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EX-32 - EQCO2, INC. | v210363_ex32.htm |
EX-31.2 - EQCO2, INC. | v210363_ex31-2.htm |
EX-31.1 - EQCO2, INC. | v210363_ex31-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x
|
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF
1934
|
For the fiscal year ended October 31,
2010
o
|
TRANSACTION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the transaction period
from to
Commission
File Number: 000-52653
CLEANTECH
TRANSIT, INC.
|
(Exact
name of registrant as specified in
charter)
|
Nevada
|
98-0505768
|
State
or other jurisdiction of incorporation or organization
|
(I.R.S.
Employee I.D. No.)
|
21020
North Pima Road, Scottsdale, Arizona
|
85255
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code
(888)
870-4823
|
Securities registered pursuant to
section 12 (b) of the Act: None
Securities registered pursuant to
section 12 (g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined by
Rule 405 of the Securities Act o Yes x No
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15 (d) of the Act. o
Yes x No
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. o Yes x No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this
chapter) during the proceeding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). o Yes o No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy
information statements incorporated by reference in Part III of this Form 10-K
or any amendments to this Form 10-K o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company. See
definition of “large accelerated filer”, “accelerated filer” and “small
reporting company” Rule 12b-2 of the Exchange Act.
Large
accelerated filer
|
o
|
Accelerated
filer
|
o
|
Non-accelerated
filer
|
o (Do
not check if a small reporting company)
|
Small
reporting company
|
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes o No x
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of April 30, 2010 was approximately
$7,933,230 based upon the closing price of $0.53 per share reported for such
date on the Over-the-Counter Bulletin Board maintained by the
NASD. Shares of common stock held by each officer and director and by
each person who is known to own 10% of more of the outstanding Common Stock have
been excluded in that such persons may be deemed to be affiliates of the
Company. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.
Common Stock
|
Outstanding at January 25,
2011
|
|
Common
Stock, $.001 par value per share
|
104,905,074
shares
|
DOCUMENTS INCORPORATED BY
REFERENCE: None.
TABLE
OF CONTENTS
|
Page
|
|
PART I | ||
ITEM
1.
|
Business.
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1
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ITEM
1A.
|
Risk
Factors.
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3
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ITEM
1B.
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Unresolved
Staff Comments.
|
12
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ITEM
2.
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Properties.
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12
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ITEM
3.
|
Legal
Proceedings.
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12
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ITEM
4.
|
Removed
and Reserved.
|
13
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PART II
|
||
ITEM
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchase of Equity Securities.
|
13
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ITEM
6
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Selected
Financial Information.
|
13
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ITEM
7.
|
Management’s
Discussion and Analysis of Financial Conditions and Results of
Operations.
|
14
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ITEM
7A.
|
Quantitative
and Qualitative Disclosure about Market Risk.
|
17
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ITEM
8.
|
Financial
Statement and Supplementary Data.
|
17
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ITEM
9.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure.
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17
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ITEM
9A
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Controls
and Procedures.
|
18
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ITEM
9B
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Other
Information.
|
19
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PART III
|
||
ITEM
10.
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Directors,
Executive Officers and Corporate Governance.
|
19
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ITEM
11.
|
Executive
Compensation.
|
20
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ITEM
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
|
23
|
ITEM
13.
|
Certain
Relationships and Related Transactions, and Director
Independence.
|
24
|
ITEM
14
|
Principal
Accounting Fees and Services.
|
25
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PART IV
|
||
ITEM
15.
|
Exhibits,
Financial Statement Schedules
|
26
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SIGNATURES
|
27
|
i
PART 1
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some
discussions in this Annual Report on Form 10-K contain forward-looking
statements that have been made pursuant to the provisions of the Private
Securities Litigation Reform Act of 1995. These statements involve
risks and uncertainties and relate to future events or future financial
performance. A number of important factors could cause our actual
results to differ materially from those expressed in any forward-looking
statements made by us in this Form 10-K. Forward-looking statements
are often identified by words such as “believe,” “expect,” “estimate,”
“anticipate,” “intend,” “project,” “plans,” “seek” and similar expressions or
words which, by their nature, refer to future events. In some cases,
you can also identify forward-looking statements by terminology such as “may,”
“will,” “should,” “plans,” “predicts,” “potential” or “continue” or the negative
of these terms or other comparable terminology.
These
forward-looking statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled “Risk Factors” below that may cause our or our industry’s actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. In
addition, you are directed to factors discussed in the “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” section as well
as those discussed elsewhere in this Form 10-K.
Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity or
achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results. However, readers
should carefully review the risk factors set forth in other reports or documents
the Company files from time to time with the Securities and Exchange Commission
(the “SEC”), particularly the Company’s Quarterly Reports on Form 10-Q and any
Current Reports on Form 8-K. All written and oral forward-looking statements
made subsequent to the date of this report and attributable to us or persons
acting on our behalf are expressly qualified in their entirety by this
section.
As
used in this Annual Report on Form 10-K, “we,” “us,” and “our” refer to
Cleantech Transit, Inc., which is also sometimes referred to as the “Company,”
unless the context otherwise requires. In addition, references to
“dollars” and “$” are to United States dollars.
ITEM
1.
|
BUSINESS
|
History
and Organization
We were
incorporated under the laws of the State of Nevada on June 28, 2006 under the
name Patterson Brooke Resources Inc. to identify and acquire a mineral property
that held the potential to contain gold and/or silver
mineralization. In early 2010, due to the global economic crisis, a
challenging environment for raising capital and the lack of suitable drill
targets discovered on the Alice Claim, we decided to shift our business focus to
begin to explore opportunities in the development and production of hybrid,
electric, alternative fuel and diesel heavy duty transit buses, luxury motor
coaches and tour buses. In furtherance of that, on April 7, 2010, we
amended our Articles of Incorporation to change our corporate name to Cleantech
Transit, Inc.
Summary
of Significant Events
In
October 2006 we purchased the Alice Claim, situated in NWT, Canada, for $1,000
from Mr. Max Braden, an independent unrelated prospector of Yellowknife, NWT to
explore for minerals.
On
October 31, 2006 we closed a private placement pursuant to Regulation S of the
Securities Act of 1933, whereby 538,000 common shares were sold at the price of
$0.05 per share to raise $26,900.
On
February 14, 2008, we conducted a 25 to 1 forward stock split of all of our
issued and outstanding shares.
1
On March
10, 2010, we entered into a Letter of Intent with Greentech Holdings LLC
(“Greentech”) outlining the terms of a contemplated definitive agreement for the
purchase of certain assets in the clean technology urban mass transit sector
from Greentech in exchange for 32,000,000 shares of our common stock. In
mid-2010, we decided not to pursue a transaction with Greentech.
On
October 13, 2010, we conducted a 3 to 1 forward stock split by way of stock
dividend. In accordance with the forward stock split, we issued a
dividend of two shares of common stock of the Company for each share of common
stock issued and outstanding as of the record date of October 13, 2010 (the
“Stock Dividend”). The payment date for the Stock Dividend was
October 13, 2010.
Planned
Business
We are no
longer a pre-exploration stage company, but are now considered a development
stage company with minimal day-to-day operations as we seek out potential
business opportunities. We have no revenues, have achieved losses
since inception, and currently have limited operations.
As a
result of the current difficult economic environment and our lack of funding to
implement our business plan, our Board of Directors has begun to analyze
strategic alternatives available to our Company to continue as a going concern.
Such alternatives included raising additional debt or equity financing or
consummating a merger or acquisition with a partner that may involve a change in
our business plan. Although our Board of Directors’ preference was to obtain
additional funding to pursue the transaction with Greentech, the Board believed
that it must consider all viable strategic alternatives that are in the best
interests of our shareholders. Such strategic alternatives included a merger,
acquisition, share exchange, asset purchase, or similar transaction in which our
present management will no longer be in control of our Company and our business
operations would be replaced by that of our transaction partner. We believe we
would be an attractive candidate for such a business combination due to the
perceived benefits of being a publicly registered company, thereby providing a
transaction partner access to the public marketplace to raise
capital.
Employees
At
present, we have no employees, other than our sole officer and
director. Our sole officer and director is a part-time employee and
will devote about 4-5 hours per week of his time to our
operations. Our sole officer and director does not have an employment
agreement with us. We presently do not have pension, health, annuity,
insurance, stock options, profit sharing or similar benefit plans; however, we
may adopt such plans in the future. There are presently no personal
benefits available to our sole officer and director. Our sole officer
and director will handle our administrative duties.
Investment
Policies
We do not
have an investment policy at this time. Any excess funds the Company
has on hand will be deposited in interest bearing notes such as term deposits or
short term money instruments. There are no restrictions on what the
directors are able to invest or additional funds held by our
Company. Presently we do not have any excess funds to
invest.
Capital
Equipment and Expenditures
During
the year ended October 31, 2010, we did not acquire any material capital
equipment.
Corporate
Information
We are
responsible for filing various forms with the United States Securities and
Exchange Commission (the “SEC”) such as Form 10-K and Form 10-Q. The
shareholders may read and copy any material filed by us with the SEC at the
SEC’s Public Reference Room at 100 F. Street, N.E., Washington, DC,
20549. The shareholders may obtain information on the
operations of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information which
we have filed electronically with the SEC by assessing the website using the
following address: http://www.sec.gov.
2
Our
principal executive office is located at: 21020 North Pima Road, Scottsdale,
Arizona 85255. Our telephone number at that address is (888)
870-4823. Our website address is
http://www.cleantechtransit.com/. The information on our website is
not a part of this Annual Report on Form 10-K.
ITEM
1A. RISK
FACTORS
An
investment in our securities involves an exceptionally high degree of risk and
is extremely speculative. The material risks and uncertainties that management
believes affect us are described below. Before making an investment
decision, you should carefully consider the risks and uncertainties described
below together with all of the other information included or incorporated by
reference in this report. The risks and uncertainties described below are
not the only ones facing us. Additional risks and uncertainties that
management is not aware of or focused on or that management currently deems
immaterial may also impair our business operations. This report is
qualified in its entirety by these risk factors.
If
any of the following risks actually occur, our financial condition and results
of operations could be materially and adversely affected. If this were to
happen, the value of our common stock could decline significantly, and you could
lose all or part of your investment.
Risks
Related to Financing Our Business
We
will need to obtain additional financing to fully implement our business
plan. If we do not obtain such financing, we may have to reduce or
cease our activities and investors could lose their entire
investment.
There is
no assurance that we will operate profitably or generate positive cash flow in
the future. We will require additional financing in order to
implement the various stages of our business plan. We will also
require additional financing to sustain our business operations if we are not
successful in receiving revenues at the levels that we anticipate. We
may not be able to obtain financing on commercially reasonable terms or terms
that are acceptable to us when it is required. Because of the
worldwide economic downturn or because of other reasons, we may not be able to
raise any additional funds that we require on favorable terms, if
any. The failure to obtain necessary financing may impair our ability
to manufacture our products and continue in business. If we do not
obtain such financing, our business could fail and investors could lose their
entire investment.
Our
ability to generate positive cash flow is uncertain.
To
develop and expand our business, we will need to make significant up-front
investments in our manufacturing capacity and incur research and development,
sales and marketing and general and administrative expenses. In
addition, our growth will require a significant investment in working
capital. Our business will require significant amounts of working
capital to meet our production requirements and support our
growth. Therefore, even after the proceeds from any potential
offering, we will need to raise additional capital from investors to meet our
production requirements and achieve our expected growth.
We cannot
provide any assurance that we will be able to raise the debt and equity
necessary to meet these requirements. Obtaining capital will be
challenging, due to the current environment in the financial markets and current
world instability. If adequate funds are not available or are not
available on acceptable terms when required, we may be required to significantly
curtail our operations and may not be able to fund our current production
requirements — let alone fund expansion, take advantage of unanticipated
acquisition opportunities, develop or enhance our products, or respond to
competitive pressures. Any failure to obtain such additional
financing could have a material adverse effect on our business, results of
operations and financial condition.
3
We
may be unable to raise additional capital to pursue our commercialization plans
and may be forced to delay product development, reduce our sales and marketing
efforts or forego attractive business opportunities.
If we are
successful in raising financing proceeds we believe this will permit us to
complete the development of a limited number of product prototypes that can be
evaluated by potential customers, and to pay for certain other operating
costs. However, even if we are successful in raising such proceeds,
we will need to raise additional funds in order to implement our intended
operating plan. If we are unable to raise additional capital or are
unable to do so on acceptable terms, we may be prevented from conducting all or
a portion of our planned operations. In particular, the development
or expansion of our business could be delayed or aborted if we are unable to
fund our activities. In addition, we may be forced to reduce our
sales and marketing efforts or forego attractive business
opportunities. If we fail to execute our strategy to achieve and
maintain profitability in the future, we may fail to meet expectations of
investors, and the price of our common shares may decline, which would adversely
affect our ability to raise additional capital.
Our
stockholders may suffer significant dilution if we raise additional
capital.
If we
raise additional capital, we expect it will be necessary for us to issue
additional equity or convertible debt securities. If we issue equity
or convertible debt securities, the price at which we offer such securities may
not bear any relationship to our value, the net tangible book value per share
may decrease, the percentage ownership of our current stockholders would be
diluted, and any equity securities we may issue in such offering or upon
conversion of convertible debt securities issued in such offering, may have
rights, preferences or privileges with respect to liquidation, dividends,
redemption, voting and other matters that are senior to or more advantageous
than our common stock.
We
are a new company with limited operating history. We have no track
record to determine if our planned business will be financially viable or
successful.
We have
only recently commenced operations of the business described herein, and we have
not yet manufactured or sold any buses or vehicles to
customers. Until we are actually in the marketplace for a
demonstrable period of time, it is impossible to determine if our business
strategies will be viable or successful. Although the bus and motor
coach industries are not new, the market for eco-friendly buses and motor
coaches is relatively new. The viability of our business will, to
some extent, rely both upon the demand for eco-friendly, novel buses and motor
coaches by both public transit agencies and authorities and by private
customers. It is impossible to give any assurance of our future
viability or success in generating revenues or profits.
Because
we may never have net income from our operations, our business may fail and then
investors may lose all of their investment in our company.
We have
no history of revenues and profitability from operations. There can
be no assurance that we will ever operate profitably. The success of
our company is significantly dependent on uncertain events, including
development of successful commercial prototypes of products, successful testing
of those prototypes by third parties, establishing satisfactory manufacturing
arrangements and processes, and obtaining orders from customers for our
products. If our business plan is not successful and we are not able
to operate profitably, then our stock may become worthless and investors may
lose all of their investment in our company.
Before
receiving revenues from sales to customers of our products, we anticipate that
we will incur increased operating expenses without realizing any
revenues. We therefore expect to incur significant
losses. If we are unable to generate significant revenues from sales
of our products, we will not be able to earn profits or continue
operations. We can provide no assurance that we will generate any
revenues or ever achieve profitability. If we are unsuccessful in
addressing these risks, our business will fail and investors may lose all of
their investment in our company.
4
Our
limited operating history makes it difficult to evaluate our future prospects
and results of operations.
We
recently commenced operations and have a limited operating
history. Accordingly, you should consider our future prospects in
light of the risks and uncertainties experienced by early stage companies in
evolving industries, and by companies engaged in overseas
operations. Some of these risks and uncertainties relate to our
ability to:
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·
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establish
and maintain our market position;
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·
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respond
to competitive market conditions;
|
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·
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increase
awareness of our brand;
|
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·
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respond
to changes in our regulatory
environment;
|
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·
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maintain
effective control of our costs and
expenses;
|
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·
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raise
sufficient capital to sustain and expand our business;
and
|
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·
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attract,
retain and motivate qualified
personnel.
|
If we are
unsuccessful in addressing any of these risks and uncertainties, our business
may be materially and adversely affected.
If
we obtain debt financing, we will face risks associated with financing our
operations.
If we
obtain debt financing, we will be subject to the normal risks associated with
debt financing, including the risk that our cash flow will be insufficient to
meet required payments of principal and interest, and the risk that we will not
be able to renew, repay, or refinance our debt when it matures or that the terms
of any renewal or refinancing will not be as favorable as the existing terms of
that debt. If we enter into secured lending facilities and are unable
to pay our obligations to our secured lenders, they could proceed against any or
all of the collateral securing our indebtedness to them.
If
we fail to implement our business strategy, our financial performance and our
growth could be materially and adversely affected.
Our
future financial performance and success are dependent in large part upon our
ability to implement our business strategy successfully. Our business
strategy envisions several initiatives, including driving revenue growth and
enhancing operating results by generating customer demand for and acceptance of
our innovative buses and vehicles, establishing successful sales, marketing and
distribution networks and reducing operating costs through efficient
manufacturing arrangements. We may not be able to implement our
business strategy successfully or achieve the anticipated benefits of our
business plan. If we are unable to do so, our long-term growth and
profitability may be adversely affected. Even if we are able to
implement some or all of the initiatives of our business plan successfully, our
operating results may not improve to the extent we anticipate, or at
all. Implementation of our business strategy could also be affected
by a number of factors beyond our control, such as increased competition, legal
developments, government regulation, general economic conditions or increased
operating costs or expenses. In addition, to the extent we have
misjudged the nature and extent of industry trends or our competition; we may
have difficulty in achieving our strategic objectives. Any failure to
implement our business strategy successfully may adversely affect our business,
financial condition and results of operations. In addition, we may
decide to alter or discontinue certain aspects of our business strategy at any
time.
The
continuation or worsening of current recessionary economic conditions could have
a material adverse effect on our profitability and financial
condition.
We are in
the midst of a significant global recession. Current conditions are
causing significant global economic uncertainty, thus subjecting us to
significant planning risk with respect to our business and potential pricing
pressure on our products. We cannot predict when the recession will
end or what our prospects will be once the recession has ended and markets
resume to more normal conditions. In addition, the recession may last
longer and/or be more severe than we currently anticipate. The
continuation of current economic conditions for an extended period of time or
the worsening of such conditions could have a material adverse effect on our
business.
5
Risks
Related to Our Business and Industry
The
success of our business depends in part upon factors beyond the control of our
company. We may never become commercially viable and we may be forced
to cease operations.
The
commercial feasibility of our business and intended business is dependent upon
many factors beyond our control, including customer demand for our products,
governmental decisions relating to public transit and alternate energy policies,
actions by our competitors, and environmental regulation. These
factors cannot be accurately predicted, and any one or a combination of these
factors may result in our company not receiving an adequate return on invested
capital. These factors may have material and negative effects on our
financial performance and our ability to continue operations.
We
will depend on our suppliers, some of which are limited sources of supply, and
the loss of these suppliers could materially and adversely affect our business,
results of operations and financial condition.
Our
design and development activities will rely on significant use of commercially
available components. We intend to obtain some of our critical
components from limited sources and generally will not maintain significant
inventories or generally have long-term or exclusive supply contracts with our
vendors. If any of the commercially available components we will use
fails to perform as expected, or if our rights to use, modify and resell these
components are restricted, we would have to find replacement components and may
not be able to do so on terms that are acceptable to us or at all, and that
could result in added expenses, schedule or delivery delays, customer
dissatisfaction and damages being assessed against us, any of which could have a
material adverse effect on our business, results of operations and financial
condition.
We may
experience delays in receiving products from vendors from time to time due to
lack of availability, quality control, manufacturing problems, shortages of
materials or components, or product design difficulties. We may
experience delays in the future, and replacement products may not be available
when needed, or at all, or at commercially reasonable rates or
prices. If we were to change some of our vendors, we would have to
perform additional testing procedures on the product supplied by the new vendors
and might have to reconfigure our products to integrate any new components,
which could delay the availability of, or make unavailable, our
products. Furthermore, our costs could increase significantly if we
need to change vendors. If we do not receive timely deliveries of
quality products, or if there are significant increases in the prices of these
products, our business, financial condition and results of operations could be
affected adversely.
Changes
in tax policies and governmental incentives may reduce or eliminate the economic
benefits that make our products attractive to customers.
In some
jurisdictions, such as the United States, governments provide tax benefits and
incentives to customers for clean-air vehicles, including tax credits, rebates
and reductions in applicable tax rates. Any reduction in, or
elimination of, these tax benefits or incentives may have an adverse effect on
our business, financial condition and results of operations.
We
may be subject to lengthy sales cycles.
Particularly
with respect to sales to government entities, we may be subject to lengthy sale
cycles that may last months or years. These lengthy and challenging
sales cycles may mean that it could take longer before our sales and marketing
efforts result in revenue, if at all, and may have adverse effects on our
operating results, financial condition, cash flows and stock price.
Our
business may become substantially dependent on contracts that are awarded
through competitive bidding processes.
We may
sell a significant portion of our products pursuant to contracts that are
subject to competitive bidding, including contracts with municipal and other
local transit authorities. Competition for, and negotiation and award
of, contracts in the United States and foreign markets present varied risks,
including, but not limited to:
6
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·
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investment
of substantial time and resources by management for the preparation of
bids and proposals with no assurance that a contract will be awarded to
us;
|
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·
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the
requirement to certify as to compliance with numerous laws (for example,
socio-economic, small business and domestic preference) for which a false
or incorrect certification can lead to civil and criminal
penalties;
|
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·
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the
need to estimate accurately the resources and cost structure required to
service a contract; and
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·
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the
expenses and delays that we might suffer if our competitors protest a
contract awarded to us, including the potential that the contract may be
terminated and a new bid competition may be
conducted.
|
If we are
unable to win contracts awarded through the competitive bidding process, we may
not be able to operate in the market for products and services that are provided
under those contracts for a number of years. If we are unable to
consistently win new contract awards over any extended period, or if we fail to
anticipate all of the costs and resources that will be required to secure and
perform such contract awards, our growth strategy and our business, financial
condition and results of operations could be materially and adversely
affected.
Some
of our future contracts may be fixed-price contracts, which could subject us to
losses if we are not able to perform within the fixed prices that we have
negotiated for our contracts.
Some of
our contracts that we expect to enter into in the future with customers may be
fixed-price contracts. Fixed-price contracts enable us to benefit
from cost savings. While we may have provisions in multi-year
contracts allowing certain price adjustments based upon, among other things, the
consumer price index and certain extraordinary cost events, we anticipate that
we will be required to carry the burden of covering our costs in excess of the
negotiated fixed prices, as adjusted. If our initial estimates are
incorrect, we could lose substantial sums on these contracts. In
addition, some of our future contracts may have provisions relating to audit
rights and certain other conditions, which if we fail to meet the terms
specified in those contracts, then we may not realize their full
benefits. Our financial condition and results of operations depend on
our ability to maximize our earnings from our contracts. Lower
earnings caused by increased costs, particularly those in excess of the fixed
prices of the contracts, and cost control problems would have a material adverse
effect on our financial condition and results of operations.
Our
insurance coverage may be inadequate to cover all significant risk
exposures.
We will
be exposed to liabilities that are unique to the products we will
provide. While we intend to maintain insurance for certain risks, the
amount of our insurance coverage may not be adequate to cover all claims or
liabilities, and we may be forced to bear substantial costs resulting from risks
and uncertainties of our business. It is also not possible to obtain
insurance to protect against all operational risks and
liabilities. The failure to obtain adequate insurance coverage on
terms favorable to us, or at all, could have a material adverse effect on our
business, financial condition and results of operations.
We
may not be able to maintain performance bonds or letters of credit required by
our contracts or obtain performance bond and letters of credit required for new
contracts.
In the
United States, many municipalities and local authorities require suppliers to
obtain performance bonds from surety companies or letters of credit to ensure
that suppliers will perform under purchase agreements. There is no
guarantee that we will be able to access the performance bond market in the
future. There can be no assurance that our customers will not require
additional performance security in the future or that either letters of credit
or performance bonds will continue to be available to us as security for
performance of our contracts or, if available, on favorable terms (including
cost) to us. If the amount of performance security we are required to
provide significantly increases or if adequate performance security is not
available or if the terms or costs of such security are too onerous, we may lose
existing contracts and may not be able to bid on many new contracts, which could
result in a material adverse effect on our business, financial condition and
results of operations.
7
We
may not be able to protect the intellectual property upon which we depend, and
we could incur substantial costs defending against claims that our products
infringe on the proprietary rights of others.
Our
ability to compete effectively will depend, in part, on our ability to protect
our proprietary technologies, product and system designs and manufacturing
processes. While we have attempted to safeguard and maintain our
proprietary rights, we do not know whether we have been or will be completely
successful in doing so. We intend to rely on a combination of
patents, trademarks, trade secrets, know-how, and policies and procedures
related to confidentiality to protect our intellectual property.
Confidentiality
agreements to which we are or may become a party may be breached, in which case
we may not have adequate remedies. Our trade secrets may become
publicly available without breach of such agreements or may be independently
developed by competitors. Our inability to maintain the proprietary
nature of our technology and processes could allow our competitors to limit or
eliminate any competitive advantages we may have.
Some of
our intellectual property is not covered by any patents or patent
applications. Moreover, in the case of patents that may issue, there
can be no assurance that the claims allowed are, or will be, sufficiently broad
to protect our technology or processes. Patents that we may hold may
be also challenged or invalidated. Similarly, even if U.S. federal or
foreign trademark registrations are granted to us, our trademark rights may be
challenged. Our competitors or others may adopt trademarks similar to
ours, thereby impeding our ability to maintain our brand identity and possibly
leading to customer confusion.
Asserting,
defending and maintaining our intellectual property rights could be difficult
and costly, and failure to do so may diminish our ability to compete effectively
and may harm our operating results. We may need to pursue legal
action to enforce our intellectual property rights, to protect our trademarks,
trade secrets, domain names and other intellectual property rights and to
determine the validity and scope of the proprietary rights of
others. Litigation may be necessary to enforce our intellectual
property rights, protect our trade secrets or determine the validity and scope
of the proprietary rights of others and the enforcement of intellectual property
rights, may be difficult. We cannot assure you that the outcome of
any litigation will be in our favor. Intellectual property litigation
may be costly and may divert management attention, as well as expend our other
resources away from our business. If third parties prepare and file
applications for trademarks used or registered by us, we may oppose those
applications and be required to participate in proceedings to determine the
priority of rights to the trademark.
Similarly,
competitors may have filed applications for patents, may have received patents
and may obtain additional patents and proprietary rights relating to products or
technology that block or compete with patents that we may obtain. We
may have to participate in interference proceedings to determine the priority of
invention and the right to a patent for the technology. Litigation
and interference proceedings, even if they are successful, are expensive to
pursue and time consuming, and could require the expenditure of a substantial
amount of our financial resources.
We
depend on the recruitment and retention of qualified personnel, and our failure
to attract and retain such personnel could seriously harm our
business.
Our
future performance is highly dependent upon the continued services of key
engineering personnel and managers. Our future business depends upon
our ability to attract and retain qualified engineering, manufacturing,
marketing, sales and management personnel for our operations. We may
also have to compete with the other companies in our industry in the recruitment
and retention of qualified managerial and technical
employees. Competition for personnel is intense, and confidentiality
and covenant-not-to-compete agreements may restrict our ability to hire
individuals employed by other companies. Therefore, we may not be
successful in attracting or retaining qualified personnel. Our
failure to attract and retain qualified personnel could seriously harm our
business, results of operations and financial condition. Furthermore,
we may not be able to accurately forecast our needs for additional personnel,
which could adversely affect our ability to grow.
8
Our
operations could be adversely affected by interruptions of production that are
beyond our control.
Our
business, financial condition and results of operations may be adversely
affected by certain events that we cannot anticipate or that are beyond our
control, such as earthquakes, fires, floods, hurricanes, wars, terrorist
attacks, computer viruses, pandemics, breakdowns or impairments of our
information system or communication network, or other natural disasters and
national emergencies that could curtail production and cause delayed deliveries
and canceled orders. Even if our facilities are not directly affected
by such events, we could be affected by interruptions at our manufacturers or
suppliers. Such manufacturers or suppliers may be less likely than
our own facilities to be able to quickly recover from such events and may be
subject to additional risks such as financial problems that limit their ability
to conduct their operations. In addition, global supply disruptions,
such as those caused by political or other dislocations, could lead to shortages
of raw materials used in our buses or components. The inability to
acquire critical components on commercially reasonable terms, or at all, could
delay and increase the cost of manufacturing our buses and result in an adverse
effect on our profitability.
If
we fail to develop or maintain an effective system of internal controls, we may
not be able to accurately report our financial results or prevent financial
fraud. As a result, current and potential stockholders could lose
confidence in our financial reporting.
We are
subject to the risk that sometime in the future, our independent registered
public accounting firm could communicate to the board of directors that we have
deficiencies in our internal control structure that they consider to be
“significant deficiencies”. A “significant deficiency” is defined as
a deficiency, or a combination of deficiencies, in internal controls over
financial reporting such that there is more than a remote likelihood that a
material misstatement of the entity’s financial statements will not be prevented
or detected by the entity’s internal controls.
Effective
internal controls are necessary for us to provide reliable financial reports and
effectively prevent fraud. If we cannot provide reliable financial
reports or prevent fraud, we could be subject to regulatory action or other
litigation and our operating results could be harmed. We are required
to document and test our internal control procedures to satisfy the requirements
of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”
or “SOX”), which requires our management to annually assess the effectiveness of
our internal control over financial reporting.
We
currently are not an “accelerated filer” as defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended. Section 404 of the
Sarbanes-Oxley Act of 2002 (“Section 404”) requires us to include an internal
control report with our Annual Report on Form 10-K. That report must
include management’s assessment of the effectiveness of our internal control
over financial reporting as of the end of the fiscal year. This
report must also include disclosure of any material weaknesses in internal
control over financial reporting that we have identified. As of
October 31, 2010, the management of the Company assessed the effectiveness
of our internal control over financial reporting based on the criteria for
effective internal control over financial reporting established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (“COSO”) and SEC guidance on conducting such
assessments. Management concluded, during the year ended
October 31, 2010, that its internal controls and procedures were not
effective to detect the inappropriate application of U.S. GAAP
rules. Management realized there were deficiencies in the design or
operation of our internal control that adversely affected our internal controls
which management considers to be material weaknesses. A material
weakness in the effectiveness of our internal controls over financial reporting
could result in an increased chance of fraud and the loss of customers, reduce
our ability to obtain financing and require additional expenditures to comply
with these requirements, each of which could have a material adverse effect on
our business, results of operations and financial condition.
Our
intended business, operations and accounting are expected to be substantially
more complex than they have been in the past. 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 personnel 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, then we may not be able to obtain the independent accountant certifications
required by such act, which may preclude us from keeping our filings with the
SEC current.
If we are
unable to maintain the adequacy of our internal controls, as those standards are
modified, supplemented, or amended from time to time, we may not be able to
ensure that we can conclude on an ongoing basis that we have effective internal
control over financial reporting in accordance with
Section 404. Failure to achieve and maintain an effective
internal control environment could cause us to face regulatory action and cause
investors to lose confidence in our reported financial information, either of
which could adversely affect the value of our common stock.
9
As
a public company, we will incur significant increased operating costs and our
management will be required to devote substantial time to new compliance
initiatives.
Our
management has only limited experience operating the Company as a public
company. To operate effectively, we will be required to continue to
implement changes in certain aspects of our business and develop, manage and
train management level and other employees to comply with on-going public
company requirements. Failure to take such actions, or delay in the
implementation thereof, could have a material adverse effect on our business,
financial condition and results of operations.
The
Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC, impose
various requirements on public companies, including requiring establishment and
maintenance of effective disclosure and financial controls and changes in
corporate governance practices. Our management and other personnel
will need to devote a substantial amount of time to these new compliance
initiatives. Moreover, these rules and regulations will increase our
legal and financial compliance costs and will make some activities more
time-consuming and costly.
Our
independent registered public accounting firm has issued its audit opinion on
our consolidated financial statements appearing in this annual report on Form
10-K, including an explanatory paragraph as to an uncertainty with the respect
to the Company’s ability to continue as a going concern.
The
report of Madsen & Associates, CPA’s Inc., our independent registered public
accounting firm, with respect to our consolidated financial statements and
the related notes for the fiscal year ended October 31, 2010, indicates
that there was substantial doubt about our ability to continue as a going
concern. Our financial statements do not include any adjustments that
might result from this uncertainty.
Because
our officers and directors have other outside business activities and may not be
in a position to devote a majority of their time to our future activities and
hence we might cease to operate.
Our sole
officer and director will only be devoting a portion of his time to our
operations. As a consequence of the limited devotion of time to the
affairs of the Company expected from management, our business may
suffer. For example, because our officers and directors have other
outside business activities and may not be in a position to devote a majority of
their time to our future business activities are Company might not succeed and
hence cease to operate.
Risks
Related to Ownership of Our Common Stock
There
has been no trading activity in our common stock on the OTC Bulletin Board for a
long time. An extremely limited public trading market exists for our
common stock, which makes it more difficult for our stockholders to sell their
common stock in the public markets. Any trading in our shares may
have a significant effect on our stock prices.
Although
our common stock is listed for quotation on the OTCBB under the symbol
“CLNO.OB”, there have not been any reported trades in our common stock for at
least the last year. There is currently no active trading market for
our common stock and such a market may not develop or be
sustained. As a result, any trading price of our common stock on the
OTC Bulletin Board may not be an accurate indicator of the trading price of our
common stock. Any trading in our shares could have a significant
effect on our stock price. If a public market for our common stock
does not develop, then investors may not be able to resell the shares of our
common stock that they have purchased and may lose all of their
investment. No assurance can be given that an active market will
develop or that a shareholder will ever be able to liquidate its shares of
common stock without considerable delay, if at all. Many brokerage
firms may not be willing to effect transactions in the
securities. Even if a purchaser finds a broker willing to effect a
transaction in these securities, the combination of brokerage commissions, state
transfer taxes, if any, and any other selling costs may exceed the selling
price. Furthermore, our stock price may be impacted by factors that
are unrelated or disproportionate to our operating performance. These
market fluctuations, as well as general economic, political and market
conditions, such as recessions, interest rates or international currency
fluctuations may adversely affect the market price and liquidity of our common
stock.
10
Our
stock price may be volatile.
The
market price of our common stock is likely to be highly volatile and could
fluctuate widely in price in response to various factors, many of which are
beyond our control, including the following:
|
·
|
limited
“public float” in the hands of a small number of persons whose sales (or
lack of sales) could result in positive or negative pricing pressure on
the market price for our common
stock;
|
|
·
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actual
or anticipated variations in our quarterly operating
results;
|
|
·
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changes
in our earnings estimates;
|
|
·
|
our
ability to obtain adequate working capital
financing;
|
|
·
|
changes
in market valuations of similar
companies;
|
|
·
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publication
(or lack of publication) of research reports about
us;
|
|
·
|
changes
in applicable laws or regulations, court rulings, enforcement and legal
actions;
|
|
·
|
loss
of any strategic relationships;
|
|
·
|
additions
or departures of key management
personnel;
|
|
·
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actions
by our stockholders (including transactions in our
shares);
|
|
·
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speculation
in the press or investment
community;
|
|
·
|
increases
in market interest rates, which may increase our cost of
capital;
|
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·
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changes
in our industry;
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|
·
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competitive
pricing pressures;
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|
·
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our
ability to execute our business plan;
and
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|
·
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economic
and other external factors.
|
In
addition, the securities markets have from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of
particular companies. These market fluctuations may also materially
and adversely affect the market price of our common stock.
Our
stock is categorized as a penny stock. Trading of our stock may be
restricted by the SEC’s penny stock regulations which may limit a shareholder’s
ability to buy and sell our stock.
As that
term is defined in SEC Rule 3a51-1, our stock is categorized as a penny stock,
which generally defines “penny stock” to be any equity security that has a
market price (as defined) less than US$5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules,
including Rule 15g-9, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
accredited investors. The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock not otherwise exempt from the rules, to
deliver a standardized risk disclosure document in a form prepared by the SEC
which provides information about penny stocks and the nature and level of risks
in the penny stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer’s account. The bid and offer quotations, and the
broker-dealer and salesperson compensation information, must be given to the
customer orally or in writing prior to effecting the transaction and must be
given to the customer in writing before or with the customer’s
confirmation. In addition, the penny stock rules require that prior
to a transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser’s written
agreement to the transaction. These disclosure requirements may have
the effect of reducing the level of trading activity in the secondary market for
the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities and reduces the number of potential investors. We believe
that the penny stock rules discourage investor interest in and limit the
marketability of our common stock.
11
You
should be aware that, according to SEC Release No. 34-29093, the market for
“penny stocks” has suffered in recent years from patterns of fraud and
abuse. Such patterns include: (1) control of the market
for the security by one or a few broker-dealers that are often related to the
promoter or issuer; (2) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (3) boiler room
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (4) excessive and undisclosed
bid-ask differential and markups by selling broker-dealers; and (5) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor
losses. The occurrence of these patterns or practices could increase
the future volatility of our share price.
FINRA
sales practice requirements may also limit a shareholder’s ability to buy and
sell our stock.
In
addition to the “penny stock” rules described above, the Financial Industry
Regulatory Authority (“FINRA”) has adopted rules that require that in
recommending an investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low priced securities to
their non-institutional customers, broker-dealers must make reasonable efforts
to obtain information about the customer’s financial status, tax status,
investment objectives and other information. Under interpretations of
these rules, FINRA believes that there is a high probability that speculative
low priced securities will not be suitable for at least some
customers. The FINRA requirements make it more difficult for
broker-dealers to recommend that their customers buy our common stock, which may
limit your ability to buy and sell our stock and have an adverse effect on the
market for our shares.
To
date, we have not paid any cash dividends and no cash dividends will be paid in
the foreseeable future.
We do not
anticipate paying cash dividends on our common stock in the foreseeable future
and we may not have sufficient funds legally available to pay
dividends. Even if the funds are legally available for distribution,
we may nevertheless decide not to pay any dividends. We presently
intend to retain all earnings for our operations.
The
elimination of monetary liability against our directors, officers and employees
under Nevada law and the existence of indemnification rights to our directors,
officers and employees may result in substantial expenditures by our company and
may discourage lawsuits against our directors, officers and
employees.
Our
Articles of Incorporation contain a provision permitting us to eliminate the
personal liability of our directors to our company and stockholders for damages
for breach of fiduciary duty as a director or officer to the extent provided by
Nevada law. The foregoing indemnification obligations could result in
us incurring substantial expenditures to cover the cost of settlement or damage
awards against directors and officers, which we may be unable to
recoup. These provisions and resultant costs may also discourage our
company from bringing a lawsuit against directors and officers for breaches of
their fiduciary duties, and may similarly discourage the filing of derivative
litigation by our stockholders against our directors and officers even though
such actions, if successful, might otherwise benefit our company and
stockholders.
ITEM
1B.
|
UNRESOLVED
STAFF COMMENTS
|
There are
no unresolved staff comments outstanding at the present time.
ITEM
2.
|
PROPERTIES
|
We
currently maintain our registered offices at 21020 North Pima Road, Scottsdale,
Arizona 85255.
ITEM
3.
|
LEGAL
PROCEEDINGS
|
To the
best of management’s knowledge, there are no material legal proceedings pending
against the Company.
12
ITEM
4.
|
REMOVED
AND RESERVED
|
PART II
ITEM
5.
|
MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF
EQUITY SECURITIES
|
Market for Registrant’s
Common Equity
Our
common stock has been listed on the Over-the-Counter Bulletin Board (“OTCBB”)
maintained by the Financial Industry Regulatory Authority under the Symbol
“CLNO,” since March 15, 2010. Prior to that time, there was no public
market for our common stock. The table below lists the high and low
closing prices per share of our common stock since our stock was first traded,
as quoted on the OTCBB.
Fiscal 2010
|
High
|
Low
|
||||||
First
Quarter
|
$ | - | $ | - | ||||
Second
Quarter
|
$ | 0.53 | $ | 0.53 | ||||
Third
Quarter
|
$ | 0.47 | $ | 0.47 | ||||
Fourth
Quarter
|
$ | 0.51 | $ | 0.51 |
Trading
in our common stock has been sporadic and the quotations set forth above are not
necessarily indicative of actual market conditions. All prices
reflect inter-dealer prices without retail mark-up, mark-down, or commission and
may not necessarily reflect actual transactions.
Approximate Number of
Holders of Common Stock
As of
January 25, 2011, there were 41 shareholders of record of our common
stock. Such number does not include any shareholders holding shares
in nominee or “street name.”
Dividends
Holders
of our common stock are entitled to receive such dividends as may be declared by
our Board of Directors.
We do
not anticipate paying any dividends in the foreseeable
future.
Securities Authorized For
Issuance under Equity Compensation Plans
None.
Recent Sales of Unregistered
Securities
The
information set forth below describes our issuance of securities without
registration under the Securities Act of 1933, as amended, during the year ended
October 31, 2010, that were not previously disclosed in a Quarterly Report on
Form 10-Q or in a Current Report on Form 8-K:
None.
ITEM
6.
|
SELECTED
FINANCIAL INFORMATION
|
We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
13
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
|
The
following discussion should be read in conjunction with the information
contained in our financial statements and the notes thereto, which form an
integral part of the financial statements, which are attached
hereto. The financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America
and are stated in United States dollars.
Our
Form 10-K includes a number of forward-looking statements that reflect our
current views with respect to future events and financial
performance. Forward-looking statements are often identified by words
such as: believe, expect, estimate, anticipate, intend, project and similar
expressions, or words which, by their nature, refer to future
events. You should not place undue certainty on these forward-looking
statements, which apply only as of the date of this Form 10-K. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical results or our
predictions.
Overview
We were
incorporated under the laws of the State of Nevada on June 28, 2006 under the
name Patterson Brooke Resources Inc. to identify and acquire a mineral property
that held the potential to contain gold and/or silver
mineralization. In early 2010, due to the global economic crisis, a
challenging environment for raising capital and the lack of suitable drill
targets discovered on the Alice Claim, we decided to shift our business focus to
begin to explore opportunities in the development and production of hybrid,
electric, alternative fuel and diesel heavy duty transit buses, luxury motor
coaches and tour buses. In furtherance of that, on April 7, 2010, we amended our
Articles of Incorporation to change our corporate name to Cleantech Transit,
Inc.
Summary
of Significant Accounting Policies
The
preparation of financial statements in conformity with United States generally
accepted accounting principles requires our management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, 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.
Our
management routinely makes judgments and estimates about the effects of matters
that are inherently uncertain. As the number of variables and assumptions
affecting the probable future resolution of the uncertainties increase, these
judgments become even more subjective and complex. Our significant accounting
policies are discussed below.
Accounting
Methods
We
recognize income and expenses based on the accrual method of
accounting.
Dividend
Policy
We have
not yet adopted a policy regarding payment of dividends.
Income
Taxes
The
Company utilizes the liability method of accounting for income taxes. Under the
liability method deferred tax assets and liabilities are determined based on
differences between financial reporting and the tax bases of the assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect, when the differences are expected to be reversed. An allowance
against deferred tax assets is recorded, when it is more likely than not, that
such tax benefits will not be realized.
On
October 31, 2010, the Company had a net operating loss carry forward of
$280,988. The tax benefit of approximately $84,000 from the loss carry forward
has been fully offset by a valuation reserve because the use of the future tax
benefit is doubtful since the Company has no operations. The loss carry forward
will expire starting in 2026 through 2030.
14
Statement of Cash
Flows
For the
purposes of the statement of cash flows, we consider all highly liquid
investments with a maturity of three months or less to be cash
equivalents.
Basic and Diluted Net Income
(loss) Per Share
Basic net
income (loss) per share amounts are computed based on the weighted average
number of shares actually outstanding. Diluted net income (loss) per share
amounts are computed using the weighted average number of common and common
equivalent shares outstanding as if shares had been issued on the exercise of
any common share rights unless the exercise becomes antidilutive and then only
the basic per share amounts are shown in the report.
Revenue
Recognition
Revenue
is recognized on the sale and transfer of goods or completion of
service.
Advertising and Market
Development
The
Company expenses advertising and market development costs as
incurred.
Financial and Concentrations
Risk
The
Company does not have any concentration or related financial credit
risk.
Environmental
Requirements
At the
report date environmental requirements related to the mineral claim acquired are
unknown and therefore an estimate of any future cost cannot be
made.
Estimates and
Assumptions
Management
uses estimates and assumptions in preparing financial statements in accordance
with accounting principles accepted in the United States of America. Those
estimates and assumptions affect the reported amounts of the assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the estimates
that were assumed in preparing these financial statements.
Impairment of Long-lived
Assets
The
Company reviews and evaluates long-lived assets for impairment when events or
changes in circumstances indicate that the related carrying amounts may not be
recoverable. The assets are subject to impairment consideration under ASC
360-10-35-17 if events or circumstances indicate that their carrying amounts
might not be recoverable. When the Company determines that an impairment
analysis should be done, the analysis will be performed using rules of ASC
930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or
Disposal of Long-Lived Assets.
Fair Value of Financial
Instruments
The
carrying amounts reported in the balance sheets for cash, accounts payable, and
convertible notes payable approximate fair values because of the immediate or
short-term maturity of these financial instruments.
Reclassifications
Certain
prior period amounts have been reclassified to conform to current period
presentation.
15
Recent Accounting
Pronouncements
In August
2010, the FASB issued Accounting Standard Updates No. 2010-21 (ASU No. 2010-21)
“Accounting for Technical Amendments to Various SEC Rules and Schedules” and No.
2010-22 (ASU No. 2010-22) “Accounting for Various Topics – Technical Corrections
to SEC Paragraphs”. ASU No 2010-21 amends various SEC paragraphs
pursuant to the issuance of Release no. 33-9026: Technical Amendments to Rules,
Forms, Schedules and Codification of Financial Reporting
Policies. ASU No. 2010-22 amends various SEC paragraphs based on
external comments received and the issuance of SAB 112, which amends or rescinds
portions of certain SAB topics. Both ASU No. 2010-21 and ASU No.
2010-22 are effective upon issuance. The amendments in ASU No.
2010-21 and No. 2010-22 will not have a material impact on the Company’s
financial statements.
The
Company does not expect the adoption of any other recent accounting
pronouncements to have a material impact on the Company’s financial
statements.
Financial
Condition as of October 31, 2010
We
reported no current assets as of October 31, 2010. Total current
liabilities reported of $141,170 consisted of $9,252 in accounts payable and
$131,918 in convertible notes payable.
Stockholders’
deficit increased from a deficit of $707 at October 31, 2009 to a deficit of
$141,170 at October 31, 2010.
Results
of Operations
The
following discussion of the financial condition, results of operations, cash
flows and changes in our financial position should be read in conjunction with
our audited consolidated financial statements and notes thereto for the fiscal
year ended October 31, 2010 annexed hereto.
Comparison
of Fiscal Years Ended October 31, 2010 and October 31, 2009
October 31,
2010
|
October 31,
2009 |
|||||||
|
||||||||
Accounting
and audit
|
$ | 3,516 | $ | — | ||||
Filing
fees
|
5,210 | — | ||||||
Interest
|
2,927 | — | ||||||
Investors’
relations
|
15,000 | — | ||||||
Legal
|
24,386 | — | ||||||
Marketing
|
8,997 | — | ||||||
Transfer
agent fees
|
1,275 | — | ||||||
Expenses
from operations
|
61,311 | — | ||||||
Expenses
from discontinued operations
|
86,566 | 27,048 | ||||||
Total
Expenses
|
$ | 147,877 | $ | 27,048 |
Total
expenses for the year ended October 31, 2010 increased to $61,311 from $nil for
the year ended October 31, 2009, due largely to an increase in investors’
relations expenses from $0 in 2009 to $15,000 in 2010, increase in marketing
expenses from $0 in 2009 to $8,997 in 2010 and an increase in legal expenses
from $0 in 2009 to $24,386, which increases are primarily attributed to an
increase in professional costs and fees associated with the shift in our
business focus and our fundraising efforts. Expenses from discontinued
operations increased from $27,048 in 2009 to $86,566 in 2010.
Expenses
or other cash flows in these periods may not be indicative of future periods as
we are in the early development stage.
16
Period
from inception, June 28, 2006, to October 31, 2010
We had an
accumulated deficit during this period of $280,988. Deficit accumulated during
the pre exploration stage was $219,677 and accumulated during the development
stage was $61,311.
As a
development stage company, we currently have limited operations, principally
directed at potential acquisition targets and revenue-generating
opportunities.
Liquidity
and Capital Resources
As of
October 31, 2010, we had no cash or other current assets, a decrease from the
period ending October 31, 2009 where total assets were $6,286. We
currently have no revenue from operations and have not generated any revenue
from operations since inception. Since inception and prior to the
year ended October 31, 2010, our Company was funded by a private placement of
shares and advances by a former director. During the year ended
October 31, 2010, we funded our operations from convertible debt offerings and
capital contributions for expenses. We plan to continue further
financings, however, we do not currently have any arrangements for financing and
we can provide no assurance to investors we will be able to find such financing.
There can be no assurance that additional financing will be available to us, or
on terms that are acceptable. Consequently, we may not be able to proceed with
our intended business plans and our business will then likely fail.
For the
year ended October 31, 2010, we had no cash provided by operating, investing or
financing activities.
We
continue to operate with very limited administrative support and our current
sole officer and director is responsible for many duties to preserve our working
capital.
Prior
Financings
On August
27, 2009, certain of our creditors accepted 4,555,074 common shares at a price
of $0.02 per share in consideration of amounts owed to them of
$75,918.
Off-Balance
Sheet Arrangements
We have
not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as
shareholder’s equity or that are not reflected in our consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and development
services with us.
Contractual
Obligations
The
Company has no contractual obligations as of October 31, 2010 and
2009.
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK
|
We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
The
financial statements attached to this Form 10-K for the year ended October 31,
2010 have been examined by our independent accountants, Madsen & Associates
CPA’s Inc.
ITEM
9.
|
CHANGES
IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
None.
17
ITEM
9A. CONTROLS
AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
We
carried out an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer along with our Chief
Financial Officer, of the effectiveness of the design of our disclosure controls
and procedures (as defined by Exchange Act Rule 13a-15(e) and 15a-15(e)) as of
October 31, 2010 pursuant to Exchange Act Rule 13a-15. Based upon
that evaluation, our Principal Executive Officer along with our Principal
Financial Officer concluded that our disclosure controls and procedures are not
effective as of October 31, 2010 in ensuring that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission’s rules and forms. This
conclusion is based on findings that constituted material
weaknesses. A material weakness is a deficiency, or a combination of
control deficiencies, in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of the Company’s
interim financial statements will not be prevented or detected on a timely
basis.
Management’s
Report on Internal Control Over Financial Reporting
In
performing the above-referenced assessment, our management identified the
following material weaknesses:
● Our
Audit Committee does not function as it should since there is a lack of
independent directors due to Roger Nelsen being the sole member of the Audit
Committee.
● We
do not have a written internal control procedurals manual which outlines the
duties and reporting requirements of the officers. This lack of a
written internal control procedurals manual does not meet the requirements of
the SEC or good internal control policies.
● There
are no effective controls instituted over financial disclosure and the reporting
processes.
Our
present management feels the weaknesses identified above, being the latter
three, have not had any material affect on our financial results. Our
present management will have to address the lack of independent members on the
Audit Committee and identify an “expert” for the Audit Committee to advise other
members as to correct accounting and reporting procedures.
We will
endeavor to correct the above noted weaknesses in internal control once we have
adequate funds to do so. Appointing independent members and using the
services of an expert on the Audit Committee will greatly improve the overall
performance of the Audit Committee. With the addition of other Board
Members and staff, the segregation of duties issue will be addressed and will no
longer be a concern to management. Having a written policy manual
outlining the duties of each of our officers and staff will facilitate better
internal control procedures.
Our
present management will continue to monitor and evaluate the effectiveness of
our internal controls and procedures and our internal controls over financial
reporting on an ongoing basis and are committed to taking further action and
implementing additional enhancements or improvements, as necessary and as funds
allow.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control
systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation.
18
Changes
in Internal Control Over Financial Reporting
There
were no changes in our internal controls over financial reporting that occurred
during the three months ended October 31, 2010 that have materially affected, or
are reasonably likely to materially affect, our internal controls over financial
reporting.
ITEM 9 B.
|
OTHER
INFORMATION
|
None.
PART III
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
|
Set forth
below are the present directors and executive officers of the
Company. Note that there are no other persons who have been nominated
or chosen to become directors nor are there any other persons who have been
chosen to become executive officers. There are no arrangements or
understandings between any of the directors, officers and other persons pursuant
to which such person was selected as a director or an officer
Present Position
|
Has Served As
|
|||||
Name
|
Age
|
and Offices
|
Director Since
|
|||
|
|
|
|
|
|
|
Roger
Nelsen
|
64
|
President,
Chief Executive, Interim Chief
Financial
Officer, Secretary and Sole Director
|
2010
|
The Board
of Directors is comprised of only one class. All directors serve for
a term of one year and until their successors are elected at the Company’s
Annual Shareholders’ Meeting and are qualified, subject to removal by the
Company’s shareholders. Each executive officer serves, at the
pleasure of the Board of Directors, for a term of one year and until his
successor is elected at a meeting of the Board of Directors and is
qualified.
Our Board
of Directors believes that all members of the Board and all executive officers
encompass a range of talent, skill, and experience sufficient to provide sound
and prudent guidance with respect to our operations and
interests. The information below with respect to our directors and
executive officers includes each individual’s experience, qualifications,
attributes, and skills that led our Board of Directors to the conclusion that he
or she should serve as a director and/or executive officer.
Biographies
Set forth
below are brief accounts of the business experience during the past five years
of our sole officer and director.
Roger
Nelsen. Since January 2010, Mr. Nelsen has served as Secretary
and Director of UV Flu Technologies, Inc., a company listed on the OTC Bulletin
Board, under the symbol “UVFT.” From 1996 to 2010 he served as Senior Vice
President at Eco-Rx, Inc., a company specializing in the air purification
industry. Prior to that, he was the principle of Nelsen &
Associates, an independent health care sales and consulting
organization. From 1980 to 1991 he held senior positions with medical
equipment manufacturers Retec, USA and Everest & Jennings. His
highly successful career in the sector began in 1973 with a lengthy period at
several divisions of Johnson & Johnson. Mr. Nelsen was educated
at the University of Connecticut, with a B.S. in Business Administration
received in 1969.
Family
Relationships
There are
no family relationships among our directors and executive officers.
Involvement
in Certain Legal Proceedings
No
director, executive officer, significant employee or control person of the
Company has been involved in any legal proceeding listed in Item 401(f) of
Regulation S-K in the past 10 years.
19
Board
Committees and Audit Committee Financial Expert
We do not
currently have a standing audit, nominating or compensation committee of the
Board of Directors, or any committee performing similar
functions. Our Board of Directors, currently comprised of one
director, Mr. Nelsen, performs the functions of audit, nominating and
compensation committees. As of the date of this Form 10-K, no member
of our Board of Directors qualifies as an “audit committee financial expert” as
defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities
Act.
Director
Nominations
As of
October 31, 2010, we did not effect any material changes to the procedures by
which our shareholders may recommend nominees to our Board of
Directors. We have not established formal procedures by which
security holders may recommend nominees to the Company’s Board of
Directors.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section
16(a) of the Securities Exchange Act requires our executive officers and
directors, and persons who own more than 10% of our common stock, to file
reports regarding ownership of, and transactions in, our securities with the
Securities and Exchange Commission and to provide us with copies of those
filings.
Based
solely on our review of the copies of such forms received by us, or written
representations from certain reporting persons, we believe that during fiscal
year ended October 31, 2010, our officers, directors and greater than 10%
percent beneficial owners complied with all applicable filing
requirements.
Code
of Ethics
On
October 31, 2006, the Board of Directors adopted a Code of Business Conduct and
Ethics to ensure that potential conflicts of interest are avoided or declared to
the Company and its shareholders and to comply with the requirements of the
Sarbanes Oxley Act of 2002. Our Code of Business Conduct and Ethics
embodies our commitment to such ethical principles and sets forth the
responsibilities of the Company and its officers and directors to its
shareholders, employees, customers, lenders and other
stakeholders. Our Code of Business Conduct and Ethics addresses
general business ethical principles and other relevant issues. A copy
of our Code of Business Conduct and Ethics can be found on our Registration
Statement on Form SB-2 filed with the SEC on January 4, 2007.
ITEM
11. EXECUTIVE
COMPENSATION
General
Philosophy
Our Board
of Directors is responsible for establishing and administering the Company’s
executive and director compensation. Executive compensation for the
year ended October 31, 2010 and October 31, 2009 is set forth in the following
summary:
Summary
Compensation Table
Name and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Nonqualified
deferred
compensation
earnings
($)
|
All Other
Compen-
sation
($)
|
Total
($)
|
|||||||||||||||||||||||||
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|||||||||||||||||||||||||
Roger
Nelsen
|
2010
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||||||||||
Chief
Executive Officer, President, Interim Chief Financial
Officer
|
2009
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||||||||||
B.
Gordon Brooke
|
2010
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||||||||||
Former
Chief Executive Officer, President, Chief Financial Officer, Secretary,
Treasurer and Director(1)
|
2009
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||||||||||
Ian
McAvoy
|
2010
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
—
|
|||||||||||||||||
Former
Director, Chief Executive Officer and President (2)
|
2009
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
20
(1) On
March 10, 2010, B. Gordon Brooke resigned as the Chief Executive Officer and
President of the Company. On September 22, 2010, Mr. B. Gordon Brooke
resigned as a Director, Chief Financial Officer, Treasurer and Secretary of the
Company.
(2) On
June 24, 2010, Mr. Ian McAvoy, resigned as a Director, President and Chief
Executive Officer of the Company.
Compensation
of Directors
We have
no standard arrangement to compensate directors for their services in their
capacity as directors. Directors are not paid for meetings
attended. All travel and lodging expenses associated with
corporate matters are reimbursed by us, if and when incurred.
The
following table sets forth compensation paid to our former directors and
non-executive directors for the fiscal year ended October 31, 2010.
Name
|
Fees Earned
or Paid
in Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|||||||||||||||||||||
B.
Gordon Brooke(1)
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||||
Ian
McAvoy(2)
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||||
David
Oldridge(1)
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
(1)
Resigned as a director on September 22, 2010.
(2)
Resigned as a director on June 24, 2010.
Outstanding
Equity Awards at Fiscal 2010 Year-End
None of
our named executive officers had any outstanding equity awards as of the fiscal
year ended October 31, 2010.
21
Bonuses
and Deferred Compensation
None.
Compensation
Pursuant to Plans
None.
Pension
Table
None.
Other
Compensation
None.
Termination
of Employment
There are
no compensatory plans or arrangements, including payments to be received from
the Company, with respect to any person named in the Compensation Summary set
out above which would in any way result in payments to any such person because
of his resignation, retirement, or other termination of such person’s employment
with the Company, or any change in control of the Company, or a change in the
person’s responsibilities following a change in control of the
Company.
Compensation
Committee
The
Company does not have a separate Compensation Committee. Instead, the
Company’s Board of Directors reviews and approves executive compensation
policies and practices, reviews salaries and bonuses for other officers,
administers the Company’s stock option plans and other benefit plans, and
considers other matters.
Risk
Management Considerations
We
believe that our compensation policies and practices for our employees,
including our executive officers, do not create risks that are reasonably likely
to have a material adverse effect on our Company.
Indemnification
Nevada
Revised Statutes 78.037 provides that Articles of Incorporation can contain
provisions which eliminate or limit the personal liability of our officers and
directors and even stockholders for damages for breach of fiduciary duty, but a
corporation cannot eliminate or limit a director’s or officer’s liability for
acts or failure to act which are based on intentional misconduct, fraud, or a
willful violation of law. Our Articles of Incorporation provides that
a director or officer is not personally liable to us or our shareholders for
damages for any breach of fiduciary duty as a director or officer, except for
liability for (i) acts or omissions which involve intentional misconduct, fraud
or a knowing violation of law, or (ii) the payment of distribution in violation
of Nevada Revised Statures, 78.300.
Additionally,
our By-laws provide that we will indemnify our officers and directors to the
fullest extent permitted by the Nevada Revised Statutes, provided the officer or
director acts in good faith and in a manner which he or she reasonably believes
to be in or not opposed to our best interest, and with respect to any criminal
matter, had no reasonable cause to believe that his or her conduct was
unlawful. Our By-laws also provide that, to the fullest extent
permitted by Section 78.751 of the Nevada Revised Statutes, we will pay the
expenses of our officers and directors incurred in defending a civil or criminal
action, suit or proceeding, as they are incurred and in advance of the final
disposition of the matter, upon receipt of an undertaking acceptable to the
Board of Directors for the repayment of such advances if it is ultimately
determined by a court of competent jurisdiction that the officer or director is
not entitled to be indemnified.
22
Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934 or the Rules and Regulations of the
Securities and Exchange Commission thereunder may be permitted under said
indemnification provisions of the law, or otherwise, we have been advised that,
in the opinion of the Securities and Exchange Commission, any such
indemnification is against public policy and is, therefore,
unenforceable.
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
|
The
following table sets forth, as of January 25, 2011, the total number of shares
owned beneficially by each of our directors, officers and key employees,
individually and as a group, and the present owners of 5% or more of our total
outstanding shares. The shareholder listed below has direct ownership of his/her
shares and possesses sole voting and dispositive power with respect to the
shares.
Title or Class
|
Name and Address of Beneficial Owner (1)
|
Amount of Beneficial
Ownership (2)
|
Percent of Class
|
||||||
Common Stock
|
B.
Gordon Brooke
115
Argelene Street
Mississauga,
Ontario, Canada, L5G 1X1
|
15,000,000 | 14.3 | % | |||||
Common Stock
|
Strand
Group, Inc.
Henville
Building
Charlestown,
Nevis
|
47,275,074 | 45.1 | % | |||||
Common Stock
|
Roger
Nelsen
21020
North Pima Road,
Scottsdale,
Arizona 85255
|
- | - | % | |||||
Common Stock
|
All
Officers and Directors as a Group
|
- | - | % |
(1)
|
Unless
otherwise noted, the security ownership disclosed in this table is of
record and beneficial.
|
(2)
|
Under
Rule 13-d of the Exchange Act, shares not outstanding but subject to
options, warrants, rights, conversion privileges pursuant to which such
shares may be acquired in the next 60 days are deemed to be outstanding
for the purpose of computing the percentage of outstanding shares owned by
the person having such rights, but are not deemed outstanding for the
purpose of computing the percentage for such other
persons. None of our officers or directors has options,
warrants, rights or conversion privileges
outstanding.
|
Description
of Securities
Our
authorized capital consists of 600,000,000 shares of common stock, par value
$0.001 per share, of which 104,905,074 shares are issued and outstanding as of
January 25, 2011.
The
holders of our common stock are entitled to receive dividends as may be declared
by our Board of Directors; are entitled to share ratably in all of our assets
available for distribution upon winding up of the affairs our Company; and are
entitled to one non-cumulative vote per share on all matters on which
shareholders may vote at all meetings of the shareholders.
The
shareholders are not entitled to preference as to dividends or interest;
preemptive rights to purchase in new issues of shares; preference upon
liquidation; or any other special rights or preferences.
Non-Cumulative
Voting
The
holders of our shares of common stock do not have cumulative voting rights,
which means that the holders of more than 50% of such outstanding shares, voting
for the election of Directors, can elect all of the Directors to be elected, if
they so choose. In such event, the holders of the remaining
shares will not be able to elect any of our Directors.
23
Dividend
Policy
As of the
date of this Form 10-K we have not paid any cash dividends to
stockholders. The declaration of any future cash dividends will be at
the discretion of our Director and will depend on our earnings, if any, capital
requirements and financial position, general economic conditions and other
pertinent conditions. It is our present intention not to pay any cash
dividends in the near future.
Transfer
Agent
We have
engaged the services of Empire Stock Transfer Inc., 1859 Whitney Mesa Drive,
Henderson, Nevada, USA, 89014, to act as transfer and registrar.
Holders
We have
41 shareholders of record as at the date of January 25, 2011.
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
Related
Party Transactions
On March
10, 2010, the Company entered into a Letter of Intent with Greentech Holdings
LLC, a limited liability company registered under the laws of Nevis, who owns
certain intellectual property, know-how, trade secrets, data, materials, blue
prints, drawings, copyrights, technology, brand names, logos, designs and
manufacturing techniques for hybrid buses and motor coaches, including Hybrid
Low Floor GTH40, Interurban GTI40 and Commuter Coach GTC45 which the Company
wished to acquire in order to develop, manufacture and distribute eco-friendly
buses and luxury motor coaches in China. Two of the former directors of the
Company are members of Greentech Holdings LLC.
Further,
during the year ended October 31, 2010, officers and directors paid expenses on
behalf of the Company totaling $6,000. In addition, as at
October 31, 2010, certain officers and directors have made contributions to
capital of $34,000 in the form of expenses paid for the Company.
Other
than the foregoing, there were no material transactions, or series of similar
transactions, since the Company’s inception and during its current fiscal
period, or any currently proposed transactions, or series of similar
transactions, to which the Company was or is to be a party, in which the amount
involved exceeds $120,000, and in which any director or executive officer, or
any security holder who is known by the Company to own of record or beneficially
more than 5% of any class of the Company’s common stock, or any member of the
immediate family of any of the foregoing persons, has an interest.
Review,
Approval or Ratification of Transactions with Related Persons
Although
we have adopted a Code of Ethics, we still rely on our Board to review related
party transactions on an ongoing basis to prevent conflicts of
interest. Our Board reviews a transaction in light of the
affiliations of the director, officer or employee and the affiliations of such
person’s immediate family. Transactions are presented to our Board
for approval before they are entered into or, if this is not possible, for
ratification after the transaction has occurred. If our Board finds
that a conflict of interest exists, then it will determine the appropriate
remedial action, if any. Our Board approves or ratifies a transaction
if it determines that the transaction is consistent with the best interests of
the Company.
Director
Independence
As of the
date of this Form 10-K, none of our directors can be considered “independent
directors” due to our sole director’s role as sole officer of the
Company. We evaluate independence by the standards for director
independence established by applicable laws, rules, and listing standards
including, without limitation, the standards for independent directors
established by The New York Stock Exchange, Inc., The NASDAQ National Market,
and the Securities and Exchange Commission.
24
Subject
to some exceptions, these standards generally provide that a director will not
be independent if (a) the director is, or in the past three years has been,
an employee of ours; (b) a member of the director’s immediate family is, or
in the past three years has been, an executive officer of ours; (c) the
director or a member of the director’s immediate family has received more than
$120,000 per year in direct compensation from us other than for service as a
director (or for a family member, as a non-executive employee); (d) the
director or a member of the director’s immediate family is, or in the past three
years has been, employed in a professional capacity by our independent public
accountants, or has worked for such firm in any capacity on our audit;
(e) the director or a member of the director’s immediate family is, or in
the past three years has been, employed as an executive officer of a company
where one of our executive officers serves on the compensation committee; or
(f) the director or a member of the director’s immediate family is an
executive officer of a company that makes payments to, or receives payments
from, us in an amount which, in any twelve-month period during the past three
years, exceeds the greater of $1,000,000 or two percent of that other company’s
consolidated gross revenues.
ITEM
14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES
The
following table shows the fees paid or accrued by us for the audit and other
services provided by Madsen & Associates CPA’s, Inc. for the fiscal periods
shown.
October
31,
2010
|
October
31,
2009
|
|||||||
Audit
Fees
|
$ | 8,550 | $ | 8,000 | ||||
Audit
Related Fees
|
— | |||||||
Tax
Fees
|
— | |||||||
All
Other Fees
|
— | |||||||
Total
|
$ | 8,550 | $ | 8,000 |
Audit
fees consist of fees billed for professional services rendered for the audit of
our financial statements and review of the interim financial statements included
in quarterly reports and services that are normally provided by the above
auditors in connection with statutory and regulatory fillings or
engagements
In the
absence of a formal audit committee, the full Board of Directors pre-approves
all audit and non-audit services to be performed by the independent registered
public accounting firm in accordance with the rules and regulations promulgated
under the Securities Exchange Act of 1934, as amended. The Board of
Directors pre-approved 100% of the audit, audit-related and tax services
performed by the independent registered public accounting firm for the fiscal
year ended October 31, 2010. The percentage of hours expended on the
principal accountant’s engagement to audit the Company’s financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the principal accountant’s full-time, permanent employees was
0%.
25
PART IV
ITEM
15. EXHIBITS,
FINANCIAL STATEMENTS SCHEDULES
Exhibits
The
following exhibits are included as part of this report by
reference:
3.1
|
Certificate
of Incorporation (incorporated by reference from the registrant’s
Registration Statement on Form SB-2 filed on January 4, 2007, Registration
No. 333-139797)
|
|
3.2
|
Articles
of Incorporation (incorporated by reference from the registrant’s
Registration Statement on Form SB-2 filed on January 4, 2007, Registration
No. 333-139797)
|
|
3.3
|
By-laws
(incorporated by reference from the registrant’s Registration Statement on
Form SB-2 filed on January 4, 2007; Registration No.
333-139797
|
|
3.4
|
Amendment
to Articles of Incorporation (incorporated by reference from the
registrant’s Current Report on Form 8-K filed on April 7, 2010,
Registration No. 000-52653)
|
|
4.1
|
Stock
Specimen Certificate (incorporated by reference from the registrant’s
Registration Statement on Form SB-2 filed on January 4, 2007; Registration
No. 333-139797
|
|
10.1
|
Transfer
Agent and Registrar Agreement (incorporated by reference from the
registrant’s Registration Statement on Form SB-2 filed on January 4, 2007
Registration No. 333-139797)
|
|
10.2
|
Letter
of Intent with Greentech Holdings LLC (incorporated by reference from the
registrant’s Current Report on Form 8-K filed on March 11, 2010
Registration No. 000-52653)
|
|
14.1
|
Code
of Ethics (incorporated by reference from the registrant’s Registration
Statement on Form SB-2 filed on January 4, 2007 Registration No.
333-139797)
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes
Oxley Act of 2002*
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*
|
* Filed
herewith.
Financial
Statements.
The
following financial statements are included in this report:
Title of Document
|
Page
|
|
Report
of Madsen & Associates, CPA’s Inc.
|
F-1
|
|
Balance
Sheet as at October 31, 2010 and 2009
|
F-2
|
|
Statement
of Operations for the years ended October 31, 2010 and 2009 and for the
period from May 25, 2010 (Inception of Development Stage) to October 31,
2010
|
F-3
|
|
Statement
of Stockholders’ (Deficit) Equity for the period from November 1, 2008 to
October 31, 2010
|
F-4
|
|
Statements
of Cash Flows for the years ended October 31, 2010 and 2009 and for the
period from May 25, 2010 (Inception of Development Stage) to October 31,
2010
|
F-5
|
|
Notes
to the Financial Statements
|
F-6
|
26
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CLEANTECH TRANSIT, INC.
|
|
(Registrant)
|
|
Date: February
8, 2011
|
/s/ Roger Nelsen
|
Roger Nelsen, Chief Executive
Officer and Sole Director
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signatures
|
Title(s)
|
Date
|
||
/s/ Roger Nelsen |
Chief
Executive Officer, Interim Chief Financial
|
February
8, 2011
|
||
Roger Nelsen |
Officer,
President, Secretary and Sole Director (Principal Executive Officer,
Principal Financial Officer and Principal Accounting
Officer)
|
27
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of Cleantech Transit, Inc.
(a
Development Stage Company)
We have
audited the accompanying balance sheets of Cleantech Transit, Inc. (a
Development Stage Company) (the Company) as of October 31, 2010 and 2009, and
the related statements of operations, stockholders’ (deficit) equity, and cash
flows for each of the years in the two-year period ended October 31, 2010, and
for the period from May 25, 2010 (inception of Development Stage) to October 31,
2010. The Company’s management is responsible for these financial statements.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board
(United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
company’s internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the 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 financial statements referred to above present fairly, in all
material respects, the financial position of Cleantech Transit, Inc. (a
Development Stage Company) as of October 31, 2010 and 2009, and the results of
its operations and its cash flows for each of the years in the two-year period
ended October 31, 2010, and for the period from May 25, 2010 (inception of
Development Stage) to October 31, 2010, in conformity with accounting principles
generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has accumulated operating losses
since inception and has limited business operations, which raises substantial
doubt about its ability to continue as a going concern. Management’s plans in
regards to these matters are described in the Notes to the financial statements.
These financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Madsen
& Associates CPA’s, Inc.
Murray,
Utah
February
4, 2011
F-1
CLEANTECH
TRANSIT, INC.
(Development
Stage Company)
BALANCE
SHEETS
October 31,
2010
|
October 31,
2009
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
|
$
|
-
|
$
|
6,286
|
||||
Total
Current Assets
|
$
|
-
|
$
|
6,286
|
||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$
|
9,252
|
$
|
5,579
|
||||
Convertible
notes payable
|
131,918
|
-
|
||||||
Total
Current Liabilities
|
141,170
|
5,579
|
||||||
STOCKHOLDERS’ (DEFICIT)
EQUITY
|
||||||||
Common
Stock 600,000,000 shares authorized, at $0.001 par value
104,905,074 shares issued and Outstanding
(2009 – 269,905,074 shares issued and outstanding)
|
104,905
|
269,905
|
||||||
Capital
in excess of par value
|
34,913
|
(159,650)
|
||||||
Deficit
accumulated during the pre-exploration stage
|
(219,677)
|
(133,111)
|
||||||
Deficit
accumulated during the development stage
|
(61,311)
|
-
|
||||||
Total
Stockholders’ (Deficit) Equity
|
(141,170)
|
707
|
||||||
$
|
-
|
$
|
6,286
|
The
accompanying notes are an integral part of these financial
statements.
F-2
CLEANTECH
TRANSIT, INC.
(Development
Stage Company)
STATEMENTS
OF OPERATIONS
Year ended
October 31,
2010
|
Year ended
October 31,
2009
|
From
May 25, 2010
(Inception of
Development
Stage)
to
October 31,
2010
|
||||||||||
REVENUES
|
$ | — | $ | — | $ | — | ||||||
EXPENSES
|
||||||||||||
Accounting
and audit
|
3,516 | — | 3,516 | |||||||||
Filing
fees
|
5,210 | — | 5,210 | |||||||||
Interest
|
2,927 | — | 2,927 | |||||||||
Investors’
relations
|
15,000 | — | 15,000 | |||||||||
Legal
|
24,386 | — | 24,386 | |||||||||
Marketing
|
8,997 | — | 8,997 | |||||||||
Transfer
agent’s fees
|
1,275 | — | 1,275 | |||||||||
Total
Operating Expenses
|
61,311 | — | 61,311 | |||||||||
NET
LOSS FROM CONTINUING OPERATIONS
|
(61,311 | ) | — | (61,311 | ) | |||||||
DISCONTINUED
OPERATIONS
|
(86,566 | ) | (27,048 | ) | — | |||||||
NET
LOSS
|
$ | (147,877 | ) | $ | (27,048 | ) | $ | (61,311 | ) | |||
NET LOSS PER SHARE FROM CONTINUING OPERATIONS | ||||||||||||
Basic
and diluted
|
$ | (0.00 | ) | $ | (0.00 | ) | ||||||
NET LOSS PER SHARE FROM DISCONTINUED OPERATIONS | ||||||||||||
Basic
and diluted
|
$ | (0.00 | ) | $ | (0.00 | ) | ||||||
WEIGHTED
AVERAGE OUTSTANDING SHARES
|
||||||||||||
Basic
and diluted
|
267,644,800 | 266,161,152 |
The
accompanying notes are an integral part of these financial
statements.
F-3
CLEANTECH
TRANSIT, INC.
(Development
Stage Company)
STATEMENT
OF STOCKHOLDERS' (DEFICIT) EQUITY
November
1, 2008 to October 31, 2010
Common
Shares
|
Stock
Amount
|
Capital in
Excess of
Par Value
|
Accumulated
Deficit
during
Exploration
Stage
|
Accumulated
Deficit
during
Development
Stage
|
||||||||||||||||
Balances,
November 1, 2008
|
265,350,000 | 265,350 | (219,450 | ) | (106,063 | ) | - | |||||||||||||
Issuance
of common shares for debt
August
27, 2009
|
4,555,074 | 4,555 | 71,363 | - | - | |||||||||||||||
Net
loss for the year ended
October
31, 2009
|
- | - | - | (27,048 | ) | - | ||||||||||||||
Capital
contribution – expenses
|
- | - | 12,000 | - | - | |||||||||||||||
Balances,
October 31, 2009
|
269,905,074 | 269,905 | (136,087 | ) | (133,111 | ) | - | |||||||||||||
MEMO:
Forward split of shares of 3:1
October
13, 2010
|
- | - | ||||||||||||||||||
Shares
surrendered and cancelled
October
26, 2010
|
(165,000,000 | ) | (165,000 | ) | 165,000 | - | - | |||||||||||||
Capital
contributions – expenses
|
- | - | 6,000 | - | - | |||||||||||||||
Net
loss for the year ended
October
31, 2010
|
- | - | - | (86,566 | ) | (61,311 | ) | |||||||||||||
Balances,
October 31, 2010
|
104,905,074 | 104,905 | 34,913 | (219,677 | ) | (61,311 | ) |
The
accompanying notes are an integral part of these financial
statements.
F-4
CLEANTECH
TRANSIT, INC.
(Development
Stage Company)
STATEMENTS
OF CASH FLOWS
Year ended
October 31,
2010
|
Year ended
October 31,
2009
|
From
May 25, 2010
(Inception of
Development
Stage)
to
October 31,
2010
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net
loss
|
$ | (147,877 | ) | $ | (27,048 | ) | $ | (61,311 | ) | |||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
Notes
issued for expenses
|
88,395 | - | 88,395 | |||||||||
Notes
issued for expenses related to discontinued operations
|
43,523 | |||||||||||
Contributed
capital – expenses related to discontinued operations
|
6,000 | 12,000 | - | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Accounts
payable
|
(27,084 | ) | (27,084 | ) | ||||||||
Accounts
payable related to discontinued operations
|
30,757 | 19,078 | - | |||||||||
Net
cash used in operating activities
|
(6,286 | ) | 4,030 | |||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
- | - | - | |||||||||
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
- | - | - | |||||||||
Net
Increase (Decrease) in Cash
|
(6,286 | ) | 4,030 | - | ||||||||
Cash
at Beginning of Period
|
6,286 | 2,256 | - | |||||||||
CASH
AT END OF PERIOD
|
- | 6,286 | - |
Noncash
financing activities:
|
||||
Notes
issued for expenses
|
$ | 88,395 | ||
Notes
issued for expenses related to discontinued operations
|
43,523 | |||
Contributed
capital – expenses related to discontinued operations
|
$ | 6,000 |
The
accompanying notes are an integral part of these financial
statements.
F-5
Cleantech
Transit, Inc.
(Development
Stage Company)
Notes
to Financial Statements
October
31, 2010
1. ORGANIZATION
AND BASIS OF PRESENTATION
Organization
The
Company was incorporated under the laws of the State of Nevada on June 28, 2006
under the name of Patterson Brooke Resources Inc. with the authorized common
stock of 200,000,000 shares at $0.001 par value. On February 14, 2008, the
shareholders approved the increase of the authorized share capital from
200,000,000 shares at $0.001 par value to 600,000,000 shares at $0.001 par
value.
On April
7, 2010, the Company amended its Articles of Incorporation to change its
corporate name from “Patterson Brooke Resources Inc.” to “Cleantech Transit,
Inc.”.
Originally
the Company was organized for the purpose of acquiring and developing mineral
properties. The Company has decided to allow the Alice claim to lapse without
renewing it on May 24, 2010. Therefore, the Company is no longer a
pre-exploration stage company but is now considered a development stage company
as defined under FASB ASC 915 formerly Statement on Financial Accounting
Standards No. 7, Development Stage Enterprises (“SFAS No.7”) and commenced
operations in both the public and private transportation bus and coach
industries, providing high quality engineered modern eco-friendly vehicles in a
cost conscious and environmentally sustainable manner. For the period
from inception on May 25, 2010 through October 31, 2010, the Company has
generated $nil in revenues and has accumulated losses of $61,311.
2. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
The
Company recognizes income and expenses based on the accrual method of
accounting.
Dividend
Policy
The
Company has not yet adopted a policy regarding payment of
dividends.
Income
Taxes
The
Company utilizes the liability method of accounting for income taxes. Under the
liability method deferred tax assets and liabilities are determined based on
differences between financial reporting and the tax bases of the assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect, when the differences are expected to be reversed. An allowance
against deferred tax assets is recorded, when it is more likely than not, that
such tax benefits will not be realized.
On
October 31, 2010, the Company had a net operating loss carry forward of
$280,988. The tax benefit of approximately $84,000 from the loss carry forward
has been fully offset by a valuation reserve because the use of the future tax
benefit is doubtful since the Company has no operations. The loss carry forward
will expire starting in 2026 through 2030.
Statement of Cash
Flows
For the
purposes of the statement of cash flows, the Company considers all highly liquid
investments with a maturity of three months or less to be cash
equivalents.
Basic and Diluted Net Income
(loss) Per Share
Basic net
income (loss) per share amounts are computed based on the weighted average
number of shares actually outstanding. Diluted net income (loss) per share
amounts are computed using the weighted average number of common and common
equivalent shares outstanding as if shares had been issued on the exercise of
any common share rights unless the exercise becomes antidilutive and then only
the basic per share amounts are shown in the report.
F-6
Cleantech
Transit, Inc.
(Development
Stage Company)
Notes
to Financial Statements
October
31, 2010
Revenue
Recognition
Revenue
is recognized on the sale and transfer of goods or completion of
service.
Advertising and Market
Development
The
company expenses advertising and market development costs as
incurred.
Financial and Concentrations
Risk
The
Company does not have any concentration or related financial credit
risk.
Environmental
Requirements
At the
report date environmental requirements related to the mineral claim acquired are
unknown and therefore an estimate of any future cost cannot be
made.
Estimates and
Assumptions
Management
uses estimates and assumptions in preparing financial statements in accordance
with accounting principles accepted in the United States of America. Those
estimates and assumptions affect the reported amounts of the assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the estimates
that were assumed in preparing these financial statements.
Impairment of Long-lived
Assets
The
Company reviews and evaluates long-lived assets for impairment when events or
changes in circumstances indicate that the related carrying amounts may not be
recoverable. The assets are subject to impairment consideration under ASC
360-10-35-17 if events or circumstances indicate that their carrying amounts
might not be recoverable. When the Company determines that an impairment
analysis should be done, the analysis will be performed using rules of ASC
930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or
Disposal of Long-Lived Assets.
Fair Value of Financial
Instruments
The
carrying amounts reported in the balance sheets for cash, accounts payable, and
convertible notes payable approximate fair values because of the immediate or
short-term maturity of these financial instruments.
Reclassifications
Certain
prior period amounts have been reclassified to conform to current period
presentation.
Recent Accounting
Pronouncements
In August
2010, the FASB issued Accounting Standard Updates No. 2010-21 (ASU No. 2010-21)
“Accounting for Technical Amendments to Various SEC Rules and Schedules” and No.
2010-22 (ASU No. 2010-22) “Accounting for Various Topics – Technical Corrections
to SEC Paragraphs”. ASU No 2010-21 amends various SEC paragraphs
pursuant to the issuance of Release no. 33-9026: Technical Amendments to Rules,
Forms, Schedules and Codification of Financial Reporting
Policies. ASU No. 2010-22 amends various SEC paragraphs based on
external comments received and the issuance of SAB 112, which amends or rescinds
portions of certain SAB topics. Both ASU No. 2010-21 and ASU No.
2010-22 are effective upon issuance. The amendments in ASU No.
2010-21 and No. 2010-22 will not have a material impact on the Company’s
financial statements.
F-7
Cleantech
Transit, Inc.
(Development
Stage Company)
Notes
to Financial Statements
October
31, 2010
The
Company does not expect the adoption of any other recent accounting
pronouncements to have a material impact on the Company’s financial
statements.
3. CONVERTIBLE
NOTES PAYABLE
As at
October 31, 2010, the Company had convertible notes payable of $131,918 (October
31, 2009 - $nil) including interest expense relating to these notes of $2,927
for the year ended October 31, 2010. The notes bear interest at a
rate of 10% per annum, and are due on demand. Arrears in payment of
the principal and any interest shall bear interest at the rate of 30% per year
calculated annually. As of October 31, 2010, no demand for payment has been made
on these notes.
4. DISCONTINUED
OPERATIONS
On May
24, 2010 the Company changed its focus from exploration of mineral properties,
to manufacturing, marketing and distributing in the urban mass transit sector.
The Company had the following losses from discontinued operations.
Discontinued
Operations
October 31, 2010
|
October 31, 2009
|
|||||||
Accounting
and audit
|
$ | 3,110 | $ | 7,500 | ||||
Bank
charges
|
48 | 132 | ||||||
Edgarizing
|
250 | 625 | ||||||
Exploration
expenses
|
- | 413 | ||||||
Filing
fees
|
892 | - | ||||||
Interest
expense
|
- | 375 | ||||||
Investors’
relations
|
19,455 | - | ||||||
Legal
|
44,603 | - | ||||||
Management
fees
|
6,000 | 12,000 | ||||||
Marketing
|
9,065 | - | ||||||
Office
|
768 | 1,365 | ||||||
Rent
|
2,125 | 3,933 | ||||||
Transfer
agent’s fees
|
250 | 705 | ||||||
Discontinued
operations
|
$ | 86,566 | $ | 27,048 |
5. SIGNIFICANT
TRANSACTIONS WITH RELATED PARTIES
Officers
and directors paid expenses on behalf of the Company of $6,000 for the year
ended October 31, 2010.
As at
October 31, 2010, officers-directors had acquired 83% of the common capital
stock issued and have made contributions to capital of $34,000 to the Company in
the form of expenses paid for the Company.
6. COMMON
STOCK
On August
27, 2009, certain creditors of the Company accepted 4,555,074 common shares in
consideration of amounts owed to them of $75,918.
On
October 13, 2010, the Company issued a 3 to 1 forward stock split which resulted
in an increase in the number of outstanding shares of common stock from
89,968,358 to 269,905,074. All common stock references in these financial
statements have been retroactively adjusted to account for this forward stock
split.
On
October 26, 2010, 165,000,000 shares were surrendered and
cancelled.
F-8
Cleantech
Transit, Inc.
(Development
Stage Company)
Notes
to Financial Statements
October
31, 2010
7. LETTER
OF INTENT
On March
10, 2010, the Company entered into a Letter of Intent with Greentech Holdings
LLC, a limited liability company registered under the laws of Nevis, who owns
certain intellectual property, know-how, trade secrets, data, materials, blue
prints, drawings, copyrights, technology, brand names, logos, designs and
manufacturing techniques for hybrid buses and motor coaches, including Hybrid
Low Floor GTH40, Interurban GTI40 and Commuter Coach GTC45 which the Company
wishes to acquire in order to develop, manufacture and distribute eco-friendly
buses and luxury motor coaches in China. As at February 4, 2011, this Letter of
Intent has not been finalized and no formal agreement has been
signed.
Two of
the former directors of the Company are members of Greentech Holdings
LLC.
8. CONTRACTUAL
COMMITMENT
On March
15, 2010, the Company entered into an agreement with Evergreen Investor
Relations (formerly “Bakerview Investors Relations, Inc.”), an independent
company incorporated under the laws of the State of Washington, whereby
commencing March 15, 2010 and continuing until March 14, 2012, the Company will
pay on the first day of each month the sum of $7,500 for work performed under
this agreements comprising marketing and investor relation services. The
contract was terminated on July 31, 2010 by mutual consent.
9. GOING
CONCERN
The
Company will need additional working capital to service its debt and to expand
its operations, which raises substantial doubt about its ability to
continue as a going concern. Continuation of the Company as a going concern is
dependent upon obtaining additional working capital and the management of the
Company has developed a strategy, which it believes will accomplish this
objective through additional equity funding, and long term financing, which will
enable the Company to operate for the coming year.
F-9