Tiger Oil & Energy, Inc. - Quarter Report: 2009 September (Form 10-Q)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C.
FORM 10-Q
(Mark One)
X
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2009
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission
file number 333-141875
UTEC, INC.
(Exact name of Registrant as specified in its charter)
|
NEVADA |
20-5936198 |
|
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
2420 Springer Drive, Suite 110
Norman,
OK 73069
(Address of principal executive offices)
(620) 783-1361
(Registrant’s telephone number, including area
code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 checkmark 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[ ] Yes
[X]
No (Not Required)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions 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
[ ] (Do not check if a smaller reporting company)
Smaller reporting company
[X]
1
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [X ] No [
APPLICABLE ONLY TO CORPORATE ISSUERS
As of November 16, 2009, the Company had 33,518,159 issued and outstanding shares of its common stock.
2
PART I — FINANCIAL INFORMATION
The accompanying interim unaudited financial statements of UTEC, Inc. (a Nevada corporation) are condensed and, therefore, do not include all disclosures normally required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the Company's most recent annual financial statements for the year ended December 31, 2008 included in a 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on April 15, 2009. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying interim financial statements and consist of only normal recurring adjustments. The results of operations presented in the accompanying interim financial statements for the nine months ended September 30, 2009 are not necessarily indicative of the operating results that may be expected for the full year ending December 31, 2009.
3
UTEC, INC.
Consolidated Financial Statements
September 30, 2009 and December 31, 2008
4
Contents
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4T. Controls and Procedures
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
5
UTEC, INC.
Condensed Notes to Consolidated Financial Statements
September 30, 2009 and December 31, 2008
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Business Activity
UTEC INC., formerly Lyon Capital Venture Corp., is a Nevada corporation organized on November 8, 1993 as a “For Profit” corporation for the purpose of engaging in any lawful activity. The Company was in the development stage through December 31, 2006. The year ended December 31, 2007, is the first year during which the Company is considered an operating company and was no longer considered in a development stage. On January 10, 2007, the Company purchased 100% of the shares of UTEC Corporation, Inc for a total consideration of 22,500,000 of the Company’s par value $0.001 common shares and 20,000 of the Company’s par value $0.001 preferred shares. The Company also issued 2,525,000 common shares in finder’s fees.
The Company’s business is to offer state of the art testing and analysis to clients worldwide. The Company is a leader in commercial explosives technology, including development, analysis, testing and manufacturing.
The Company operates a chemical research and development laboratory near Riverton, Kansas, which specializes in commercial explosives development and analysis. The Company also operates a destructive test facility near Hallowell, Kansas, which specializes in determining the detonating characteristics of commercial explosives.
In 2007, the Company licensed technology covering the use of cold plasma oxidizer technology for the destruction of solid and liquid hazardous chemicals and biologicals. During 2007 and 2008, the Company worked to validate the technology and prepare a business plan for its commercialization.
In April 2009, the Company divested its commercial explosives development, analysis, testing and manufacturing business (“Legacy Business”) to eliminate the need to inject new capital into the Company to support this business, and concentrate on raising the funds necessary to commercialize its hazardous waste destruction business in exchange for 22,500,000 shares of its common stock.
b) Unaudited Consolidated Financial Statements
The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at September 30, 2009 and for all periods presented have been made.
Certain information and 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. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2008 audited financial statements. The results of operations for the period ended September 30, 2009 and 2008 are not necessarily indicative of the operating results for the full year.
UTEC, INC.
Condensed Notes to Consolidated Financial Statements
September 30, 2009 and December 31, 2008
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
c) New Accounting Pronouncements
In May 2009, the FASB issued FAS 165, “Subsequent Events”. This pronouncement establishes standards for accounting for and disclosing subsequent events (events which occur after the balance sheet date but before financial statements are issued or are available to be issued). FAS 165 requires and entity to disclose the date subsequent events were evaluated and whether that evaluation took place on the date financial statements were issued or were available to be issued. It is effective for interim and annual periods ending after June 15, 2009. The adoption of FAS 165 did not have a material impact on the Company’s financial condition or results of operation.
In June 2009, the FASB issued FAS 166, “Accounting for Transfers of Financial Assets” an amendment of FAS 140. FAS 140 is intended to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets: the effects of a transfer on its financial position, financial performance , and cash flows: and a transferor’s continuing involvement, if any, in transferred financial assets. This statement must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009. The Company does not expect the adoption of FAS 166 to have an impact on the Company’s results of operations, financial condition or cash flows.
In June 2009, the FASB issued FAS 167, “Amendments to FASB Interpretation No. 46(R) ”. FAS 167 is intended to (1) address the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, as a result of the elimination of the qualifying special-purpose entity concept in FAS 166, and (2) constituent concerns about the application of certain key provisions of Interpretation 46(R), including those in which the accounting and disclosures under the Interpretation do not always provided timely and useful information about an enterprise’s involvement in a variable interest entity. This statement must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009. The Company does not expect the adoption of FAS 167 to have an impact on the Company’s results of operations, financial condition or cash flows.
In June 2009, the FASB issued FAS 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles”. FAS 168 will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009.The Company does not expect the adoption of FAS 168 to have an impact on the Company’s results of operations, financial condition or cash flows.
UTEC, INC.
Condensed Notes to Consolidated Financial Statements
September 30, 2009 and December 31, 2008
NOTE 2: GOING CONCERN ASSUMPTION
The Company’s group of activities consists solely of UTEC Corporation. The legacy activities of UTEC Corporation have not been sufficient to fund development and commercialization of the waste destruction business and consequently, for the past several months, the Directors and Management of UTEC, Inc. have been exploring various means to continue the growth of the business and fund the final development and commercialization of the waste destruction technology licensed from Ceramatec, Inc. in early 2007.
A decision was made to sell the legacy business to Energetic Systems, Inc., LLC., and retain within the UTEC consolidated group the Ceramatec license and waste destruction assets developed over the past two years. This will minimize the immediate cash requirements of the company. The sale was completed on April 26, 2009, effective as of April 1, 2009. UTEC, Inc. and its wholly owned subsidiary UTEC Corporation will continue as public companies, retaining the assets of the waste destruction business.
Following the sale, the companies do not have any significant operations to fund, but do have some liabilities related to the purchase and development of the waste destruction units that need to be satisfied within a few months of the sale of the legacy business in order to continue as a going concern. In addition, UTEC Inc. needs to link up with a financial partner capable of funding the business plan for the waste destruction business. Management believes this can be accomplished and has considering various options to acquire this funding, but has not yet entered into an agreement to do so.
Intangible assets consist of the following at September 30, 2009 and December 31, 2008:
|
|
|
2009 |
|
|
2008 |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Patent rights |
$ |
-0- |
|
$ |
71,750 |
|
Accumulated amortization |
|
-0- |
|
|
(10,174) |
|
|
$ |
-0- |
|
$ |
61,576 |
The Patent rights are based upon the contractual agreement between the Company and Ceramatec, as described in Note 4. The Company is amortizing these Patent rights over 17 years. On September 2, 2009 the contract with Ceramatec was cancelled due to nonperformance. Accordingly, the assets associated with the contract were impaired and an impairment expenses was recorded as detailed in Note 7.
NOTE 4: CONTRACTUAL OBLIGATIONS
Ceramatec, Inc.
Effective February 1, 2007, the company entered into a License and Supply Agreement with Ceramatec, Inc. of Salt Lake City, Utah (“License”) for a world wide exclusive royalty-free license to practice Cermatec’s Gild Arc Plasma Oxidizer technology for the destruction of solid and liquid hazardous chemicals and biologicals. The agreement continues to the full end of the term or terms for which patent rights held by Ceramatec and related to the technology have not expired.
UTEC, INC.
Condensed Notes to Consolidated Financial Statements
September 30, 2009 and December 31, 2008
NOTE 4: CONTRACTUAL OBLIGATIONS (CONTINUED)
In connection with the agreement, the Company granted 850,000 shares of its Common Stock to Ceramatec. Subject to any Securities and Exchange Commission regulations, Ceramatec may sell its stock starting two years from the Effective Date of the agreement. The Ceramatec agreement provided for (i) a license to the technology, (ii) support with the technology and (iii) a supply agreement with Ceramatec in exchange for the shares provided.
The shares to Ceramatec were provided for item (i), the license. The support and supply agreement (i & ii) were included in the supply agreement and payments made to Ceramatec to purchase the equipment and units specified in the agreement.
The restricted stock given in exchange for the exclusive licensing agreement with Ceramatec was valued at $0.0842 per share. This value was adopted from the calculation of the value of the restricted shares given in exchange for the acquired company, Utec Corporation. The agreement with Ceramatec is dated February 1, 2007 within three weeks of the day UTEC Corporation was acquired. Although the market price at the close of business on February 1, 2007 was $0.52 per share a true trading market for the stock had not been established during that brief period and Management believed a more accurate fair value was represented by the value established in the acquisition of Utec Corporation. The Company has accounted for its share-based payments in accordance with SFAS 123(R), “Share Based Payments”, and EITF Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”.
If Ceramatec is not able to sell its stock granted under this agreement for at least $700,000 within the first two years after it is allowed to sell its stock under this agreement, then any license granted under this agreement shall become non-exclusive. Ceramatec agreed to pay a finders fees of 85,000 shares to a third party in connection with this agreement.
The Company is amortizing the asset over seventeen (17) years, which is the estimated remaining life of the patents to which the Company has exclusivity rights. See Note 5.
During the term of the License, the company is obligated to purchase plasma oxidizer units from Ceramatec in order to maintain exclusivity under the license agreement. The company’s minimum obligations under this purchase arrangement are $100,000 in 2008, $200,000 in 2009 and $600,000 for each remaining year of the agreement. If the minimum purchase requirement is not met for any year, the license grant of this agreement shall automatically convert from exclusive to nonexclusive for the remainder of the term of the agreement.
The License includes a provision that entitles the Company to any improvements to the technology, whether patentable or not, without further cost to the Company.
On September 30, 2009, this contract with Ceramatec was cancelled. As of September 30, 2009, the Company had not made any purchases from Ceramatec against the minimum obligations for 2009, and the Company owed Ceramatec $111,457 with respect to purchases during 2008 which is included in accounts payable and accrued liabilities.
UTEC, INC.
Condensed Notes to Consolidated Financial Statements
September 30, 2009 and December 31, 2008
Effective March 26, 2008 the restricted shares issued pursuant to the Employee Stock Ownership Plan dated January 11, 2007 were cancelled in their entirety, except for 16,000 which were misplaced by the employee and will be cancelled in a timely manner. The Plan has since been rescinded.
In its place each employee signed an Employee Stock Option Plan dated March 26, 2008. The plan contains no provision for vesting and each employee may exercise their rights to purchase shares at the strike price of $0.25 on the plan date. The unexercised options terminate at the end of five years or upon the employee being terminated from the Company whichever is earlier.
The fair value of each option award is estimated on the date of grant using a Black-Scholes valuation model that uses the assumptions noted in the following table. Expected volatilities are based on implied volatilities from traded options on the Company’s stock in addition to other publicly traded companies stock within the market segment of industrial waste management. This is due primarily to the fact that The Company does not have enough history to properly ascertain the volatility rate. The expected term of options granted is also estimated since the company does not have a history of granting stock rights and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the Libor rate in effect at the time of grant.
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|
|
|
|
FYE 2008 |
|
Expected volatility |
71.44% |
|
Expected dividends |
0.00 |
|
Expected term (in years) |
3.5 |
|
Risk-free rate |
2.67% |
A summary of the status of The Company’s non-vested stock options granted with this plan as of September 30, 2009 is presented below:
|
Non-vested Options |
Options (000) |
Weighted Average Grant-Date Fair Value |
|
|
|
|
|
Non-vested at January 1, 2009 |
$ 1,914 |
$ 0.24 |
|
Granted |
- |
- |
|
Vested |
1,914 |
0.24 |
|
Forfeited |
- |
- |
|
Non-vested at September 30, 2009 |
$ - |
$ - |
UTEC, INC.
Condensed Notes to Consolidated Financial Statements
September 30, 2009 and December 31, 2008
NOTE 5: EMPLOYEE STOCK PLAN (CONTINUED)
On March 29, 2009 stock options totaling 5,650,000 of its $0.001 par value common stock to key employees, consultants and officers and directors in a non-qualified stock option plan with a conversion period of 10 years, at a conversion price of $0.01 for past fully completed services. Using the Black-Scholes method of valuing the options detailed above the options were valued using the following assumptions:
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|
|
|
|
FYE 2009 |
|
Expected volatility |
71.44% |
|
Expected dividends |
0.00 |
|
Expected term (in years) |
5.00 |
|
Risk-free rate |
2.11% |
A summary of the status of The Company’s non-vested stock options granted with this plan as of September 30, 2009 is presented below:
|
Non-vested Options |
Options (000) |
Weighted-Average Grant-Date Fair Value |
|
Non-vested at January 1, 2009 |
$ - |
$ 0.236 |
|
Granted |
5,650 |
0.006 |
|
Vested |
5,650 |
0.006 |
|
Forfeited |
- |
- |
|
Non-vested at September 30, 2009 |
$ - |
$ - |
For the nine months ending September 30, 2009 and 2008 share based compensation expense of $66,200 and $33,151 was recognized, respectively.
NOTE 6: DISCONTINUED OPERATIONS
In April 2009, the Company sold its commercial explosives development, analysis, testing and manufacturing business (“Legacy Business”) in a non-cash transaction to a related party in exchange for stock in the Company totaling 22,500,000 shares. The stock was cancelled in July of 2009.
A breakdown of the loss associated with the discontinued is presented in the table below.
|
|
Three Months Ended September 30, 2009 |
|
Three Months Ended September 30, 2008 |
|
Nine Months Ended September 30, 2009 |
|
Nine Months Ended September 30, 2008 |
|
Income |
$ -0- |
|
$ 821,361 |
|
$ 1,039,595 |
|
$ 1,888,427 |
|
Cost of Goods Sold |
-0- |
|
247,477 |
|
353,544 |
|
521,259 |
|
Operating expenses |
-0- |
|
514,584 |
|
460,353 |
|
1,368,763 |
|
Net Operating Income (Loss) |
-0- |
|
59,300 |
|
225,698 |
|
(1,595) |
|
Loss on disposal of assets |
-0- |
|
-0- |
|
(1,730,742) |
|
-0- |
|
Tax benefit at 34% |
-0- |
|
23,100 |
|
-0- |
|
(4,300) |
|
Net income (loss) |
$ -0- |
|
$ 36,200 |
|
$ (1,505,044) |
|
$ 2,705 |
UTEC, INC.
Condensed Notes to Consolidated Financial Statements
September 30, 2009 and December 31, 2008
NOTE 7: IMPAIRMENT OF INTANGIBLE ASSETS
Effective February 1, 2007, the company entered into a License and Supply Agreement with Ceramatec, Inc. of Salt Lake City, Utah (“License”) for a world-wide exclusive royalty-free license to practice Cermatec’s Gild Arc Plasma Oxidizer technology for the destruction of solid and liquid hazardous chemicals and biologicals. The agreement continued to the full end of the term or terms for which patent rights held by Ceramatec and related to the technology have not expired.
The company recognized an intangible asset associated with this license and patent right and is amortizing this asset over the 17 year useful life of the contract. On September 2, 2009, this contract with Ceramatec was cancelled due to non-performance. In conjunction with the cancellation of the contract, management has evaluated the intangible asset for impairment and has determined that with no contract in place, the asset no longer has an economic value to the Company. Accordingly, the Company has impaired the entire carrying value of the asset and recognized an impairment of intangible asset expense of $60,343.
NOTE 8: SUBSEQUENT EVENTS
On October 01, 2009 the Company entered into an agreement to purchase 100% of the outstanding shares of C2R Energy Commodities, Inc., a Nevada corporation in exchange for 4,050,000 shares of the Company’s restricted common stock.
On October 20, 2009 the Company sold 600,000 shares of restricted common stock for $0.05 per share.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
2007 was the first year of operation for the Company, after it acquired the UTEC Corporation from Energetic Systems Inc, LLC. In 2007, the Company was organized into three marketing units, Energetic Materials, Specialty Chemicals and Raw Materials and Hazardous Chemicals and Biological Waste Destruction. The Company’s historical legacy business was primarily constituted by the first two marketing units and almost exclusively within the commercial explosives market. Revenue comparisons are included from these two activities.
The new marketing unit, Hazardous Chemicals and Biological Waste Destruction was in a development stage through June of 2009, and had no commercial revenues. Focus has been on licensing and validation of the Cold Plasma Oxidizer technology, and on the development of the Company’s Waste Destruction System, identification of potential markets, and preparation of its business plan. This business unit was structured in order to pursue commercialization of Cold Plasma Oxidizer waste destruction systems during 2009.
During the latter part of 2008, the Directors and Management conducted a review of the Company’s business prospects and concluded that the legacy activities of UTEC Corporation were not sufficient to fund development and commercialization of the waste destruction business. Consequently, the Directors and Management began exploring various means to continue the growth of the business and fund the final development and commercialization of the waste destruction technology licensed from Ceramatec. A decision was made to sell the legacy business to Energetic Systems, Inc., LLC., and retain within the UTEC consolidated group the Ceramatec license and waste destruction assets developed over the past two years. The effect of this will be to simplify and focus the activities of the Company on the waste destruction business, eliminate the need to inject additional cash required to fund the legacy business, and thereby make the Company more attractive to potential lenders and investors.
The sale was completed on April 26, 2009, with effect from April 1, 2009. UTEC, Inc. and its wholly owned subsidiary UTEC Corporation will continue as public companies, retaining the assets of the waste destruction business.
On September 2, 2009 the Company received a termination notice from Ceramatec that this agreement was cancelled for non-performance. The Company had issued 850,000 of its $.001 par value common shares to Ceramatec that Ceramatec could sell starting two years from the date of the agreement. These unregistered shares were issued under section 4(2) of the Securities Act of 1933 as they were transactions by an issuer not involving any public offering. The Company has received assurances that the 765,000 shares still held by Ceramatec issued under this agreement will be returned to treasury.
On October 1, 2009 the Company purchased 100% of the outstanding shares of C2R Energy Commodities Inc for the issuance of 4,050,000 of the Company’s $0.001 par value common shares. These unregistered shares were issued under section 4(2) of the Securities Act of 1933 as they were transactions by an issuer not involving any public offering.
Revenues
Revenues from continuing operations for the three and nine months ended September 30, 2009 were $-0- and $-0-. The Company divested all assets that generated revenue in prior periods as part of the sale of the legacy business.
Expenses
Expenses from continuing operations for the three and nine month periods ended September 30, 2009 were $136,396 and $246,222. For the same periods ended September 30, 2008, expenses were $24,771 and $87,177. The majority of the remaining expenses are composed of $75,000 and $100,000 in compensation to officers of the Company for the three and nine months ended September 2009, respectively. The Company also recorded a one-time write-down of its intangible assets of $60,343 during the three months ended September 30, 2009.
Discontinued Operations
In April 2009, the Company sold its commercial explosives development, analysis, testing and manufacturing business (“Legacy Business”) in a non-cash transaction to a related party in exchange for stock in the Company totaling 22,500,000 shares. The stock was cancelled in July of 2009.
A breakdown of the loss associated with the discontinued is presented in the table below.
|
|
Three Months Ended September 30, 2009 |
|
Three Months Ended September 30, 2008 |
|
Nine Months Ended September 30, 2009 |
|
Nine Months Ended September 30, 2008 |
|
Income |
$ - |
|
$ 821,361 |
|
$ 1,039,595 |
|
$ 1,888,427 |
|
Cost of Goods Sold |
- |
|
247,477 |
|
353,544 |
|
521,259 |
|
Operating expenses |
- |
|
537,684 |
|
460,353 |
|
1,364,463 |
|
Net Operating Income (Loss) |
- |
|
36,200 |
|
225,698 |
|
2,705 |
|
Loss on disposal of assets |
- |
|
- |
|
(1,730,742) |
|
- |
|
Tax benefit at 34% |
- |
|
- |
|
- |
|
- |
|
Net income (loss) |
$ - |
|
$ 36,200 |
|
$ (1,505,044) |
|
$ 2,705 |
Liquidity and Capital Resources
As of September 30, 2009, the Company had $-0- cash on hand. When UTEC Corporation was formed and acquired by UTEC, Inc., management believed that the Company would need approximately $500,000 to properly fund operations until such time as the Company was able to generate enough cash flow from increased or new business to generate appropriate amounts of working capital. This money was to be raised via a secondary offering or through private placements. Due to current financial market conditions, the Company was unable to externally finance, through independent third parties, the projected $500,000 management believed would be necessary to properly fund operations, and failed to generate the required funds from new or increased business.
The legacy activities of UTEC Corporation have not been sufficient to fund development and commercialization of the waste destruction business and consequently, for the past several months, the Directors and Management of UTEC, Inc. have been exploring various means to continue the growth of the business and fund the final development and commercialization of the waste destruction technology licensed from Ceramatec, Inc. in early 2007. It was decided to sell the legacy business to Energetic Systems, Inc., LLC. and retain within the UTEC consolidated group the Ceramatec license and waste destruction assets developed over the past two years, thereby minimizing the immediate cash requirements of the company.
The sale was completed on April 26, 2009, effective as of April 1, 2009. UTEC, Inc. and its wholly owned subsidiary UTEC Corporation will continue as public companies, retaining the assets of the waste destruction business. Following the sale, the companies do not have any significant operations to fund, but do have some liabilities related to the purchase and development of the waste destruction units that need to be satisfied within a few months of the sale of the legacy business in order to continue as a going concern. In addition, UTEC Inc. needs to link up with a financial partner capable of funding the business plan for the waste destruction business. Management believes this can be accomplished and has been considering various options to acquire this funding, but has not yet entered into an agreement to do so.
On September 2, 2009 the Company received a termination notice of the license from Ceramatec that this agreement was cancelled for non-performance.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
Item 4T. Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
-
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
-
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
-
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of September 30, 2009, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) inadequate segregation of duties consistent with control objectives. The aforementioned material weakness was identified by our Chief Executive Officer in connection with the review of our financial statements as of September 30, 2009.
Management believes that the material weakness set forth above did not have an effect on our financial results.
Changes in internal controls over financial reporting
There was no
change in our internal controls over financial reporting that occurred during
the period covered by this report that has materially affected, or is reasonably
likely to materially affect, our internal controls over financial reporting.
PART II — OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On October 1, 2009 the Company purchased 100% of the outstanding shares of C2R Energy Commodities Inc for the issuance of 4,050,000 of the Company’s $0.001 par value common shares. These unregistered shares were issued under section 4(2) of the Securities Act of 1933 as they were transactions by an issuer not involving any public offering.
Item 5. Other Information
On October 1, 2009, the Board of Directors asked Suresh Subramanian to step down as President and J. Curt Stafford to step down as CFO of the Company pursuant to a condition of the Company’s agreement with CR2 Energy Commodities Corp. Effective October 1, 2009, the Board of Directors appointed Fortunato Villamagna President and CEO; Kenneth B. Liebscher as Secretary and Howard Bouch as CFO.
Item 6. Exhibits
Exhibits:
|
Exhibit No. |
Document |
Location |
|
31 |
Rule 13a-41(a)/15d-14(a) Certificates |
Included |
|
32 |
Section 1350 Certifications |
Included |
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.
UTEC, INC.
November 17, 2009
/s/ Fortunato Villamagna
Date
Fortunato Villamagna, Director & CEO,