009, AMP has a working capital deficiency of $296,785. If we
incur additional significant operating losses, our stock price, may decline,
perhaps significantly.
Our
management is developing plans to alleviate the negative trends and conditions
described above. Our business plan is speculative and unproven. There
is no assurance that we will be successful in executing our business plan or
that even if we successfully implement our business plan, that we will be able
to curtail our losses now or in the future. Further, as we are a new
enterprise, we expect that net losses will continue and our working capital
deficiency will exacerbate.
We
depend upon key personnel and need additional personnel.
Our
success depends on the continuing services of Stephen Burns, our sole executive
officer and director. The loss of Mr. Burns could have a material and
adverse effect on our business operations. Additionally, the success
of the Company’s operations will largely depend upon its ability to successfully
attract and maintain competent and qualified key management personnel. As with
any company with limited resources, there can be no guaranty that the Company
will be able to attract such individuals or that the presence of such
individuals will necessarily translate into profitability for the
Company. Our inability to attract and retain key personnel may
materially and adversely affect our business operations.
We must effectively manage the growth
of our operations, or our company will suffer.
To manage
our growth, we believe we must continue to implement and improve our
operational, manufacturing, and research and development departments. We may not
have adequately evaluated the costs and risks associated with this expansion,
and our systems, procedures, and controls may not be adequate to support our
operations. In addition, our management may not be able to achieve the rapid
execution necessary to successfully offer our products and services and
implement our business plan on a profitable basis. The success of our future
operating activities will also depend upon our ability to expand our support
system to meet the demands of our growing business. Any failure by our
management to effectively anticipate, implement, and manage changes required to
sustain our growth would have a material adverse effect on our business,
financial condition, and results of operations.
Our
business requires substantial capital, and if we are unable to maintain adequate
financing sources our profitability and financial condition will suffer and
jeopardize our ability to continue operations.
We
require substantial capital to support our operations. If we are
unable to maintain adequate financing or other sources of capital are not
available, we could be forced to suspend, curtail or reduce our operations,
which could harm our revenues, profitability, financial condition and business
prospects.
We
face intense competition which could cause us to lose market share.
In the
electric vehicle market in the United States, we compete with large
manufacturers, including GM, Tesla and Nissan who have more significant
financial resources, established market positions, long-standing relationships
with customers and dealers, and who have more significant name recognition,
technical, marketing, sales, manufacturing, distribution, financial and other
resources than we do. Each of these companies is currently selling a hybrid or
electric vehicle or are working to develop, market, and sell advanced technology
vehicles in the United States market. The resources available to our competitors
to develop new products and introduce them into the marketplace exceed the
resources currently available to us. This intense competitive
environment may require us to make changes in our products, pricing, licensing,
services, distribution, or marketing to develop a market position.
Changes
in the market for electric vehicles could cause our products to become obsolete
or lose popularity.
The
electric vehicle industry is in its infancy and has experienced substantial
change in the last few years. To date, demand for and interest in electric
vehicles has been sporadic. As a result, growth in the electric vehicle industry
depends on many factors, including:
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continued
development of product technology;
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the
environmental consciousness of
customers;
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the
ability of electric vehicles to successfully compete with vehicles powered
by internal combustion engines;
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limitation
of widespread electricity shortages;
and
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whether
future regulation and legislation requiring increased use of nonpolluting
vehicles is enacted.
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We cannot assure you that growth in the
electric vehicle industry will continue. Our business may suffer if the electric
vehicle industry does not grow or grows more slowly than it has in recent years
or if we are unable to maintain the pace of industry demands.
We
may be unable to keep up with changes in electric vehicle technology and, as a
result, may suffer a decline in our competitive position.
Our
current products are designed for use with, and are dependent upon, existing
electric vehicle technology. As technologies change, we plan to upgrade or adapt
our products in order to continue to provide products with the latest
technology. However, our products may become obsolete or our research and
development efforts may not be sufficient to adapt to changes in or create
necessary technology. As a result, our potential inability to adapt and develop
the necessary technology may harm our competitive position.
The
failure of certain key suppliers to provide us with components could have a
severe and negative impact upon our business.
We rely
on a small group of suppliers to provide us with components for our products. If
these suppliers become unwilling or unable to provide components, there are a
limited number of alternative suppliers who could provide them. Changes in
business conditions, wars, governmental changes, and other factors beyond our
control or which we do not presently anticipate could affect our ability to
receive components from our suppliers. Further, it could be difficult to find
replacement components if our current suppliers fail to provide the parts needed
for these products. A failure by our major suppliers to provide these components
could severely restrict our ability to manufacture our products and prevent us
from fulfilling customer orders in a timely fashion.
Product
liability or other claims could have a material adverse effect on our
business.
The risk
of product liability claims, product recalls, and associated adverse publicity
is inherent in the manufacturing, marketing, and sale of electrical vehicles.
Although we have product liability insurance for our consumer products, that
insurance may be inadequate to cover all potential product claims. We also carry
liability insurance on our automobile products. Any product recall or lawsuit
seeking significant monetary damages either in excess of our coverage, or
outside of our coverage, may have a material adverse effect on our business and
financial condition. We may not be able to secure additional product liability
insurance coverage on acceptable terms or at reasonable costs when needed. A
successful product liability claim against us could require us to pay a
substantial monetary award. Moreover, a product recall could generate
substantial negative publicity about our products and business and inhibit or
prevent commercialization of other future product candidates. We cannot assure
you that such claims and/or recalls will not be made in the future.
We
must devote substantial resources to implementing a product distribution
network.
Dealers
are often hesitant to provide their own financing to contribute to our product
distribution network. As a result, we anticipate that we may have to provide
financing or other consignment sale arrangements for dealers who would like to
participate as our regional distribution centers. The further expansion of our
product distribution network will require a significant capital investment and
will require extensive amounts of time from our management. A capital investment
such as this presents many risks, foremost among them being that we may not
realize a significant return on our investment if the network is not profitable.
Our inability to collect receivables from dealers could cause us to suffer
losses. Lastly, the amount of time that our management will need to devote to
this project may divert them from performing other functions necessary to assure
the success of our business.
Regulatory
requirements may have a negative impact upon our business.
While our
products are subject to substantial regulation under federal, state, and local
laws, we believe that the products we have sold are materially in compliance
with all applicable laws. However, to the extent the laws change, or if we
introduce new products in the future, some or all of our products may not comply
with applicable federal, state, or local laws. Further, certain federal, state,
and local laws and industrial standards currently regulate electrical and
electronics equipment. Although standards for electric vehicles are not yet
generally available or accepted as industry standards, our products may become
subject to federal, state, and local regulation in the future. Compliance with
this regulation could be burdensome, time consuming, and expensive.
Our
automobile products are subject to environmental and safety compliance with
various federal and state regulations, including regulations promulgated by the
EPA, NHTSA, and various state boards, and compliance certification is required
for each new model year. The cost of these compliance activities and the delays
and risks associated with obtaining approval can be substantial. The risks,
delays, and expenses incurred in connection with such compliance could be
substantial.
Our
success is heavily dependent on protecting our intellectual property
rights.
We rely
on trade secret protections to protect our proprietary technology. Our success
will, in part, depend on our ability to obtain trademarks and patents. We
presently do not hold patents registered with the United States Patent and
Trademark Office. Although we have entered into confidentiality
agreements with our employees and consultants, we cannot be certain that others
will not gain access to these trade secrets. Others may independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to our trade secrets.
We
may be exposed to liability for infringing intellectual property rights of other
companies.
Our
success will, in part, depend on our ability to operate without infringing on
the proprietary rights of others. Although we have conducted searches and are
not aware of any patents and trademarks which our products or their use might
infringe, we cannot be certain that infringement has not or will not occur. We
could incur substantial costs, in addition to the great amount of time lost, in
defending any patent or trademark infringement suits or in asserting any patent
or trademark rights, in a suit with another party.
We
have not paid dividends in the past and do not expect to pay dividends in the
future. Any return on investment may be limited to the value of our
common stock
We have
never paid cash dividends on our common stock and do not anticipate paying cash
dividends in the foreseeable future. The payment of dividends on our common
stock will depend on earnings, financial condition and other business and
economic factors affecting it at such time as the board of directors may
consider relevant. If we do not pay dividends, our common stock may be less
valuable because a return on your investment will only occur if its stock price
appreciates.
Our
stock price and trading volume may be volatile, which could result in
substantial losses for our stockholders.
The
equity trading markets may experience periods of volatility, which could result
in highly variable and unpredictable pricing of equity securities. The market
price of our common stock could change in ways that may or may not be related to
our business, our industry or our operating performance and financial condition.
In addition, the trading volume in our common stock may fluctuate and cause
significant price variations to occur. We have experienced significant
volatility in the price of our stock over the past few years. We cannot assure
you that the market price of our common stock will not fluctuate or decline
significantly in the future. In addition, the stock markets in general can
experience considerable price and volume fluctuations.
We
have not voluntary implemented various corporate governance measures, in the
absence of which, shareholders may have more limited protections against
interested director transactions, conflict of interest and similar
matters.
Recent
Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in
the adoption of various corporate governance measures designed to promote the
integrity of the corporate management and the securities markets. Some of these
measures have been adopted in response to legal requirements. Others have been
adopted by companies in response to the requirements of national securities
exchanges, such as the NYSE or the NASDAQ Stock Market, on which their
securities are listed. Among the corporate governance measures that are required
under the rules of national securities exchanges are those that address board of
directors' independence, audit committee oversight, and the adoption of a code
of ethics. While we intend to adopt certain corporate governance measures such
as a code of ethics and established an audit committee, Nominating and Corporate
Governance Committee, and Compensation Committee of our board of
directors, we presently do not
have any independent directors. We intend to expand our board membership in
future periods to include independent directors. It is possible that if we were
to have independent directors on our board, stockholders would benefit from
somewhat greater assurances that internal corporate decisions were being made by
disinterested directors and that policies had been implemented to define
responsible conduct. For example, in the absence of audit, nominating and
compensation committees comprised of at least a majority of independent
directors, decisions concerning matters such as compensation packages to our
senior officers and recommendations for director nominees may be made by our
sole director who has an interest in the outcome of the matters being decided.
Prospective investors should bear in mind our current lack of both corporate
governance measures and independent directors in formulating their investment
decisions.
We
may be exposed to potential risks relating to our internal controls over
financial reporting and our ability to have those controls attested to by our
independent auditors.
As
directed by Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX 404"), the
Securities and Exchange Commission adopted rules requiring smaller reporting
companies, such as our company, to include a report of management on the
company's internal controls over financial reporting in their annual reports for
fiscal years ending on or after December 15, 2007. We will be
required to include the management report in the annual report for the year
ending December 31, 2009. In addition, for our fiscal year ending December 31,
2009 the independent registered public accounting firm auditing our financial
statements must also attest to and report on management's assessment of the
effectiveness of our internal controls over financial reporting as well as the
operating effectiveness of our internal controls. In the event we are unable to
receive a positive attestation from our independent auditors with respect to our
internal
controls, investors and others may lose confidence in the reliability of our
financial statements and our ability to obtain financing as needed could
suffer.
If
a public market for our common stock develops, trading will be limited under the
SEC’s penny stock regulations, which will adversely affect the liquidity of our
common stock.
The
trading price of our common stock is less than $5.00 per share and, as a result,
our common stock is considered a "penny stock," and trading in our common stock
would be subject to the requirements of Rule 15g-9 under the Exchange Act. Under
this rule, broker/dealers who recommend low-priced securities to persons other
than established customers and accredited investors must satisfy special sales
practice requirements. Generally, the broker/dealer must make an individualized
written suitability determination for the purchaser and receive the purchaser's
written consent prior to the transaction.
SEC
regulations also require additional disclosure in connection with any trades
involving a "penny stock," including the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and its
associated risks. These requirements severely limit the liquidity of securities
in the secondary market because few broker or dealers are likely to undertake
these compliance activities. In addition to the applicability of the
penny stock rules, other risks
associated with trading in penny stocks could also be price fluctuations and the
lack of a liquid market. An active and liquid market in our common stock may
never develop due to these factors.
MANAGEMENT’S DISCUSSION AND
ANALYSIS
Forward
Looking Statements
Some of
the statements contained in this Form 8-K that are not historical facts are
"forward-looking statements" which can be identified by the use of terminology
such as "estimates," "projects," "plans," "believes," "expects," "anticipates,"
"intends," or the negative or other variations, or by discussions of strategy
that involve risks and uncertainties. We urge you to be cautious of the
forward-looking statements, that such statements, which are contained in this
Form 8-K, reflect our current beliefs with respect to future events and involve
known and unknown risks, uncertainties and other factors affecting our
operations, market growth, services, products and licenses. No assurances can be
given regarding the achievement of future results, as actual results may differ
materially as a result of the risks we face, and actual events may differ from
the assumptions underlying the statements that have been made regarding
anticipated events. Factors that may cause actual results, our performance or
achievements, or industry results, to differ materially from those contemplated
by such forward-looking statements include without limitation:
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Our
ability to attract and retain
management;
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Our
ability to raise capital when needed and on acceptable terms and
conditions;
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The
intensity of competition;
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General
economic conditions;
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Changes in
regulations; |
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Whether the market for electric
vehicles continues to grow, and, if it does, the pace at which it may
grow; and |
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Our ability to compete against large
competors in a rapidly changing market for electric
vehicles. |
All
written and oral forward-looking statements made in connection with this Form
8-K that are attributable to us or persons acting on our behalf are expressly
qualified in their entirety by these cautionary statements. Given the
uncertainties that surround such statements, you are cautioned not to place
undue reliance on such forward-looking statements.
Our Plan
of Operation should be read in conjunction with our financial statements
included herein.
Overview
On
December 28, 2009, we entered into and closed a Share Exchange
Agreement with the AMP Shareholders pursuant to which we acquired 100% of
the outstanding securities of AMP in exchange for 1,063,636 shares of our common
stock. Considering that, following the merger, the AMP Shareholders control the
majority of our outstanding voting common stock and we effectively succeeded our
otherwise minimal operations to those that are theirs, AMP is considered the
accounting acquirer in this reverse-merger transaction. A reverse-merger
transaction is considered, and accounted for as, a capital transaction in
substance; it is equivalent to the issuance of AMP securities for our net
monetary assets, which are deminimus, accompanied by a recapitalization.
Accordingly, we have not recognized any goodwill or other intangible assets in
connection with this reverse merger transaction. AMP is the surviving and
continuing entities and the historical financials following the reverse merger
transaction will be those of AMP. We were a "shell company" (as such
term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as
amended) immediately prior to our acquisition of AMP pursuant to the terms of
the Share Exchange Agreement. As a result of such acquisition, our
operations our now focused on the design, marketing and sale of modified
automobiles with an all electric drivetrain and battery systems. Consequently,
we believe that acquisition has caused us to cease to be a shell company as we
no longer have nominal operations.
On
December 29, 2009, subsequent to the acquisition of AMP, the Company entered
into an Agreement and Release with Mark DeFoor, a significant shareholder of the
Company, pursuant to which Mr. DeFoor agreed to return 3,105,000 shares of
common stock of the Company to the Company for cancellation and has provided a
full release of the Company in consideration of the transfer of all securities
of Title Starts of Kansas City, LLC, the Company’s former wholly owned
subsidiary, and all assets relating to the online abstract
business.
Results
of Operations
Expenses. Our
expenses for the nine months ended September 30, 2009 were $865,754 consisted of
payroll and payroll taxes ($461,340), legal and professional fees ($71,281),
advertising and public relations ($26,698) and $(144,050) in
batteries, motors and supplies. Our expenses for the nine months
ended September 30, 2008 were $885,915
consisted of payroll and payroll taxes ($241,541),
legal and professional fees ($113,493), advertising and public relations
($208,372) and ($216,765) in batteries, motors and
supplies. The reason for the increase in comparing the nine months
ended September 30, 2008 to the same period for 2009 was an increase in activity
in developing our products which included the hiring of additional
employees.
Expenses. Our
expenses for the year ended December 31, 2008 were $1,383,884 consisted of
payroll and payroll taxes ($389,508), legal and professional fees ($311,408) and
advertising and public relations ($182,940). Our expenses
for the year ended December 31, 2007 were $456,145 consisted of payroll and
payroll taxes ($240,712), legal and professional fees ($66,415) and advertising
and public relations ($34,748). The reason for the year ended 2008 to
2009 was an increase in activity in developing our products which included the
hiring of additional employees.
Net
loss. Net loss for the years ended December 31, 2009 and 2008 were
$1,383,884 and $104,275, respectively.
Liquidity
and Capital Resources
As
of December 31, 2008, we had current assets of $79,584 including cash of $58,303
and current liabilities of $224,147. As of September 30, 2009,
we had current assets of $31,432 including cash of $9,443 and current
liabilities of $328,217.
Operating
Activities
Our
operating activities from continuing operations resulted in a net cash used by
operations of $728,858 for the nine months ended September 30, 2009 compared to
net cash used by operations of $785,437
for the nine months ended September 30, 2008. The net cash used by
operations for the nine months ended September 30, 2009 reflects a net loss of
$863,657 offset by depreciation of $27,531, customer deposits of $50,000,
account payables of $54,070 and other minor factors. The net
cash used by operations for the nine months ended September 30, 2008 reflects a
net loss of $885,915 offset by depreciation of $45,878, account payables
of $54,600 and other minor factors.
Investing
Activities
Our
investing activities resulted in a net cash outflow of $8,502 for the nine
months ended September 30, 2009 compared to a net cash outflow of $1,485 for the
nine month ended September 30, 2008. Cash used in investing
activities principally represents capital expenditures offset by proceeds from
the sale of assets.
Financing
Activities
Our
financing activities resulted in a cash inflow of $688,500 for the nine months
ended September 30, 2009 and $600,000 for the nine months ended September 30,
2008, which represents sales of common stock by AMP.
Presently,
due to the lack of revenue we are not able to meet our operating and capital
expenses. There is doubt about our ability to continue as a going concern, as
the continuation of our business is dependent upon successful roll out of our
products and maintaining a break even or profitable level of operations. We have
incurred operating losses since inception, and this is likely to continue
through the fiscal year ending December 31, 2010.
From
October 2009 through December 2009, AMP received $445,000 in bridge loans,
which provided the funding to remain in operation during the second half of
2008. On December 28, 2009, following the acquisition of AMP by the
Company, $385,000 of the bridge loans were converted into equity of the
Company.
We
require funds to enable us to address our minimum current and ongoing expenses,
expand marketing and promotion activity connected with the development and
marketing of our products and to increase market share. Our cash on hand will
not be sufficient to satisfy all of our cash requirements as we continue to
progress and expand. We estimate that we will require between $1,500,000 and
$2,000,000 to carry out our business plan for the next twelve months. Because we
cannot anticipate when we will be able to generate revenues from sales, we will
need to raise additional funds to continue to develop our business, respond to
competitive pressures and to respond to unanticipated requirements or expenses.
If we are not able to generate significant revenues from the sale of our
products, we will not be able to maintain our operations or achieve a profitable
level of operations.
The
financial requirements of our Company will be dependent upon the financial
support through credit facilities and additional sales of our equity
securities. The issuance of additional equity securities by us may
result in a significant dilution in the equity interests of our current
shareholders. Should additional financing be needed, there is no assurance that
we will be able to obtain further funds required for our continued operations or
that additional financing will be available to us when needed or, if available,
that it can be obtained on commercially reasonable terms. If we are not able to
obtain the additional financing on a timely basis, we will not be able to meet
our other obligations as they become due and we will be forced to scale down or
perhaps even cease our operations.
We can
give no assurance that we will be successful in implementing any phase, all
phases of the proposed business plan, or that we will be able to continue as a
going concern.
Credit
Facility
Presently
we have no revolving Credit Facility established. There is no
guarantee that we will be able to enter into an agreement to establish a line of
credit or that if we do enter into such agreement that it will be on favorable
terms.
Off-Balance
Sheet Arrangements
The
Company does not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on the Company's financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to investors.
Critical
Accounting Policies and Estimates
The following accounting principles and
practices of AMP, or the Company) are set forth to facilitate the understanding
of data presented in the consolidated financial statements:
Nature of
operations
A
developing stage company, AMP is a technology-driven business that delivers a
full-performance, all electric, powertrain for passenger vehicles. Operating
with three specific approaches, AMP converts existing internal combustion engine
based vehicles to AMP designed and manufactured all electric powertrains,
provides original equipment manufacturers (OEM’s) with AMP designed and
manufactured modular electric components, and provides electric powertrain
engineering and consulting services to end-users. AMP has not recorded revenue
since inception in February 2007, and is developing its operations through a
sale, design and manufacturing facility located in Cincinnati,
Ohio.
Use of
estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Property and
depreciation
Property
and equipment is recorded at cost. Depreciation is provided on the straight-line
and accelerated methods over the estimated useful lives of the respective
assets.
Advertising
Advertising
and public relation costs are charged to operations when incurred. Advertising
and public relation expense was approximately $151,500 and $186,000 for the year
ended December 31, 2008 and the period from inception to December 31, 2008,
respectively. Advertising and public relation expense was
approximately $27,000 and $244,000 for the nine months ended September 30, 2009
and the period from inception to September 30, 2009, respectively.
Income
taxes
With
the consent of its shareholders, at the date of inception, the Company elected
under the Internal Revenue Code to become an S corporation. Since shareholders
of an S corporation are taxed on their proportionate share of the Company’s
taxable income, an S corporation is generally not subject to either federal or
state income taxes at the corporate level. Therefore, no provision or liability
for federal or state income taxes has been included in the financial statements.
The Financial Accounting Standards Board (“FASB”) has issued guidance, which
clarifies generally acceptable accounting principles for recognition,
measurement, presentation and disclosure relating to uncertain tax positions.
The guidance applies to all business enterprises. As permitted by the guidance
(as amended), AMP has elected to defer the application of the guidance until
issuance of its December 31, 2009 financial statements. For financial statements
covering periods prior to 2010, the Company evaluates uncertain tax positions in
accordance with existing generally accepted accounting principles and makes such
accruals and disclosures as might be required there under. As
of December 28, 2009, AMP is wholly-owned subsidiary of the Company and is no
longer considered an S-corporation.
Research and development
costs
AMP
expenses research and development costs as they are incurred. Research and
development expense incurred was approximately $748,000 and $1,031,000 for the
year ended December 31, 2008 and the period from inception to December 31, 2008,
respectively, consisting of consulting, payroll and payroll taxes, purchased
supplies, parts and small tools. Research and development expense
incurred was approximately $657,000 and $1,688,000 for the nine months ended
September 30, 2009 and the period from inception to September 30, 2009,
respectively, consisting of consulting, payroll and payroll taxes, purchased
supplies, parts and small tools.
Concentrations
AMP
maintains its bank deposits in accounts that, at times, may exceed federally
insured limits. AMP has not experienced any losses in such accounts and
management does not believe it is exposed to significant risk on cash and cash
equivalents.
Subsequent
events
AMP
evaluates events and transactions occurring subsequent to the date of the
financial statements for matters requiring recognition or disclosure in the
financial statements. The accompanying financial statements consider events
through November 13, 2009.
MANAGEMENT
Executive
Officers and Directors
Below are
the names and certain information regarding AMP’s executive officers and
directors following the acquisition of AMP.
|
Name
|
|
Age
|
|
Position
|
| Stephen
S. Burns |
|
50 |
|
Director
and Chief Executive Officer, Chief Financial Officer, Treasurer and
Secretary |
|
Kelvin
D. Moore (1)
|
|
61 |
|
Director |
|
Maggie
M. Moran (1)
|
|
35
|
|
Director
|
|
Mark
DeFoor (2)
|
|
37
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Kelvin D. Moore and Maggie M. Moran have been appointed as directors of the
Company subject to the filing and mailing of a Schedule 14f information
statement. They will begin service as directors of the Company on the
10th day
following the filing and mailing of a Schedule 14f information
statement.
(2) On
December 28, 2009, Mark DeFoor resigned as an executive officer of the Company
and also resigned as a director of the Company subject to the filing and mailing
of a Schedule 14f information statement.
Officers
are elected annually by the Board of Directors (subject to the terms of any
employment agreement), at its annual meeting, to hold such office until an
officer’s successor has been duly appointed and qualified, unless an officer
sooner dies, resigns or is removed by the Board.
Background
of Executive Officers and Directors
Stephen
S. Burns, Director and Chief Executive Officer, Chief Financial Officer,
Treasurer and Secretary
Mr. Burns
is a Co-Founder in AMP and has served as AMP’s CEO since
inception. Mr. Burns was appointed as CEO, CFO, Treasurer and
Secretary of the Company on December 28, 2009. Mr. Burns had founded
several companies, most recently iTookThisOnMyPhone.com, a mobile photo and
video-sharing technology company, MobileVoiceControl, Inc. a developer of
high-end speech recognition software for smartphones sold to Nuance
Communications (NASDAQ:NUAN), Inc. in 2006, AskMeNow [OTC:AKMN] a mobile search
and information delivery system sold to Ocean West Holdings in 2005,
PocketScript, the leading mobile electronic prescription system in the world
which was sold to ZixCorp [NASDAQ:ZIXI] in 2002, Over The Line/AdLink, sold to
Gannett Co. Inc. (NYSE:GCI) in 1994 and the design and development of Suspension
Parameter Measurement Machines.
Kelvin
D. Moore, Director
Mr. Moore
has been appointed to the Board of Directors of the Company subject to the
filing and mailing of a Schedule 14f information statement. Since
2009 and continuing into 2010, Mr. Moore has served as the Consultant Sales
Director of Seaborne Group. From 2004 through 2008, Mr. Moore served as a Senior
Advisor with Exit Strategy Planning Ltd. From 2001 to 2004, Mr. Moore
served as an independent human resources development
consultant. Prior to 2001, Mr. Moore held various positions in the
banking industry as well as positions with various start up
enterprises. Mr. Moore holds a degree in in Geography and Pure
Mathematics and attended Education and Development Programmes at
London Business School, IMD (Switzerland), Oxford University Business Summer
School and Sundridge Park Business School (UK).
Maggie
M. Moran, Director
Ms. Moran
has been appointed to the Board of Directors of the Company subject to the
filing and mailing of a Schedule 14f information statement. Ms.
Moran, from 2006 through 2008, served as the served in the Office of the
Governor as Deputy Chief of Staff to Gov. Jon. S. Corzine and from 2005 to 2006
as the Senior Advisor – Director, Executive Search for the then Governor-Elect
Jon S. Corzine Transition Team. From 2002 to 2005, Ms. Moran served
as the Chief of Staff to the United States Senate, Office of US Senator Jon S.
Corzine. Ms. Moran received a BA – Political Science from Douglass
College, Rutgers University in 1996 and a Mini MBA Business Essentials
Certificate from Graduate School of Business, Rutgers University in
2003. Ms. Moran serves as an Adjunct Professor at the Eagleton
Institute of Politics at Rutgers University.
Mark
DeFoor, Director
Mr.
DeFoor served as a director since inception. Mr. DeFoor has agreed to
resign subject to the filing and mailing of the Schedule 14f information
statement. Mr. DeFoor earned a Bachelor’s of Business Administration
(1993) and a Master’s of Business Administration (1995) from the University of
Missouri at Kansas City. Mr. DeFoor’s previous experience includes
the development of the National Association of Insurance Commissions Central
Repository of Producer Agents as well as the operation, purchase and sale of
several title insurance companies.
Executive
Compensation
Summary
Compensation Table
|
Name
and Principal Position
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
(5)
Stock
Awards
($)
|
|
|
(6)
Stock
Options
($)
|
|
|
Non-equity
Incentive
Plan
Compensation
($)
|
|
|
Non-Qualified
Deferred
Compensation
Earnings
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
|
Stephen
S. Burns
|
2008
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Chief
Executive Officer and Director
|
2007
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tim
Wieck (1)
|
2008
|
|
$
|
150,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
150,000
|
|
|
|
2007
|
|
$
|
125,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
125,000
|
|
|
Richard
East (1)
|
2008
|
|
$
|
150,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
150,000
|
|
|
|
2007
|
|
$
|
125,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
125,000
|
|
|
(1)
|
Serve
as engineers for Advanced Mechanical Products,
Inc.
|
Outstanding
Equity Awards at Fiscal Year-End
DIRECTOR
COMPENSATION
The
Directors of AMP have not received compensation for rendering services
as directors of AMP since inception.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
On
December 29, 2009, subsequent to the acquisition of AMP,
the Company entered
into an Agreement and Release with Mark DeFoor, a significant shareholder of the
Company, pursuant to which Mr. DeFoor agreed to return 3,105,000 shares of
common stock of
the Company to
the Company for cancellation and has provided a
full release of
the Company in consideration of the transfer of all securities
of Title Starts of Kansas City, LLC,
the Company’s former wholly owned
subsidiary, and all assets relating to the online abstract business.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information, as of December 31, 2009 with
respect to the beneficial ownership of the outstanding common stock by (i) any
holder of more than five (5%) percent; (ii) each of the Company’s executive
officers and directors; and (iii) the Company’s directors and executive officers
as a group. Except as otherwise indicated, each of the stockholders listed below
has sole voting and investment power over the shares beneficially
owned.
|
Name
of Beneficial Owner (1)
|
|
Common
Stock
Beneficially
Owned
|
|
|
Percentage
of
Common
Stock (2)
|
|
|
Stephen
S. Burns*
|
|
|
324,398
|
|
|
|
25.6%
|
|
|
Kelvin
D. Moore*
|
|
|
0
|
|
|
|
**
|
|
|
Maggie
M. Moran*
|
|
|
0
|
|
|
|
**
|
|
|
Mark
DeFoor*
|
|
|
0
|
|
|
|
**
|
|
|
John
J. Kuntz
|
|
|
192,692
|
|
|
|
15.2%
|
|
|
Mickey
W. Kowitz
|
|
|
134,301
|
|
|
|
10.6%
|
|
|
H.
Kimberly Lukens Advanced Mechanical Products, Inc. Subchapter S.
Trust***
|
|
|
105,105
|
|
|
|
8.3%
|
|
|
Gerald
Wolken
|
|
|
105,105
|
|
|
|
8.3%
|
|
|
Charles
E. Allen
|
|
|
91,480
|
|
|
|
7.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
All
officers and directors as a group (4 persons)
|
|
|
324,398
|
|
|
|
25.6%
|
|
*Executive
officer and/or director of the Company. The appointment of Mr. Moore
and Ms. Moran is subject to the filing and mailing of the Schedule 14f
information statement.
**
Less than 1%
*** H.
Kimberly Lukens is the trustee of the H. Kimberly Lukens Advanced Mechanical
Products, Inc. Subchapter S. Trust.
|
(1)
|
Except
as otherwise indicated, the address of each beneficial owner is c/o
Advanced Mechanical Products, Inc., 11103 Deerfield Road, Cincinnati, Ohio
45242.
|
|
(2)
|
Applicable
percentage ownership is based on 1,269,274 shares of common stock
outstanding as of December 31, 2009, together with securities exercisable
or convertible into shares of common stock within 60 days of December 31,
2009 for each stockholder. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to
securities. Shares of common stock that are currently
exercisable or exercisable within 60 days of December 31, 2009 are deemed
to be beneficially owned by the person holding such securities for the
purpose of computing the percentage of ownership of such person, but are
not treated as outstanding for the purpose of computing the percentage
ownership of any other person.
|
DESCRIPTION
OF SECURITIES
The
Company’s authorized capital stock consists of 425,000,000 shares of common
stock at a par value of $0.001 per share and 75,000,000 shares of preferred
stock at a par value of $0.001 per share. As of December 31, 2009,
there are 1,269,274 shares of the Company’s common stock issued and
outstanding that are held by approximately 33 stockholders of record and 8,375
shares of Series A Preferred Stock issued and outstanding.
Holders
of the Company’s common stock are entitled to one vote for each share on all
matters submitted to a stockholder vote. Holders of common stock do
not have cumulative voting rights. Therefore, holders of a majority
of the shares of common stock voting for the election of directors can elect all
of the directors. Holders of the Company’s common stock representing
a majority of the voting power of the Company’s capital stock issued,
outstanding and entitled to vote, represented in person or by proxy, are
necessary to constitute a quorum at any meeting of stockholders. A
vote by the holders of a majority of the Company’s outstanding shares is
required to effectuate certain fundamental corporate changes such as
liquidation, merger or an amendment to the Company’s articles of
incorporation.
Holders
of the Company’s common stock are entitled to share in all dividends that the
board of directors, in its discretion, declares from legally available
funds. In the event of liquidation, dissolution or winding up, each
outstanding share entitles its holder to participate pro rata in all assets that
remain after payment of liabilities and after providing for each class of stock,
if any, having preference over the common stock. The
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Information
Our
common stock was listed on the OTC Bulletin Board on July 14, 2009. The symbol
is TTSO. There has been no active trading and no high or low bid
prices.
Holders
of our Common Stock
As of
December 31, 2009, there were approximately 33 stockholders of record of our
common stock. This number does not include shares held by brokerage clearing
houses, depositories or others in unregistered form. The stock
transfer agent for our securities is Empire Stock Transfer, Inc., 1859 Whitney
Mesa Drive, Henderson, Nevada 89014.
Dividends
The
Company has never declared or paid any cash dividends on its common stock. The
Company currently intends to retain future earnings, if any, to finance the
expansion of its business. As a result, the Company does not anticipate paying
any cash dividends in the foreseeable future.
Securities
Authorized for Issuance Under Equity Compensation Plans
The
Company does not have an authorized equity compensation
plan.
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
The
Company’s directors and executive officers are indemnified as provided by the
Nevada Corporation law and its Bylaws. These provisions state that the Company’s
directors may cause the Company to indemnify a director or former director
against all costs, charges and expenses, including an amount paid to settle an
action or satisfy a judgment, actually and reasonably incurred by him as a
result of him acting as a director. The indemnification of costs can include an
amount paid to settle an action or satisfy a judgment. Such
indemnification is at the discretion of the Company’s board of directors and is
subject to the Securities and Exchange Commission’s policy regarding
indemnification.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers or persons controlling us pursuant to the
foregoing provisions, or otherwise, The Company has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
Item
3.02 Unregistered Sales of Equity Securities.
On
December 28, 2009, we entered into and closed a Share Exchange
Agreement with the AMP Shareholders pursuant to which we acquired 100% of
the outstanding securities of AMP in exchange for 1,063,636 shares of our common
stock. Considering that, following the merger, the AMP Shareholders control the
majority of our outstanding voting common stock and we effectively succeeded our
otherwise minimal operations to those that are theirs, AMP is considered the
accounting acquirer in this reverse-merger transaction. A reverse-merger
transaction is considered, and accounted for as, a capital transaction in
substance; it is equivalent to the issuance of AMP securities for our net
monetary assets, which are deminimus, accompanied by a recapitalization.
Accordingly, we have not recognized any goodwill or other intangible assets in
connection with this reverse merger transaction. AMP is the surviving and
continuing entities and the historical financials following the reverse merger
transaction will be those of AMP. We were a "shell company" (as such
term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as
amended) immediately prior to our acquisition of AMP pursuant to the terms of
the Share Exchange Agreement. As a result of such acquisition, our
operations our now focused on the design, marketing and sale of modified
automobiles with an all electric drivetrain and battery systems. Consequently,
we believe that acquisition has caused us to cease to be a shell company as we
no longer have nominal operations.
On
December 28, 2009, the Company entered a Conversion Agreement with Bowden
Transportation Ltd. (“Bowden”) pursuant to which Bowden agreed to convert a loan
in the amount of $20,000 provided to AMP on December 21, 2009 into 500 shares of
Series A Preferred Stock (the “Series A Stock”).
The
Series A Stock is convertible, at any time at the option of the holder,
into common shares of the Company based on a
conversion price of $4.70588 per share. The Series A Stock has a $40
stated value per share. The holders of the Series A Stock are not
entitled to convert the Series A Stock and receive shares of common stock such
that the number of shares of common stock held by them in the aggregate and
their affiliates after such conversion or exercise does not exceed 4.99% of the
then issued and outstanding shares of common stock. The Series A
Stock has voting rights on an as converted basis. Holders of the Series A Stock
are not entitled to receive dividends and do not hold any liquidation
rights.
On
December 29, 2009, subsequent to the acquisition of AMP, the Company entered
into an Agreement and Release with Mark DeFoor, a significant shareholder of the
Company, pursuant to which Mr. DeFoor agreed to return 3,105,000 shares of
common stock of the Company to the Company for cancellation and has provided a
full release of the Company in consideration of the transfer of all securities
of Title Starts of Kansas City, LLC, the Company’s former wholly owned
subsidiary, and all assets relating to the online abstract
business.
This
issuance of these above securities is exempt from the registration requirements
under Rule 4(2) of the Securities Act of 1933, as amended, and/or Rule 506 as
promulgated under Regulation D.
Item
3.03 Material Modification to
Rights of Security holders
The
information set forth in Item 1.01 and Item 3.02 of this Current Report on Form
8-K is incorporated by reference into this Item 3.03.
Item
5.01 Changes in Control of Registrant.
Item 5.02
Departure of Directors or Principal Officers; Election of Directors; Appointment
of Principal Officers.
The information
set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by
reference into this Item 5.02.
Item
5.06 Change in Shell Company Status.
As a
result of the consummation of the AMP Acquisition described in Item 1.01 of
this Current Report on Form 8-K, we are no longer a shell corporation as that
term is defined in Rule 405 of the Securities Act and Rule 12b-2 of
the Exchange Act.
Item 9.01 Financial Statements and
Exhibits
Financial
Statements of Business Acquired
(a) Filed
herewith are the following:
Audited
financial statements of Advanced Mechanical Products, Inc. as of December 31,
2008 (EXHIBIT A)
Unaudited
financial statements Advanced
Mechanical Products, Inc. as of September 30, 2009 (EXHIBIT
B)
(b) Pro
Forma Financial Information
Not
Applicable
(c) Shell
Company Transactions
Not
Applicable
(d) Exhibits
|
Exhibit
No.
|
|
Description
|
| |
|
|
|
3.1
|
|
Certificate
of Designation for Series A Preferred Stock
|
| |
|
|
| 10.1 |
|
Share
Exchange Agreement dated as of December 28, 2009 by and among Advanced
Mechanical Products, Inc., the shareholders of Advanced Mechanical
Products, Inc. and Title Starts Online, Inc.
|
| |
|
|
|
10.2
|
|
Agreement
and Release between Title Starts Online, Inc. and Mark DeFoor dated
December 29, 2009
|
|
|
|
|
|
10.3
|
|
Conversion
Agreement between Title Starts Online, Inc. and Bowden Transportation,
Inc. dated December 28, 2009
|
|
|
|
|
|
10.4
|
|
Conversion
Agreement between Title Starts Online, Inc. and Han Solutions II, LLC
dated December 28, 2009
|
|
|
|
|
|
10.5
|
|
Conversion
Agreement between Title Starts Online, Inc. and Ziu Zhang dated December
28, 2009
|
| |
|
|
|
21.1
|
|
|
Pursuant
to the requirements of the Securities and Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
|
|
TITLE
STARTS ONLINE, INC.
|
|
|
|
|
|
|
|
|
By:
|
/s/ Stephen
S. Burns
|
|
|
|
|
Name:
Stephen Burns
|
|
|
|
|
Title:
Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and
Director
|
|
|
|
|
|
|
Exhibit A
Advanced
Mechanical
