Attached files
AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 25, 2009
FILE NO. 333-161522
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Amendment
No. 3 to
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
MIDAS
MEDICI GROUP HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
Delaware | 8742 | 37-1532843 |
(State or jurisdiction of incorporation or
organization)
|
(Primary Standard Industrial Classification Code Number)
|
(I.R.S.
Employer Identification No.)
|
445 Park
Avenue, 20th
Flr.
New York,
New York 10022
(212)
792-0920
(Address
and telephone number of principal executive offices)
Nana
Baffour, CFA
Chief
Executive Officer & Co-Executive Chairman
445 Park
Avenue, 20th
Flr.
New York,
New York 10022
(212)
792-0920
(Name,
address and telephone number of agent for service)
Thomas A. Rose, Esq | Stephen A. Weiss, Esq | ||
Marcelle S. Balcombe, Esq. | Janet Gabel, Esq. | ||
Sichenzia Ross Friedman Ference LLP | Hodgson Russ, LLP | ||
61 Broadway, 32 nd Floor | 1540 Broadway | ||
New York, New York 10006 | New York, New York 10036 | ||
T: (212) 930-9700 | T: (212) 751-4300 | ||
F: (212) 930-9725 | F: (212) 751-0928 | ||
Approximate date of commencement of
proposed sale to the public: As soon as practicable after this
Registration Statement becomes effective.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box. o
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
(COVER
CONTINUES ON FOLLOWING PAGE)
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
oLarge accelerated filer | oNon-accelerated filer | |
oAccelerated filer | x Smaller reporting company | |
CALCULATION
OF REGISTRATION FEE
Title
of each class of securities
to
be registered
|
Amount
to be Registered
|
Proposed
Maximum Offering Price Per Share (1)
|
Proposed
Maximum Aggregate Offering Price
|
Amount
of Registration Fee
|
||||||||||||
Common
Stock, $0.001 par value (2)
|
1,150,000
|
$
|
6.50
|
$
|
7,475,000
|
$
|
417.11
|
|||||||||
Common
Stock, $0.001par value (3)
|
42,500
|
$
|
7.80
|
$
|
331,500
|
$
|
18.50
|
|||||||||
Total
Registration Fee
|
$
|
435.60
|
*
|
*$357.62
of which have been previously paid.
(1)
Estimated solely for purposes of calculating the registration fee in accordance
with Rule 457(o) under the Securities Act of 1933.
(2)
Includes shares of common stock issuable upon the exercise of a 45-day option
granted to the registration to the underwriter to cover over-allotments, if
any.
(3)
Issuable to the underwriter upon exercise of warrants of the registrant,
exercisable at no less than 120% of the initial public offering price of the
registrant’s shares and expiring five years from the effective date of this
registration statement.
THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
The
information in this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these securities and is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
Preliminary Prospectus | Subject To Completion, Dated November 25, 2009 |
MIDAS
MEDICI GROUP HOLDINGS, INC.
1,000,000
Shares of Common Stock
This is a
firm commitment public offering of 1,000,000 shares of our common stock. We
expect that the public offering price of our common stock will be between $5.50
and $6.50 per share.
We are a
reporting company under Section 13 of the Securities Exchange Act of 1934, as
amended.
There is
no public market for our securities. On or before the date of
this prospectus, we intend to have our common stock quoted for trading on the
FINRA OTC Bulletin Board. There can be no assurance that our common stock will
ever be quoted on a quotation service or a stock exchange or that any market for
our securities will develop.
Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning
on page 9 of this prospectus for a discussion of information that should be
considered in connection with an investment in our securities.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
|
|
Public
Offering
Price
|
|
Underwriting
Discount
and
Commissions(1)
|
|
Proceeds,
to
Us,
Before
Expenses(2)
|
|||||
Per
share
|
$
|
|
|
|
$
|
|
|
$
|
|
|
|
Total
|
$
|
|
|
|
$
|
|
|
$
|
|
|
(1)
|
Does
not include a non-accountable expense allowance equal to 1% of the gross
proceeds of this offering payable to National Securities, as
representative of the several underwriters and other expenses of this
offering estimated at $51,000. We have also agreed to issue to the
representative of the underwriters warrants to purchase up to
42,500 shares of our common stock at an exercise price equal to
120% of the per share offering price, exercisable for a four year period
commencing one year after the effective date of this
prospectus. The foregoing warrant will only be issued to the
representative of the underwriters and permitted officers or employees of
the representative.
|
|||
(2)
|
We
estimate that the total expenses of this offering, excluding the
underwriters’ discount and non accountable expenses allowance, will be
approximately $748,305.
|
We have
granted the underwriters a 45-day option to purchase up to 150,000
additional shares from us to cover over-allotments, if any. If the underwriters
exercise the over-allotment option in full, the net proceeds to us will be
$________.
We are
offering the shares for sale on a firm-commitment basis. The underwriters expect
to deliver our securities to investors in the offering on or about
___________ , 2009.
NATIONAL SECURITIES CORPORATION | ||
ARDOUR CAPITAL
INVESTMENTS, LLC
|
The
date of this prospectus is_________, 2009.
Until
[*], 2009, all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
No
dealer, salesperson or any other person is authorized to give any information or
make any representations in connection with this offering other than those
contained in this prospectus and, if given or made, the information or
representations must not be relied upon as having been authorized by us. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the securities offered by this prospectus, or an
offer to sell or a solicitation of an offer to buy any securities by anyone in
any jurisdiction in which the offer or solicitation is not authorized or is
unlawful.
TABLE
OF CONTENTS
Page
|
||||
Prospectus
Summary
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1
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|||
The
Offering
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7
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|||
Summary
Financial Data
|
8
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|||
Risk
Factors
|
9
|
|||
Determination
of Offering Price
|
16
|
|||
Special
Note Regarding Forward-Looking Statements
|
16
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|||
Use
of Proceeds
|
17
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|||
Capitalization
|
17
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|||
Dilution
|
18
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|||
Unaudited
Pro Forma Condensed Consolidated Financial Data
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19
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|||
Management’s
Discussion and Analysis of Financial Condition and Results
of Operations
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25
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|||
Business
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33
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|||
Description
of Properties
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47
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|||
Legal
Proceedings
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47
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|||
Market
for Common Stock and Related Stockholder Matters
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47
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|||
Directors,
Executive Officers, Promoters and Control Persons
|
49
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|||
Executive
Compensation
|
53
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|||
Security
Ownership of Certain Beneficial Owners and
Management
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55
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|||
Certain
Relationships and Related Transactions
|
56
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|||
Underwriting
|
57
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|||
Description
of Securities
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59
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|||
Legal
Matters
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60
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|||
Experts
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60
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|||
Changes
in Registrant’s Certifying Accountant
|
60
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|||
Disclosure
of Commission Position of Indemnification for Securities Act
Liabilities
|
60
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|||
Where
you can find more Information
|
61
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|||
Index
to Financial Statements
|
F-1
|
You
should rely only on the information contained or incorporated by reference to
this prospectus in deciding whether to purchase our common stock. We
have not authorized anyone to provide you with information different from that
contained or incorporated by reference to this prospectus. Under no
circumstances should the delivery to you of this prospectus or any sale made
pursuant to this prospectus create any implication that the information
contained in this prospectus is correct as of any time after the date of this
prospectus. To the extent that any facts or events arising after the date of
this prospectus, individually or in the aggregate, represent a fundamental
change in the information presented in this prospectus, this prospectus will be
updated to the extent required by law.
We
obtained statistical data, market data and other industry data and forecasts
used throughout this prospectus from market research, publicly available
information and industry publications. Industry publications generally state
that they obtain their information from sources that they believe to be
reliable, but they do not guarantee the accuracy and completeness of the
information. Nevertheless, we are responsible for the accuracy and completeness
of the historical information presented in this prospectus, as of the date of
the prospectus.
PROSPECTUS
SUMMARY
This
summary highlights certain information appearing elsewhere in this prospectus.
For a more complete understanding of this offering, you should read the entire
prospectus carefully including the risk factors, our business description and
the consolidated financial statements and notes related to those statements
included elsewhere in this prospectus. Unless the context indicates otherwise,
as used in this prospectus, “Midas Medici” or the “Registrant” refers only to
Midas Medici Group Holdings, Inc., a Delaware corporation, and “we”, “us”, “our”
or the “Company” refers to Midas Medici, together with our wholly-owned
subsidiary Utilipoint International, Inc. (“Utilipoint”) and its 60% owned
subsidiary The Intelligent Project LLC. The term “year” or “fiscal
year” refers to the year ended December 31. All share and per share information
assumes an initial offering price of $6.00 per
share.
Midas
Medici Group Holdings, Inc.
Overview
We are a
clean energy company that provides services to utilities and others to further
the development of the electric grid. The electric grid is the entire
infrastructure available to generate, transmit, and distribute electricity to
end users. We define the “Smart Grid” as the electrical grid, enhanced by
technologies and solutions designed to make it function more efficiently,
reliably and securely.
In much
the same way that technological advances in microprocessors, power electronics
and the internet revolutionized the telecommunications industry, we believe that
technological advances are transforming the traditional electrical grid into a
smarter grid and significantly improving its capabilities. Key
elements of the Smart Grid include the ability to: introduce clean energy
sources into the grid; collect, transmit, store and analyze data from the grid;
communicate information between all segments of the grid; automate certain
functions of the grid using advanced control systems and devices; and reduce the
carbon footprint using various products, processes and services for remote
demand management and ensuring affordability of electrical
power.
In
October 2008, the U.S. Department of Energy released a study, “The Smart Grid:
An Introduction”, in which it estimated that for the past 20 years, demand
growth has exceeded supply growth by 25% per year. As a result, power outages
are estimated to cost U.S. businesses $100 billion per year, with a 41% rise in
the number of power outages in the second half of the 1990s than in the first
half. Smart Grid enhancements will ease congestion and increase utilization of
generating capacity, sending between 50% to 300% more electricity through the
existing electric grid.
Through
our wholly-owned subsidiary, Utilipoint International, Inc. ("Utilipoint"), we
provide energy industry consulting services and proprietary research in seven
practice areas that encompass the entire energy and utility value chain,
including:
·
|
Smart
Meter Deployment,
|
·
|
Energy
Investments & Business Planning,
|
·
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CommodityPoint,
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·
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Meter-to-Cash,
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·
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Pricing
& Demand Response,
|
·
|
Public & Regulatory Issues
Management,
and
|
·
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The
Intelligent Project.
|
Our
clients include utilities, investors, regulators, and energy industry vendors
and service providers, both domestically and internationally. According to the
International Energy Agency’s (“IEA”) World Energy Outlook 2008, electric power
infrastructure will require cumulative worldwide investment of over $13.6
trillion (in 2007 dollars) from 2007-2030. On a national level, and according to
the Brattle Group, investment totaling approximately $1.5 trillion will be
required between 2010 and 2030 to pay for grid infrastructure in the United
States1. We believe we are well positioned to benefit
from this anticipated market opportunity
1
With its
origins dating back to 1933, Utilipoint built its reputation in the power
utility industry by supplying market data to United States utilities. Today,
Utilipoint is a full service energy-focused consulting firm, providing
independent research, information, analysis, and consulting to energy companies,
utilities, investors, regulators, and industry service
providers.
With
Utilipoint’s acquisition of 60% of The Intelligent Project, LLC, completed in
July 2009, we now have the ability to provide additional consulting services,
which complement our current service offerings, to help clients understand and
consider the Smart Grid’s impact. We believe this knowledge will
provide critical intelligence to enable our clients to successfully deploy Smart
Grid solutions. We provide our consulting services and proprietary
research using multi-disciplinary teams with deep subject matter expertise,
analytical methodologies, primary research and technology-enabled tools. We also
host annual conferences in the U.S. and Europe targeted to our client base to
discuss topical issues in the Clean Energy and Smart Grid sectors. As
of September 30, 2009, more than 50% of our professional staff held
post-graduate degrees in such diverse fields as economics, engineering, business
administration, information technology, law, life sciences and public policy.
Our senior managers have considerable industry and project management experience
and an average tenure of more than 20 years in the industry. We believe this
diverse pool of intellectual capital is what enables us to assemble the
multi-disciplinary teams that can provide creative solutions to our clients’
most pressing problems. We are headquartered in New York, New York.
Our subsidiary, Utilipoint is headquartered in Albuquerque, New Mexico, with two
domestic regional offices in Tulsa, Oklahoma and Houston, Texas, and it
maintains international operations through its office in Brno, Czech
Republic. The Intelligent Project, LLC is located in West Lafayette,
Indiana.
Our
Strategy
Our goal
is to become a global leader in alternative energy and Smart Grid solutions. Our
strategy is to grow our business both organically and through acquisitions by
leveraging the knowledge and experience of Utilipoint and the experience of our
management team’s 20 years of investing in and operating energy services
companies. Prior to joining our company, our management team has acquired and
operated businesses with an aggregate enterprise value of approximately $600
million in the energy services sector. We intend to identify new areas of growth
and expand our activities beyond our current consulting business. We
targeted the following areas of growth: engineering services, data warehousing
and information technologies and financial services.
Accelerate
organic growth
Our
organic growth strategy has been to build technology systems and a back-office
infrastructure, complemented by increased market awareness of the Utilipoint
brand to support our consultants. This strategy is designed to
generate significant financial and operational leverage by attracting and hiring
proven practice leads in select niche areas of the clean energy and smart grid
sector.
Pursue
strategic acquisitions
The core
of our growth strategy includes executing strategic acquisitions of companies
providing services and solutions that support the development of the Smart Grid.
We plan to pursue a disciplined acquisition strategy to obtain new customers,
increase our size and market presence and obtain capabilities that complement
our existing portfolio of services, while focusing on cultural compatibility and
financial impact. We made our first acquisition in August 2009, when we acquired
Utilipoint International, Inc., a full service energy-focused consulting firm,
providing independent research, information, analysis, and consulting to energy
companies, utilities, investors, regulators, and industry service
providers.
Some of
the types of businesses that we have currently identified for possible
acquisition include:
· Engineering
companies that provide enabling solutions to the Smart Grid infrastructure;
· Technology
companies that provide data warehousing technology infrastructure and data
center solutions;
· Companies
that facilitate financing of energy efficiency initiatives for consumers and
commercial enterprises; and
· Other
companies or products and services aimed at commercial/industrial customers and
consumers to impact the Smart Grid.
2
We are
currently engaged in discussions with respect to the acquisition of a company
affiliated with certain of our officers and directors. Any such
acquisition would be subject to negotiation of a definitive agreement and
approval by the independent members of our Board of Directors. We
currently have no agreements, plans or arrangements for any
acquisitions. There can be no assurance that we will be able to
consummate any strategic acquisitions, or even if we are able to do so, that any
one or more of the acquisitions will prove to be profitable or otherwise
beneficial to our Company.
Leverage
our management team’s diverse industry experience
Our
management team, led by our CEO, Nana Baffour, and President, Johnson Kachidza,
possesses a breadth and depth of industry experience which we believe will
enable us to achieve our growth objectives. We believe that our relationships
with executive level management at utilities, regulators, vendors, technology
leaders and investment professionals who are active in the utility space will
serve us well as we continue to execute our business strategy. We believe that
our experience and expertise will maximize our chances of succeeding in
acquiring and managing energy services companies with customers that include
utilities, educational institutions, automobile manufacturers, architectural
engineering firms, technology providers, general manufacturers and local
municipalities.
Grow our client
base and increase the scope of services provided to existing
clients
According
to The Athena Institute’s research report entitled “ Poised for Profit
II: Prospects for the Smart Energy Sector in the Pacific
Northwest”,
2003, the energy
consulting and energy services market is sized at approximately $2.5 billion and
growing 15-20% annually. The overall Smart Grid market opportunity,
according to the Energy Information Administration’s (“EIA”) World Energy Outlook 2008, is
approximately $13.6 trillion (in 2007 dollars) for the period 2007-2030. We
intend to capitalize on this large market and grow our client base by expanding
our geographic presence domestically and internationally, while expanding the
scope of services we provide. In addition, we intend to invest in development
and marketing initiatives in order to strengthen our brand recognition among
potential clients.
Focus on higher margin contracts and
recurring revenue
We plan
to focus our efforts on obtaining energy consulting assignments in the form of
subscription-based revenues and bundled service agreements, which we believe
will provide us with higher profit margins and increase the share of our revenue
that is recurring. We also intend to expand and improve our existing databases
in order to increase our revenues from subscriptions to those
databases.
Strengthen
our end-to-end service offerings
We plan
to leverage our strong client and industry relationships to increase our revenue
from research, advisory and consulting services, which include information
technology solutions, executive level consortiums, primary research, project
management, project delivery and conferences.
Build
upon our brand equity
Through
our subsidiary Utilipoint, we enjoy 76 years of brand recognition as an energy
industry expert. We intend to distinguish ourselves as a diversified Clean
Energy and Smart Grid focused company.
Capitalize on
operating leverage
We
are building a corporate infrastructure and internal systems that we
believe when in place would be readily scalable and can accommodate
significant growth without a proportionate increase in
expense.
3
Competition
We
operate in a highly competitive and fragmented marketplace and compete against a
number of firms in each of our key markets. A substantial number of
these firms have significantly greater infrastructure and financial resources
than our company.
Industry
Background
The
Electrical Power Industry
The
electrical power industry can be divided into four segments: Generation,
Transmission, Distribution, and End-Use Consumption. Generation is the process
of producing electrical energy or the amount of electrical energy produced by
transforming other forms of energy, commonly expressed in kilowatt hours (“kWh”)
or megawatt hours (“MWh”). Transmission refers to the high-voltage,
long-distance transfer of electricity. Distribution refers to medium-voltage,
medium-distance transport from transmission substations to customer meters.
End-Use Consumption is the use of electricity by residential, commercial and
industrial consumers.
Substantive
regulation of the utility industry at the federal level began with the passage
of the Public Utility Holding Company Act of 1935, (“PUHCA”). PUHCA regulated
vertically integrated monopolies that were designed to manage the mission
critical service of generating, transmitting and distributing electricity to end
users in predefined service regions. These vertically integrated
utilities are also regulated at the federal level by the Federal Energy
Regulatory Commission (“FERC”) and at the state level by the Public Utility
Commissions (“PUCs”). FERC regulates the interstate transmission of
natural gas, oil and electricity, including wholesale sales of electricity
outside the utility’s predefined service region, while the PUCs generally
regulate the quality of service and rates charged to retail
customers. The rates are designed to recover a PUC determined return
on the investment, as well as other cost of service
expenses.
The
benefits of the monopoly nature of the industry have been questioned and
challenged over the past 30 years. FERC and the PUCs have driven an industry
restructuring meant to enable and encourage the development of more
efficient generation sources and to permit increased competition in order to
reduce prices. Restructuring throughout North America is fostering a
competitive environment in the industry. The most fundamental change to the
electrical energy business has been separating the generating from the
distribution functions and breaking up the vertically integrated utilities. In
these restructured markets, utility companies continue to operate and maintain
the local distribution lines, delivering electricity to consumers at regulated
prices as before, but power generators and electricity suppliers are now allowed
to openly compete to sell their electricity at market prices. Grid operators,
comprised of independent system operators, referred to as ISOs, or regional
transmission organizations, referred to as RTOs, have been formed in these
restructured markets to take control of the operation of the power systems,
including transmission lines and energy trading, coordinating the wholesale of
electricity, and establishing fair and efficient markets. These grid operators
are responsible for maintaining federal reliability standards designed to avoid
service disruptions.
Increasingly,
grid operators and utilities in both restructured markets and in traditional
regulated markets are challenged to provide electricity reliably during periods
of peak demand. Recently, Government legislation, such as the Energy Policy Act
of 2005, The Clean Air Act of 2005, the Energy Independence and Security Act of
2007, and the American Recovery and Reinvestment Act of 2009, have
been promulgated to address national and global issues pertaining to energy
security, energy independence and environmental concerns. The key structural
changes in the utility industry and recent legislation have all laid the
groundwork for the implementation and acceleration of the Smart Grid
by:
·
|
Expanding
the sources of generation to include more efficient and environmentally
friendly resources such as solar, biomass and
wind;
|
·
|
Opening
access to the transmission and distribution system to facilitate wholesale
trading of electricity between regions to introduce competition;
and
|
·
|
Providing
consumers with choices of where to purchase power further promoting
competition.
|
Once
implemented, we believe the Smart Grid will address the current constraints of
the existing grid and make it function more efficiently, by:
·
|
Improving
reliability through the enhanced monitoring of the grid using
technology-based tools such as digital electronics, visualization
technologies and advanced controls to avoid power
outages;
|
·
|
Maintaining
power affordability by facilitating competition and energy efficiency
through reduced usage;
|
·
|
Reinforcing
U.S. competitiveness by promoting energy independence and energy
security;
|
·
|
Accommodating
renewable energy sources on the
grid;
|
·
|
Helping
reduce the carbon footprint by decreasing consumption and thus reducing
the need to build new fossil fuel power
plants;
|
·
|
Increasing
effective supply by reducing blackouts and brownouts through data-driven
grid management, optimizing capacity allocation and demand response and
management;
|
·
|
Facilitating
cost savings for utilities by automating tasks such as meter reading or
remote grid monitoring; and
|
·
|
Introducing
efficiencies yet to be envisioned driven by further advances to the Smart
Grid.
|
4
Recent acceleration in demand for
power on a global and national scale. According to the EIA, overall U.S.
electricity consumption will be about five trillion gigawatt hours (“GWh”)
by 2030 (World Energy Outlook
2009) which will require about 218 gigawatts (“GW”) of new generating
capacity during the 2007 to 2030 period (Annual Energy Outlook 2009)
although only 47 GW is under plan today. Given the supply and demand disparity,
along with constraints in building new generation capacity, including
construction and environmental costs, the Smart Grid provides a cost-effective
and practical opportunity to optimize the grid to accommodate the increased
electrical energy demand while minimizing these costs.
The Cost of
Under-Investment and Grid Deterioration. Historically,
investment in expanding the grid infrastructure has not generally kept pace with
the increase in demand, creating increased congestion and sub-optimization of
utility operations. The Smart Grid offers a practical solution to
optimize the current grid, reducing infrastructure investment, in order to meet
future demand.
An Evolving
Regulatory Framework. Driven by national and global
environmental, energy security, and energy dependence concerns, new and existing
legislation will continue to constrain the ability to meet energy demand by
building more power plants. As such, the Smart Grid presents a cost effective
solution to meet future electrical energy needs within the constraints of
present and anticipated legislation and environmental
policy.
Competitive
Strengths
Experienced
management team. Our management team possesses extensive
experience acquiring and integrating energy services businesses, relationships
with senior executives throughout the electric energy industry and a
comprehensive understanding of the U.S. regulatory framework. With an average
tenure of 20 years in the industry, members of our management have a history of
successfully building companies through organic, strategic and operational
expertise and leveraging critical partnerships into stable and positive cash
flow generating assets.
Highly
experienced professional staff with deep subject matter knowledge. Management
believes the thought leadership and in-depth subject matter knowledge of our
experts coupled with our corporate experience developed over decades of
providing advisory services at the intersection of electricity and technology
make us a valuable resource to our clients and distinguish us from our
competitors.
Versatile
advisory services practice. We
believe our advisory approach to consulting and understanding of our clients’
requirements and objectives, gives us a significant competitive advantage,
permitting us to gain access to key client decision makers during the initial
phases of their policy, program, project or initiative which we hope to leverage
into opportunities for other facets of our business.
Proprietary
analytics and methods which allow us to deliver superior solutions to
clients. We
have developed energy-planning, benchmarking and pricing models that are used by
municipalities and commercial entities around the world. In addition, we have
developed a suite of proprietary tools, databases and project management
methodologies that are available to be utilized on client engagements and
leveraged to develop proprietary products.
5
Corporate
History
We were
incorporated in the State of Delaware on October 30, 2006 under the name Mondo
Acquisition I, Inc. We were formed as a vehicle to pursue a business combination
through the acquisition of, or merger with, an operating
business. From inception until May, 2009, we were engaged in
organizational efforts and obtaining initial financing. On May 15, 2009, our
then sole shareholder, Mondo Management Corp., and Midas Medici Group, Inc.
entered into a Purchase Agreement. Pursuant to the Purchase
Agreement, Mondo Management Corp. sold 100%
of the issued and outstanding capital stock of the
Company to Midas Medici Group, Inc. The execution of the Purchase Agreement
resulted in a change in control of the Company, both in its shareholding and
management. Effective May 22, 2009, we changed our name to Midas Medici Group
Holdings, Inc.
On August
10, 2009, Midas Medici entered into an Agreement and Plan of Merger
with Utilipoint and Utilipoint Acquisition Co., a New Mexico corporation
and wholly-owned subsidiary of Midas Medici (the "Merger Sub"). Pursuant to
the Merger Agreement, Merger Sub merged with and into Utilipoint and
Utilipoint became our wholly-owned subsidiary on August 21, 2009. At the closing
of the Merger on August 21, 2009, we ceased to be a shell
company. In connection with the Merger, we issued an aggregate of
1,348,516 shares of common stock to the Utilipoint stockholders in exchange for
42,191 Utilipoint common shares and 172,597 options in exchange for 5,400
Utilipoint options. In addition, Knox Lawrence International, LLC, KLI IP
Holding, Inc. and UTP International LLC, former shareholders of Utilipoint,
received an aggregate of 889,444 shares of our common stock
and 27,168 options at the closing of the Merger. Nana Baffour, our CEO
and Johnson Kachidza, our President, each own 373.5 membership units or 37.35%
of Knox Lawrence International LLC, 150 shares or 30% of KLI IP Holding, Inc.
and no membership units or 0% of UTP International LLC. Also, at the closing of
the Merger, we issued options to purchase 25,000 shares of our common stock to
David Steele, President of Utilipoint and options to purchase 10,000 of our
common stock each to Peter Shaw, Managing Director of The Intelligent Project,
LLC ("IP") and Stephen Schweich, our Director.
The
Merger is being accounted for as a reverse merger and recapitalization
which resulted in Midas Medici being the “legal acquirer” and Utilipoint the
“accounting acquirer”. The prospective filings with the Securities and Exchange
Commission (the “SEC”) included the historical financial results of Utilipoint
as of and for the periods ended September 30, 2009 and 2008 and Midas Medici,
and its subsidiaries only as of and for the period commencing August 21, 2009,
the date of the reverse merger.
References
herein to Utilipoint common shares has been retrospectively adjusted
to reflect the exchange ratio 31.962187 Midas Medici common shares for each
share of Utilipoint common stock established in the Merger
Agreement.
Utilipoint,
together with its subsidiaries, is a utility and energy consulting, and issues
analysis firm. Utilipoint offers public issues and regulatory management,
advanced metering infrastructure and meter data management, rates and demand
response, utility energy and technology, trading and risk management, and energy
investment services. Utilipoint provides its services to energy companies,
utilities, investors, regulators, and industry service providers primarily in
North America and Europe. Utilipoint also serves select clients in Asia, South
America, Africa and the Middle East. Utilipoint is headquartered in Albuquerque,
New Mexico, with two domestic regional offices in Tulsa, Oklahoma and Houston,
Texas, and is incorporated under the laws of the State of New Mexico. Utilipoint
also has a wholly owned subsidiary, Utilipoint, s.r.o., in the Czech Republic
and maintains its international operations through its office in Brno, Czech
Republic. In July 2009, Utilipoint acquired a controlling interest in IP. IP is
a research and advisory services firm addressing the challenges that utilities
face in advancing and solving electricity consumers’ needs related to the Smart
Grid. IP is headquartered in West Lafayette, Indiana.
Corporate
Information
Our
executive offices are located at 445 Park Avenue, 20th Floor, New York, New York,
10022. Our telephone number is (212) 792-0920. Utilipoint’s web address is www.utilipoint.com. The information
contained on, or that can be accessed through, Utilipoint’s website is not a
part of this prospectus. We have included the website address in this prospectus
solely as an inactive textual reference.
6
The
Offering
Securities
being offered
|
1,000,000 shares
of common stock .
|
|
Over-allotment
option
|
Up
to an additional 150,000 shares of common stock may be issued in
the
event
that the underwriters exercise their over-allotment option within
45
days
of the effective date of the registration statement of which
this
prospectus
is a part.
|
|
Common
stock outstanding before
this
offering
|
2,310,516
shares
|
|
Common
stock outstanding after this offering
|
3,310,516
shares (1)
|
|
Use
of proceeds
|
Repayment
of debt and accrued expenses; website and database upgrades;
marketing
and infrastructure expenses; investment in strategic partnerships; and
working capital, including acquisition and transactions
costs.
|
|
Underwriters’
compensation
|
·
·
·
|
8%
of the public offering price
1%
non-accountable expense allowance
Warrants
to purchase 42,500 shares of common stock at an exercise price
of
120% of the public offering price, exercisable on the first anniversary of
the effective date of this prospectus and expiring on the fifth
anniversary of the
date of this prospectus.
|
Risk
Factors
|
The
securities offered by this prospectus are speculative and involve a
high
degree
of risk and investors purchasing securities should not purchase
the
securities
unless they can afford the loss of their entire investment.
See
“Risk
Factors” beginning on page 9.
|
|
_______________________________
(1)
Excludes (i) up to 150,000 shares of common stock that may be sold by us to the
underwriters to cover over-allotments, (ii) 42,500 shares of our common stock
issuable upon exercise of warrants to be issued to the underwriters in
connection with this offering, and (iii) 650,000 shares of common stock reserved
for issuance under our stock option plan.
.
7
Summary
Historical Consolidated Financial
Data
In the
table below we provide you with summary historical consolidated financial data
of Utilipoint International, Inc. for the year ended December 31, 2008 and
2007 (pre August 21, 2009 reverse merger) and Midas Medici Group Holdings, Inc.
(formerly Mondo Acquisition I, Inc.) for the nine month period ended September
30, 2009 and 2008, derived from our historical audited and unaudited condensed
consolidated financial statements included elsewhere in this prospectus. We have
prepared the unaudited condensed consolidated interim financial information set
forth below on the same basis as our audited consolidated financial statements.
References to Utilipoint common shares have been retrospectively adjusted to
reflect the exchange ratio 31.962187 Midas Medici Common Shares for each share
of Utilipoint Common Stock. Refer to page 21 for offering
adjustments.
The
summary audited consolidated financial data for the fiscal year ended December
31, 2008 and the unaudited consolidated financial data for the nine month period
ended September 30, 2009 have been prepared to give effect to the reverse merger
transaction in the manner described under “Unaudited Pro Forma Condensed
Consolidated Financial Data” and the notes thereto. The pro forma
adjustments are based upon available information and certain assumptions that we
believe are reasonable. The summary unaudited pro forma consolidated
financial data are for additional informational purposes only and do not purport
to represent what results of operations actually would have been if
the offering had occurred at any date, and such data do not purport to
project the results of operations for any future period. Refer to page 21 for
offering adjustments.
Historical
results are not necessarily indicative of the results that may be expected for
any future period. The information presented below is only a summary and should
be read in conjunction with our consolidated financial statements and related
notes and “Management's Discussion and Analysis of Financial Condition and
Results of Operations” included elsewhere in this
prospectus.
Utilipoint
|
Utilipoint
|
Midas
Medici
|
Midas
Medici
|
|||||||||||||
International,
Inc.
|
International,
Inc.
|
Group
Holdings, Inc.
|
Group
Holdings, Inc.
|
|||||||||||||
Fiscal
Year Ended
|
Fiscal
Year Ended
|
Nine
Months Ended
|
Nine
Months Ended
|
|||||||||||||
December
31,
|
December
31,
|
September
30,
|
September
30,
|
|||||||||||||
2007
|
2008
|
2009
|
2008
|
|||||||||||||
Statement
of Operations Data
|
||||||||||||||||
Net
Revenues
|
$ | 3,910,392 | $ | 3,660,941 | $ | 2,566,962 | $ | 2,826,650 | ||||||||
Cost
of Services
|
2,149,136 | 2,037,046 | 1,445,193 | 1,485,006 | ||||||||||||
Gross
Margin
|
1,761,256 | 1,623,895 | 1,121,769 | 1,341,644 | ||||||||||||
Operating
Expenses
|
||||||||||||||||
Selling,
general and administrative
|
1,548,028 | 1,777,613 | 1,784,968 | 1,338,676 | ||||||||||||
Depreciation
and amortization
|
10,871 | 17,845 | 13,835 | 12,207 | ||||||||||||
Management
fees
|
25,000 | 100,000 | - | - | ||||||||||||
Total
operating expenses
|
1,583,899 | 1,895,458 | 1,798,803 | 1,350,883 | ||||||||||||
Operating
income (loss)
|
177,357 | (271,563 | ) | (677,034 | ) | (9,239 | ) | |||||||||
Other
Income (Expense)
|
||||||||||||||||
Interest
income
|
1,974 | 1 | 2 | - | ||||||||||||
Interest
expense
|
(66,381 | ) | (63,942 | ) | (62,855 | ) | (49,332 | ) | ||||||||
Other
income
|
850 | - | - | - | ||||||||||||
Total
other income (expense)
|
(63,557 | ) | (63,941 | ) | (62,853 | ) | (49,332 | ) | ||||||||
Income
(loss) before income taxes
|
113,800 | (335,504 | ) | (739,887 | ) | (58,571 | ) | |||||||||
Provision
(benefit) for income taxes
|
45,737 | (35,815 | ) | 2,077 | (1,362 | ) | ||||||||||
Net
income (loss)
|
68,063 | (299,689 | ) | (741,964 | ) | (57,209 | ) | |||||||||
Preferred
stock dividends and dividend accretion
|
||||||||||||||||
Preferred
stock stated dividends
|
(34,125 | ) | (136,500 | ) | (109,958 | ) | (102,375 | ) | ||||||||
Preferred
stock dividend accretion
|
(116,232 | ) | (279,353 | ) | (203,109 | ) | (201,659 | ) | ||||||||
Net
loss applicable to common stockholders
|
$ | (82,294 | ) | $ | (715,542 | ) | $ | (1,055,031 | ) | $ | (361,243 | ) | ||||
Net
loss per share applicable to common
|
||||||||||||||||
stockholders
- basic and diluted
|
$ | (0.05 | ) | $ | (0.52 | ) | $ | (0.69 | ) | $ | (0.26 | ) | ||||
Weighted
average common shares
|
||||||||||||||||
outstanding
- basic
|
1,378,178 | 1,367,923 | 1,531,736 | 1,372,730 | ||||||||||||
Weighted
average common shares
|
||||||||||||||||
outstanding
- diluted
|
1,378,178 | 1,367,923 | 1,531,736 | 1,372,730 | ||||||||||||
Balance
Sheet Data
|
||||||||||||||||
Cash
and cash equivalents
|
$ | - | $ | 144,546 | $ | 112,335 | $ | 144,546 | ||||||||
Total
assets
|
858,896 | 776,875 | 570,578 | 776,875 | ||||||||||||
Total
liabilities
|
1,743,462 | 2,292,245 | 2,301,867 | 2,292,245 | ||||||||||||
Stockholders'
equity (deficit)
|
(884,566 | ) | (1,515,370 | ) | (1,731,289 | ) | (1,515,370 | ) | ||||||||
Total
liabilities and stockholders' equity (deficit)
|
858,896 | 776,875 | 570,578 | 776,875 |
8
RISK
FACTORS
An
investment in our common stock involves risk. You should
carefully consider the risks described below which are material and inherent in
this offering together with all of the other information included in this
prospectus before making an investment decision with regard to our securities.
The statements contained in or incorporated into this prospectus that are not
historic facts are forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those
set forth in or implied by forward-looking statements. If any of the following
risks actually occurs, our business, financial condition or results of
operations could be harmed. In that case, the trading price of our common stock
could decline, and you may lose all or part of your
investment.
Risks
Associated with Our Business
We
have recently incurred annual net losses, and we may continue to incur annual
net losses in the future.
The
combined historical net loss of Midas Medici and Utilipoint in 2008 was
$(300,547). Our combined historical accumulated deficit from inception through
December 31, 2008 was $(816,973). Our net losses in 2008 were driven principally
by deteriorated macroeconomic conditions and the fixed cost nature of our
business. More recently, our net losses have been driven principally by general
and administrative, marketing, operating and depreciation and amortization
expenses relating to investing in human capital to support our newer service
offerings and grow our presence in Europe. To grow our revenues and customer
base, we plan to continue emphasizing the expansion and development of our
services, which will include increased marketing and operating
expenses.
We
face intense competition from many competitors that have greater resources than
we do, which could result in price reductions, reduced profitability and loss of
market share.
We
operate in highly competitive markets and generally encounter intense
competition to win contracts and acquire new business. Many of our competitors
are larger and have greater financial, technical, marketing and public relations
resources, larger client bases, and greater brand or name recognition than
we do. Some of our competitors include ICF International, Navigant
Consulting, IBM, and Accenture. We also have numerous smaller competitors, many
of which have narrower service offerings and serve niche markets. Our
competitors may be able to compete more effectively for contracts and offer
lower prices to clients, causing us to lose contracts. In order to
compete, we may lower the prices at which we offer our services in order to win
contracts, which could lower our profits or even cause us to suffer losses on
contracts that we do win. Some of our subcontractors are also competitors, and
some of them may in the future secure positions as prime contractors, which
could deprive us of work we might otherwise have won under such contract. Our
competitors also may be able to provide clients with different and greater
capabilities and benefits than we can provide in areas such as technical
qualifications, past performance on relevant contracts, geographic presence,
ability to keep pace with the changing demands of clients and the availability
of key professional personnel. Our competitors also have established or may
establish relationships among themselves or with third parties, including
through mergers and acquisitions, to increase their ability to address client
needs. Accordingly, it is possible that new competitors or alliances among
competitors may emerge. We also may compete with our competitors for the
acquisition of new businesses. Our competitors may also be able to
offer higher prices for attractive acquisition candidates, which could harm our
strategy of growing through selected acquisitions. In addition, our competitors
may engage in activities, whether proper or improper, to gain access to our
proprietary information, to encourage our employees to terminate their
employment with us, to disparage our company, and otherwise to gain competitive
advantages over us. For further information regarding competition, see the
section entitled “Business — Competition.” If we are unable to compete
successfully in the provision of services to clients and for new business, our
revenue and operating margins may decline.
Because
much of our work is performed as short-term projects, research assignments and
consulting engagements, we are exposed to a risk of not having sufficient work
for our staff.
Utilipoint
performed some of its work under short-term contracts. Even under many of its
longer-term contracts, it performs much of its work under individual
task orders and delivery orders, many of which are awarded on a competitive
basis. If Utilipoint cannot obtain new work in a timely fashion, whether through
new task orders or delivery orders, modifications to existing task orders or
delivery orders, or otherwise, it may not be able to keep its staff profitably
utilized. It is difficult to predict when such new work or modifications will be
obtained. Moreover, Utilipoint will need to manage its staff carefully in order
to ensure that staff with appropriate qualifications are available when needed
and that staff do not have excessive down-time when working on multiple
projects, or as projects are beginning or nearing completion. There can be no
assurance that Utilipoint can profitably manage the utilization of its staff.
Lack of staff utilization may hurt our revenue, profit and operating
results.
9
If
we fail to successfully educate existing and potential customers regarding the
benefits of our service offerings or solutions or if the Smart Grid market fails
to develop, our ability to sell our solutions and grow our business could be
limited.
Our
future success depends on commercial acceptance of our clean energy and Smart
Grid solutions and our ability to obtain additional contracts. We anticipate
that revenues related to our consulting services and solutions will constitute a
substantial portion of our revenues for the foreseeable future. The market for
clean energy and Smart Grid solutions in general is relatively new. In addition,
because the clean energy and Smart Grid solutions sector is rapidly evolving, we
cannot accurately assess the size of the market, and we may have limited insight
into trends that may emerge and affect our business. For example, we may have
difficulty predicting customer needs and developing clean energy and Smart Grid
solutions that address those needs. If the market for our consulting services
and solutions does not continue to develop, our ability to grow our business
could be limited and we may not be able to achieve profitability.
If
we lose key personnel upon whom we are dependent or fail to attract and retain
skilled employees, we may not be able to manage our operations and meet our
strategic objectives.
We
believe that our success depends on the continued contributions of the members
of our senior management team. We are especially dependent on our senior
management team’s experience and expertise to implement our acquisition
strategy. Also, we rely on our senior management to generate business and manage
and execute projects and programs successfully. In addition, the relationships
and reputation that many members of our senior management team have established
and maintain with client personnel and industry professionals contribute to our
ability to maintain good client relations and identify new business
opportunities. The loss of key personnel could impair our ability to implement
our growth strategy through acquisitions, identify and secure new contracts, to
maintain good client relations, and otherwise manage our business.
Also, we
must continue to hire significant numbers of highly qualified individuals who
have technical skills and who work well with our clients. These employees are in
great demand and are likely to remain a limited resource for the foreseeable
future. If we are unable to recruit and retain a sufficient number of these
employees, our ability to staff engagements and to maintain and grow our
business could be limited. In such a case, we may be unable to win or perform
contracts, and we could be required to engage larger numbers of subcontractor
personnel, any of which could cause a reduction in our revenue, profit and
operating results and harm our reputation. We could even default under one or
more contracts for failure to perform properly in a timely fashion, which could
expose us to additional liability and further harm our reputation and ability to
compete for future contracts. In addition, some of our contracts contain
provisions requiring us to commit to staff an engagement with personnel the
client considers key to our successful performance under the contract. In the
event we are unable to provide these key personnel or acceptable substitutes, or
otherwise staff our work, the client may reduce the size and scope of our
engagement under a contract or terminate it, and our revenue and operating
results may suffer.
We
may not be able to identify suitable acquisition candidates or complete
acquisitions successfully, which may inhibit our rate of growth.
In
addition to organic growth, we intend to pursue growth through the acquisition
of companies or assets that may enable us to expand our project skill-sets and
capabilities, enlarge our geographic markets, add experienced management and
increase our product and service offerings. However, we may be unable to
implement this growth strategy if we cannot identify suitable acquisition
candidates or reach agreement on potential acquisitions on acceptable terms or
for other reasons. Our failure to successfully implement our acquisition
strategy could have an adverse effect on other aspects of our business strategy
and our business in general and could inhibit our growth and future
profitability.
We
may not be able to successfully integrate acquisitions to realize the full
benefits of the combined business, and may therefore not be as profitable as
planned.
Acquisitions
that we complete may expose us to a number of unanticipated operational or
financial risks, including:
·
|
The
business we acquire may not prove to be profitable and my cause us to
incur additional consolidated losses from
operations;
|
·
|
we
may have difficulty integrating new operations and
systems;
|
10
·
|
key
personnel and customers of the acquired company may terminate their
relationships with the acquired company as a result of the
acquisition;
|
·
|
we
may experience additional financial and accounting challenges and
complexities in areas such as tax planning and financial
reporting;
|
·
|
we
may assume or be held liable for risks and liabilities (including for
environmental-related costs) as a result of our acquisitions, some of
which we may not discover during our due
diligence;
|
·
|
our
ongoing business may be disrupted or receive insufficient management
attention; and
|
·
|
we
may not be able to realize the cost savings or other financial benefits we
anticipated.
|
Moreover,
to the extent that any acquisition results in additional goodwill, it will
reduce our tangible net worth, which might have an adverse effect on our credit.
In addition, in the event that we issue shares of our common stock as part or
all of the purchase price, an acquisition will dilute the ownership of our
then-current stockholders.
The
process of completing the integration of acquisitions could cause an
interruption of, or loss of momentum in, the activities of our company. The
diversion of management’s attention and any delays or difficulties encountered
in connection with the merger and the integration of the operations of
acquisition targets could have an adverse effect on our business, financial
condition or results of operations.
Our
business may become subject to modified or new government regulation, which may
negatively impact our ability to market our products.
Our
services are not subject to existing federal and state regulations in the U.S.
governing the electric utility industry. In the future, federal, state or local
governmental entities or competitors may seek to change existing regulations or
impose additional regulations. Any modified or new government regulation
applicable to our products or services, whether at the federal, state or local
level, may negatively impact the installation, servicing and marketing of our
products and increase our costs and the price of our services.
Our
relations with our contracting partners are important to our business and, if
disrupted, could affect our earnings.
We derive
a portion of our revenue from contracts under which we act as a subcontractor or
from “teaming” arrangements in which we and other contractors jointly bid on
particular contracts, projects or programs. As a subcontractor or team
member, we often lack control over fulfillment of a contract, and poor
performance on the contract could tarnish our reputation, result in reduction of
the amount of our work under or result in termination of that contract, and
could cause us not to obtain future work, even when we perform as required. We
expect to continue to depend on relationships with other contractors for a
portion of our revenue and profit in the foreseeable future. Moreover, our
revenue and operating results could be materially and adversely affected if any
prime contractor or teammate does not pay our invoices in a timely fashion,
chooses to offer products or services of the type that we provide, teams with
other companies to provide such products or services, or otherwise reduces its
reliance upon us for such products or services.
We
derive significant revenue from contracts awarded through a competitive bidding
process, which can impose substantial costs upon us, and we will lose revenue if
we fail to compete effectively.
We derive
significant revenue and profit from public and private utility contracts that
are awarded through a competitive bidding process. We expect that most of the
business we seek in the foreseeable future from these clients will be awarded
through competitive bidding. We will occasionally bid these jobs as the prime
contractor, and occasionally as a sub-contractor. Competitive bidding imposes
substantial costs and presents a number of risks, including:
·
|
the
substantial cost and managerial time and effort that we spend to prepare
bids and proposals for contracts that may or may not be awarded to
us;
|
·
|
the
need to estimate accurately the resources and costs that will be required
to service any contracts we are awarded, sometimes in advance of the final
determination of their full scope;
|
·
|
the
expense and delay that may arise if our competitors protest or challenge
awards made to us pursuant to competitive bidding, and the risk that any
such protest or challenge could result in the resubmission of bids on
modified specifications, and in termination, reduction or modification of
the awarded contracts; and
|
·
|
the
opportunity cost of not bidding on and winning other contracts we might
otherwise pursue.
|
11
To the
extent we engage in competitive bidding and are unable to win particular
contracts, we may incur substantial costs in the bidding process that would
negatively affect our operating results. Even if we win a particular contract
through competitive bidding, our profit margins may be depressed or we may even
suffer losses as a result of the costs incurred through the bidding process and
the need to lower our prices to overcome competition.
We
may lose money on some contracts if we underestimate the resources we need to
perform under the contract.
We
provide services to clients primarily under three types of contracts:
time-and-materials contracts; fixed-price contracts; and bundled service
agreement contracts. Each of these types of contracts, to differing
degrees, involves the risk that we could underestimate our cost of fulfilling
the contract, which may reduce the profit we earn or lead to a financial loss on
the contract.
For all
three contract types, we bear varying degrees of risk associated with the
assumptions we use to formulate our pricing for the work. To the extent our
working assumptions prove inaccurate, we may lose money on the contract, which
would adversely affect our operating results.
Our
international operations are subject to risks which could harm our business,
operating results and financial condition.
We expect
to expand over time our international commercial operations and activities. Such
international business operations will be subject to a variety of risks
associated with conducting business internationally, including the
following:
·
|
changes
in, or interpretations of, foreign regulations that may adversely affect
our ability to perform services or repatriate profits, if any, to the
United States;
|
·
|
difficulties
in developing, staffing, and simultaneously managing a large number of
varying foreign operations as a result of distance, language, and cultural
differences;
|
·
|
economic
or political instability in foreign
countries;
|
·
|
imposition
of limitations on or increase of withholding and other taxes on
remittances and other payments by foreign subsidiaries or joint
ventures;
|
·
|
conducting
business in places where business practices and customs are unfamiliar and
unknown;
|
·
|
the
existence of inconsistent laws or
regulations;
|
·
|
the
imposition or increase of investment requirements and other restrictions
or requirements by foreign
governments;
|
·
|
uncertainties
relating to foreign laws and legal
proceedings;
|
·
|
fluctuations
in foreign currency and exchange rates;
and
|
·
|
failure
to comply with U.S. laws (such as the Foreign Corrupt Practices Act), and
local laws prohibiting corrupt payments to government
officials.
|
The
realization of any of the foregoing, could harm our business, operating results
and financial condition.
12
Our
operating results in U.S. dollar terms may be affected due to fluctuations in
foreign currency exchange rates affect our operating results in U.S. dollar
terms.
A portion
of our revenues arises from international operations and we anticipate that as
we grow, our revenues from international operations will increase. Revenues
generated and expenses incurred by our international operations are often
denominated in the currencies of the local countries. As a result, our
consolidated U.S. dollar financial statements are subject to fluctuations due to
changes in exchange rates as revenues and expenses of our international
operations are translated from local currencies into U.S. dollars. In addition,
our financial results are subject to changes in exchange rates that impact the
settlement of transactions in non-local currencies.
Our
business depends on providing services to utility companies. In recent months,
worldwide economic conditions have deteriorated significantly in the United
States and other countries, and may remain depressed for the foreseeable future.
Slowdowns in the economy may reduce the demand for our services by causing
utility companies to delay or abandon implementation of new systems and
technologies. We cannot predict the timing, strength or duration of any economic
slowdown or subsequent economic recovery, worldwide or in the United States.
These economic factors could have a material adverse effect on our financial
condition and operating results.
Our
ability to use our net operating loss carryforwards may be subject to limitation
which could result in increased future tax liability for
us.
Generally,
a change of more than 50% in the ownership of a company’s stock, by value, over
a three-year period constitutes an ownership change for U.S. federal income tax
purposes. An ownership change may limit a company’s ability to use its net
operating loss carryforwards attributable to the period prior to such change.
The number of shares of our common stock that we issue in this offering may be
sufficient, taking into account prior or future shifts in our ownership over a
three-year period, to cause us to undergo an ownership change. As a result, if
we earn net taxable income, our ability to use our pre-change net operating loss
carryforwards to offset U.S. federal taxable income may become subject to
limitations, which could potentially result in increased future tax liability
for us.
Risks
Associated with this Offering and Our Capital Structure
Investors
will experience immediate and substantial dilution of our common stock's book
value.
Upon the
closing of this offering, investors will incur immediate and substantial
dilution in the per share net tangible book value of their common stock. At
September 30, 2009, after giving pro forma effect to our receipt of the net
proceeds of this offering and the acquisition of Utilipoint, we would have a pro
forma net tangible book value of $1.05 per share. Net tangible book value is the
amount of our total assets minus intangible assets and liabilities. This
represents a gain in our net tangible book value of $1.80 per share for the
benefit of our current stockholders, and assuming an offering price to the
public of $6.00, dilution of $4.95 or 83% of the public offering price, for
investors in this offering. Investors in this offering may be subject to
increased dilution upon the exercise of existing outstanding stock
options.
Insiders
have substantial control over the company, and issuance of shares of Common
Stock pursuant to our incentive plan will dilute your ownership and voting
rights and allow insiders to control the direction of the Company.
The
executive officers of Midas Medici and its directors beneficially owned as
of November 23, 2009 in the aggregate, approximately 1,724,568 shares
of our outstanding common stock, which constitutes approximately 73.5% of our
outstanding shares. Our officers and directors ownership percentage
will increase as a result of any shares issued under our incentive plan under
which we can issue 650,000 shares to our officers, directors, employees and
consultants. To date we have granted options to purchase an aggregate
of 465,097 shares of our common stock to our management.
The
executive officers of Midas Medici and its directors have the ability to
exert significant control over our management and affairs requiring stockholder
approval, including approval of significant corporate transactions. This
concentration of ownership may have the effect of delaying or preventing a
change in control and might adversely affect the market price of our common
stock. This concentration of ownership may not be in the best interests of all
of our stockholders.
13
Liquidity
of shares of our common stock may be limited.
Our
shares are not and have not been listed or quoted on any exchange or quotation
system. Simultaneously with this filing, we have arranged for a market maker to
apply to have our common stock quoted on the OTC Bulletin Board. Our shares are
not listed or quoted on any exchange or quotation system. There can be no
assurance that such an application for quotation will be approved or that a
regular trading market will develop or that if developed, will be sustained. In
the absence of a trading market, an investor will be unable to liquidate his
investment except by private sale.
Even if a
market for our common stock does develop, the market price of our common stock
may be highly volatile. In addition to the uncertainties relating to future
operating performance and the profitability of operations, factors such as
variations in interim financial results or various, as yet unpredictable,
factors, many of which are beyond our control, may have a negative effect on the
market price of our common stock.
Should
our stock become listed on the OTC Bulletin Board, if we fail to remain current
on our reporting requirements, we could be removed from the OTC Bulletin Board
which would limit the ability of broker-dealers to sell our securities in the
secondary market
Companies
trading on the OTC Bulletin Board must be reporting issuers under Section 12 of
the Securities Exchange Act of 1934, as amended, and must be current in their
reports under Section 13, in order to maintain price quotation privileges on the
OTC Bulletin Board. If we fail to remain current in our reporting requirements,
we could be removed from the OTC Bulletin Board. As a result, the market
liquidity for our securities could be severely adversely affected by limiting
the ability of broker-dealers to sell our securities and the ability of
stockholders to sell their securities in the secondary market.
Our
common stock could be subject to extreme volatility.
The
trading price of our common stock may be affected by a number of factors,
including events described in the risk factors set forth in this prospectus, as
well as our operating results, financial condition and other events or factors.
In recent years, broad stock market indices, in general, and smaller
capitalization companies, in particular, have experienced substantial price
fluctuations. In a volatile market, we may experience wide fluctuations in the
market price of our common stock. These fluctuations may have a negative effect
on the market price of our common stock. In addition, the securities
market has from time to time experienced significant price and volume
fluctuations that are not related to the operating performance of particular
companies. These market fluctuations may also materially and adversely affect
the market price of our stock.
We
have never paid common stock dividends and have no plans to pay dividends
in the future, as a result our common stock may be less valuable because a
return on an investor’s investment will only occur if our stock price
appreciates.
Holders of shares of our common stock
are entitled to receive such dividends as may be declared by our board of
directors. To date, we have paid no cash dividends on our shares of common stock
and we do not expect to pay cash dividends on our common stock in the
foreseeable future. We intend to retain future earnings, if any, to provide
funds for operations of our business. Therefore, any return investors in our
common stock may have will be in the form of appreciation, if any, in the market
value of their shares of common stock. There can be no assurance
that shares of our common stock will appreciate in value or even maintain the
price at which our stockholders have purchased their
shares.
Our
common stock may be subject to “penny stock” rules of the Securities and
Exchange Commission, which may make it more difficult for stockholders to sell
our common stock.
Our
common stock may be subject to the “penny stock” rules adopted under Section
15(g) of the Exchange Act. The penny stock rules generally apply to companies
whose common stock is not listed on a national securities exchange and trades at
less than $4.00 per share, other than companies that have had average revenue of
at least $6,000,000 for the last three years or that have tangible net worth of
at least $5,000,000 ($2,000,000 if the company has been operating for three or
more years). These rules require, among other things, that brokers who trade
penny stock to persons other than “established customers” complete certain
documentation, make suitability inquiries of investors and provide investors
with certain information concerning trading in the security, including a risk
disclosure document and quote information under certain circumstances. Many
brokers have decided not to trade penny stocks because of the requirements of
the penny stock rules and, as a result, the number of broker-dealers willing to
act as market makers in such securities is limited. If we are subject to the
penny stock rules for any significant period, it could have an adverse effect on
the market, if any, and investors may find it more difficult to dispose of our
securities.
Our
compliance with the Sarbanes-Oxley Act and SEC rules concerning internal
controls may be time consuming, difficult and costly for us.
It may be
time consuming, difficult and costly for us to develop and implement the
internal controls and reporting procedures required by the Sarbanes-Oxley Act.
We may need to hire additional financial reporting, internal controls and other
finance staff in order to develop and implement appropriate internal controls
and reporting procedures. If we are unable to comply with the internal controls
requirements of the Sarbanes-Oxley Act, we may not be able to obtain the
independent accountant opinion that the Sarbanes-Oxley Act requires
publicly-traded companies to obtain.
14
If
we fail to maintain an effective system of internal controls, we may not be able
to accurately report our financial results or prevent fraud.
We are
subject to reporting obligations under the U.S. securities laws. The SEC, as
required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules
requiring every public company to include a management report on such company’s
internal controls over financial reporting in its annual report, which contains
management’s assessment of the effectiveness of our internal controls over
financial reporting. Our reporting obligations as a public company
will place a significant strain on our management, operational and financial
resources and systems for the foreseeable future. Effective internal controls,
particularly those related to revenue recognition, are necessary for us to
produce reliable financial reports and are important to help prevent fraud. As a
result, our failure to achieve and maintain effective internal controls over
financial reporting could result in the loss of investor confidence in the
reliability of our financial statements, which in turn could harm our business
and negatively impact the trading price of our stock.
We
may need additional capital, and the sale of additional shares or other equity
securities could result in additional dilution to our stockholders.
We
believe that our current cash and cash equivalents, anticipated cash flow from
operations and the net proceeds from this financing will be sufficient to meet
our anticipated cash needs for the foreseeable future. We may, however, require
additional cash resources due to changed business conditions or other future
developments, including any investments or acquisitions we may decide to pursue.
If our resources are insufficient to satisfy our cash requirements, we may seek
to sell additional equity or debt securities or obtain a credit facility. The
sale of additional equity securities could result in additional dilution to our
stockholders. The incurrence of indebtedness would result in increased debt
service obligations and could result in operating and financing covenants that
would restrict our operations. We cannot assure that financing will be available
in amounts or on terms acceptable to us, if at all.
The
implementation of our stock-based incentive plan may dilute your percentage
ownership interest and may also result in downward pressure on the price of our
stock.
Our board
has adopted a stock-based incentive plan. Under the incentive plan, the Company
can grant a minimum of up to 650,000 shares to our officers, directors,
employees and consultants. Shareholders would experience a dilution
in ownership interest assuming the maximum issuance of 650,000 shares from stock
options or awards of restricted stock under the plan. In addition,
the existence of a significant amount of stock and stock options that would be
issuable under our incentive plan may be perceived by the market as having a
dilutive effect, which could lead to a decrease in the price of our common
stock.
Our
Board has the ability to issue shares of preferred stock with such designations,
rights and preferences as it determines without the requirement that shareholder
approval be obtained.
Our
Certificate of Incorporation authorizes the issuance of up to 10,000,000 shares
of preferred stock with designations, rights and preferences determined from
time to time by its Board of Directors. Accordingly, our Board of Directors is
empowered, without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting, or other rights which could adversely affect
the voting power or other rights of the holders of the common stock. In the
event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company.
15
DETERMINATION
OF OFFERING PRICE
The
offering price of our shares was determined by our management after consultation
with our underwriters and was based upon consideration of various factors, our
history and prospects, the background of our management and current conditions
in the securities markets. The price of our shares does not bear any
relationship to our assets, book value, net worth or other economic or
recognized criteria of value. In no event should the offering price of our
shares be regarded as an indicator of any future market price of our
securities.
SPECIAL
NOTE REGARDING FORWARD LOOKING STATEMENTS
This
prospectus contains forward-looking statements. All statements other
than statements of historical fact contained in this prospectus constitute
forward-looking statements. Such forward-looking statements include statements
regarding, among other things, (a) our projected sales and profitability, (b)
our growth strategies, (c) anticipated trends in our industry, (d) our future
financing plans, and (e) our anticipated needs for working capital.
Forward-looking statements, which involve assumptions and describe our future
plans, strategies, and expectations, are generally identifiable by use of the
words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,”
“intend,” or “project” or the negative of these words or other variations on
these words or comparable terminology. This information may involve known and
unknown risks, uncertainties, and other factors that may cause our actual
results, performance, or achievements to be materially different from the future
results, performance, or achievements expressed or implied by any
forward-looking statements. These statements may be found under “Prospectus
Summary,” “Management's Discussion and Analysis of Financial Condition and
Results of Operations” and “Description of Business,” as well as in this
prospectus generally. Actual events or results may differ materially from those
discussed in forward-looking statements as a result of various factors,
including, without limitation, the risks outlined under “Risk Factors” and
matters described in this prospectus generally. This prospectus may contain
market data related to our business, which may have been included in articles
published by independent industry sources. We are responsible for the accuracy
and completeness of the historical information contained in this market data as
of the date of this prospectus. However, this market data also includes
projections that are based on a number of assumptions. If any one or more of
these assumptions turns out to be incorrect, actual results may differ
materially from the projections based on these assumptions. In light of these
risks and uncertainties, there can be no assurance that the forward-looking
statements contained in this prospectus will in fact occur. In addition to the
information expressly required to be included in this filing, we will provide
such further material information, if any, as may be necessary to make the
required statements, in light of the circumstances under which they are made,
not misleading.
Each
forward-looking statement should be read in context with, and with an
understanding of, the various other disclosures concerning our company and our
business made elsewhere in this prospectus as well as other pubic reports which
may be filed with the United States Securities and Exchange Commission. You
should not place undue reliance on any forward-looking statement as a prediction
of actual results or developments. We are not obligated to update or revise any
forward-looking statement contained in this prospectus to reflect new events or
circumstances, unless and to the extent required by applicable law.
16
USE
OF PROCEEDS
Based on
an assumed $6.00 initial offering price per share, we estimate the gross
proceeds from the offering, prior to deducting underwriting discounts and
commissions and the estimated offering expenses payable by us, will be
approximately $6,000,000 (approximately $6,900,000 if the over-allotment
option granted to the underwriters is exercised in full). Pending the use of the
net proceeds, we will invest the proceeds in short-term, investment grade,
interest-bearing securities.
Without
Over-
|
Over-Allotment
|
|||||||||||||||
Allotment
|
Option
|
|||||||||||||||
Option
|
Exercised
|
|||||||||||||||
Gross
proceeds
|
$ | 6,000,000 | 100.0 | % | $ | 6,900,000 | 100.0 | % | ||||||||
Offering
expenses (1)
|
791,822 | 13.2 | % | 872,822 | 12.6 | % | ||||||||||
Net
proceeds
|
$ | 5,208,178 | 86.8 | % | 6,027,178 | 87.4 | % | |||||||||
Use
of net proceeds
|
||||||||||||||||
Marketing
and infrastructure
|
$ | 1,300,000 | 21.7 | % | 1,550,000 | 22.5 | % | |||||||||
Investment
in strategic partnerships
|
1,100,000 | 18.3 | % | 1,300,000 | 18.8 | % | ||||||||||
Website
and databases upgrade
|
1,000,000 | 16.7 | % | 1,200,000 | 17.4 | % | ||||||||||
Repay
subordinated debt and accrued unpaid dividends (2)
|
981,793 | 16.4 | % | 981,793 | 14.2 | % | ||||||||||
Working
capital, including acquisitions and transaction costs
(3)
|
826,385 | 13.8 | % | 995,385 | 14.4 | % | ||||||||||
Total
|
$ | 5,208,178 | 86.8 | % | $ | 6,027,178 | 87.4 | % |
( 1)
|
Includes
underwriting discount of 8%, underwriting non-accountable expense
allowance of 1% and other legal, accounting and consulting agreement
expenses.
|
(2)
|
Our
management may determine to repay up to $689,607 of the principal amount
plus accrued interest on the following notes: (A) (i) a 12%
$447,106 note due on 01/01/2010; (ii) a 10% $62,500 note due on
12/31/2013; (iii) a 10% $10,000 note due on 01/15/2014; (iv) a
4% $5,000 note due on 05/04/2010; (v) a 4% $16,000 note due on
01/30/2010; (vi) a 10% $7,500 note due on 01/15/2014; (vii) a $32,590
variable interest rate note due on 08/02/2009; (viii) a 10% $7,500
note due on 01/15/2014, (ix) $3,722 on 4% note payable which was due June
2, 2009, (x) a 5% $108,969 note due on 6/30/2012; Notes with due
dates in June and August have been extended through 2010. (B) accrued
unpaid dividends in the amount of $178,208 on Series A preferred stock of
Utilipoint issued to UTP International, LLC and (C) unpaid management fees
to Knox Lawrence in the amount of approximately $113,978.
|
(3)
|
Includes,
salaries, administrative expenses and cost associated with being a
reporting company. In addition we may utilize a portion of the
proceeds allocated for working capital to pay acquisition and transaction
costs including costs associated with identifying potential acquisition
targets and initial due diligence costs. Such costs will not include
amounts related to payment for the acquisitions, but will only cover costs
related to such acquisitions. Our management has identified the
following types of businesses for possible acquisition: (i) engineering
companies that provide enabling solutions to the Smart Grid
infrastructure; (ii) technology companies that provide data warehousing
technology infrastructure and data center solutions; (iii) companies that
facilitate financing of energy efficiency initiatives for consumers and
commercial enterprises; and (iv) other
companies or products and services aimed at commercial/industrial
customers and consumers to impact the Smart Grid. Currently we have no
agreements, plans or arrangements with any third parties for any one or
more acquisitions. There can be no assurance that we will be
able to consummate any strategic acquisitions, or even if we are able to
do so, that any one or more of the acquisitions will prove to be
profitable or otherwise beneficial to our
company.
|
In the
event that we locate one or more acquisition candidates we deem to be
attractive, we may be required to raise additional proceeds from the sale of
debt or equity securities in order to finance such
acquisitions. There can be no assurance that we will be successful in
raising any additional capital or that the terms offered will be financially
attractive to the Company and its stockholders.
DIVIDEND
POLICY
We have
never paid cash dividends or distributions to our common stock owners. We do not
expect to pay cash dividends on our common stock, but instead, intend to utilize
available cash to support the development and expansion of our business. Any
future determination relating to our dividend policy will be made at the
discretion of our Board of Directors and will depend on a number of factors,
including but not limited to, future operating results, capital requirements,
financial condition and the terms of any credit facility or other financing
arrangements we may obtain or enter into, future prospects and other factors our
Board of Directors may deem relevant at the time such payment is considered.
There is no assurance that we will be able or will desire to pay dividends in
the near future or, if dividends are paid, in what amount.
CAPITALIZATION
The
following table sets forth our capitalization as of September 30, 2009 (unaudited):
·
|
on
an actual basis; and
|
·
|
on
a pro forma as adjusted basis giving effect to the sale of 1,000,000
shares of common stock (excluding the 150,000 shares which the
underwriter has the option to purchase to cover over-allotments, if any)
in this offering at an assumed public offering price of $6.00, and
after deducting underwriting discounts and commission and
additional offering expenses estimated at
$791,822
|
You
should read this table in conjunction with “Use of Proceeds,” “Summary
Historical Consolidated Financial Data” “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and our consolidated financial
statements and related notes included in this prospectus.
Midas
Medici
|
Pro
Forma
|
|||||||
Group
Holdings, Inc.
|
Offering
|
|||||||
Cash
and cash equivalents
|
$ | 112,335 | $ | 4,361,470 | ||||
Revolving
credit facility
|
53,764 | 53,764 | ||||||
Short-term
notes payable
|
577 | 577 | ||||||
Long
term debt
|
689,607 | - | ||||||
Common
stock
|
2,736 | 3,736 | ||||||
Additional
paid in capital
|
(187,719 | ) | 5,019,459 | |||||
Treasury
stock
|
(40 | ) | (40 | ) | ||||
Accumulated
other comprehensive income
|
8,480 | 8,480 | ||||||
Accumulated
deficit
|
(1,554,746 | ) | (1,554,746 | ) | ||||
Total
Capitalization
|
$ | (987,341 | ) | $ | 3,531,230 |
17
DILUTION
Purchasers
of common stock in this offering will be diluted to the extent of the difference
between the public offering price per share and the net tangible book value per
share of our common stock immediately after this offering. Net tangible book
value dilution per share represents the difference between the amount per share
paid by purchasers of common stock in this offering and the pro forma, adjusted
net tangible book value (deficit) per share of common stock immediately
after completion of this offering. Pro forma net tangible book value (deficit)
per share as of a specified date is determined by dividing our tangible book
value (deficit) (total tangible assets less total liabilities) by the number of
outstanding shares of common stock at such date.
After
giving effect to our reverse merger with Utilipoint and the issuance of
1,348,516 shares of our common stock to the Utilipoint shareholders, our pro
forma net tangible book value as of September 30, 2009, would have been
$(1,731,289), or $(0.75) per share of common stock.
After
giving effect to our sale of the 1,000,000 shares of common stock offered by
this prospectus (based upon a public offering price of $6.00 per share, after
deducting the underwriting discount and our estimated offering expenses), our
pro forma net tangible book value as of September 30, 2009, would have been
$3,476,889, or $1.05 per share of common stock. This represents an immediate
increase in pro forma net tangible book value to existing stockholders of $1.80
per share, and an immediate dilution to new investors of $4.95 per share, or 83%
of the public offering price of the shares offered in this offering. The
following table illustrates the per share dilution:
Public
offering price per share
|
|
$
|
6.00
|
|||||
Pro
forma net tangible book value (deficit) per share as of September 30,
2009
|
$
|
(0.75
|
)
|
|
||||
Increase
in pro forma net tangible book value (deficit) per share attributable to
new investors in this offering
|
1.80
|
|||||||
Pro
forma net tangible book value per share as of September 30, 2009 after
this offering
|
1.05
|
|||||||
Pro
forma net tangible book value dilution per share to new investors in this
offering
|
4.95
|
The
following table sets forth, on an as adjusted basis as of September 30,
2009, the difference between the number of shares of common stock purchased from
us, the total cash consideration paid, and the average price per share paid by
our existing stockholders and by new public investors before deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us, using an assumed public offering price of $6.00 per share of common
stock:
Average
|
||||||||||||||||||||
Shares Purchased
|
Total Cash
Consideration
|
Price
Per
|
||||||||||||||||||
Number
|
Percent
|
Amount
|
Percent
|
Share
|
||||||||||||||||
Existing
stockholders
|
2,310,516 | 70 | % | $ | 397,153 | 6 | % | $ | 0.17 | |||||||||||
New
investors from public offering
|
1,000,000 | 30 | % | $ | 6,000,000 | 94 | % | $ | 6.00 | |||||||||||
Total
|
3,310,516 | 100 | % | 6,397,153 | 100 | % |
The total
consideration amount for shares of common stock held by our existing
stockholders includes total cash paid for our outstanding shares of common stock
as of September 30, 2009. If the underwriters’ over-allotment option
of 150,000 shares of common stock is exercised in full, the number of shares
held by existing stockholders will be reduced to 54% of the total number of
shares to be outstanding after this offering; and the number of shares held by
the new investors will be increased to 977,500 shares, or 46%, of the total
number of shares of common stock outstanding after this
offering.
The
discussion and tables above is based on (i) 962,000 shares of common stock
issued and outstanding as of September 30, 2009, and (ii) 1,000,000 shares of
common stock issued in the public offering (excluding the underwriter’s
over-allotment option of up to 150,000 shares). In addition, we may
choose to raise additional capital due to market conditions or strategic
considerations even if we believe we have sufficient funds for our current or
future operating plans. To the extent that additional capital is raised through
the sale of equity or convertible debt securities, the issuance of these
securities could result in further dilution to our
stockholders.
18
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The
following unaudited condensed combined pro forma financial data of Midas Medici
Group Holdings, Inc. (“Midas Medici”) and Utilipoint International, Inc.
(“Utilipoint”) were derived from the historical consolidated financial
statements of Midas Medici and Utilipoint International, Inc., the Surviving
Company pursuant to the Agreement and Plan of Merger between Utilipoint
Acquisition Co. (a corporation formed pursuant to the laws of the State of New
Mexico and a wholly owned subsidiary of Midas Medici) and Utilipoint
International, Inc. and should be read in conjunction with the historical
financial statements and the notes thereto, included elsewhere in this
Prospectus. Included are: (i) the unaudited pro forma condensed balance sheet of
Midas Medici as of September 30, 2009 pro forma for the additional shares
issued in this offering and as presented in the prospectus and (ii) the
unaudited condensed pro forma statements of operations that combine the
operations of Midas Medici from the date of the reverse merger, August 21, 2009
until September 30,2009 with the operations of Utilipoint for the nine months
ended September 30, 2009 pro forma for the issuance of additional shares
issued in this offering and as presented in the prospectus. Certain
reclassifications have been made to the historical presentation of the financial
statements of Utilipoint and Midas Medici to conform to the presentation used in
the unaudited pro forma condensed financial statements.
On August
21, 2009, Midas Medici completed a reverse merger with privately held
Utilipoint, a New Mexico Corporation which resulted in Midas Medici being the
“legal acquirer” and Utilipoint the “accounting acquirer”. The acquisition was
effected pursuant to a Merger Agreement dated August 10, 2009 by and among the
Company, Utilipoint and Utilipoint Acquisition Company. Pursuant to the Merger
Agreement, an aggregate of 1,348,516 shares of Midas Medici were issued to
Utilipoint shareholders in exchange for 42,191 Utilipoint shares (which
represents 100% of the then outstanding shares). This includes 21,523 Utilipoint
Series A Preferred Stock that were converted to 687,922 Midas Medici common
shares. Further, all outstanding Utilipoint options were exchanged for 172,597
Midas Medici options in accordance with the Midas Medici stock option program,
adopted on July 27, 2009. Immediately after the closing of the acquisition and
as of September 30, 2009, an aggregate of 2,310,516 shares of common stock were
outstanding. Hence, the 1,348,516 shares represented approximately 58% of the
outstanding shares of Midas Medici. The shares of common stock issued in
connection with the reverse merger were not registered with the Securities and
Exchange Commission and are considered to be restricted
securities.
The
unaudited pro forma condensed combined statement of operations and the unaudited
pro forma condensed combined balance sheet as of September 30, 2009 gives effect
to the following transactions as if they had occurred on January 1,
2009:
•
|
the
issuance of 1,000,000 shares of our common stock in this offering at
an assumed price of $6.00 per share, the mid-point of the range shown on
the cover of this prospectus;
and
|
|
•
|
the
use of the proceeds we will receive as set forth in the “Use of
Proceeds” section of this
prospectus.
|
References
herein to Utilipoint common shares have been retrospectively adjusted to
reflect the exchange ratio 31.962187 Midas Medici common shares for each share
of Utilipoint common stock established in the Acquisition Agreement. All Midas
Medici shares received by any Utilipoint shareholders in exchange for their
Utilipoint common were not registered for resale and, therefore, remain subject
to the rights and restrictions of Rule 144.
The
unaudited condensed pro forma financial statements were prepared using the
assumptions described below and in the related notes. The historical
consolidated financial information has been adjusted to give effect to pro forma
events that are:
•
|
factually
supportable; and
|
|
•
|
with
respect to the statements of operations, expected to have a continuing
impact on the results.
|
The
unaudited pro forma condensed consolidated financial
statements data is provided for illustrative purposes only. They do
not purport to represent what the combined company’s results of operations and
financial position would have been had the transaction actually occurred as of
the dates indicated, and they do not purport to project the combined company’s
future results of operations or financial position.
19
CONDENSED
CONSOLIDATED UNAUDITED PRO FORMA BALANCE SHEET
(Unaudited)
|
|||||||||||||
AS
OF SEPTEMBER 30, 2009
|
|||||||||||||
Midas
Medici Group Holdings, Inc. and Subsidiaries (formerly, Mondo Acquisition
I, Inc.)
|
Offering
Adjustments
|
Notes
(3)
|
Pro
Forma Midas Medici Group Holdings, Inc.
Offering
|
||||||||||
Assets
|
|||||||||||||
Current
Assets
|
|||||||||||||
Cash
and cash equivalents
|
$ | 112,335 | $ | 4,226,385 |
(A)
|
$ | 4,338,720 | ||||||
Accounts
receivable, net
|
408,605 | - | 408,605 | ||||||||||
Prepaid
expenses and other current assets
|
23,083 | - | 23,083 | ||||||||||
Total
Current Assets
|
544,023 | 4,226,385 | 4,770,408 | ||||||||||
Property
and Equipment, net
|
23,603 | - | 23,603 | ||||||||||
Other
assets
|
2,952 | - | 2,952 | ||||||||||
Total
assets
|
$ | 570,578 | $ | 4,226,385 | $ | 4,796,963 | |||||||
Liabilities
and Stockholders' Equity (Deficit)
|
|||||||||||||
Liabilities
|
|||||||||||||
Current
Liabilities
|
|||||||||||||
Accounts
payable
|
$ | 578,803 | $ | - | $ | 578,803 | |||||||
Accrued
expenses
|
464,591 | - | 464,591 | ||||||||||
Revolving
credit facility
|
53,764 | - | 53,764 | ||||||||||
Deferred
revenue
|
180,455 | - | 180,455 | ||||||||||
Current
portion of long-term debt
|
493,138 | (493,138 | ) |
(B)
|
- | ||||||||
Capital
lease obligations - current portion
|
13,493 | - | 13,493 | ||||||||||
Preferred
stock dividends payable - stated
|
178,208 | (178,208 | ) |
(B)
|
- | ||||||||
Management
fees payable
|
113,978 | (113,978 | ) |
(B)
|
- | ||||||||
Other
current liabilities
|
20,566 | - | 20,566 | ||||||||||
Total
current liabilities
|
2,096,996 | (785,324 | ) | 1,311,672 | |||||||||
Long-term
Debt, less current portion
|
196,469 | (196,469 | ) |
(B)
|
- | ||||||||
Capital
Lease Obligations, less current portion
|
8,402 | - | 8,402 | ||||||||||
Total
non-current Liabilities
|
204,871 | (196,469 | ) | 8,402 | |||||||||
Total
Liabilities
|
2,301,867 | (981,793 | ) | 1,320,074 | |||||||||
Stockholders'
Equity (Deficit)
|
|||||||||||||
Common
stock
|
2,736 | 1,000 |
(C)
|
3,736 | |||||||||
Additional
paid-in capital
|
(187,719 | ) | 5,207,178 |
(C)
|
5,019,459 | ||||||||
Treasury
stock
|
(40 | ) | - | (40 | ) | ||||||||
Accumulated
other comprehensive income (loss)
|
8,480 | - | 8,480 | ||||||||||
Retained
earning (Accumulated deficit)
|
(1,554,746 | ) | - | (1,554,746 | ) | ||||||||
Total
stockholders' equity (deficit)
|
(1,731,289 | ) | 5,208,178 | 3,476,889 | |||||||||
Total
liabilities and stockholders' equity (deficit)
|
$ | 570,578 | $ | 4,226,385 | $ | 4,796,963 |
See Notes
to Unaudited Pro Forma Condensed Consolidated Financial
Data.
20
UNAUDITED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
|
||||||||||||||||||||||||||||||
FOR
THE NINE MONTHS ENDED SEPTEMBER 30,
2009
|
||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||
Consolidated
Midas Medici Group Holdings, Inc.
For
the Nine Months Ended September 30, 2009
|
Midas
Medici Group Holdings, Inc.
For
the Six Months Ended June 30, 2009
|
Midas
Medici Group Holdings, Inc.
For
the Period
July
1 -
August
20, 2009
|
Merger
Adjustments
|
Note
(4)
|
Pro
Forma Midas Medici Group Holdings, Inc. Merger
|
Offering Adjustments
|
Note
(4)
|
Combined
Pro
Forma Midas Medici Group Holdings, Inc. Offering
|
||||||||||||||||||||||
Net
Revenues
|
$ | 2,566,962 | $ | - | $ | - | $ | - | $ | 2,566,962 | $ | - | $ | 2,566,962 | ||||||||||||||||
Cost
of Services
|
1,445,193 | - | - | - | 1,445,193 | - | 1,445,193 | |||||||||||||||||||||||
Gross
Margin
|
1,121,769 | - | - | - | 1,121,769 | - | 1,121,769 | |||||||||||||||||||||||
Operating
Expenses
|
- | - | - | |||||||||||||||||||||||||||
Selling,
general and administrative
|
1,784,968 | 100 | 1,250,300 | 83,883 |
(A)
|
3,119,251 | - | 3,119,251 | ||||||||||||||||||||||
Depreciation
and amortization
|
13,835 | - | - | - | 13,835 | - | 13,835 | |||||||||||||||||||||||
Management
fees
|
- | - | - | - | - | - | - | |||||||||||||||||||||||
Total
operating expenses
|
1,798,803 | 100 | 1,250,300 | 83,883 | 3,133,086 | - | 3,133,086 | |||||||||||||||||||||||
Operating
income (loss)
|
(677,034 | ) | (100 | ) | (1,250,300 | ) | (83,883 | ) | (2,011,317 | ) | - | (2,011,317 | ) | |||||||||||||||||
Other
Income (Expense)
|
||||||||||||||||||||||||||||||
Interest
income
|
2 | - | - | - | 2 | - | 2 | |||||||||||||||||||||||
Interest
expense
|
(62,855 | ) | - | - | - | (62,855 | ) | 48,013 |
(B)
|
(14,842 | ) | |||||||||||||||||||
Other
income
|
- | 1,196 | - | - | 1,196 | - | 1,196 | |||||||||||||||||||||||
Total
other income (expense)
|
(62,853 | ) | 1,196 | - | - | (61,657 | ) | 48,013 | (13,644 | ) | ||||||||||||||||||||
Income
(loss) before income taxes
|
(739,887 | ) | 1,096 | (1,250,300 | ) | (83,883 | ) | (2,072,974 | ) | 48,013 | (2,024,961 | ) | ||||||||||||||||||
- | - | - | ||||||||||||||||||||||||||||
Provision
(benefit) for income taxes
|
2,077 | - | - | - | 2,077 | - | 2,077 | |||||||||||||||||||||||
Net
income (loss)
|
(741,964 | ) | 1,096 | (1,250,300 | ) | (83,883 | ) | (2,075,051 | ) | 48,013 | (2,027,038 | ) | ||||||||||||||||||
Preferred
stock dividends and dividend accretion
|
||||||||||||||||||||||||||||||
Preferred
stock stated dividends
|
(109,958 | ) | - | - | - | (109,958 | ) | - | (109,958 | ) | ||||||||||||||||||||
Preferred
stock dividend accretion
|
(203,109 | ) | - | - | - | (203,109 | ) | - | (203,109 | ) | ||||||||||||||||||||
Net
loss applicable to common stockholders
|
(1,055,031 | ) | 1,096 | (1,250,300 | ) | (83,883 | ) | (2,388,118 | ) | 48,013 | (2,340,105 | ) | ||||||||||||||||||
Net
loss per share applicable to common
|
||||||||||||||||||||||||||||||
stockholders
- basic and diluted
|
$ | (0.69 | ) | $ | 0.00 | $ | (1.03 | ) | $ | (0.71 | ) | |||||||||||||||||||
Weighted
average common shares
|
||||||||||||||||||||||||||||||
outstanding
- basic
|
1,531,736 | 1,000,000 | 2,310,516 | 3,310,516 | ||||||||||||||||||||||||||
Weighted
average common shares
|
||||||||||||||||||||||||||||||
outstanding
- diluted
|
1,531,736 | 1,037,293 | 2,775,613 | 3,775,613 | ||||||||||||||||||||||||||
Shares
from Midas Medici stockholders
|
962,000 | 962,000 | 962,000 | |||||||||||||||||||||||||||
Shares
issued to Utilipoint stockholders
|
1,348,516 | 1,348,516 | 1,348,516 | |||||||||||||||||||||||||||
Shares
issued in connection with this offering
|
1,000,000 | |||||||||||||||||||||||||||||
Total
for period
|
2,310,516 | 2,310,516 | 3,310,516 | |||||||||||||||||||||||||||
Options
to purchase common stock issued under
|
||||||||||||||||||||||||||||||
Midas
Medici stock option program
|
465,097 | 465,097 | 465,097 | |||||||||||||||||||||||||||
Total
Diluted
|
2,775,613 | 2,775,613 | 3,775,613 |
See Notes
to Unaudited Pro Forma Condensed Consolidated Financial
Data.
21
PRO
FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
|
||||||||||||||||||||||||||
FOR
THE YEAR ENDED DECEMBER 31, 2008
|
||||||||||||||||||||||||||
Midas
Medici Group Holdings, Inc.
|
Utilipoint
International, Inc.
|
Merger
Adjustments
|
Note
(4)
|
Combined
Pro Forma Midas Medici Group Holdings, Inc.
Merger
|
Offering
Adjustments
|
Note
(4)
|
Combined
Pro Forma Midas Medici Group Holdings, Inc.
Offering
|
|||||||||||||||||||
Net
Revenues
|
$ | - | $ | 3,660,941 | $ | - | $ | 3,660,941 | $ | - | $ | 3,660,941 | ||||||||||||||
Cost
of Services
|
- | 2,037,046 | - | 2,037,046 | - | 2,037,046 | ||||||||||||||||||||
Gross
Margin
|
- | 1,623,895 | - | 1,623,895 | - | 1,623,895 | ||||||||||||||||||||
Operating
Expenses
|
||||||||||||||||||||||||||
Selling,
general and administrative
|
858 | 1,777,613 | 234,796 |
(A)
|
2,013,267 | 2,013,267 | ||||||||||||||||||||
Depreciation
and amortization
|
- | 17,845 | - | 17,845 | - | 17,845 | ||||||||||||||||||||
Management
fees
|
- | 100,000 | - | 100,000 | - | 100,000 | ||||||||||||||||||||
Total
operating expenses
|
858 | 1,895,458 | 234,796 | 2,131,112 | - | 2,131,112 | ||||||||||||||||||||
Operating
income (loss)
|
(858 | ) | (271,563 | ) | (234,796 | ) | (507,217 | ) | - | (507,217 | ) | |||||||||||||||
Other
Income (Expense)
|
||||||||||||||||||||||||||
Interest
income
|
- | 1 | - | 1 | - | 1 | ||||||||||||||||||||
Interest
expense
|
- | (63,942 | ) | - | (63,942 | ) | 57,767 |
(B)
|
(6,175 | ) | ||||||||||||||||
Total
other income (expense)
|
- | (63,941 | ) | - | (63,941 | ) | 57,767 | (6,174 | ) | |||||||||||||||||
Income
(loss) before income taxes
|
(858 | ) | (335,504 | ) | (234,796 | ) | (571,158 | ) | 57,767 | (513,391 | ) | |||||||||||||||
Provision
(benefit) for income taxes
|
- | (35,815 | ) | - | (35,815 | ) | - | (35,815 | ) | |||||||||||||||||
Net
income (loss)
|
(858 | ) | (299,689 | ) | (234,796 | ) | (535,343 | ) | 57,767 | (477,576 | ) | |||||||||||||||
Preferred
stock dividends and dividend accretion
|
||||||||||||||||||||||||||
Preferred
stock stated dividends
|
- | (136,500 | ) | - | (136,500 | ) | - | (136,500 | ) | |||||||||||||||||
Preferred
stock dividend accretion
|
- | (279,353 | ) | - | (279,353 | ) | - | (279,353 | ) | |||||||||||||||||
Net
loss applicable to common stockholders
|
$ | (858 | ) | $ | (715,542 | ) | $ | (234,796 | ) | $ | (951,196 | ) | $ | 57,767 | $ | (893,429 | ) | |||||||||
Net
loss per share applicable to common
|
||||||||||||||||||||||||||
stockholders
- basic and diluted
|
$ | - | $ | (0.52 | ) | $ | (0.41 | ) | $ | (0.27 | ) | |||||||||||||||
Weighted
average common shares
|
||||||||||||||||||||||||||
outstanding
- basic
|
1,000,000 | 1,367,923 | 2,348,516 | 3,348,516 | ||||||||||||||||||||||
Weighted
average common shares
|
1,000,000 | 1,367,923 | 2,573,516 | 3,423,516 | ||||||||||||||||||||||
outstanding
- diluted
|
||||||||||||||||||||||||||
Shares
from Midas Medici stockholders
|
1,000,000 | 1,000,000 | 1,000,000 | |||||||||||||||||||||||
Shares
issued to Utilipoint stockholders
|
1,348,516 | 1,348,516 | ||||||||||||||||||||||||
Shares
issued in connection with this offering
|
1,000,000 | |||||||||||||||||||||||||
Total
for period
|
1,000,000 | 2,348,516 | 3,348,516 | |||||||||||||||||||||||
Options
to purchase common stock issued under
|
||||||||||||||||||||||||||
Midas
Medici stock option program
|
172,597 | 172,597 | ||||||||||||||||||||||||
Total
Diluted
|
1,000,000 | 2,521,113 | 3,521,113 |
See Notes
to Unaudited Pro Forma Condensed Consolidated Financial
Data.
22
Notes to Pro Forma Condensed Consolidated Financial Data
(Unaudited)
Note 1 — Reverse
Merger
On August
21, 2009, Midas Medici completed a reverse merger with privately held
Utilipoint, a New Mexico Corporation which results in Midas Medici being the
“legal acquirer” and Utilipoint the “accounting acquirer”. The acquisition was
effected pursuant to a Merger Agreement dated August 10, 2009 by and among the
Company, Utilipoint and Utilipoint Acquisition Company. Pursuant to the Merger
Agreement, an aggregate of 1,348,516 shares of Midas Medici were issued to
Utilipoint shareholders in exchange for 42,191 Utilipoint shares (which
represents 100% of the then outstanding shares). This includes 21,523 Utilipoint
Series A Preferred Stock that were converted to 687,922 Midas Medici common
shares. Further, all outstanding Utilipoint options were exchanged for 172,597
Midas Medici options in accordance with the Midas Medici stock option program,
adopted on July 27, 2009. Immediately after the closing of the acquisition and
as of September 30, 2009, an aggregate of 2,310,516 shares of common stock were
outstanding. Hence, the 1,348,516 shares represented approximately 58% of the
outstanding shares of Midas Medici. The shares of common stock issued in
connection with the reverse merger were not registered with the
Securities and Exchange Commission and are considered to be restricted
securities.
Note 2 — Unaudited
Pro Forma Condensed Consolidated Net Income (Loss) Per Share
The
pro forma net income (loss) per share and shares used in computing the net
income (loss) per share for the periods presented was calculated by dividing the
pro forma net income (loss) by the weighted average number of shares of
common stock outstanding, giving effect to the shares of common stock issued in
connection with the Merger and the shares of common stock expected to be issued
with the offering as described in this prospectus. For the computation of the
basic pro forma net income (loss) per share, in addition to the 962,000
shares of common stock issued and outstanding at September 30, 2009 of Midas
Medici, 1,348,516 shares of common stock were issued to the former
stockholders of Utilipoint, and 1,000,000 shares of common stock are expected to
be issued in connection with the offering described in the prospectus. The
following summarizes the shares used in the computation of the pro forma
basic net income (loss) per share:
Shares
from Midas Medici stockholders
|
962,000
|
|||
Shares
issued to Utilipoint stockholders
|
1,348,516
|
|||
Shares
issued in connection with this offering
|
1,000,000
|
|||
Pro forma
basic weighted average shares outstanding
|
3,310,516
|
|||
Options
to purchase common stock issued under Midas Medici stock option
program
|
465,097
|
|||
Pro forma
diluted weighted average shares outstanding
|
3,775,613
|
23
Note 3 — Adjustments
to Pro Forma Condensed Consolidated Balance Sheet
The
following adjustments were applied to the pro forma condensed consolidated
balance sheet:
(A)
|
Adjustment
to reflect the estimated net proceeds from the offering discussed in this
prospectus. Amount includes gross proceeds of $6,000,000 less estimated
fees associated with the transaction of $791,822 of proceeds used to pay
off the certain indebtedness of Utilipoint.
|
(B) Adjustment
to remove Utilipoint's management fees payable, notes payable
and accrued interest expected to be repaid with proceeds from this
offering.
(C) Adjustments
to “Paid in Capital” to reflect amounts associated with the
offering.
Note 4 — Adjustment
to Pro Forma Condensed Consolidated Statements of
Operations
The
following adjustments were applied to our historical financial statements and
those of Utilipoint to arrive at the pro forma consolidated statement of
operations (in thousands):
(A) Adjustment to reflect compensation expense
of $150,913 and merger expenses of $83,883.
(B) Adjustment
to add back the interest of the notes payable of Utilipoint expected to be
repaid with proceeds from this offering.
24
MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We urge
you to read the following discussion in conjunction with our consolidated
financial statements and the notes thereto beginning on page F-1. This
discussion may contain forward-looking statements that involve substantial risks
and uncertainties. Our actual results, performance or achievements could differ
materially from those expressed or implied by the forward-looking statements as
a result of a number of factors, including, but not limited to risks and
uncertainties discussed under the heading “Risk Factors” beginning on page 9 of
this prospectus, and in our other filings with the SEC. See “Special Note
Regarding Forward Looking Statements”.
Midas
Medici Group Holdings, Inc.
Overview
We were
incorporated in the State of Delaware on October 30, 2006 under the name Mondo
Acquisition I, Inc. Since inception, we have been engaged in organizational
efforts and obtaining initial financing. We were formed as a vehicle to pursue a
business combination through the acquisition of, or merger with, an operating
business. On May 15, 2009, we, Mondo Management Corp., our then sole
shareholder, and Midas Medici Group, Inc. entered into a Purchase
Agreement. Pursuant to the Purchase Agreement, Mondo
Management Corp. sold to Midas Medici Group,
Inc. 1,000,000 previously issued and
outstanding shares of the Company's
restricted common stock, comprising 100%
of the issued and
outstanding capital stock of the Company. The
execution of the Purchase Agreement resulted in a change in control of the
Company, both in its shareholding and management. Effective May 22, 2009, we
changed our name to Midas Medici Group Holdings, Inc.
Prior to
its acquisition of Utilipoint International, Inc., the Company was a
“ shell company” based on its business activities.
Under SEC rule 12b-2 under the Securities Act of 1933, as amended (the
“Securities Act”), the Company also qualified as a “shell company,” because it
had no or nominal assets (other than cash) and no or nominal
operations.
Utilipoint
provides consulting services and proprietary research to its clients using
multi-disciplinary teams with deep subject matter expertise, highly analytical
methodologies, primary research and technology-enabled tools. As of November
23, 2009, Utilipoint had 19 employees. More than 50% of
professional staff hold post-graduate degrees in such diverse fields as
economics, engineering, business administration, information technology, law,
life sciences and public policy. Utilipoint’s senior managers have considerable
industry and project management experience and an average tenure of more than 20
years in the industry. We believe this diverse pool of intellectual capital
enables us to assemble multi-disciplinary teams that can provide creative
solutions to our clients’ most pressing
problems.
Utilipoint
is headquartered in Albuquerque, New Mexico, with two domestic regional offices
in Tulsa, Oklahoma and Houston, Texas. It maintains international operations
through its office in Brno, Czech Republic.
25
Recent
Developments
Revolving Loan Agreement
On
October 14, 2009, Midas Medici and UtiliPoint, entered into a Revolving Loan
Agreement with Proficio Bank. Pursuant to the terms of the Loan Agreement, the
Lender agreed to loan up to $500,000 to the Company which amounts will be
evidenced by a Senior Secured Revolving Promissory Note.
The Loan
matures on October 14, 2010, unless earlier accelerated upon the occurrence of
an event of default, as such term is defined in the Loan Agreement. Interest on
the Loan is payable monthly in arrears commencing on November 1, 2009, at a rate
which is equal to the published Wall Street Journal prime rate plus 2.5%, or a
minimum of 6.5%. In the event of default, as such term is defined in
the Loan Agreement, the interest rate shall bear additional interest of
3%. Pursuant to the terms of the Loan Agreement, events of default
include: (i) failure by the Company to make any payments due under the Loan
within 10 days of the due date, (ii) the Company’s failure to make any required
payments on any material obligation for money borrowed or the Company’s failure
to pay its debts as they become due, unless the debts are the subject of a
bonafide dispute; (iii) default under the security agreement or any other
agreement executed in favor of Proficio; (iv) breach of any
representation or warranty by the Company under the Loan Agreement; (v) failure
to perform or observe any covenants under the Agreement, which failure continues
for 10 days after written notice from Proficio; (vi) the Company’s assignment
for the benefit of its creditors, or taking action with respect to the
appointment of a receive or custodian for the Company or a substantial part of
its business or the filing of any proceeding under any bankruptcy or similar law
or if any such petition or proceeding has been commenced against the Company,
such petition is not dismissed within 60 days; (vii) the Company concealing or
removing any of its assets with the intent to defraud its creditors or making a
fraudulent transfer or while insolvent, permitting a creditor to
obtain a lien on its property, which is not vacated within 30 days.
The Loan
is secured by all property of the Company, including, all accounts, inventory,
furniture, fixtures, equipment leasehold improvements, chattel pager and general
intangibles of the Company and all proceeds thereof.
In
connection with the Loan Agreement, the Company paid an origination fee of 2% or
$10,000. The proceeds of the Loan are to be utilized solely for working capital
purposes. At the closing of the Loan Agreement, the Company issued a
senior secured revolving promissory note to Proficio Bank in the amount of
$150,000.
In
connection with the Loan, in addition to the Loan Agreement, the Company entered
into a Security Agreement with Proficio and the holders of the senior
subordinate debentures issued by Utilipoint entered into a Subordination and
Standstill Agreement. In addition, Knox Lawrence International, LLC
(“KLI”) issued a comfort letter to Proficio Bank. Nana Baffour, the
CEO and Co-Executive Chairman of Midas Medici and Johnson Kachidza, the
President, CFO and Co-Executive Chairman of Midas Medici are key
shareholders of KLI.
Agreement with Forbes Magazine
On
October 2, 2009 Utilipoint and Forbes Magazine entered into an agreement whereby
Utilipoint would produce a series of video and audio interviews with Energy and
Utility industry senior executives and policy makers, to be called “The Great
Transformers”. The Great Transformers interviews would be posted on the Forbes
Custom and Utilipoint websites as well as be part of the Special Advertising
section in the March 15, 2010 edition of Forbes Magazine. The videos and
podcasts of Great Transformers interview can be viewed and listened to on the
Utilipoint and Forbes websites at www.utilipoint.com/greattransformers
and www.forbescustom.com
respectively.
Results
of Operations
The
Company’s accumulated deficit at September 30, 2009 was
$1,554,746. This deficit is primarily attributable to expenses
related to the preparation and filing of our registration statement and
Utilipoint’s acquisition. These expenses coupled with the
Utilipoint’s results of operations contributed to a net loss
of $741,964 for the nine months ended September 30, 2009.
Liquidity
and Capital Resources
At
September 30, 2009, we had cash and cash equivalents of $112,335 and
working capital deficiency of $1,552,973.
26
On
October 14, 2009, Midas Medici Group Holdings, Inc. and UtiliPoint entered into
a Revolving Loan Agreement with Proficio Bank. Pursuant to the terms of the Loan
Agreement, the Lender agreed to loan up to $500,000 to the Company which amounts
will be evidenced by a Senior Secured Revolving Promissory Note. At the closing
of the Loan Agreement, the Company issued a senior secured revolving promissory
note to Proficio Bank in the amount of $150,000.
Management
believes the Company’s Line of Credit coupled with improved profitability
resulting from management’s strategic initiatives will enable the Company to
operate its business in a sustainable manner through December 31,
2010.
Off-Balance
Sheet Arrangements
We have
no significant off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on our condensed financial condition, changes
in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to our
stockholders.
Utilipoint
International, Inc.
Overview
We
provide custom research and management, technology and policy consulting
services to utilities, investors, regulators, and energy industry service
providers both domestically and internationally. We help our clients conceive,
develop, implement and improve Smart Grid and other energy solutions that
address the efficiency, reliability and security of the generation,
transmission, and distribution of electricity to end users. Through our
wholly-owned subsidiary, Utilipoint, we provide our services along seven
practice areas: (1) Smart Meter Deployment; (2) Energy Investments &
Business Planning; (3) CommodityPoint; (4) Meter-to-Cash; (5) Pricing &
Demand Response; (6) Public & Regulatory Issues Management; and (7)
Intelligent Project. We believe increased demand for electricity,
infrastructure under-investment and grid deterioration and an evolving
regulatory environment has created opportunities for us.
We served
132 clients during fiscal year 2008. We concentrate our business activity
throughout the United States and Canada, and Europe and also serve select
clients in Asia, South America, Africa and the Middle East. Our clients include
utilities, investors, regulators, and energy industry service providers such as
vendors to utilities, both domestically and internationally, including companies
such as General Electric, Electronic Data Systems (EDS), SAP, Eskom Holdings,
Union Fonesa SA, ICAP Energy, International Power, Alliance Data and several
other blue chip utility companies. Strategically, we believe customer
concentration risk is mitigated, as no one single client represented more than
9.5% of our total net revenue in 2008. While customer retention is critically
important to us, Utilipoint has continued to successfully drive new customer
relationships. Revenue contribution from our 63 new clients was approximately
$502,700 in 2008.
27
Acquisitions
A key
element of our growth strategy is to pursue acquisitions. We plan to continue to
acquire businesses if and when opportunities arise. We expect future
acquisitions to also be accounted for as purchases and therefore generate
goodwill and other intangible assets. We expect to incur additional debt for
future acquisitions and, in some cases, to use our stock as acquisition
consideration in addition to, or in lieu of, cash. Any issuance of stock may
have a dilutive effect on our stock outstanding.
Intelligent
Project.
On July
1, 2009, Utilipoint, acquired 60% of the interest in the Intelligent Project,
LLC, a research and advisory services firm addressing the challenges that
utilities face in advancing and solving electricity consumers’ needs related to
the Smart Grid. As consideration for the transaction, Utilipoint entered into a
capital commitment agreement with Intelligent Project for an amount up to
$200,000 to support its initial financing. Utilipoint will also provide certain
management services to Intelligent Project in exchange for reasonable
compensation. Further, the existing members of Intelligent Project will provide
services to Utilipoint in exchange for options to purchase an aggregate of 550
shares of the common stock of Midas Medici that are fully-vested on the date of
grant.
Utilipoint
On August
21, 2009, Midas Medici completed a reverse merger transaction with Utilipoint
International, Inc. (“Utilipoint”), a New Mexico Corporation which resulted in
Midas Medici being the “legal acquirer” and Utilipoint the “accounting
acquirer”. The merger was effected pursuant to Agreement and Plan of Merger (the
“Merger Agreement”) dated August 10, 2009 by and among the Company, Utilipoint
Inc. and Utilipoint Acquisition Co. Pursuant to the Merger Agreement, an
aggregate of 1,348,516 shares of Midas Medici were issued to Utilipoint
shareholders in exchange for 42,191 UtiliPoint shares (which represents 100%) of
the then outstanding shares). Further, all outstanding UtiliPoint options were
exchanged for 172,597 Midas Medici options in accordance with the Midas Medici
stock option program, adopted on July 27, 2009. Immediately after the closing of
the merger and as of September 30, 2009, an aggregate of 2,310,516 shares of
common stock are issued and outstanding. Hence, the 1,348,516 shares represented
approximately 58% of the outstanding shares of Midas Medici. The shares of
common stock issued in connection with the merger were not registered with the
Securities and Exchange Commission and are considered to be restricted
securities. Knox Lawrence International, LLC, KLI IP Holding, Inc.
and UTP International LLC, former shareholders of Utilipoint, received an
aggregate of 889,444 of shares of our common stock and options to purchase
27,168 shares of our common stock at the closing of the Merger. Nana Baffour,
our CEO and Johnson Kachidza, our President are the principal shareholders of
Knox Lawrence International LLC, KLI IP Holding, Inc. and each own 373.5
membership units or 37.35% of Knox Lawrence International LLC, 150 shares or 30%
of KLI IP Holding, Inc. and no membership units or 0% of UTP International
LLC.
Immediately
after the closing of the acquisition, but prior to this offering, an aggregate
of 2,310,516 shares of common stock were outstanding. The shares of
common stock issued by Midas Medici in connection with the acquisition were not
registered with the Securities and Exchange Commission and are considered to be
restricted securities.
28
Revenue
Our
revenue is predominantly generated through time-and-materials contracts, bundled
service agreements, fixed-price contracts, events and conferences, and other
revenue. Our revenue mix varies from year to year due to numerous factors,
including our business strategies and the procurement activities of our clients.
Unless the content requires otherwise, we use the term “contracts” to refer to
contracts and any task orders or delivery orders issued under a
contract.
Under
time-and-materials contracts, we are paid for labor at fixed hourly rates and
generally reimbursed separately for allowable materials, other cost of services
and out-of-pocket expenses. Under bundled service agreements, the customers sign
one-year subscription agreements for a bundled set of analyst time and related
services. Under fixed-price contracts, we perform specific tasks for a
pre-determined price. Compared to time-and-materials and cost-based contracts,
fixed-price contracts involve greater financial risk because we bear the full
impact of labor and non-labor costs that exceed our estimates, in terms of costs
per hour, number of hours, and all other costs of performance, in return for the
full benefit of any cost savings. We therefore may generate more or less than
the targeted amount of profit or, perhaps, a loss. Under revenue from our events
and conferences; we solicit companies as event sponsors and individuals as
conference attendees. These events include revenues from sponsorships
and registration fees.
Cost of services
Cost of
services consist primarily of costs incurred to provide services to clients, the
most significant of which are employee salaries and benefits, reimbursable
project expenses associated with fringe benefits, all relating to specific
client engagements. Cost of services also include the costs of subcontractors
and outside consultants, third-party materials and any other related cost of
services, such as travel expenses.
Selling,
general and administrative
SG&A
expenses include our management, facilities and infrastructure costs, as well as
salaries and associated fringe benefits, not directly related to client
engagements. Among the functions covered by these expenses are marketing,
business and corporate development, bids and proposals, facilities, information
technology and systems, contracts administration, accounting, treasury, human
resources, legal, corporate governance and executive and senior
management.
29
Results
of Operations
The
following discussion highlights results from our comparison of consolidated
statements of operations for the periods indicated.
Year
ended December 31, 2008 compared to year ended December 31, 2007
(dollars in thousands)
Net
revenues. Net revenues for 2008 was $3,660.9,
compared to $3,910.4 for 2007, representing a decrease of $249.5, or 6.4%. This
decrease was due primarily to macroeconomic market conditions, impacting
clients' budgets for research and consulting engagements.
Cost of
services. Cost of services for 2008 were $2,037.0, or 55.6% of
net revenue, compared to of $2,149.1, or 55.0% of net revenues for 2007. This
5.2% decrease in cost of services associated with our net revenues was in
proportion to our reduction in net revenues during the reporting
period.
Selling, general
and administrative expenses. Selling, general and
administrative expenses for 2008 were $ 1,777.6 , or
48.6% of net revenue, compared to $1,548.0, or 39.6% of net revenue, for 2007.
This 14.8% increase in selling, general and administrative expenses resulted
from a variety of factors including: hiring additional staff to support our
finance function and European operation and increased professional services
expenses to support our audit and incremental legal fees. Depreciation and
amortization for 2008 and 2007 was stable, at $17.9 and $10.9,
respectively.
Operating income
(loss). For
2008, operating loss was $271.6, down $449.0 from an operating income of $177.4
in 2007. The decrease was primarily due to the decrease in net revenues and
increase in cost of services that resulted in lower than historical
staff utilization.
Interest and tax
expense. For 2008, interest expense was $63.9,
compared to $66.4 for 2007. Our payment of interest has remained steady during
the reporting period because long term contractual obligations remained
relatively constant. The Company incurred income tax expense of $45.7
in 2007 and income tax benefit of $35.8 in 2008 primarily as a result
of changes in deferred assets and liabilities.
Liquidity
and Capital Resources
Our condensed consolidated financials statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business and, accordingly, no adjustments have been made to recorded amounts to reflect the outcome of this uncertainty. The Company’s accumulated deficit at September 30, 2009 was $2,003,800 and the Company incurred a net loss of $1,191,018 for the nine months ended September 30, 2009.
At
September 30, 2009 the Company had working capital deficiency of $1,528,860.
Historically, Utilipoint has funded its operations with cash obtained mainly
from stockholders and third party financings. As a wholly-owned subsidiary of
Midas Medici, Utilipoint anticipates receiving external financing (upon
completion of Midas Medici’s initial public offering) for its working capital
needs and will be in a position to operate profitably and solve its liquidity
constraints on a go-forward basis in a sustainable manner. Utilipoint is
currently taking steps to improve its operational results and liquidity.
Management actions and plans for improving operational results and liquidity
include the following:
Increased
Staff Utilization – The Company has begun implementing definitive plans
to increase staff utilization which management believes will improve
margins.
Increased
Business Development and Executive Leadership Resources – In July 2009,
with the combination of IP, two veteran executives joined Utilipoint. IP is
a research and advisory services firm focused on assisting utilities with the
challenge of advancing and solving customer dimension complexities of the Smart
Grid. The addition of these individuals significantly increased
Utilipoint’s resources in business development and executive leadership.
Management believes this addition of executive talent will significantly
increase its revenues and profits while optimizing how it manages its
operations.
Deferring
of Insider Obligations – Utilipoint has on its books, as of September 30,
2009, current debt obligations due to insiders of approximately $500,000. The
Company believes that its insiders are going to continue deferring their
obligations until the Company generates internal cash flows or procures outside
financing.
Management
believes it will be successful in completing the foregoing actions which will
enable the Company to operate its business in a sustainable manner through
December 31, 2010.
30
Following
this offering, we expect that our cash flow from operations and the proceeds
from the public equity offering will allow the Company to continue to meet our
anticipated cash requirements for at least the next twelve months, excluding any
additional funding we will need to pursue our acquisition
strategy. Such acquisitions, if entered into will be funded by the
sale of additional debt or equity securities or additional bank
financing. The sale of additional equity securities could result in
additional dilution to our stockholders and there can be no guarantee that we
will be successful in raising those additional funds on terms that are favorable
to us. Any acquisitions we undertake may be funded through other forms of debt,
such as publicly issued or privately placed senior or subordinated debt, or the
use of common or preferred equity as acquisitions are
considered.
Our
liquidity is affected by many factors, some based on the normal ongoing
operations of the business and others related to the uncertainties of the
industries in which we compete. Our liquidity may also be adversely affected by
the current economic conditions, including consumer spending rates, the ability
to collect on our accounts receivable and our ability to obtain working capital
due to the tightening of global credit markets. Although our cash requirements
will fluctuate based on the timing and extent of these factors, we believe that,
after this offering, cash generated from operations, together with our current
cash balance and borrowing capability should be sufficient to satisfy our cash
requirements for the next twelve months. Long-term liquidity is
dependent upon achieving consistent profitability or raising additional
financing. If necessary, the Company will seek any necessary additional funding
through arrangements with corporate collaborators, through public or private
sales of its securities, including equity securities, or through bank financing.
There is no assurance that additional funds will be available on terms favorable
to the Company and its stockholders, or at all.
Off-Balance Sheet
Arrangements
Utilipoint
does not have any off-balance sheet arrangements.
Contractual
obligations
The
following table summarizes our contractual obligations (excluding interest in
the case of debt) as of September 30, 2009 that requires us to make future cash
payments.
Maturities
of long-term borrowings at September 30, 2009 are as follows
Year
|
Amount
|
|||
2009
|
$ | 41,032 | ||
2010
|
452,106 | |||
2011
|
- | |||
2012
|
108,969 | |||
2013
|
62,500 | |||
2014
|
25,000 | |||
Total
|
$ | 689,607 | ||
We
renegotiated the remaining principal and unpaid interest balance on our line of
credit of $82,264 with an interest rate of 9.25% by executing a Promissory Note
Agreement with the Bank of Albuquerque on June 30, 2009. The 9.25% note matures
on December 31, 2009 and will be repaid in 5 principal payments of $9,000
each and one final principal and interest payment of $37,561. The 9.25% note is
an extension / renewal / modification of the credit facility and as such is
secured by Utilipoint’s accounts receivable, fixed assets and a right of offset
against cash accounts held with the bank.
Impact
of our initial public offering
The
completion of this offering will have near and long-term effects on our results
of operations. Over the long-term, our results of operations will be affected by
the costs of being a public company, including changes in board and executive
compensation, the costs of compliance with the Sarbanes-Oxley Act of 2002, the
costs of complying with the Security Exchange Commission (“SEC”) and NASDAQ
requirements, and increased insurance, accounting and legal costs. These costs
are not reflected in our historical results.
Increased
Business Development and Executive Leadership Resources
In July
2009, with the Capital Contribution Agreement with The Intelligent Project, LLC
(refer to footnote #13 of the audited notes to Utilipoint’s consolidated
financial statements, Subsequent Events – Capital Contribution Agreement with
The Intelligent Project, LLC), two veteran executives joined the
Company. The addition of these individuals increased the Company’s
resources in business development and executive leadership. With the
merger with Midas Medici, two seasoned executives are expected to contribute to
the business development efforts of the Company via their extensive
relationships and contacts in the energy industry. The Company
believes this addition of executive talent will significantly increase its
revenues and profits while optimizing how it manages its
operations.
Critical
Accounting Policies and Significant Judgments and Estimates
Our
discussion and analysis of our financial condition and results of operations are
based on our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States, or GAAP. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. We review our estimates on an ongoing basis, including those
related to allowances for doubtful accounts, fair value of common stock put
options, certain revenue recognition related to contract deliverables, valuation
allowances for deferred tax assets, rates at which deferred tax assets and
liabilities are expected to be recorded or settled, accruals for paid time off
and the estimated labor utilization rate used to determine cost of services. We
base our estimates on historical experience, known trends and events, and
various other factors that we believe to be reasonable under the circumstances,
the results of which form our basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.
Our
management believes the following accounting policies and estimates are most
critical to aid you in understanding and evaluating our reported financial
results.
31
Revenue Recognition
We
recognize revenue under our contracts when a contract has been executed, the
contract price is fixed and determinable, delivery of services or products has
occurred, and collectability is considered probable and can be reasonably
estimated. Contract revenue recognition inherently involves the use of
estimates. Examples of estimates include the contemplated level of effort to
accomplish the tasks under contract, the cost of the effort, and an ongoing
assessment of the Company's progress toward completing the contract. From time
to time, as part of our standard management process, facts develop that require
us to revise our estimated total costs and revenues. To the extent that a
revised estimate affects contract profit or revenue previously recognized, we
record the cumulative effect of the revision in the period in which the facts
requiring the revision become known. The full amount of an anticipated loss on
any type of contract is recognized in the period in which it becomes probable
and can be reasonably estimated.
We have
multiple service offerings to our client base for which revenue is recognized as
follows:
Fixed-Price
Contracts
Fixed
price contracts are projects where services are provided at an agreed to price
for defined deliverables. On occasion, clients with fixed price contracts
will require an accounting of all hours worked on a project at an agreed to
hourly rate to accompany an invoice.
We
recognize revenue when a deliverable is provided except in the case where the
client requires time reporting to accompany invoices. In that case, we
recognize revenue up to the amount the time records support, because clients
requiring time reporting with hourly rates on fixed price contracts typically
can only ask for refunds on fixed price projects up to the amount determined as
if the contract had been time and materials. With acceptance of the final
deliverable, all revenue is recognized.
Bundled
Service Agreements (“BSAs”)
BSAs are
packages of services that clients subscribe to, typically on an annual contract
basis. The services typically include a combination of the
following:
•
|
Access
to subject matter experts as needed, by
telephone
|
•
|
Discounted
fees for Utilipoint events
|
•
|
Advertising
space on the IssueAlert®
e-publication
|
•
|
One
to three reports and/or whitepapers on industry
topics
|
•
|
Briefings
on industry trends and research
findings
|
BSAs also
include annual memberships in the Advanced Metering Infrastructure and Meter
Data Management (“AMI MDM”) forum and corporate contracts. The AMI MDM forum is
designed for electric, water, and/or gas utilities, regulators, utility
governing boards, ISOs (Independent System Operators), and consumer advocacy
groups to come together and discuss meter data management successes, problems,
issues, interfaces and best practices. Corporate contracts are
characterized by an annual contract for a pre-defined amount of market research
hours. Clients of this service receive access to Utilipoint’s directory
and InfoGrid products. The primary service is the block of hours
purchased.
We
believe that the substance of BSA’s, as pointed out in a recent survey of its
clients, indicates that the purchaser pays for a service that is delivered over
time. As a result, revenue recognition occurs over the subscription
period, or in the case of corporate contracts as the hours are utilized,
reflecting the pattern of provision of service.
Time
and Materials Contracts (“T&M”)
T&M
are services billed at a set hourly rate. Project related expenses are
passed through at cost to clients. Normally invoices occur on monthly
basis. We recognize revenue as billed unless the project has a major
deliverable(s) associated with it, in which case the revenue is deferred until
the major deliverable(s) is provided.
Events
and Sponsorships
We host
events such as conferences. These events include revenues from
sponsorships and registration fees which are recognized in the month of the
event. Revenues from sponsors of the AMI MDM forum are recognized over the
annual subscription period, reflecting the pattern of provision of
service.
Effects
of inflation
We
generally have been able to price our contracts in a manner to accommodate the
rates of inflation experienced in recent years, although we cannot be sure that
we will be able to do so in the future.
32
BUSINESS
Overview
We are a
clean energy company that provides services to utilities and others to further
the development of the electric grid. The electric grid is the entire
infrastructure available to generate, transmit, and distribute electricity to
end users. We define the “Smart Grid” as the electrical grid, enhanced by a full
spectrum of technologies and solutions designed to make it function more
efficiently, reliably and securely. We believe the Smart Grid will enable
consumers to make smarter decisions about electricity consumption, helping curb
the rising demand for electricity while reducing their carbon
footprint.
In much
the same way that technological advances in microprocessors, power electronics
and the internet revolutionized the telecommunications industry, we believe that
technological advances are transforming the traditional electrical grid into a
“Smarter Grid” and significantly improving its capabilities. Key
elements of the Smart Grid include the ability to: introduce clean energy
sources into the grid; transmit, store and analyze data along the grid;
communicate information between all segments of the grid; automate certain
functions of the grid using advanced control systems and devices; and reduce the
carbon footprint using various products, processes and services for remote
demand management and ensuring affordability of electrical
power.
In
October 2008, the U.S. Department of Energy released a study, “The Smart Grid:
An Introduction”, in which it estimated that for the past 20 years, demand
growth has exceeded supply growth by 25% per year. As a result, power outages
are estimated to cost U.S. businesses $100 billion per year, with a 41% rise in
the number of power outages in the second half of the 1990s than in the first
half. Smart Grid enhancements will ease congestion and increase utilization of
generating capacity, sending between 50% to 300% more electricity through the
existing electric grid.
Through
our wholly-owned subsidiary, Utilipoint, we provide energy industry consulting
services and proprietary research in seven practice areas that encompass the
entire energy and utility value chain, including:
·
|
Smart Meter Deployment
– that provides: 1) research and consulting focused on more effective
deployment of smart meters to customers, and 2) efficient management of
data traffic between end-users and providers of
electricity;
|
·
|
Energy Investments &
Business Planning –that provides investment decision support to
utilities and investment firms;
|
·
|
CommodityPoint – that
provides research and advisory services designed to assist commodities
traders to manage trading risk;
|
·
|
Meter-to-Cash – that
provides independent research and consulting services applied to the
end-to-end utility-customer value chain from when a meter is read to the
point cash is received;
|
·
|
Pricing & Demand
Response – that assists utilities and their regulators to design
mechanisms for setting electricity rates and formulating prices for
electricity;
|
·
|
Public & Regulatory Issues
Management – that provides assistance for potentially controversial
public, regulatory, and legal issues associated with the generation,
transmission and distribution of electricity;
and
|
·
|
The Intelligent Project
– that produces highly structured, issue-focused research and executive
forums to assist executives in analyzing customer related issues
associated with the “Smart
Grid”.
|
In
addition, we host annual conferences in the US and Europe targeted to our client
base to discuss topical issues in the clean energy and Smart Grid
sector. These conferences bring together key energy industry
participants such as regulators, utility senior executives, policy makers,
investors and senior executives from technology and services companies serving
the energy industry. Our flagship US annual conference attracted over 200
participants in 2008. Our European conference in its second year
attracted over 100 participants in 2008.
Our
clients include utilities, investors, regulators, and energy industry vendors
and service providers both domestically and internationally. According to the
International Energy Agency’s World Energy Outlook 2008, electric power
infrastructure will require cumulative worldwide investment of over $13.6
trillion (in 2007 dollars) in 2007-2030, or 52% of the total infrastructure
needed. On a national level, and according to the Brattle Group, investment
totaling approximately $1.5 trillion will be required between 2010 and 2030 to
pay for grid infrastructure in the United States. We believe we are well
positioned to benefit from this anticipated market evolution.
Founded
in 1933, Utilipoint built its brand name in the power utility industry by
supplying market data intelligence to major US utilities spanning the entire
market segment from generation to consumption. Today, Utilipoint is a full
service energy-focused consulting firm, providing independent research-based
information, analysis, and consulting to energy companies, utilities, investors,
regulators, and industry service providers alike.
33
Our
Strategy
Our goal
is to become a global leader in alternative energy and Smart Grid solutions. Our
strategy is to grow our business both organically and through acquisitions by
leveraging the knowledge and experience of Utilipoint and the experience of our
management team’s 20 years of investing in and operating energy services
companies. Prior to joining our company, our management team has acquired
and operated businesses with an aggregate enterprise value of approximately $600
million in the energy services sector. We intend to identify new areas of growth
and expand our activities beyond our current consulting business. We
targeted the following areas of growth: engineering services; data warehousing
and information technologies; and financial services.
Accelerate
organic growth
Our
organic growth strategy has been to build technology, systems and back-office
infrastructure to complement our strategy of increased market awareness of the
Utilipoint brand. This strategy is designed to generate significant
financial and operating leverage by attracting and hiring proven practice leads
who in turn, make use of our technology, systems and back-office infrastructure
as well as our brand to generate revenues and profits on an incremental
basis. The technology systems and back-office infrastructure makes
use of shared platforms, collaboration tools, disaster recovery, and business
continuity applications to safe guard databases and enable a mobile
workforce.
Our
market awareness and branding efforts capitalize on the company’s long history
in the energy industry, the breath and scope of the company’s IssueAlert®
product and other research publications, the company’s conferences as well as
partnerships with media organizations like Forbes and the Great Transformers
interview series.
This
strategy leverages Utilipoint’s Client Engagement Model shown below. The
Utilipoint Client Engagement Model provides a method for delivering ongoing
strategic value to our clients.
Figure
1. Utilipoint’s Client Engagement Model
Pursue
strategic acquisitions
A key
element of our growth strategy includes executing strategic acquisitions of
companies providing services and solutions that support the development of clean
energy and the Smart Grid. We believe that we can leverage our management team’s
expertise in investing in and operating companies in the energy services sector
to implement our strategy of expanding our activities outside of Utilipoint's
core area of consulting services. We plan to pursue a disciplined acquisition
strategy to obtain new customers, increase our size and market presence and
obtain capabilities that complement our existing portfolio of services, while
focusing on cultural compatibility and financial impact. Our acquisition
strategy is focused on specific and well-suited business activities that fit
within the clean energy and Smart Grid sector.
Our
acquisition strategy cuts across the four major segments of the electricity
grid: generation, transmission, distribution and end-use consumption. We believe
that the ability to provide services that apply across the four segments
provides the greatest opportunity to impact the development of the Smart
Grid. We believe that a comprehensive product offering will
differentiate us from the other companies serving our industry
sector.
• Generation: We believe firms
which provide technology or processes to allow power generation into the grid
from alternative forms of energy such as solar, wind or hybrid cars enhance the
Smart Grid by reducing the carbon footprint. Companies that provide clean coal
solutions, renewables dispatch solutions, load and asset management systems,
engineering services, distributed generation technologies and support services
are all critical components to the Smart Grid solution to reduce emissions,
improve efficiency, increase reliability and promote energy
independence.
• Transmission: The transmission
system can also benefit from technologies, devices and solutions including grid
automation systems, superconducting wires, transmission support services,
engineering services, Supervisory Control and Acquisition Data Systems (SCADA)
Management Systems, visualization systems for control rooms, and control and
management systems for dispatch. Companies providing these services and
solutions enable utilities and transmission system operators to deliver
electricity more efficiently, securely and reliably. We plan to acquire and grow
firms that provide these types services or solutions.
• Distribution: We believe that
enhanced information and communication between the utility and end-consumer is
the most powerful aspect of a Smart Grid. Firms which provide the hardware and
software around advanced meters and meter data management, or provide
professional services around smart meter deployments and demand response
programs, are well positioned to benefit from the evolution of the Smart
Grid.
• End-Use Consumption: The
entire power infrastructure culminates in the usage of electricity by customers
in homes and commercial businesses. Understanding end-user consumer behavior
patterns and drivers is critical to successful deployment of most Smart Grid
solutions and technologies. Utilipoint’s acquisition of The
Intelligent Project is the first step towards participating in this critical
aspect of the Smart Grid. We intend to acquire more companies
providing tools and services that serve, better understand and educate the
end-use consumer.
Some of
the types of businesses that we have currently identified for possible
acquisition include:
·
|
Engineering
companies that provide enabling solutions to the Smart Grid
infrastructure;
|
·
|
Technology
companies that provide data warehousing technology infrastructure and data
center solutions;
|
·
|
Companies
that facilitate financing of energy efficiency initiatives for consumers
and commercial enterprises;
and
|
·
|
Other
companies or products and services aimed at commercial/industrial
customers and consumers to impact the Smart
Grid.
|
Currently
we have no agreements, plans or arrangements with any third parties for any one
or more acquisitions. There can be no assurance that we will be able
to consummate any strategic acquisitions, or even if we are able to do so, that
any one or more acquisition will prove to be profitable or otherwise beneficial
to our company.
34
Consistent
with its strategy, we made our first acquisition in August 2009, when we
acquired Utilipoint International, Inc., a full service energy-focused
consulting firm, providing independent research, information, analysis, and
consulting to energy companies, utilities, investors, regulators, and industry
service providers.
On July
1, 2009, Utilipoint completed the acquisition of 60% of The Intelligent Project,
LLC, a research and advisory services firm that provides consulting services to
help clients understand and consider the Smart Grid’s impact on end user
customers, critical to successfully deploying Smart Grid solutions. The
Intelligent Project produces highly structured, issue-focused research and
executive forums to enable dialogue, innovative thinking and solutions-based
strategies to emerge. The Intelligent Project’s product offering is designed to
assist executives think through all customer related issues associated with the
Smart Grid to ensure customers’ acceptance and Smart Grid penetration. It is
headquartered at Purdue Research Park in West Lafayette, Indiana. As part of the
transaction, we have retained The Intelligent Project’s senior management, David
Steele and Peter Shaw. Mr. Steele and Mr. Shaw are veteran utility executives
with expertise in customer issues who will play critical roles in
implementing our business strategy.
Leverage
our Management Team’s diverse industry experience
Our
management team, led by our CEO, Nana Baffour, and President, Johnson Kachidza,
possesses a breadth and depth of industry experience which we believe will
directly enable us to achieve our growth objectives. We believe that
collectively, our relationships with executive level management at utilities,
regulators, vendors, technology leaders and investment professionals who are
active in the utility space will serve us well as we continue to execute our
business strategy. Prior to joining our company, the members of our management
team successfully completed, as principal investors and operators, 11 energy
services acquisitions with an aggregate enterprise value of approximately $600
million. We believe that their experience and expertise will maximize
our chances of succeeding in acquiring and managing energy services companies
with customers that include utilities, educational institutions, automobile
manufacturers, architectural engineering firms, technology providers, general
manufacturers and local municipalities.
Grow our client base and increase
scope of services provided to existing
clients.
We intend
to grow our client base by expanding our geographic presence domestically and
internationally, while maintaining strong relationships with our current clients
by increasing the scope of services provided to them. We expect to focus
our international expansion on Europe, leveraging Utilipoint’s European
headquarters in the Czech Republic. In addition, we intend to invest in
development and marketing initiatives in order to strengthen our brand
recognition among potential clients. An integral part of our customer strategy
is implementing our customer relationship management process that enables us to
manage our customer base more effectively as customers spend more on our
services. Through Utilipoint, we served 132 clients during fiscal year
2008.
Focus on higher margin contracts and
recurring revenue.
We
currently invoice our clients for our services based on either fixed price
contracts, time and materials contracts or under “bundled service” arrangements
(subscription agreements for a bundled set of analyst time and related services,
typically renewed annually). Presently, a majority of our agreements
are based on fixed price contracts. We plan to focus our efforts on
obtaining energy consulting assignments in the form of subscription-based
revenues and bundled service agreements, which we believe will provide us with
higher profit margins and increase the share of our revenue that is
recurring.
Strengthen
our end-to-end service offerings.
We plan
to leverage our strong client and industry relationships to increase our revenue
from research, advisory and consulting services, which include information
technology solutions, executive level executive consortiums, primary research,
project management, project delivery and conferences. Due to the comprehensive
nature of our service offerings through our subsidiary Utilipoint, we believe
our advisory services provide us with insight into market gaps that may not be
evident to our competitors. Additionally, we feel we are best positioned to
capture a greater portion of the implementation work on the Smart Grid that
directly results from our advisory services. We believe that expanding our
client engagements into implementation and evaluation and improvement services
will increase the scale, scope and duration of our contracts and thus accelerate
our growth.
Build upon our
brand equity.
Through
our subsidiary Utilipoint, we enjoy 76 years of brand recognition as an industry
expert and leader in the energy utility consulting segment spanning generation,
transmission, distribution, and end-use consumption. We intend to distinguish
ourselves as a diversified clean energy and Smart Grid focused company. We
believe that by distinguishing ourselves as a clean energy and Smart
Grid-focused organization will increase the number of clients seeking our
services as well as expand the acquisition opportunities available to
us.
35
Capitalize on
operating leverage.
We have
built a corporate infrastructure and internal systems that we believe are
readily scalable and can accommodate significant growth without a proportionate
increase in expense. We have invested significant time and resources in
developing our acquisition, integration, strategic and operational management
processes and methodologies. Prior to joining our company, our management team
members have successfully applied these processes and methodologies to grow
companies profitably. As our revenue base grows, we expect to realize
operating leverage by spreading the costs associated with our corporate
infrastructure and internal systems over a larger revenue base, which would
increase our operating margins. We believe that the knowledge base provided by
Utilipoint can be used to identify additional organic and acquisition
opportunities as well as provide the framework for analyzing those opportunities
and thereby ensuring successful execution.
Our
Competitive Strengths
We
believe that our industry experience and expertise position us well for rapid
expansion into the clean energy and Smart Grid space. We believe that our
competitive strengths include:
We have an experienced management
team.
Our
management team possesses extensive experience acquiring and integrating energy
services businesses. We believe our relationships with senior executives
throughout the electrical energy industry and our comprehensive understanding of
the US regulatory framework provide us with the insight to identify and the
skills to take advantage of opportunities. We think that our
processes and methodologies are well proven and will help us effectively target,
implement and integrate acquisitions. This experience will be critical in
executing our business plan in the clean energy and Smart Grid
sector.
In
addition, with an average tenure of 20 years in the industry, our
management team has a history of successfully building companies into stable and
positive cash flow generating assets through organic, strategic and operational
expertise and leveraging critical partnerships. Furthermore, we
believe that our management team’s industry relationships will enable us to
attract the best talent to effectively support our aggressive acquisition
strategy. Over the past decade, our management team has developed a metrics
based process for operating and growing businesses including compensation models
for incentivising management, dashboards for monitoring operational and
financial performance, sales and pipeline management techniques and customer
relationship management processes. We believe that consistent with
our historical performance, these methodologies and processes will enable us to
achieve success in operating and managing our
business.
We have a highly experienced
professional staff with deep subject matter
knowledge.
Management
believes the thought leadership and in-depth subject matter knowledge of our
experts coupled with our corporate experience developed over decades of
providing advisory services at the intersection of electricity and technology
makes us a valuable resource to our clients and distinguishes us from our
competitors. Currently, more than 50% of our professional staff holds
post-graduate degrees in such diverse fields as economics, engineering, business
administration, information technology, law, life sciences and public
policy. In addition, members of our professional staff each have
average of 20 years of direct industry experience. We believe their experience
and qualifications enable us to deploy multi-disciplinary teams able to
identify, develop and implement solutions that are creative, pragmatic and
tailored to our clients’ specific needs.
Long-standing relationships with our
clients.
Through Utilipoint
in the year ended December 31, 2008, we have successfully served 132
clients. Through our Utilipoint subsidiary, we maintain a highly reference-able
customer base and long-standing relationships with our clients and industry
executives. We believe that our existing client base, provides an excellent
foundation to acquire additional clients, while also providing opportunities to
sell additional products and services to our existing clients. We
believe that our client base is a value creator for our acquisition program
since it enhances our reputation as a business, making us a desirable
buyer.
Versatile
advisory services practice. We
believe our advisory approach to consulting and understanding of our clients’
requirements and objectives, gives us a significant competitive advantage,
permitting us to gain access to key client decision makers during the initial
phases of their policy, program, project or initiative which we hope to leverage
into opportunities for other facets of our business.
Our
analytical models and methods allow us to deliver solutions to
clients.
We have
developed energy-planning, benchmarking and pricing models that are used by
municipalities and commercial utilities around the world. In addition, we have
developed a suite of proprietary tools, databases and project management
methodologies that are available to be utilized on client engagements. We have
developed proprietary research databases, tools and publications such as
Utilipoint’s Technology Vendor Analysis Matrix, QuickStrategy methodology and
IssueAlert® all of which we believe promote our competitive advantage in the
energy consulting industry. Our coal plant database is widely used by power
generators and their vendors to make decisions about emission control systems,
siting and maintenance programs for coal plants. Our demand response
database includes metrics measuring the effectiveness of demand response
programs across 3,000 utilities in the US and has been part of a 2008 report by
the US Congress on demand response initiative. We believe that these tools
cannot be easily duplicated and therefore provide us with a compelling
competitive advantage.
36
Our
Clients and Contracts
Through
our Utilipoint subsidiary, we served 132 clients during fiscal year
2008. In 2008, roughly $1.6 million, or 48% of total revenue was generated
from returning customers and approximately $1.8 million from new customers. In
2008, our average revenue per customer was approximately $22,000. Representative
clients include: major utilities and energy companies, energy generation and
other industry equipment vendors, suppliers of emerging and alternative energy
technologies and services, investment firms who cover the energy utility or
commodity verticals, software vendors, and other information technology service
providers serving the industry. Our clients are international, with
representation stretching across North America, South America, Europe, Asia,
Africa and Australia. We concentrate our business activity throughout
the United States and Canada, We also serve select clients in Asia, South
America, Africa and the Middle East. Our clients include utilities, investors,
regulators, and energy industry service providers such as vendors to utilities,
both domestically and internationally, including companies such as General
Electric, Electronic Data Systems (EDS), SAP, Eskom Holdings, Union Fonesa SA,
ICAP Energy, International Power, Alliance Data and several other blue chip
utility companies. No one single client represented more than 9.5% of
total net revenues in 2008.
We
currently have a variety of contractual arrangements with our clients, which
include:
Fixed-Price
Contracts
Fixed
price contracts are projects where services are provided at an agreed to price
for defined deliverables. On occasion, clients with fixed price
contracts will require an accounting of all hours worked on a project at an
agreed to hourly rate to accompany an invoice.
Bundled
Service Agreements
Bundled
Service Agreements, or BSAs, are packages of services that clients subscribe to,
typically on an annual basis. The services typically include a
combination of the following:
•
|
Access
to subject matter experts as needed, by
telephone;
|
•
|
Discounted
fees for Utilipoint events;
|
•
|
Advertising
space on the IssueAlert®
e-publication;
|
•
|
One
to three reports and/or whitepapers on industry topics;
and
|
•
|
Briefings
on industry trends and research
findings
|
BSAs also
include annual memberships in the Advanced Metering Infrastructure and Meter
Data Management (“AMI MDM”) forum and corporate contracts. The AMI MDM forum is
designed for electric, water, and/or gas utilities, regulators, utility
governing boards, ISOs (Independent System Operators), and consumer advocacy
groups to come together and discuss meter data management successes, problems,
issues, interfaces and best practices. Corporate contracts are
characterized by an annual contract for a pre-defined amount of market research
hours. Clients of this service receive access to Utilipoint’s
directory and InfoGrid products. The primary service is the block of hours
purchased.
We
believe that the substance of BSA’s, as pointed out in a recent survey of its
clients, indicates that the purchaser pays for a service that is delivered over
time. We recognize revenues over the subscription period, or in the
case of corporate contracts as the hours are utilized reflecting the pattern of
provision of service.
Time
and Materials Contracts
Time and
material contracts are services billed at a set hourly rate. Project
related expenses are passed through at cost to clients. Normally
invoices are sent to our clients on a monthly basis.
Our
Services
Smart
Meter Deployment
Our
unique Smart Meter Deployment practice provides unbiased market
research, consulting and project management services to utilities, regulators,
new and established vendors deploying smart meter technology into the
marketplace. We work with utilities to help manage smart meter pilot programs
and technology implementations by managing all elements of the service offering
including: program design, vendor selection, project planning, meter, our meter
data management and data analysis.
37
As an
example of our Smart Meter
Deployment services,
Utilipoint is currently managing a residential smart meter and smart
meter pricing pilot, where 1,400 customers will use a combination of technology
and innovative rate structures to reduce electricity usage. The pilot was
sponsored by the local public utility, the Public Utilities Commission, and a
consumer advocate group. We believe it is the first in the world to test smart
metering with three different advanced residential rate options.
Energy
Investments & Business Planning
Our
Energy Investments practice provides business planning and market studies, and
helps refine business plans for companies looking for external funding,
acquisition opportunities, and investment decision support. Our consultants and
analysts have an understanding of the regulatory considerations impacting
investment into the sector and unique strategy modeling capabilities and
approaches to support investment decisions. We also work with investor groups,
venture capital and private equity firms on independent analysis of investment
opportunities.
As an
example of our business planning services, in response to a then upcoming public
vote on whether to form a new electric utility, Utilipoint was hired by a local
utility company in Washington to advice on upcoming public vote on whether to
form a new electric utility, Utilipoint was hired by a local utility company to
perform asset and a business valuation, economic and engineering feasibility
study and presentations of the study results in numerous public forums. We
believe our involvement helped to successfully mitigate the requirement of
additional capital investment by the client.
CommodityPoint
Our CommodityPoint
practice provides expert information, independent research, market studies,
consulting and analyst services in the area of energy commodity trading,
transaction and risk management. We believe that our practice professionals are
acknowledged and accomplished experts in their field and are relied upon by our
clients to provide unambiguous and independent advice and
information.
Our
CommodityPoint practice recently released its 2009 TRM Vendor Perceptions Study
report. The CommodityPoint TRM Vendor Perception study is repeated every two
years and represents a view of how users and prospective buyers perceive the
market landscape. We believe that by capturing a representation of user and
buyer perceptions about the vendors in the space much can be learned regarding
market maturity and the overall evolution of TRM software. This study was
conducted during the first quarter of 2009 and represents user and buyer views
as of the close of 2008.
Meter-to-Cash
Our
Meter-to-Cash practice provides expert information, independent research, market
studies, consulting and analyst services in the areas of customer care, customer
information systems and customer relationship management. We
believe Utilipoint's practice professionals are acknowledged and
accomplished experts in their field and are relied upon by our clients to
provide unambiguous and independent advice and information. Utilipoint's
customer information services clients include Investor-owned utilities,
cooperatives, municipals, technology vendors, software vendors and regulatory
agencies.
As an
example of our meter-to-cash services, the a Canadian Public Utility Commission,
ordered a collaborative process to benchmark gas and electric customer care and
billing to market using Utilipoint’s database. As a result, the commission was
able to set gas and electric rates on a go-forward basis based on the benchmark
results.
Pricing
& Demand Response
Our
pricing and demand response practice is dedicated to providing wholesale and
retail electricity market design and pricing services to electricity market
stakeholders. Our clients include independent system operators, utilities,
competitive load serving entities, demand response program providers, state and
federal regulatory agencies, and business and investment entities with a
commercial interest in the design and operation of electricity
markets.
As an
example of these services, the Energy Policy Act of 2005 mandated demand
response as the official policy of the United States. On behalf of the Federal
Energy Regulatory Commission, or FERC, we surveyed over 3,000 utilities in the
United States and performed analysis that contributed to a FERC Staff Report on
Demand Response and Smart Metering published in 2006 and 2008 and sent to
Congress as an update on progress on Smart Grid related issues including
demand response and advanced metering initiatives.
38
Public
& Regulatory Issues Management
Our
Public & Regulatory Issues Management practice has a 25-year track record of
working with utilities to manage potentially controversial public, regulatory,
and legal issues. We believe that through Utilipoint's independent and expert
assistance, utilities can enhance public trust, broaden and improve
communication of the relevant issues and smooth the communication process with
their customers and the public.
In 2008,
Utilipoint was hired to design a public outreach process including documentation
of the project for public use in connection with a proposed nuclear plant and
the associated 200 miles of new transmission facilities. The project was
approved by state regulators with no organized public opposition.
The
Intelligent Project, LLC
Management
believes that Utilipoint’s acquisition of The Intelligent Project, LLC a
consulting firm focused on helping clients address issues related to the
customer aspects of Smart Grid deployment, positions us to be a leader in
dealing with Smart Grid customer-related issues. The Intelligent
Project delivers its services through a consortium delivery model, combining
power industry executives with executives from other industries where
significant customer transformation has occurred, such as telecommunication,
financial services and retail industries where technology and regulations have
transformed the customer experience.
In 2009,
The Intelligent Project was hired by a Mid-Atlantic utility to develop a
progressive voice of the customer program to enable the utility assess the
impact of its upcoming smart meter deployment. In partnership with
academic resources from Purdue University, the team from the Intelligent Project
designed and facilitated customer focus groups and specialized research to
provide data and analyses to help the client determine the best pricing models
to induce adoption of smart meters.
·
|
Acquisition
of the Intelligent Project, LLC
|
On July
1, 2009, in connection with Utilipoint’s acquisition of its 60% owned
subsidiary, The Intelligent Project, LLC (“IP”), Utilipoint entered into the
following agreements:
(A) a
Capital Commitment Agreement (the “Capital Agreement”) pursuant to which
Utilipoint committed to contribute up to $200,000 to IP, as may be requested by
IP, but in no event not in excess of $25,000 in a any single request. The
parties contemplated that the capital contributions under the Capital Agreement
may be satisfied by capital contributions which KLI intended to make to
Utilitpoint in the amount of $200,000 and therefore any failure by Utilipoint to
make a capital contribution to IP because it has not received sufficient funds
from KLI will not constitute a default under the Capital Agreement.
(B) a
Management Services Agreement with IP pursuant to which Utilipoint will provide
management services and provide consultants to assist IP with IP
projects. The services will include, but are not limited
to: (i) assisting in the preparation of annual budgets, (ii)
providing sales, marketing and strategic services, (iii) assisting IP with
complying with reporting requirements under any financing agreements, (iv)
providing legal, human resources, loss prevention and risk management services;
(v) providing receivables collection services, cash management services and
payroll services, (vi) any other service performed or expenses incurred by
UtiliPoint for IP in the ordinary course of business. In addition,
under the Management Service agreement, Utilipoint is authorized to make
payments to creditors of IP on its behalf and to collect receivables on behalf
of IP; provided Utilipoint has assurance that the necessary funds for discharge
of any liability or obligation will be provided by IP.
Management
services will be charged to IP based on the actual expenses incurred by
Utilipoint, and consultants will be charged at the same rate that Utilipoint
charges to subcontract its consultants to third
parties.
Utilipoint
will also pay all salaries and benefits for certain employees of IP who will
also provide services to Utilipoint, which will initially include David Steele
and Peter Shaw. The Management Services Agreement has a two-year
term, and, thereafter, automatically renews for one-year terms. It
may be cancelled by either party on 60 days prior written notice.
(C) an
Agreement to be Bound to the Limited Liability Agreement of IP. The IP LLC
Agreement provides that Net Cash Flow will be distributed as follows: first,
contributed capital will be returned to the members on a pro rata basis (based
on the amount of capital contributed), and, thereafter, Net Cash Flow will be
distributed to the members on a percentage ownership
basis. Utilipoint’s percentage ownership immediately after the
execution of the agreement by Utilipoint will be 60%.
The
Limited Liability Company Agreement further provides for restrictions on the
transfer of Company Interests (only to Permitted Transferees) and provides that
the Members holding a majority of the Company Interests may drag-along the
minority members in the event of a Sale of the Company.
39
(D) a
Consulting Agreement which provides that KLI IP Holding Inc. will provide
consulting services to Utilipoint in connection with the joint business and
marketing efforts of Utilipoint and IP. The agreement has a term of
24 months and may be terminated by either party upon 90 days advance written
notice. In exchange for its services KLI IP Holding Inc. will receive
an option to purchase 850 shares of common stock of Utilipoint, which options
were converted at the closing of the Utilipoint Acquistion into options to
purchase 27,168 shares of common stock of Midas Medici, at an exercise price of
$1.56 per share. The options are exercisable for a term of 5 years
through August 21, 2014 and are fully vested. If KLI IP Holding Inc. terminates
the agreement without cause within its first year, any unexercised options held
KLI IP Holding Inc. will terminate.
(E) a
Revolving Senior Subordinated Debenture which provides that KLI may loan up to
$100,000 to Utilipoint. The debenture has a term of 5 years and pays
interest at a rate of 10% per annum. Accrued interest and unpaid
interest is payable monthly (the parties can agree to mutually defer interest
payments), and the unpaid principal amount is due on the five-year anniversary
of the debenture. The debenture is subordinate to all indebtedness,
liabilities and obligations of Utilipoint to any financial
institution.
(F) a
subscription agreement pursuant to which KLI agreed to purchase up to $100,000
of the common stock of the Company at a per share purchase price of $50.00 per
share for a period of up 2 months through September 1, 2009. KLI did not
purchase any shares under the subscription agreement.
Industry
Background
The
Electrical Power Industry
The
electrical power industry can be divided into four segments: Generation,
Transmission, Distribution, and End-Use Consumption. Generation is the process
of producing electrical energy or the amount of electrical energy produced by
transforming other forms of energy. Transmission refers to the high-voltage,
long-distance transfer of electricity. Distribution refers to medium-voltage,
medium-distance transport from transmission substations to customer meters.
Furthermore, distribution and transmission are commonly referred to together as
the “grid”. End-Use Consumption is the use of electricity by residential,
commercial and industrial customers
Figure 2:
The “traditional electric” power value chain encompassed centralized generation,
high-voltage transmission, medium-voltage distribution, and end use by
industrial, commercial and residential customers.
Substantive
regulation of the utility industry at the federal level began with the passage
of the Public Utility Holding Company Act of 1935. PUHCA regulated vertically
integrated monopolies that were designed to manage the mission critical service
of generating, transmitting and distributing electricity to end users in
predefined service regions. These vertically integrated utilities are
also regulated at the federal level by the Federal Energy Regulatory Commission
and at the state level by the Public Utility Commissions. FERC regulates the
interstate transmission of natural gas, oil and electricity, including wholesale
sales of electricity outside the utility’s predefined service region, while the
PUCs generally regulate the quality of service and rates charged to retail
customers. The rates are designed to recover a PUC determined return
on and of investment as well as other cost of service
expenses.
40
The
benefits of the monopoly nature of the industry have been questioned and
challenged over the past 30 years. The rationale for a deregulated market place
has been driven by various factors, including: (1) a need to reduce end-user
rates by introducing competition among utilities; (2) advances in technologies
used to generate electricity that made it possible to produce electricity more
cost effectively on a smaller scale (making it possible to introduce other
efficient generating sources into the grid); (3) a general view that the
regulatory laws introduced in 1935 were obsolete. FERC and the PUCs have driven
an industry restructuring meant to enable and encourage the development of
more efficient generation sources and to permit increased competition in order
to reduce prices. Restructuring throughout North America is fostering a
competitive environment in the industry. The most fundamental change to the
electrical energy business has been separating the generating from the
distribution functions and breaking up the vertically integrated utilities. In
these restructured markets, utility companies continue to operate and maintain
the local distribution lines, delivering electricity to consumers at regulated
prices as before, but power generators and electricity suppliers are now allowed
to openly compete to sell their electricity at market prices. Grid operators,
comprised of independent system operators, referred to as ISOs, or regional
transmission organizations, referred to as RTOs, have been formed in these
restructured markets to take control of the operation of the power systems,
including transmission lines and energy trading, coordinating the wholesale of
electricity, and establishing fair and efficient markets. These grid operators
are responsible for maintaining federal reliability standards designed to avoid
service disruptions.
Under a
deregulated environment all utilities owning transmission lines are required to
allow access to other generating sources under the same terms as the utility
itself. Independent system operators, referred to as ISOs, or regional
transmission organizations, referred to as RTOs, have been formed in these
restructured markets to take control of the operation of the regional power
system, coordinate the supply of electricity, and establish fair and efficient
markets. ISOs and RTOs are collectively referred to as grid operators. This has
facilitated the development of a wholesale market for electricity as electricity
generated in one service region can be transmitted and sold to another
non-contiguous service region promoting competition and choice for end-users. On
the other hand, the deregulated market structure has also introduced challenges
such as congestion of the grid as various power producers seek to transmit and
sell power in other regions compromising the reliability of the grid. To address
this, the National Electric Reliability Council has the responsibility,
under the direction of FERC, to monitor the grid operators in order to maintain
reliability standards designed to avoid service disruptions.
As the
demand for electricity has soared, grid operators and utilities in both
restructured markets and in traditional regulated markets are challenged to
provide reliably electricity during periods of peak demand. Typically, higher
consumption during peak demand is accommodated by building more plants, which
exacerbates the carbon footprint, or buying wholesale power from other regions,
which leads to congestion of the grid thereby compromising reliability of the
grid. Recently, Government legislation, such as the Energy Policy Act of 2005,
The Clean Air Act of 2005, the Energy Independence and Security Act of 2007, and
the American Recovery and Reinvestment Act of 2009 have been promulgated to
address national and global issues pertaining to energy security, energy
independence and environmental concerns. The key structural changes in the
utility industry and recent legislations have all laid the groundwork for the
implementation of the Smart Grid by:
·
|
Expanding
the sources of generation to include more efficient and environmentally
friendly resources such solar and
wind;
|
·
|
Opening access
to the transmission and distribution system to facilitate wholesale
trading of electricity between regions to introduce competition;
and
|
·
|
Providing
consumers with choices of where to purchase power further promoting
competition.
|
Once
implemented, we believe the Smart Grid will address the current constraints of
the existing grid and make it function more efficiently, by:
·
|
Improving
reliability through the enhanced monitoring of the grid using
technology-based tools such as digital electronics and advanced controls
to avoid power outages;
|
·
|
Maintaining
power affordability by facilitating competition and energy efficiency
through reduced usage;
|
·
|
Reinforcing
U.S. global competitiveness by promoting energy independence and energy
security;
|
·
|
Accommodating
renewable energy sources on the
grid;
|
·
|
Helping
reduce the carbon footprint by decreasing consumption and thus reducing
the need to build new power plants;
|
·
|
Increasing
effective supply by reducing blackouts and brownouts through data-driven
grid management, optimizing capacity allocation and demand response and
management
|
·
|
Facilitating
cost savings for utilities by automating tasks such as meter reading or
remote grid monitoring; and
|
·
|
Introducing
efficiencies yet to be envisioned driven by further advances to the Smart
Grid.
|
41
Recent
acceleration in demand for power on a global scale
According
to the Energy Information Administration (EIA) Annual Energy Outlook 2008
(updated for the provisions of the American Recovery and Reinvestment Act),
about 218 gigawatts (“GW”) of new generating capacity will be needed from 2007
to 2030, out of which only 47 GW are planned. Worldwide, according to EIA, net
electricity generation increases by 77 percent, from 18.0 trillion kilowatt
hours in 2006 to 31.8 trillion kilowatt hours in 2030. To put that growth in
concrete terms, the world will need the equivalent of 27,600 additional 500 MW
power plants. A 500 MW power plant lights 600,000 homes. Electricity is
projected to supply an increasing share of the world’s total energy demand and
is the fastest-growing form of end-use energy worldwide in the mid-term. Growth
in demand for electricity continues to outpace growth in total energy use
throughout the projection:
Table 1:
The table above demonstrates the world’s projected and growing dependency on
power electricity. Terawatt is defined as a measure of electricity
production or consumption equal to one trillion watts.
Management
believes the challenges in meeting this growing demand are exacerbated by
environmental concerns and stringent regulatory environments which make it
increasingly difficult to find suitable sites, obtain permits, and construct
generation, transmission and distribution facilities where they are needed most,
often in densely populated areas. Management believes that the solution to these
issues lie in the more efficient use of the current electric grid driven by the
Smart Grid.
The
Cost of Under-Investment and Grid Deterioration
According
to a Smart Grid study prepared by Litos Strategic Communication for the U.S.
Department of Energy, since 1982, growth in peak demand for electricity has
exceeded transmission growth by almost 25% every year. Yet spending on research
and development is among the lowest among all industries.2
Figure 3:
R&D as a % Revenue
Source:
“The Smart Grid: An Introduction”, Litos Strategic Communication for the U.S.
Department of Energy
__________________
2 “The
Smart Grid: An Introduction”, Litos Strategic Communication for the U.S.
Department of Energy
42
According
to the International Energy Agency’s "World Energy Outlook 2008", electric power
infrastructure will require cumulative worldwide investment of over $13.6
trillion (in 2007 dollars) in 2007-2030, or 52% of the total infrastructure
needed. On a national level, and according to the Brattle Group, investment
totaling approximately $1.5 trillion will be required between 2010 and 2030 to
pay for grid infrastructure in the United States.
The
Department of Energy has estimated that while today’s electricity system is
99.97 percent reliable, it still allows for power outages and interruptions that
cost Americans at least $150 billion each year.
An
Evolving Regulatory Framework
The
energy regulatory environment in the US continues to be driven by a need to
utilize the grid more efficiently, to encourage the use of renewables, promote
energy efficiency and reduce the carbon footprint. In addition to historical
legislation already discussed, new legislation is anticipated that will continue
to shape the industry in favor of adopting the Smart Grid. For example, recently
under the American Recovery and Reinvestment Act of 2009 ("Recovery Act") the
Department of Energy announced on June 25, 2009 that it is soliciting
applications for $3.9 billion in grants to support efforts to modernize the
electric grid, allowing for greater integration of renewable energy sources
while increasing the reliability, efficiency and security of the nation’s
transmission and distribution system.
Figure 4:
Renewables Portfolio Standards
Source:
DSIRE (www.dsire.org), March
2007
Additionally,
state Renewables Portfolio Standards programs to set targets for renewables
adoption by different states continue to play an important role in encouraging
renewables, growing in number, while existing programs are modified with more
stringent targets. In total, 28 states and the District of Columbia now have
mandatory Renewable Portfolio Standards "RPS" programs, and at least 4
other States have voluntary renewable energy programs.
Another
critical set of regulations influencing the Smart Grid landscape are the
environmental policies (as recently demonstrated with the Clean Air Act of 2005
and the American Clean Energy and Security Act of 2009 (due to be discussed and
voted on in the Senate). With evidence mounting that sea levels are rising and
climate volatility is increasing at a rapid pace, reducing or offsetting
greenhouse gas emissions is becoming a critical element of energy industry
strategy, resulting in the development of additional regulations for curbing
emissions that significantly affect energy industry operations. Entirely new
markets will be created in response to problems associated with emissions, such
as carbon credits emission trading.
State
(and potentially federal) Renewable Portfolio Standards "RPS" and likely federal
carbon legislation are helping to drive the demand and economics for renewable
development, which subsequently requires significant transmission
investment. There is a need to connect remotely located renewable
resources, particularly wind, to the grid and provide such power access to
high-power price and/or renewable constrained load centers.
43
The need
for significant investment in transmission to tap the nation’s wind energy
potential and improved the overall efficiency of the grid is highlighted in the
favorable treatment of renewable energy and the Smart Grid in Recovery Act. The
bill provides $16.8 billion in direct spending for renewable energy and energy
efficiency programs over the next ten years. The bill also provides $11 billion
to modernize the nation's electricity grid with smart grid technology. This
includes $4.5 billion for the DOE Office of Electricity Delivery and Energy
Reliability for activities to modernize the nation's electrical grid, integrate
demand response equipment and implement smart grid technologies. In addition,
$6.5 billion is provided for two federal power marketing administrations to
assist with financing the construction, acquisition, and replacement of their
transmission systems.
Building
a Smarter Grid
For
roughly a century, the developed world has delivered electric power using the
same basic four-step approach described in the previous section and depicted in
Figure 1. The elements of this traditional grid critical to its
operations have included analog electromechanical devices used to capture and
store data; one-way communication system to facilitate communication between the
utility and the customer and by human labor to monitor and control the grid. In
much the same way that technological advances in microprocessors, power
electronics and the internet revolutionized the telecommunications industry as
it transitioned from analog to digital, dramatically improving our communication
capabilities, these similar technological advances are continuously transforming
the traditional grid into a “Smarter Grid” significantly improving its
capabilities. The heart of an intelligently managed grid, in our
view, is the smart meter. While automated meter reading originated as a means
for utilities to save money and speed up the billing process, management
believes metering technology is the a key building block to the Smart Grid. The
smart meter generates data to facilitate communication between the end-user
customer and the utility.
Figure 5:
Illustrates how the current grid is evolving into a smarter grid capable of
functioning more efficiently
Source:
“The Electricity Economy, New Opportunities from the Transformation of the
Electric Power Sector”, Global Environment Fund, August 2008.
With the
aid of concepts proven in telecommunications, computing and the internet, the
“smarter grid” uses digital electronic systems and devices to capture, store and
analyze data into useful information; advanced control systems capable of
automating certain functions of the grid; and communications platforms capable
of two way communications among the various components of the
grid. As a result, for example, a system operator will be able to
sense, predict, diagnose and remotely mitigate issues in the grid that might
previously have caused an outage or blackout, thereby increasing reliability of
the grid. In another instance, the “smarter grid” might introduce a renewable
source of generation in response to higher demand by a customer in real time or
re-route power in a congested part of the grid to avoid a blackout.
44
Figure 6:
The modernized grid lies at the intersection of telecommunications, computing
and internet technologies.
Source: “The
Emerging Smart Grid, Investment and Entrepreneurial Potential in the Electric
Power Grid of the Future”, Global Environment Fund, October 2005.
In
particular, Advanced Metering Infrastructure Meter Data Management, an
important capability of the Smart Grid, is the technology platform or
architecture that enables the communication and interoperability of the various
devices and participants of the Smart Grid to collect, analyze, transfer and
interpret data and convert it into useful information. AMI allows utilities the
ability to offer time-of-use rates, critical peak pricing, and peak load
reduction, and to perform flexible demand response. To facilitate these
capabilities, data management and warehousing capabilities and hardware and
software platforms are critical for a Smart Grid infrastructure. Growth in these
services is a function of smart meter penetration. As indicated in Figure 7,
smart meter penetration in the USA was 4.7% in 2008, calculated as a percentage
of announced and contracted smart meter replacements of total existing electric
meters, and is anticipated to grow at a compounded annual growth rate of 129.0%
through 2016 (see Figure 6).
Figure 7:
Projected Smart Meter Penetration
Source:
|
1)
Appendix F, Utility AMI Implementation Projection, Table F-1, 2007 FERC
Demand Response Report available at
http://www.ferc.gov/legal/staff-reports/09-07-demand-rsponse.pdf
2) Assessment
of Demand Response & Advanced Metering, FERC Staff Report, December
2008
|
45
Figure: 8
United States 2008 penetration of advanced metering
Source:
2008 FERC Survey
From a
macro perspective, AMI/MDM technology is part of the overall umbrella of
demand-side management programs, and supports the build out of a Smart
Grid, whereby utilities can communicate with customers (households as well as
commercial enterprises) in real time via their network on the power grid.
Potential smart-grid applications include, but are not nearly limited to,
thermal management, such as food storage (refrigerators and freezers) and
heating, ventilating, and air conditioning systems, automated lighting system
management, the operation of home appliances, and the charging of
electronics. On a very broad level, the efficient and economic dispatch of
increasingly expensive resources and the reduction of environmental emissions
are two very significant societal and environmental benefits of AMI/MDM and
smart meters.
Overall,
key elements of the Smart Grid made possible by technological advances include
ability to introduce clean energy sources into the grid; to transmit, store and
analyze data from the grid; to communicate information between all segments of
the grid; to automate certain functions of the grid using advanced control
systems and devices; and to reduce the carbon footprint using various products,
services and processes. A majority of the products and services that are used to
deploy Smart Grid solutions can be categorized under the following: engineering
solutions, data warehousing and information technology solutions, consulting and
advisory services. Within the electric power industry, these elements
drive most product and service offerings of companies that participate in the
Smart Grid sector, such as our company.
It is
estimated by Litos Strategic Communication for the U.S. Department of Energy
that Smart Grid enhancements will ease congestion and increase utilization (of
full capacity), sending 50% to 300% more electricity through existing energy
corridors.
The
Market Opportunity
A
confluence of various factors including; (1) rising energy demand, (2)
regulatory, environmental, construction cost constraints on upgrading the
current electric grid and building new power plants, and (3) technological
advances in telecommunications, computing and internet technology, have resulted
in the Smart Grid presenting a unique and cost effective solution to meeting
rising energy demands while reducing the carbon footprint. We believe our
Company is uniquely positioned and qualified to participate in the markets which
will serve the clean energy and Smart Grid sector. Our current consulting
product/services offerings, our management team’s experience and expertise in
the sector and our extensive knowledge of the Smart Grid opportunities uniquely
positions us to expand our product offerings into engineering services, data and
information technology, and other areas relevant to the clean energy and Smart
Grid sector.
Competition
We
operate in a highly competitive and fragmented marketplace and compete against a
number of firms in each of our key markets. A substantial number of
these firms have significantly greater infrastructure and financial resources
than our company. We divide our competitive universe into three segments: (1)
research and consulting services; (2) technology services and solutions; and (3)
engineering services and solutions.
Some of
our principal competitors in the consulting universe include mid-size, specialty
consulting firms such as Navigant Consulting, Inc., FTI Consulting, Inc., and
ICF International, Inc – each of which have specific utility-focused consulting
practices. In addition, within our key energy and power markets, we have
numerous smaller competitors, many of which have narrower service offerings and
serve niche markets.
46
Within
the technology services and solutions segment, we will compete against firms
such as American Superconductor Corp., Esco Technologies Inc., Badger Meter,
Inc., Echelon Corp., EnerNOC, Inc., and smaller vendors such as Orion Energy
Systems, Inc. and Composite Technology Corp. Each of the aforementioned is
providing utilities with clean and intelligent energy technology solutions.
Firms such as Comverge Inc., Itron Inc., Echelon Corp., Neteeza Corp., Teradata
Corp., and Digi International Inc. are in the market to primarily provide
enterprise-class analytic tools and services. Other companies such as Quanta
Services provide engineering services to enable the Smart
Grid.
Finally,
some of our competitors such as IBM Corp. and Electronic Data Systems, an
Hewlett- Packard company are significantly larger than us and have greater
access to resources and stronger brand recognition than we do. On some of our
past projects, competitors including IBM and EDS, have also been our customers.
We
consider the principal competitive factors in our market to be client
relationships, proprietary products or data, reputation and past performance of
the firm, client references, technical knowledge and industry expertise of
employees, proprietary products or data, quality of services and solutions,
scope of service offerings and pricing.
Employees
As
of November 24, 2009, we have 4 full time employees who work in our
corporate headquarters. Utilipoint directly employs 19 full time staff members,
including a professional staff of 16, and an administrative staff of 3, each of
whom support our seven practice areas.
DESCRIPTION
OF PROPERTIES
Our
subsidiary, Utilipoint’s corporate headquarters is located in Albuquerque, New
Mexico in approximately 2,400 square feet of office space under a lease that
expires in January 2010 at a cost of $3,503 per month. Additionally,
Utilipoint occupies satellite offices in Tulsa, Oklahoma and Houston, Texas in
approximately 860 and 200 square feet of office space respectively under leases
that expire in December 2009 and September 2009 respectively at costs of $859
per month and $1,023 per month respectively. Utilipoint intends to
extend each of the foregoing leases. Utilipoint’s European
headquarters is located in Brno, Czech Republic in approximately 1,000 square
feet of office space. We believe that our current premises are sufficient to
handle our activities for the near future.
LEGAL
PROCEEDINGS
Presently,
there are no material pending legal proceedings to which the Company is a party
or as to which any of the Company’s property is subject, and no such proceedings
are known to the Company to be threatened or contemplated against
it.
MARKET
FOR COMMON STOCK
AND
RELATED SHAREHOLDER MATTERS
OTC
Bulletin Board Considerations
There is
no public market for our securities. On or before the date of this prospectus we
intend to have our common stock quoted for trading on the FINRA OTC Bulletin
Board. There can be no assurance that our common stock will ever be quoted on a
quotation service or a stock exchange or that any market for our securities will
develop.
Holders
As of
November 24, 2009, the Company had 23 stockholders of
record.
Transfer
Agent
The
Company's registrar and transfer agent is Continental Stock Transfer & Trust
Company.
Dividend
Policy
We
have never declared or paid any cash dividends on its common stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
47
Securities
Authorized for Issuance under Equity Compensation Plans
On July
27, 2009, the Board approved the Midas Medici Group Holdings, Inc. Stock Award
and Incentive Plan (the “MMGH Plan”). The purpose of the MMGH Plan is to give us
a competitive advantage in attracting, retaining, and motivating officers,
employees, directors, and consultants and to provide us with an incentive
plan that gives officers, employees, directors, and consultants financial
incentives directly linked to shareholder value.
The
maximum number of shares that may be issued under the Plan is 650,000. However
for the period commencing January 1, 2010, the maximum number of shares issuable
under the Plan shall be equal to 20% of the issued and outstanding shares of the
Company’s common stock on a fully diluted basis but shall not be less than
650,000. Notwithstanding the foregoing, for a period of one year from the
date of this prospectus, the total number of options issued under the Plan shall
be limited to 15%. Pursuant to the Plan, incentive stock options or
non-qualified options to purchase shares of common stock may be
issued. The plan may be administered by our board of directors or by
a committee to which administration of the Plan, or part of the Plan, may be
delegated by our board of directors. Options granted under the Plan are not
generally transferable by the optionee except by will, the laws of descent and
distribution or pursuant to a qualified domestic relations order, and are
exercisable during the lifetime of the optionee only by such optionee. Options
granted under the plan vest in such increments as is determined by our board of
directors or designated committee. To the extent that options are vested, they
must be exercised within a maximum of thirty days of the end of the optionee's
status as an employee, director or consultant, or within a maximum of 12 months
after such optionee's termination or by death or disability, but in no event
later than the expiration of the option term. The exercise price of all stock
options granted under the plan will be determined by our board of directors or
designated committee. With respect to any participant who owns stock possessing
more than 10% of the voting power of all classes of our outstanding capital
stock, the exercise price of any incentive stock option granted must equal at
least 110% of the fair market value on the grant date.
As of November 24, 2009, options to purchase an
aggregate of 465,097 shares of common stock of the Company were granted under
the MMGH Plan with an average price of $1.99. The Company took a compensation
charge of $150.913 to recognize the opportunity cost of the 5,400 Utilipoint
stock options valued at a fair market price of $50.00. The compensation charge
is reflected as an adjustment in the pro forma statement for the year ended
December 31, 2008.
The
following table shows information with respect to each equity compensation plan
under which our common stock is authorized for issuance at December 31,
2008:
Plan
category
|
Number
of securities
to
be issued upon
exercise
of
outstanding
options,
warrants
and rights
|
Weighted
average
exercise
price of
outstanding
options,
warrants
and rights
|
Number
of securities
remaining
available for future issuance under equity compensation plans (excluding
securities reflected in column (a)
|
(a)
|
(b)
|
(c)
|
|
Equity
compensation plans approved by security holders
|
-0-
|
-0-
|
-0-
|
Equity
compensation plans not approved by security holders
|
-0-
|
-0-
|
-0-
|
Total
|
-0-
|
-0-
|
-0-
|
48
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The
following table sets forth the names and ages of our directors and executive
officers, and their positions with us:
|
|||
Name
|
Age
|
Position
|
|
Nana
Baffour
|
37
|
CEO,
Co-Executive Chairman, Director and CEO of Utilipoint
|
|
Johnson
M. Kachidza
|
43
|
CFO,
President, Co-Executive Chairman and Director
|
|
Frank
Asante-Kissi
|
38
|
Vice-President
and Chief Administrative Officer
|
|
Ken
Globerman
|
40
|
Senior
Vice-President
|
|
David
Steele
|
54
|
President
of Utilipoint
|
|
Stephen
Schweich
|
50
|
Director
|
|
Frank Henson | 38 |
Director
|
Directors
and Executive Officers
Nana
Baffour, CEO, Co-Executive Chairman and Director
Mr.
Baffour, 37, was appointed to serve as our President and a Director in May 2009.
On July 16, 2009, Mr. Baffour was appointed as our CEO and Co-Executive
Chairman. Since 2004, Mr. Baffour has been a Managing Principal and Co-Founder
of Knox Lawrence International, LLC (“KLI”) an energy services investment
company that has completed over $600 million in acquisitions to date. He is
currently Executive Chairman of Consonus Technologies, Inc. a technology company
he co-founded in 2005 and grew from start-up to over $100 million in revenues.
He has led acquisitions, integrations, and held operating roles including
executive chairman, president, and CEO for different energy services companies
during his tenure at KLI. Mr. Baffour currently serves as Board Member of
Dearborn Mid-West Conveyor Co. and Utilipoint International as well as Chair of
the Advisory Board of the University of Utah Opportunity Scholars
Program.
From 2000
to 2004, Mr. Baffour was an investment banker at Credit Suisse First Boston in
Europe and the US, where he was directly involved in billions of dollars of
M&A and financing transactions for utilities, including clean energy
companies and did the first capital markets wind financing transaction. Mr.
Baffour started his career in finance as a Credit Analyst for CIT Group from
1996 to 1998 and was an equity portfolio analyst at Standard and Poor’s from
1998 to 2000. Mr. Baffour received his MBA from New York University’s Stern
School of Business, a Master of Science in Economics from University of North
Carolina at Charlotte and a Bachelor of Arts Degree in Economics from Lawrence
University. Mr. Baffour is a Chartered Financial
Analyst.
Johnson
Kachidza, Chief Financial Officer, President, Co-Executive Chairman, Secretary
and Director
Mr.
Kachidza, 43, was appointed to serve as our Secretary and a Director in May
2009. On July 16, 2009, Mr. Kachidza was appointed as President and Co-Executive
Chairman. Effective November 2, 2009, Mr. Kachidza was appointed as our
Chief Financial Officer. Since 2002, Mr. Kachidza has been a Managing Principal
and Co-Founder of Knox Lawrence International, LLC (“KLI”), an energy services
investment company that has completed over $600 million in acquisitions to date.
He is currently Executive Chairman of Dearborn Midwest Conveyor Co., Inc., a
provider of pollution control systems to the power and automotive industries.
During his tenure at KLI, Mr. Kachidza co-founded Consonus Technologies, Inc. in
2005 and has led acquisitions, integrations, and held operating positions,
including Executive Chairman, President, and CEO for different energy services
companies. Mr. Kachidza currently serves as a board member of Consonus
Technologies, Utilipoint International and Transactis, Inc. He is also on the
Board of Directors of Shared Interest, a non-profit organization focused on
micro-lending.
From 1997
to 2001, Mr. Kachidza was an investment banker at Merrill Lynch and JP Morgan
Chase, where he was directly involved in billions of dollars of M&A and debt
and equity financing transactions in the energy sector. Mr. Kachidza began his
career as a project engineer at General Electric from 1991 to 1995 and holds US
patent #5686795 for an innovative fluorescent lamp design. Mr. Kachidza received
his MBA from University of Chicago Booth School of Business, a Master of Science
in Materials Engineering from University of Illinois at Urbana-Champaign and a
Bachelor of Arts Degree in Chemistry from Knox College.
49
Frank
Asante-Kissi, Chief Administrative Officer
Mr.
Asante-Kissi, was appointed to serve as our Vice-President in May 2009. In July
2009 Mr. Asante-Kissi was appointed as Chief Administrative Officer. Since March
2008, Mr. Asante-Kissi has served as Chief Operating Officer and as a consultant
since March 2003 of Knox Lawrence International, an energy services investment
company that has completed over $600 million in acquisitions to date since March
2008.
Mr.
Asante-Kissi has over 10 years experience in business performance management,
process improvement and operational efficiency. Mr. Asante-Kissi was
Senior Business Analyst at Citigroup from 2002 through 2008. While at Citigroup,
Mr. Asante-Kissi led several process improvement and performance management
initiatives including industry benchmarking. Mr. Asante-Kissi began
his career as a software developer prior to joining Citigroup.
Mr.
Asante-Kissi received his MBA from Rensselaer Polytechnic Institute’s Lally
School of Management and Technology (RPI) and a Bachelor of Arts Degree in
Mathematics and Computer Science from Lawrence
University.
Ken
Globerman, Senior Vice-President
Mr.
Globerman was appointed to serve as our Senior Vice President in July
2009. Since 2003, Mr. Globerman has served as Vice President of Knox
Lawrence International, an energy services investment company that has completed
over $600 million in acquisitions to date. Mr. Globerman serves as a Board
observer for Consonus Technologies, Dearborn Mid-West Conveyor Co.,Utilipoint
International and Transactis, Inc., working with executive management to oversee
business operations, develop business strategy, execute external financings and
mergers & acquisitions. Mr. Globerman also co-founded and serves
as Executive Chairman of KLI’s Africa Business Plan Competition, an annual MBA
focused competition geared towards encouraging entrepreneurship to support
development in Africa. Prior to joining KLI, Mr. Globerman spent more
than 6 years at WPP’s media investment firm, MediaEdge (former division of Young
& Rubicam Advertising). As Associate Media Research & Planning Director
for MediaEdge, he was responsible for managing Fortune 500 media client
relationships and business development in the consumer packaged goods, media and
pharmaceutical sectors. He also served as an integral member of the firm’s new
business development team and actively participated in the formation of the
firm’s online media planning division, DigitalEdge. Mr. Globerman
received a MBA in Finance and Management from New York University’s Stern School
of Business, where he was elected Stern Scholar, Research Fellow and served as
Teaching Assistant to Professor Aswath Damodaran of Stern’s Finance
Department. Mr. Globerman also holds a BS in Applied Mathematics /
Operations Research from Carnegie Mellon University.
David
Steele – President of Utilipoint
Effective
August 12, 2009, Dave Steele was appointed President of Utilipoint. Mr. Steele
has served as Senior Managing Director and Chief Operation Officer of UiliPoint
since May 2009. Mr. Steele has extensive executive experience in both
growth and turnaround assignments. With over 30 years of experience in the
energy space, he has held broad officer roles in both public utility and service
organizations. His international experience includes Executive Vice President
& General Manager; North America for Vertex Data Science, a UK based
business process outsourcing company from 2007 – 2008. In this role
he managed over 1200 employees in the US and Canada leading a growth and
turnaround effort funded by a New York based private-equity consortium. Steele
led a $45M direct cost-out initiative, developed and led the execution of the
first comprehensive sales & marketing plan for North America, and
established new key relationships with industry partners and
clients. Prior to this, he was Vice Chairman and CEO of IEI Financial
Services from 2004 – 2007. In this role, he led a 40% per annum growth for three
consecutive years, and a full operational turnaround while becoming the 27th
J.D. Power and Associates certified Customer Operations Center in the US, and
the first business process outsourcer to be certified.
Mr.
Steele is an award winning faculty member at Indiana University’s Kelley School
of Business where he has taught for 12 years. Currently, he is lecturing a
course in entrepreneurship. Mr. Steele holds a B.S. in Business
Economics and Public Policy from Indiana University.
Stephen
Schweich – Director
Stephen
Schweich was appointed to our Board of Directors in July 2009. Mr. Schweich is a
Managing Director of Mooreland Partners, an investment banking advisory firm
with offices in London, New York and San Francisco. In 1996, Mr. Schweich
established the European division of the San Francisco-based investment
bank Robertson
Stephens International (RSIL). Mr. Schweich
served as CEO of RSIL where he was responsible for the firm’s investment banking
and equity sales & trading operations with offices in London, Munich and Tel
Aviv. During the 1996-2002 period, Stephen was involved in over 40 equity
capital markets transactions in Europe. During 1998-2001, Mr. Schweich served on
the Board of Directors of EASDAQ, the pan-European stock exchange based in
Brussels. Prior to 1996, Mr. Schweich was a sell-side equity research analyst
for over 11 years. From 1987 to 1993, Mr. Schweich was a Senior Analyst with
Alex Brown & Sons in Baltimore, where he
founded the firm’s environmental practice, and became one of the leading waste
services and pollution control technology analysts in the US. Mr. Schweich
covered a broad range of related sectors including: hazardous & solid waste
services, clean energy (geothermal, solar and wind power), water &
wastewater treatment, site remediation (asbestos, groundwater, soil), air
pollution control, recycling (metal, plastic, solid waste), and industrial
services.
Mr.
Schweich began his business career in New York with Booz Allen & Hamilton,
the management consulting firm.
Mr.
Schweich is currently a Director of Credo Capital LLC, a US equity fund
management company, and an Advisory Board member at Cypak AB (Sweden) and Global
Bay Mobile Technologies (US). Mr. Schweich is a
graduate of Amherst College (1981) and the Harvard
Business School (1985), and received a
CEP degree from L’Institut d’Etudes Politiques de Paris (1980).
Frank
Henson – Director
Frank
Henson was appointed to our Board of Directors in November 2009. Mr. Henson is a
Managing Director in the Institutional Sales Group at Cohen & Company
Securities LLC, an institutional broker-dealer focused on debt securities. Prior
to joining Cohen & Company Securities LLC, Mr. Henson held a position of
Managing Director in the Corporate Bond Research Department at Bear Stearns,
where he covered retail and consumer product companies from 2005 to 2008. In
2006 and 2007, Mr. Henson was recognized by Institutional Investor for his
research on retail companies. Prior to working at Bear Stearns, Mr.
Henson worked at Morgan Stanley with roles in the Corporate Bond Research and
Investment Banking Departments. From 2001 to 2005, Mr. Henson worked in Morgan
Stanley’s Corporate Bond Research Department, covering retail and consumer
product companies and from 1995 to 1998, Mr. Henson worked in Morgan Stanley’s
Investment Banking Department, implementing numerous initial and secondary
public equity offerings in New York, as well as M&A transactions in
Southeast Asia.
Mr.
Henson holds an MBA from Columbia Business School and a Bachelor of Arts Degree
from Rutgers College.
50
Other
Key Employees
Robert
C. Bellemare, P.E. – Chief Operating Officer of Utilipoint
Robert
Bellemare joined Utilipoint in 2002. With 20 years of experience in the
utility business, Mr. Bellemare advises clients on asset valuation, financial
modeling, strategic planning, public issues management, and pricing products and
solutions. He previously worked for Fortune 500 utilities in a variety of
capacities including managing director of energy services, director of market
research, wholesale trading and operations, research and development,
distribution engineering and power plant engineering. Mr. Bellemare was co-lead
of the unregulated business merger integration team for the American Electric
Power South West Corporation merger, which formed the largest utility of its
time. Mr. Bellemare is frequently quoted in the press and makes public
presentations on energy issues, with recent forums including CNBC, the World
Energy Council, Energy Risk Mutual and industry regulators. Mr. Bellemare is a
registered professional engineer and holds a M.S. in Electric Power Engineering
from the Georgia Institute of Technology. Mr. Bellemare also holds a BSEE with
Business minor from Kettering University.
Peter
Shaw –Managing Director of the Intelligent Project, LLC
Peter
Shaw has served as Managing Director of IP since May 2009. Mr. Shaw has 20 years
of experience advising energy companies on integrated resource planning, new
product development and customer strategy. Prior to Utilipoint, Mr. Shaw served
as Director at Navigant Consulting from 1998 to March, 2009. Mr. Shaw
has assisted numerous companies in developing business plans and launching new
lines of business selling energy commodities, energy services and related
outsource solutions. Mr. Shaw is a recognized thought leader in the development
of utility “Smart Grid” infrastructures, and leads two industry consortiums
focused on integrating energy efficiency, renewable and distributed energy
resources into utility marketing and customer management operations. Mr. Shaw’s
Board work relating to green energy and alternative fuels includes The Energy
Cooperative Association of Pennsylvania and the Sustainable Development Fund.
Mr. Shaw holds a M.S. in Energy Policy and a Certificate in Economic Development
from the University of Pennsylvania. Mr. Shaw also holds a B.A in International
Studies from the Bucknell University.
Larry
Robinson - Managing Director and Publisher of Utilipoint
Larry
Robinson joined UtiliPoint in November 2009. Mr. Robinson has
responsibility for all external communication channels, product and service
positioning, research direction, thought leadership and knowledge management, as
well as editor of publications. He has over 20 years experience in the
marketing/ publishing industry including consumer and business publishing
with steady progression of senior level marketing, communication and
publishing roles. Mr. Robinson holds a BS in Journalism from the University of
Colorado.
Gary
M. Vasey, Ph.D. – Managing Director, Europe & Commodity Point
Dr. Gary
M. Vasey has been with Utilipoint since 2003 when Utilipoint acquired VasMark
where Dr. Vasey served as President. VasMark Group offered a unique combination
of marketing and analyst services to energy trading vendors and was viewed as
the leader in understanding that software market. Currently Dr. Vasey manages
Utilipoint's European practice from our office in the Czech Republic and also
heads up Utilipoint’s CommodityPoint Division. CommodityPoint is the leading
provider of analyst services around commodity trading and risk management and
other technologies providing a range of services to end users, software vendors,
agencies and consulting firms. Dr. Vasey has over 24-years experience in the
energy and utilities industry which has included senior roles at Cap Gemini
Sogeti, Sybase, Inc., TransEnergy Management and BP. Dr. Vasey is a noted expert
on the energy trading, transaction and risk management software industry. Gary
holds a B.Sc. (Hons.) degree in Geological Sciences from the University of Aston
in Birmingham, England and a Ph.D. in Geology from the University of
Strathclyde, Scotland.
51
Senior
Advisor
Spencer Abraham
– Senior Advisor
Spencer
Abraham was appointed as our senior advisor in November 2009. Mr. Abraham is the
former United States Secretary of Energy having been appointed by President Bush
as the tenth and longest-serving Energy Secretary in U.S. history. As Secretary,
he led a federal department with a $23 billion budget and over 100,000 federal
and contractor employees. Since
September 2005, he has been chairman and chief executive officer of The Abraham
Group LLC, an international strategic consulting firm based in Washington
D.C. In addition, he serves as non-executive chairman of AREVA, Inc.
the North American subsidiary of the French-owned nuclear energy company, and on
the Board of Directors of Occidental Petroleum (NYSE:OXY). Prior
to being Secretary of Energy, Spencer Abraham served as a U.S. Senator from
Michigan for six years. In the Senate, he was a member of the Senate
Commerce, Judiciary and Budget Committees and served as chairman of the Senate
Immigration Subcommittee and the Senate Commerce Subcommittee on
Manufacturing
and Competitiveness.
Secretary
Abraham is a graduate of Michigan State University and Harvard Law
School.
Involvement
in Certain Legal Proceedings
To our
knowledge, during the past five years, none of our directors, executive
officers, promoters, control persons, or nominees has been:
·
|
the
subject of any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that
time;
|
·
|
convicted
in a criminal proceeding or is subject to a pending criminal proceeding
(excluding traffic violations and other minor
offenses);
|
·
|
subject
to any order, judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities;
or
|
·
|
found
by a court of competent jurisdiction (in a civil action), the Commission
or the Commodity Futures Trading Commission to have violated a federal or
state securities or commodities
law.
|
Code
of Business Conduct and Ethics
We have
adopted a Code of Business Conduct and Ethics to provide guiding principles to
all of our employees, including our principal executive officer, principal
financial officer and persons performing similar functions. Our Code of Business
Conduct and Ethics does not cover every issue that may arise, but it sets out
basic principles to guide our employees and provides that all of our employees
must conduct themselves accordingly and seek to avoid even the appearance of
improper behavior. Any employee who violates our Code of Business Conduct and
Ethics will be subject to disciplinary action, up to and including termination
of his or her employment. The Company will provide a copy of the Code
of Business Conduct and Ethics to any person , without charge, upon request to
Frank Asante-Kissi, Chief Administrative Officer, Midas Medici Group Holdings,
Inc., 445 Park Avenue, 20th
Floor, New York, NY 10022.
Director
Compensation
All
directors are reimbursed for their reasonable out-of-pocket expenses incurred in
connection with their duties to us. Currently, no compensation is paid to our
directors for services rendered to us as directors. However, at the closing of
the merger, Stephen Schweich, a director, was awarded options to purchase 10,000
shares of the Company’s common stock at an exercise price of $6.00 per
share.
52
EXECUTIVE
COMPENSATION
The table
below sets forth, for the last two fiscal years, the compensation earned by each
person acting as our Principal Executive Officer, Principal Financial Officer
and our other most highly compensated executive officers whose total annual
compensation exceeded $100,000 (together, the “Named Executive Officers”). None
of our Named Executive Officers received annual compensation in excess of
$100,000 during the last two fiscal years.
Summary
compensation table
Name
and principal position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation (#)
|
Non-Qualified
Deferred Compensation Earnings ($)
|
All
Other Compensation ($)
|
Total
($)
|
||
Nana
Baffour
|
2008
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
||
CEO
and Co-Executive Chairman (1)
|
2007
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
||
Johnson Kachidza
|
2008
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
||
CFO,
President and Co-Executive Chairman (2)
|
2007
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
||
(1)
Effective May 15, 2009, Mr. Baffour was appointed as President. Subsequently on
July 16, 2009, Mr. Baffour was appointed CEO, and Co-Executive
Chairman
(2)
Effective May 15, 2009, Mr. Kachidza was appointed as Secretary. Subsequently on
July 16, 2009, Mr. Kachidza was appointed President and Co-Executive Chairman.
In
addition, on November 2, 2009, Mr. Kachidza was appointed as Chief Financial
Officer.
Employment
Agreements
Effective
July 16, 2009, we entered into employment agreements with Nana Baffour and
Johnson Kachidza which agreements contain the same terms and provisions. The
agreements provide for an initial term of five years which shall be
automatically extended for successive one year periods unless terminated.
Pursuant to the employment agreements Messrs. Baffour and Kachidza will devote
at least 65% of their time to the Company’s business.
The
employment agreements provide for an annual base salary of $125,000 which shall
be increased as follows: (i) to $200,000 on the earlier to occur of the first
anniversary of the agreements or the Company publicly reports consolidated
annual gross revenues of at least $10,000,000, (ii) to $250,000 on the earlier
to occur of the second anniversary of the agreements or the Company publicly
reports consolidated annual gross revenues of at least $35,000,000, (iii) to
$350,000 on the earlier to occur of the third anniversary of the
agreements or the Company publicly reports consolidated annual gross revenues of
at least $100,000,000. In addition, the executives will each be
entitled to an annual bonus targeted between 150% to 250% of the base salary
during the first 3 years of the term of the Agreements and thereafter, at a
target to be determined in good faith by the Company’s board of directors. The
executives will also be entitled to grant of bonus stock under the Company’s
incentive stock option, on an annual basis. The Company also agreed to grant
each of the executives options to purchase 100,000 shares of the Company’s stock
as soon as practicable. The options are exercisable at a price of $2.31 and
become fully vested on the first anniversary of the grant.
In the
event of the executives’ death while in our employ, the agreements shall
automatically terminate and any unvested equity compensation shall vest
immediately and any vested warrants may be exercised on the earlier of the
warrant’s expiration or 18 months after the death. In the event of the
executives death or if the agreement is terminated due to a disability or for
cause (as defined in the agreements), any unpaid compensation, prorata bonus or
bonus options earned and any amounts owed to the executives shall be paid by us.
In addition, if the agreements are terminated due to the disability of the
executive, any unvested equity compensation shall vest immediately and any
vested warrants may be exercised on the earlier of the warrant’s expiration or
18 months after such termination. In the event the executive’s employment is
terminated without cause, the executives shall be entitled to receive, in a lump
sum payment, the base salary, the maximum bonus and options that would have been
paid to the executives if the agreements had not been terminated or for 12
months, whichever is greater. In addition, any unpaid compensation, pro rata
bonus or bonus options earned and any amounts owed to the executives shall be
paid by us and any unvested equity compensation shall vest immediately and
any vested warrants may be exercised on the earlier of the warrant’s expiration
or 18 months after the termination. In the event of the executives’ resignation
without good reason (as defined in the agreement), or retirement, the executives
shall be entitled to receive any unpaid compensation, pro rata bonus or bonus
options earned and any amounts owed to the executives
As a
method to retain senior management in the event of a change of control, the
agreements also provide that upon the closing of a transaction that constitutes
a “liquidity event”, as such term is defined in the agreements, each executive
shall be entitled to receive a transaction bonus equal to 2.99 times his then
current base salary, provided that he remains employed with the Company on the
closing of such liquidity event, unless his employment is terminated without
cause or he resigns for good reason. Liquidity events include any consolidation
or merger, acquisition of beneficial ownership of more than 50% of the voting
shares of the Company, or any sale, lease or transfer of all or substantially
all of the Company’s assets.
53
The
agreements also contain standard non-solicitation, non-competition and
indemnification clauses.
Outstanding
Equity Awards at Fiscal Year-End Table.
The
following table sets forth information with respect to grants of options to
purchase our common stock to the named executive officers at December 31,
2008.
Option
Awards
|
Stock
Awards
|
|||||||||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#) Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#) Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of Shares or Units of Stock That Have Not
Vested
(#)
|
Market Value of Shares or Units of Stock That Have Not
Vested
($)
|
Equity
Incentive
Plan
Awards: Number of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
|
Equity Incentive
Plan
Awards:
Market
or Payout
Value
of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
($)
|
|||||||||||
Nana
Baffour
|
0 | 0 | 0 | 0 |
-
|
0 | 0 | 0 |
0
|
|||||||||||
Johnson
Kachidza
|
0 | 0 | 0 | 0 |
-
|
0 | 0 | 0 |
0
|
Director
Compensation
The
following table sets forth with respect to the named directors, compensation
information inclusive of equity awards and payments made for the fiscal year
ended December 31, 2008.
Name (1) | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation ($) | Total ($) |
Nana
Baffour
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Johnson
Kachidza
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Stephen
Schweich
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Frank Henson | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
(1)
Effective May 15, 2009, Mr. Baffour was appointed to the Board. Effective May
30, 2009, Mr. Johnson was appointed to the Board. Mr. Schweich was appointed to
the Board on July 29, 2009. Mr.
Henson was appointed to the Board on November 2, 2009.
54
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information regarding the beneficial ownership of our
common stock as of November 24, 2009 and as adjusted to reflect the sale of our
common stock included in the shares offered by this prospectus (assuming the
individuals listed do not purchase shares in this offering),
by:
·
|
each
person known by us to be the beneficial owner of more than 5% of our
outstanding shares of common
stock;
|
·
|
each
of our officers and directors;
and
|
·
|
all
our officers and directors as a
group.
|
Based on
information available to us, all persons named in the table have sole voting and
investment power with respect to all shares of common stock beneficially owned
by them, unless otherwise indicated. Beneficial ownership is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended. In computing the number of shares beneficially owned by a person or a
group and the percentage ownership of that person or group, shares of our common
stock subject to options or warrants currently exercisable or exercisable within
60 days after the date of this prospectus are deemed outstanding, but are
not deemed outstanding for the purpose of computing the percentage of ownership
of any other person. The following table assumes 3,160,516 shares of common
stock are outstanding after the closing of this offering based on the
2,310,516 shares of common stock outstanding as of the date of this
prospectus as calculated above, and no exercise of the over-allotment
option.
Unless
otherwise indicated, the address of each individual named below is the address
of our executive offices in New York, New York.
Amount
and Nature of Beneficial
|
Approximate
Percentage of Outstanding Common Stock
|
|||||||||||
Name
and Address of Beneficial owner
|
Ownership
|
Before
Offering
|
After
Offering (1)
|
|||||||||
Nana
Baffour (2)
|
1,243,143 | 53.8 | % | 37.6 | % | |||||||
Johnson
M. Kachidza (3)
|
1,243,143 | 53.8 | % | 37.6 | % | |||||||
Frank
Asante-Kissi (4)
|
65,305 | 2.8 | % | 2.0 | % | |||||||
Stephen
Schweich
|
80,000 | 3.5 | % | 2.4 | % | |||||||
UTP
International, LLC (5)
|
687,922 | 29.8 | % | 20.8 | % | |||||||
Knox
Lawrence International, LLC (6)
|
201,522 | 8.7 | % | 6.1 | % | |||||||
B.N.
Bahadur (7)
|
||||||||||||
c/o
BKK, Ltd. 400 Galleria Office Centre, Suite 400, Southfield, MI
48034
|
166,876 | 7.2 | % | 5.0 | % | |||||||
David
Steele (8)
|
9,589 | * | * | |||||||||
All
directors and executive officers as a group (5 persons)
|
1,724,568 | 74.6 | % | 52.1 | % | |||||||
*
Less than 1%
|
(1)
|
Excludes
up to 150,000 shares of common stock that may be sold by us to the
underwriters to cover
over-allotments.
|
(2)
|
Includes
(a) 201,522 shares held by Knox Lawrence International, LLC, (b) 687,922
shares held by UTP International, LLC , (c) 27,168 shares underlying
an option held by KLI IP Holdings, Inc., to purchase shares of
the Company issued at the closing of the acquisition of Utilipoint which
is currently exercisable at a price of $1.99 per share and (d) 326,531
held by Mr. Baffour. Does not include shares underlying an option to
purchase 100,000 shares of common stock of the Company which becomes
vested on July 27, 2010.
|
(3)
|
Includes
(a) 201,522 shares held by Knox Lawrence International, LLC, (b) 687,922
shares held by UTP International, LLC, (c) 27,168 shares underlying
an option held by KLI IP Holdings, Inc., to purchase shares of
the Company issued at the closing of the acquisition of Utilipoint which
is currently exercisable at a price of $1.99 per share and (d)
326,531 held by Mr. Kachidza. Does not include shares underlying an option
to purchase 100,000 shares of common stock of the Company which becomes
vested on July 27, 2010.
|
(4)
|
Does
not include shares underlying an option to purchase 20,000 shares of
common stock of the Company which becomes vested on July 27,
2010.
|
(5)
|
Nana
Baffour, our CEO and Johnson Kachidza hold the power to vote and dispose
of the shares of UTP International
LLC.
|
(6)
|
Nana
Baffour, our CEO and Johnson Kachidza hold the power to vote and dispose
of the shares of Knox Lawrence
International.
|
(7)
|
Includes
85,243 shares held by The Bahadur Family Foundation, Mr. Bahadur
holds the power to vote and dispose of the shares of The Bahadur
Family Foundation.
|
(8)
|
Represents
shares underlying an option to purchase 9,589 shares of common stock of
the Company which are vested. Does not include options to purchase 25,000
shares of the company’s common stock at an exercise price of $6.00 per
share which were granted to Mr. Steele at the closing of the merger on
August 21, 2009, which vest on the first anniversary of the
grant.
|
55
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Utilipoint
currently owes $113,978 in accrued and unpaid dividends to Knox Lawrence
International LLC which dividends will be paid in cash out of the net proceeds
of this offering.
On August
10, 2009, Midas Medici entered into an Agreement and Plan of Merger
with Utilipoint and Utilipoint Acquisition Co., a New Mexico corporation
and wholly-owned subsidiary of the Utilipoint (the "Merger Sub"). Pursuant to
the Merger Agreement, Merger Sub merged with and into Utilipoint and
Utilipoint became our wholly-owned subsidiary on August 21, 2009. At the closing
of the Merger on August 21, 2009, we ceased to be a "blank check"
company. In connection with the Merger, we issued an aggregate of
1,348,516 shares of common stock to the Utilipoint stockholders in exchange for
42,191 Utilipoint common shares and 172,597 options in exchange for 5,400
Utilipoint options. In addition, Knox Lawrence International, LLC, KLI IP
Holding, Inc. and UTP International LLC, former shareholders of Utilipoint,
acquired an aggregate of 889,444 of shares of our common stock
and 27,168 options at the closing of the Merger. Nana Baffour, our CEO
and Johnson Kachidza, our President, each own 373.5 membership units or 37.35%
of Knox Lawrence International LLC, 150 shares or 30% of KLI IP Holding, Inc.
and no membership units or 0% of UTP International LLC. Also, at the closing of
the Merger, we issued options to purchase 25,000 shares of our common stock to
David Steele, President of Utilipoint and options to purchase 10,000 of our
common stock each to Peter Shaw, Managing Director of Utilipoint and Stephen
Schweich, our Director.
The
Merger is being accounted for as a reverse acquisition and recapitalization
which resulted in Midas Medici being the “legal acquirer” and Utilipoint the
“accounting acquirer”.
On July
29, 2009, the Company entered into return to treasury agreements with
shareholders Nana Baffour, Johnson Kachidza, Frank Asante-Kissi and B.N.
Bahadur, resulting in the return to treasury of an aggregate of 425,000 shares
of the Company’s common stock which resulted in the reduction of the Company’s
issued and outstanding shares from 1,305,000 to 880,000. The return of shares to
treasury was done in proportion to each shareholder’s ownership interest in the
Company with no resulting change in their percentage ownership of each
shareholder
On
January 15, 2009, Utilipoint issued a Senior Subordinated Debenture to Knox
Lawrence International, LLC in the principal amount of $10,000. The Debenture
provides for payment of interest in the amount of 10% per annum and matures on
January 15, 2014. The outstanding balance on the Debenture as of the date hereof
is $10,000. Also, on December 31, 2008, Utilipoint issued a Senior Subordinated
Debenture to Knox Lawrence International, LLC in the principal amount of
$62,500. The Debenture provides for payment of interest in the amount of 10% per
annum. The Debenture matures on December 31, 2013. The outstanding balance on
the Debenture as of the date hereof is $62,500. Nana Baffour, our CEO, and
Johnson Kachidza, our President, are the managing principals of Knox Lawrence
International, LLC.
Effective
July 23, 2007 Utilipoint and Knox Lawrence International, LLC entered into a
management agreement (the “Management Agreement”) pursuant to which Knox
Lawrence provides management, consulting and financial services to Utilipoint
for a period of one year with automatic annual renewals unless terminated by
either party. The Management Agreement provides for annual compensation of
$100,000, which payment may be deferred if after such payment the Company shall
not have sufficient liquidity to pay its obligations, including dividends on its
Series A Preferred Stock. KLI directly and indirectly through a subsidiary owns
a controlling interest in Utilipoint. Effective upon completion of the
Utilipoint acquisition, the management agreement was terminated. As at the
date of this prospectus, Utilipoint owes an aggregate of $100,000 in accrued and
unpaid management fees and expenses to Knox Lawrence International,
LLC. Nana Baffour, our CEO, and Johnson Kachidza, our President, are the
managing principals of Knox Lawrence International, LLC.
On July
1, 2009, in connection with Utilipoint’s acquisition of its 60% owned
subsidiary, The Intelligent Project, LLC (“IP”), Utilipoint entered into the
following agreements:
(A) a
Capital Commitment Agreement (the “Capital Agreement”) pursuant to which
Utilipoint committed to contribute up to $200,000 to IP, as may be requested by
IP, but in no event not in excess of $25,000 in a any single request. The
parties contemplate that the capital contributions under the Capital Agreement
may be satisfied by capital contributions which KLI intends to make to
Utilitpoint in the amount of $200,000 and therefore any failure by Utilipoint to
make a capital contribution to IP because it has not received sufficient funds
from KLI will not constitute a default under the Capital Agreement.
(B) a
Management Services Agreement with IP pursuant to which Utilipoint will provide
management services and provide consultants to assist IP with IP
projects. The services will include, but are not limited
to: (i) assisting in the preparation of annual budgets, (ii)
providing sales, marketing and strategic services, (iii) assisting IP with
complying with reporting requirements under any financing agreements, (iv)
providing legal, human resources, loss prevention and risk management services;
(v) providing receivables collection services, cash management services and
payroll services, (vi) any other service performed or expenses incurred by
UtiliPoint for IP in the ordinary course of business. In addition,
under the Management Service agreement, Utilipoint is authorized to make
payments to creditors of IP on its behalf and to collect receivables on behalf
of IP; provided Utilipoint has assurance that the necessary funds for discharge
of any liability or obligation will be provided by IP.
Management
services will be charged to IP based on the actual expenses incurred by
Utilipoint, and consultants will be charged at the same rate that Utilipoint
charges to subcontract its consultants to third
parties.
Utilipoint
will also pay all salaries and benefits for certain employees of IP who will
also provide services to Utilipoint, which will initially include David Steele
and Peter Shaw. The Management Services Agreement has a two-year
term, and, thereafter, automatically renews for one-year terms. It
may be cancelled by either party on 60 days prior written notice.
(C) an
Agreement to be Bound to the Limited Liability Agreement of IP. The IP LLC
Agreement provides that Net Cash Flow will be distributed as follows: first,
contributed capital will be returned to the members on a pro rata basis (based
on the amount of capital contributed), and, thereafter, Net Cash Flow will be
distributed to the members on a percentage ownership
basis. Utilipoint’s percentage ownership immediately after the
execution of the agreement by Utilipoint will be 60%.
The
Limited Liability Company Agreement also provides that IP will be managed by a
Management Committee, who, after the Utilipoint transaction, initially, will be:
Nana Baffour, Johnson Kachidza, Ken Globerman and David Steele. The
Members have no power or authority to manage the affairs of the
company.
The
Limited Liability Company Agreement further provides for restrictions on the
transfer of Company Interests (only to Permitted Transferees) and provides that
the Members holding a majority of the Company Interests may drag-along the
minority members in the event of a Sale of the Company.
(D) a
Consulting Agreement which provides that KLI IP Holding Inc. will provide
consulting services to Utilipoint in connection with the joint business and
marketing efforts of Utilipoint and IP. The agreement has a term of
24 months and may be terminated by either party upon 90 days advance written
notice. In exchange for its services KLI IP Holding Inc. will receive
an option to purchase 850 shares of common stock of Utilipoint, which options
were converted at the closing of the Utilipoint Acquisition into options to
purchase 27,168 shares of common stock of Midas Medici, at an exercise price of
$1.56 per share. The options are exercisable for a term of 5 years
through August 21, 2014 and are fully vested. If KLI IP Holding Inc. terminates
the agreement without cause within its first year, any unexercised options held
KLI IP Holding Inc. will terminate.
(E) a
Revolving Senior Subordinated Debenture which provides that KLI may loan up to
$100,000 to Utilipoint. The debenture has a term of 5 years and pays
interest at a rate of 10% per annum. Accrued interest and unpaid
interest is payable monthly (the parties can agree to mutually defer interest
payments), and the unpaid principal amount is due on the five-year anniversary
of the debenture. The debenture is subordinate to all indebtedness,
liabilities and obligations of Utilipoint to any financial
institution.
(F) a
subscription agreement pursuant to which KLI agreed to purchase up to $100,000
of the common stock of the Company at a per share purchase price of $50.00 per
share for a period of up 2 months through September 1, 2009. KLI did not
purchase any shares under the subscription agreement.
IP currently has a note payable to KLI-IP
Holdings, Inc. in the amount of $108.969. Interest on this note accrues at an
annual percentage rate of 5% and the note has a maturity date of June 30,
2012.
Midas
Medici believes that each of the foregoing transactions were completed on terms
at least as favorable to Midas Medici or its affiliates as could have been
obtained from unaffiliated third parties, under the same
circumstances. All future material affiliated
transactions and loans or forgiveness of loans will be made or entered into on
terms that are no less
favorable to Midas Medici than those that can be obtained from unaffiliated
third parties and shall be approved by at least two independent directors or a
majority of the independent directors, whichever is greater. Midas
Medici currently has two independent members of the Board of Directors, Stephen
Schweich and Frank Henson. Both of such directors have been appointed
to shall serve on the audit committee of the Board of Directors and will be
required to approve all further transaction between Midas Medici and any
affiliate. The audit committee will have access to independent legal
counsel at the expense of Midas Medici. Midas Medici will maintain at
least two independent members of the Board Directors in the future.
Each of
the foregoing affiliated transactions was entered into at a time when Midas
Medici had only one or no independent directors. Subsequent to
consummation of the foregoing transactions, each of such transactions has been
ratified by Midas Medici’s two independent directors.
56
UNDERWRITING
In
accordance with the terms and conditions contained in the underwriting
agreement, we have agreed to sell to the underwriter named below, and each of
the underwriters, for which National Securities Corporation, is acting as
representative, have severally, and not jointly, agreed to purchase on a firm
commitment basis the number of shares of common stock offered in this offering
set forth opposite their respective names below:
Underwriters
|
Number of
Shares
|
National
Securities Corporation
Ardour
Capital Investments, LLC
A copy of
the underwriting agreement will be filed as an exhibit to the registration
statement of which this prospectus forms a part.
The
underwriters have advised us that they propose to offer the shares directly to
the public at the public offering price set forth on the cover page of this
prospectus, and to certain dealers that are members of the Financial Industry
Regulatory Authority (FINRA), at such price less a concession not in excess
of $_______ per share. The underwriters may allow, and the selected dealers
may reallow, a concession not in excess of $_______ per share to certain brokers
and dealers. After this offering, the offering price and concessions and
discounts to brokers and dealers and other selling terms may from time to time
be changed by the underwriters. These prices should not be considered an
indication of the actual value of our shares and are subject to change as a
result of market conditions and other factors. No variation in those terms will
change the amount of proceeds to be received by us as set forth on the cover
page of this prospectus. The public offering price of the shares was
negotiated between us and the representative of the underwriters.
The
principal factors considered in determining the public offering price of the
shares included:
·
|
the
information in this prospectus and otherwise available to the
underwriters;
|
·
|
the
history and the prospects for the industry in which we will
compete;
|
·
|
our
current financial condition and the prospects for our future cash flows
and earnings;
|
·
|
the
general condition of the economy and the securities markets at the time of
this offering;
|
·
|
the
recent market prices of, and the demand for, publicly-traded securities of
generally comparable companies;
and
|
·
|
the
public demand for our securities in this
offering.
|
Over-Allotment
Option
We have
also granted to the underwriters an option, exercisable during the 45-day period
commencing on the date of this prospectus, to purchase from us at the offering
price, less underwriting discounts, up to an aggregate of 150,000 additional
shares for the sole purpose of covering over-allotments, if any. The
over-allotment option will only be used to cover the net syndicate short
position resulting from the initial distribution. The underwriters may exercise
that option if the underwriters sell more shares than the total number set forth
in the table above. If any shares underlying the option are purchased, the
underwriters will severally purchase shares in approximately the same proportion
as set forth in the table above.
Commissions
and Discounts
The
following table shows the public offering price, underwriting discount to be
paid by us to the underwriters and the proceeds, before expenses, to us. This
information assumes either no exercise or full exercise by the underwriters of
their over-allotment option.
|
Per
share
|
Without
Option
|
With
Option
|
|||||||||
Public
offering price
|
$ | 6.00 | $ | 6,000,000 | $ | 6,900,000 | ||||||
Discount
(8%)
|
$ | 0.48 | $ | 480,000 | $ | 552,000 | ||||||
Non-accountable
expense allowance (1%)
|
$ | 0.06 | $ | 60,000 | $ | 69,000 | ||||||
Proceeds
before expenses
|
$ | 5.46 | $ | 5,460,000 | $ | 6,279,000 | ||||||
( 1) The
offering expenses after the underwriter’s discount and non-accountable expense
allowance are estimated at $____.
57
Lock-Up
Agreements
We have
agreed not to permit or cause a public sale or public offering of any of our
securities (in any manner, including pursuant to Rule 144 under the
Securities Act of 1933, as owned nominally or beneficially by the
Company’s officers, directors and shareholders owning five percent (5%) or more
of the outstanding shares of Common Stock for a period of one hundred and eighty
(180) days following the effective date of the registration statement of which
this prospectus forms a part, without obtaining the prior written approval of
the representative except for an aggregate of 200,000 held by non-executive
officers to be given to non-executive officers designated by the Company. The
representative may consent to an early release from the lock-up periods if, in
its opinion, the market for the common stock would not be adversely impacted by
sales and in cases of a financial emergency of an officer, director or other
stockholder. We are unaware of any officer, director or current shareholder who
intends to ask for consent to dispose of any of our equity securities during the
lock-up period.
In
connection with this offering, we are issuing to the underwriters warrants to
acquire our common stock, exercisable at no less than 120% of the initial public
offering price of our shares in this offering, exercisable commencing on year
from the effective date of the registration statement of which this prospectus
forms a part and expiring five years from the effective date of this
registration statement. The representative of the underwriters has agreed
that they will not transfer the warrants or underlying common stock except to
officers, partners or members of the representative of the
underwriters.
Electronic
Delivery
A
prospectus in electronic format may be made available on the websites maintained
by one or more of the underwriters. The representative may agree to allocate a
number of shares to underwriters for sale to their online brokerage account
holders. The representative will allocate shares to underwriters that may make
Internet distributions on the same basis as other allocations. In addition,
shares may be sold by the underwriters to securities dealers who resell shares
to online brokerage account holders.
Other
Terms
In
connection with this offering, the underwriters or certain of the securities
dealers may distribute prospectuses electronically. No forms of prospectus other
than printed prospectuses and electronically distributed prospectuses that are
printable in Adobe PDF format will be used in connection with this
offering.
Stabilization
Until the
distribution of the shares of common stock offered by this prospectus is
completed, rules of the SEC may limit the ability of the underwriters to bid for
and to purchase our securities. As an exception to these rules, the underwriters
may engage in transactions effected in accordance with Regulation M under the
Securities Exchange Act of 1934 that are intended to stabilize, maintain or
otherwise affect the price of our common stock. The underwriters may engage in
over-allotment sales, syndicate covering transactions, stabilizing transactions
and penalty bids in accordance with Regulation M.
·
|
Stabilizing
transactions permit bids or purchases for the purpose of pegging, fixing
or maintaining the price of the common stock, so long as stabilizing bids
do not exceed a specified
maximum.
|
·
|
Over-allotment
involves sales by the underwriters of shares in excess of the number of
shares the underwriters are obligated to purchase, which creates a short
position. The short position may be either a covered short position or a
naked short position. In a covered short position, the number of shares
over-allotted by the underwriters is not greater than the number of shares
that they may purchase in the over-allotment option. In a naked short
position, the number of shares involved is greater than the number of
shares in the over-allotment option. The underwriters may close out any
covered short position by either exercising their over-allotment option or
purchasing shares in the open
market.
|
·
|
Covering
transactions involve the purchase of securities in the open market after
the distribution has been completed in order to cover short positions. In
determining the source of securities to close out the short position, the
underwriters will consider, among other things, the price of securities
available for purchase in the open market as compared to the price at
which they may purchase securities through the over-allotment option. If
the underwriters sell more shares of common stock than could be covered by
the over-allotment option, creating a naked short position, the position
can only be closed out by buying securities in the open market. A naked
short position is more likely to be created if the underwriters are
concerned that there could be downward pressure on the price of the
securities in the open market after pricing that could adversely affect
investors who purchase in this
offering.
|
58
·
|
Penalty
bids permit the underwriters to reclaim a selling concession from a
selected dealer when the shares of common stock originally sold by the
selected dealer are purchased in a stabilizing or syndicate covering
transaction.
|
These
stabilizing transactions, covering transactions and penalty bids may have the
effect of raising or maintaining the market price of our common stock or
preventing or retarding a decline in the market price of our common stock. As a
result, the price of our common stock may be higher than the price that might
otherwise exist in the open market.
Neither
we nor the underwriters make any representation or prediction as to the effect
that the transactions described above may have on the prices of our securities.
These transactions may occur on the NASDAQ Capital Market or on any other
trading market. If any of these transactions are commenced, they may be
discontinued without notice at any time.
Indemnification
The
underwriting agreement provides for indemnification between us and the
underwriters against specified liabilities, including liabilities under the
Securities Act, and for contribution by us and the underwriters to payments that
may be required to be made with respect to those liabilities. We have been
advised that, in the opinion of the SEC, indemnification for liabilities under
the Securities Act is against public policy as expressed in the Securities Act,
and is therefore, unenforceable.
DESCRIPTION
OF SECURITIES
The
Company is authorized by its Certificate of Incorporation to issue an aggregate
of 50,000,000 shares of capital stock, of which 40,000,000 are shares of common
stock, par value $.001 per share (the "Common Stock") and 10,000,000 are shares
of preferred stock, par value $.001 per share (the “Preferred Stock”). As of
November 24, 2009, 2,735,516 shares of Common Stock were issued and 2,310,516
were outstanding and no shares of Preferred Stock were issued and
outstanding.
Common
Stock
All
outstanding shares of Common Stock are of the same class and have equal rights
and attributes. The holders of our Common Stock are entitled to one vote
per share on all matters submitted to a vote of our stockholders. All
stockholders are entitled to share equally in dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available. In the event of liquidation, the holders of our Common Stock are
entitled to share ratably in all assets remaining after payment of all
liabilities. The stockholders do not have cumulative or preemptive
rights.
Preferred
Stock
Our
certificate of incorporation permits our Board of Directors to fix the rights,
preferences and privileges of, and issue up to 10,000,000 shares of, preferred
stock with voting, conversion, dividend and other rights and preferences that
could adversely affect the voting power or other rights of our shareholders. The
issuance of preferred stock or rights to purchase preferred stock could have the
effect of delaying or preventing a change in control of our company. In
addition, the possible issuance of additional preferred stock could discourage a
proxy contest, make the acquisition of a substantial block of our common stock
more difficult or limit the price that investors might be willing to pay for
shares of our common stock. The Board of Directors of Midas Medici
has adopted a resolution that it will not offer preferred stock to its promoters
except on the same terms as it is offered to all other existing or new
shareholders or the issuance of such shares of preferred stock to its
promoters is approved by a majority of Midas Medici’s independent directors (who
do not have an interest in the transaction and have access to independent legal
counsel at Midas Medici’s expense).
The
description of certain matters relating to our securities is a summary
and is qualified in its entirety by the provisions of our Certificate of
Incorporation and By-Laws, copies of which have been filed as exhibits
to our Form 10-SB filed with the Commission on May 2, 2007.
59
LEGAL
MATTERS
The
validity of the shares sold by us under this prospectus will be passed upon for
us by Sichenzia Ross Friedman Ference LLP in New York, New York. Hodgson
Russ LLP in New York, New York has acted as counsel for the
underwriters.
EXPERTS
The
financial statements of Utilipoint as of and for the years ended December 31,
2008 and 2007 included in this prospectus have been audited by REDW LLC,
independent registered public accounting firm to the extent and for the periods set
forth in their report appearing elsewhere herein and are included in reliance
upon such report given upon the authority of that firm as experts in auditing
and accounting.
The
financial statements of Midas Medici as of and for the years ended December 31,
2008 and 2007 included in this prospectus have been audited by RBSM
LLP, independent certified public accountants to the extent and for
the periods set forth in their report appearing elsewhere herein and are
included in reliance upon such report given upon the authority of that firm as
experts in auditing and accounting.
CHANGE
IN REGISTRANT’S CERTIFYING ACCOUNTANT
On July
16, 2009, our Board of Directors dismissed RBSM LLP (“RBSM”) as our independent
registered public accounting firm.
During
the fiscal years ended December 31, 2008 and December 31,
2007, RBSM’s reports on the Company's financial statements did not
contain an adverse opinion or disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope or accounting principles except, RBSM’s
audit reports for the year ended December 31, 2008 and December 31, 2007 stated
that several factors raised substantial doubt about the Company’s ability to
continue as a going concern and that the financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
During
the fiscal years ended December 31, 2008 and December 31, 2007 and the
subsequent interim period through July 16, 2009, (i) there were no disagreements
between the Company and RBSM on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure which,
if not resolved to the satisfaction of RBSM would have caused RBSM to make
reference to the matter in its reports on the Company's financial statements;
and (ii) there were no reportable events as the term described in
Item 304(a)(1)(iv) of Regulation S-K.
On July
16, 2009, the Company engaged J.H. Cohn LLP (“JH Cohn”) as its independent
registered public accounting firm for the Company’s fiscal year ended December
31, 2009. The change in the Company’s independent registered public accounting
firm was approved by the Company’s Board of Directors on July 16,
2009.
During
the year ended December 31, 2008 and any subsequent period through July 16,
2009, the Company did not consult with JH Cohn regarding either (i) the
application of accounting principles to a specific completed or contemplated
transaction, or the type of audit opinion that might be rendered on the
Company’s financial statements or (ii) any matter that was either the subject of
a disagreement or event identified in response to (a)(1)(iv) of Item 304 of
Regulation S-K.
DISCLOSURE
OF COMMISSION POSITION OF
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Section
145 (“Section 145”) of the Delaware General Corporation Law, as amended (the
“DGCL”), permits indemnification of directors, officers, agents and controlling
persons of a corporation under certain conditions and subject to certain
limitations. Section 145 empowers a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director,
officer or agent of the corporation or another enterprise if serving at the
request of the corporation. Depending on the character of the proceeding, a
corporation may indemnify against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit or proceeding if the person indemnified
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to, the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. In the case of an action by or in the right of the
corporation, no indemnification may be made with respect to any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine that despite the
adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. Section 145
further provides that to the extent a present or former director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to above or in the defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys’ fees)
actually and reasonably incurred by such person in connection
therewith.
Our
Certificate of Incorporation, as amended, provides that no current or former
director of ours shall be personally liable to the us or our stockholders for
monetary damages for breach of fiduciary duty as a director, except to the
extent such exemption from liability or limitation thereof is not permitted
under the DGCL as the same exists or may hereafter be amended.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
(Securities Act) may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
60
WHERE
YOU CAN FIND MORE INFORMATION
We are
subject to informational filing requirements of the U.S. Securities Exchange Act
of 1934, as amended, and its rules and regulations. This means that we will file
reports and other information with the U.S. Securities and Exchange Commission.
You can inspect and copy this information at the Public Reference Facility
maintained by the SEC at 100 F. Street, N.E., Room 1580,
Washington, D.C. 20549. You can receive additional information about the
operation of the SEC's Public Reference Facilities by calling the SEC at
1-800-SEC-0330. The SEC maintains a Web site that will contain the reports and
other information that we file electronically with the Commission and the
address of that website is http://www.sec.gov.
Statements contained in this prospectus as to the intent of any contract or
other document referred to are not necessarily complete, and, in each instance,
reference is made to the copy of the particular contract or other document filed
as an exhibit to this registration statement, each statement being qualified in
all respects by this reference.
This
prospectus is part of a registration statement we filed with the SEC. You should
rely only on the information or representations provided in this prospectus. We
have not authorized anyone to provide you with any information other than that
provided in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front of the document.
61
Index to Financial
Statements
Page
|
||||
Midas
Medici Group Holdings, Inc. (Formerly Mondo Aquisition I,
Inc.)
|
||||
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|||
Balance
Sheets as of December 31, 2008 and 2007
|
F-3
|
|||
Statements
of Losses for the years ended December 31, 2008 and
2007
|
F-4
|
|||
Statements
of Stockholders’ Equity for the year ended December 31,
2008
|
F-5
|
|||
Statements
of Cash Flows for the years ended December 31, 2008 and
2007
|
F-6
|
|||
Notes
to Financial Statements
|
F-7-F-9
|
|||
Condensed Balance
Sheets as of September 30, 2009 (Unaudited) and December 31,
2008
|
F-10
|
|||
Condensed
Statements of Operations (Unaudited) for the three and nine months ended
September 30, 2009 and 2008
|
F-11
|
|||
Condensed
Statements of Cash Flows (Unaudited) for the nine months ended September
30, 2009 and 2008
|
F-12
|
|||
Condensed
Statements of Stockholders’ Equity (Unaudited) for the nine months ended
September 30, 2009
|
F-13
|
|||
Notes
to Condensed Unaudited Financial
Statements
|
F-14-F-23
|
|||
Utilipoint
International, Inc.
|
||||
Report
of Independent Registered Public Accounting Firm
|
F-24
|
|||
Consolidated
Balance Sheets as of December 31, 2008 and 2007
|
F-25
|
|||
Consolidated
Statements of Operations for the years ended December 31, 2008 and
2007
|
F-26
|
|||
Consolidated
Statements of Stockholders’ Deficit and Comprehensive Income (Loss) for
the years ended December 31, 2008 and 2007
|
F-27
|
|||
Consolidated
Statements of Cash Flows for the years ended December 31, 2008 and
2007
|
F-28
|
|||
Notes
to Consolidated Financial Statements December 31, 2008 and
2007
|
F-29-F-42
|
F-1
RBSM
LLP
CERTIFIED
PUBLIC ACCOUNTANTS
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors,
Mondo
Acquisition I, Inc.
61
Broadway, 32 nd
Floor
New York,
NY 10006
We have
audited the accompanying balance sheets of Mondo Acquisition I, Inc. (a
development stage company) as of December 31, 2008 and 2007 and the related
statements of losses, stockholder’s equity, and cash flows for the years ended
December 31, 2008 and 2007, and for the period October 30, 2006 (date of
inception) through December 31, 2008. These financial statements are the
responsibility of the company’s management. Our responsibility is to express an
opinion on the financial statements based upon our audits.
We have
conducted our audits in accordance with the standards of the Public Company
Accounting oversight Board (United States of America). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining on 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 statements presentation. We believe 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 Mondo Acquisition I, Inc. (a
development stage company) as of December 31, 2008 and 2007 and the related
statements of losses, stockholder’s equity, and cash flows for the years ended
December 31, 2008 and 2007, and for the period October 30, 2006 (date of
inception) through December 31, 2008 in conformity with accounting
principles generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in the Note 1(b) to the accompanying
financial statements, the Company is in the development stage and has not
established a source of revenues. This raises substantial doubt about the
company’s ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ RBSM
LLP
|
|
Certified
Public Accountants
|
New York,
New York
March 6,
2009
F-2
MONDO
ACQUISITION I, INC.
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEET
AS
OF DECEMBER 31, 2008 AND 2007
December
31,
|
||||||||
2008
|
2007
|
|||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 5,944 | $ | 16,802 | ||||
Total
Assets
|
$ | 5,944 | $ | 16,802 | ||||
Liabilities
and Stockholders' Equity
|
||||||||
Current
Liabilities:
|
||||||||
Accrued
expenses related to incorporation
|
$ | 1,493 | $ | 1,493 | ||||
Accounts
payable
|
1,196 | 1,196 | ||||||
Total
Current Liabilities
|
2,689 | 2,689 | ||||||
Long
Term Liabilities
|
- | - | ||||||
Total
liabilities
|
2,689 | 2,689 | ||||||
Commitments
and Contingencies
|
||||||||
Stockholders'
Equity:
|
||||||||
Preferred
stock, par value $0.001; 10,000,000 shares authorized, no issued and
outstanding as of
|
||||||||
December
31, 2008 and 2007, respectively
|
- | - | ||||||
Common
stock, $0.001 par value; 40,000,000 authorized; 1,000,000 issued and
outstanding as of
|
||||||||
December
31, 2008 and 2007, respectively
|
1,000 | 1,000 | ||||||
Additional
paid in capital
|
6,500 | 16,500 | ||||||
Accumulated
deficit during development stage
|
(4,245 | ) | (3,387 | ) | ||||
Total
Stockholders' Equity
|
3,255 | 14,113 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 5,944 | $ | 16,802 |
See the
accompanying footnotes to audited financial statements
F-3
MONDO
ACQUISITION I, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF LOSSES
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
FROM
OCTOBER 30, 2006 (DATE OF INCEPTION) TO DECEMBER 31, 2008
Year
Ended December 31,
|
For
the Period From October 30, 2006 (Date of Inception) to December
31,
|
|||||||||||
2008
|
2007
|
2008
|
||||||||||
Operating
Expenses:
|
||||||||||||
Selling,
general and administrative
|
$ | 858 | $ | 1,894 | $ | 4,245 | ||||||
Net
loss
|
$ | (858 | ) | $ | (1,894 | ) | $ | (4,245 | ) | |||
Net
loss per common share (basic and fully diluted)
|
$ | (0.001 | ) | $ | (0.002 | ) | $ | (0.004 | ) | |||
Weighted
average of common shares outstanding (basic and fully
diluted)
|
1,000,000 | 1,000,000 | 1,000,000 |
See the
accompanying footnotes to audited financial statements
F-4
MONDO
ACQUISITION I, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF STOCKHOLDER’S EQUITY
FROM
OCTOBER 30, 2006 (DATE OF INCEPTION) TO DECEMBER 31, 2008
Preferred
stock
|
Common
stock
|
Paid-in-
|
Accumulated
deficit
during development
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
stage
|
Total
|
||||||||||||||||||||||
Balance-October
30, 2006
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||||||||||
Common
stock issued to founders
|
-
|
-
|
1,000,000
|
1,000
|
16,500
|
-
|
17,500
|
|||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(1,493
|
)
|
(1,493
|
)
|
|||||||||||||||||||
Balance-
December 31, 2006
|
-
|
-
|
1,000,000
|
1,000
|
16,500
|
(1,493
|
)
|
16,007
|
||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(1,894
|
)
|
(1,894
|
)
|
|||||||||||||||||||
Balance
– December 31, 2007
|
-
|
-
|
1,000,000
|
|
1,000
|
|
16,500
|
|
(3,387
|
)
|
|
14,113
|
||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
(858
|
)
|
(858
|
)
|
||||||||||||||||||||
Return
of capital to founders
|
-
|
-
|
-
|
-
|
(10,000
|
)
|
-
|
(10,000
|
)
|
|||||||||||||||||||
Balance—December
31, 2008
|
-
|
$
|
-
|
1,000,000
|
$
|
1,000
|
$
|
6,500
|
$
|
(4,245
|
)
|
$
|
3,255
|
See the
accompanying footnotes to audited financial statements
F-5
MONDO
ACQUISITION I, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
FROM
OCTOBER 30, 2006 (DATE OF INCEPTION) TO DECEMBER 31, 2008
Year
Ended December 31,
|
For
the Period From October 30, 2006 (Date of Inception) to December
31,
|
|||||||||||
2008
|
2007
|
2008
|
||||||||||
Cash
Flow from Operating Activities:
|
||||||||||||
Net
loss
|
$ | (858 | ) | $ | (1,894 | ) | $ | (4,245 | ) | |||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
Changes
in operating assets and liabilities
|
||||||||||||
Accounts
payable and accrued expenses
|
- | 1,196 | 2,689 | |||||||||
Net
Cash Provided By Operating Activities
|
(858 | ) | (698 | ) | (1,556 | ) | ||||||
Cash
Flow from Investing Activities:
|
- | - | - | |||||||||
Cash
Flow from Financing Activities:
|
||||||||||||
Proceeds
from issuance of common stock to founders
|
- | - | 17,500 | |||||||||
Return
of capital to founders
|
(10,000 | ) | - | (10,000 | ) | |||||||
Net
Cash Provided By Financing Activities:
|
(10,000 | ) | - | 7,500 | ||||||||
Net
(Decrease) Increase in Cash and Cash Equivalents
|
(10,858 | ) | (698 | ) | (5,944 | ) | ||||||
Cash
and Cash Equivalents at beginning of period
|
16,802 | 17,500 | - | |||||||||
Cash
and Cash Equivalents at end of period
|
$ | 5,944 | $ | 16,802 | $ | 5,944 |
See the
accompanying footnotes to audited financial statements
F-6
MONDO
ACQUISITION I, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008
NOTE 1 -ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES:
(a)
|
Organization
and Business:
|
Mondo
Acquisition I, Inc. (the “Company”), a wholly owned subsidiary of Mondo
Management Corp., was incorporated in the state of Delaware on October 30,
2006 for the purpose of raising capital that is intended to be used in
connection with its business plans which may include a possible merger,
acquisition or other business combination with an operating
business.
|
|
(b)
|
Development
Stage Company:
|
The
Company is currently a development stage company under the provisions of
Statement of Financial Accounting Standards (“SFAS”) No. 7. All activities
of the Company to date relate to its organization, initial funding and
share issuances.
The
Company has not begun principal operations and as is common with a
development stage company, the Company has had recurring losses during its
development stage. The Company’s financial statements are prepared using
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. However, the Company does
not have significant cash or other material assets, nor does it have an
established source of revenues sufficient to cover its operating costs and
to allow it to continue as a going concern. In the interim, shareholders
of the Company have committed to meeting its minimal operating
expenses.
|
|
(c)
|
Use
of Estimates:
|
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the balance sheet and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
|
|
(d)
|
Cash
and Cash Equivalents:
|
For
purposes of the statement of cash flows, the Company considers highly
liquid financial instruments purchased with original maturities of three
months or less to be cash
equivalents.
|
F-7
MONDO
ACQUISITION I, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008
NOTE 1 -ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued):
(e)
|
Income
Taxes:
|
The
Company has implemented the provisions on Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109).
SFAS 109 requires that income tax accounts be computed using the liability
method. Deferred taxes are determined based upon the estimated future tax
effects of differences between the financial reporting and tax reporting
bases of assets and liabilities given the provisions of currently enacted
tax laws.
Any
deferred tax asset is considered immaterial and has been fully offset by a
valuation allowance because at this time the Company believes that it is
more likely than not that the future tax benefit will not be realized as
the Company has no current operations.
In
June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes-an interpretation of FASB Statement No. 109 ("FIN
48"). FIN 48 prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, treatment of interest and
penalties, and disclosure of such positions. Effective January 1,
2007, the Company adopted the provisions of FIN 48, as required. As a
result of implementing FIN 48, there has been no adjustment to the
Company’s financial statements and the adoption of FIN 48 did not have a
material effect on the Company’s consolidated financial statements for the
year ending December 31, 2008.
|
|
(f)
|
Loss
per Common Share:
|
Basic
loss per share is calculated using the weighted-average number of common
shares outstanding during each reporting period. Diluted loss per share
includes potentially dilutive securities such as outstanding options and
warrants, using various methods such as the treasury stock or modified
treasury stock method in the determination of dilutive shares outstanding
during each reporting period. The Company does not have any potentially
dilutive instruments.
|
|
(g)
|
Fair
Value of Financial Instruments:
|
The
carrying value of cash equivalents and accrued expenses approximates fair
value due to the short period of time to
maturity.
|
NOTE 2 -RECENT ACCOUNTING
PRONOUNCEMENTS:
SFAS No.
141(R), “Business Combinations” — This statement includes a number of changes in
the accounting and disclosure requirements for new business combinations
occurring after its effective date. The changes in accounting
requirements include: acquisition costs will be expensed as incurred;
noncontrolling (minority) interests will be valued at fair value; acquired
contingent liabilities will be recorded at fair value; acquired research and
development costs will be recorded at fair value as an intangible asset with
indefinite life; restructuring costs will generally be expensed subsequent to
the acquisition date; and changes in deferred tax asset valuation allowances and
changes in income tax uncertainties after the acquisition date will generally
affect income tax expense. The statement is effective for new
business combinations occurring on or after the first reporting period beginning
on or after December 15, 2008.
SFAS No.
160, “Noncontrolling Interests in Consolidated Financial
Statements: An Amendment of ARB No. 51” — This statement
changes the accounting and reporting for noncontrolling (minority) interests in
subsidiaries and for deconsolidation of a subsidiary. Under the
revised basis, the noncontrolling interest will be shown in the balance sheet as
a separate line in equity instead of as a liability. In the income
statement, separate totals will be shown for consolidated net income including
noncontrolling interest, noncontrolling interest as a deduction, and
consolidated net income attributable to the controlling interest. In addition,
changes in ownership interests in a subsidiary that do not result in
deconsolidation are equity transactions if a controlling financial interest is
retained. If a subsidiary is deconsolidated, the parent company will now
recognize gain or loss to net income based on fair value of the noncontrolling
equity at that date. The statement is effective prospectively for
fiscal years and interim periods beginning on or after December 15, 2008, but
upon adoption will require restatement of prior periods to the revised bases of
balance sheet and net income presentation.
F-8
MONDO
ACQUISITION I, INC.
(DEVELOPMENT
STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008
NOTE 3 -CAPITAL
STOCK:
The
total number of shares of capital stock which the Company shall have authority
to issue is fifty million (50,000,000). These shares shall be divided into two
classes with 40,000,000 shares designated as common stock at $.001 par value
(the “Common Stock”) and 10,000,000 shares designated as preferred stock at
$.001 par value (the “Preferred Stock”). The Preferred stock of the Company
shall be issued by the Board of Directors of the Company in one or more classes
or one or more series within any class and such classes or series shall have
such voting powers, full or limited, or no voting powers, and such designations,
preferences, limitations or restrictions as the Board of Directors of the
Company may determine, from time to time.
Holders
of shares of Common Stock shall be entitled to cast one vote for each share held
at all stockholders' meetings for all purposes, including the election of
directors. The Common Stock does not have cumulative voting rights.
No
holder of shares of stock of any class shall be entitled as a matter of right to
subscribe for or purchase or receive any part of any new or additional issue of
shares of stock of any class, or of securities convertible into shares of stock
of any class, whether now hereafter authorized or whether issued for money, for
consideration other than money, or by way of dividend.
On
December 8, 2006, the Company issued 1,000,000 shares of Common Stock to Mondo
Management Corp. at a purchase price of $.0175 per share, for an aggregate
purchase price of $17,500.
The
Company had 1,000,000 shares of common stock issued and outstanding at December
31, 2008 and December 31, 2007. As of December 31, 2008 and December 31, 2007
the Company had no preferred stock issued and outstanding.
NOTE 4 -RELATED
PARTIES:
The
officers, directors and stockholders of the Company are affiliated with
Sichenzia Ross Friedman Ference LLP, an entity providing legal services to the
Company at no cost. The Company recorded the fair value of such legal services
to reflect all the costs of doing business in the Company’s financial
statements.
NOTE
5 - INCOME TAXES:
For
income tax reporting purposes, the Company's aggregate unused net operating
losses of approximately $4,200 will expire through 2027, subject to limitations
of Section 382 of the Internal Revenue Code, as amended. The deferred tax asset
related to the carryforward was deemed to be approximately $900. The Company has
provided a valuation reserve against the full amount of the net operating loss
benefit, because in the opinion of management based upon the development stage
and the likelihood of a future Section 382 limitation it is more likely than not
that the benefits will not be realized.
F-9
Midas
Medici Group Holdings, Inc. and Subsidiaries
|
||||||||
(formerly,
Mondo Acquisition I, Inc.)
|
||||||||
Condensed
Consolidated Balance Sheets
|
||||||||
September
30, 2009
(Unaudited)
|
December
31, 2008
(Note
2)
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 112,335 | $ | 144,546 | ||||
Accounts
receivable, net
|
408,605 | 552,517 | ||||||
Prepaid
expenses and other current assets
|
23,083 | 42,593 | ||||||
Total
current assets
|
544,023 | 739,656 | ||||||
Property
and equipment, net
|
23,603 | 34,266 | ||||||
Other
assets
|
2,952 | 2,953 | ||||||
Total
assets
|
$ | 570,578 | $ | 776,875 | ||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 578,803 | $ | 336,906 | ||||
Accrued
expenses
|
464,591 | 188,555 | ||||||
Revolving
credit facility
|
53,764 | 216,590 | ||||||
Deferred
revenue
|
180,455 | 154,011 | ||||||
Current
portion of long-term debt
|
493,138 | 60,792 | ||||||
Current
portion of capital lease obligations
|
13,493 | 16,242 | ||||||
Preferred
stock dividends payable - stated
|
178,208 | 68,250 | ||||||
Preferred
stock dividends payable - accreted
|
- | 395,585 | ||||||
Common
stock put options
|
- | 269,000 | ||||||
Management
fee payable
|
113,978 | 50,000 | ||||||
Other
current liabilities
|
20,566 | 5,299 | ||||||
Total
current liabilities
|
2,096,996 | 1,761,230 | ||||||
Long-term
debt, less current portion
|
196,469 | 514,606 | ||||||
Capital
lease obligations, less current portion
|
8,402 | 16,409 | ||||||
Total
liabilities
|
2,301,867 | 2,292,245 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders’
deficit:
|
||||||||
Preferred
stock, par value $0.001; 10,000,000 shares authorized; none issued and
outstanding as of September 30, 2009 and December 31, 2008,
respectively
|
- | - | ||||||
Common
stock, $0.001 par value; 40,000,000 authorized; issued 2,735,516 and
outstanding 2,310,516 shares at September 30,
2009; issued 2,192,095 and outstanding 1,383,483
shares at December 31, 2008
|
2,736 | 2,192 | ||||||
Treasury
stock, at cost; 425,000 and 808,611 shares at September 30, 2009 and
December 31, 2008, respectively
|
(40 | ) | (974,015 | ) | ||||
Additional
paid-in capital
|
(187,719 | ) | 540,997 | |||||
Common
stock put options
|
(269,000 | ) | ||||||
Accumulated
deficit
|
(1,554,746 | ) | (812,782 | ) | ||||
Accumulated
other comprehensive income (loss)
|
8,480 | (2,762 | ) | |||||
Total
stockholders' deficit
|
(1,731,289 | ) | (1,515,370 | ) | ||||
Total
liabilities and stockholders' deficit
|
$ | 570,578 | $ | 776,875 |
See accompanying
notes to unaudited condensed consolidated financial
statements .
F-10
Midas
Medici Group Holdings, Inc. and Subsidiaries
|
||||||||||||||||
(formerly,
Mondo Acquisition I, Inc.)
|
||||||||||||||||
Condensed
Consolidated Statements of Operations and Comprehensive
Loss
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||
Three
Months Ended September 30, 2009
|
Three
Months Ended September 30, 2008
|
Nine
Months Ended September 30, 2009
|
Nine
Months Ended September 30, 2008
|
|||||||||||||
Revenues
|
$ | 837,404 | $ | 1,055,595 | $ | 2,566,962 | $ | 2,826,650 | ||||||||
Cost
of services
|
506,153 | 599,581 | 1,445,193 | 1,485,006 | ||||||||||||
Gross
margin
|
331,251 | 456,014 | 1,121,769 | 1,341,644 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Selling,
general and administrative
|
820,474 | 493,683 | 1,784,968 | 1,338,676 | ||||||||||||
Depreciation
and amortization
|
4,421 | 4,464 | 13,835 | 12,207 | ||||||||||||
Total operating
expenses
|
824,895 | 498,147 | 1,798,803 | 1,350,883 | ||||||||||||
Operating
loss
|
(493,644 | ) | (42,133 | ) | (677,034 | ) | (9,239 | ) | ||||||||
Other
income (expense):
|
||||||||||||||||
Interest
income
|
1 | - | 2 | - | ||||||||||||
Interest
expense
|
(19,791 | ) | (19,888 | ) | (62,855 | ) | (49,332 | ) | ||||||||
Total other
income (expense)
|
(19,790 | ) | (19,888 | ) | (62,853 | ) | (49,332 | ) | ||||||||
Loss
before income taxes
|
(513,434 | ) | (62,021 | ) | (739,887 | ) | (58,571 | ) | ||||||||
Provision
(benefit) for income taxes
|
- | (13,879 | ) | 2,077 | (1,362 | ) | ||||||||||
Net
loss
|
(513,434 | ) | (48,142 | ) | (741,964 | ) | (57,209 | ) | ||||||||
Preferred
stock dividends and dividend accretion
|
||||||||||||||||
Preferred stock
stated dividends
|
(41,708 | ) | (34,125 | ) | (109,958 | ) | (102,375 | ) | ||||||||
Preferred stock
dividend accretion
|
(30,377 | ) | (72,285 | ) | (203,109 | ) | (201,659 | ) | ||||||||
Net
loss applicable to common stockholders
|
$ | (585,519 | ) | $ | (154,552 | ) | $ | (1,055,031 | ) | $ | (361,243 | ) | ||||
Net
loss per common share (basic and diluted)
|
$ | (0.37 | ) | $ | (0.11 | ) | $ | (0.69 | ) | $ | (0.26 | ) | ||||
Weighted
average of common shares outstanding (basic and
diluted)
|
1,600,037 | 1,355,631 | 1,531,736 | 1,372,730 | ||||||||||||
Comprehensive
loss:
|
||||||||||||||||
Net
loss
|
$ | (513,434 | ) | $ | (48,142 | ) | $ | (741,964 | ) | $ | (57,209 | ) | ||||
Foreign
currency translation
|
(4,882 | ) | - | 11,242 | - | |||||||||||
Comprehensive
loss
|
$ | (518,316 | ) | $ | (48,142 | ) | $ | (730,722 | ) | $ | (57,209 | ) | ||||
See
accompanying notes to unaudited condensed consolidated financial
statements.
F-11
Midas
Medici Group Holdings, Inc. and Subsidiaries
|
||||||||||||||||||||||||||||||||
(formerly,
Mondo Acquisition I, Inc.)
|
||||||||||||||||||||||||||||||||
Condensed
Consolidated Statements of Stockholders' Deficit
|
||||||||||||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||||||||||
Common
stock
|
||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Treasury
stock
|
Additional
paid-in
capital
|
Common
stock put options
|
Accumulated
deficit
|
Accumulated
other comprehensive income (loss)
|
Total
stockholders' deficit
|
|||||||||||||||||||||||||
Balance
- December 31, 2008
|
2,192,095 | $ | 2,192 | $ | (974,015 | ) | $ | 540,997 | $ | (269,000 | ) | $ | (812,782 | ) | $ | (2,762 | ) | $ | (1,515,370 | ) | ||||||||||||
Net
loss for the period
|
- | - | - | - | - | (741,964 | ) | - | (741,964 | ) | ||||||||||||||||||||||
Issuance
of common stock
|
15,981 | 16 | - | 24,984 | - | - | - | 25,000 | ||||||||||||||||||||||||
Purchase
of treasury stock
|
(50,948 | ) | - | - | - | - | - | - | - | |||||||||||||||||||||||
Stated
dividends on preferred stock
|
- | - | - | (109,958 | ) | - | - | - | (109,958 | ) | ||||||||||||||||||||||
Accretion
of accelerated and balloon dividends on preferred
stock
|
- | - | - | (203,109 | ) | - | - | - | (203,109 | ) | ||||||||||||||||||||||
Effect
of reverse merger adjustments
|
578,388 | 528 | 973,975 | (637,008 | ) | 269,000 | - | - | 606,495 | |||||||||||||||||||||||
Stock-based
compensation
|
- | - | - | 196,375 | - | - | - | 196,375 | ||||||||||||||||||||||||
Translation
adjustments
|
- | - | - | - | - | - | 11,242 | 11,242 | ||||||||||||||||||||||||
Balance
- September 30, 2009
|
2,735,516 | $ | 2,736 | $ | (40 | ) | $ | (187,719 | ) | $ | - | $ | (1,554,746 | ) | $ | 8,480 | $ | (1,731,289 | ) |
See
accompanying notes to unaudited condensed consolidated financial
statements.
F-12
Midas
Medici Group Holdings, Inc. and Subsidiaries
|
||||||||
(formerly,
Mondo Acquisition I, Inc.)
|
||||||||
Condensed
Consolidated Statements of Cash Flows
|
||||||||
(Unaudited)
|
||||||||
Nine
Months Ended
September
30, 2009
|
Nine
Months Ended
September
30, 2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (741,964 | ) | $ | (57,209 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
and amortization
|
13,835 | 12,207 | ||||||
Provision
for uncollectible accounts
|
- | 3,425 | ||||||
Stock-based
compensation
|
196,375 | - | ||||||
Deferred
taxes
|
- | (4,302 | ) | |||||
Changes
in operating assets and liabilities net of effects of consolidation of
Utilipoint International, Inc:
|
||||||||
Accounts
receivable
|
150,795 | (81,482 | ) | |||||
Prepaid
expenses and other current assets
|
20,074 | 86,205 | ||||||
Accounts
payable
|
159,794 | 2,219 | ||||||
Accrued
expenses and other current liabilities
|
91,623 | 54,577 | ||||||
Deferred
revenue
|
25,813 | (50,599 | ) | |||||
Management
fees payable
|
63,978 | 25,000 | ||||||
Other
|
4,310 | (11,602 | ) | |||||
Net
cash used in operating activities
|
(15,367 | ) | (21,561 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Additions
to property and equipment
|
(1,081 | ) | (2,411 | ) | ||||
Net
cash acquired from acquisition
|
16,482 | - | ||||||
Net
cash provided by (used in) investing activities
|
15,401 | (2,411 | ) | |||||
Cash
flow from financing activities:
|
||||||||
Net
borrowings (payments) on revolving credit facility
|
(163,062 | ) | 164,894 | |||||
Change
in bank overdrafts
|
- | (113,937 | ) | |||||
Principal
payments on capital lease obligations
|
(12,639 | ) | (10,362 | ) | ||||
Principal
payments on notes payable
|
(97,260 | ) | (78,233 | ) | ||||
Proceeds
from notes payable
|
212,046 | 150,000 | ||||||
Proceeds
from issuance of common stock
|
25,000 | - | ||||||
Distribution/dividend
to preferred stockholders
|
- | (68,250 | ) | |||||
Capital
contribution
|
- | - | ||||||
Net
cash provided by (used in) financing activities:
|
(35,915 | ) | 44,112 | |||||
Net
increase (decrease) in cash and cash equivalents
|
(35,881 | ) | 20,140 | |||||
Effect
of exchange rate changes on cash and cash
equivalents
|
3,670 | - | ||||||
Cash
and cash equivalents at beginning of period
|
144,546 | - | ||||||
Cash
and cash equivalents at end of period
|
$ | 112,335 | $ | 20,140 | ||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid during the period for:
|
||||||||
Interest
|
$ | 55,350 | $ | 42,480 | ||||
Taxes
|
$ | 2,077 | $ | 2,940 | ||||
Supplemental
disclosure of non-cash financing and investing
activities:
|
||||||||
Property
and equipment acquired under capital leases
|
$ | 1,884 | $ | 13,054 |
See
accompanying notes to unaudited condensed consolidated financial
statements.
F-13
MIDAS
MEDICI GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE
1 - DESCRIPTION OF BUSINESS
Midas
Medici Group Holdings, Inc, formerly Mondo Acquisition I, Inc. (“Midas Medici”,
the “Company”), was incorporated in the State of Delaware on October 30, 2006
for the purpose of raising capital that is intended to be used in connection
with its business plans which may include a possible merger, acquisition or
other business combination with an operating business. On May 15, 2009, Mondo
Management Corp., the then sole shareholder, and Midas Medici Group, Inc.
entered into a Purchase Agreement. Pursuant to the Purchase
Agreement, Mondo Management Corp. sold to Midas Medici Group
1,000,000 previously issued and
outstanding shares of Mondo Management Corp.'s
restricted common stock, comprising 100%
of the issued and
outstanding capital stock of Mondo Management
Corp. The execution of the Purchase Agreement resulted in a change in control of
the Company, both in its shareholding and management. Effective May 22, 2009,
the Company changed its name to Midas Medici Group Holdings,
Inc.
Utilipoint
International, Inc. (“Utilipoint”), together with its subsidiaries, is a utility
and energy consulting, and issues analysis firm. Utilipoint offers public issues
and regulatory management, advanced metering infrastructure and meter data
management, rates and demand response, utility energy and technology, trading
and risk management, and energy investment services. Utilipoint provides its
services to energy companies, utilities, investors, regulators, and industry
service providers primarily in North America and Europe. Utilipoint also serves
select clients in Asia, South America, Africa and the Middle East. Utilipoint is
headquartered in Albuquerque, New Mexico, with two domestic regional offices in
Tulsa, Oklahoma and Houston, Texas, and is incorporated under the laws of the
State of New Mexico. Utilipoint also has a wholly owned subsidiary, Utilipoint,
s.r.o., in the Czech Republic and maintains its international operations through
its office in Brno, Czech Republic. In July 2009, Utilipoint acquired a
controlling interest in The Intelligent Project, LLC (“IP”). IP is a research
and advisory services firm addressing the challenges that utilities face in
advancing and solving electricity consumers’ needs related to the Smart Grid. IP
is headquartered in West Lafayette, Indiana. The
acquisition was accounted for as a combination of entities under common
control. As such, expenditures amounting to $107,969 for the period
from January 1, 2009 through date of acquisition have been included in the
condensed consolidated statement of operations and comprehensive loss as if the
acquisition had occurred on January 1, 2009.
On August
21, 2009, Midas Medici and Utilipoint entered into a reverse merger transaction
(discussed further in Note 4), which results in Midas Medici being the “legal
acquirer” and Utilipoint the “accounting acquirer”. The prospective filings with
the Securities and Exchange Commission (the “SEC”) included the historical
financial results of Utilipoint as of and for the periods ending September 30,
2009 and 2008 and Midas Medici, and its subsidiaries only as of and for the
period commencing August 21, 2009, the date of the reverse
merger.
At the
closing of the Merger Agreement on August 21, 2009, Midas Medici ceased to
be a shell company. Any reference to “Company”, “Midas Medici”, “we” or “our”
after August 21, 2009, refers to Midas Medici Group Holdings, Inc. together with
our wholly-owned subsidiary Utilipoint and its subsidiaries.
References
herein to Utilipoint common shares has been retrospectively adjusted
to reflect the exchange ratio 31.962187 Midas Medici common shares for each
share of Utilipoint common stock established in the Merger
Agreement.
NOTE
2 – LIQUIDITY AND BASIS OF PRESENTATION
Our
condensed consolidated financials statements have been prepared assuming that we
will continue as a going concern, which contemplates the realization of assets
and the settlement of liabilities in the normal course of business and,
accordingly, no adjustments have been made to recorded amounts to reflect the
outcome of this uncertainty. The Company’s accumulated deficit at September 30,
2009 was $1,554,746 and the Company incurred a net loss of $741,964 for the nine
months ended September 30, 2009.
At
September 30, 2009 the Company had working capital deficiency of $1,552,973.
Historically, Utilipoint has funded its operations with cash obtained mainly
from stockholders and third party financings. As a wholly-owned subsidiary of
Midas Medici, Utilipoint anticipates receiving external financing (upon
completion of Midas Medici’s initial public offering) for its working capital
needs and will be in a position to operate profitably and solve its liquidity
constraints on a go-forward basis in a sustainable manner. Utilipoint is
currently taking steps to improve its operational results and liquidity.
Management actions and plans for improving operational results and liquidity
include the following:
F-14
Increased
Staff Utilization – The Company has begun implementing definitive plans
to increase staff utilization which management believes will improve
margins.
Increased
Business Development and Executive Leadership Resources – In July 2009,
with the combination of IP, two veteran executives joined Utilipoint. IP is
a research and advisory services firm focused on assisting utilities with the
challenge of advancing and solving customer dimension complexities of the Smart
Grid. The addition of these individuals significantly increased
Utilipoint’s resources in business development and executive leadership.
Management believes this addition of executive talent will significantly
increase its revenues and profits while optimizing how it manages its
operations.
Deferring
of Insider Obligations – Utilipoint has on its books, as of September 30,
2009, current debt obligations due to insiders of approximately $500,000. The
Company believes that its insiders are going to continue deferring their
obligations until the Company generates internal cash flows or procures outside
financing.
Management
believes it will be successful in completing the foregoing actions which will
enable the Company to operate its business in a sustainable manner through
December 31, 2010.
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
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 and the 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. Significant estimates include: allowances for doubtful
accounts, certain revenue recognition methodologies related to contract
deliverables, valuation allowances for deferred tax assets, rates at which
deferred tax assets and liabilities are expected to be recorded or settled,
accruals for paid time off and the estimated labor utilization rate used to
determine cost of services for the Company’s foreign
subsidiary.
(b) Cash
and Cash Equivalents
For
purposes of the statement of cash flows, the Company considers highly
liquid financial instruments purchased with original maturities of three months
or less to be cash equivalents.
(c) Allowance
for Doubtful Accounts
Allowance
for doubtful accounts are based on evaluation of customers’ ability to
meet their financial obligations to the Company. When evaluation indicates
that the ability to pay is impaired, a specific allowance against amounts due is
recorded thereby reducing the net recognized receivable to the amount the
Company reasonably believes will be collected. When management determines that
receivables are not collectible, the gross receivable is written off against the
allowance for doubtful accounts.
(d)
Income Taxes
The
current or deferred tax consequences of all events that have been
recognized in the financial statements are measured based on provisions of
enacted tax law to determine the amount of taxes payable or refundable in future
periods. Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between financial statement
carrying amounts of existing assets and liabilities, and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax
rates for the years in which those temporary differences are expected to be
recovered or settled. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized into income during the period that includes
the enactment date. A valuation allowance is established to reduce
deferred tax assets if it is more likely than not that all, or some portion of,
such deferred tax assets will not be realized. The Company accounts for
uncertain tax positions in accordance with by provision FASB ASC 740, Subtopic
FASB ASC 740, Subtopic 10 which prescribes a recognition threshold and
measurement attribute for financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. The Company does not
believe it has any material unrecognized income tax positions. As of September
30, 2009, deferred tax assets have been fully offset by a valuation allowance
and therefore no tax benefit has been recognized on the loss through September
30, 2009.
(e)
Fair Value of Financial Instruments
The
carrying amounts of financial instruments, which include cash and cash
equivalents, accounts receivable, prepaid expenses and other current assets,
accounts payable, accrued expenses, other current liabilities, revolving credit
facility and debt approximate their fair values due to their short maturities
and variable interest rate on the revolving credit facility and fixed rates
which approximate market rates on significant notes payable. Based on borrowing
rates currently available to the Company for loans with similar terms, the
carrying value of capital lease obligations approximates fair
value.
F-15
(f) Revenue
Recognition
Utilipoint’s
primary revenue streams and the basis on which revenue is recognized for
each are as follows:
Fixed-Price
Contracts
Fixed
price contracts are projects where services are provided at an agreed upon price
for defined deliverables. On occasion, clients with fixed price contracts will
require an accounting of all hours worked on a project at an agreed upon hourly
rate to accompany an invoice.
Utilipoint
recognizes revenue when a deliverable is provided except in the case
where the client requires that time reporting accompany an invoice. In that
case, Utilipoint recognizes revenue up to the amount the time records support,
in that clients requiring time reporting with hourly rates on fixed price
contracts typically can only ask for refunds on fixed price projects up to the
amount as if the contract had been time and materials. With acceptance of the
final deliverable, all revenue is recognized.
Bundled
Service Agreements (“BSAs”)
BSAs are
packages of services that clients subscribe to, typically on an annual contract
basis. The services typically include a combination of the
following:
• Access
to subject matter experts as needed, by telephone
• Discounted
fees for Utilipoint events
• Advertising
space on the IssueAlert® e-publication
• One
to three reports and/or whitepapers on industry topics
• Briefings
on industry trends and research findings
BSAs
also include annual memberships in the Advanced Metering
Infrastructure and Meter Data Management (“AMI MDM”) forum and corporate
contracts. The AMI MDM forum is designed for electric, water, and/or gas
utilities, regulators, utility governing boards, independent system operators
and consumer advocacy groups to come together and discuss meter data management
successes, problems, issues, interfaces and best practices. Corporate contracts are
characterized by an annual contract for a pre-defined amount of market research
hours. Clients of this service receive access to Utilipoint’s
directory and InfoGrid products. The primary service is the block of hours
purchased.
Utilipoint
believes
that the substance of BSAs, as pointed out in a recent survey of its clients,
indicates that the purchaser pays for a service that is delivered over
time. As a result, revenue recognition occurs over the subscription
period, or in the case of corporate contracts as the hours are utilized,
reflecting the pattern of provision of service.
Time and Materials Contracts
(“T&M”)
T&M
are services billed at a set hourly rate. Project related expenses
are passed through at cost to clients. Normally invoices occur on
monthly basis. Utilipoint recognizes revenue as billed unless the project has a
major deliverable(s) associated with it, in which case the revenue is deferred
until the major deliverable(s) is provided.
Events and
Sponsorships
Utilipoint
hosts events such as conferences. These events include revenues from
sponsorships and registration fees which are recognized in the month of the
event. Revenues from sponsors of the AMI MDM forum are recognized
over the annual subscription period, reflecting the pattern of provision of
service.
Utilipoint’s
deferred revenue consists primarily of amounts received from or billed to
clients in conjunction with BSAs, T&M and fixed price contracts for which
revenue is recognized over time or upon completion of contract
deliverables.
(g)
Property and Equipment
Property and equipment is carried at cost, less accumulated
depreciation and amortization. Depreciation and amortization is calculated using
the straight-line method over the useful lives that typically range from three
to ten years. Equipment under capital leases is amortized over the
lesser of the lease term which is typically three years and is removed from the
Company’s accounting records upon lease termination .
F-16
(h)
Foreign Currency Translation and Transactions
The U.S.
dollar is the reporting currency for all periods presented. The financial
information for the Company outside the United States is measured using the
local currency as the functional currency. Assets and liabilities for the
Company’s foreign subsidiary are translated into U.S. dollars at the exchange
rate in effect on the respective balance sheet dates, and revenues and expenses
are translated into U.S. dollars based on the average rate of exchange for the
corresponding period. Exchange rate differences resulting from translation
adjustments are accounted for as a component of accumulated other comprehensive
income. Gains and (losses) from foreign currency transactions are reflected in
the consolidated statements of operations under the line item selling, general
and administrative expense. The foreign exchange gain (loss) was $(841) and
$(8,194) for the three and nine months ended September 30, 2009, respectively,
and $166 and $(4,947) for the three and nine months ended September 30, 2008.
Such foreign currency transactions include primarily billings denominated in
foreign currencies by the Company’s U.S. subsidiary, which are reported based on
the applicable exchange rate in effect on the balance sheet date. The related
deferred revenue from such billings is reported in U.S. dollars at the exchange
rate in effect at the billing dates when the revenue was
deferred.
(i)
Comprehensive Income (Loss)
Comprehensive
income (loss) consists of net loss or gains on foreign currency translations and
net income or loss from operations and is presented in the consolidated
statements of stockholders’ equity. This includes charges and credits to equity
that are not the result of transactions with stockholders. Included in other
comprehensive income (loss) are the cumulative translation adjustments related
to the net assets of the operations of the Company’s foreign subsidiary. These
adjustments are accumulated within the consolidated statements of stockholders’
equity under the caption “Accumulated Other Comprehensive Income (Loss)” Other
comprehensive income (loss) was ($4,882) and $11,242 for the three
and nine months ended September 30, 2009, respectively and $0 for the
three and nine months ended September 30, 2008.
(j)
Stock-Based Compensation
The
Company accounts for stock-based compensation arrangements in accordance with
the provision of SFAS ASC 178, Share Based Payment. Compensation expense that
the Company recognizes includes expense associated with the fair value of
share-based awards granted.
NOTE
4 – REVERSE MERGER
On August
21, 2009, Midas Medici completed a reverse merger with privately held
Utilipoint, a New Mexico Corporation which results in Midas Medici being the
“legal acquirer” and Utilipoint the “accounting acquirer”. The acquisition was
effected pursuant to a Merger Agreement dated August 10, 2009 by and among the
Company, Utilipoint and Utilipoint Acquisition Company. Pursuant to the Merger
Agreement, an aggregate of 1,348,516 shares of Midas Medici were issued to
Utilipoint shareholders in exchange for 42,191 Utilipoint shares (which
represents 100% of the then outstanding shares). This includes 21,523 Utilipoint
Series A Preferred
Stock that were converted to 687,922 Midas Medici common shares. Further,
all outstanding Utilipoint options were exchanged for 172,597 Midas Medici
options in accordance with the Midas Medici stock option program, adopted on
July 27, 2009. Immediately after the closing of the acquisition and as of
September 30, 2009, an aggregate of 2,310,516 shares of common stock were
outstanding. Hence, the 1,348,516 shares represented approximately 58% of the
outstanding shares of Midas Medici. The shares of common stock issued in
connection with the reverse merger were not registered with the
Securities and Exchange Commission and are considered to be restricted
securities.
F-17
NOTE
5 – DEBT
Debt,
including interest rates and maturities, is summarized as follows at September
30, 2009:
Interest
rates
|
Maturity
|
September
30, 2009
|
December
31, 2008
|
|||||||
12.00% |
1/1/2010
|
$ | 447,106 | $ | 447,106 | |||||
10.00% |
12/31/2013
|
62,500 | 62,500 | |||||||
4.00% |
5/4/2010
|
5,000 | 5,000 | |||||||
4.00% |
9/23/2009
(1)
|
16,000 | 16,000 | |||||||
4.00% |
6/2/2009 (2)
|
3,722 | 9,722 | |||||||
10.00% |
1/15/2014
|
10,000 | - | |||||||
10.00% |
1/15/2014
|
7,500 | - | |||||||
10.00% |
1/15/2014
|
7,500 | - | |||||||
5.00% |
6/30/2012
|
108,969 | - | |||||||
Variable,
3% and 4.68% at September 30, 2009 and
|
||||||||||
December
31, 2008, respectively
|
8/2/2009 (3)
|
21,310 | 35,070 | |||||||
Total
long-term debt, including
|
||||||||||
current
maturities
|
689,607 | 575,398 | ||||||||
Current
maturities of long-term debt
|
(493,138 | ) | (60,792 | ) | ||||||
Long-term
debt, less current portion
|
196,469 | 514,606 | ||||||||
Short-term
debt:
|
||||||||||
Revolving
credit facility/note payable Utilipoint
|
46,264 | 216,590 | ||||||||
Revolving
credit facility Intelligent Project, LLC
|
7,500 | - | ||||||||
Short-term
notes payable
|
577 | - | ||||||||
Current
maturities of long-term debt
|
493,138 | 60,792 | ||||||||
Total
short-term debt
|
547,479 | 277,382 | ||||||||
Total
debt
|
$ | 743,948 | $ | 791,988 |
The
$689,607 of total long-term debt including current maturities is due to either
current or former shareholders of the Company. Interest rates are
fixed unless otherwise noted. Variable interest rates are per the
credit union from which the current management shareholder obtained a home
equity loan from which the funds were then loaned to the
Company.
Notes
payable to current and former shareholders are unsecured and subordinated to
obligations under credit facility borrowings with the Bank of
Albuquerque. Notes payable to current and former management
shareholders are further subordinated to the $62,500 note to Knox Lawrence
International, LLC (“Knox Lawrence”) due December 31, 2013. Payment terms on
three notes have been revised as follows:
(1)
|
The
$16,000 note payable due September 23, 2009 was restructured on August 1,
2009 in connection with the resignation of the Company executive who holds
the note. Per terms of a separation agreement, the former Company
executive agreed to an extension of terms in the amount of two
installments of $2,000 and $14,000 due December 31, 2009 and January 30,
2010, respectively.
|
(2)
|
The
same former Company executive also agreed to a payment date of September
30, 2009 for the unpaid portion, $3,722 of the $9,722 note due June 2,
2009 of which $6,000 had been paid on June 2, 2009. Payment of the unpaid
portion of $3,722 was made on October 16,
2009.
|
(3)
|
In
connection with the employment agreement of one of the management
shareholders, we have agreed to make a principal payment of $5,000 per
month beginning July 31, 2009 in addition to the normal monthly payment
for the variable rate sub-debt note that is due August 2, 2009 until the
note is paid in full. As of September 30, 2009, the outstanding balance
was $21,310.
|
Utilipoint
had a revolving credit facility, used for working capital needs, with the Bank
of Albuquerque from 2005 through mid-2008 at which point the line
expired. Utilipoint had not been in compliance with debt covenant
financial ratios on debt coverage, funded debt to earnings before interest,
taxes, depreciation and amortization (“EBITDA”) and tangible net worth for years
2007 and 2008. The balance at December 31, 2008 was partially paid
down on January 22, 2009 and converted into a short-term note in the amount of
$165,000 due September 30, 2009 with an interest rate of 9.25%. Six
monthly consecutive principal payments of $16,500 plus interest on unpaid
principal were due commencing January 15, 2009 with a final payment of $66,000
plus interest due September 30, 2009. The Company paid the first five
installments and subsequently renegotiated the remaining balance of principal
and interest totaling $82,264 into a new 9.25% note with the Bank of Albuquerque
on September 30, 2009. The 9.25% note matures on December 31, 2009 and will be
repaid in 5 principal payments of $9,000 each and one final principal and
interest payment of $37,561. The 9.25% note is an extension / renewal /
modification of the credit facility and as such is secured by Utilipoint’s
accounts receivable, fixed assets and a right of offset against cash accounts
held with the bank. As of September 30, 2009, $46,264 was the outstanding
balance of the Company’s 9.25% note with the Bank of
Albuquerque.
F-18
The note
payable of $108,969 represents a loan form KLI-IP Holding, Inc. to IP for
working capital. Interest on this note accrues at an annual percentage rate of
5% and the note matures on June 30, 2012.
In July
2009, IP secured a revolving credit facility with Chase Bank. The credit
facility allows IP to borrow up to $15,000 at an interest rate ranging from
13.24% to 19.24%. Interest accrues at an annual percentage rate of
13.24% for purchases and 19.24% for cash advances and overdraft protection. As
of September 30, 2009, the amount outstanding under this credit facility was
$7,500.
The short
term note payable of $577 at September 30, 2009 represents the remaining balance
of an interest free loan by Knox Lawrence to IP for working capital. This note
was paid in full on October 5, 2009. At September 30, 2009, the balance of $577
was included in “Other current liabilities” in the condensed consolidated
Balance Sheet.
On
October 14, 2009, the Company, entered into a revolving loan agreement with
Proficio Bank (the “Loan Agreement”). Pursuant to the terms of the Loan
Agreement, the Lender agreed to loan up to $500,000 (the “Loan”) to the Company
which amounts will be evidenced by a Senior Secured Revolving Promissory Note.
The Loan matures on October 14, 2010, unless earlier accelerated upon the
occurrence of an event of default, as such term is defined in the loan
agreement. Interest on the Loan is payable monthly in arrears commencing on
November 1, 2009, at a rate which is equal to the prime rate plus 2.5%, or a
minimum of 6.5%. In the event of default, as such term is defined in
the Loan Agreement; the interest rate shall bear additional interest of
3%. There was no balance outstanding at September 30,
2009.
Interest
expense on notes payable and the revolving credit facilities was $17,797 and
$60,715 for the three and nine months ended September 30, 2009 and $19,221
and $47,373 for the three and nine months ended September 30,
2008.
The
Company's contractual payments of long-term borrowings at September 30, 2009 are
as follows:
Year
|
Amount
|
|||
2009
|
$ | 41,032 | ||
2010
|
452,106 | |||
2011
|
- | |||
2012
|
108,969 | |||
2013
|
62,500 | |||
2014
|
25,000 | |||
Total
|
$ | 689,607 |
NOTE
6 - 401(K) PLAN
The
Company maintains a defined contribution retirement plan under Internal Revenue
Code Section 401(k). Substantially all regular full time employees
are eligible to participate in the plan. The Company matches each
eligible employee’s salary reduction contribution up to a limit of
3%. The Company’s contributions were $4,748 and $10,551 for the three
and nine months ended September 30, 2009, respectively, and $6,336 and $22,447
for the three and nine months ended September 30, 2008,
respectively.
NOTE
7 - STOCKHOLDERS’ EQUITY
(a)
Common
Stock Dividends
The
Company may make distributions on the common stock. There has been no common
stock dividends declared as of September 30, 2009. Under the terms of the Loan
Agreement with Proficio Bank (refer to Note 5, Debt), the Company is restricted
from declaring or paying dividends without the prior written consent of the
bank, so long as it may borrow under the Loan Agreement or so long as any
indebtedness remains outstanding under the Loan Agreement.
(b)
Preferred
Stock Dividends
Prior to
the acquisition by Midas Medici on August 21, 2009 Utilipoint was required to
pay preferential cumulative dividends in cash to the holders of Utilipoint’s
Series A Preferred Stock. The
Company is in a negative retained earnings position and therefore the dividends
were recorded as a reduction in the APIC Series A Preferred Stock. As of the
acquisition date, August 21, 2009 and September 30, 2009, $178,208 of stated
Series A Preferred Stock dividends had been paid to the preferred shareholders
by Knox Lawrence on behalf of Utilipoint. Refer to Note 10 (b),
Related Party Transactions - Utilipoint Preferred Dividends.
F-19
The
discount resulting from the increasing rate feature of the Series A Preferred
Stock dividend represents an unstated dividend cost that was being amortized
over the three year dividend payment period using the effective interest method,
by charging the imputed dividend cost against APIC Series A Preferred
Stock. The total stated dividends, whether or not declared, and
unstated dividend cost combined represents a period’s total preferred stock
dividend, which is deducted from net income (loss) to arrive at net loss
available to common shareholders.
On August
21, 2009, all Series A Preferred Stock were exchanged for shares of Midas
Medici. Refer to Note 4, Reverse Merger. Therefore, the preferred stock dividend
payable-accreted was reclassified to additional paid-in
capital.
(c)
Loss per Common Share
Basic
loss per share has been computed by dividing net loss available to common
stockholders by the weighted average number of shares of common stock
outstanding during each period. Shares issued during the period and shares
reacquired during the period are weighted for the portion of the period that
they were outstanding. Diluted earnings per share considers the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock. Potentially dilutive securities
for the Company include stock options awarded pursuant to the Company’s 2009
Incentive Stock Plan. An aggregate of 465,097 options to purchase shares of
common stock of the Company granted under the Midas Medici Group Holdings, Inc.
Stock Award and Incentive Plan (the “MMGH Plan”) for the three and nine months
ended September 30, 2009 were not included in the computation of diluted
net loss per share because the inclusion of such shares would have an
anti-dilutive effect on the net loss per share. There were no outstanding
options for the three and nine months ended September 30,
2008.
(d)
2009 Stock Award and Incentive Plan
On July
27, 2009, the Board approved the MMGH Plan. The maximum number of shares that
may be issued under the Plan is 650,000. However for a period of ten (10) years
commencing January 1, 2010, the maximum number of shares issuable under the Plan
shall be equal to 20% of the issued and outstanding shares of the Company’s
common stock on a fully diluted basis but shall not be less than 650,000.
Pursuant to the Plan, incentive stock options or non-qualified options to
purchase shares of common stock may be issued. The plan may be
administered by our board of directors or by a committee to which administration
of the Plan, or part of the Plan, may be delegated by our board of directors.
Options granted under the Plan are not generally transferable by the optionee
except by will, the laws of descent and distribution or pursuant to a qualified
domestic relations order, and are exercisable during the lifetime of the
optionee only by such optionee. Options granted under the plan vest in such
increments as is determined by our board of directors or designated committee.
To the extent that options are vested, they must be exercised within a maximum
of thirty days of the end of the optionee's status as an employee, director or
consultant, or within a maximum of 12 months after such optionee's termination
or by death or disability, but in no event later than the expiration of the
option term. The exercise price of all stock options granted under the plan will
be determined by our board of directors or designated committee. With respect to
any participant who owns stock possessing more than 10% of the voting power of
all classes of our outstanding capital stock, the exercise price of any
incentive stock option granted must equal at least 110% of the fair market value
on the grant date.
Stock
option awards granted from this plan are granted at the fair market value on the
date of grant, vest over a period determined at the time the options are
granted, ranging from zero to one year, and generally have a maximum term of ten
years. Certain options provide for accelerated vesting if there is a termination
of employment event for specified reasons set forth in certain employment
agreements. When options are exercised, new shares of the Company’s common
stock, par value $0.001 per share, are issued.
On July
27, 2009 the Company granted options to purchase an aggregate of 247,500 shares
of common stock under the MMGH Plan with a weighted-average exercise price of
$2.27.
On August
21, 2009, the Company completed an offer to exchange Utilipoint stock options
for Midas Medici stock options (the “Exchange”). All previously granted
Utilipoint options were exchanged for new Midas Medici options with a lower
exercise price on a one-for-thirty two basis. Options for an aggregate of 5,400
shares of Utilipoint’s common stock were exchanged. Options granted pursuant to
the Exchange have an exercise price of $1.56 per share and vested on grant date.
The outstanding Utilipoint options were exchanged for 172,597 Midas Medici
options.
Also, on
August 21, 2009, we issued options to purchase 45,000 shares of our common stock
to employees and one of our directors at an exercise price of $6.00 per
share.
F-20
A summary
of option activity under the MMGH Plan as of September 30, 2009, and changes
during the nine months then ended is presented below:
|
||||||||||||||||
Weighted-Average
|
Weighted-Average Remaining |
Aggregate
|
||||||||||||||
Shares
|
Exercise
Price
|
Contractual
Term
|
Intrinsic
Value
|
|||||||||||||
Outstanding
at January 1, 2009
|
- | $ | - | |||||||||||||
Granted
|
465,097 | $ | 2.37 | |||||||||||||
Exercised
|
- | $ | - | |||||||||||||
Forfeited
or expired
|
(15,981 | ) | $ | 1.56 | ||||||||||||
Outstanding
at September 30, 2009
|
449,116 | $ | 2.40 | 5.5 | $ | 1,113,480 | ||||||||||
Expected
to vest at September 30, 2009
|
424,741 | $ | 2.34 | 5.5 | $ | 1,070,199 | ||||||||||
Exercisable
at September 30, 2009
|
161,616 | $ | 1.58 | 5.2 | $ | 512,855 |
The
weighted-average grant-date fair value of options granted during the nine months
ended September 30, 2009, was $1.39 and was estimated using the
Black-Scholes-Merton option pricing model. We did not have any option plans in
prior years and to date, no option has been exercised.
The fair
value of each stock option grant is estimated on the grant date using the
Black-Scholes-Merton option-pricing model, which incorporates a number of
valuation assumptions noted in the following table, shown at their
weighted-average values:
Expected
dividend yield
|
0 | % | ||
Risk-free
rate
|
1.59 | % | ||
Expected
stock price volatility
|
103.88 | % | ||
Expected
term (years)
|
3.1 |
The
expected volatility is calculated by using the average historical volatility of
companies that management believes are representative of Midas Medici’s business
and market capitalization.
The
expected option term represents the period that stock-based awards are expected
to be outstanding based on the simplified method provided in ASC Topic 718,
which averages an award’s weighted-average vesting period and expected term
for share options. The Company will continue to use the simplified method
until it has the historical data necessary to provide a reasonable estimate of
expected life in accordance with ASC Topic 718, as amended by SAB 110. For the
expected option term, the Company used a simple average of the vesting period
and the contractual term for options granted subsequent to January 1, 2006
as permitted by ASC Topic 718.
For
equity awards to non-employees, the Company also applies the
Black-Scholes-Merton option pricing model to determine the fair value of such
instruments in accordance with ASC Topic 718 and the provisions of ASC Topic
505-50, “Equity-Based Payments to Non-Employees.” The options granted to
non-employees are re-measured as they vest and the resulting value is recognized
as an adjustment against the Company’s net loss over the period during which the
services are received.
The total
value of the stock option awards is expensed ratably over the vesting period of
the option. As of September 30, 2009, total unrecognized compensation cost
related to stock option awards, to be recognized as expense subsequent to
September 30, 2009 was approximately $342,094, and the related
weighted-average period over which it is expected to be recognized was
approximately one (1) year.
The total
fair value of options vested during the nine months ended September 30, 2009 was
$158,684. Stock-based compensation in the amount of $196,375 was expensed for
the three and nine months ended September 30, 2009 and $0 was expensed for the
three and nine months ended September 30, 2008.
F-21
NOTE
8 - COMMITMENTS AND CONTINGENCIES
(a)
Capital
Leases
The
Company is obligated under capital leases for computer equipment that expire on
various dates through December 2011. The minimum payments for the capital leases
in effect at September 30, 2009 are as follows:
Three
Months Ending December 31, 2009
|
$ | 4,659 | ||
Years
Ending December 31,
|
||||
2010
|
13,179 | |||
2011
|
6,143 | |||
2012
|
60 | |||
24,041 | ||||
Less
amount representing interest
|
2,146 | |||
Present
value of minimum lease payments
|
$ | 21,895 | ||
Short
term portion
|
$ | 13,493 | ||
Long
term portion
|
8,402 | |||
$ | 21,895 |
The
equipment recorded under capital leases was $48,146 and $52,439 at September 30,
2009 and December 31, 2008, respectively. Amortization of capital
leases amounted to $4,012 and $12,607 for the three and nine months ended
September 30, 2009, respectively, and $3,955 and $10,948 for the three and nine
months ended September 30, 2008, respectively. Interest on capital leases
amounted to $621 and $2,140 for the three and nine months ended September 30,
2009, respectively, and $666 and $1,959 for the three and nine months ended
September 30, 2008, respectively.
(b)
Operating Leases
The
Company leases buildings and equipment under various operating leases with lease
terms ranging from one to three years. The following is a schedule of
the future minimum lease payments required under operating leases that have
initial non-cancelable lease terms in excess of one year:
Fiscal
year ending December 31,
|
Minimum
Lease Commitments
|
|||
2009
|
$ | 13,687 | ||
2010
|
10,375 | |||
$ | 24,062 |
Rent
expense for office space amounted to $36,453 and $74,721 for the three and nine
months ended September 30, 2009, respectively, and $24,113 and $64,471 for the
three and nine months ended September 30, 2008,
respectively.
(c)
Litigation
The
Company, in the normal course of business, may be subject to claims and
litigation. Management is not aware of any outstanding claims or
assessments against the Company that are estimable and
likely.
NOTE
9 - CONCENTRATION RISKS
(a)
Credit Concentration
Our
demand deposits are placed with major financial
institutions. Management believes the Company is not exposed to undue
credit risk for any demand deposits that may, from time to time, exceed the
federally insured limits.
(b)
Revenue and Accounts Receivable Concentration
For the
nine months ended September 30, 2009, three clients individually represented
approximately 10% each of revenue. For the nine months ended
September 30, 2008, three clients individually represented approximately 12% to
16% each of revenue. Cumulatively, these clients comprised
approximately 30% and 43% of revenue for the nine months ended September 30,
2009 and 2008, respectively. Three clients individually represented
approximately 14% to 17% each and cumulatively 45% of net accounts receivable at
September 30, 2009.
NOTE
10 - RELATED PARTY TRANSACTIONS
(a)
Utilipoint
Management Fees
Effective
with the acquisition of Utilipoint, management fees to Knox Lawrence of $25,000
per quarter are no longer applicable. At September 30, 2009,
outstanding management fees of $113,978 are due to Knox
Lawrence.
F-22
(b)
Utilipoint
Preferred Dividends
The net
assets of Utilipoint acquired by the Company on August 21, 2009 included
preferred dividends payable to Knox Lawrence. Knox Lawrence assumed the
obligation to pay the preferred dividends to UTP International, LLC (“UTPI”) on
Utilipoint’s behalf as per the former Utilipoint preferred shareholders’
agreement. Utilipoint’s obligation for preferred dividends therefore became an
obligation to Knox Lawrence. At September 30, 2009, outstanding dividends
payable of $178,208 are due to Knox Lawrence.
(c)
IP Notes Payable
The note
payable of $108,969 represents a loan form KLI-IP Holding, Inc. to IP for
working capital. Interest on this note accrues at an annual percentage rate of
5% and the note matures on June 30, 2012.
The short
term note payable of $577 at September 30, 2009 represents the remaining balance
of an interest free loan by Knox Lawrence to IP for working capital. This note
was paid in full on October 5, 2009. At September 30, 2009, the balance of $577
was included in “Other current liabilities” in the condensed consolidated
Balance Sheet.
(d)
Expense
Reimbursement Agreement
On August
7, 2009, the Company entered into an expense reimbursement agreement (the
“Reimbursement Agreement”) with Knox Lawrence. Pursuant to the Reimbursement
Agreement, Knox Lawrence is authorized to incur up to $350,000 in certain
expenses and obligations on behalf of the Company and the Company agreed to
reimburse Knox Lawrence for such expenses and obligations promptly after
delivery of invoices for such expenses. The Reimbursement Agreement has a term
of one year, subject to earlier termination upon 30 days’ written notice by
either party. Knox Lawrence also allocates expenses for rent and office services
to the Company.
Incurred
and allocated expenses related to office rent, office services and professional
fees for the three and nine months ended September 30, 2009 were $198,058
for which the Company reimbursed Knox Lawrence $166,255. The balance of $31,803
at September 30, 2009 is a component of "Accrued Expenses" on the consolidated
balance sheet. The expenses are a component of “Selling, general and
administrative” operating expenses on the consolidated Statements of
Operations.
NOTE 11 - SUBSEQUENT
EVENTS
As
required by ASC Topic 855, “Subsequent Events”, the Company has evaluated
subsequent events through November 23, 2009, which is the date
its September 30, 2009 Condensed Financial Statements were
issued.
F-23
Report
of Independent Registered Public Accounting Firm
To the
Board of Directors and Stockholders
Utilipoint
International, Inc.
We have
audited the accompanying consolidated balance sheets of Utilipoint
International, Inc. and subsidiary (the “Company”) as of December 31, 2008 and
2007, and the related consolidated statements of operations, stockholders’
deficit and comprehensive income (loss), and cash flows for the years then
ended. 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 generally accepted auditing standards
established by the Auditing Standards Board (United States) and in accordance
with the auditing 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 consolidated 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 also 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 financial
statement presentation. We believe that our audits provide 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 Utilipoint International,
Inc. and subsidiary as of December 31, 2008 and 2007, and the results of
their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of
America.
/S/ REDW
LLC
Albuquerque,
New Mexico
August
17, 2009
F-24
UTILIPOINT
INTERNATIONAL, INC.
CONSOLIDATED
BALANCE SHEETS
December
31,
|
||||||||
2008
|
2007
|
|||||||
Assets
|
||||||||
Current
Assets
|
||||||||
Cash
and cash equivalents
|
$ | 144,546 | $ | - | ||||
Accounts
receivable, net of allowance for doubtful accounts of
$139,305
|
||||||||
and
$234,183 at 2008 and 2007, respectively
|
552,517 | 711,292 | ||||||
Prepaid
expenses and other current assets
|
42,593 | 118,111 | ||||||
Total
Current Assets
|
739,656 | 829,403 | ||||||
Property
and Equipment, net
|
34,266 | 26,040 | ||||||
Other
Assets
|
2,953 | 3,453 | ||||||
Total
Assets
|
$ | 776,875 | $ | 858,896 | ||||
Liabilities
and Stockholders' Deficit
|
||||||||
Liabilities
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable and accrued expenses
|
$ | 525,461 | $ | 272,803 | ||||
Bank
overdrafts
|
- | 113,937 | ||||||
Line
of credit
|
216,590 | 50,000 | ||||||
Deferred
revenue
|
154,011 | 336,627 | ||||||
Current
portion of long-term debt
|
60,792 | 6,925 | ||||||
Capital
lease obligations - current portion
|
16,242 | 11,844 | ||||||
Preferred
Stock dividends payable - stated
|
68,250 | - | ||||||
Preferred
Stock dividends payable - accretion of accelerated
|
||||||||
dividends
and $812,382 balloon dividend
|
395,585 | 116,232 | ||||||
Management
fees payable
|
50,000 | - | ||||||
Deferred
tax liability
|
1,057 | 42,440 | ||||||
Common
stock put options
|
269,000 | 269,000 | ||||||
Other
current liabilities
|
4,242 | 1,985 | ||||||
Total
Current Liabilities
|
1,761,230 | 1,221,793 | ||||||
Long-term
debt, less current portion
|
514,606 | 509,177 | ||||||
Capital
lease obligations, less current portion
|
16,409 | 12,492 | ||||||
Total
non-current Liabilities
|
531,015 | 521,669 | ||||||
Total
Liabilities
|
2,292,245 | 1,743,462 | ||||||
Stockholders'
Deficit
|
||||||||
Series
A Preferred stock with voting rights,
|
||||||||
cumulative
and convertible, $0.00 par value,
|
||||||||
25,000
shares authorized; issued and outstanding:
|
||||||||
21,523
shares at December 31, 2008 and 2007
|
- | - | ||||||
Series
B Preferred stock, no voting rights, $0.00 par value,
|
||||||||
25,000
shares authorized; -0- shares issued
|
- | - | ||||||
Common
stock, $0.00 par value, 150,000 shares authorized;
|
||||||||
21,762
and 21,696 shares issued and outstanding
|
||||||||
at
December 31, 2008 and 2007, respectively
|
- | - | ||||||
Capital
in excess of par value, net of $231,968 of stock issuance
costs
|
||||||||
and
accretion of accelerated dividends and balloon dividend
|
543,189 | 871,542 | ||||||
Treasury
stock at cost (25,299 and 23,615 common shares held
|
||||||||
at
2008 and 2007, respectively)
|
(974,015 | ) | (974,015 | ) | ||||
Common
stock put options
|
(269,000 | ) | (269,000 | ) | ||||
Accumulated
other comprehensive income (loss)
|
(2,762 | ) | - | |||||
Accumulated
deficit
|
(812,782 | ) | (513,093 | ) | ||||
Total
Stockholders' Deficit
|
(1,515,370 | ) | (884,566 | ) | ||||
Total
Liabilities and Stockholders' Deficit
|
$ | 776,875 | $ | 858,896 |
See
accompanying notes to consolidated financial statements
F-25
UTILIPOINT
INTERNATIONAL, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
Year
Ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Net
Revenues
|
$ | 3,660,941 | $ | 3,910,392 | ||||
Cost
of Services
|
2,037,046 | 2,149,136 | ||||||
Gross
Margin
|
1,623,895 | 1,761,256 | ||||||
Operating
Expenses
|
||||||||
Selling,
general and administrative
|
1,777,613 | 1,548,028 | ||||||
Depreciation
and amortization
|
17,845 | 10,871 | ||||||
Management
fees
|
100,000 | 25,000 | ||||||
Total
operating expenses
|
1,895,458 | 1,583,899 | ||||||
Operating
income (loss)
|
(271,563 | ) | 177,357 | |||||
Other
Income (Expense)
|
||||||||
Interest
income
|
1 | 1,974 | ||||||
Interest
expense
|
(63,942 | ) | (66,381 | ) | ||||
Other
income
|
- | 850 | ||||||
Total
other income (expense)
|
(63,941 | ) | (63,557 | ) | ||||
Income
(loss) before income taxes
|
(335,504 | ) | 113,800 | |||||
Provision
(benefit) for income taxes
|
(35,815 | ) | 45,737 | |||||
Net
income (loss)
|
(299,689 | ) | 68,063 | |||||
Preferred
stock dividends and dividend accretion
|
||||||||
Preferred
stock stated dividends
|
(136,500 | ) | (34,125 | ) | ||||
Preferred
stock dividend accretion
|
(279,353 | ) | (116,232 | ) | ||||
Net
loss applicable to common stockholders
|
$ | (715,542 | ) | $ | (82,294 | ) | ||
Net
loss per share applicable to common
|
||||||||
stockholders
- basic and diluted
|
$ | (33.63 | ) | $ | (2.47 | ) | ||
Weighted
average common shares
|
||||||||
outstanding
- basic and diluted
|
21,275 | 33,345 |
See
accompanying notes to consolidated financial statements
F-26
UTILIPOINT
INTERNATIONAL, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT AND COMPREHENSIVE INCOME (LOSS)
Shares
of Common Stock, $0.00 par value
|
Shares
of Common Stock in Treasury
|
Shares
of Series A Preferred Stock, $0.00 par value
|
APIC
Common Stock
|
APIC
Treasury Stock
|
APIC
Series
A Preferred Stock
|
Put
Options
|
Other
Compre-hensive Loss
|
Accumulated
Deficit
|
Total
Stockholders' Deficit
|
Comprehensive
Income (Loss)
|
|||||||||||||||||||||||||||
Balance
at December 31,
2006
|
44,048 | (1,390 | ) | - | $ | 147,120 | $ | (4,639 | ) | $ | - | $ | - | $ | - | $ | (581,156 | ) | $ | (438,675 | ) | ||||||||||||||||
Net
income (loss)
|
- | - | - | - | - | - | - | - | 68,063 | 68,063 | $ | 68,063 | |||||||||||||||||||||||||
Issuance
of shares
upon reorganization
|
- | - | 21,523 | - | - | 1,050,000 | - | - | - | 1,050,000 | - | ||||||||||||||||||||||||||
Purchase
of shares
upon reorganization
|
- | (21,523 | ) | - | - | (967,031 | ) | - | - | - | - | (967,031 | ) | - | |||||||||||||||||||||||
Stock
compensation
upon reorganization
|
1,263 | - | - | 56,747 | - | - | - | - | - | 56,747 | - | ||||||||||||||||||||||||||
Issuance
of 5,988
common stock
put
options
upon
reorganization
|
- | - | - | - | - | - | (269,000 | ) | - | - | (269,000 | ) | - | ||||||||||||||||||||||||
Stock
issuance costs
|
- | - | - | (67,962 | ) | - | (164,006 | ) | - | - | - | (231,968 | ) | - | |||||||||||||||||||||||
Purchase
of shares
|
- | (702 | ) | - | - | (2,345 | ) | - | - | - | - | (2,345 | ) | - | |||||||||||||||||||||||
Stated
dividends on
preferred
stock
|
- | - | - | - | - | (34,125 | ) | - | - | - | (34,125 | ) | - | ||||||||||||||||||||||||
Accretion
of accelerated
and
balloon dividends
on
preferred stock
|
- | - | - | - | - | (116,232 | ) | - | - | - | (116,232 | ) | - | ||||||||||||||||||||||||
Balance
at December 31,
2007
|
45,311 | (23,615 | ) | 21,523 | 135,905 | (974,015 | ) | 735,637 | (269,000 | ) | - | (513,093 | ) | (884,566 | ) | $ | 68,063 | ||||||||||||||||||||
Net
income (loss)
|
- | - | - | - | - | - | - | - | (299,689 | ) | (299,689 | ) | $ | (299,689 | ) | ||||||||||||||||||||||
Issuance
of shares
|
1,250 | - | - | 62,500 | - | - | - | - | - | 62,500 | - | ||||||||||||||||||||||||||
Issuance
of shares for
professional services
|
500 | - | - | 25,000 | - | - | - | - | - | 25,000 | - | ||||||||||||||||||||||||||
Purchase
of shares
|
- | (1,684 | ) | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||
Stated
dividends on
preferred stock
|
- | - | - | - | - | (136,500 | ) | - | - | - | (136,500 | ) | - | ||||||||||||||||||||||||
Accretion
of accelerated
and balloon dividends
on
preferred stock
|
- | - | - | - | - | (279,353 | ) | - | - | - | (279,353 | ) | - | ||||||||||||||||||||||||
Foreign
currency
translation adjustments
|
- | - | - | - | - | - | - | (2,762 | ) | - | (2,762 | ) | (2,762 | ) | |||||||||||||||||||||||
Balance
at December 31, 2008
|
47,061 | (25,299 | ) | 21,523 | $ | 223,405 | $ | (974,015 | ) | $ | 319,784 | $ | (269,000 | ) | $ | (2,762 | ) | $ | (812,782 | ) | $ | (1,515,370 | ) | $ | (302,450 | ) |
See
accompanying notes to consolidated financial
statements
F-27
UTILIPOINT
INTERNATIONAL, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
Year
Ended December 31,
|
||||||||
2008
|
2007
|
|||||||
OPERATING
ACTIVITIES
|
||||||||
Net
income (loss)
|
$ | (299,689 | ) | $ | 68,063 | |||
Adjustments
to reconcile net income (loss) to net cash provided (used) by operating
activities:
|
||||||||
Depreciation
and amortization
|
17,845 | 10,871 | ||||||
Provision
for uncollectible accounts
|
3,425 | 99,303 | ||||||
Stock
based compensation
|
- | 56,747 | ||||||
Issuance
of stock for professional services
|
25,000 | - | ||||||
Deferred
taxes
|
(41,383 | ) | 42,440 | |||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
155,350 | (147,787 | ) | |||||
Prepaid
expenses and other current assets
|
75,519 | (105,512 | ) | |||||
Accounts
payable and accrued expenses
|
252,659 | 72,304 | ||||||
Deferred
revenue
|
(182,616 | ) | (57,017 | ) | ||||
Management
fees payable
|
50,000 | - | ||||||
Other
|
6,813 | 1,853 | ||||||
Total
adjustments
|
362,612 | (26,798 | ) | |||||
Net
cash provided (used) by operating activities
|
62,923 | 41,265 | ||||||
INVESTING
ACTIVITIES
|
||||||||
Additions
to property and equipment
|
(3,168 | ) | - | |||||
FINANCING
ACTIVITIES
|
||||||||
Net
borrowings (payments) on line of credit
|
163,738 | 25,000 | ||||||
Change
in bank overdrafts
|
(113,937 | ) | 113,937 | |||||
Principal
payments on capital lease obligations
|
(14,480 | ) | (8,497 | ) | ||||
Principal
payments on notes payable
|
(129,408 | ) | (3,810 | ) | ||||
Proceeds
from notes payable
|
187,500 | - | ||||||
Proceeds
from issuance of preferred stock, net of stock issuance
costs
|
- | 885,994 | ||||||
Proceeds
from issuance of common stock
|
62,500 | - | ||||||
Stock
issuance costs for common stock transactions upon
reorganization
|
- | (67,962 | ) | |||||
Purchase
of treasury stock
|
- | (969,376 | ) | |||||
Distribution/dividend
to preferred stockholders
|
(68,250 | ) | (34,125 | ) | ||||
Net
cash provided (used) by financing activities
|
87,663 | (58,839 | ) | |||||
Net
increase (decrease) in cash and cash equivalents
|
147,418 | (17,574 | ) | |||||
Effect
of exchange rate changes on cash and cash equivalents
|
(2,872 | ) | - | |||||
Cash
and cash equivalents beginning of year
|
- | 17,574 | ||||||
Cash
and cash equivalents end of year
|
$ | 144,546 | $ | - | ||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid during the year for:
|
||||||||
Interest
|
$ | 55,886 | $ | 66,381 | ||||
Taxes
|
$ | 4,144 | $ | 1,312 | ||||
Supplemental
disclosure of non-cash financing and investing activities:
|
||||||||
Property
and equipment acquired under capital leases
|
$ | 22,794 | $ | 23,469 |
See
accompanying notes to consolidated financial statements
F-28
UTILIPOINT
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1.
DESCRIPTION OF BUSINESS
Utilipoint
International, Inc., together with its subsidiary (“Utilipoint” or the
“Company”), is a utility and energy consulting, and issues analysis firm. The
Company offers public issues and regulatory management, advanced metering
infrastructure and meter data management, rates and demand response, utility
energy and technology, trading and risk management, and energy investment
services. It provides its services to energy companies, utilities, investors,
regulators, and industry service providers primarily in North America and
Europe.
The
Company was founded as Reddy Corporation International in 1933 and in 1998 was
acquired by Scientech LLC. The name was changed to Utilipoint
International, Inc. in 2002 in conjunction with a management
buyout. In July 2007, the Company reorganized and received equity
funding from Knox Lawrence International, LLC (“KLI”) and UTP International, LLC
(“UTPI”), a KLI company, which together now hold a controlling interest in
Utilipoint. The Company is based in Albuquerque, New Mexico and is incorporated
under the laws of the State of New Mexico. Utilipoint established a
wholly owned subsidiary, Utilipoint, s.r.o., in the Czech Republic on October 3,
2008.
2.
LIQUIDITY
The
Company has incurred cumulative losses through December 31, 2008 totaling
$812,782 and subsequent unaudited interim financial statements reflect
continuing losses. Also, the Company ended 2008 with negative working capital of
$1,021,574. The Company has funded its operations since inception through the
use of cash obtained principally from stockholders and third party financings.
The Company is in the process of improving operational results and raising
external financing to provide working capital which will enable it to operate
profitably and to solve its liquidity constraints on a go-forward basis in a
sustainable manner. Management actions and plans for improving
operational results and liquidity include the following:
Merger
Agreement – On August 10, 2009, the Company entered into a merger
agreement (refer to Note 13, Subsequent Events – Merger
Agreement). The merger, when completed, will have the effect of
increasing Utilipoint shareholders’ equity significantly above where it is
currently as well as provide access to capital from Midas Medici Group Holdings,
Inc.
Increased
Staff Utilization – The Company has begun implementing definitive plans
to increase staff utilization which management believes will improve
margins.
Increased
Business Development and Executive Leadership Resources – In July 2009,
with the Capital Contribution Agreement with The Intelligent Project, LLC (refer
to Note 13, Subsequent Events – Capital Contribution Agreement with The
Intelligent Project, LLC), two veteran executives joined the
Company. The addition of these individuals significantly increased
the Company’s resources in business development and executive
leadership. With the pending merger (refer to Note 13, Subsequent
Events – Merger Agreement), two additional executives of the acquiring entity
are expected to contribute to the business development efforts of the Company
via their extensive relationships and contacts in the energy
industry. Management believes this addition of executive talent will
significantly increase the Company’s revenues and profits while optimizing how
it manages its operations.
Continued
Support from a Significant Shareholder – The Company has historically
received financial support from KLI for working capital. Over the eighteen
months ended June 30, 2009 KLI provided financial support in the form of a
$62,500 note payable and $62,500 stock purchase, deferred $100,000 in management
fees (see also Note 11), and deferred $136,500 in dividends which it paid on
behalf of the Company to UTPI. KLI is committed to continue to
provide support when needed on a going – forward basis.
Deferring
of Insider Obligations – The Company has on its books, as of June 30,
2009, current debt obligations due to insiders of approximately
$500,000. The Company believes that its insiders are going to
continue deferring their obligations until the Company generates internal cash
flows or procures outside financing.
Management
believes it will be successful in completing the foregoing actions which will
enable the Company to run its business in a sustainable manner through December
31, 2009 and beyond and will result in increased revenues, profits and cash
flow.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of
Presentation - The
accompanying consolidated financial statements have been prepared in accordance
with U.S. generally accepted accounting principles (“GAAP”). All
material intercompany accounts and transactions have been
eliminated.
Fair
Value of Financial Instruments -
The carrying amounts of
the Company’s financial instruments, which include cash and cash equivalents,
accounts receivable, prepaid expenses and other current assets, accounts
payable, bank overdrafts, other current liabilities, line of credit and debt,
approximate their fair values due to their short maturities and variable
interest rate on the line of credit and fixed rates which approximate market on
significant notes payable. Based on borrowing rates currently
available to the
Company for loans with similar terms, the carrying value of capital lease
obligations approximates fair value. The fair value of put options is
discussed in Note 8.
F-29
UTILIPOINT
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Revenue
Recognition - Utilipoint’s primary revenue streams and the basis on which
revenue is recognized for each are as follows:
Fixed-Price
Contracts
Fixed
price contracts are projects where services are provided at an agreed to price
for defined deliverables. On occasion, clients with fixed price
contracts will require an accounting of all hours worked on a project at an
agreed to hourly rate to accompany an invoice.
Utilipoint
recognizes revenue when a deliverable is provided except in the case where the
client requires time reporting to accompany invoices. In that case,
Utilipoint recognizes revenue up to the amount the time records support, because
clients requiring time reporting with hourly rates on fixed price contracts
typically can only ask for refunds on fixed price projects up to the amount
determined as if the contract had been time and materials. With acceptance of
the final deliverable, all revenue is recognized.
Bundled
Service Agreements (“BSAs”)
BSAs are
packages of services that clients subscribe to, typically on an annual contract
basis. The services typically include a combination of the
following:
•
|
Access to subject
matter experts as needed, by
telephone
|
•
|
Discounted fees
for Utilipoint events
|
•
|
Advertising space
on the IssueAlert® e-publication
|
•
|
One to three
reports and/or whitepapers on industry
topics
|
•
|
Briefings on
industry trends and research
findings
|
BSAs also
include annual memberships in the Advanced Metering Infrastructure and Meter
Data Management (“AMI MDM”) forum and corporate contracts. The AMI MDM forum is
designed for electric, water, and/or gas utilities, regulators, utility
governing boards, independent system operators and consumer advocacy groups to
come together and discuss meter data management successes, problems, issues,
interfaces and best practices. Corporate contracts are
characterized by an annual contract for a pre-defined amount of market research
hours. Clients of this service receive access to Utilipoint’s
directory and InfoGrid products. The primary service is the block of hours
purchased.
Utilipoint
believes that the substance of BSAs, as pointed out in a recent survey of its
clients, indicates that the purchaser pays for a service that is delivered over
time. As a result, revenue recognition occurs over the subscription
period, or in the case of corporate contracts as the hours are utilized,
reflecting the pattern of provision of service.
Time
and Materials Contracts (“T&M”)
T&M
are services billed at a set hourly rate. Project related expenses
are passed through at cost to clients. Normally invoices occur on
monthly basis. Utilipoint recognizes revenue as billed unless the project has a
major deliverable(s) associated with it, in which case the revenue is deferred
until the major deliverable(s) is provided.
Events
and Sponsorships
Utilipoint
hosts events such as conferences. These events include revenues from
sponsorships and registration fees which are recognized in the month of the
event. Revenues from sponsors of the AMI MDM forum are recognized
over the annual subscription period, reflecting the pattern of provision of
service.
Property and
Equipment - Property and equipment is carried at cost, less accumulated
depreciation and amortization. Depreciation and amortization is calculated using
the straight-line method over the useful lives that typically range from three
to ten years. Equipment under capital leases is amortized over the
lease term which is typically three years and is removed from the Company’s
accounting records upon lease termination.
Foreign Currency
Translation and Transactions - The U.S. dollar is the reporting
currency for all periods presented. The financial information for the entity
outside the United States is measured using the local currency as the functional
currency. Assets and liabilities for the Company’s foreign entity are translated
into U.S. dollars at the exchange rate in effect on the respective balance sheet
dates, and revenues and expenses are translated into U.S. dollars based on the
average rate of exchange for the corresponding period. Exchange rate differences
resulting from translation adjustments are accounted for as a component of
accumulated other comprehensive income. Gains and (losses) from foreign currency
transactions are reflected in the consolidated statements of operations under
the line item selling, general and administrative expense, and were ($7,658)
and$9,809,
in 2008 and 2007, respectively. Such foreign currency transactions include
primarily billings denominated in foreign currencies by the Company’s U.S.
entity, which are reported based on the applicable exchange rate in effect on
the balance sheet date. The related deferred revenue from such billings is
reported in U.S. dollars at the exchange rate in effect at the billing dates
when the revenue was deferred.
F-30
UTILIPOINT
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Comprehensive Income (Loss) -
Comprehensive income (loss) consists of net loss or gains on foreign
currency translations and net income or loss from operations and is presented in
the consolidated statements of stockholders’ deficit. This includes charges and
credits to equity that are not the result of transactions with stockholders.
Included in other comprehensive income (loss) are the cumulative translation
adjustments related to the net assets of the operations of the Company’s foreign
subsidiary. These adjustments are accumulated within the consolidated statements
of stockholders’ deficit under the caption “Other Comprehensive Loss.” Other
comprehensive loss for the year ended December 31, 2008 was $2,762. The
Company’s foreign subsidiary was established in 2008 and accordingly there is no
comprehensive income or loss for 2007.
Stock-Based
Compensation - Effective January 1, 2006, the Company
adopted the fair value recognition provisions of SFAS No. 123(R), Share-Based
Payment, using the modified prospective transition method. Under the transition
method, compensation expense that the Company recognizes includes expense
associated with the fair value of share based awards
granted.
Allowance for Doubtful Accounts -
Reserves for bad debt are based on evaluation of customers’ ability to
meet their financial obligations to the Company. When evaluation
indicates that the ability to pay is impaired, a specific allowance against
amounts due is recorded thereby reducing the net recognized receivable to the
amount the Company reasonably believes will be collected. When
management determines that receivables are not collectible, the gross receivable
is written off against the reserve for bad debt.
Income
Taxes - The current or deferred tax consequences of all events that have
been recognized in the financial statements are measured based on provisions of
enacted tax law to determine the amount of taxes payable or refundable in future
periods. Effective with the July 2007 reorganization, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between financial statement carrying amounts of
existing assets and liabilities, and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted
tax rates for the years in which those temporary differences are expected to be
recovered or settled. The effect of a change in tax rates on deferred
tax assets and liabilities is recognized into income during the period that
includes the enactment date. A valuation allowance is established to
reduce deferred tax assets if it is more likely than not that all, or some
portion of, such deferred tax assets will not be realized. The
Company accounts for uncertain tax positions in accordance with Financial
Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income
Taxes — an Interpretation of FASB Statement No. 109, (“FIN
48”). FIN 48 prescribes a recognition threshold and measurement
attribute for financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. The Company does not believe it
has any material unrecognized income tax positions.
Prior
to reorganization in July 2007, Utilipoint was an S
corporation. Under this election, the Company’s taxable income flowed
through to the stockholders and was not the responsibility of the
Company. Upon reorganization, Utilipoint became a C corporation and
is responsible for its own income taxes.
The
Company is a cash basis taxpayer.
Cost of Services - Cost of services
represents direct job costs plus direct labor and related benefits and payroll
taxes. The Company allocates employee labor between direct and indirect based
upon a factor of billable employee payroll dollars multiplied by an estimated
labor utilization rate of 80%. As such, payroll dollars are categorized as cost
of services and selling, general and administrative
expense.
Segment Reporting -
Operating segments are defined as components of an enterprise for which
separate financial information is available and evaluated regularly by the chief
operating decision maker, or decision making group, in deciding the method to
allocate resources and assess performance. The Company currently has one
reportable segment for financial reporting purposes, which represents the
Company's core business as a utility and energy consulting, and issues analysis
firm. The Company does not report revenue by product or service or groups of
products or services because it is impracticable to do so.
Use of Estimates - The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the 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. Significant estimates include: allowances for doubtful
accounts, fair value of common stock put options, certain revenue recognition
methodologies related to contract deliverables, valuation allowances for
deferred tax assets,
rates at which deferred tax assets and liabilities are expected to be recorded
or settled, accruals for paid time off and the estimated labor utilization rate
used to determine cost of services.
F-31
UTILIPOINT
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Recently Issued Accounting Standards –
In September 2006, the FASB issued Statement of Financial Account
Standards No. 157, Fair Value
Measurements (“SFAS 157”). SFAS 157 defines fair value,
establishes a framework for measuring fair value in accordance with accounting
principles generally accepted in the United States, and expands disclosures
about fair value measurements. The Company adopted SFAS 157 during the
first quarter of 2008, and the implementation did not have a material impact on
the Company’s financial condition, results of operations, or cash flows. The
Company has deferred the adoption of SFAS 157 until fiscal year beginning
January 1, 2009 with respect to non-financial assets and liabilities in
accordance with the provisions of FASB Staff Position (“FSP”) No. 157-2, Effective Date
of FASB Statement No. 157 (“FSP FAS 157-2”) effective February 2008.
Such non-financial assets and liabilities include goodwill and intangible assets
with indefinite lives. The adoption of FSP FAS 157-2 is not expected
to have a material impact on the Company's consolidated financial
statements.
In
February 2007, the FASB issued Statement of Financial Account Standards No. 159,
The Fair
Value Option for Financial Assets and Financial Liabilities – Including an
amendment of FASB Statement No. 115 (“SFAS 159”). SFAS 159
permits entities to measure eligible assets and liabilities at fair value as of
specified dates. Subsequent unrealized gains and losses on items for
which the fair value option has been elected are reported in earnings. The
objective of SFAS 159 is to improve financial reporting by providing entities
with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. SFAS 159 is effective for fiscal
years beginning after November 15, 2007. The Company adopted SFAS 159
on January 1, 2008 and did not elect to apply the fair value method to any
eligible assets or liabilities at that time.
In
December 2007, FASB issued Statement of Financial Accounting Standards
No. 141 (revised 2007), Business
Combinations (“SFAS 141R”). SFAS 141R moves closer to a fair
value model by requiring the acquirer, in a business combination, to measure all
assets acquired and all liabilities assumed at their respective fair values at
the date of acquisition, including the measurement of non-controlling interests
at fair value. SFAS 141R also establishes principles and requirements as to
how the acquirer recognizes and measures goodwill acquired in a business
combination or a gain from a bargain purchase and determines what information to
disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. In addition, SFAS 141R
significantly changes the accounting for business combinations in a number of
areas, including the treatment of contingent consideration, pre-acquisition
contingencies, in-process research and development, restructuring costs, and
requires the expensing of acquisition-related costs as incurred. The effective
date of SFAS 141R is for fiscal years beginning after December 15,
2008. For transactions consummated after the effective date of SFAS 141R,
prospective application of the new standard is applied. For business
combinations consummated prior to the effective date of SFAS 141R, the
guidance in SFAS 141 is applied. The adoption of this new standard is not
expected to have a material impact on the Company's consolidated financial
statements.
In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 160, Noncontrolling
Interests in Consolidated Financial Statements—An Amendment of ARB
No. 51 (“SFAS 160”). SFAS 160 establishes new accounting
and reporting standards for the non-controlling interest in a subsidiary and for
the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years
beginning on or after December 15, 2008. The adoption of this new standard
did not have a material impact on the Company's consolidated financial
statements.
In
March 2008, the FASB issued Statement of Financial Account Standards
No. 161, Disclosure
about Derivative Instruments and hedging Activities—An Amendment of FASB
Statement No. 133 (“SFAS 161”). SFAS 161 expands and
amends the disclosure requirement for derivative instruments and hedging
activities. SFAS 161 is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008. The
Company is in the process of determining what effect, if any, the application of
the provisions of SFAS 161 will have on its consolidated financial
statements.
In
June 2008, the FASB issued FSB EITF 03-6-1, Determining
whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities (“EITF 03-6-1”), to clarify that all
outstanding unvested share-based payment awards that contain non-forfeitable
rights to dividends or dividend equivalents, whether paid or unpaid, are
participating securities. An entity must include participating securities in its
calculation of basic and diluted earnings per share pursuant to the two-class
method as described in SFAS No. 128, Earnings Per
Share. EITF 03-6-1 is effective for fiscal years beginning after
December 15, 2008. The Company is in the process of determining what
effect, if any, the application of EITF 03-6-1 will have on its
consolidated financial statements.
In May 2009, the FASB issued Statement of Financial
Account Standards No. 165, Subsequent
Events (“SFAS 165”). SFAS 165 establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements
are issued or are available to be issued. SFAS 165 is effective
for financial statements issued for fiscal years and interim periods beginning
after June 15, 2009. The adoption of SFAS 165 is not expected to have a
material impact on the Company's consolidated financial
statements.
F-32
UTILIPOINT
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
4.
BALANCE SHEET ITEMS
Cash
and Cash Equivalents
Cash
and cash equivalents consists primarily of cash in banks.
Prepaid
Expenses and Other Current Assets
At
December 31, prepaid expenses and other current assets were as
follows:
2008
|
2007
|
|||||||
Prepaid
management fees
|
$ | - | $ | 25,000 | ||||
Due
from stockholder for shares issued
|
- | 56,747 | ||||||
Foreign
income tax refunds due
|
15,652 | 14,583 | ||||||
Receivable
from former employee
|
20,000 | - | ||||||
Other
|
6,941 | 21,781 | ||||||
$ | 42,593 | $ | 118,111 |
Property
and Equipment
At
December 31, property and equipment consists of the
following:
Estimated
Useful
Life
|
2008
|
2007
|
|||||||
Office
equipment
|
3
years
|
$ | 7,758 | $ | 5,347 | ||||
Furniture
and fixtures
|
10
years
|
6,257 | 5,500 | ||||||
Equipment
under capital leases
|
3
years
|
52,439 | 36,315 | ||||||
66,454 | 47,162 | ||||||||
Accumulated
depreciation
|
(9,839 | ) | (7,313 | ) | |||||
Accumulated
amortization of
equipment under capital leases
|
(22,349 | ) | (13,809 | ) | |||||
$ | 34,266 | $ | 26,040 |
Property
and equipment are stated at cost. Depreciation and amortization is
provided on the straight-line method over the estimated useful lives of the
assets. Depreciation expense was $2,635 and $1,232 for fiscal years
2008 and 2007, respectively. Amortization expense was $15,210 and
$9,639 for fiscal years 2008 and 2007, respectively.
Other
Assets
Other
assets consist of deposits on leased office space.
Accounts
Payable and Accrued Expenses
At
December 31, accounts payable and accrued expenses consists of the
following:
2008
|
2007
|
|||||||
Accounts
payable
|
$ | 336,906 | $ | 172,446 | ||||
Accrued
payroll and vacation
|
163,207 | 100,357 | ||||||
Other
|
25,348 | - | ||||||
$ | 525,461 | $ | 272,803 |
Deferred
Revenue
Deferred
revenue consists primarily of amounts received from or billed to clients in
conjunction with BSAs, T&M and fixed price contracts for which revenue is
recognized over time or upon completion of contract deliverables.
Other
Current Liabilities
Other
current liabilities consist of sales taxes payable and minimum state taxes due
regardless of income.
F-33
UTILIPOINT
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
5. DEBT
Debt,
including interest rates and maturities is summarized as follows at December
31:
Interest
Rates
|
Maturity
|
2008
|
2007
|
||||||||
Long-term
debt – notes payable:
|
|||||||||||
12.00%
|
01/01/2010
|
$
|
447,106
|
$
|
447,106
|
||||||
10.00%
|
12/31/2013
|
62,500
|
-
|
||||||||
4.00%
|
05/04/2010
|
5,000
|
5,000
|
||||||||
4.00%
|
09/23/2009
|
16,000
|
16,000
|
||||||||
4.00%
|
06/02/2009
|
9,722
|
8,518
|
||||||||
Variable,
4.68% and 8.15% at
|
|||||||||||
December 31, 2008 and 2007, respectively
|
08/02/2009
|
35,070
|
39,478
|
||||||||
Total
long-term debt, including current maturities
|
575,398
|
516,102
|
|||||||||
Current
maturities of long-term debt
|
(60,792
|
)
|
(6,925
|
)
|
|||||||
Total
long-term debt
|
514,606
|
509,177
|
|||||||||
Short-term
debt:
|
|||||||||||
Line
of credit
|
216,590
|
50,000
|
|||||||||
Current
maturities of long-term debt
|
60,792
|
6,925
|
|||||||||
Total
short-term debt
|
277,382
|
56,925
|
|||||||||
Total
debt
|
$
|
791,988
|
$
|
566,102
|
All notes
payable are due to either current or former shareholders of the
Company. Interest rates are fixed unless otherwise
noted. Variable interest rates are per the credit union from which
the current management shareholder obtained a home equity loan from which the
funds were then loaned to the Company.
Notes
payable to current and former shareholders are unsecured and subordinated to
obligations under the Company’s line of credit with the Bank of
Albuquerque. Notes payable to current and former management
shareholders are further subordinated to the $62,500 note to KLI due December
31, 2013.
Utilipoint
had a revolving line of credit, used for working capital needs, with the Bank of
Albuquerque from 2005 through mid-2008 at which point the line
expired. The Company had not been in compliance with debt covenant
financial ratios on debt coverage, funded debt to earnings before interest,
taxes, depreciation and amortization (“EBITDA”) and tangible net worth for years
2007 and 2008. The weighted average interest rate on the line of credit
was 5.63% and 8.83% for 2008 and 2007, respectively. The balance at December 31,
2008 was partially paid down on January 22, 2009 and converted into a short-term
note in the amount of $165,000 due June 30, 2009 with an interest rate of
9.25%. Six monthly consecutive principal payments of $16,500 plus
interest on unpaid principal are due commencing January 15, 2009 with a final
payment of $66,000 plus interest due June 30, 2009. The Company
paid the first five installments and subsequently renegotiated the remaining
balance of principal and interest totaling $82,264 into a new 9.25% note with
the Bank of Albuquerque on June 30, 2009. The 9.25% note matures on
December 31, 2009 and will be repaid in 5 principal payments of $9,000 each
and one final principal and interest payment of $37,561. The 9.25% note is an
extension / renewal / modification of the credit facility and as such is secured
by Utilipoint’s accounts receivable, fixed assets and a right of offset against
cash accounts held with the bank.
Interest
expense on notes payable and the line of credit was $61,265 and $64,433 for
fiscal years 2008 and 2007, respectively.
The
Company's contractual payments of long-term borrowings at December 31, 2008 are
as follows:
Year
|
Amount
|
|||
2009
|
$ | 60,792 | ||
2010
|
452,106 | |||
2011
|
- | |||
2012
|
- | |||
2013
|
62,500 | |||
Total
|
$ | 575,398 |
6. INCOME
TAXES
Since
reorganization on July 23, 2007, the Company is a C-corporation, cash basis
taxpayer. Previously, the Company was an S-corporation whereby its tax burden
flowed through to its shareholders. The Company files state tax returns in New
Mexico where it is domiciled, and other states where it has
nexus.
F-34
UTILIPOINT
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
As
a result of operating losses incurred for tax purposes in 2007 (after July 23,
2007) and 2008, the Company has no current liability for federal or state income
taxes in those years (other than minimum state taxes due regardless of
income).
A
reconciliation of income tax expense using the statutory federal and state
income tax rates is as follows for the years ended December 31:
2008
|
2007
|
|||||||
Federal
tax at statutory rates
|
$ | (114,071 | ) | $ | 38,692 | |||
State
tax at statutory rates
|
(20,130 | ) | 6,828 | |||||
Increase
(decrease) in tax due to:
|
||||||||
S-corporation
income taxable to shareholders
|
- | (74,158 | ) | |||||
Nondeductible
expenses
|
6,988 | 8,869 | ||||||
Change
in deferred tax asset valuation allowance
|
35,531 | 63,113 | ||||||
Effect
of difference between statutory rates and
|
||||||||
graduated
rates used to calculate deferred taxes
|
50,533 | 414 | ||||||
Other
|
5,334 | 1,979 | ||||||
Income
tax expense (benefit)
|
$ | (35,815 | ) | $ | 45,737 |
Deferred
income taxes reflect the tax consequences in future years for differences
between the tax basis of assets and liabilities and their basis for financial
reporting purposes. Temporary differences giving rise to the deferred
tax assets and liabilities relate in part to accrual-to-cash adjustments, as the
Company follows the accrual basis of accounting for financial reporting but the
cash basis for tax purposes. Deferred tax assets arise from net
operating losses, and from temporary differences in depreciation and
amortization and from equipment leases capitalized on the financial statements
but treated as operating leases for tax purposes. A deferred tax
liability arises from the net income of a wholly owned foreign corporation
(Utilipoint s.r.o.), which becomes taxable in the United States upon
repatriation of the funds. Deferred tax assets and liabilities were
calculated using the graduated rates anticipated in the years tax assets and
liabilities are anticipated to reverse. The reversal of timing
differences requires significant estimation; accordingly, deferred tax assets
and liabilities may reverse at tax rates significantly different than
anticipated.
As
a result of net losses incurred and because the likelihood of being able to
utilize these losses is not presently determinable, the Company has recorded a
valuation allowance to fully reserve its deferred tax asset. If in
the future the Company were to determine that it would be able to realize its
deferred tax assets in excess of its net recorded amount, an adjustment would
increase income in such period or, if such determination were made in connection
with an acquisition, an adjustment would be made in conjunction with the
allocation of the purchase price.
At
December 31, 2008 and 2007 the significant components of the Company’s deferred
tax assets and liabilities were:
2008
|
2007
|
|||||||
Deferred
tax assets:
|
||||||||
Net
operating loss carryforwards
|
$ | 12,012 | $ | 4,632 | ||||
Accrual
to cash adjustments
|
53,980 | - | ||||||
Depreciation
and amortization adjustments
|
29,360 | 48,938 | ||||||
Leases
not capitalized for tax purposes
|
3,292 | 9,543 | ||||||
Total
deferred tax assets
|
98,644 | 63,113 | ||||||
Valuation
allowance
|
(98,644 | ) | (63,113 | ) | ||||
Total
deferred tax assets net of valuation allowance
|
$ | - | $ | - | ||||
Deferred
tax liabilities:
|
||||||||
Accrual
to cash adjustments
|
$ | - | $ | (42,440 | ) | |||
Wholly
owned foreign corporation
|
(1,057 | ) | - | |||||
Total
deferred tax liability
|
$ | (1,057 | ) | $ | (42,440 | ) | ||
Deferred
tax expense (benefit)
|
$ | (41,383 | ) | $ | 42,440 |
In
addition to the deferred tax expense (benefit), provision (benefit) for income
taxes on the accompanying consolidated statements of operations includes $5,568
and $3,297 in 2008 and 2007, respectively, of minimum state taxes due regardless
of income.
F-35
UTILIPOINT
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Availability
to Offset Future Taxes
Deferred
tax assets arising from net operating losses and accrual to cash adjustments are
available to offset future taxes beginning with the first year following their
creation. Deferred tax assets arising from depreciation and
amortization differences and leases not capitalized become available in future
years according to their respective amortization schedules.
Net
Operating Loss Carryforwards
The
Company has net operating loss carryforwards totaling $45,582 that may be used
to offset against future taxable income, subject to change in ownership
limitations. If not used, the carryforwards will expire as
follows:
2027
|
$ | 11,813 | ||
2028
|
33,769 | |||
$ | 45,582 |
Tax
Examinations
Since
July 2007 when the Company became a C-corporation, there have been no
examinations conducted by the Internal Revenue Service and accordingly the
C-corporation returns for years 2007 and 2008 remain open for
examination. The S-corporation returns for 2006 and 2007 are also
open for examination.
7. 401(K)
PLAN
The
Company maintains a defined contribution retirement plan under Internal Revenue
Code Section 401(k). Substantially all regular full time employees
are eligible to participate in the plan. The Company matches each
eligible employee’s salary reduction contribution up to a limit of
3%.
The
matching contributions by the Company included in selling, general and
administrative expenses were $27,560 and $40,128 for fiscal years 2008 and 2007,
respectively.
8. STOCKHOLDERS’
DEFICIT
Stock Purchase
and Reorganization - In July 2007, the Company entered into a
reorganization and stock purchase agreement with KLI and UTPI. The
terms of the agreement are as follows:
·
|
UTPI
purchased 21,523 shares of Class A convertible, voting Preferred Stock
from the Company for $1,050,000.
|
·
|
The
Company repurchased 21,523 shares of Common stock owned by current and
former management shareholders for
$967,031.
|
·
|
KLI
issued notes payable totaling $378,357 to the same current and former
management shareholders for the purchase of 8,421 shares of Common
Stock.
|
Closing
and other costs of $234,868 were incurred in connection with the stock purchase
and reorganization. Of these costs, $2,900 is reflected in selling,
general and administrative expense in 2007. The balance of $231,968 is
classified as stock issuance costs and reflected as a reduction of additional
paid-in capital.
Stock Issued and
Outstanding - Utilipoint is authorized
to issue 200,000 shares of no par stock of which 150,000 shall be Common Stock,
25,000 shall be Series A Convertible, Voting Preferred Stock and 25,000 shall be
Series B Non-Voting Preferred Stock. Series A Preferred Stock holders
are entitled to cast the number of votes that such holder would be entitled to
cast if such holder had converted its shares to Common Stock. Series
A Preferred Stock is convertible to Common Stock using a rate formula outlined
below under Preferred
Stock Conversion Rights.
Shares
issued and outstanding at December 31 were:
2008
|
2007
|
|||||||
Common
Stock issued
|
47,061 | 45,311 | ||||||
Treasury
shares held
|
(25,299 | ) | (23,615 | ) | ||||
Common
Stock issued and
outstanding
|
21,762 | 21,696 | ||||||
Series
A Preferred Stock
|
21,523 | 21,523 | ||||||
Series
B Preferred Stock
|
- | - |
F-36
UTILIPOINT
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Stock Liquidation
Preferences - If, upon a Liquidation Event,
the holders of the Series A Preferred Stock have not then received distributions
equal to the Quarterly Dividends, Monthly Dividends and Balloon Dividend, the
holders of all Series A Preferred Stock shall be entitled to be paid, before any
distribution or payment is made to the holders of Series B Preferred Stock
or Common Stock, an
aggregate amount in cash equal to the Series A Liquidation Value of all Series A
Preferred Stock on a pro-rata basis determined by the number of Series A
Preferred Stock held by a holder divided by the total number of shares of Series
A Preferred Stock then outstanding. If, upon a Liquidation Event, the holders of
Series A Preferred Stock have not then received distributions equal to the
Quarterly Dividends, Monthly Dividends and Balloon Dividend, then, after payment
of the Series A Liquidation Value, the holders of Series B Preferred Stock shall
be entitled to be paid, before any distribution is made to the holders of Common
Stock, an aggregate amount in cash equal to the Series B Liquidation Value of
all Series B Preferred Stock on a pro-rata basis determined by the number of
Series B Preferred Stock held by a holder divided by the total number of shares
of Series B Preferred Stock then outstanding. Thereafter, and in the event that
the Quarterly Dividends, Monthly Dividends and Balloon Dividend have been paid
prior to the Liquidation Event, the holders of the Series A Preferred Stock and
Series B Preferred Stock shall be entitled to participate in the distribution of
any assets of the Company as though all outstanding shares of Series A Preferred
Stock were then converted into shares of Common Stock, and as though each share
of Series B Preferred Stock was equal to one share of Common
Stock.
Preferred Stock
Conversion Rights - The holder of
shares of Series A Preferred Stock (the “Stock”) has the option, at any time, to
convert any or all such shares of the Stock into fully paid and non-assessable
whole shares of Common Stock as is obtained by multiplying the number of shares
of the Stock so to be converted by the quotient, the numerator of which is the
original purchase price for such share of the Stock and the denominator of which
is the Stock conversion price for such share of Stock as last adjusted and in
effect at the date any share or shares of the Stock are surrendered for
conversion.
The
Company will at all times reserve and keep available out of its authorized
Common Stock or its treasury shares, such number of shares of Common Stock as
shall be issuable upon the conversion of all outstanding shares of Series A
Preferred Stock.
Preferred Stock
Dividends - Utilipoint is required to
pay preferential cumulative dividends in cash to the holders of the Series A
Preferred Stock as follows:
·
|
An
annual dividend equal to 13% of the original purchase price, payable
quarterly on October 31st, January 31st, April 30th and July 31st of each
year commencing on October 31, 2007 (the “Quarterly Dividends”). This
equates to $34,125 per
quarter.
|
·
|
Commencing
on January 31, 2010, and continuing on the last day of each month
thereafter until July 23, 2010, a dividend equal to the monthly payment
that would be payable on the Original Purchase Price based on a 24-month
amortization schedule using a 13% annual interest rate (the “Monthly
Dividends”). This equates to $49,919 per
month.
|
·
|
Upon
the first to occur of the following: (i) a liquidation of the Company;
(ii) a change in control of the Board of Directors of the Company; or
(iii) the failure to convert the Series A Preferred Stock to Common Stock
by July 23, 2010, a dividend equal to the Original Purchase Price less any
portion of the Monthly Dividends that would be allocable to principal if
the Monthly Dividends were treated as loan payments (the “Balloon
Dividend”). This equates to an $812,382 Balloon
Dividend.
|
Series
A Preferred Stock dividends shall be cumulative so that, if the Company is
unable to pay, or if the Board of Directors fails to declare Series A Preferred
Stock dividend for any period, such Series A Preferred Stock dividends
nevertheless shall accrue and be payable in subsequent periods. Any
payment of Series A Preferred Stock dividends by the Company in any period shall
first be applied to any accrued but unpaid Series A Preferred Stock dividends
for prior periods, in chronological order, and then to dividends due for that
period. The Company shall not pay any of the Series A Preferred Stock
dividends if, in the opinion of the Board of Directors, the Company will not be
able to meet its debt obligations or growth initiatives.
Stated
Series A Preferred Stock dividends of $136,500 and $34,125 were declared in 2008
and 2007, respectively. The Company is in a negative retained
earnings position and therefore the dividends were recorded as a reduction in
the APIC Series A Preferred Stock. Of the 2008 dividends, $68,250 was declared
but not paid. The 2007 declared dividend was paid.
The
discount resulting from the increasing rate feature of the Series A Preferred
Stock dividend represents an unstated dividend cost that is being amortized over
the three year period preceding payment of the Balloon Dividend using the
effective interest method, by charging the imputed dividend cost against APIC
Series A Preferred Stock. The total stated dividends, whether or not
declared, and unstated dividend cost combined represents a period’s total
preferred stock dividend, which is deducted from net income (loss) to arrive at
net loss available to common shareholders.
Common Stock
Dividends - The Company may make distributions on the Common Stock,
provided that no distributions shall be declared or paid with respect to the
Common Stock without there being contemporaneously declared and paid a dividend
on the Series A Preferred Stock (with the same record and payment date), so that
each holder of a share of Series A Preferred Stock shall receive a dividend
equal to the distribution paid per share of Common Stock, determined by the
number of shares of Common Stock that such holder would be entitled to receive
if such Series A Preferred Stock was then converted into Common Stock, and
without there being contemporaneously declared and paid a dividend on the Series
B Preferred Stock (with the same record and payment date).
There
have been no common stock dividends declared as of December 31,
2008.
F-37
UTILIPOINT
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Common Stock Put
Options - In conjunction with the July 2007 stock purchase and
reorganization, the Company issued a total of 5,988 Common Stock put options to
two management stockholders. These agreements give the management
stockholders the right and the option, but not obligation, to sell all of their
common shares to Utilipoint through December 31, 2009. The agreements
define the purchase price of the put based on original purchase price if
calendar year 2007 EBITDA exceeds $520,000 or, if the management shareholder is
still employed by Utilipoint at December 31, 2008, based on the lesser of the
original purchase price or fair market value (“FMV”) as determined by an
independent valuation expert. If the shareholders exercise their
options at different times, the FMV first determined will apply to both
shareholders.
The
Common Stock put options were not exercisable at December 31, 2007 based on 2007
EBITDA. Both shareholders continued to be employed by Utilipoint at
December 31, 2008. Management estimates the FMV as of December 31,
2008 and 2007 to be the value of the most recent per share purchase price; which
is higher than the original purchase price. Due to the lack of quoted
process and significant third-party transactions, this estimate is subject to
change should better inputs become available.
SFAS
157 established a three level fair value hierarchy to classify the inputs used
in measuring fair value as follows:
·
|
Level
1: Quoted prices for identical instruments in active
markets.
|
·
|
Level
2: Quoted prices for similar instruments in active markets; quoted prices
for identical or similar instruments in markets that are not active; and
model-driven valuations whose inputs are observable or whose significant
value drivers are observable.
|
·
|
Level
3: Significant inputs to the valuation model are
unobservable.
|
As
of December 31, 2008 and 2007, the financial liability measured at fair value
consisted of Common Stock put options. There are no quoted prices for identical
or similar instruments in markets that are active or not active and there is no
model-driven valuation for the Common Stock put options. The fair value is based
on recent related party transactions which approximate the original purchase
price and falls within the Level 3 hierarchy of Fair Value
Measurements.
The
Common Stock put options are reflected as a liability with a corresponding
reduction to equity. The amount recorded at December 31, 2008 and
2007 was $269,000.
Earnings
(Loss) per Common
Share - Basic earnings per share has been computed by dividing net income
(loss) available to common stockholders by the weighted average number of shares
of common stock outstanding during each period. Shares issued during the period
and shares reacquired during the period are weighted for the portion of the
period that they were outstanding. Diluted earnings per share considers the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. Potentially dilutive
securities for the Company include convertible preferred stock and written put
options. The following table sets forth the computation of basic and diluted
loss per share for years ended December 31:
2008
|
2007
|
|||||||
Net
income (loss)
|
$ | (299,689 | ) | $ | 68,063 | |||
Less
stated preferred dividends
|
(136,500 | ) | (34,125 | ) | ||||
Less
preferred stock discount accretion
|
(279,353 | ) | (116,232 | ) | ||||
Net
(loss) applicable to common
stockholders
|
$ | (715,542 | ) | $ | (82,294 | ) | ||
Shares
used in net (loss) per share;
basic
and diluted
|
21,275 | 33,345 | ||||||
Net
loss per share; basic and
diluted
|
$ | (33.63 | ) | $ | (2.47 | ) |
Shares
of convertible preferred stock issued July 23, 2007 which are convertible into
21,523 shares of common stock and written put options issued July 23, 2007 for
the purchase of 5,988 shares of common stock were not included in the
computation of diluted net loss per share because the inclusion of such shares
would have an anti-dilutive effect on the net loss applicable to common
stockholders.
F-38
UTILIPOINT
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
9. COMMITMENTS
AND CONTINGENCIES
Capital
Leases - The Company is obligated under capital leases for computer
equipment that expire on various dates through December 2011. The minimum
payments for the capital leases in effect at December 31, 2008 are as
follows:
Year
Ending December 31,
|
||||
2009
|
$ | 18,767 | ||
2010
|
12,448 | |||
2011
|
5,412 | |||
36,627 | ||||
Less
amount representing interest
|
3,976 | |||
Present
value of minimum lease payments
|
$ | 32,651 | ||
Short
term portion
|
$ | 16,242 | ||
Long
term portion
|
16,409 | |||
$ | 32,651 |
Equipment
recorded under capital leases was $52,439 and $36,315 as of December 31, 2008
and 2007, respectively. Accumulated amortization of capital assets
subject to capital leases amounted to $22,349 and $13,809 for fiscal years 2008
and 2007, respectively. Interest on capital leases amounted to $2,677
and $1,947 for fiscal years 2008 and 2007, respectively. Amortization
on equipment under capital leases amounted to $15,210 and $9,639 for fiscal
years 2008 and 2007, respectively.
Operating
Leases – The Company leases buildings and equipment under various
operating leases with lease terms ranging from one to three
years. The following is a schedule of the future minimum lease
payments required under operating leases that have initial non-cancelable lease
terms in excess of one year:
Fiscal
year ending December 31,
|
Minimum
Lease Commitments
|
|||
2009
|
$ | 62,057 | ||
2010
|
3,503 | |||
$ | 65,560 |
Rent
expense for office space was $78,164 and $152,463 for fiscal years 2008 and
2007, respectively. The significant decrease in office space rent
from year 2007 to 2008 is attributed primarily to the closing and lease buyout
of the Syracuse, New York office.
Stockholder
Agreements - Effective with the July 23, 2007 reorganization, Utilipoint
entered into stockholder agreements with its minority stockholders, some of whom
are key managers of the Company. These agreements provide Utilipoint
the first right to purchase each stockholder’s shares in the event of a bona
fide offer from any persons to purchase shares from the
stockholder. The Company has the right to purchase such shares on the
same terms and conditions set forth in any such purchase agreement within sixty
days following the Company’s receipt of the notice to
purchase.
The
agreements contain restrictions on transfer of stock to third parties and
clauses on the Company’s right to repurchase terminated shareholders shares for
a price equal to the net book value of the shares at the time of termination of
employment.
Employment
Agreements - Utilipoint has employment agreements with two key
management shareholders which grant right of first refusal to management
shareholders under special circumstances which are delineated as
follows:
If
there is a proposed sale or liquidation of 100% of Utilipoint prior to the end
of the Initial Term (July 23, 2009), then no less than thirty (30) days prior to
the consummation of such sale or liquidation, Utilipoint shall give, or shall
cause its shareholders to give, the management shareholders, jointly, a right of
first refusal for the purchase of Utilipoint for the same consideration as such
proposed sale or liquidation. The management shareholders shall have
the right to purchase 100% of Utilipoint in the percentages agreed among the
management shareholders at the same price and on the same terms set forth in
such notice. The management shareholders shall provide Utilipoint
with notice of their intent to exercise the right of first refusal within twenty
five (25) days of receiving notice of such proposed sale or liquidation and
shall consummate such purchase within thirty (30) days thereafter.
Litigation
- Utilipoint, in the normal course of business, may be subject to
claims and litigation. Management is not aware of any outstanding
claims or assessments against the Company that are estimable and
likely.
F-39
UTILIPOINT
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
10. CONCENTRATION
RISKS
Credit
Concentration -
Utilipoint’s demand deposits are placed with major financial
institutions. Management believes the Company is not exposed to undue
credit risk for any demand deposits that may, from time to time, exceed the
federally insured limits.
Financing
Concentration -
Utilipoint’s capitalization has been
provided by founders, management employees, KLI and
UTPI.
Revenue and
Accounts Receivable Concentration – In 2008, seven clients
individually represented from approximately 5% to 10% each of revenue. In 2007,
six clients represented from approximately 5% to 14% each of
revenue. Cumulatively, these clients comprised approximately 51% of
revenue for both years ended December 31, 2008 and 2007. Five clients each
represented 5% or higher and cumulatively 59% of net accounts receivable at
December 31, 2008. Six clients each represented 5% or higher and
cumulatively 60% of net accounts receivable at December 31,
2007. Accounts receivable associated with revenue concentration
clients were 100% collected. Revenue and accounts receivable of the
Company’s subsidiary in the Czech Republic are de minimus.
11.
|
RELATED
PARTY TRANSACTIONS
|
Management
Fees - Management fees to KLI of
$25,000 per quarter are payable in advance on the 15th day of the 1st month of
the quarter; January 15th, April 15th, July 15th and October
15th. Management fees paid were $50,000 and $25,000 for fiscal years
2008 and 2007, respectively.
Preferred Stock
Dividends - Commencing October 31, 2007,
stated dividends on preferred stock of $34,125 per quarter are payable to UTPI
on January 31st, April 30th, July 31st and October 31st. If
Utilipoint does not have sufficient cash, KLI advances the funds to UTPI on
behalf of the Company. The dividend amount increases and is paid
monthly commencing on January 31, 2010 with a final Balloon Dividend on July 23,
2010. See also Note 8 – Stockholders’ Deficit – Preferred Stock
Dividends.
Revenues -
Revenues from KLI were $10,264 and $14,978 in
2008 and 2007, respectively.
Legal and
Consulting Expense - A member of the
Board of Directors and a law firm which employs a relative of the Board member
were reimbursed for fees in conjunction with operational support during
2008. Expenses for the Board member and the law firm were $52,500 and
$10,864, respectively, of which $25,000 was paid with common stock issued to the
Board member.
12.
|
STOCK-BASED
COMPENSATION
|
Utilipoint
awarded stock-based compensation in 2007 to an employee per terms of their
employment agreement in the amount of 1,263 shares with a fair value of $56,747.
The shares vested immediately in July 2007 when the Company entered into the
reorganization and stock purchase agreement with KLI and UTPI (see Note
8). The fair value assigned to the shares was based on the purchase
price of common shares at the point of the Company’s July 2007
reorganization. There was no stock-based compensation in 2008. The
Company granted no stock options through December 31, 2008.
13.
|
SUBSEQUENT
EVENTS
|
Merger
Agreement – On August 10, 2009,
Utilipoint signed an Agreement and Plan of Merger (the “Agreement”) with
Utilipoint Acquisition Co. (the “Acquirer”), a wholly owned subsidiary of Midas
Medici Group Holdings, Inc. (“Midas”), a reporting company under the Securities
Exchange Act of 1934, as amended. The executive management of Midas are key
personnel of KLI. Per the Agreement, Utilipoint will be acquired and
merged with the Acquirer, with Utilipoint remaining as the surviving
company. The transaction will be a share exchange whereby Utilipoint
shareholders will exchange their shares for shares of the Acquirer (“Acquisition
Shares”). The conversion of Utilipoint shares will be as follows per
the Agreement:
Conversion
of Utilipoint Shares - As agreed
between Midas, the Acquirer and Utilipoint, the net equity value of Utilipoint
is $6,977,417. As further agreed between Midas, the Acquirer and
Utilipoint, each share of Midas Common Stock is deemed to be valued at $4.75 per
share. As a result of the foregoing, an aggregate of 1,348,516 Acquisition
Shares shall be issued in exchange for the 42,191 Utilipoint shares, equaling an
exchange ratio of 32 to 1 (the “Exchange Ratio”).
Existing
options to purchase Utilipoint shares under the 2009 Utilipoint stock option
program will be exchanged for options to purchase Acquisition Shares at the
Exchange Ratio.
Utilipoint
believes that it will have access to additional capital resources which the
Acquirer has recently raised, as well as, in combination with the management of
the Acquirer, will be positioned to undertake an Initial Public Offering of
shares based on the firm commitment underwriting engagement letter that the
Acquirer has disclosed to Utilipoint.
Capital Commitment Agreement with The Intelligent
Project, LLC - On July 1, 2009 the Company entered into a transaction
with The Intelligent Project, LLC (“IP”), a KLI portfolio company, and KLI. IP
is a research and advisory services firm focused on assisting utilities with the
challenge of advancing and solving customer dimension complexities of the Smart
Grid. IP partners with leading academic researchers at Purdue University in the
U.S. and Maastricht University in the Netherlands to drive primary research
around consumer response to smart grid enabled energy management. IP also tracks
consumer trends around the globe to deliver best practices surrounding consumer
behavior and customer engagement to utility leadership.
F-40
UTILIPOINT
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Components
of the transaction are as follows:
1)
|
The
Company entered into a capital commitment agreement with IP for an amount
of up to $200,000. IP will be able to make capital requests on
the capital commitment agreement for initial financing. The
Company will receive a 60% interest in IP in exchange for the capital
contribution agreement.
|
2)
|
The
existing members of IP will provide services to Utilipoint in exchange for
options to purchase an aggregate of 1,400 shares of the common stock of
the Company that are fully-vested on the date of grant and that have a
strike price equal to the fair market value of the Company’s common stock
on the date of grant. The stock options for the individuals
will be granted pursuant to the equity compensation plan that was adopted
by the Company effective as of May 1, 2009. All of the stock
options will have a term of five years and a cashless exercise
option.
|
3)
|
The
Company will provide certain management services to IP in exchange for
reasonable compensation.
|
4)
|
KLI
will agree to purchase up to $100,000 of the common stock of the Company
at a per share purchase price of $50.00 per share and will agree to lend
up to $100,000 pursuant to a Revolving Senior Subordinated
Debenture.
|
The
above components are further delineated in the agreements which the Company
entered into in conjunction with the transaction. These agreements
with IP and KLI include the following:
Utilipoint
– IP Agreements -
The IP Agreement provides that Net Cash Flow will be distributed as
follows: first, contributed capital will be returned to the members on a
pro-rata basis (based on the amount of capital contributed), and, thereafter,
Net Cash Flow will be distributed to the members on a percentage ownership
basis. Utilipoint’s percentage ownership immediately after the
execution of the agreement by Utilipoint will be 60%.
The
Capital Commitment Agreement provides that Utilipoint will make capital
contributions to IP of up to $200,000.
The
Management Services Agreement provides that Utilipoint will provide management
services to IP and provide consultants to assist IP with IP
projects. Management services will be charged to IP based on the
actual expenses incurred by Utilipoint, and consultants will be charged at the
same rate that Utilipoint charges to subcontract its consultants to third
parties. Utilipoint will also pay all salaries and benefits for
certain employees of IP who will also provide services to Utilipoint, which will
initially include two employee owners of IP.
The
Consulting Agreement provides that KLI IP Holding Inc. will provide consulting
services to Utilipoint in connection with the joint business and marketing
efforts of Utilipoint and IP. In exchange for its services KLI IP
Holding Inc. will receive Utilipoint stock options.
The
Stock Options Agreement provides that in consideration of the services being
provided to Utilipoint by IP and KLI IP Holding Inc., Utilipoint shall issue
stock options in such amounts as set forth below. The stock options
will be fully-vested upon issuance and will have an exercise price equal to the
fair market value of Utilipoint common stock on the grant date
($50). The stock options will have a term of five years and a
cashless exercise option.
a.
|
KLI
IP Holding Inc. – options to purchase 850
shares
|
b.
|
IP
management shareholders – options to purchase 550
shares
|
Utilipoint
– KLI Agreements -
The Subscription Agreement provides that KLI will purchase up to 2,000
shares of Utilipoint common stock at a per share purchase price of $50 per share
for an aggregate consideration of up to $100,000. KLI, or its
affiliates or assigns, shall have a period of up to two months from the
execution of the Subscription Agreement to make such
purchases.
The
Revolving Senior Subordinated Debenture provides that KLI may loan up to
$100,000 to Utilipoint. The debenture has a term of five years and
pays interest at a rate of 10% per annum.
Continued Support
from Shareholders – On January 15, 2009 management shareholders and KLI
provided a combined $50,000 to meet working capital needs via purchase of common
stock of $25,000 and notes payable of $25,000 at 10% due January 15,
2014.
F-41
UTILIPOINT
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
2009 Stock
Investment Plan – On April 23, 2009 the Company’s 2009 Stock
Investment Plan (the “Plan”) was put into effect. Under the Plan
terms, eligible participants include directors, officers, key employees and
consultants as selected by the Company’s compensation committee (the
“Committee”). Awards under the Plan may be in the form of stock
options or incentive stock options for purchase of shares of the Company’s
Common Stock at an exercise price equal to 100% of the estimated fair market
value of a share of Common Stock on the date option is
granted. Vesting terms are at the discretion of the Committee but in
no case may the exercise period of time exceed ten years. The maximum
amount of Common Stock which may be issued under the Plan is 12,000
shares.
Cancellation of
Common Stock Put Options – On July 26, 2009 per renewal terms of
one executive’s employment agreement and on August 1, 2009 per terms of the
separation agreement of a different executive, all common stock put options were
cancelled. See also Debt Maturity Extension below.
Debt Maturity
Extension - On August 1, 2009 per terms of a separation agreement (see
also Cancellation of Common Stock Put Options above), the former Company
executive who holds the $16,000 note payable due September 23, 2009 agreed to an
extension of terms in the amount of two installments of $2,000 and $14,000 due
December 31, 2009 and January 30, 2010, respectively. The same former
Company executive also agreed to a payment date of September 30, 2009 for the
unpaid portion, $3,722 of the $9,722 note due June 2, 2009 of which $6,000 had
been paid on June 2, 2009.
F-42
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution
The
following table sets forth an estimate of the costs and expenses payable by us
in connection with the offering described in this registration statement. All of
the amounts shown are estimates except the Securities and Exchange Commission
Registration Fee:
Securities
and Exchange Commission Registration Fee
|
$ | 436.00 | ||
FINRA
Filling Fees
|
825 | |||
Printing
Fees
|
20,000 | |||
Accounting
Fees and Expenses
|
160,640 | |||
Legal
Fees and Expenses
|
70,000 | |||
Miscellaneous
|
540,000 | |||
Total
|
791,822 |
Item
14. Indemnification of Directors and Officers
Section
145 (“Section 145”) of the Delaware General Corporation Law, as amended (the
“DGCL”), permits indemnification of directors, officers, agents and controlling
persons of a corporation under certain conditions and subject to certain
limitations. Section 145 empowers a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director,
officer or agent of the corporation or another enterprise if serving at the
request of the corporation. Depending on the character of the proceeding, a
corporation may indemnify against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit or proceeding if the person indemnified
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to, the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. In the case of an action by or in the right of the
corporation, no indemnification may be made with respect to any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine that despite the
adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. Section 145
further provides that to the extent a present or former director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to above or in the defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys’ fees)
actually and reasonably incurred by such person in connection
therewith. The foregoing is only a summary of the described sections
of the Delaware General Corporation Law and is qualified in its entirety by
reference to such sections.
Our
Certificate of Incorporation and bylaws provide that we shall indemnify each of
our officers and directors to the fullest extent permitted by Section
145.
Our
Certificate of Incorporation, as amended, provides that no current or former
director of ours shall be personally liable to us or our stockholders for
monetary damages for breach of fiduciary duty as a director, except to the
extent such exemption from liability or limitation thereof is not permitted
under the DGCL as the same exists or may hereafter be amended.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
(Securities Act) may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-1
Item
15. Recent Sales of Unregistered Securities
The
Company issued 1,000,000 shares of common stock on December 8, 2006, to Mondo
Management Corp., for an aggregate purchase price of $17,500.
The
Company issued an aggregate of 225,000 shares of common stock on June 1, 2009 to
Nana Baffour, Johnson Kachidza, Frank Asante-Kissi and B.N. Bahadur for an
aggregate purchase price of $225.
The
Company issued 80,000 shares of common stock on July 17, 2009. 30,000 shares of
common stock on July 31, 2009 and 52,000 of common stock on August 14, 2009 to investors for an aggregate purchase
price of $340,200.
We
believe that the offer and sale of the securities referenced were exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act and/or Regulation D promulgated thereunder as transactions
not involving any public offering. All of the purchasers of unregistered
securities for which we relied on Section 4(2) and/or Regulation D
represented that they were accredited investors as defined under the Securities
Act, except for up to 35 non-accredited investors. The purchasers in each case
represented that they intended to acquire the securities for investment only and
not with a view to the distribution thereof and that they either received
adequate information about the registrant or had access, through employment or
other relationships, to such information; appropriate legends were affixed to
the stock certificates issued in such transactions; and offers and sales of
these securities were made without general solicitation or
advertising.
Item
16. Exhibits
1.1**
|
Form
of Underwriting Agreement between Midas Medici Group Holdings, Inc. and
National Securities Corporation.
|
2.1
|
Agreement
of Merger and Plan of Reorganization, dated as of August 10, by and among
Midas Medici Group Holdings, Inc., Utilipoint Acquisition Corp. and
Utilipoint International, Inc. (Incorporated by reference to the
Registrant’s Form 8-K filed on August 14,
2009).
|
3.1
|
Articles
of Incorporation (Incorporated by reference to Exhibit 3.1 on Form 10SB
filed May 2, 2007).
|
3.2
|
Certificate
of Ownership of Mondo Acquisition I, Inc. and Midas Medici Group Holdings,
Inc. (Incorporated by reference to the Registrant’s Form 8-K filed on May
27, 2009)
|
3.3
|
Bylaws
(Incorporated by reference to the Registrant’s Form S-1/A filed on
September 30, 2009).
|
4.1**
|
Form
of Underwriter’s Purchase Option
|
5.1
|
Opinion
of Sichenzia Ross Friedman Ference LLP (Incorporated by reference to the
Registrant’s Form S-1/A filed on September 30,
2009).
|
10.1
|
Stock
Option Plan (Incorporated by reference to the Registrant’s Form 8-K filed
on July 31, 2009).
|
10.2
|
Employment
Agreement between Midas Medici Group Holdings, Inc. and Nana Baffour dated
as of July 16, 2009 (Incorporated by reference to the Registrant’s Form
8-K filed on July 22, 2009).
|
10.3
|
Employment
Agreement between Midas Medici Group Holdings, Inc. and Johnson Kachidza
dated as of July 16, 2009 (Incorporated by reference to the Registrant’s
Form 8-K filed on July 22, 2009).
|
10.4
|
Stock
Purchase Agreement dated May 15, 2009, among Mondo Acquisition I, Inc.,
Mondo Management Corp., and Midas Medici Group, Inc. (Incorporated by
reference to the Registrant’s Form 8-k filed on May 21,
2009)
|
10.5
|
Capital
Commitment Agreement between Utilipoint International, Inc. and The
Intelligent Project, LLC dated as of July 1, 2009 (Incorporated by
reference to the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.6
|
Agreement
to be bound to the Limited Liability Company Agreement between of The
Intelligent Project, LLC dated as of July 1, 2009 (Incorporated by
reference to the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.7
|
Limited
Liability Company Agreement of The Intelligent Project, LLC dated as of
May 22, 2009. (Incorporated by reference to the Registrant’s Form S-1/A
filed on November 3, 2009).
|
10.8
|
Consulting
Agreement between Utilipoint International, Inc. and KLI IP Holding, Inc.
dated as of July 1, 2009 (Incorporated by reference to the Registrant’s
Form S-1/A filed on September 30, 2009).
|
10.9
|
Management
Services Agreement between Utilipoint International, Inc. and The
Intelligent Project, LLC dated as of July 1, 2009 (Incorporated by
reference to the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.10
|
Stock
Subscription Agreement executed by Knox Lawrence International, LLC dated
as of July 1, 2009 (Incorporated by reference to the Registrant’s Form
S-1/A filed on September 30, 2009).
|
10.11
|
Revolving
Senior Subordinated Note dated as of July 1, 2009 (Incorporated by
reference to the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.12
|
Form
of Subscription Agreement for sales of common stock on July 17, July 31,
and August 14, 2009 (Incorporated by reference to the Registrant’s Form
S-1/A filed on September 30, 2009).
|
10.13
|
Form
of Return to Treasury Agreement executed by Nana Baffour, Johnson
Kachidza, Frank Asante-Kissi and B.N. Bahadur effective June 29, 2009
(Incorporated by reference to the Registrant’s Form 8-K filed on July 31,
2009)
|
10.14
|
Reimbursement
Agreement between Midas Medici Group Holdings, Inc. and Knox Lawrence
International LLC dated as of August 7, 2009 (Incorporated by reference to
the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.15
|
Management
Agreement between Utilipoint International, Inc. and Knox Lawrence
International LLC dated as of July 23, 2007(Incorporated by reference to
the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.16
|
Senior
Subordinated Debenture issued by Utilipoint International, Inc. to Knox
Lawrence International LLC dated as of January 15, 2009 (Incorporated by
reference to the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.17
|
Senior
Subordinated Debenture issued by Utilipoint International, Inc. to Knox
Lawrence International LLC dated as of December 31, 2008 (Incorporated by
reference to the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.18
|
Lease
for Utilipoint’s corporate offices in Albuquerque, New Mexico
(Incorporated by reference to the Registrant’s Form S-1/A filed on
September 30, 2009).
|
10.19
|
Lease
for Utilipoint’s corporate offices in Tulsa, Oklahoma (Incorporated by
reference to the Registrant’s Form S-1/A filed on November 3,
2009).
|
10.20
|
Lease
for Utilipoint’s corporate offices in Houston, Texas (Incorporated by
reference to the Registrant’s Form S-1/A filed on November 3,
2009).
|
10.21
|
Lease
for Utilipoint’s corporate offices in Brno, Czech Republic (Incorporated
by reference to the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.22*
|
Revolving
Loan Agreement among Midas Medici Group Holdings, UtiliPoint
International, Inc. and Proficio
Bank
|
10.23
|
Form
of Secured Revolving Promissory Note (Incorporated by reference to the
Registrant’s Form 8-K filed on October 20,
2009)
|
10.24
|
Security
Agreement among Midas Medici Group Holdings, Inc., UtiliPoint
International, Inc. and Proficio Bank. (Incorporated by reference to the
Registrant’s Form 8-K filed on October 20,
2009)
|
10.25
|
Subordination
and Standstill Agreement among, Bruce R. Robinson Trust under agreement
dated March 27, 2006, Jon Brock, Robert C. Bellemare, and Knox Lawrence
International, LLC (Incorporated by reference to the Registrant’s Form 8-K
filed on October 20, 2009)
|
10.26
|
Comfort
Letter by Knox Lawrence International, LLC (Incorporated by reference to
the Registrant’s Form 8-K filed on October 20,
2009)
|
10.27
|
Letter
Agreement between Forbes Magazine and Utlipoint International, Inc. dated
as of October 2, 2009(Incorporated by reference to the Registrant’s Form
S-1/A filed on November 3, 2009).
|
14.1
|
Code
of Ethics (Incorporated by reference to the Registrant’s Form S-1/A filed
on September 30, 2009).
|
16.1
|
Letter
from Russell Bedford International dated July 24, 2009 (Incorporated by
reference to the Registrant’s Form 8-K/A filed on July 28,
2009).
|
21
|
Subsidiaries
(Incorporated by reference to the Registrant’s Form S-1/A filed on
September 30, 2009).
|
23.1*
|
Consent
of REDW LLC.
|
23.2*
|
Consent
of RBSM, LLP.
|
23.3*
|
Consent
of Sichenzia Ross Friedman Ference LLP (included in Exhibit
5.1)
|
* Filed
herewith.
** To be
filed by amendment
II-2
Item
17. Undertakings
(a) The
undersigned registrant hereby undertakes to:
(1) File,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement to:
i.
Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended (the “Securities Act”);
ii.
Reflect in the prospectus any facts or events which, individually or in the
aggregate, represent a fundamental change in the information in the registration
statement.
Notwithstanding
the foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Securities and Commission (the “Commission”) pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the “Calculation of
Registration Fee” table in the effective registration statement.
iii.
Include any additional or changed material information on the plan of
distribution.
(2) For
determining liability under the Securities Act, treat each such post-effective
amendment as a new registration statement relating to the securities offered,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering.
(3) File
a post-effective amendment to remove from registration by means of a
post-effective amendment any of the securities that remain unsold at the end of
the offering.
(4) For
determining liability of the undersigned small business issuer under the
Securities Act to any purchaser in the initial distribution of the securities,
the undersigned small business issuer undertakes that in a primary
offering of securities of the undersigned small business issuer pursuant to this
registration statement, regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the undersigned small
business issuer will be a seller to the purchaser and will be considered to
offer or sell such securities to such purchaser:
i. Any
preliminary prospectus or prospectus of the undersigned small business issuer
relating to the offering required to be filed pursuant to Rule 424;
ii. Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned small business issuer or used or referred to by the undersigned
small business issuer;
iii. The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned small business issuer or its
securities provided by or on behalf of the undersigned small business issuer;
and
iv. Any
other communication that is an offer in the offering made by the undersigned
small business issuer to the purchaser.
(b)
Provide to the underwriters at the closing specified in the underwriting
agreements, certificates in such denominations and registered in such names as
required by the underwriters to permit prompt delivery to each
purchaser.
(c)
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
(d) (1)
For determining any liability under the Securities Act, treat the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
small business issuer under Rule 424(b)(1), or (4), or 497(h) under the
Securities Act as part of this registration statement as of the time the
Commission declared it effective.
(2) For
determining any liability under the Securities Act, treat each post-effective
amendment that contains a form of prospectus as a new registration statement for
the securities offered in the registration statement, and that offering of the
securities at that time as the initial bona fide offering of those
securities.
II-3
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, , in the city
of New York, in the State of New York, on November 25, 2009.
Midas
Medici Group Holdings, Inc.
|
|||
By:
|
/s/ Nana
Baffour
|
||
Nana
Baffour
CEO,
Co-Executive Chairman (Principal
Executive
Officer) and Director
|
|||
By:
|
/s/ Johnson
M. Kachidza
|
||
Johnson
M. Kachidza
|
|||
CFO,
President, Co-Executive Chairman (Principal Financial and Accounting
Officer) and Director
|
|||
POWER
OF ATTORNEY
In
accordance with the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons on behalf of the
Company in the capacities and on the dates indicated.
NAME
|
TITLE
|
DATE
|
||
/s/
Nana Baffour
|
||||
Nana
Baffour
|
CEO,
Co-Executive Chairman
(Principal
Executive Officer) and Director
|
November
25, 2009
|
||
/s/
Johnson M. Kachidza*
|
||||
Johnson
M. Kachidza
|
CFO,
President, Co-Executive Chairman (Principal Financial and Accounting
Officer) and
Director
|
November
25, 2009
|
||
/s/
Stephen Schweich*
|
||||
Stephen
Schweich
|
Director
|
November
25, 2009
|
||
/s/
Frank Henson
|
||||
Frank
Henson
|
Director
|
November
25, 2009
|
||
*By:
/s/ Nana
Baffour
|
||||
Nana
Baffour, attorney-in-fact
|
||||
II-4