Item 1. Description of Business
General
DAM Holdings, Inc. (“DAMH”), was incorporated on July 22, 1999 in the State of Nevada and is a non-operating holding company. Our principal operating subsidiary is Delaware American Motors LLC (“DAM”) which we acquired on May 13, 2008 in a stock for stock exchange. DAM is a builder of high performance over the road motorcycles.
Our Motorcycle Business
DAM was founded by our President Mark Klein on August 12, 2002 to be an uncompromising motorcycle design and craft enterprise. DAM has designed and built two Tech Twin American 13C motorcycles as the first models in a series of high performance motorcycle products known as Delaware and Pennsylvania. These motorcycles were completed in 2008 and the Pennsylvania debuted at the 2008 Sturgis AMD World Championship competition where it won the first place award in the Production Manufacture class. We expect our motorcycles to be sold in the United States. Our manufacturing operation is based in Paterson, New Jersey consisting primarily of motorcycle assembly and our repair and maintenance facility. For more information on Delaware American Motors, please visit www.dammotorcycles.com.
The Delaware American Motors
2008 Sturgis AMD World Championship trophy winner the “Pennsylvania”
The Delaware American Motors
The Colony series “Delaware” model.
Our motorcycles are designed by our in house staff of professionals and are hand assembled in Paterson by us from custom and stock parts manufactured to our specifications.
Motorcycle Related Product Offerings
As a contextual component of our factory technical service structure, we offer a select variety of wearing apparel and other related retail products displaying the Delaware American Motors name. This has the effect of providing enjoyment for our customers and displaying our name in the current market.
DAM Acquisition
On May 13, 2008 we issued 22,500 shares of Common Stock as the sole consideration paid in exchange for 100% of the issued shares of the common stock of Delaware American Motors, Inc. (“DAM INC”) a Nevada corporation, the sole owner of DAM. The acquisition has been accounted for as a purchase transaction for an aggregate value of $140,166 and the accompanying financial statements include the accounts of DAM INC and DAM for the period May 13, 2008 to December 31, 2008 and for all periods presented thereafter.
Inactive Subsidiaries
We also own 100% of the capital stock of Pukka USA, Inc. (“Pukka”) a Utah corporation and its wholly-owned subsidiaries: Red Iron Group, LLC (“RIG”), a Utah limited liability company, Infomac Corporation (“Infomac”), a Nevada corporation and Fire Ant Corporation (“Fire Ant”), a Utah corporation. We acquired Pukka on August 15, 2006 in a stock for stock exchange, RIG on June 27, 2007 in a stock for stock exchange, and Infomac and Fire Ant on August 23, 2007 in a stock for stock exchange. As of the date of this report these companies are inactive.
Pukka and its subsidiaries are the owners of several motor vehicle technologies and patent applications including five (5) motor-control systems and hybrid drive-train technologies for use in electric and hybrid motorized vehicles:
(i)
On December 1, 2005 we filed a patent application for a maximum efficiency control device (“MEC”) that will allow an electric motor to run more efficiently by operating at or near it peak operating limit for a higher percentage of total operating time.
(ii)
On November 3, 2005 we filed a patent application for a hydraulic regenerative braking system (“HRB”) for capturing a moving vehicle’s kinetic energy for use in braking or battery recharging. An update to this patent application was file on December 12, 2005.
(iii)
On November 3, 2005 we filed a patent application for an integrated extended range propulsion system (“ERT”) linking three drive motors to the same transmission.
(iv)
On October 4, 2004 we filed a patent application for a split-rim wheel (“Split-Rim”) that encapsulates a multi-speed planetary gear type transmission for light vehicles having small diameter wheels and small motors.
(v)
the rights to a spring-loaded, regenerative braking system for light electric and hybrid vehicles in connection with our acquisition of Fire Ant Corporation.
The Company has been unsuccessful in obtaining the substantial investment capital necessary to develop and prove these technologies and we have determined to terminate this project including termination of our development of a hybrid electric motor scooter which would utilize elements of these technologies. Our investment in these technologies was written down to a net realizable value of zero in 2007. We are presently assessing opportunities for the sale of technologies or the opportunity to restart the project in the event sufficient capital becomes available for development.
Governmental Regulations
Vehicles intended for use on public roadways must satisfy regulations implemented by the United States Department of Transportation (“DOT”) and by the corresponding agencies in other countries. Our vehicles and our manufacturing and repair facility are also subject to environmental regulations. Our vehicles are manufactured to meet all applicable government standards.
Competitive Conditions
The high performance custom manufactured motorcycle market is highly competitive. The Company’s major competitors are based both within and outside the U.S. and generally have financial and marketing resources that are substantially greater than those of the Company. They also have large worldwide revenues and are more diversified than the Company. In addition to
these larger, established competitors, the Company has custom manufacturing shop competitors headquartered in the United States. These competitors generally offer high performance heavyweight motorcycles with traditional styling that compete directly with many of the Company’s products. These competitors currently have established production and sales volumes that are higher than the Company’s and have considerably higher U.S. market share than the Company.
Competition in the high performance custom motorcycle market is based upon a number of factors, including price, quality, reliability, styling, product features, customer preference and warranties. In the U.S., suggested retail prices for the Company’s motorcycles range from being comparable to higher than suggested retail prices for comparable motorcycles available in the market. The Company believes that its high performance custom products will be able to command a premium price. The Company emphasizes quality, reliability and styling in its products and generally offers a two-year warranty for its motorcycles. The Company’s established competitors, such as Harley-Davidson, have the financial ability to offer manufacturer financing, which the Company cannot presently offer to customers which is a substantial competitive advantage over the Company.
Employees
As of December 31, 2009, we had a total of 1 employee. We have an employment agreement with Mr. Klein our President, Secretary and Treasurer that provides for his continued service to the Company until either party provides 2 weeks notice to the other of their intent to terminate. We believe our employee relations are generally good. Our employees are not represented by a collective bargaining unit.
Item 2. Description of Property
The Company is the owner of certain proprietary technologies for which United States patents have been applied for.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Market Information. Our common stock currently trades on the OTC Bulletin Board under the symbol “DAMH.” The following table states the range of the high and low bid-prices per share of our common stock for each of the calendar quarters since our stock began trading in July 2007, as reported by the OTC Bulletin Board. These quotations represent inter-dealer prices, without retail mark-up, markdown, or commission, and may not represent actual transactions.
The last price of our common stock as reported on the OTC Bulletin Board on December 31, 2009 was $0.16 per share.
(b) Holders. As of December 31, 2009, there were 175 shareholders of record of our common stock; this number does not include beneficial owners from whom shares are held by nominees in street name.
(c) Dividends. During the last two fiscal years, no cash dividends have been declared on the Company’s common stock and management does not anticipate that dividends will be paid in the foreseeable future.
(d) Securities authorized for issuance under equity compensation plans.
______________
(i)
Includes the aggregate of all options that may be granted pursuant to the terms of the Company’s 2009 Consultant’s Stock Compensation Plan.
(ii)
The Company has no plans or agreements for the issuance of shares of common stock under any compensation plan or individual compensation arrangement other than upon the exercise of an option, warrant or right.
The Company has no compensation plan under which equity securities of the Company are authorized for issuance that was adopted without the approval of security holders.
Item 6. Management’s Discussion and Analysis
This Management’s Discussion and Analysis and other parts of this report contain forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this report are based on information available to us on the date hereof, and except as required by law, we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth in the section captioned "Risk Factors" in Item 1A
Item 7. Financial Statements
Please refer to the pages beginning with.
Item 8.
Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
Change in Accountants
On November 11, 2008, we changed our principal public accounting firm as reported on Form 8-K and filed with the Commission on November 17, 2008.
Disagreements with Accountants
None.
Item 8A. Controls And Procedures.
Reference is made to the disclosures below under Item 8A(T) Controls and Procedures.
Item 8A(T). Controls and Procedures.
Disclosure Controls and Procedures
Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report (December 31, 2008), as is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended.
Our disclosure controls and procedures are intended to ensure that the information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and (ii) accumulated and communicated to our management, including the Principal Executive Officer and Principal Financial Officer, as the principal executive and financial officers, respectively, to allow timely decisions regarding required disclosures.
Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this Annual Report, our disclosure controls and procedures were effective.
Our management has concluded that the financial statements included in this Form 10-K present fairly, in all material respects our financial position, results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.
Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as set forth in Internal Control - Integrated Framework. Based on our evaluation under the framework in Internal Control - Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2008.
This annual report does not include an audit or attestation report of our registered public accounting firm regarding our internal control over financial reporting. Our management’s report was not subject to audit or attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Also, 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.
Evaluation of Changes in Internal Control over Financial Reporting
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of our internal control over financial reporting to determine whether any change occurred during the fourth quarter of 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our management concluded that the improvements described below were the only such changes during the quarter. As of the end of the period covered by this Annual Report, no deficiencies were identified in our internal controls over financial reporting which constitute a “material weakness.”
Remediation Plan for Previously Identified Material Weaknesses
Other than as described herein, there has been no change in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 8B. Other Information.
None.
PART III
Item 9.
Item 9. Directors, Executive Officers, Promoters and Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act.
(a) Directors and executive officers:
The directors of the Company are elected to serve until the next annual shareholders' meeting or until their respective successors are elected and qualified. Officers of the Company hold office until the meeting of the Board of Directors immediately following the next annual shareholders' meeting or until removal by the Board of Directors.
MARK S. KLEIN is a graduate of the American Motorcycle Institute and certified technician. Mr. Klein opened his first independent service facility in 1979, held northeast distribution rights for Yoshimura racing parts and from that, developed Cycle Connection, Inc., a highly successful super-bike racing team. He also developed the first branded store for Ducati Motors in Manhattan, New York and served on the Ducati Dealer Development Group for several years.
(b) Significant Employees.
None.
(c) Family relationships.
None.
(d) Involvement in certain legal proceedings.
None.
(e) Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and directors, and persons who own more than 10% of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10% percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Mr. Klein was required to file an Initial Statement of Beneficial Ownership of Securities on Form 3 at the time of his acquisition of shares from DAMH on May 13, 2008 and Form 4 for the acquisition of 750,000 shares acquired on December 20, 2009. Mr. Giordano was required to file a report on Form 4 at the time of his acquisition of shares from DAMH on May 13, 2008 and Mr. David S. Lee was required to file a report on Form 4 at the time of his acquisition of a convertible note from DAMH on December 17, 2008 and upon the conversion of his to note to 118,653 shares of common stock. To the best knowledge and belief of the Company, none of such persons made a timely filing of the required forms and, to the best of the Company’s knowledge, these persons are not current as of the date of this Report in their respective Section 16(A) Beneficial Ownership Reporting Compliance requirements. To the best of the Company's knowledge, with the exception of those persons disclosed at ITEM 11 hereof, no reports have been filed by any other persons who claim ownership of more than 10% of the Company's equity securities.
(f) Code of Ethics
We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. Our Code of Ethics is designed to deter wrongdoing and promote: (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii) full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in our other public communications; (iii) compliance with applicable governmental laws, rules and regulations; (iv) the prompt internal reporting of violations of our Code of Ethics to an appropriate person or persons identified in the code; and (v) accountability for adherence to our Code of Ethics.
Item 10.
Item 10. Executive Compensation
The following table sets forth certain information with respect to annual compensation paid in 2008 and 2008 to the Company's executive officers.
(b) Outstanding equity awards at fiscal year-end
None.
(c) Compensation of Directors
The Executive Officers of the Company also serve as the Directors of the Company. The Company did not make any separate director compensation payments of fees, stock awards, option awards, non-equity incentive plan compensation, non-qualified deferred compensation earnings or other compensation to any of its directors. The Company does not pay its directors for their service as a director or for attending meetings of the directors.
Item 11.
Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information, as of December 31, 2009, with respect to the beneficial ownership of the Company’s common stock by each person known by the Company to be the beneficial owner of more than five percent of the outstanding common stock and by directors and officers of the Company, both individually and as a group.
(a) Security ownership of certain beneficial owners and management
The following table indicates how many shares of our common stock were beneficially owned as of December 31, 2009, by (1) each person known by us to be the owner of more than 5% of our outstanding shares of common stock, (2) our directors, (3) our executive officers, and (4) our directors and executive officers as a group.
In general, “beneficial ownership” includes those shares a director or executive officer has sole or shared power to vote or transfer (whether or not owned directly) and rights to acquire common stock through the exercise of stock options or warrants those are exercisable currently or become exercisable within 60 days. Except as indicated otherwise, the persons named in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them. We based our calculation of the percentage owned on 1,291,939 shares outstanding on December 31, 2009. The address of each director, executive officer and certain beneficial owners is listed below:
(b) Changes in control
Our articles of incorporation and by-laws do not contain any provisions having an anti-takeover effect, except that our articles of incorporation authorize the issuance of common and preferred stock. Although no shares of preferred stock have been issued to date, our articles of incorporation were amended on October 25, 2006 to grant the Company’s board of directors the power to issue such shares and to establish their terms. For example, the directors have the power to establish terms for the preferred stock which would cause the preferred stock may rank prior to the common stock as to dividend rights, liquidation preference or both, may have full or limited voting rights and may be convertible into shares of common stock. Accordingly, the issuance of shares of preferred stock may discourage bids for the common stock or may
otherwise adversely affect the market price of the common stock. If issued, the preferred stock could also render more difficult, or discourage, a merger, tender offer or proxy contest relative to the Company, and make the removal of incumbent management more difficult. Our board of directors has no present intention to issue preferred stock for such purposes. Our articles of incorporation prohibit cumulative voting with respect to any matters brought to a vote by our stockholders. The Company filed Definitive Schedule 14F describing the amendment to its articles of incorporation with the Securities & Exchange Commission on October 5, 2006.
Item 12.
Item 12. Certain Relationships and Related Transactions, and Director Independence
(a) Transactions with related persons.
Other than as disclosed below, none of the present directors, officers or principal shareholders of the Company, nor any family member of the foregoing, have or have had any interest, direct or indirect, in any transaction, the amount of which exceeds the lesser of $120,000 or one percent of the average of the Company’s total assets at year-end for the last three completed fiscal years, within the last fiscal year, or in any proposed transaction. Management believes the following transactions are fair to the Company and similar to terms that could be obtained from unrelated third parties.
During 2008 the Company paid finder’s fees and issued shares of common stock to Mr. Christopher Giordano individually and to company’s controlled by him in the amount of $25,000 in cash and 4,425 shares of Company common stock in acquisition of the shares of common stock of Delaware American Motors Inc.
On June 1, 2008 the Company issued to Steven Radt the right to purchase up to 5,000 shares of Company common stock pursuant to a stock option grant under the Company’s 2006 Qualified Incentive Stock Option Plan (the “Radt Options”) with 1,750 options at an exercise price of $60.00 per share immediately vested. The Radt Options were terminated on December 2, 2008 the date of Radt’s resignation.
On October 10, 2008 Leonard DuCharme, Paul Ressler, and Darren Jensen (the “Resigning Officers”), each an executive officer and a director entered into a Settlement Agreement and Release with the Company which provided for, among other things, their resignations, the payment to the Company of an aggregate of 2,109,873 shares of the Company’s common stock being all of the shares owned by the Resigning Officers, the release of the Company’s obligation to pay the Resigning Officers an aggregate of $179,399 of unpaid wages and mutual releases and indemnifications.
On October 10, 2008 the Company agreed to issue to Mark Klein its President and sole director, 10,548 shares and to Steven Radt, its then President and director, 3 shares of the common stock which was received from the Resigning Officers. In addition, the Company issued Mr. Klein 12,500 shares of Company common stock on May 13, 2008 in acquisition of the shares of common stock of Delaware American Motors Inc. and 752,500 shares as stock based compensation for the year ending December 31, 2009.
On December 17, 2008 the Company issued its 8% Convertible Secured Promissory Note and Assignment to Mr. David Lee. The Note provided for the payment of 500 shares as bonus interest. During the year ending December 31, 2009 the Company issued Mr. Lee 118,653 shares of Company common stock in conversion of his Note.
(b) Parents
None.
(c) Promoters and control persons
DAM Holdings, Inc. (formerly Hybrid Dynamics Corporation) was a blank check shell company at August 15, 2006, the date of the acquisition of Pukka USA, Inc. The acquisition was a reverse acquisition whereby the shareholders of Pukka exchanged their shares of Pukka common stock for a controlling number of DAMH shares of common stock. The Company filed Schedule 14F-1 describing the Change of Control Transaction with the Securities & Exchange Commission on June 12, 2006 and Form 8-K describing the exchange and including Form 10-SB information in respect of Pukka with the Securities & Exchange Commission on August 21, 2006.
(d) Corporate Governance
(i) Director independence
The directors of the Company are the executive officers of the Company and are shareholders of the Company. Members of the Company's management may become associated with other firms involved in a range of business activities. Consequently, there are potential inherent conflicts of interest in their acting as officers and directors of the Company. Insofar as the officers and directors are engaged in other business activities, management anticipates they will devote as much time to the Company's affairs as is reasonably needed.
The officers and directors are, so long as they are officers or directors of the Company, subject to the restriction that all opportunities contemplated by the Company's plan of operation which come to their attention, either in the performance of their duties or in any other manner, will be considered opportunities of, and be made available to the Company and the companies that they are affiliated with on an equal basis. A breach of this requirement will be a breach of the fiduciary duties of the officer or director. If the Company or the companies in which the officers and directors are affiliated with both desire to take advantage of an opportunity, then said officers and directors would abstain from negotiating and voting upon the opportunity. However, all directors may still individually take advantage of opportunities if the Company should decline to do so. Except as set forth above, the Company has not adopted any other conflict of interest policy with respect to such transactions.
(ii) Board meetings and committees; annual meeting attendance
The Board of Directors does not meet on a regular basis and take action as and when required. The Company does not have any standing audit, nominating, or compensation committees of the Board of Directors.
Item 13.
Item 13. Exhibits and Reports on Form 10-K
(a) Exhibits
(1)
Incorporated by reference to the attachments filed with the Registration Statement of Sunrise USA, Incorporated on Form 10-SB filed with the United States Securities and Exchange Commission (the “Commission”) on August 19, 2003 (File #000-50370) (the “Form 10-SB”)
(2)
Incorporated by reference to the Exhibits filed with the Registration Statement of Sunrise USA, Incorporated on Form 10-SB Amendment No. 1 filed with the Commission on June 4, 2004 (File #000-50370) (the “Form 10-SB/A1”)
(3)
Incorporated by reference to the Exhibits filed with the Registration Statement of Sunrise USA, Incorporated on Form 10-SB Amendment No. 2 filed with the Commission on November 15, 2004 (File #000-50370) (the “Form 10-SB/A2”)
(4)
Incorporated by reference to the Exhibits filed with the Registration Statement of Sunrise USA, Incorporated on Form 10-SB Amendment No. 3 filed with the Commission on March 11, 2005 (File #000-50370) (the “Form 10-SB/A3”)
(5)
Incorporated by reference to the Exhibits filed with the Registration Statement of Sunrise USA, Incorporated on Form 10-SB Amendment No. 4 filed with the Commission on May 23, 2005 (File #000-50370) (the “Form 10-SB/A4”)
(6)
Incorporated by reference to the Exhibits filed with the Registration Statement of Sunrise USA, Incorporated on Form 10-SB Amendment No. 5 filed with the Commission on July 20, 2005 (File #000-50370) (the “Form 10-SB/A5”)
(7)
Incorporated by reference to the Exhibits filed with the Form 14C Information Statement of Sunrise USA, Incorporated, filed with the Commission on February 28, 2006 (File #000-50370) (the “Form 14C”)
(8)
Incorporated by reference to the Exhibits filed with the Form 10K of Sunrise USA, Incorporated, filed with the Commission on March 31, 2006 (File #000-50370)
(9)
Incorporated by reference to the Exhibits filed with the Form 10KSB of Hybrid Dynamics Corporation, for the year ending December 31, 2007 (File #000-50370)
(b) Reports on Form 10-K: None
Item 14.
Item 14. Principal Accountant Fees and Services
Audit Fees consist of fees billed for professional services rendered for the audit of our financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by our independent accountants in connection with statutory and regulatory filings or engagements.
Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company's consolidated financial statements and are not reported under "Audit Fees."
Tax129 consist of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance, tax audit defense, customs and duties, and mergers and acquisitions.
All Other Fees consist of fees billed for products and services provided by the principal accountant, other than those services described above.
Audit Committee Pre-Approval Procedures
Our Board of Directors serves as our audit committee. Our Board of Directors approves the engagement of our independent auditors, and meets with our independent auditors to approve the annual scope of accounting services to be performed and the related fee estimates. It also meets with our independent auditors, on a quarterly basis, following completion of their quarterly reviews and annual audit and prior to our earnings announcements, if any, to review the results of their work. During the course of the year, our chairman has the authority to pre-approve requests for services that were not approved in the annual pre-approval process. The chairman reports any interim pre-approvals at the following quarterly meeting. At each of the meetings, management and our independent auditors update the Board of Directors with material changes to any service engagement and related fee estimates as compared to amounts previously approved. During 2008, all audit and non-audit services performed by our independent accountants were pre-approved by the Board of Directors in accordance with the foregoing procedures.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated April 15, 2010
By:
/s/ MARK KLEIN
Mark Klein
President, Principal Financial Officer and Sole Director
(Principal Executive Officer)
*31
Rule 13a-14(a)/15d-14(a) Certifications
*32
Section 1350 Certifications
* Filed herewith
DAM Holdings, Inc. and Subsidiaries
I N D E X
F - 1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
DAM Holdings, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of DAM Holdings, Inc. and Subsidiaries (“the Company) as of December 31, 2009 and 2008, and the related consolidated statement of operations, stockholders’ deficit and cash flows for the years ended December 31, 2009 and 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of DAM Holdings, Inc. and Subsidiaries as of December 31, 2009 and 2008 and the results of its operations, and cash flows for the years ended December 31, 2009 and 2008 in conformity with accounting principles generally accepted in the United States of America.
The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has accumulated deficit of $2,606,252 as of December 31, 2009 and has incurred a net loss of $317,608 for the year ended December 31, 2009. These factors as discussed in notes to the financial statements raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3 to the consolidated financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Gruber & Company, LLC
Lake Saint Louis, Missouri
April 14, 2010
F - 2
DAM HOLDINGS, INC. & SUBSIDIARIES
Comparative Consolidated Balance Sheet
As of December 31, 2009 and 2008
The accompanying notes are an integral part of these financial statements
F - 3
DAM HOLDINGS, INC. & SUBSIDIARIES
Consolidated Statement of Operations
For the Years Ended December 31, 2009 and 2008
The accompanying notes are an integral part of these financial statements
F - 4
DAM HOLDINGS, INC. & SUBSIDIARIES
Consolidated Statement of Cash Flow
For the Years Ended December 31, 2009 and 2008
The accompanying notes are an integral part of these financial statements
F - 5
Supplemental Disclosures of Cash Flow Information:
Cash paid during the periods ending December 31:
Supplemental Schedule of Non-cash Investing and Financing Activities:
For the year ended December 31, 2009:
The Company issued common stock for services in the amount of $75,658.
The Company issued promissory notes in payment of accrued officers compensation and accounts payable due shareholders in the amount of $150,000.
The Company issued common stock to convert a note payable in the amount of $108,891.
The Company issued common stock in termination of a royalty agreement in the amount of $7,549.
The Company issued common stock pursuant to antidilution agreements in the amount of $4,363.
An officer and two shareholders contributed services and indebtedness to the capital of the Company in the amounts of $172,410 and $140,670, respectively.
For the year ended December 31, 2008:
The Company issued common stock for services in the amount of $357,545.
The Company issued common stock for an acquisition in the amount of $140,166.
The Company issued common stock to convert a note payable in the amount of $97,619.00
The Company redeemed common stock in a settlement agreement in the amount of $84,395.00
The accompanying notes are an integral part of these financial statements
F - 6
DAM HOLDINGS, INC. & SUBSIDIARIES
Statements of Stockholder’s Deficit
For the Years Ending December 31, 2009 and 2008
The accompanying notes are an integral part of these financial statements
F - 7
DAM HOLDINGS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS
DAM Holdings, Inc. (“DAMH”) is a Nevada corporation incorporated on July 22, 1999. DAMH is a non-operating holding company owning 100% of the capital stock of Pukka USA, Inc. and subsidiaries (“Pukka”) which was acquired in a reverse acquisition transaction completed on August 15, 2006 (the “Pukka Acquisition Date”) which are now dormant and 100% of the capital stock of Delaware American Motors, Inc. and subsidiary (“DAM”) which was acquired in a purchase acquisition transaction completed on May 13, 2008 (the “DAM Acquisition Date”). DAMH, DAM and Pukka and all of their subsidiaries are collectively referred to hereafter as the “Company”.
The DAM Purchase Acquisition
On May 13, 2008 the Company issued 22,500 shares of Common Stock as the sole consideration paid in exchange for 100% of the issued shares of the common stock of Delaware American Motors, Inc., a Nevada corporation, and the sole owner of Delaware American Motors LLC (“DAMLLC”), a New Jersey limited liability company. The acquisition has been accounted for as a purchase transaction for an aggregate value of $140,166 and the accompanying financial statements include the accounts of DAM and DAMLLC for the period May 13, 2008 to December 31, 2008 and for each period thereafter.
2009 Reverse Split of Common Stock
On September 14, 2009 (the “Effective Date”) the Company filed an amendment to its articles of incorporation which reduced the number of shares of issued and outstanding common stock $0.00015 par value from 13,758,706 shares to 68,794 shares; a 200:1 reverse split (the “Reverse Split”). All references to common stock in the accompanying financial statements and these notes have been adjusted to the number of shares of common stock equivalent to DAMH’s $0.00015 par value common stock on a post-reverse split basis.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of all subsidiaries after elimination of all intercompany accounts, transactions, and profits.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
F - 8
Revenue Recognition
Revenue from product sales is recognized at the time products are shipped and title transfers. Allowances for returned products, charge backs and other credits are estimated and recorded as revenue is recognized.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash is held primarily in one bank. At December 31, 2009 and 2008 the Company had cash on hand of $696 and $65,954 respectively.
Accounts Receivable Allowances
Management maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market. The Company has recorded an allowance for slow moving and obsolete inventory of $13,580 at December 31, 2009 and $17,898 at December 31, 2008.
Property, Plant and Equipment
Property, plant and equipment are carried at original cost. Expenditures for betterments and additions are capitalized, while maintenance and repairs are charged to operations as incurred. Upon sale, retirement or other disposition of property, plant and equipment, the cost and accumulated depreciation are eliminated from the accounts and gain or loss is included in the statement of income.
Depreciation is computed generally using the straight line method over the following estimated useful lives of the various classes of assets:
F - 9
Trademarks, Patents and Copyrights
The direct costs associated with the filing of the Company’s copyrights, trademarks and patents have been capitalized and are amortized over the effective period of the related trademarks or patents once granted (20 and 21 years). The Company follows SFAS 121, which requires a review of the Company’s trademarks and patents be made whenever events or changes in circumstances indicate that the carrying amount of the patents may not be recoverable. As of the date of these consolidated financial statements, no such events have occurred.
Long Lived Assets
Long-lived assets consist primarily of property and equipment. The recoverability of long-lived assets is evaluated by an analysis of operating results and consideration of other significant events or changes in the business environment. The Company evaluates whether impairment exists for property and equipment on the basis of undiscounted expected future cash flows from operations before interest. If impairment exists, the carrying amount of the long-lived assets is reduced to its estimated fair value, less any costs associated with the final settlement. For the years ended December 31, 2009 and 2008 there was no impairment of the Company’s long-lived assets.
Income Taxes
The Company follows SFAS No. 109, Accounting for Income Taxes, which requires the use of the asset and liability method of accounting for deferred income taxes. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Future tax benefits, including net operating loss carryforwards, are recognized to the extent that realization of such benefits is more likely than not to occur.
Fair Value of Financial Instruments
The Company’s financial instruments consist of long-term debt, interest rate swaps, accounts receivable, and accounts payable. The carrying amount of these financial instruments approximated their fair value.
In September 2006, the Financial Accounting Standards Board (“FASB”) issued a standard to define fair value, establish a framework for measuring fair value and to expand disclosures about fair value measurements. This standard does not change the requirements to apply fair value in existing accounting standards. Under this standard, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The standard clarifies that fair value should be based on the assumptions market participants would use when pricing the asset or liability.
F - 10
To increase consistency and comparability in fair value measurements, this standard establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy disclosed is based on the lowest level of input that is significant to the fair value measurement. The three levels of the fair value hierarchy are as follows:
●
Level 1 inputs are quoted prices (unadjusted) in active markets for identical asset or liabilities that the company has the ability to access as of the reporting date.
●
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly through corroboration with observable market data.
●
Level 3 inputs are unobservable inputs, such as internally developed pricing models for the asset or liability due to little or no market activity for the asset or liability.
There were no recurring or non-recurring fair value measurements for the year ended December 31, 2009.
In March 2008, the FASB issued a standard to amend and expand the disclosure requirements of derivative instruments with the intent to provide users of the financial statements with an enhanced understanding of how and why an entity uses derivative instruments, how these derivatives are accounted for and how the respective reporting entity’s financial statements are affected. The Company adopted this standard on January 1, 2009.
The Company has no derivative instruments at December 31, 2009.
Earnings Per Common Share
Basic earnings per common share is computed based on the weighted average number of common shares outstanding during the period. Diluted earnings per common share are computed similarly but include the effect of the assumed exercise of dilutive stock options and vesting of restricted stock under the treasury stock method.
F - 11
215,600 shares at December 31, 2009 and 76,904 shares at December 31, 2008 were not included in diluted earnings per share as they were anti-dilutive.
Research and Development
All costs incurred to establish the technological feasibility of new products or technology to be sold, leased, or otherwise marketed are charged to expense. Technological feasibility is established when a product design and a working model of the product have been completed and confirmed by testing. Costs to produce or purchase technology incurred subsequent to establishing technological feasibility are capitalized. Capitalization of costs ceases when the product is available for general release to customers. Costs to perform consulting or development services are charged to cost of revenues in the period in which the corresponding revenues are recognized. Costs of maintenance and customer support are charged to expense when related revenue is recognized or when these costs are incurred, whichever occurs first.
All costs associated with the development, production and sale of the DAM and Pukka technologies have been expensed in the periods to which they relate.
Recent Accounting Pronouncements
In June 2009, FASB issued a standard regarding the FASB Accounting Standards CodificationTM (the “Codification”), and the hierarchy of generally accepted accounting principles, which replaces the standard previously issued by the FASB regarding the hierarchy of generally accepted accounting principles (“GAAP”) in the United States. This standard identifies the source of accounting principles and the framework for selecting the principles used in the preparation of financial statements of non-governmental entities that are presented in conformity with GAAP (the “GAAP hierarchy”). In addition, this standard establishes the Codification as the single source of authoritative GAAP recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP. All guidance contained in the Codification carries an equal level of authority. This standard was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted this standard during the third quarter of 2009 and its adoption did not have a significant impact on its financial statements.
In December 2008, the FASB issued a standard to amend guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. This standard is effective for fiscal years ending after December 15, 2009 with earlier adoption permitted. The adoption of this standard did not have a material impact on the Consolidated Financial Statements.
In February 2008, the FASB issued a standard, which delayed the effective date of accounting for all nonrecurring fair value measurements of non-financial assets and liabilities until fiscal years beginning after November 15, 2008. The Company has not recorded any nonrecurring fair value measurements of non-financial assets and liabilities since adopting this standard on January 1, 2009.
F - 12
In April 2009, the FASB issued a standard to provide additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. This standard is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted.
In June 2009, the FASB issued a standard to amend certain requirements of accounting for consolidation of variable interest entities, to improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to users of financial statements. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on the first fiscal year that begins after November 15, 2009 with early adoption prohibited. The adoption of this standard did not have a material impact on the Consolidated Financial Statements.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles, which contemplates continuation of the Company as a going concern. The Company incurred a net loss of $317,608 and $752,148 for the years ended December 31, 2009 and 2008 respectively and as of December 31, 2009 the Company has an accumulated deficit of $2,606,252 and a working capital deficit of $477,250. Consequently, the aforementioned items raise substantial doubt about the Company’s ability to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon its ability to raise capital through equity and debt financing or other means on desirable terms. If the Company is unable to obtain additional funds when they are required or if the funds cannot be obtained on favorable terms, management may be required to, liquidate available assets, restructure the company or cease operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE 4 - PLAN OF 0PERATIONS
The current economic environment in the U.S. and abroad has continued to deteriorate throughout 2009. The effect of this deterioration on the Company is expected to be significant. The Company is a young company with a new brand and a high dollar value luxury product. Over the next twelve months we intend to build our brand name “Delaware American Motors” based upon the introduction of the Tech Twin American 13C Series and Tech Twin American Signature Series of high-performance heavy weight motorcycles. Competition in the heavyweight motorcycle market is based upon a number of factors, including price, quality, reliability, styling, product features, customer preference and warranties. In the U.S., suggested retail prices for the Company’s motorcycles range from being comparable to, to higher than the suggested retail prices for comparable motorcycles available in the market.
F - 13
Our plan of operation for the coming year is to focus on obtaining the financing necessary to undertake our goals of: (i) the development of our Tech Twin American 13C Series and Tech Twin American Signature Series of motorcycles, (ii) undertake selling efforts of these products and (iii) undertake the development of our brand.
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31:
Depreciation expense was $12,999 and $10,686 for the years ended December 31, 2009 and 2008 respectively.
NOTE 6 - DEBT AND COMMITTMENTS
Debt consists of the following at December 31:
Accounts Payable and Commercial Notes
Accounts payable includes accounts payable due vendors, and commercial obligations due banks under a commercial line of credit loan with a maximum loan amount of $15,000 and amounts due on various bank credit cards. Interest rates vary on the line of credit loan and the bank credit card obligations at rates ranging from 5.5% to 24% per annum, all are payable monthly and include the personal repayment guarantee of the Company's President.
Secured Convertible Promissory Notes
The Company has a $5,000 10% Convertible Secured Promissory Note (the “10% Secured Note”). The 10% Secured Note was due on May 12, 2009 and bears an annual rate of interest of ten percent (10%). The 10% Secured Note is secured by assignment of a motorcycle engine. The 10% Secured Note may be converted by the holder into shares of the Company’s common stock at a price equal to seventy-five percent (75%) of the market price of the Company’s shares on the date of conversion limited to not more than 300,000 shares. The Company also paid 25 shares of common stock as bonus interest at a fair value of $250. At the date of issuance, the Company determined that the fair value of the beneficial conversion
F - 14
feature in respect of this 10% Secured Note on the date the note was issued to be equal to $4,054 using the Black-Scholes model which amount has been recorded as a debt discount and is being amortized over the term of the note. The accompanying financial statements include $3,203 and $1,668 of interest expense and additional interest in respect of the beneficial conversion feature for the years ending December 31, 2009 and 2008, respectively.
On May 30, 2009 the Company issued an aggregate of 118,655 shares of common stock to a note holder in full conversion of a secured convertible promissory in the principal amount of $100,000 originally issued on December 17, 2008. The accompanying financial statements include $8,340 and $306 of interest expense for the years ending December 31, 2009 and 2008, respectively.
Unsecured Convertible Promissory Notes
The Company has four (4) unsecured 6% Convertible Promissory Notes payable in the aggregate amount of $50,000 (the “Convertible Notes”). The Convertible Notes bear interest at the rate of 6% per annum and are due on dates ranging from August 8, 2010 through September 8, 2010. The Convertible Notes may be converted into shares of the Company’s common stock at the election of the holder at any time prior to the maturity date at the rate of thirty dollars ($40.00) per share. Interest may, at the election of the Company, be paid in shares of the Company’s common stock at the rate of one hundred ($100.00) per share. The accompanying financial statements include $3,182 and $962 of interest expense for the year ending December 31, 2009 and 2008, respectively.
A wholly-owned subsidiary of the Company has an unsecured promissory note payable to a shareholder in the principal amount of $20,000. The note bears interest at the rate of 20% per annum and was due on June 30, 2008. Pukka is in default on the payment of this note. The accompanying financial statements include $4,000 and $3,000 of interest expense for the years ended December 31, 2009 and 2008, respectively.
Unsecured Demand Promissory Notes
The Company has promissory notes in the principal amount of $166,700 each due on demand. The notes were issued throughout 2009 and each note bears interest at the rate of 12% per annum. The accompanying financial statements include $702 of interest expense for the year ending December 31, 2009 and there is a total balance due on December 31, 2009 of $167,402.
F - 15
Conversion Feature of Convertible Promissory Notes
In accordance with Emerging Issues Task Force (“EITF”) No.00-27, “Application of EITF Issue No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Rates’, to Certain Convertible Instruments.” We determined there to be no value attributable to the beneficial conversion features of the Convertible Notes in that the effective conversion price of those shares was greater than the FMV price of our common stock.
Facilities Lease
The Company rents 8,300 sq. ft. of office, garage and storage space in a single facility located in Paterson, New Jersey. The lease is for an initial term of 60 months from April, 2006 at $2,500 per month and includes 2 five year renewal terms at an increase in monthly payments to $3,100 per month and $3,600 per month, respectively. The accompanying financial statements include rent expense of $30,000 and $30,712 for the year ended December 31, 2009 and 2008, respectively.
The following table summarizes the future annual rentals for all periods including renewal periods:
Key Employee Agreements
On May 8, 2008 the Company entered into a Key Employee Agreement with its President. The terms of the agreement provides that the executive is employed on an “at will” basis at an annual rate of compensation of $96,000, having an initial term of two years. Each agreement also provides that any intellectual property originated by the executive during his term of the agreement shall be the property of the Company.
The accompanying consolidated financial statements include an aggregate of $119,957 and $266,261 of executive officer compensation expense for the years ending December 31, 2009 and 2008 respectively.
October 10, 2008 three of the Company’s executive officers resigned and entered into a Settlement Agreement and Release with the Company which provided for, among other things, their resignations, the payment to the Company of an aggregate of 10,549 shares of the Company’s common stock being all of the shares owned by the Resigning Officers having a fair value of $84,393, the release of the Company’s obligation to pay the Resigning Officers an aggregate of $175,133 of unpaid wages and accounts payable and for mutual releases and indemnifications. The accompanying financial statements include $256,596 of other income for the year ending December 31, 2008 relating to the forgiveness of the indebtedness and receipt of the shares of stock.
F - 16
NOTE 7 - CAPITAL STOCK
Private Placement Unit Offering
The Company closed on the sale of $15,000 of the Company’s Series B Convertible Preferred Stock investment units (the “Units”). The Units were sold for an aggregate selling price of $15,000 and included 20 shares of Series B Convertible Preferred Stock, 400 shares of Common Stock and 400 Class B Warrants entitling the holders to purchase 400 shares of Common Stock. This issuance was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act (or Regulation D promulgated thereunder) for transactions by an issuer not involving a public offering. The securities issued are deemed restricted securities for the purposes of the Securities Act. The Company received a total of $15,100. The sold Units are part of Unit offering of up to 1,500 shares of Series B Convertible Preferred Stock, 30,000 shares of Common Stock on a post-reverse split basis and 30,000 Class B Warrants entitling the holders to purchase 30,000 shares of Common Stock on a post-split basis.
Preferred Stock
The Company has 338,000 shares of $0.0001 par value shares of preferred stock authorized with no shares issued and outstanding. This stock, if issued, will carry liquidation preferences and other rights, as determined by the Board of Directors.
Series A 8% Convertible Preferred Stock
The Company has 660,000 shares of “Series A 8% Convertible Preferred Stock” authorized with 60,000 shares issued and outstanding as of the date of this report having an aggregate stated value of $300,000. Each share of Series A Preferred Stock (a) has a stated value of $5.00 per share (“Stated Value”), (b) is non-voting, (c) includes a dividend of 8% per annum paid annually, (d) may be redeemed at any time for an amount equal to the Stated Value plus all accumulated and unpaid dividends, (e) may be converted into 10 shares of $0.00015 par value common stock, and has a (f) liquidation preference of $5.00 per share plus all accumulated and unpaid dividends.
The terms of these shares have been adjusted pursuant to an Anti-Dilution Agreement with the purchasers such that the purchasers may now convert their shares of Series A Preferred Stock into 13,300 shares of the Company’s common stock at an exercise conversion ratio of one (1) share of Preferred Stock to 0.22 shares of Common Stock. This adjustment does not affect the terms of the remaining authorized but un-issued shares of Series A Preferred Stock.
Series B 8% Convertible Preferred Stock
The Series B 8% Convertible Preferred Stock consists of 2,000 shares of preferred stock (the “Series B Preferred Stock”). Each share of Series B Preferred Stock has an initial issue price or face value of $500.00 (the “Original Issue Price”) and may
F - 17
be converted into shares of the Company’s $0.00015 par value common stock (the “Common Stock”) at any time at the election of the holder. The Series B Preferred Stock may also be redeemed by the Company upon the cash payment per share of $500.00 plus any unpaid dividends thereon. The Series B Preferred Stock is non-voting.
Shares of Series B Convertible Preferred Stock may be converted into fully paid and nonassessable shares of Common Stock of the Company at a price (the "Conversion Price") equal to 50% of the Market Price per share of Common Stock on the date of conversion (but the Conversion Price shall not be less than $5.00 per share (the "Minimum Price") or greater than $25.00 per share (the "Maximum Price") with respect to the Stated Value of each share of Series B Convertible Preferred Stock and on the basis of the post-reverse split shares of Common Stock. Such option may be exercised by any holder on an all or none basis on or after July 1, 2010. The Market Price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices for the 10 consecutive trading days commencing 12 trading days before the day in question.
Common Stock
The Company has authorized 99,000,000 shares of common stock $.00015 par value per share (the “Common Stock”). As of December 31, 2009, the Company has 1,291,939 shares of Common Stock issued and outstanding. The Company’s shares of Common Stock are traded on the Over the Counter Bulletin Board (“OTCBB”) electronic quotation system, the trading symbol is DAMH.
On May 8, 2009 the Company entered into an agreement with the members of Garden Rise Investments LTD LLC for the termination of a Royalty Agreement dated August 31, 2006 in exchange for an aggregate of 28,371 shares of our common stock. The accompanying financial statements include $7,549 of stock based compensation expense for the year ended December 31, 2009 related to the termination of the royalty agreement.
On May 31, 2009 a noteholder agreed to convert his promissory note to shares of common stock. The Company issued an aggregate of 118,653 shares of common stock in conversion of this note and in satisfaction of an anti-dilution agreement with the noteholder. The accompanying financial statements include $8,340 of interest expense for the year ending December 31, 2009.
On December 20, 2009 the Company issued 174,536 shares of common stock pursuant to anti-dilution agreements plus 400 shares of common stock issued for $100 in cash. The accompanying financial statements include $4,463 of stock based compensation expense in respect of these shares for the year ending December 31, 2009.
On December 20, 2009 the Company issued 60,850 shares of common stock pursuant to the terms of the 2008 and 2009 Consultant Stock Compensation Plans in payment of $2,395 of prior year services and $3,880 of current period compensation expense. In addition, the Company issued 752,500 shares to its President for payment of $45,925 of accrued wages. The accompanying financial statements include $49,804 of stock based compensation expense for the year ending December 31, 2009.
F - 18
Class A Warrants
At December 31, 2009 the Company had Class A Warrants issued pursuant to its Series A Preferred Stock Private Placement Unit Offering. The terms of these Class A Warrants have been adjusted pursuant to the Anti-Dilution Agreement with the Unit purchasers such that the purchasers may purchase 13,333 shares of the Company’s common stock at an exercise price of $45.00 per share at any time prior to December 31, 2012 the date of expiration of the Class A Warrants and may be called for redemption at a redemption price of $2.00 per warrant at any time after the Company’s shares of common stock have traded above $1.50 for 10 consecutive trading days.
Class B Warrants
The Company has outstanding Class B Warrants for the purchase of 600 shares of common stock at an exercise price of $25.00 per share. The Class B Warrants (a) may be exercised at any time before expiration or redemption, (b) may be called for redemption for a redemption price of $0.01 per warrant and (c) expire on June 30, 2014. The Company may call the Warrants at any time.
Selling Agent Warrants
The Company granted a selling agent rights to purchase 2,497 shares of the Company’s common stock at an exercise price of fifty-four dollars ($54.00) cents per share at any time prior to the date of expiration of January 31, 2013.
2009 Consultant Stock Compensation Plan
The 2009 Consultant Stock Compensation Plan provides for the issuance of up to 1,000,000 shares of Company’s $0.00015 shares of Common Stock at a price to be no less than the fair value of the Company’s shares of common stock on the date of grant. On December 22, 2009 the Company filed SEC Form S-8 in registration of shares to be issued pursuant to this plan. As of the date of this report he Company has issued pursuant to the Plan 60,000 shares of common stock and granted options for the purchase of 200,000 shares of common stock at an exercise price of $1.00 per share.
Shares Available For Future Issuance
The Company has reserved shares of common stock for future issuance upon conversion of convertible debt, conversion of shares of convertible preferred stock, exercise of warrants and options and for future issuance under the Company’s 2009 Consultants Stock Compensation Plan summarized as of December 31, 2009 is presented below:
F - 19
Summary of Common Stock Warrants and Options Outstanding
A summary of the status of warrants and options granted at December 31, and changes during the periods then ended is presented below:
A summary of the status of the warrants and options outstanding at December 31, 2009 is presented below:
F - 20
NOTE 8 - ACQUISITION OF DELAWARE AMERICAN MOTORS, INC.
On May 13, 2008, the Company issued 22,500 shares of $0.00015 par value common stock for the purchase of 100% of the outstanding capital of Delaware American Motors Inc. and its wholly-owned subsidiary Delaware American Motors LLC valued in the aggregate at $140,166 or $6.23 per share. The assets and liabilities were the following:
NOTE 9 - INCOME TAXES
The Company has available at December 31, 2009 an unused operating loss carryforward of approximately $2,448,555 which may be applied against future taxable income and which expires in the years 2026 and 2028. The amount of and ultimate realization of the benefits from the operating loss carryforward for income tax purposes is dependent, in part, upon the tax laws then in effect, the future earnings of the Company, and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the net deferred tax asset associated with the Company’s net operating loss carryforward and allowances for uncollectible accounts, the Company has established a valuation allowance equal to their tax effect and, therefore, no deferred tax asset has been recognized.
F - 21
NOTE 10 - MATERIAL SUBSEQUENT EVENTS AND CONTINGENCIES
The Company has evaluated subsequent events through the time April 12, 2010 which is the date the consolidated financial statements were issued. No events have occurred subsequent to April 12, 2010, that requires disclosure or recognition in these financial statements.
F - 22