As of June 30, 2013, there was $2,830 of unrecognized compensation cost related to unvested stock options. The Company intends to issue new shares to satisfy share option exercises.
On June 3, 2013, the Company entered into a settlement agreement (the Settlement Agreement) with Tony Osibov (Osibov) settling all outstanding claims between the Company and Osibov. As consideration for the Settlement Agreement, the Company agreed to pay Mr. Osibov $24,000 of which $15,000 had been paid as of June 30, 2013 and $9,000 remained in accounts payable. Mr. Osibov agreed to sell his 300,000 shares of common stock in the Company to unaffiliated third parties for $6,000 within 30 days from the date of the Settlement Agreement. Additionally, Mr. Osibov relinquished the Company and the Companys CEO from any and all rights that he has alleged that he has to any intellectual property of the Company except for the relinquishment of the PHP object oriented application backup system for creating application programming interfaces, called PHPMC which both the Company and Osibov are free to use.
NOTE 6 SUBSEQUENT EVENTS
On July 1, 2013, the Company transferred all of its assets and business operations to SaaSMAX Corp., the Companys wholly-owned subsidiary (the Subsidiary), in exchange for the Subsidiary assuming all of the Companys indebtedness at that date, other than Convertible Notes totaling $225,000.
On July 10, 2013, we entered into a Share Exchange Agreement (the Share Exchange Agreement) with Dina M. Moskowitz, our sole executive officer and director. The Share Exchange Agreement contemplates the cancellation by Ms. Moskowitz of 2,156,704 common shares of the Company in consideration of all of the issued and outstanding common shares of the Subsidiary.
On July 22, 2013, upon closing of the Share Exchange Agreement, Dina M. Moskowitz resigned as the Companys Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and as a Director. The resignations of Ms. Moskowitz were made in accordance with the terms of the Share Exchange Agreement and were not due to any disagreements with the Company. Upon the tendering of Ms. Moskowitzs resignations, Rob Rainer was appointed a Director and as the Companys Chief Financial Officer, Secretary and Treasurer and Harold C. Moll was appointed a Director and as the Companys Chief Executive Officer and President.
On July 23, 2013, in connection with the closing the Share Exchange Agreement Ms. Moskowitz returned for cancellation 2,156,704 shares of the Companys common stock, representing all of the shares beneficially owned by her.
There was a change in control of the Company as a result of (i) the issuance of 1,500,000 shares of the Companys common stock to new management, and (ii) the cancellation of the 2,156,704 shares of the Companys common stock held by Ms. Moskowitz.
We entered into an agreement dated July 9, 2013 (the Exclusive Distributor Agreement) with California Clean Air Technologies, LLC, a Nevada limited liability company (CCAT) whereby the Company obtained the exclusive distribution rights in Canada (non-exclusive for British Columbia, Alberta and Saskatchewan) to market, sell and distribute a propane diesel duel fuel retrofit system (DFRS Products) owned by CCAT.
The Exclusive Distributor Agreement is for a term of five (5) years unless sooner terminated in accordance with the provisions of the Exclusive Distributor Agreement. The Company has the right to extend the Agreement for an additional five (5) year term, if it is in compliance with the Minimum Royalty requirements described below.
Under the terms of the Exclusive Distributor Agreement, as consideration for the exclusive distribution rights, the Company (i) issued 25,000 shares of its common stock to CCAT, and (ii) issued a promissory note in the principal amount of $50,000 payable without interest on July 30, 2013. As additional consideration for the Exclusive Distributor Agreement, the Company will pay to CCAT a royalty of $750 per sale of DFRS Products. CCAT will have the exclusive rights to install the DFRS Products at a fixed price between $2,500 and $5,000, depending on the size of the engine. CCAT may, on 30 days written notice, terminate the Exclusive Distributor Agreement if the Company fails to achieve sufficient sales to generate Minimum Royalties of $22,500 (Year 1), $37,500 (Year 2), $60,000 (Year 3), $82,500 (Year 4), and $105,000 (Year 5).
Share Issuances
On July 9, 2013, we issued 25,000 shares of our common stock to California Clean Air Technologies, LLC (CCAT) as part consideration of the exclusive distribution rights granted by CCAT to the Company. The shares were issued pursuant to Rule 506 of Regulation D of the Securities Act and CCAT has represented that it is an accredited investor as defined in Regulation D of the Securities Act.
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On July 18, 2013, we issued an aggregate of 828,574 shares of our common stock (the Conversion Shares) as payment for $225,000 of Convertible Notes as follows:
We issued 250,000 and 214,287 Conversion Shares at a conversion price of $0.20 and $0.35, respectively, pursuant to the provisions of Regulation S of the Securities Act of 1933, as amended (the Securities Act). Each of the subscribers represented that they were not US persons as defined in Regulation S of the Securities Act and that they were not acquiring the shares for the account or benefit of a US person.
We issued 125,000 and 214,287 Conversion Shares at a conversion price of $0.20 and $0.35, respectively, pursuant to the provisions of Rule 506 of Regulation D of the Securities Act. Each U.S. subscriber except one represented that they were an accredited investor as defined under Regulation D of the Securities Act.
On July 22, 2013, we issued an aggregate of 1,500,000 shares of our common stock (the Earn-Out Shares) 750,000 each to Harold C. Moll and Rob Rainer under the terms of management consulting agreements entered into by the Company and each of Mr. Moll and Mr. Rainer. The Earn-Out Shares are held in the custody of the Company and will be released on the basis of 10% of the original number of Earn-Out Shares on each anniversary of the management consulting agreements. The Earn-Out Shares may not be sold, transferred or pledged, and are subject to forfeiture under the termination provisions of the management consulting agreements. The Earn-Out Shares were issued as part consideration for Mr. Molls agreement to act as the Companys Chief Executive Officer, President and as a Director and for Mr. Rainers agreement to act as the Companys Chief Financial Officer, Secretary, Treasurer and as a Director pursuant to the exemption from registration contained in Section 4(2) of the Securities Act.
On August 14, 2013, our Board of Directors approved the issuance 300,000 shares of our common stock at a price of $0.50 per share pursuant to Regulation S of the Securities Act and each of the subscribers represented that they were not US persons as defined in Regulation S of the Securities Act and that they were not acquiring the shares for the account or benefit of a US person. Formal closing of private place is expected to occur within the next few days.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q constitute "forward-looking statements. These statements, identified by words such as plan, "anticipate, "believe, "estimate, "should, "expect" and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from those described in the forward-looking statements. Such risks and uncertainties include those set forth under the caption "Part II, Item 1A. Risk Factors and elsewhere in this Quarterly Report on Form 10-Q. We advise you to carefully review the reports and documents we file from time to time with the United States Securities and Exchange Commission (the SEC), particularly our periodic reports filed with the SEC pursuant to the Securities Exchange Act of 1934 (the Exchange Act).
OVERVIEW
We were incorporated on January 19, 2011 under the laws of the State of Nevada. We were formerly developing and launching an online business-to-business marketplace and channel management tools for the rapidly growing software-as-a-service ("SaaS") market (the SaaSMAX Marketplace). We have decided to shift our business operations to the marketing, selling and distribution of a propane diesel dual fuel retrofit system (DFRS Products) owned by California Clean Air Technologies, LLC, a Nevada limited liability company (CCAT).
Exclusive Distributor Agreement
We entered into an agreement dated July 9, 2013 (the Exclusive Distributor Agreement) with California Clean Air Technologies, LLC, a Nevada limited liability company (CCAT) for the exclusive distribution rights in Canada (non-exclusive for British Columbia, Alberta and Saskatchewan) to market, sell and distribute a propane diesel dual fuel retrofit system (DFRS Products) owned by CCAT. See Exclusive Distributor Agreement below.
CCAT and DFRS Products
California Clean Air Technologies, LLC, a Nevada limited liability company (CCAT), is a Southern California-based developer, marketer and distributor of diesel engine retrofit products, including a patent-pending Propane Diesel Dual-Fuel Retrofit System
TM
(DFRS). DFRS is a retrofit system that demonstrates high (approximately 50%) substitution rates of propane fuel for diesel fuel without loss of power or torque, while exhibiting very low emissions of pollutants, such as hydrocarbons (HC), nitrogen oxides (NOx), carbon monoxide (CO), and particulate matter (PM or soot).
In November 2011, the California Air Resource Board (CARB) awarded CCAT an Alternative Fuel Certification for a dual-fuel device. CARB is a widely recognized global leader in air quality regulations and related research. CARB certification is recognized by the US EPA and all 50 states.
The national market contains approximately 16 million potential engines to be retrofitted on-road and 4.4 million off-road. CCATs initial business focus is to sell to the off-road mobile and stationary markets where it believes it has no serious competition.
Acquisition of CCAT
We are also negotiating to acquire CCAT. The proposed acquisition would involve the issuance of a very large number (control block) of our common shares to CCATs owners and would be conditional on us having available significant financing for the development of CCATs business. The exact terms of the proposed acquisition have not been established. There is no assurance that the negotiations will be successful or that we will be able to raise the necessary funding for CCATs business.
Recent Corporate Developments
We experienced the following Corporate Developments since the filing of our Quarterly Report on Form 10-Q for the three months ended March 31, 2013:
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Exclusive Distributor Agreement
We entered into an agreement dated July 9, 2013 (the Exclusive Distributor Agreement) with California Clean Air Technologies, LLC, a Nevada limited liability company (CCAT) for the exclusive distribution rights in Canada (non-exclusive for British Columbia, Alberta and Saskatchewan) to market, sell and distribute a propane diesel dual fuel retrofit system (DFRS Products) owned by CCAT.
The Exclusive Distributor Agreement is for a term of five (5) years unless sooner terminated in accordance with the provisions of the Exclusive Distributor Agreement. We have the right to extend the Agreement for an additional five (5) year term, if it is in compliance with the Minimum Royalty requirements described below.
Under the terms of the Exclusive Distributor Agreement, as consideration for the exclusive distribution rights, we (i) issued 25,000 shares of our common stock to CCAT, and (ii) issued a promissory note in the principal amount of $50,000 payable without interest on July 30, 2013. As additional consideration for the Exclusive Distributor Agreement, we will to pay to CCAT a royalty of $750 for each DFRS Product sold. CCAT will have the exclusive rights to install the DFRS Products at a fixed price between $2,500 and $5,000, depending on the size of the engine. CCAT may, on 30 days written notice, terminate the Exclusive Distributor Agreement if we fail to achieve sufficient sales to generate Minimum Royalties of $22,500 (Year 1), $37,500 (Year 2), $60,000 (Year 3), $82,500 (Year 4), and $105,000 (Year 5).
Share Exchange Agreement
On July 10, 2013, we entered into a Share Exchange Agreement (the Share Exchange Agreement) with Dina M. Moskowitz, our sole executive officer and director. The Share Exchange Agreement contemplates the cancellation by Ms. Moskowitz of 2,156,704 our common shares in consideration of all of the issued and outstanding common shares of SaaSMAX Corp., our wholly-owned subsidiary (the Subsidiary) (previously by Asset Purchase Agreement dated July 1, 2013, we had transferred all of our assets and business operations to the Subsidiary in exchange for the Subsidiary assuming all of our indebtedness at that date, other than convertible promissory notes totaling $225,000.
Under the terms of the agreement, we agreed that the name and goodwill associated with the name SaaSMAX will be the exclusive property of the Subsidiary, and we agreed that as soon as practicable, we will change our corporate name to a name not using the word SaaSMAX. Further, during the interim period between the date of the Share Exchange Agreement and the date upon which we change our corporate name, we will not compete with the business of the Subsidiary.
On July 22, 2013, upon closing of the Share Exchange Agreement, Dina M. Moskowitz resigned as our Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and as a Director. The resignations of Ms. Moskowitz were made in accordance with the terms of the Share Exchange Agreement and were not due to any disagreements with us. Upon the tendering of Ms. Moskowitzs resignations, Rob Rainer was appointed a Director and as our Chief Financial Officer, Secretary and Treasurer and Harold C. Moll was appointed a Director and as our Chief Executive Officer and President.
On July 23, 2013, in connection with the closing the Share Exchange Agreement Ms. Moskowitz returned for cancellation 2,156,704 shares of our common stock, representing all of the shares beneficially owned by her.
There was a change in control as a result of (i) the issuance of 1,500,000 shares of our common stock to new management, and (ii) the cancellation of the 2,156,704 shares of our common stock held by Dina M. Moskowitz, our former sole officer and director.
Share Issuances
On July 9, 2013, we issued 25,000 shares of our common stock to California Clean Air Technologies, LLC (CCAT) as part consideration of the exclusive distribution rights granted by CCAT to us. The shares were issued pursuant to Rule 506 of Regulation D of the Securities Act and CCAT has represented that it is an accredited investor as defined in Regulation D of the Securities Act.
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On July 18, 2013, we issued an aggregate of 828,574 shares of our common stock (the Conversion Shares) on exercise of $225,000 of convertible notes as follows:
We issued 250,000 and 214,287 Conversion Shares at a conversion price of $0.20 and $0.35, respectively, pursuant to the provisions of Regulation S of the Securities Act of 1933, as amended (the Securities Act). Each of the subscribers represented that they were not US persons as defined in Regulation S of the Securities Act and that they were not acquiring the shares for the account or benefit of a US person.
We issued 125,000 and 214,287 Conversion Shares at a conversion price of $0.20 and $0.35, respectively, pursuant to the provisions of Rule 506 of Regulation D of the Securities Act. Each U.S. subscriber except one represented that they were an accredited investor as defined under Regulation D of the Securities Act.
On July 22, 2013, we issued an aggregate of 1,500,000 shares of our common stock (the Earn-Out Shares) 750,000 each to Harold C. Moll and Rob Rainer under the terms of management consulting agreements entered into by each of Mr. Moll and Mr. Rainer and us. The Earn-Out Shares are held in our custody and will be released on the basis of 10% of the original number of Earn-Out Shares on each anniversary of the management consulting agreements. The Earn-Out Shares may not be sold, transferred or pledged, and are subject to forfeiture under the termination provisions of the management consulting agreements. The Earn-Out Shares were issued as part consideration for Mr. Molls agreement to act as the our Chief Executive Officer, President and as a Director and for Mr. Rainers agreement to act as our Chief Financial Officer, Secretary, Treasurer and as a Director pursuant to the exemption from registration contained in Section 4(2) of the Securities Act.
On August 14, 2013, our Board of Directors approved the issuance 300,000 shares of our common stock at a price of $0.50 per share pursuant to Regulation S of the Securities Act and each of the subscribers represented that they were not US persons as defined in Regulation S of the Securities Act and that they were not acquiring the shares for the account or benefit of a US person. Formal closing of private place is expected to occur within the next few days.
The above does not constitute an offer to sell or a solicitation of an offer to buy any of our securities in the United States. The securities have not been registered under the United States Securities Act of 1933, as amended and may not be offered or sold within the United States or to U.S. persons unless an exemption from such registration is available.
Consulting Agreements
On July 22, 2013, we entered into management consulting agreements (the Management Consulting Agreements) dated July 22, 2013, with each of Harold C. Moll and Rob Rainer.
Under the terms of the Management Consulting Agreement with Harold C. Moll and subject to our completing equity financing totaling not less than $1,000,000, Mr. Moll agreed to act as our Chief Executive Officer, President and a Director in consideration of a base consulting fee of $5,000 per month which amount will be reviewed annually by the Board of Directors. In addition to the base consulting fee, we issued 750,000 Earn-Out Shares to Mr. Moll.
Under the terms of the Management Consulting Agreement with Rob Rainer and subject to our completing equity financing totaling not less than $1,000,000, Mr. Rainer agreed to act as our Chief Financial Officer, Secretary, Treasurer and a Director in consideration of a base consulting fee of $5,000 per month which amount will be reviewed annually by the Board of Directors. In addition to the base consulting fee, we issued 750,000 Earn-Out Shares to Mr. Rainer.
The Board of Directors may also grant performance based bonuses annually and stock options under any stock option plan adopted by us.
The foregoing description of the Management Consulting Agreements and related documents and transactions does not purport to be complete and is qualified in its entirety by reference to the complete text of the Management Consulting Agreements filed as Exhibits 10.2 and 10.3 to our current report on Form 8-K filed with the SEC on July 25, 2013.
Amendment to Articles of Incorporation
On July 22, 2013, our Board of Directors adopted an additional Bylaw No. 2A to Article III - Directors, to amend our existing by-laws of by:
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(i)
allowing the directors by unanimous vote to increase or decrease the number of directors, subject to maximum and minimum as permitted by our Articles of Incorporation; and
(ii)
allowing the directors by unanimous vote to fill any vacancies created by any increase to the number of directors.
RESULTS OF OPERATIONS
Three and Six Months Summary