Item 1. Business
Pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, this Annual Report on Form 10-K contains forward-looking statements that reflect our estimates, expectations and projections about our future results, performance, prospects and opportunities. Forward-looking statements include all statements that are not historical facts. These statements are often identified by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “plan,” “may,” “should,” “will,” “would” and similar expressions. These forward-looking statements are based on information available to us and are subject to numerous risks and uncertainties that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, the forward- looking statements we make in this Annual Report. The discussion in the section “Risk Factors” in Item 1A.
Item 1A. Risk Factors
Set forth below are the risks that we believe are material to our investors. This section contains forward-looking statements. You should refer to the explanation of the qualifications and limitations on forward-looking statements set forth at the beginning of Item 1 of this Annual Report.
Risks Related to Our Business and Industry
We face competition and technological advances by competitors. There is significant competition among companies that design and manufacture internal combustion engines. Newly developed products could be more mechanically efficient and/or cost efficient than our current or future products. We also face indirect competition from vehicles using alternative fuels such as electricity.
We depend on intellectual property and the failure to protect our intellectual property could adversely affect our future growth and success.
We rely on patent, trademark and copyright law, trade secret protection, and confidentiality and other agreements with affiliates, employees, customers, partners and others to protect our intellectual property. However, some of our intellectual property is not covered by any patent or patent application, and, despite precautions, it may be possible for third parties to obtain and use our intellectual property without authorization.
We do not know whether any patents will be issued from pending or future patent applications or whether the scope of the issued patents is sufficiently broad to protect our technologies or processes. Moreover, patent applications and issued patents may be challenged or invalidated. We could incur substantial costs in prosecuting or defending patent infringement suits. Furthermore, the laws of some foreign countries may not protect intellectual property rights to the same extent as do the laws of the U.S.
As part of our confidentiality procedures, we generally have entered into nondisclosure agreements with affiliates, employees, consultants and corporate partners. We also have attempted to control access to and distribution of our technologies, documentation and other proprietary information. We plan to continue these procedures. Despite these procedures, third parties could copy or otherwise obtain and make unauthorized use of our technologies or independently develop similar technologies. The steps that we have taken and that may occur in the future might not prevent misappropriation of our solutions or technologies, particularly in foreign countries where laws or law enforcement practices may not protect the proprietary rights as fully as in the U.S.
There can be no assurance that we will be successful in protecting our proprietary rights. Any infringement upon our intellectual property rights could have an adverse effect on our ability to develop and sell commercially competitive internal combustion engines.
Potential for revenue may fluctuate due to certain regulatory, marketing and competitive factors over which we have little or no control.
The factors listed below, some of which we cannot control, may cause our potential for revenue and results of operations to fluctuate significantly:
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Actions taken by regulatory bodies relating to the verification, registration or health effects of our products.
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The timing and size of customer purchases.
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Customer and/or business partners concerns about the stability of our business which could cause them to seek alternatives to our solutions and products.
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Increases in raw material costs
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loss of key engineering personnel
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loss of key executive personnel
Failure to attract and retain key personnel could have a material adverse effect on our future success.
Our success depends, in part, on our ability to attract and retain future key personnel, additional qualified management, marketing, scientific and engineering personnel, and develop and maintain relationships with research institutions and other outside consultants. The loss of key personnel (including the loss of key personnel employed by or contracted to Manthey Holdings Pty Ltd) or the inability to hire or retain qualified personnel, or the failure to assimilate effectively such personnel, could have a material adverse effect on our business, operating results and financial condition.
The Company is a development-stage company with no operating history of its own
Because the Company is a development-stage company with no operating history, it is impossible for an investor to assess the performance of the Company or to determine whether the Company will meet its projected business plan. The Company has limited financial results upon which an investor may judge its potential. The likelihood of its success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company starting a new business enterprise and the highly competitive environment in which it will operate. Since MRC does not have a substantial operating history, it cannot assure an investor that its business will be profitable or that it will ever generate sufficient revenues to meet its expenses and support its anticipated activities.
The Investment Agreement between the Company and Manthey Redmond (Aust) Pty Ltd is governed by and enforceable under the laws of Queensland, Australia and the Company's officer and directors control Manthey Redmond (Aust), therefore if Manthey Redmond (Aust) were to breach its agreement to fund the Company there may be little or no likelihood that the officer and director would seek its enforcement and even if they chose to so enforce such enforcement of the $40,000 monthly investment payment may be difficult or impossible.
Pursuant to the investment contract between the Company and Manthey Redmond (Aust) Pty Ltd, Manthey Redmond (Aust) makes a monthly payment to the Company of $40,000 for assistance in the development and commercialization of the Technology. Should Manthey Redmond (Aust) Pty Ltd stop making or reducing such investment payments, the Company would be required to enforce the contract in Queensland, Australia and such enforcement may be too costly for the Company to undertake. Also, because the directors and controlling shareholders of Manthey Redmond (Aust) are also the directors of the Company, a conflict may exist and the directors of the Company may determine, in breach of their duty to the Company, not to attempt to enforce the Investment Agreement. In addition, if the Company determined to enforce the contract in Queensland, Australia, it may be at a significant disadvantage as such long distance legal matter may be difficult to pursue and difficult to obtain a favorable judgment. The loss of funding source for the Company would impact its ability to proceed with its business plan in developing and marketing the commercial applications of the Eco-Engine and developing additional technology.
Previous payments made by the Redmond Family Holdings provide no assurance that such payments will continue.
Redmond Family Holdings has provided at least $50,000 per month to Manthey Redmond (Aust) since October 2007. This payment is the source of funds by which Manthey Redmond (Aust) intends to meet its contractual obligation pursuant to the Investment Agreement to fund the Company $40,000 per month. History of the payments by the Redmond Family Holdings is not a guarantee such payments will continue. Unforeseen circumstances or other changes may, for whatever reason, make the Redmond Family Holdings unable or unwilling to continue such monthly payments. The Company has a contractual right to the continuation of these payments, but enforcement of such contract may be difficult if not impossible if such contract were breached.
The success of the development and manufacturing of the Technology by the Company is unknown and contains many inherent risks.
The company is dependent upon the performance and ultimate marketability of the Technology which is untested in the market place. The continuing development stage of the Technology and related internal combustion engines may reveal failures in the Technology presently unknown and unanticipated by the Company and that can not be resolved with adequate research and development. Such failures may not be immediately readily apparent and may occur only after engines are placed in different applications or different climates throughout the world. Likewise, at the manufacturing stage, development and/or cost issues may arise presently unknown or unanticipated by the Company that render the production of engines based on the Technology on a commercial scale impractical.
The Company may not be able to market the Technology as easily and readily as it currently anticipates.
The internal combustion engine market is a highly competitive market and new technology related to the internal combustion engine attempting to make engines more fuel efficient and more economical appears on the market frequently. The successful marketing of the Technology will depend on the ability of the Company to demonstrate sustainable advantages over existing proven and other newly developed technology and the ability of the Company to fund the marketing of these advantages. The Company believes that its Technology is highly competitive and provides provable and sufficient advantages but the Company cannot predict what new technology is being developed that may impact on the Company's Technology and make it less attractive.
The controlling directors and beneficial shareholders of Manthey Redmond (Aust) Pty Ltd are the directors and officers of the Company which creates a conflict of interest.
The directors and beneficial and controlling shareholders of Manthey Redmond (Aust) are Steven Charles Manthey, Timothy John Eric Redmond and Geoffrey Redmond who are also the directors of the Company. As such they control the actions of Manthey Redmond (Aust). If for any reason, they should determine not to continue the research, development and commercialization of the Manthey Redmond Eco-Engine, they could effect Manthey Redmond (Aust) board action to terminate or breach the agreements with the Company providing the monthly investment of $40,000 and the licensing rights to the patent Eco-Engine and Technology; and as directors of the Company, they would also be in a position to determine whether to pursue legal enforcement of either or both of the agreements. In effect, they could breach the development agreement and/or the patent licensing agreement with the Company with no likely enforcement actions. As directors of the Company, Messrs. Redmond and Mr. Manthey have an obligation and duty to act in the best interests of the Company and make the best business judgment for it; however, they each have this same duty and obligation to Manthey Redmond (Aust) as directors of it as well and a breach of the agreements with the Company may be in the best interests and be the best business judgment for that company despite its ramifications to the Company. This would result in a conflict between the two companies and the directors would be in a position to have to assist one at the expense of the other.
The sole officer and two directors of the Company beneficially own and will continue to own a majority of the Company's common stock and, as a result, can exercise control over shareholder and corporate actions.
The three directors (one of whom is the sole officer) of the Company own 57.7% of the Company's outstanding common stock. As such, they are able to control matters requiring approval by shareholders, including the election of directors and approval of significant corporate transactions. A director is required to act in the best interest of the company and to make his best business judgments based on such best interests of the company in approving corporate actions. As a director, and when voting on matters under consideration by the board of directors, the directors have a duty to act in the best interests of the Company; there is no such required duty when acting as shareholders or voting on matters under consideration by shareholders.
The directors and executive officers all reside outside the United States which may inhibit the ability of investors to bring any legal action or to enforce or collect on any favorable judgement that in such case may be received.
All the directors and the executive officer of the Company reside outside of the United States which may compromise the ability of investors to enforce their legal rights or effect service of process upon directors or executive officer or enforce civil or criminal judgments of United States courts against the Company, its directors or executive officer. Likewise, other than the cash on hand, as of the date of the registration statement, the Company has no assets in the United States. In addition, the Company's licensed research facility is located outside the United States and the jurisdiction of the United States legal system. This may render any monetary penalty (whether civil or criminal in nature) obtained by any investor for any reason against the Company or any of its directors or executives difficult if not impossible to enforce.
As the Technology licensed by the Company is not protected by patent, the Company may find it difficult to protect it or additional developments based on the Technology and competitors or others may develop or copy similar technology.
The Technology licensed by the Company is not protected by a patent. There is no such thing as a world patent and the issuance of a patent in Australian does not necessarily prohibit others from using or developing the same technology. To protect its intellectual property, the Company will need to secure patent protection for the Technology under the Patent Cooperation Treaty (PCT) and also lodge separate patent applications in countries that are not members of the PCT. Under the PCT, member states, which include the United States and Australia, may initially lodge one application and all member states will recognize this application as recording a "priority date" for the invention. The Company has leased Technology that is the subject of a provisional patent lodged in Australia and as Australia is a member of the PCT, the Company's leased intellectual property can be secured by the prosecution of a full patent application under the PCT process. Should the PCT process not be correctly prosecuted, the Company may fail to secure a patent for the Technology in all jurisdictions covered under the PCT and this could give rise to commercial harm. Likewise, if the Company becomes unable to fund the prosecution of the PCT process, or fund patent application process in non-member countries, the Company would fail to secure ongoing patent protection for the Technology and this could give rise to commercial harm. Moreover, to mitigate against the risk of circumvention of its intellectual property, the Company will need to ensure that all initial demonstrations of the technology are conducted on a private and confidential basis and that confidentiality agreements are entered into with organizations seeking to view and evaluate the Technology.
The Company is a development stage company and has a correspondingly small financial and accounting organization. Being a public company may strain the Company's resources, divert management’s attention and affect its ability to attract and retain qualified directors.
The Company is a development stage company with a newly formed and developing finance and accounting organization; the rigorous demands of being a public reporting company will require a large and experienced finance and accounting group. As a public company, the Company will be subject to the reporting requirements of the Securities Exchange Act of 1934. The requirements of these laws and the rules and regulations promulgated thereunder entail significant accounting, legal and financial compliance costs, and have made, and will continue to make, some activities more difficult, time consuming or costly and may place significant strain on the Company's personnel, systems and resources.
The Securities Exchange Act requires, among other things, that the Company maintain effective disclosure controls and procedures and internal control over financial reporting. In order to establish the requisite disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight are required. As a result, management’s attention may be diverted from other business concerns, which could have a material adverse effect on the Company's business, financial condition and results of operations.
These rules and regulations may also make it difficult and expensive for the Company to obtain director and officer liability insurance. If the Company is unable to obtain adequate director and officer insurance, its ability to recruit and retain qualified officers and directors, especially those directors who may be deemed independent, will be significantly curtailed.
Government regulation could negatively impact the technology.
The Manthey Redmond Eco-Engine has been developed to comply and surpass environmental standards and regulations for air, water and noise as well as meet and surpass regulations and guidelines for fuel efficiency and consumption. However, unforeseen changes in these regulations and standards could have an impact on the business if any such changes were not able to be met by the Eco-Engine.
Item 1B.
Item 1B.
Unresolved Staff Comments
None.
Item 2.
Item 2.
Properties
The company has an office in Sydney, Australia. On July 10, 2009, the Company also entered into a lease agreement with Premier Business Centers, under which the Company will lease approximately 165 square feet of office space located at 10940 Wilshire Boulevard, Suite 1600, Los Angeles, California 90024 at a monthly rate of $1050. The lease term is month-to-month having commenced on August 3, 2009.
Item 3.
Item 3. Legal Proceedings
We are not involved in any legal proceedings.
Item 4.
Item 4. (Removed and reserved)
Part II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is traded on the OTC- Bulletin Board under the trading symbol “MHYR”.
Holders
As at March 28, 2011, there are 74 shareholders.
Item 6.
Item 6. Selected Financial Data
We are a “smaller reporting company” and, as such, are not required to provide this information.
Statements of Operations Data
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The Company was formed on April 20, 2009 and is a development stage company with no operating revenues or profits. The Company has developed three prototypes of the Manthey Redmond Eco-Engine which will be tested for performance validation by government agencies and academic institutions. After validation of the tests, the Company will market the Eco-Engine to manufacturers in the United States, Australia and around the World.
Expenses and Capital Expenditures
Other than the development agreement for use of the testing facilities at Manthey Holdings, the Company has not incurred any large expenses nor made or planned any large capital expenditures.
Results of Operations
For the year ending December 31, 2010 and for the period from April 20 (inception) to December 31, 2009:
The Company was incorporated in April 2009 to primarily engage business in the development and commercialization of the Manthey Redmond Eco-Engine and related Technologies. For the year ended December 31, 2010 and for the period from April 20, 2009 (inception) to December 31, 2009, the Company had not generated any revenue.
The Company intends to continue research and development of the Manthey Redmond Eco-Engine during 2011. The Company received the updated prototype of the Eco-Engine in the fourth quarter of 2010 and testing is being conducted on the engine at present. Throughout 2011 the Company intends to begin selective and proprietary marketing of the engine to potential end users and manufacturers and to possible interested joint venture partners. The Company incurred $406,678 and $78,672 operating expenses for the year ending December 31, 2010 and for the period April 20 to December 31, 2009, respectively, which primarily consisted of research and development expense of $360,000 and $410,000, professional services of $33,488 and $31,503, and rent expense of $12,596 and $5,417, respectively. The research and development expenses were incurred pursuant to the amended Development Agreement with Manthey Holdings on November 6, 2009, which revises the commencement date of development service fee payment from July 1, 2009 to November 20, 2009. Research and development expenses of $360,000 incurred pursuant to the Development Agreement in the final quarter of 2010 were not paid and were recorded as accrued expense.
Liquidity and Capital Resources
The following summarizes the key component of the company’s cash flows for the year ended December 31, 2010 and the period from April 20, 2009 (inception) to December 31, 2010:
Net cash used in operating activities was $47,728 and $75,445 for the year ended December 31, 2010 and for the period from April 20, 2009 (inception) to December 31, 2009, respectively, which were mainly driven by net losses in the amount of $406,678 and $78,673, partially offset by increases in accrued expense and other liabilities in the amount of $358,950 and $4,278, respectively. Increases in accrued expense and other liabilities were primarily to record unpaid research and development expenses to Manthey Holdings Pty Ltd pursuant to the Development Agreement.
Net cash provided by financing activities was $44,842 and $79,900 for the year ended December 31, 2010 and for the period from April 20, 2009 (inception) to December 31, 2009, respectively. During its initial organization, the Company received $38,950 in advances from Manthey Redmond (Aust) not pursuant to the Investment Agreement, and is a loan, interest free, which must be repaid. No formal loan terms were established, but the Company intends to repay the loan once in a position to do so. In November 2009, March 2010 and May 2010, the Company received $39,925, $955 and $43,887 of capital injection, respectively from Manthey Redmond (Aust) pursuant to the Investment Agreement, which was recorded as additional paid-in capital.
The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Management’s Plan to Continue as a Going Concern
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its securities, (2) the sublicensing and sale of the Manthey Redmond Eco-Engine, (3) additional capital injection from Manthey Redmond (Aust) pertaining to the Investment Agreement, and (4) short-term borrowings from shareholders or related party when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations.
Factors Affecting our Business and Prospects
See Item 1A. “Risk Factors.”
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
In the opinion of management, with the exception of exposure to current turmoil in the capital markets, we are not subject to any significant market risk exposure.
Item 8.
Item 8. Consolidated Financial Statements and Supplementary Data
MANTHEY REDMOND CORPORATION
(A Development Stage Company)
December 31, 2010
Financial Statements:
Balance Sheets
.F-1
Statements of Operations
Statements of Cash Flows
Notes to Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Manthey Redmond Corporation:
We have audited the accompanying balance sheet of Manthey Redmond Corporation (the “Company”) (a development stage company) as of December 31, 2010 and 2009, and the related statement of operations, changes in stockholders' deficit, and cash flows for the year ended December 31, 2010 and for the period from April 20, 2009 (date of inception) to December 31, 2009. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits 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 financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Manthey Redmond Corporation as of December 31, 2010 and 2009 and the results of its operations and its cash flows for the year ended December 31, 2010 and for the period from April 20, 2009 (date of inception) to December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 of the financial statements, the Company has been in the development stage since its inception (April 20, 2009) and continues to incur expenses. The Company’s viability is dependent upon its ability to obtain future financing and the success of its future operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/KCCW Accountancy Corp.
Diamond Bar, California
March 21, 2011
MANTHEY REDMOND CORPORATION
(A Development Stage Company)
BALANCE SHEETS
The accompanying notes are an integral part of these financial statements.
MANTHEY REDMOND CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
MANTHEY REDMOND CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these financial statements.
NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS
Manthey Redmond Corporation (the “Company”) is a development stage company incorporated in the State of Delaware in April, 2009 to research, design, manufacture, and market technology now leased and to be developed by the Company. Manthey Redmond (Aust) Pty Ltd., an Australian corporation ("Manthey Redmond (Aust)"), is the patent owner and developer of the Manthey Redmond Eco-Engine, a fuel-efficient, lightweight, low-emission, multi-fuel engine smaller and less expensive than conventional internal combustion engines initially targeted for marine applications.
In May, 2009, the Company entered into a Patent Licensing Agreements with Manthey Redmond (Aust) for the development, manufacture, use, sale, and sublicense of the Manthey Redmond Eco-Engine and all developed technology and products related to the technology patent (the "Technology") for a royalty payment to Manthey Redmond (Aust) of 5% of annual gross profits. Pursuant to an Investment Agreement entered into with the Company in May, 2009, Manthey Redmond (Aust) agreed to fund to the Company monthly payments of $40,000 up to a maximum of $4,200,000 in aggregate to assist the Company in commercializing products based on the Technology. All three of the Company’s directors serve as the directors of Manthey Redmond (Aust).
In May, 2009, the Company entered into a Development Agreement with Manthey Holdings Pty Limited (“Manthey Holdings”) for the exclusive use of Manthey Holdings' engineering facility and employees for research and development of and related to the Technology at a monthly fee of $30,000 up to a maximum of $540,000 in aggregate. In November, 2009, the Development Agreement was amended to remove the exclusivity of the use of Manthey Holdings’ engineering facility and employees, and to defer the commencement date of the agreement and first payment to November 20, 2009. The Company’s president/director is the sole shareholder and director of Manthey Holdings which serves as the trustee of the Manthey Holdings Trust. The Company’s president/director is also the beneficiary of the Manthey Holdings Trust and may be deemed the beneficial owner of the 3,040,000 shares, or 29.6% of the Company’s common stock owned by the Manthey Holdings Trust. On November 6, 2009, the agreement was amended to revise the commencement date of payment from July 1, 2009 to November 20, 2009.
NOTE 2 - GOING CONCERN
The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Management’s Plan to Continue as a Going Concern
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its securities, (2) the sublicensing and sale of the Manthey Redmond Eco-Engine, (3) additional capital injection from Manthey Redmond (Aust) pertaining to the Investment Agreement (see Note 3), and (3) short-term borrowings from shareholders or related party when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The fiscal year of the Company is January 1 to December 31.
Cash and Cash Equivalents
Cash and cash equivalents include unrestricted deposits and short-term investments with an original maturity of three months or less. The Company minimizes its risk associated with cash and cash equivalents by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. At December 31, 2010, the balance did not exceed the federally insured limit. As of December 31, 2010 and December 31, 2009, cash and cash equivalent amounted to $1,569 and $ 4,455, respectively.
Revenue Recognition
We recognize product revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) our price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is reasonably assured. We recognize revenue for product sales upon transfer of title to the customer. Customer purchase orders and/or contracts are generally used to determine the existence of an arrangement. Shipping documents and the completion of any customer acceptance requirements, when applicable, are used to verify product delivery or that services have been rendered. We assess whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. We will record reductions to revenue for estimated product returns and pricing adjustments in the same period that the related revenue is recorded. These estimates will be based on historical sales returns when available, analysis of credit memo data, and other factors known at the time.
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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Net Loss per Common Share
Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share reflects the potential dilution of securities by including common stock equivalents, such as stock options, stock warrants and convertible preferred stock, in the weighted average number of common shares outstanding for a period, if dilutive. At December 31, 2010, there were no potentially dilutive securities.
Recently Issued Accounting Pronouncements
The Company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.
NOTE 4 - RELATED PARTY TRANSACTIONS
Advances from Related Party
On June 3, 2009, the Company received $38,950 of advances from Manthey Redmond (Aust), all directors of which are also directors of the Company. The advances were non-interest bearing loan to be repaid at the discretion of the Board of Directors of the Company.
Patent Licensing Agreement
On May 1, 2009, the Company entered into a Patent Licensing Agreement with Manthey Redmond (Aust). Manthey Redmond is the owner, developer and patent applicant of the Eco-Engine and all related technology (the "Technology") developed and to be developed. Pursuant to the agreement, Manthey Redmond (Aust) has granted to the Company, a license to develop, manufacture, have manufactured, use and sell or supply the Technology in return for a royalty fee equal to 5% of the Company's gross profits earned as a result of the license agreement. The Company has the right to sublicense its rights under the agreement and is entitled to information and use of any inventions or improvements on the Technology made by Manthey Redmond (Aust) without additional charge. Manthey Redmond (Aust) will apply for valid patents pursuant to each invention or improvements on the Technology. The agreement may be terminated at the option of Manthey Redmond (Aust) in the event that the Company becomes insolvent, or seeks protection from its creditors under any United States federal or state bankruptcy act or if an outside administrator or controller is voluntary or involuntarily appointed to control the Company. The agreement is subject to and governed by the law of Queensland, Australia.
Investment Agreement
On May 1, 2009, the Company entered into an Investment Agreement with Manthey Redmond (Aust) by which Manthey Redmond (Aust) has agreed to invest a non-refundable amount of $40,000 per month beginning July 1, 2009, aggregating $4,200,000 to assist the Company in commercializing products based on the Technology. Manthey Redmond (Aust) may terminate this agreement in the event that the Patent Licensing Agreement is terminated. The agreement is subject to and governed by the law of Queensland, Australia.
In November 2009, March 2010 and May 2010, the Company received $39,925, $955 and $43,887 of capital injection, respectively from Manthey Redmond (Aust) pursuant to the Investment Agreement, which was recorded as additional paid-in capital.
Development Agreement
On May 1, 2009 the Company entered into a Development Agreement with Manthey Holdings by which, commencing July 1, 2009, Manthey Holdings will provide exclusive use of its engineering facility and employees for the purpose of research and development related to the Technology for which the Company will pay Manthey Holdings $30,000 per month beginning July 1, 2009 up to a maximum of $540,000 at which time the agreement shall terminate. On November 6, 2009 the Company entered into an amended Development Agreement dated May 1, 2009 with Manthey Holdings. The amended agreement removed the exclusivity of the use of Manthey Holdings’ engineering facility and employees, and deferred the commencement date of the agreement and first payment to November 20, 2009. Our president/director is the sole shareholder and director of Manthey Holdings which serves as the trustee of the Manthey Holdings Trust. Our president/director is also the beneficiary of the Manthey Holdings Trust and may be deemed the beneficial owner of the 3,040,000 shares, or 29.6% of the Company’s common stock owned by the Manthey Holdings Trust.
On November 6, 2009, the agreement was amended to revise the commencement date of payment from July 1, 2009 to November 20, 2009. For the year ended December 31, 2010, the Company incurred $360,000 of service fees pursuant to the amended agreement with Manthey Holdings and recorded in accrued expense.
The agreement will also terminate in the event that the Patent Licensing Agreement is terminated. Manthey Holdings has agreed to build and test prototypes based on the Technology at its research facility. The agreement is subject to and governed by the law of Queensland, Australia.
NOTE 5 - ACCRUED EXPENSES
Accrued expenses consisted of the following:
NOTE 6 - STOCKHOLDERS’ DEFICIT
The Company is authorized to issue 100,000,000 shares of common stock with a par value of $.0001 and 20,000,000 shares of preferred stock with a par value of $.0001. On June 1, 2009, the Company issued 10,250,000 shares of common stock at par value to its sixty-six (66) initial stockholders.
Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the board of directors in its discretion from funds legally available therefore. In the event of a liquidation, dissolution or winding up, the holders of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities. Holders of common stock have no preemptive rights to purchase the Company’s common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock.
In November 2009, March 2010 and May 2010, the Company received $39,925, $955 and $43,887 of capital injection, respectively from Manthey Redmond (Aust) pursuant to the Investment Agreement (see Note 4), which was recorded as additional paid-in capital.
NOTE 7 - OPERATING LEASES
On July 10, 2009, the Company entered into a lease agreement with Premier Business Centers, under which the Company will lease approximately 165 square feet of office space located at 10940 Wilshire Boulevard, Suite 1600, Los Angeles, California 90024 at a monthly rate of $1,050. The lease term is month-to-month commencing August 3, 2009 with security deposit of one-month rent of $1,050 recorded as Other Assets as of December 31, 2010 and December 31, 2009.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Item 9A. Controls and Procedures
(a)
Disclosure Controls and Procedures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure.
(b)
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 such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Based on that evaluation, our management concluded that our internal control over financial reporting is effective as of December 31, 2010.
(c)
Changes in Internal Control over Financial Reporting. The Company is continuously seeking to improve the efficiency and effectiveness of its operations and of its internal controls. This results in refinements to processes throughout the year. We continue to enhance the design and documentation of our internal control processes to ensure suitable controls over our financial reporting. There were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during our fourth fiscal quarter of 2010.
Item 9B.
Item 9B. Other Information
None.
Part III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
The following table sets forth information regarding the members of the company’s board of directors and its executive officers:
The number of directors to compose the company’s Board of Directors is not fewer than one nor more than five. Directors do not receive any compensation. Directors may be shareholders of the company.
The directors serve until the annual meeting of the shareholders and until their respective successors have been elected and qualified or until death, resignation, removal or disqualification.
The company’s by-laws provide that the number of directors to serve on the Board of Directors may be established, from time to time, by action of the Board of Directors. Vacancies in the existing Board are filled by a majority vote of the remaining directors on the Board. The company’s executive officers are appointed by and serve at the discretion of the Board.
Committees and Terms
The Board of Directors has not established any committees.
The Board has not resolved to set a date for its annual meeting of shareholders.
Item 11.
Item 11. Executive Compensation
Steven Charles Manthey is the sole officer of the Company. Mr Manthey has not received any remuneration from the company but is the sole shareholder and director of Manthey Holdings Pty Ltd and is the beneficiary of the Manthey Holdings Trust and may be deemed the beneficial owner of the 3,040,000 shares of the company’s common stock owned by it. Pursuant to the development agreement, Manthey Holdings Pty Ltd receives $30,000 per month from the company for use of its testing and research facilities.
Anticipated officer and director remuneration
Although not presently offered, the company anticipates that its officers and directors may be provided with a group health, vision and dental insurance program along with director and officer indemnity insurance.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information as of the date of this Form 10K regarding the beneficial ownership of the company’s common stock by each of its executive officers and directors, individually and as a group and by each person who beneficially owns in excess of five percent of the common stock after giving effect to any exercise of warrants or options held by that person.
(1)
The total number of outstanding shares of common stock as of March 28, 2011 is 10,250,000.
(2)
Manthey Holdings Trust owns 3,040,000 shares; Manthey Holdings Pty Ltd serves as the trustee for the Manthey Holdings Trust. Steven Charles Manthey is the sole shareholder and director of Manthey Holdings Pty Ltd and is the beneficiary of the Manthey Holdings Trust and may be deemed the beneficial owner of the shares owned by it.
(3)
The Redmond Family Investment Trust owns 2,590,800 shares; Redmond Family Holdings Pty Ltd serves as the trustee for the Redmond Family Investment Trust. Timothy John Eric Redmond and Geoffrey Redmond are the only shareholders and directors of Redmond Family Holdings Pty Ltd and are the sole beneficiaries of such trust and may therefore be deemed to be the beneficial owner of those shares.
(4)
The Redmond Family Investment Trust owns 2,590,800 shares; Redmond Family Holdings Pty Ltd serves as the trustee for the Redmond Family Investment Trust. Timothy John Eric Redmond and Geoffrey Redmond are the only shareholders and directors of Redmond Family Holdings Pty Ltd and are the sole beneficiaries of such trust and may therefore be deemed to be the beneficial owner of those shares. Alison Redmond, wife of Geoffrey Redmond, owns 290,000 shares of the company’s common stock.
(5)
NAM Trust No. 1 owns 600,000 shares; North American Motors Pty Ltd serves as the trustee for the NAM Trust No. 1. Steven Charles Manthey is the sole director and a beneficiary under the NAM Trust No. 1 and may therefore be deemed to be the beneficial owner of those shares.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Timothy John Eric Redmond and Geoffrey Redmond are brothers and are the sole directors and shareholders of Redmond Family Holdings Pty Ltd which owns 360 shares (40%) of the 900 outstanding shares of Manthey Redmond (Aust) Pty Ltd. In 2007, Redmond Family Holdings Pty Ltd (or its predecessor in title) agreed to invest $50,000 monthly in Manthey Redmond (Aust) Pty Ltd for research and development of the Manthey Redmond Eco-engine. Manthey Redmond (Aust) Pty Ltd has entered into an investment agreement with the company to invest $40,000 monthly to continue research, development, commercialization of the Eco-engine.
Steven Charles Manthey is the sole director and shareholder of Manthey Holdings Pty Ltd which owns 540 shares (60%) of the 900 shares of Manthey Redmond (Aust) Pty Ltd. The company has entered into an agreement with Manthey Holdings Pty Ltd for use of its research facility, staff and prototype testing for a monthly fee of $30,000.
During its initial organization, the company received $38,950 in advances from Manthey Redmond (Aust) Pty Ltd not pursuant to the Investment Agreement and, as such, is a loan interest free, which, unlike the funds received from the Investment Agreement, must be repaid. No formal loan terms were established but the company intends to repay the loan as soon as possible.
Item 14.
Item 14. Principal Accounting Fees and Services
Public Accounting Fees
The following chart sets forth public accounting fees paid and payable to KCCW Accountancy Corp. (“KCCW”) during the year ended December 31, 2010 and the period from April 20, 2009 (inception) through December 31, 2009:
Audit fees were for professional services rendered by KCCW for the audit of our annual financial statements and the review of the financial statements included in our quarterly reports on Forms 10-Q, and services that are normally provided by KCCW in connection with statutory and regulatory filings or engagements for that fiscal year.
Audit related fees consist of services by KCCW that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under Audit Fees. This category includes accounting consultations on transaction and proposed transaction related matters. We incurred these fees in connection with registration statements, financing, and acquisition transaction.
KCCW did not bill any other fees for services rendered to us during the year ended December 31, 2010 and for the period from April 20, 2009 (inception) through December 31, 2009 for assurance and related services in connection with the audit or review of our financial statements.
Pre-Approval of Services
The Audit Committee appoints the independent accountant each year and pre-approves the audit services. The Audit Committee chair is authorized to pre-approve specified non-audit services for fees not exceeding specified amounts, if he promptly advises the other Audit Committee members of such approval.
Audit of Financial Statements
During the year ended December 31, 2010 and the period from April 20, 2009 (inception) through December 31, 2009, KCCW was our principal auditor and no work was performed by persons outside of KCCW.
Item 15.
Item 15. Exhibits and Financial Statement Schedules (a)
(1) Financial Statements
The Financial Statements required by Part II, Item 8 of this Form 10-K are set forth above.
Other schedules have been omitted because of the absence of the conditions under which they are required or because the required information where material is shown in the consolidated financial statements or the notes thereto.
SIG NATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Clean Diesel Technologies, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MANTHEY REDMOND CORPORATION
By: /s/ Steven Charles Manthey Date: March 28, 2010
Chief Executive Officer, President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons on behalf of Manthey Redmond Corporation and in the capacities and on the date indicated have duly signed this report below.
/s/Steven Charles Manthey
Chief Executive Officer, President and Director
/s/ Geoffrey Redmond,
Director
/s/ Timothy John Eric Redmond,
Director