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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For fiscal year ended June 30, 2014
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 000-54222
MAKISM 3D CORP.
(Exact name of registrant as specified in its Charter)
Nevada 42-1771506
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Suite R, Bristol Court
Martlesham Business Park
United Kingdom IP5 3RY
(Address of principal executive offices) (Zip Code)
011-44-01954-715030
(Registrant's telephone number, including area code)
Future Business Centre
Cambridge, CB4 2HY
(Former name, former address, and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.0001
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
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 preceding 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. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss. 232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [ X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller 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 [] No [X]
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter: $24,827,586
As of October 14, 2014, there were 60,000,000 shares of our common stock issued
and outstanding.
MAKISM 3D CORP.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this Annual Report on Form 10-K that are not
historical facts are "forward-looking statements." Forward-looking statements
may include our statements regarding our goals, beliefs, strategies, objectives,
plan, including product and service developments, future financial conditions,
results or projections or current expectations. Such forward-looking statements
may be identified by, among other things, the use of forward-looking terminology
such as "believes," "estimates," "intends," "plan" "expects," "may," "will,"
"should," "predicts," "anticipates," "continues," or "potential," or the
negative thereof or other variations thereon or comparable terminology, and
similar expressions are intended to identify forward-looking statements. We
remind readers that forward-looking statements are merely predictions and
therefore inherently subject to uncertainties and other factors and involve
known and unknown risks that could cause the actual results, performance, levels
of activity, or our achievements, or industry results, to be materially
different from any future results, performance, levels of activity, or our
achievements, or industry results, expressed or implied by such forward-looking
statements. Such forward-looking statements appear in Item 1 - "Business" and
Item 7 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations," as well as elsewhere in this Annual.
The factors discussed herein and expressed from time to time in our filings with
the Securities and Exchange Commission could cause actual results and
developments to be materially different from those expressed in or implied by
such statements. The forward-looking statements are made only as of the date of
this filing, and we undertake no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.
Further information on potential factors that could affect our business is
described under the heading "Risks Related to Our Business, Strategy and
Industry" in "Risk Factors" in Item 1A of this Annual Report on Form 10-K.
INTRODUCTION
Unless otherwise specified or required by context, as used in this Annual
Report, the terms "we," "our," "us" and the "Company" refer collectively to
Makism 3D Corp. The term "fiscal year" refers to our fiscal year ending June 30.
Unless otherwise indicated, the term "common stock" refers to shares of our
common stock.
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States generally accepted accounting
principles (U.S. GAAP).
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TABLE OF CONTENTS
PART I
ITEM 1. Business 3
ITEM 1A. Risk Factors 12
ITEM 1B. Unresolved Staff Comments 24
ITEM 2. Properties 24
ITEM 3. Legal Proceedings 24
ITEM 4. Mine Safety Disclosures 24
Part II
ITEM 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 25
ITEM 6. Selected Financial Data 26
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 26
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 28
ITEM 8. Financial Statements and Supplementary Data 29
ITEM 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure 38
ITEM 9A. Controls and Procedures 38
ITEM 9B. Other Information 39
PART III
ITEM 10. Directors, Executive Officers, and Corporate Governance 39
ITEM 11. Executive Compensation 43
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 45
ITEM 13. Certain Relationships and Related Transactions, and Director
Independence 46
ITEM 14. Principal Accounting Fees and Services 47
PART IV
ITEM 15. Exhibits, Financial Statement Schedules 49
Signatures 50
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PART I
ITEM 1. BUSINESS
BACKGROUND
We are a development stage company that was incorporated under the laws of the
State of Nevada on May 4, 2010 under the name "Advanced Cellular, Inc." with an
initial focus on developing and commercializing a performance management system
to be used by cellular network operators.
On February 20, 2013, we effected a 5 for 1 forward stock split of all of its
issued and outstanding shares of common stock (the "Stock Split"). On October
28, 2013, upon approval from the Financial Industry Regulatory Authority
("FINRA"), we effected a name change to "Makism 3D Corp."
On October 29, 2013, we entered into and consummated a voluntary share exchange
transaction with Umicron Ltd., a private limited company organized under the
laws of England and Wales ("Umicron"), and the shareholders of Umicron ("Selling
Shareholders") pursuant to a Stock Exchange Agreement (the "Exchange Agreement")
by and among the Company, Umicron, and the Selling Shareholders. As a result of
the Exchange Transaction, the Selling Shareholders acquired approximately 50.67%
of our issued and outstanding common stock, Umicron became our wholly-owned
subsidiary, and we acquired the business and operations of Umicron (the
"Exchange Transaction").
Our mission is to design and build the most desirable consumer and professional
level 3D printers. We believe there is enormous scope for innovation within the
design, usability, and engineering of 3D printers. Accordingly, we are
developing a reliable and cost-effective solution for the home, professional,
and educational markets for 3D printers.
Our offices are currently located at Suite R, Bristol Court, Martlesham Business
Park, IP5 3RY, United Kingdom. Our telephone number is 011-44-1473-621351.
STRATEGY
We are focused on the manufacture of a cost effective professional-grade 3D
printer targeted at the home, professional, and educational markets.
Our 3D printer, named "Wideboy" will include components and design features
similar to those found in commercial 3D printing applications. Wideboy will
initially be optimised for use with common Poly Lactic Acid (PLA) material to
enable users to produce fast, accurate and low-cost prototypes. The near-term
goal of the Company is to produce an entire range of 3D printers that utilize a
range of useful materials. We believe that our first product - the "Wideboy"
will be an affordable introduction to 3D printing technology for the average
customer.
Upon successful manufacture of the "Wideboy" 3D printer, we intend to distribute
initially to the United Kingdom (U.K.) market, with the goal of refining our
distribution strategy before we invest in additional facilities. At present, we
lease an industrial site in Martlesham Heath, United Kingdom. Once distribution,
returns and support infrastructure are well established in the U.K. market, we
plan to replicate our operational strategy in the European markets.
We plan on manufacturing and assembling our first 3D printer, the "Wideboy" in
China.
We will seek to enter the retail arena once the "Wideboy" has a proven
distribution infrastructure within the U.K.
Our objective is to develop a less costly solution that addresses what we
believe to be weaknesses within the current state of the 3D printing industry,
including (i) the lack of application for many existing machines due to limited
choice of materials (usually PLA)(ii) the industrial look of many machines which
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often looks out of place in a casual setting, and (iii) high expenses for
machines, especially for single users. We believe current reliable systems
remain cost prohibitive for many industries including, the advanced home user,
professional user, and educational markets. Professional-grade machines are
often shared between many users. Our objective is to develop a system that can
match the capabilities of higher-end professional systems but at a price point
manageable for individual users to purchase for use within the educational,
home, and professional segments.
Our printer will target the home, professional, and educational markets. We
believe the educational and professional segments are typically already familiar
with the creation of 3D models and are technically proficient enough to fully
utilize our technology. We intend to appease these market segments by placing a
strong emphasis on design, reliable engineering, and straight-forward usability.
We believe our business model is a reaction to the recent influx of unreliable
low-cost home user systems which fail to meet users' expectations.
The average price point of a personal 3D printer averaged $1,208 in 2013, up
from $1,138 in 2012. Recent figures estimate the number of personal 3D printers
sold in 2013 was 72,503 generating estimated revenue of $87,600,000 worldwide.
Growth within this market in the last four years (2010 - 2013) was 171.4%. The
average price point of a professional-grade machine was $90,370 in 2013, up from
$75,000 in 2012. This represents a 75 times difference in selling prices between
these two market segments. Wohlers Associates predicts that the most substantial
growth in 2014 will be in systems priced in the range of $5,000 - $20,000. Our
product will be a low cost solution in this market.
Our strategy is to position ourselves early in the 3D printing market as a brand
known for high quality manufacturing. Additionally, we plan to target the home
user market in 2014, with a mass produced product that we believe will meet
consumers' needs and expectations.
We believe our competitive advantages include:
* A system designed with an emphasis on scalable manufacturing by
utilizing only freely available components;
* Innovative design that distinguishes our product from other competing
3D printing systems in our segment;
* Early targeting of affordable, reliable systems designed for
manufacture;
* Ability to deliver a more consistent product rapidly to worldwide
markets;
* Greater reliability is achieved by delivering a simplified product
without untested features;
* Early targeting of an unsaturated market between the low end ($1,200)
and high end ($10,000);
* Ability to compete at the low end of the market by providing a cost
effective machine reliable enough for light-commercial use;
* Alternative to higher cost professional machines, our systems include
essential commercial features but will arrive in a more manageable,
effective, and user friendly package; and
* Potential to meet high-volume orders more rapidly than our
competitors.
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PRODUCTS
* WIDEBOY PERSONAL 3D PRINTER - a mid-range personal 3D printer for the
consumer, professional and educational markets. Wideboy will feature
professional grade design features at an affordable price
* TEMPERATURE CONTROLLED BUILD CHAMBER - a future upgrade for our
Wideboy 3D printer whereby the build chamber will be enclosed and can
maintain a constant set temperature.
* HIGH TEMPERATURE DUAL EXTRUDER CONFIGURATION - a future upgrade for
our Wideboy 3D printer whereby a dual extruder configuration optimized
for use of support material.
* BIO-COMPATIBLE EXTRUDER USING SYRINGE BASED METHODS - a future upgrade
whereby the extruder carriage is adapted for a compressed air-driven
syringe with needle valve intended to offer compatibility with organic
matter or food stuffs (pastes).
* PROFESSIONAL GRADE LASER SINTERING DEVICE - a new commercial-grade 3D
printer that utilizes selective laser sintering technology to produce
cost effective metal parts. The machine will take form of a white
goods appliance and will be designed for advanced home, workshop and
commercial-use.
* 3D IMAGE PROCESSING - a cluster of integrated image sensors allowing
delivery of visual feedback from printed material.
* 3D SCANNING OR RECOGNITION - Image sensors located inside the build
chamber allow low-medium resolution 3D scans or the capability to
reference objects against a repository of high resolution printable
models.
* WEB-BASED REPOSITORY FOR PRINTABLE 3D MODELS - an online database for
high quality, useful 3D printable files available for free or at cost.
* PACKAGED FILAMENT SUPPLIES - a filament cartridge for use with our
'"Wideboy'" 3D printer. The cartridge may be moisture sealed, may
contain moving parts, and may include sensors.
* FILAMENT CARTRIDGE LOADING SYSTEM - a method of automating or
simplifying the material replenishment process within a 3D printer
whereby moving parts inside either the cartridge or 3D printer are
activated upon recognition of a microchip such as an erasable
programmable read only memory ship (EPROM) or similar process.
ADVANTAGES OF WIDEBOY
* High-quality injection molded case;
* Optimized for fast, low cost models;
* Established open-source support infrastructure for firmware and
electronics;
* High-rigidity steel chassis designed for manufacture;
* High quality, easily obtainable components;
* Good compatibility with common, low-cost PLA filament.
* Open filament system;
* Returns infrastructure, customers can quickly receive replacement
systems;
* Planned certification - CE and FCC; and
* Potentially safer to use within an educational setting due to
restricted access to moving parts and non-toxic material residue.
DISADVANTAGES OF WIDEBOY
* Poor compatibility with high-temperature thermoplastics;
* Modifications to the mechanics cannot easily be made without voiding
the warranty;
* High development costs and increased time-to-market due to chosen
manufacturing techniques; and
* Priced higher than machines at the low end of the home market (below
$500).
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REVENUES AND CUSTOMERS
We plan to sell our products under the "Makism 3D" brand to the home,
professional, and educational markets within the 3D printing industry.
The opportunity in this market includes:
* Low penetration of low cost professional market (under $5,000);
* Growth rate of industry is high and under speculated;
* Scope for innovation within design for manufacture and software; and
* Greater application within creative industry and thus a wider scope
for marketing.
Our sales strategy will focus on an approach that is directed to providing 3D
content-to-print solutions to meet a wide range of customer needs, including
traditional prototyping, 3D printing, print-on-demand services, and rapid
manufacturing. We intend to generate revenue through the following methods:
* Online sales of Wideboy through our website;
* Sales of additional printing materials through our website;
* Extended warranties;
* Extended support plans;
* Distribution through authorized re-sellers;
* Business-to-business sales to educational institutions and creative
businesses; and
* Eventual sales of re-furbished `Wideboy' 3D printers.
We intend to focus our initial sales efforts in the U.K., Europe and U.S. Our
initial target customer base will encompass the following:
HOME USERS
* General/hobbyist
* Home workshop
* Home office
* Home studio
CREATIVE CUSTOMERS
* Product designers
* Industrial design houses
* Jewelers
* Animators
* Metal working/cast making
* Artists
* Fashion
* Furniture design
PROFESSIONAL CUSTOMERS
* Architectural practices
* Dental practices
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* General practices/doctors
* Prosthetics
* Engineering
* Marketing
* Advertising
EDUCATIONAL
* Pre-school/nursery
* Middle/high school
* Higher education/undergraduate
* PHD/research
TECHNOLOGY
The principle technology used by our 3D printers is an additive manufacturing
technology referred to as Fused Filament Fabrication. In this process,
thermoplastics are heated to above their glass transition temperature and
deposited by an extrusion head onto a platform layer-by-layer. The extruder head
follows a path determined by a computer-aided-manufacturing (CAM) software
package, and the part is built from the bottom up, one layer at a time. The
layer thickness and vertical dimensional accuracy is determined by the extruder
die diameter, which ranges from 0.013 to 0.005 inches. In the X-Y plane, 0.001
inch resolution is achievable.
A range of thermoplastic materials are available including ABS, polyamide,
polycarbonate, polyethylene, polypropylene, and investment casting wax.
INTELLECTUAL PROPERTY
Our success depends in part upon our ability to protect our core technology and
intellectual property. To establish and protect our proprietary rights, we will
rely on a combination of patents, patent applications, trademarks, copyrights,
trade secrets, including know-how, license agreements, confidentiality
procedures, non-disclosure agreements with third parties, employee disclosure
and invention assignment agreements, and other contractual rights.
Upon receipt of adequate financing, we plan to file patents on our hardware
designs and common law trademarks.
MANUFACTURING
We will manufacture the Wideboy personal 3D printer through third-party
manufacturers. There are no current plans to manufacture any elements of the
Wideboy on-site in the U.K.
Successful manufacture of our Wideboy 3D printer will rely on relationships
established with specialist engineering firms located in the U.K. and/or China.
These may consist of one or more relationships established with engineering
firms to manufacture and deliver our manufactured parts. Our 3D printer design
currently utilizes injection molding, steel formed parts, and machined parts, as
well as incorporating off-the-shelf components into the design.
There are several elements that will be injection molded in our design, the most
substantial being the 'shell' or exterior which requires a high level of finish.
Other elements which are to be located within the interior of the shell do not
require a high surface finish and will be less costly to produce.
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DISTRIBUTION AND MARKETING
DISTRIBUTION
Our first distribution facility is located in Martlesham, U.K. From these
premises, we intend to distribute fully assembled and tested machines directly
to our customers and/or distribution partners from sales made primarily through
our company website.
Once our sales levels reach a certain threshold, we also plan to employ a direct
sales organization, including salespersons that will operate in various areas of
the world and establish relationships with potential and existing customers. We
believe that a direct selling relationship with our customers is an important
building block for the success of our business. Our goal is to establish a
strong collaborative aspect to the relationship with our customers by
emphasizing and expanding the lines of communication with them. We hope to
achieve this in part through an emphasis on direct sales.
We also intend to use sales agents, authorized resellers and distributors to
supplement the sales of our products in areas of the world that our direct sales
staff does not operate.
Additionally, we intend to distribute our products from a retail premises in the
near future, the location of which is yet to be confirmed.
MARKETING
We believe that attendance at trade shows that showcase our products will
provide the initial traction for interest in the our brand in the market place.
In addition to 3D-printing related trade shows, we plan to establish a presence
at key creative and design-based events, such as those relating to design and
fashion.
We also plan to lend a number of our Wideboy personal 3D printers to key media
outlets, particularly those concerned with new and emerging technology.
We will produce a number of video advertisements that will be hosted on our
company Youtube channel. This will give our customers an insight as to who we
are as a company and our values. These will be produced professionally by a
dedicated film team at a leading film-based University.
INDUSTRY
The term "3D printing" is defined by the ATSM T42 committee as the fabrication
of objects through the deposition of a material using a print head, nozzle, or
other printer technology. However, the term is often used synonymously with
additive manufacturing ("AM"). In particular it is associated with machines that
are lower in relative price, and/or overall functional capability.
APPLICATIONS FOR 3D PRINTERS
3D printers allow for the physical modeling of a design using a special class of
machine technology. These systems take data created from CAD files, CT and MRI
scan data, or 3D digitized data to quickly produce models, using an additive
approach. Traditionally, 3D printing has been used by organizations to
accelerate product development. Many companies use 3D printing models to test
form, fit and function to help improve the time to market.
Frequently, users report rapid pay-back times from using 3D printing, as they
accelerate their product development cycle and reduce post-design flaws through
more extensive design verification and testing.
A wide variety of end users and organizations use 3D printers. Current markets
and applications include: prototyping, tooling, metal casting, architecture,
medical, dental, and direct part production. Among the medical applications,
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prototyping is being used to produce accurate models of internal organs, bones
and skulls for pre-operative evaluations and for modeling of prostheses.
PERSONAL 3D PRINTERS
Personal 3D printers are AM machines that sell for less than
$5,000. This market has been expanding in recent years, with an influx of new
users, media attention, and a lot of hype. We believe there are more than 300
companies and teams developing personal 3D printers worldwide.
Print quality and machine reliability have increased considerably over the past
couple years, and many new printers now on the market include dual extruders,
automatic tram detection, and heated build platforms. We believe that except for
basic improvements, little actual innovation is occurring. Most printers copy
the RepRap (discussed below) reference design and improve upon it.
Manufacturing a 3D printer is a complex and difficult undertaking. Many startups
have paid little attention to the importance of design for manufacture. This
fact alone is a major reason for little innovation in this market segment.
Consumers may soon expect 3D printers to have reliability similar to that of
consumer electronics. We believe that many vendors overstate their machines
reliability and ease of use, while downplaying technical issues. We believe that
currently 3D printers are among the least reliable devices that a consumer can
purchase.
REPRAP PROJECT
RepRap is an open-source project founded by Adrian Bowyer at the University of
Bath. The project has about 25 core contributors and a vibrant community of
people working to build machines. In total, there are an estimated 300 RepRap
designs available. Several startups have simply put old RepRap machines in new
boxes and branded them as their own. This is a potential threat to the RepRap
project as these manufacturers focus on differentiating their machines from the
competition and don't actively contribute to the open-source project. These
manufacturers often use the open-source moniker as a marketing slogan to sell
their machines. The cost of RepRap machines has fallen steadily. Kits are now
available for $330-$800 and documentation has improved. Popular designs include
the Prusa, Mendel, and Huxley.
INDUSTRY GROWTH
REVENUE FROM AM WORLDWIDE
There is a strong demand for additive manufacturing products and services. The
compound annual growth rate (CAGR) of worldwide revenues produced by all
products and services over the past 25 years was 25.4%. In 2013 the growth was
34.9% (CAGR) valuing the industry at $3.07 billion.
The average selling price of a professional-grade industrial AM system in 2013
was $90,370, compared to $75,000 in 2012. Industrial AM systems are machines
that sell for more than $5,000. The average selling price of a personal 3D
printer was $1,208 in 2013, and $1,138 in 2012. The 2013 figures represent a
difference of 75 times between the two market segments.
Growth for personal 3D printer sales from 2010 through 2013 was 171.4%. The
total number of personal 3D printer sales in 2013 was 72,503, which generated an
estimated $87.6M in revenue.
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MATERIAL SALES
An estimated $522.8M was spent on materials for all AM systems worldwide in
2013. This in an increase of 26.8% over the $417M in 2012. This segment grew 23%
in 2011, and 22.1% in 2010.
MARKET OPPORTUNITY AND FORECAST
Unit sales of professional-grade, industrial grade systems are expected to grow
over the next several years. In 2014, Wohlers Associates believe that annual
sales will reach 11,000 units worldwide. Systems priced in the range of $5,000 -
$20,000 will be responsible for much of this growth.
Unit sales of personal 3D printers are also expected to double this year to an
estimated 70,000 units.
COMPETITION
3D printing is a new industry and the market is very turbulent with an influx of
competitors entering the market. The relationships between competitors,
customers and suppliers are continuously being redefined, which creates the need
for competitive forces to be regularly reassessed.
AM companies entering the personal 3D printing marketplace pose the greatest
competition to us. These companies hold key patents that could have the most
disruptive effects on the 3D printing industry. Barriers to entry into this
`home' market are high for these companies as they are typically concerned with
selling commercial machines which hold no significant brand equity within the
community driven `home market.' The recent acquisition of Makerbot Industries by
Stratasys Ltd., a leading professional-grade systems manufacturer, demonstrates
the value of such a brand within the `home' market. Makerbot is well positioned
to enter the low-end professional market due to its relative high price point
and brand recognition obtained by being one of the very first consumer-level 3D
printer manufacturers. Ford Motors recently installed a Makerbot Replicator 2 on
every engineer's desk.
CHALLENGES IN THE MARKET
* Quality may not be a priority for all customers; hobby users will
prefer low-cost printers.
* Relatively high price point may make one-off items more cost effective
through a printing service (i.e. Shapeways).
* The print quality of Shapeways parts are of much greater quality.
* The customer could buy a printer that is closer to their location;
U.S. customers may receive a printer faster from competitors based
locally.
* The customer may wait for a new product or a reaction from a competing
company.
* Marketplace will be crowded for the next few years.
* Low priced machines will occupy a large portion of the market.
GOVERNMENT REGULATION
In order to freely sell our products in the European Economic Area (EEA), we
must obtain CE marking. This is to declare that we as a manufacturer abide by
the requirements set out in applicable EU directives. CE marking indicates the
compliance with EU legislation of a product, wherever in the world manufactured.
By affixing a CE marking on our products we as a manufacture declare our
conformity with the legal requirements set out within the EU directives that
apply to it. Our products will conform to the general principles of the Low
Voltage Directive, which is a broad set of objectives for safety regulations
which allow electrical equipment to safely be used in other EU countries.
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Additionally, we intend to gain Federal Communications Commission (FCC) marking
for our Wideboy 3D printer. This mark certifies that the electromagnetic
interference from the device is under limits approved by the FCC. The FCC mark
is mandatory for all electronics equipment sold in the U.S. classified under
part 15 of the FCC regulations.
We are also subject to a number of U.S. federal and state, and foreign laws and
regulations that affect companies conducting business on the Internet, many of
which are still evolving and being tested in courts, and could be interpreted in
ways that could harm our business. These may involve user privacy, rights of
publicity, data protection, content, intellectual property, distribution,
electronic contracts and other communications, competition, protection of
minors, consumer protection, taxation and online payment services.
We will rely on legal and operational compliance programs, as well as local
counsel, to guide our businesses in complying with applicable laws and
regulations of the jurisdictions in which we do business.
We do not anticipate at this time that the cost of compliance with U.K., U.S.
and foreign laws will have a material financial impact on our operations,
business or financial condition, but there are no guarantees that new regulatory
and tariff legislation may not have a material negative effect on our business
in the future.
EMPLOYEES
Our team currently consists of two key people. Our backgrounds are mainly in
design, software, sales, marketing, recruitment, and business. We are looking to
expand our team, go into production, and market our product once we reach our
targeted investment goals.
All employees are required to execute non-disclosure agreements as part of their
employment. We believe our relations with our employees are good. None of our
employees are subject to collective bargaining agreements.
ITEM 1A. RISK FACTORS
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND OTHER INFORMATION IN THIS
REPORT BEFORE DECIDING TO INVEST IN OUR COMPANY. IF ANY OF THE FOLLOWING RISKS
ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
PROSPECTS FOR GROWTH COULD BE SERIOUSLY HARMED. AS A RESULT, THE TRADING PRICE
OF OUR COMMON STOCK COULD DECLINE AND YOU COULD LOSE ALL OR PART OF YOUR
INVESTMENT.
RISKS RELATING TO OUR COMPANY AND OUR INDUSTRY
WE MAY NOT BE ABLE TO INTRODUCE NEW 3D PRINTING SYSTEMS AND MATERIALS ACCEPTABLE
TO THE MARKET OR TO IMPROVE THE TECHNOLOGY AND SOFTWARE USED IN OUR CURRENT
SYSTEMS.
Our ability to compete in the 3D printing market depends, in large part, on our
success in enhancing our existing product lines and in developing new products.
Even if we successfully enhance existing systems or create new systems, it is
likely that new systems and technologies that we develop will eventually
supplant our existing systems or our competitors will create systems that will
replace ours. The rapid prototyping (RP) industry is subject to rapid and
substantial innovation and technological change. We may be unsuccessful at
enhancing existing systems or developing new systems or materials on a timely
basis, and any of our products may be rendered obsolete or uneconomical by our
or others' technological advances.
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IF THE 3D PRINTING MARKET DOES NOT CONTINUE TO ACCEPT OUR SYSTEMS, OUR REVENUES
MAY STAGNATE OR DECLINE.
We plan to derive a substantial portion of our sales from the sale of 3D
printers. If the market for 3D printers declines or if competitors introduce
products that compete successfully against ours, we may not be able to sustain
the sales of those products. If that happens, our revenues may not increase and
could decline.
IF WE ARE UNABLE TO MAINTAIN REVENUES AND GROSS MARGINS FROM SALES OF OUR
EXISTING PRODUCTS, OUR PROFITABILITY WILL BE ADVERSELY AFFECTED.
Our current strategy is to attempt to manage the prices of our 3D printers to
expand the market and increase sales. In conjunction with that strategy, we are
constantly seeking to reduce our direct manufacturing costs as well. Our
engineering and selling, general and administrative expenses, however, generally
do not vary substantially in relation to our sales. Accordingly, if our strategy
is successful and we increase our revenues while maintaining our gross margins,
our operating profits generally will increase faster as a percentage of revenues
than the percentage increase in revenues. Conversely, if our revenues or gross
margins decline, our operating profits generally will decline faster than the
decline in revenues or gross margins. Therefore, declines in our revenues may
lead to disproportionate reductions in our operating profits.
OUR REVENUE AND PROFITABILITY MAY BE NEGATIVELY AFFECTED BY ADVANCES IN
TECHNOLOGY THAT CREATE ALTERNATE FORMS OF 3D PRINTING AND RAPID PROTOTYPING
INDUSTRY.
The multimedia industry in general and the 3D printing and RP industry in
particular continue to undergo significant changes, primarily due to
technological developments. Due to this rapid growth of technology, we cannot
accurately predict the overall effect that such changes may have on the
potential revenue from and profitability of our products. Any future changes in
technology may change the way we operate our business and add unforeseen costs
to our business.
IF ANY OF OUR MANUFACTURING FACILITIES IS DISRUPTED, SALES OF OUR PRODUCTS WILL
BE DISRUPTED, AND WE COULD INCUR UNFORESEEN COSTS. INCORRECT - UPDATE
We manufacture our 3D printers at our facility in Cambridge. If the operations
of this facility are disrupted, we would be unable to fulfill customer orders
for the period of the disruption. We would not be able to recognize revenue on
orders that we could not ship, and we might need to modify our standard sales
terms to secure the commitment of new customers during the period of the
disruption and perhaps longer. Depending on the cause of the disruption, we
could incur significant costs to remedy the disruption and resume product
shipments. Such a disruption could have a material adverse effect on our
revenue, results of operations and earnings.
OUR FAILURE TO EXPAND OUR INTELLECTUAL PROPERTY PORTFOLIO COULD ADVERSELY AFFECT
THE GROWTH OF OUR BUSINESS AND RESULTS OF OPERATIONS.
Expansion of our intellectual property portfolio is one of the available methods
of growing our revenues and our profits. This involves a complex and costly set
of activities with uncertain outcomes. Our ability to obtain patents and other
intellectual property can be adversely affected by insufficient inventiveness of
our employees, by changes in intellectual property laws, treaties, and
regulations, and by judicial and administrative interpretations of those laws
treaties and regulations. Our ability to expand our intellectual property
portfolio could also be adversely affected by the lack of valuable intellectual
property for sale or license at affordable prices. There is no assurance that we
will be able to obtain valuable intellectual property in the jurisdictions where
we and our competitors operate or that we will be able to use or license that
intellectual property.
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IF WE ARE NOT ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY, WE MAY NOT
BE ABLE TO COMPETE EFFECTIVELY.
Our ability to compete depends in part upon the strength of our proprietary
rights in our technologies, brands and content. Currently, and going forward, we
expect to rely on a combination of U.S. and foreign patents, trademarks, trade
secret laws and license agreements to establish and protect our intellectual
property and proprietary rights. The efforts we have taken and expect to take to
protect our intellectual property and proprietary rights may not be sufficient
or effective at stopping unauthorized use of our intellectual property and
proprietary rights. In addition, effective trademark, patent, copyright and
trade secret protection may not be available or cost-effective in every country
in which our services are made available. There may be instances where we are
not able to fully protect or utilize our intellectual property in a manner that
maximizes competitive advantage. If we are unable to protect our intellectual
property and proprietary rights from unauthorized use, the value of our products
may be reduced, which could negatively impact our business. Our inability to
obtain appropriate protections for our intellectual property may also allow
competitors to enter our markets and produce or sell the same or similar
products. In addition, protecting our intellectual property and other
proprietary rights is expensive and diverts critical managerial resources. We
rely in part on our currently issued patents to support competitive position.
There can be no assurance that some of our patents will not be challenged at a
later date. There can be no guarantee that we will be successful in obtaining
additional patents that we may need at a later date to support certain growth
initiatives. Our ability to defend our patents, if they are challenged, or the
inability to obtain certain patents in the future, could have a material adverse
effect in future periods. If we are otherwise unable to protect our intellectual
property and proprietary rights, our business and financial results could be
adversely affected.
If we are forced to resort to legal proceedings to enforce our intellectual
property rights, the proceedings could be burdensome and expensive. In addition,
our proprietary rights could be at risk if we are unsuccessful in, or cannot
afford to pursue, those proceedings. In addition, the possibility of extensive
delays in the patent issuance process could effectively reduce the term during
which a marketed product is protected by patents.
The intellectual property to support our intermediate and long-term growth plans
continues to be developed and there can be no assurance that we will complete
such process. The addition of intellectual property to support this growth is
particularly dependent on the continued services of our technology team and its
ability to develop additional technologies to support such growth plans. If we
do not have the financial resources to develop the intellectual property to
fully support these growth plans, our ability to develop future products and
refinement of current products could be negatively impacted.
We may also need to obtain licenses to patents or other proprietary rights from
third parties. We may not be able to obtain the licenses required under any
patents or proprietary rights or they may not be available on acceptable terms.
If we do not obtain required licenses, we may encounter delays in product
development or find that the development, manufacture or sale of products
requiring licenses could be foreclosed. We may, from time to time, support and
collaborate in research conducted by universities and governmental research
organizations. We may not be able to acquire exclusive rights to the inventions
or technical information derived from these collaborations, and disputes may
arise over rights in derivative or related research programs conducted by us or
our collaborators.
WE MAY BE SUBJECT TO ALLEGED INFRINGEMENT CLAIMS.
Although we perform extensive patent and trademark searches, we may be subject
to intellectual property infringement claims from individuals, vendors and other
companies who have acquired or developed patents in the fields of 3D printing
for purposes of developing competing products or for the sole purpose of
asserting claims against us. Any claims that our products or processes infringe
the intellectual property rights of others, regardless of the merit or
resolution of such claims, could cause us to incur significant costs in
responding to, defending and resolving such claims, and may prohibit or
14
otherwise impair our ability to commercialize new or existing products. If we
are unable to effectively defend our processes, our market share, sales and
profitability could be adversely impacted.
AS OUR PATENTS EXPIRE, ADDITIONAL COMPETITORS USING OUR TECHNOLOGY COULD ENTER
THE MARKET, WHICH COULD REQUIRE US TO REDUCE OUR PRICES AND RESULT IN A
REDUCTION OF OUR MARKET SHARE. COMPETITORS' INTRODUCTION OF LOWER QUALITY
PRODUCTS USING OUR TECHNOLOGY COULD ALSO NEGATIVELY AFFECT THE REPUTATION AND
IMAGE OF OUR PRODUCTS IN THE MARKETPLACE.
Upon expiration of our patents, our competitors may introduce products using the
same technology as ours that have lower prices than those for our products. To
compete, we may need to reduce our prices, which would adversely affect our
revenues, margins and profitability. Additionally, the expiration of our patents
could reduce barriers to entry into the market for additive fabrication systems,
which could result in the reduction of our market share and earnings potential.
If competitors using our technology were to introduce products of inferior
quality, our potential customers may view our products negatively, which would
have an adverse effect on our image and reputation and on our ability to compete
with systems using other additive fabrication technologies.
OUR OPERATING RESULTS AND FINANCIAL CONDITION MAY FLUCTUATE.
Our operating results and financial condition may fluctuate from
quarter-to-quarter and year-to-year and are likely to continue to vary due to a
number of factors, many of which are not within our control. If our operating
results do not meet the expectations of securities analysts or investors, who
may derive their expectations by extrapolating data from recent historical
operating results, the market price of our common stock will likely decline.
Fluctuations in our operating results and financial condition may be due to a
number of factors, including, but not limited to, those listed below and those
identified throughout this "Risk Factors" section:
* changes in the amount that we spend to develop, acquire or license new
products, technologies or businesses;
* changes in the amount we spend to promote our products and services;
* changes in the cost of satisfying our warranty obligations and
servicing our installed base of systems;
* delays between our expenditures to develop and market new or enhanced
systems and consumables and the generation of sales from those
products;
* development of new competitive systems by others;
* changes in accounting rules and tax laws;
* the geographic distribution of our sales;
* our responses to price competition;
* market acceptance of our products;
* general economic and industry conditions that affect customer demand;
and
* our level of research and development activities.
WE HAVE NO REVENUES AND HAVE INCURRED LOSSES.
We currently have no revenues and we anticipate that our existing cash and cash
equivalents will not be sufficient to fund our longer term business needs and we
will need to generate significant revenue or receive additional investment to
continue operations. Based on our current business plan, we anticipate that we
will continue to incur losses through the year ending June 30, 2015.
OUR AUDITORS HAVE EXPRESSED UNCERTAINTY AS TO OUR ABILITY TO CONTINUE AS A GOING
CONCERN.
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Primarily as a result of our recurring losses and our lack of liquidity, we
received a report from our independent auditors that includes an explanatory
paragraph describing the substantial uncertainty as to our ability to continue
as a going concern as of our fiscal year ended June 30, 2014.
IF WE FAIL TO RAISE ADDITIONAL CAPITAL, OUR ABILITY TO IMPLEMENT OUR BUSINESS
MODEL AND STRATEGY COULD BE COMPROMISED.
We have limited capital resources and operations. To date, our operations have
been funded entirely from the proceeds from limited revenues, equity and debt
financings. The Company currently does not have adequate capital or revenue to
meet its current or projected operating expenses. We anticipate needing
substantial additional capital in the near future to develop and market new
products, services and technologies. We currently do not have commitments for
financing to meet our longer term expected needs and we may not be able to
obtain additional financing on terms acceptable to us, or at all. Even if we
obtain financing for our near term operations and product development, we expect
that we will require additional capital beyond the near term. If we are unable
to raise capital when needed, our business, financial condition and results of
operations would be materially adversely affected, and we could be forced to
reduce or discontinue our operations. Debt financing, if obtained, may involve
agreements that include covenants limiting or restricting our ability to take
specific actions, such as incurring additional debt and could increase our
expenses, and would be required to be repaid regardless of its operating
results. Moreover, we may issue equity securities in connection with such debt
financing. Equity financing, even if obtained, could result in ownership and
economic dilution to our existing stockholders and/or require us to grant
certain rights and preferences to new investors. In addition, we may seek
additional capital due to favorable market conditions or strategic
considerations even if we believe we have sufficient funds for our current
operations.
We do not currently have credit facilities or arrangements in place as a source
of funds and there can be no assurance that we will be able to raise sufficient
additional capital or raise such capital on acceptable terms or raise such
capital when we need it. If such capital is not available on satisfactory terms,
or is not available at all, we may be required to delay, scale back or stop the
development of our products and/or cease its operations.
IF WE UNDERESTIMATE OUR OPERATING EXPENSES, WE MAY NOT BE ABLE TO FUND FUTURE
OPERATIONS.
To date, we have devoted substantially all of our efforts to research and
development, infrastructure building and initial marketing activities. There is
no guarantee that our cost estimates or projected sales volumes are accurate and
will be attained. An inability to meet sales volumes as forecast or to achieve
assumed cost figures could have a negative impact on our profitability, cash
flow and survival.
We expect our operating expenses to increase in connection with the continued
development of our products and expansion of its marketing activities. We may
also incur costs and expenses that are unexpected, in excess of amounts
anticipated or are otherwise not contemplated or provided for in connection with
our business plan. If these or other costs or expenses are incurred, it could
have a material adverse effect on our financial performance.
WE MAY ACQUIRE OR MAKE INVESTMENTS IN COMPANIES OR TECHNOLOGIES THAT COULD CAUSE
LOSS OF VALUE TO OUR STOCKHOLDERS AND DISRUPTION OF OUR BUSINESS.
Subject to our capital constraints, we intend to explore opportunities to
acquire companies or technologies in the future. Entering into an acquisition
entails many risks, any of which could adversely affect our business, including:
* Failure to integrate the acquired assets and/or companies with our
current business;
* The price we pay may exceed the value we eventually realize;
* Loss of share value to our existing stockholders as a result of
issuing equity securities as part or all of the purchase price;
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* Potential loss of key employees from either our current business or
the acquired business;
* Entering into markets in which we have little or no prior experience;
* Diversion of management's attention from other business concerns;
* Assumption of unanticipated liabilities related to the acquired
assets; and
* The business or technologies we acquire or in which we invest may have
limited operating histories, may require substantial working capital,
and may be subject to many of the same risks we are subject to.
SIGNIFICANT CHANGES IN GOVERNMENT REGULATION MAY HINDER SALES.
The production, distribution, sale and marketing of our products are subject to
the rules and regulations of various federal, state and local agencies, various
environmental statutes, and various other federal, state and local statutes and
regulations applicable to the production, transportation, sale, safety, and
advertising of or pertaining to our products. New statutes and regulations may
also be instituted in the future. Compliance with applicable federal and state
regulations is crucial to our success. Although we believe that we are in
compliance with applicable regulations, should the federal government or any
state in which we operate amend its guidelines or impose more stringent
interpretations of current laws or regulations, we may not be able to comply
with these new guidelines. Such regulations could require the reformulation of
certain products to meet new standards, market withdrawal or discontinuation of
certain products we are unable to redesign or reformulate, imposition of
additional record keeping requirements and expanded documentation regarding the
properties of certain products. Failure to comply with applicable requirements
could result in sanctions being imposed on us or the manufacturers of any of our
products, including but not limited to fines, injunctions, product recalls,
seizures and criminal prosecution. Further, if a regulatory authority finds that
a current or future product or production run is not in compliance with any of
these regulations, we may be required to have the packaging of our products
changed which may adversely affecting our financial condition and operations. We
are also unable to predict whether or to what extent a warning under any of
applicable statute would have an impact on costs or sales of our products.
WE FACE STRONG COMPETITION FROM LARGER AND WELL-ESTABLISHED COMPANIES, WHICH
COULD HARM OUR BUSINESS AND ABILITY TO OPERATE PROFITABLY.
Our industry is competitive. There are many different 3D printing and RP
companies in the United Kingdom and North America and our services will not be
unique to their services. Even though the industry is highly fragmented, it has
a number of large and well-established companies, which are profitable and have
developed a brand name. Aggressive marketing tactics implemented by our
competitors could impact our limited financial resources and adversely affect
our ability to compete in our market. Our inability to compete effectively with
larger companies could have a material adverse effect on our business
activities, financial condition and results of operations.
IF WE ARE UNABLE TO RETAIN OUR KEY OPERATING PERSONNEL AND ATTRACT ADDITIONAL
SKILLED OPERATING PERSONNEL, OUR DEVELOPMENT OF NEW PRODUCTS WILL BE DELAYED AND
OUR PERSONNEL COSTS WILL INCREASE.
Our growth plans require us to retain key employees in, and to hire additional
skilled employees to enhance existing products and develop new products. Our
inability to retain and hire key engineers and other employees could delay our
development and introduction of new products, which would adversely affect our
revenues. In addition, a possible shortage of such personnel in our region could
require us to pay more to retain and hire key employees, thereby increasing our
costs.
OUR BUSINESS DEPENDS SUBSTANTIALLY ON THE CONTINUING EFFORTS OF OUR EXECUTIVE
OFFICERS AND OUR BUSINESS MAY BE SEVERELY DISRUPTED IF WE LOSE THEIR SERVICES.
Our future success depends substantially on the continued services of our
executive officers. In particular, our performance depends, in large part, upon
our officers and their existing relationships in the industry. We do not
17
maintain key man life insurance on any of our executive officers and directors.
If one or more of our executive officers are unable or unwilling to continue in
their present positions, we may not be able to replace them readily, if at all.
Therefore, our business may be severely disrupted, and we may incur additional
expenses to recruit and retain new officers. In addition, if any of our
executives joins a competitor or forms a competing company, we may lose some of
our customers.
WE ARE SUBJECT TO NEW CORPORATE GOVERNANCE AND INTERNAL CONTROL REPORTING
REQUIREMENTS, AND OUR COSTS RELATED TO COMPLIANCE WITH, OR OUR FAILURE TO COMPLY
WITH, EXISTING AND FUTURE REQUIREMENTS COULD ADVERSELY AFFECT OUR BUSINESS.
We may face new corporate governance requirements under the Sarbanes-Oxley Act
of 2002, as well as new rules and regulations subsequently adopted by the
Securities and Exchange Commission ("SEC") and the Public Company Accounting
Oversight Board. These laws, rules and regulations continue to evolve and may
become increasingly stringent in the future. In particular, under SEC rules, we
are required to include management's report on internal controls as part of our
annual report, pursuant to Section 404 of the Sarbanes-Oxley Act. The financial
cost of compliance with these laws, rules and regulations is expected to be
substantial. We cannot assure you that we will be able to fully comply with
these laws, rules and regulations that address corporate governance, internal
control reporting and similar matters. Failure to comply with these laws, rules
and regulations could materially adversely affect our reputation, financial
condition and the value of our securities.
RISKS RELATED TO DOING BUSINESS INTERNATIONALLY
OUR INTERNATIONAL OPERATIONS POSE CURRENCY RISKS, WHICH MAY ADVERSELY AFFECT OUR
OPERATING RESULTS.
Our operating results may be affected by volatility in currency exchange rates
and our ability to effectively manage our currency transaction and translation
risks. In general, we conduct our business, earn revenue and incur costs in the
local currency of the country in which we operate, which is pound sterling. As a
result, our international operations present risks from currency exchange rate
fluctuations. The financial condition and results of operations are reported in
the relevant local currency, pound sterling, and then translated to U.S. dollars
at the applicable currency exchange rate for inclusion in our consolidated
financial statements. We do not manage our foreign currency exposure in a manner
that would eliminate the effects of changes in foreign exchange rates.
Therefore, changes in exchange rates between any foreign currencies and the U.S.
dollar will affect the recorded levels of our foreign assets and liabilities, as
well as our revenues, cost of goods sold, and operating margins, and could
result in exchange losses in any given reporting period.
In the future, we may not benefit from favorable exchange rate translation
effects, and unfavorable exchange rate translation effects may harm our
operating results. In addition to currency translation risks, we incur currency
transaction risks whenever we enter into either a purchase or a sale transaction
using a different currency from the currency in which we receive revenues. In
such cases we may suffer an exchange loss because we do not currently engage in
currency swaps or other currency hedging strategies to address this risk.
Given the volatility of exchange rates, we can give no assurance that we will be
able to effectively manage our currency transaction and/or translation risks or
that any volatility in currency exchange rates will not have an adverse effect
on our results of operations.
THE CURRENT ECONOMIC ENVIRONMENT AND UNCERTAINTY IN THE EUROPEAN UNION COULD
MATERIALLY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
The failure of the European Union to stabilize the fiscal condition and
creditworthiness of its member economies, such as Greece, Portugal, Spain,
Ireland, and Italy, could have significant implications on our plans to expand
into the European Union. Certain European Union member states have significant
fiscal obligations, which have caused investor concern over such countries'
18
ability to continue to service their debt and foster economic growth. Currently,
the European debt crisis has caused liquidity to be less abundant. A weaker
European economy has caused and may continue to cause market participants to
lose confidence in the safety and soundness of European financial institutions
and the stability of European Union member economies, and may likewise affect
other global institutions and the stability of the global financial markets.
In addition, the possible abandonment of the Euro currency by one or more
members of the European Union could materially affect our business in the
future. Despite measures taken by the European Union to provide funding to
certain European Union member states in financial difficulties and by a number
of European countries to stabilize their economies and reduce their debt
burdens, it is possible that the Euro could be abandoned as a currency in the
future by countries that have already adopted its use. This could lead to the
re-introduction of individual currencies in one or more European Union member
states, or in more extreme circumstances, the dissolution of the European Union.
The effects on our business of a potential dissolution of the European Union,
the exit of one or more European Union member states from the European Union or
the abandonment of the Euro as a currency, are impossible to predict with
certainty, and any such events could have a material adverse effect on our
business, trading volumes and results of operations, particularly in the long
term.
OUR INTERNATIONAL OPERATIONS SUBJECT US TO RISKS ASSOCIATED WITH THE
LEGISLATIVE, JUDICIAL, ACCOUNTING, REGULATORY, POLITICAL AND ECONOMIC RISKS AND
CONDITIONS SPECIFIC TO THE COUNTRIES OR REGIONS IN WHICH WE OPERATE, WHICH COULD
ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE.
We currently conduct operations in United Kingdom, and plan on expanding our
operations to additional international markets, including the United States,
European Union and China. Our future operating results in international markets
could be negatively affected by a variety of factors, most of which are beyond
our control. These factors include political conditions, including political
instability, economic conditions, legal and regulatory constraints, trade
policies, currency regulations, and other matters in any of the countries or
regions in which we operate, now or in the future.
Moreover, the economies of some of the countries in which we currently have, or
plan to have operations, have in the past suffered from high rates of inflation
and currency devaluations, which, if they occurred again, could adversely affect
our financial performance. Other factors which may impact our operations include
foreign trade, monetary and fiscal policies both of the United States and of
other countries, laws, regulations and other activities of foreign governments,
agencies and similar organizations, and risks associated with having numerous
officers located in countries which have historically been less stable than the
United States. Additional risks inherent in our international operations
generally include, among others, the costs and difficulties of managing
international operations, adverse tax consequences and greater difficulty in
enforcing intellectual property rights in countries other than the United
States.
CURRENT GLOBAL ECONOMIC CONDITIONS MAY ADVERSELY AFFECT OUR INDUSTRY, BUSINESS
AND RESULTS OF OPERATIONS.
The recent disruptions in the current global credit and financial markets has
led to diminished liquidity and credit availability, a decline in consumer
confidence, a decline in economic growth, an increased unemployment rate, and
uncertainty about economic stability. There can be no assurance that there will
not be further deterioration in credit and financial markets and confidence in
economic conditions. These economic uncertainties affect businesses such as ours
in a number of ways, making it difficult to accurately forecast and plan our
future business activities. The current adverse global economic conditions and
tightening of credit in financial markets may lead consumers to postpone
spending. We are unable to predict the likely duration and severity of the
current disruptions in the credit and financial markets and adverse global
economic conditions. If the current uncertain economic conditions continue or
further deteriorate, our business and results of operations could be materially
and adversely affected.
BECAUSE OUR ASSETS ARE LOCATED OUTSIDE OF THE UNITED STATES AND ALL OF OUR
DIRECTORS AND OFFICERS RESIDE OUTSIDE OF THE UNITED STATES, IT MAY BE DIFFICULT
FOR INVESTORS TO ENFORCE THEIR RIGHTS BASED ON UNITED STATES FEDERAL SECURITIES
19
LAWS OR ANY UNITED STATES COURT JUDGMENTS AGAINST US AND OUR OFFICERS AND
DIRECTORS.
Our operating company and all of our assets are currently located in the United
Kingdom. In addition, all of our current directors and officers reside outside
of the United States. It may therefore be difficult for investors in the United
States to enforce their legal rights based on the civil liability provisions of
the United States federal securities laws against us in the courts of either the
United States or the United Kingdom and, even if civil judgments are obtained in
United States courts, to enforce such judgments in United Kingdom courts.
FAILURE TO COMPLY WITH THE U.S. FOREIGN CORRUPT PRACTICES ACT OR OTHER
APPLICABLE ANTI-CORRUPTION LEGISLATION COULD RESULT IN FINES, CRIMINAL PENALTIES
AND AN ADVERSE EFFECT ON OUR BUSINESS.
We plan to operate in a number of countries throughout the world, including
countries known to have a reputation for corruption. We are committed to doing
business in accordance with applicable anti-corruption laws. We are subject,
however, to the risk that our affiliated entities or our respective officers,
directors, employees and agents may take action determined to be in violation of
such anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of
1977 and the U.K. Bribery Act of 2010, as well as trade sanctions administered
by the Office of Foreign Assets Control and the U.S. Department of Commerce. Any
such violation could result in substantial fines, sanctions, civil and/or
criminal penalties, curtailment of operations in certain jurisdictions, and
might adversely affect our results of operations. In addition, actual or alleged
violations could damage our reputation and ability to do business.
RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES
OUR BOARD OF DIRECTORS DOES NOT INTEND TO DECLARE OR PAY ANY DIVIDENDS TO OUR
STOCKHOLDERS IN THE FORESEEABLE FUTURE.
The declaration, payment and amount of any future dividends will be made at the
discretion of our board of directors, and will depend upon, among other things,
the results of our operations, cash flows and financial condition, operating and
capital requirements, and other factors the board of directors considers
relevant. There is no plan to pay dividends in the foreseeable future, and if
dividends are paid, there can be no assurance with respect to the amount of any
such dividend.
NEVADA LAW AND OUR ARTICLES OF INCORPORATION AUTHORIZE US TO ISSUE SHARES OF
STOCK, WHICH SHARES MAY CAUSE SUBSTANTIAL DILUTION TO OUR EXISTING STOCKHOLDERS
AND/OR HAVE RIGHTS AND PREFERENCES GREATER THAN OUR COMMON STOCK.
Pursuant to our Articles of Incorporation, we currently have 100,000,000 shares
of common stock authorized and 50,000,000 shares of preferred stock authorized.
As of October 13, 2014, we have 60,000,000 shares of common stock issued and
outstanding and no shares of preferred stock issued and outstanding. As a
result, our Board of Directors has the ability to issue a large number of
additional shares of common stock without stockholder approval, which, if
issued, could cause substantial dilution to our existing stockholders. In
addition, we may elect to issue preferred stock or other securities in the
future having rights and preferences greater to our common stock. Pending
approval by a majority of our stockholders, our articles of incorporation will
provide that the Board may designate the rights and preferences of preferred
stock without a vote by the stockholders.
WE EXPECT TO EXPERIENCE VOLATILITY IN OUR STOCK PRICE, WHICH COULD NEGATIVELY
AFFECT SHAREHOLDERS' INVESTMENTS.
The market price for shares of our common stock may be volatile and may
fluctuate based upon a number of factors, including, without limitation,
business performance, news announcements or changes in general market
conditions.
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Other factors, in addition to the those risks included in this section, that may
have a significant impact on the market price of our common stock include, but
are not limited to:
* quality deficiencies in products and services;
* international developments, such as technology mandates, political
developments or changes in economic policies;
* changes in recommendations of securities analysts;
* government regulations, including stock option accounting and tax
regulations;
* energy blackouts;
* acts of terrorism and war;
* widespread illness;
* proprietary rights or patent litigation;
* strategic transactions, such as acquisitions and divestitures; or
* rumors or allegations regarding our financial disclosures or
practices.
In the past, securities class action litigation has often been brought against a
company following periods of volatility in the market price of its securities.
If our stock price is volatile, we may be the target of securities litigation in
the future. Securities litigation could result in substantial costs and divert
management's attention and resources.
Shareholders should also be aware that, according to SEC Release No. 34-29093,
the market for "penny stock," such as our common stock, 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. Our
management is aware of the abuses that have occurred historically in the penny
stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our securities.
The occurrence of these patterns or practices could increase the future
volatility of our share price.
SHARES OF OUR COMMON STOCK THAT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, REGARDLESS OF WHETHER SUCH SHARES ARE RESTRICTED OR
UNRESTRICTED, ARE SUBJECT TO RESALE RESTRICTIONS IMPOSED BY RULE 144, INCLUDING
THOSE SET FORTH IN RULE 144(I) WHICH APPLY TO A "SHELL COMPANY." IN ADDITION,
ANY SHARES OF OUR COMMON STOCK THAT ARE HELD BY AFFILIATES, INCLUDING ANY
RECEIVED IN A REGISTERED OFFERING, WILL BE SUBJECT TO THE RESALE RESTRICTIONS OF
RULE 144(I).
Pursuant to Rule 144 of the Securities Act of 1933, as amended ("Rule 144"), a
"shell company" is defined as a company that has no or nominal operations; and,
either no or nominal assets; assets consisting solely of cash and cash
equivalents; or assets consisting of any amount of cash and cash equivalents and
nominal other assets. As such, we may be deemed a "shell company" pursuant to
Rule 144 prior to the Exchange Transaction, and as such, sales of our securities
pursuant to Rule 144 are not able to be made until a period of at least twelve
months has elapsed from the date on which the filing of the Current Report on
Form 8-K reflecting the Company's change in status to a non-"shell company."
Therefore, any restricted securities we sell in the future or issue to
consultants or employees, in consideration for services rendered or for any
other purpose will have no liquidity until and unless such securities are
registered with the Commission and/or until a year after the date of the filing
of the Current Report on Form 8-K and we have otherwise complied with the other
requirements of Rule 144. As a result, it may be harder for us to fund our
21
operations and pay our employees and consultants with our securities instead of
cash. Furthermore, it will be harder for us to raise funding through the sale of
debt or equity securities unless we agree to register such securities with the
Commission, which could cause us to expend additional resources in the future.
Our previous status as a "shell company" could prevent us from raising
additional funds, engaging employees and consultants, and using our securities
to pay for any acquisitions (although none are currently planned), which could
cause the value of our securities, if any, to decline in value or become
worthless. Lastly, any shares held by affiliates, including shares received in
any registered offering, will be subject to the resale restrictions of Rule
144(i).
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 STOCKHOLDER'S
ABILITY TO BUY AND SELL OUR STOCK.
Our stock is categorized as a "penny stock". The SEC has adopted Rule 15g-9
which generally defines "penny stock" to be any equity security that has a
market price (as defined) less than $5.00 per share or an exercise price of less
than $5.00 per share, subject to certain exceptions. Our securities are covered
by the penny stock rules, 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. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.
FINRA SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'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.
WE MAY NOT QUALIFY TO MEET LISTING STANDARDS TO LIST OUR STOCK ON AN EXCHANGE.
The SEC approved listing standards for companies using reverse mergers to list
on an exchange may limit our ability to become listed on an exchange. We would
be considered a reverse merger company (i.e., an operating company that becomes
an Exchange Act reporting company by combining with a shell Exchange Act
reporting company) that cannot apply to list on NYSE, NYSE Amex or Nasdaq until
our stock has traded for at least one year on the U.S. OTC market, a regulated
foreign exchange or another U.S. national securities market following the filing
with the SEC or other regulatory authority of all required information about the
merger, including audited financials. We would be required to maintain a minimum
22
$4 share price ($2 or $3 for Amex) for at least thirty (30) of the sixty (60)
trading days before our application and the exchange's decision to list. We
would be required to have timely filed all required reports with the SEC (or
other regulatory authority), including at least one annual report with audited
financials for a full fiscal year commencing after filing of the above
information. Although there is an exception for a firm underwritten IPO with
proceeds of at least $40 million, we do not anticipate being in a position to
conduct an IPO in the foreseeable future. In order for the minimum stock price
requirement to not apply, we must satisfy the one year trading requirement and
file at least four (4) annual reports with the SEC after the Exchange
Transaction. To the extent that we cannot qualify for a listing on an exchange,
our ability to raise capital will be diminished.
WE WILL BE REQUIRED TO INCUR SIGNIFICANT COSTS AND REQUIRE SIGNIFICANT
MANAGEMENT RESOURCES TO EVALUATE OUR INTERNAL CONTROL OVER FINANCIAL REPORTING
AS REQUIRED UNDER SECTION 404 OF THE SARBANES-OXLEY ACT, AND ANY FAILURE TO
COMPLY OR ANY ADVERSE RESULT FROM SUCH EVALUATION MAY HAVE AN ADVERSE EFFECT ON
OUR STOCK PRICE.
As a smaller reporting company as defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended, we are required to evaluate our internal
control over financial reporting under Section 404 of the Sarbanes-Oxley Act of
2002 ("Section 404"). Section 404 requires us to include an internal control
report with the Annual Report on Form 10-K. This 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. Failure to comply, or any adverse results
from such evaluation could result in a loss of investor confidence in our
financial reports and have an adverse effect on the trading price of our equity
securities. Management believes that its internal controls and procedures are
currently not effective to detect the inappropriate application of U.S. GAAP
rules. Management realize there are deficiencies in the design or operation of
our internal control that adversely affect our internal controls which
management considers to be material weaknesses including those described below:
i) LACK OF FORMAL POLICIES AND PROCEDURES. The Company utilizes a third
party independent contractor for the preparation of its financial
statements. Although the financial statements and footnotes are
reviewed by our management, we do not have a formal policy to review
significant accounting transactions and the accounting treatment of
such transactions. The third party independent contractor is not
involved in the day to day operations of the Company and may not be
provided information from management on a timely basis to allow for
adequate reporting/consideration of certain transactions.
ii) AUDIT COMMITTEE AND FINANCIAL EXPERT. The Company does not have a
formal audit committee with a financial expert, and thus the Company
lacks the board oversight role within the financial reporting process.
(iii) INSUFFICIENT RESOURCES. The Company has insufficient quantity of
dedicated resources and experienced personnel involved in reviewing
and designing internal controls. As a result, a material misstatement
of the interim and annual financial statements could occur and not be
prevented or detected on a timely basis.
(iv) ENTITY LEVEL RISK ASSESSMENT. The Company did not perform an entity
level risk assessment to evaluate the implication of relevant risks on
financial reporting, including the impact of potential fraud related
risks and the risks related to non- routine transactions, if any, on
internal control over financial reporting. Lack of an entity-level
risk assessment constituted an internal control design deficiency
which resulted in more than a remote likelihood that a material error
would not have been prevented or detected, and constituted a material
weakness.
23
(v) LACK OF PERSONNEL WITH GAAP EXPERIENCE. We lack personnel with formal
training to properly analyze and record complex transactions in
accordance with U.S.
Achieving continued compliance with Section 404 may require us to incur
significant costs and expend significant time and management resources. We
cannot assure you that we will be able to fully comply with Section 404 or that
we and our independent registered public accounting firm would be able to
conclude that our internal control over financial reporting is effective at
fiscal year end. As a result, investors could lose confidence in our reported
financial information, which could have an adverse effect on the trading price
of our securities, as well as subject us to civil or criminal investigations and
penalties.
In addition, our independent registered public accounting firm may not agree
with our management's assessment or conclude that our internal control over
financial reporting is operating effectively.
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 Bylaws contain a provision permitting us to eliminate the personal
liability of our directors to our company and shareholders for damages for
breach of fiduciary duty as a director or officer to the extent provided by
Nevada law. We may also have contractual indemnification obligations under our
employment agreements with our officers. The foregoing indemnification
obligations could result in the Company 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 shareholders against our directors and officers
even though such actions, if successful, might otherwise benefit our company and
shareholders.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our principal executive offices are located at Suite R, Bristol Court,
Martlesham Business Park, IP5 3RY, United Kingdom. The lease for our offices
expires on March 31, 2016 and the annual rent is $9,625.
ITEM 3. LEGAL PROCEEDINGS
We know of no existing or pending legal proceedings against us, nor are we
involved as a plaintiff in any proceeding or pending litigation. There are no
proceedings in which any of our directors, officers or any of their respective
affiliates, or any beneficial stockholder, is an adverse party or has a material
interest adverse to our interest.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
24
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Our stock is listed for trading on the OTCQB marketplace operated by OTC Market
Group, Inc. under the symbol "MDDD." There are no outstanding options or
warrants to purchase.
Fiscal Year - 2014 High Bid Low Bid
------------------ -------- -------
Fourth Quarter $0.75 $0.08
Third Quarter $3.20 $0.25
Second Quarter $6.00 $0.12
First Quarter N/A N/A
Fiscal Year - 2013 High Bid Low Bid
------------------ -------- -------
Fourth Quarter N/A N/A
Third Quarter N/A N/A
Second Quarter N/A N/A
First Quarter N/A N/A
All prices reflect inter-dealer prices without retail mark-up, mark-down or
commission, and may not necessarily reflect actual transactions.
HOLDERS
On October 15, 2014, there were 10 holders of record of our common stock,
excluding any shareholders holding shares in nominee or "street name."
DIVIDENDS
As of the date of this Annual Report, we have not paid any cash dividends to
stockholders. The declaration of any future cash dividend will be at the
discretion of our Board of Directors and will depend upon our earnings, if any,
our capital requirements and financial position, our general economic and other
pertinent conditions. It is our present intention not to pay any cash dividends
in the foreseeable future, but rather to reinvest earnings, if any, into our
business.
RECENT SALES OF UNREGISTERED SECURITIES
On August 4, 2014, we issued a convertible note (the "Note") to JMJ Financial, a
sole proprietorship ("JMJ"), for a loan in the principal amount of Five Hundred
Thousand Dollars ($500,000). JMJ is obligated to fund Seventy Five Thousand
Dollars ($75,000) upon the closing of the Note and additional amounts may be
funded by JMJ up to Four Hundred Twenty Five Thousand Dollars
($425,000).
Pursuant to the terms of the Note, JMJ has the option of converting all or part
of any unpaid amounts due under the Note to shares of our common stock (the
"Conversion Shares") at a conversion price equal to the lesser of $0.07 or 60%
of the lowest trading price for our stock in the twenty five (25) days prior to
the conversion.
25
The issuance of the Note was exempt from the registration provisions of the
federal securities laws pursuant to the exemption provided by Section 4(a)(2) of
the Securities Act and Regulation D, Rule 506 and comparable exemptions for
sales to "accredited" investors under state securities laws based on
representations made by JMJ.
REPURCHASES OF OUR SECURITIES
We have no plans, programs or other arrangements in regards to repurchases of
our common stock.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
None.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements made in this report may constitute "forward-looking
statements on our current expectations and projections about future events".
These forward-looking statements involve known or unknown risks, uncertainties
and other factors that may cause the actual results, performance, or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking
statements. In some cases you can identify forward-looking statements by
terminology such as "may," "should," "potential," "continue," "expects,"
"anticipates," "intends," "plans," "believes," "estimates," and similar
expressions. These statements are based on our current beliefs, expectations,
and assumptions and are subject to a number of risks and uncertainties. Although
we believe that the expectations reflected-in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. These forward-looking statements are made as of the date of
this report, and we assume no obligation to update these forward-looking
statements whether as a result of new information, future events, or otherwise,
other than as required by law. In light of these assumptions, risks, and
uncertainties, the forward-looking events discussed in this report might not
occur and actual results and events may vary significantly from those discussed
in the forward-looking statements.
You should read the following plan of operation together with our audited
financial statements and related notes appearing elsewhere in this Annual Report
on Form 10-K. This plan of operation contains forward-looking statements that
involve risks, uncertainties, and assumptions. The actual results may differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including, but not limited to, those presented under
"Risk Factors" or elsewhere in this Annual Report on Form 10-K.
OVERVIEW
We are a development stage company that was incorporated under the laws of the
State of Nevada on May 4, 2010 under the name "Advanced Cellular, Inc." with an
initial focus on developing and commercializing a performance management system
to be used by cellular network operators.
26
On February 20, 2013, we effected a 5 for 1 forward stock split of all of its
issued and outstanding shares of common stock. On October 28, 2013, upon
approval from the Financial Industry Regulatory Authority ("FINRA"), we effected
a name change to "Makism 3D Corp."
On October 29, 2013, we entered into and consummated a voluntary share exchange
transaction with Umicron Ltd., a private limited company organized under the
laws of England and Wales ("Umicron"), and the shareholders of Umicron ("Selling
Shareholders") pursuant to a Stock Exchange Agreement (the "Exchange Agreement")
by and among the Company, Umicron, and the Selling Shareholders. As a result of
the Exchange Transaction, the Selling Shareholders acquired approximately 50.67%
of our issued and outstanding common stock, Umicron became our wholly-owned
subsidiary, and we acquired the business and operations of Umicron (the
"Exchange Transaction").
Our mission is to design and build the most desirable consumer and professional
level 3D printers. We believe there is enormous scope for innovation within the
design, usability, and engineering of 3D printers, and we have identified a
valuable new market segment, which is the low cost professional market
in-between the high-end consumer market ($3,000) and low-cost professional
market (below $10,000). As of the date of this Annual Report on Form 10-K, we
have generated no revenue.
Our offices are currently located at Suite R, Bristol Court, Martlesham Business
Park, IP5 3RY, United Kingdom. Our telephone number is 011-44-01954-715030.
FINANCIAL CONDITION
As of June 30, 2014, our total assets were $51,951 comprised of cash, prepaid
expenses, equipment and other current assets and our total liabilities were
$63,608, consisting of accounts payable and loan payable to director.
RESULTS OF OPERATIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 2014 AS COMPARED TO JUNE 30, 2013
We have generated no revenues for the fiscal years ended June 30, 2014 and June
30, 2013.
During the fiscal year ended June 30, 2014, we had a net loss of $530,704 versus
a net loss of $0 for the fiscal year ended June 30, 2013. The increase was due
to our starting of operations in the making of a 3D printer. .
Our operating expenses were $530,704 for the fiscal year ended June 30, 2014,
compared to $0, for the fiscal year ended June 30, 2013. Our operating expenses
for the fiscal year ended June 30, 2014 consisted of general and administrative
expenses.
We anticipate our operating expenses will increase as we further implement our
business plan. The increase will be attributable to expenses to implement our
business plan and the professional fees to be incurred in connection with our
continuing as a reporting company under the Securities Exchange Act of 1934.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2014, our total assets were $51,941 comprised only of cash and
our total liabilities were $63,608.
Net cash used in operating activities for the fiscal year ended June 30, 2014
was $396,026 as compared to $0 for fiscal year ended June 30, 2013. Net cash
used in investing activities for the fiscal year ended June 30, 2014 was $28,322
as compared to $0 for the fiscal year ended June 30, 2013. Net cash provided by
27
financing activities for the fiscal year ended June 30, 2014 was $444,805 as
compared to $0 for the fiscal year ended June 30, 2013.
We believe that our cash on hand will not be sufficient to meet our anticipated
cash requirements through the next 12 months. As such, on October 29, 2013, we
entered into a Securities Purchase Agreement (the "Purchase Agreement") and
consummated a closing of a private placement offering (the "Offering") with an
accredited investor (the "Investor") for the issuance and sale of 1,000,000
shares of common stock of the Company (the "Offering Shares") at a purchase
price of $0.60 per share, for an aggregate consideration of $600,000.
We received an additional $40,000 USD to be applied to a future payment should
we achieve certain milestones. Should the milestones not be achieved, this
amount is not required to be refunded.
On August 4, 2014, we entered into a convertible note (the "Note") with JMJ
Financial, a Nevada sole proprietorship ("JMJ") for a long in the principal
amount of $500,000. The purchase price for the Note is $450,000 with an original
issue discount of $50,000. JMJ funded $75,000 upon the closing of the Note and
additional amounts may be funded by JMJ up to $425,000.
We will need additional capital in order to meet our business objectives in the
short term. Our current cash requirements are significant and will be used for
research and development, and marketing, and we anticipate generating losses for
the foreseeable future. In order to execute on our business strategy, we will
require additional working capital, commensurate with the operational needs of
our planned marketing, development and production efforts. Our management
anticipates that we should be able to raise sufficient amounts of working
capital through debt or equity offerings, as may be required to meet our
long-term obligations. However, changes in our operating plans, increased
expenses, acquisitions, or other events, may cause us to seek additional equity
or debt financing in the future. We anticipate continued and additional
development and production expenses. Accordingly, while we do not have any
short-term plans to conduct any other debt or equity financings, we may in the
future use debt and equity financing to fund operations, as we look to expand
our asset base and fund development and production of our products. Any such
equity financings could result in dilution to current shareholders, and the
incurrence of indebtedness would result in increased debt service obligations
and could require us to agree to operating and financial covenants that would
restrict our operations.
There are no assurances that we will be able to raise the required working
capital on terms favorable, or that such working capital will be available on
any terms when needed. Any failure to secure additional financing may force us
to modify our business plan. In addition, we cannot be assured of profitability
in the future.
In addition, the terms of the Purchase Agreement contain certain restrictions on
our ability to engage in financing transactions. Specifically, the Purchase
Agreement contains a right of first refusal for the Investor on any future
financing transactions and requires the approval of the Investor for any debt
financings.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Please see Note 2. Summary of Significant Accounting Policies to the
accompanying financial statements for a discussion of recently issued accounting
pronouncements.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
Makism 3D Corporation
Cambridge, United Kingdom
We have audited the accompanying balance sheets of Makism 3D Corporation ("the
Company") as of June 30, 2014 and 2013 and the related statement of operations,
changes in stockholders' deficit and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. 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 includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Makism 3D Corporation as of
June 30, 2014 and 2013 and the results of their operations and their cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has a working capital deficit and suffered
losses from operation, which raises substantial doubt about its ability to
continue as a going concern. Management's plans regarding those matters are
described in Note 3. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ MALONEBAILEY, LLP
--------------------------------
MALONEBAILEY, LLP
www.malone-bailey.com
Houston, Texas
October 13, 2014
29
Makism 3D Corp.
Balance Sheets
June 30, 2014 June 30, 2013
------------- -------------
ASSETS
Current Assets:
Cash $ 20,457 $ --
Prepaid expenses 4,455
Other current assets 13,435 --
---------- ----------
Total current assets 38,347 --
---------- ----------
Non-current Assets:
Machinery 13,594 --
---------- ----------
Total assets $ 51,941 $ --
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued liabilities $ 33,099 $ --
Loans payable - director 30,509 --
---------- ----------
Total current liabilities 63,608 --
---------- ----------
Total liabilities 63,608 --
---------- ----------
Stockholder's Deficit:
Preferred stock, 50,000,000 shares authorized,
par value $0.0001, no shares issued and outstanding -- --
Common stock, 100,000,000 shares authorized,
par value $0.0001, 60,000,000 shares issued and outstanding 6,000 2,700
Additional paid in capital 513,037 (2,700)
Deficit accumulated during the development stage (530,704) --
---------- ----------
Total stockholders' equity (deficit) (11,667) --
---------- ----------
Total liabilities and stockholders' deficit $ 51,941 $ --
========== ==========
See accompanying notes to the financial statements
30
Makism 3D Corp.
Statements of Operations
Year Ended Year Ended
June 30, 2014 June 30, 2013
------------- -------------
Revenue $ -- $ --
------------ ------------
Expenses:
Operating expenses 530,704 --
------------ ------------
Total expenses 530,704 --
------------ ------------
Loss before income taxes (530,704) --
Provision for Income Taxes -- --
------------ ------------
Net Loss $ (530,704) $ --
============ ============
Basic and Diluted
Loss per Common Share $ (0.00) $ (0.00)
============ ============
Weighted Average number of
Common Shares Outstanding 60,000,000 30,000,000
============ ============
See accompanying notes to the financial statements
31
Makism 3D Corp.
Statement of Stockholders' Deficit
Deficit
Accumulated
Common Stock Additional During the Total
---------------------- Paid in Development Stockholders'
Shares Amount Capital Stage Deficit
------ ------ ------- ----- -------
Balance, June 30, 2012 27,000,000 $ 2,700 $ (2,700) $ -- $ --
Shares issued for consulting services 1,800,000 180 45,459 -- 45,639
Shares issued for cash 1,200,000 120 29,726 -- 29,846
Contributed Services -- -- 75,000 -- 75,000
Shares issued for cash 1,000,000 100 389,900 -- 390,000
Shares issued in reverse merger 29,000,000 2,900 (24,348) -- (21,448)
Net loss -- -- -- (530,704) (530,704)
---------- ------- --------- ---------- ----------
BALANCE JUNE 30, 2014 60,000,000 $ 6,000 $ 513,037 $ (530,704) $ (11,667)
========== ======= ========= ========== ==========
See accompanying notes to the financial statements
32
Makism 3D Corp.
Statements of Cash Flows
Year Ended
----------------------------------
June 30, 2014 June 30, 2013
------------- -------------
OPERATING ACTIVITIES
Net loss $ (530,704) $ --
Non cash items
Consulting fees paid in stock 29,846 --
Amortization 14,728 --
Contbibuted services 75,000
Adjustments To Reconcile Net Loss To
Net Cash Used By Operating Activities
(Increase) decrease in receivables (13,435)
(Increase) decrease in prepaid expenses (4,455) --
Increase (decrease) in accounts payable 32,994 --
---------- ----------
Net cash used by operating activities (396,026) --
---------- ----------
INVESTING ACTIVITIES
Cash paid for purchase of fixed assets (28,322) --
---------- ----------
Net cash used by investing activities (28,322) --
---------- ----------
FINANCING ACTIVITIES
Proceeds from (repayment of) loans - director 9,166 --
Proceeds from the sale of common stock 435,639 --
---------- ----------
Net cash provided by financing activities 444,805 --
---------- ----------
Net Increase (Decrease) in Cash 20,457 --
Cash, Beginning of Period -- --
---------- ----------
Cash, End of Period $ 20,457 $ --
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ -- $ --
========== ==========
Income taxes $ -- $ --
========== ==========
NON-CASH TRANSACTIONS
Reverse merger adjustment $ (21,448) $ --
========== ==========
See accompanying notes to the financial statements
33
Makism 3D Corp.
June 30, 2014
Notes to the Financial Statements
Note 1 - Organization and Operations
Umicron Ltd.
Umicron Ltd. ("Umicron"), was incorporated on December 6, 2012 under the laws of
England and Wales to engage in any lawful business or activity for which
corporations may be organized. Umicron intends to engage in the development and
sale of 3D printers.
On October 29, 2013, Makism 3D bought Umicron for 30,000,000 shares. As a result
of the Exchange Transaction, the Selling Shareholders acquired approximately
50.67% of the companies issued and outstanding common stock in a reverse merger,
Umicron became a wholly-owned subsidiary, and the Registrant acquired the
business and operations of Umicron. In addition, the Company's former officer
and director surrendered 41,000,000 shares. As such, immediately prior to the
Exchange Transaction and after giving effect to the foregoing cancellations and
issuances pursuant to the private placement offering described above, the
Registrant had 70,000,000 shares outstanding. Immediately after the Exchange
Transaction, the Registrant had 60,000,000 shares issued and outstanding.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The Company's financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP").
Use of Estimates and Assumptions
The preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reporting amounts of revenues and
expenses during the reporting period.
The Company's significant estimates and assumptions include the fair value of
financial instruments; income tax rate, income tax provision, deferred tax
assets and valuation allowance of deferred tax assets; the carrying value and
recoverability of long-lived assets, including the values assigned to an
estimated useful lives of website development costs and the assumption that the
Company will be a going concern. Those significant accounting estimates or
assumptions bear the risk of change due to the fact that there are uncertainties
attached to those estimates or assumptions, and certain estimates or assumptions
are difficult to measure or value.
Management bases its estimates on historical experience and on various
assumptions that are believed to be reasonable in relation to the financial
statements taken as a whole under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources.
Management regularly evaluates the key factors and assumptions used to develop
the estimates utilizing currently available information, changes in facts and
circumstances, historical experience and reasonable assumptions. After such
evaluations, if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with maturities of three
months or less at the time of purchase to be cash equivalents.
34
Related Parties
The Company follows subtopic 850-10 of the FASB Accounting Standards
Codification for the identification of related parties and disclosure of related
party transactions. Related parties include principal owners and senior
management of the Company.
Revenue Recognition
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards
Codification for revenue recognition. The Company recognizes revenue when it is
realized or realizable and earned. The Company considers revenue realized or
realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) the product has been shipped or the
services have been rendered to the customer, (iii) the sales price is fixed or
determinable, and (iv) collectability is reasonably assured.
Income Tax Provision
The Company adopted the provisions of paragraph 740-10-25-13 of the FASB
Accounting Standards Codification. The Company had no material adjustments to
its liabilities for unrecognized income tax benefits according to the provisions
of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis
of assets and liabilities are reported in the accompanying consolidated balance
sheets, as well as tax credit carry-backs and carry-forwards. The Company
periodically reviews the recoverability of deferred tax assets recorded on its
consolidated balance sheets and provides valuation allowances as management
deems necessary.
Foreign currency translation
Assets and liabilities of foreign operations are translated into United States
dollar equivalents using the exchange rates in effect at the balance sheet date.
Revenues and expenses are translated using the average exchange rates during
each period. Adjustments resulting from the process of translating foreign
functional currency financial statements into U.S. dollars are included in
accumulated other comprehensive income in common shareholders' equity. Foreign
currency transaction gains and losses are included in current earnings and there
were none for the initial period ended August 31, 2013.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed pursuant to section 260-10-45 of
the FASB Accounting Standards Codification. Basic net income (loss) per common
share is computed by dividing net income (loss) by the weighted average number
of shares of common stock outstanding during the period. Diluted net income
(loss) per common share is computed by dividing net income (loss) by the
weighted average number of shares of common stock and potentially outstanding
shares of common stock during the period to reflect the potential dilution that
could occur from common shares issuable through contingent shares issuance
arrangement, stock options or warrants.
There were no potentially outstanding dilutive shares for the period from
December 6, 2012 (inception) through August 31, 2013.
Recently Issued Accounting Pronouncements
The company has limited operations and is considered in the development stage.
In the year ended June 30, 2014, the Company has elected to early adopt
Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915):
Elimination of Certain Financial Reporting Requirements. The adoption of this
ASU allows the company to remove the inception to date information and all
references to development stage.
Note 3 - Going Concern
The financial statements have been prepared assuming that the Company will
continue as a going concern, which contemplates continuity of operations,
realization of assets, and liquidation of liabilities in the normal course of
business.
35
As reflected in the financial statements, the Company had a deficit accumulated
at June 30, 2014, a net loss and net cash used in operating activities for the
period from December 6, 2012 (inception) through June 30, 2014. These factors
raise substantial doubt about the Company's ability to continue as a going
concern.
While the Company is attempting to commence operations and generate revenues,
the Company's cash position may not be significant enough to support the
Company's daily operations. Management intends to raise additional funds by way
of a public or private offering. Management believes that the actions presently
being taken to further implement its business plan and generate revenues provide
the opportunity for the Company to continue as a going concern. While the
Company believes in the viability of its strategy to increase revenues and in
its ability to raise additional funds, there can be no assurances to that
effect. The ability of the Company to continue as a going concern is dependent
upon the Company's ability to further implement its business plan and generate
revenues.
The financial statements do not include any adjustments related to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
Note 4 - Equipment
Equipment is stated at cost less accumulated depreciation. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets which is 5 years.
Accumulated Net Book
Description Cost Amortization Value
----------- ---- ------------ -----
Equipment $28,322 $ 14,728 $ 13,594
======= ======== ========
Note 5 - Lease commitments
The Company leases an industrial premises for $9,625 per year through March
31.2016. The Company may terminate this agreement starting January 1, 2014 with
three months notice. The Company leases a live/work premises for $2,079 per
month until April 30, 2014. A table of minimum lease payments due is as follows:
Year ended August 31, 2014 $26,257
2015 --
2016 --
-------
$26,257
=======
Note 6 - Due to Director
The balance due to director is unsecures, non-interest bearing and has no
specific terms of repayment.
Note 7 - Stockholders' Equity (Deficit)
Common Stock
On March 11, 2013, the Company issued 1,200,000 shares to two third parties for
services with a total value of $29,846. During the year ended 2014, the Company
sold 1,800,000 shares for total proceeds of $45,639. During 2013, various
stockholders contributed services for the Company valued at $75,000.
On October 29, 2013, the Company issued 29,000,000 shares in exchange for 100%
of the issued and outstanding shares of Umicron Ltd.
36
On October 29, 2013, the Company cancelled 41,000,000 shares.
On October 29, 2013, the Company issued 1,000,000 shares for $350,000 paid up
front and another $250,000 due after the company has designed, manufactured,
sold and delivered 10 3D printers. Should this event occur and the additional
payment is not made, 500,000 of the shares must be returned and canceled. To
date, the Company received an additional $40,000 which will be applied against
the $250,000 due after the Company has achieved this milestone.
Note 8 - Income Tax Provision
Deferred tax assets
At June 30, 2014, the Company had net operating loss ("NOL") carry-forwards for
English income tax purposes of $410,065 that may be offset against future
taxable income. No tax benefit has been reported with respect to these net
operating loss carry-forwards in the accompanying financial statements because
the Company believes that the realization of the Company's net deferred tax
assets of approximately $139,422 was not considered more likely than not and
accordingly, the potential tax benefits of the net loss carry-forwards are fully
offset by a full valuation allowance. Components of deferred tax assets are as
follows:
June 30, 2014
-------------
Net deferred tax assets - Non-current:
Expected income tax benefit from NOL carry-forwards $ 139,422
Less: Valuation allowance (139,422)
---------
Deferred tax assets, net of valuation allowance $ --
=========
Note 9 - Subsequent Event
On August 4, 2014, we issued a convertible note for a loan in the principle
amount of $500,000. The lender is obligated to fund $75,000 upon closing of the
note.
Pursuant to the terms of the note, the lender has the option of converting all
or a part of any unpaid amounts due to shares of common stock at a conversion
price equal to the lesser of $0.07 or 60% of the lowest trading price for our
stock in the twenty five days prior to the conversion.
37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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 (who is our Principal
Executive Officer) and our Chief Financial Officer (who is our Principal
Financial Officer and Principal Accounting Officer), of the effectiveness of the
design of our disclosure controls and procedures (as defined by Exchange Act
Rules 13a-15(e) or 15d-15(e)) as of June 30, 2014 pursuant to Exchange Act Rule
13a-15. Based upon that evaluation, our Principal Executive Officer and
Principal Financial Officer concluded that our disclosure controls and
procedures were not effective as of June 30, 2014 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 (the "SEC") 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
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. Under the supervision and with the participation of our
management, which currently consists of our sole executive officer, we conducted
an evaluation of the effectiveness of our internal control over financial
reporting based on criteria established in the framework in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission ("COSO") and SEC guidance on conducting such assessments.
Our management concluded, as of June 30, 2014, that our internal control over
financial reporting was not effective. Management realized there were
deficiencies in the design or operation of the Company's internal control that
adversely affected the Company's internal controls which management considers to
be material weaknesses.
In performing the above-referenced assessment, management had concluded that as
of June 30, 2014, 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 including those described below:
i) Lack of Formal Policies and Procedures. The Company utilizes a third
party independent contractor for the preparation of its financial statements.
Although the financial statements and footnotes are reviewed by our management,
we do not have a formal policy to review significant accounting transactions and
the accounting treatment of such transactions. The third party independent
contractor is not involved in the day to day operations of the Company and may
not be provided information from management on a timely basis to allow for
adequate reporting/consideration of certain transactions.
ii) Audit Committee and Financial Expert. The Company does not have a
formal audit committee with a financial expert, and thus the Company lacks the
board oversight role within the financial reporting process.
38
(iii) Insufficient Resources. The Company has insufficient quantity of
dedicated resources and experienced personnel involved in reviewing and
designing internal controls. As a result, a material misstatement of the interim
and annual financial statements could occur and not be prevented or detected on
a timely basis.
(iv) Entity Level Risk Assessment. The Company did not perform an entity
level risk assessment to evaluate the implication of relevant risks on financial
reporting, including the impact of potential fraud related risks and the risks
related to non- routine transactions, if any, on internal control over financial
reporting. Lack of an entity-level risk assessment constituted an internal
control design deficiency which resulted in more than a remote likelihood that a
material error would not have been prevented or detected, and constituted a
material weakness.
(v) Lack of Personnel with GAAP Experience. We lack personnel with formal
training to properly analyze and record complex transactions in accordance with
U.S.
Our management feels the weaknesses identified above have not had any material
affect on our financial results. However, we are currently reviewing our
disclosure controls and procedures related to these material weaknesses and
expect to implement changes in the near term, including identifying specific
areas within our governance, accounting and financial reporting processes to add
adequate resources to potentially mitigate these material weaknesses.
Our 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 is 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.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal controls over financial reporting that
occurred during the quarterly period ended June 30, 2014 that have materially
affected, or are reasonably likely to materially affect, our internal controls
over financial reporting. We believe that a control system, no matter how well
designed and operated, cannot provide absolute assurance that the objectives of
the control system are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within any
company have been detected.
ITEM 9B. OTHER INFORMATION
Effective October 14, 2014, the board of directors of the Company removed Karlo
Guray from his position as a member of the board of directors. Mr. Guray was
removed from the board of directors because of his absence and unresponsiveness,
and failure to meet his duties as a director.
There were no specific disagreements with the Company relating to Mr. Guray's
removal, and no correspondence was provided by Mr. Guray concerning the
circumstances surrounding his removal.
39
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Set forth below are our present directors and executive officers. 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. Other than as set forth below, 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.
Name Age Position
---- --- --------
Luke Ruffell 26 Director, President, Chief Executive Officer, Interim
Chief Financial Officer, Chairman of the Board of Directors
Feroz Khan 21 Secretary
Set forth below is a summary description of the principal occupation and
business experience of our directors and executive officers.
LUKE RUFFELL
Mr. Luke Ruffell has been the director of Umicron since December 6, 2012. From
April 18, 2011 through November 29, 2012, Mr. Ruffell was a director of Geoh
Networks Ltd., a company specializing in fiber network solutions, and was also a
director of Geoh Ltd. from January 24, 2011 through April 1, 2012. From May 14,
2009 through January 24, 2011, Mr Ruffell was a director of Taper UK Ltd., a
tobacco company. None of the aforementioned entities are affiliates of the
Company. Mr. Ruffell studied Product Design while attending Ravensbourne
University and Architecture at De Montfort University. Our board of directors
believes that Mr. Ruffell's technical background and experience with emerging
companies will provide an invaluable resource to achieving the business goals of
the Company.
FEROZ KHAN
Mr. Feroz Khan has been the director of Bespoke 3D Ltd., a prototyping company,
since June 29, 2013, and a director of AAKhan & Sons Ltd., a property company,
since May 1, 2010. Mr. Khan studied Product Design while attending Ravensbourne
University.
TERMS OF OFFICE
Our directors are appointed for a one-year term to hold office until the next
annual general meeting of our stockholders or until removed from office in
accordance with our bylaws and the provisions of the Nevada Revised Statutes.
Our directors hold office after the expiration of his or her term until his or
40
her successor is elected and qualified or until he or she resigns or is removed
in accordance with our bylaws and the provisions of the Nevada Revised Statutes.
Our officers are appointed by the Company's Board and hold office until removed
by the Board.
FAMILY RELATIONSHIPS
There are no family relationships between or among any of our directors,
executive officers and incoming directors or executive officers.
COMMITTEES OF THE BOARD
Our Board of Directors held no formal meetings in the prior fiscal year. All
proceedings of the Board of Directors were conducted by resolutions consented to
in writing by the directors and filed with the minutes of the proceedings of the
directors. Such resolutions consented to in writing by the directors entitled to
vote on that resolution at a meeting of the directors are, according to the
Nevada Revised Statutes and the bylaws of our Company, as valid and effective as
if they had been passed at a meeting of the directors duly called and held. We
do not presently have a policy regarding director attendance at meetings.
We do not currently have a standing nominating or compensation committee of the
Board of Directors, or any committee performing similar functions. Our Board of
Directors performs the functions of nominating and compensation committees.
AUDIT COMMITTEE AND FINANCIAL EXPERT
We do not have an audit committee or an audit committee financial expert. Our
corporate financial affairs are simple at this stage of development and each
financial transaction can be viewed by any officer or director at will.
CODE OF ETHICS
We do not currently have a Code of Ethics applicable to our principal executive,
financial and accounting officers.
CONFLICTS OF INTEREST
Since we do not have an audit or compensation committee comprised of independent
directors, the functions that would have been performed by such committees are
performed by our Board of Directors. Thus, there is a potential conflict of
interest in that our directors have the authority to determine issues concerning
management compensation, in essence their own, and audit issues that may affect
management decisions. We are not aware of any other conflicts of interest with
any of our Executives or Directors.
BOARD'S ROLE IN RISK OVERSIGHT
The Board assesses on an ongoing basis the risks faced by the Company. These
risks include financial, technological, competitive, and operational risks. The
Board dedicates time at each of its meetings to review and consider the relevant
risks faced by the Company at that time. In addition, since the Company does not
41
have an Audit Committee, the Board is also responsible for the assessment and
oversight of the Company's financial risk exposures.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 none of
our officers, directors and greater than 10% percent beneficial owners have
failed to comply with all applicable filing requirements, except that the Form 4
filed by Eliyahu Nir on November 12, 2013 was not filed in a timely manner.
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.
NOMINATIONS TO THE BOARD OF DIRECTORS
Our directors take a critical role in guiding our strategic direction and
oversee the management of the Company. Board candidates are considered based
upon various criteria, such as their broad-based business and professional
skills and experiences, a global business and social perspective, concern for
the long-term interests of the stockholders, diversity, and personal integrity
and judgment.
In addition, directors must have time available to devote to Board activities
and to enhance their knowledge in the growing business. Accordingly, we seek to
attract and retain highly qualified directors who have sufficient time to attend
to their substantial duties and responsibilities to the Company.
In carrying out its responsibilities, the Board will consider candidates
suggested by stockholders. If a stockholder wishes to formally place a
candidate's name in nomination, however, he or she must do so in accordance with
the provisions of the Company's Bylaws. Suggestions for candidates to be
evaluated by the proposed directors must be sent to the Board of Directors, c/o
Makism 3D Corp., Suite R, Bristol Court, Martlesham Business Park, IP5 3RY,
United Kingdom.
DIRECTOR NOMINATIONS
As of June 30, 2014, we did not effect any material changes to the procedures by
which our shareholders may recommend nominees to our Board of Directors.
BOARD LEADERSHIP STRUCTURE AND ROLE ON RISK OVERSIGHT
Mr. Luke Ruffell currently serves as our principal executive officer and
director. We determined this leadership structure was appropriate for us due to
our small size and limited operations and resources. The Board of Directors will
continue to evaluate our leadership structure and modify as appropriate based on
the size, resources and operations of the Company. It is anticipated that the
Board of Directors will establish procedures to determine an appropriate role
for the Board of Directors in the Company's risk oversight function.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between our board of directors and the board
of directors or compensation committee of any other company, nor has any
interlocking relationship existed in the past.
42
ITEM 11. EXECUTIVE COMPENSATION
GENERAL PHILOSOPHY
Our Board of Directors is responsible for establishing and administering our
executive and director compensation.
BOARD COMPENSATION
We have no standard arrangement to compensate directors for their services in
their capacity as directors. Directors are not paid for meetings attended.
However, we intend to review and consider future proposals regarding board
compensation. All travel and lodging expenses associated with corporate matters
are reimbursed by us, if and when incurred.
EXECUTIVE COMPENSATION
The following summary compensation table indicates the cash and non-cash
compensation earned from the Company during the fiscal years ended June 30, 2014
and 2013 by our current executive officers.
SUMMARY COMPENSATION TABLE (1)
Non-Equity
Incentive All
Name and Plan Other
Principal Stock Option Compen- Compen-
Position Year Salary Bonus Awards Awards sation sation Totals
------------ ---- ------ ----- ------ ------ ------ ------ ------
Luke 2014
Ruffell 2013 $2,494.26 -- -- -- -- -- $2,494.26
Matthew 2014
Lummis 2013 $1,882.76 -- $32.18 (2) -- -- -- $1,882.76
Feroz Khan 2014
2013 $ 32.18 -- $32.18 (2) -- -- -- $ 64.37
----------
(1) All amounts were converted from pound sterling to US dollars at the
applicable exchange rate.
(2) The stock awards for Mr. Lummis and Mr. Khan refer to their shareholding
value of (pound)20; they both own 20 shares each in Umicron par value
(pound)1. There are a total of 1,000 shares outstanding in Umicron.
None of our executive officers or directors received, nor do we have any
arrangements to pay out, any bonus, stock awards, option awards, non-equity
incentive plan compensation, or non-qualified deferred compensation.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
SEC regulations state that we must disclose information regarding agreements,
plans or arrangements that provide for payments or benefits to our executive
officers in connection with any termination of employment or change in control
of the Company. Please see the section entitled "Employment Agreements" below
43
for a discussion of management compensation in the event of a termination of
employment or change in control of the Company.
OPTION/SAR GRANTS
We do not currently have a stock option plan. No individual grants of stock
options, whether or not in tandem with stock appreciation rights known as SARs
or freestanding SARs, have been made to any executive officer or any director
since our inception; accordingly, no stock options have been granted or
exercised by any of the officers or directors since we were founded.
LONG-TERM INCENTIVE PLANS AND AWARDS
We do not have any long-term incentive plans that provide compensation intended
to serve as incentive for performance. No individual grants or agreements
regarding future payouts under non-stock price-based plans have been made to any
executive officer or any director or any employee or consultant since our
inception; accordingly, no future payouts under non-stock price-based plans or
agreements have been granted or entered into or exercised by our officer or
director or employees or consultants since we were founded.
RETIREMENT PLANS
We do not offer any annuity, pension, or retirement benefits to be paid to any
of our officers, directors, or employees in the event of retirement. There are
also no compensatory plans or arrangements with respect to any individual named
above which results or will result from the resignation, retirement, or any
other termination of employment with our company, or from a change in the
control of our Company.
COMPENSATION COMMITTEE
We do not have a separate Compensation Committee. Instead, our Board of
Directors reviews and approves executive compensation policies and practices,
reviews salaries and bonuses for other officers, administers our stock option
plans and other benefit plans, if any, 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.
EMPLOYMENT ARRANGEMENTS
LUKE RUFFELL
On October 5, 2013, Umicron, our wholly owned subsidiary, entered into an
employment agreement with Luke Ruffell in connection with his service as
Designer for Umicron for an indefinite term. The Company has the right to
terminate Mr. Ruffell's employment upon one months' written notice, or
immediately upon payment to Mr. Ruffell of his basic salary for the notice
period, while Mr. Ruffell may terminate his employment upon two months' notice.
Mr. Ruffell is entitled to receive a salary of (pound)9,430 per year or an
hourly salary of (pound)6.19. Mr. Ruffell also receives the right to a pension
44
contribution from Umicron equal to 1% of his basic salary. Mr. Ruffell is
subject to Umicron's data protection policy and is subject to the
confidentiality provisions of the employment agreement.
FEROZ KHAN
On October 5, 2013, Umicron entered into an employment agreement with Feroz Khan
in connection with his service as Designer for Umicron for an indefinite term.
The Company has the right to terminate Mr. Khan's employment upon one months'
written notice, or immediately upon payment to Mr. Khan of his basic salary for
the notice period, while Mr. Khan may terminate his employment upon two months'
notice. Mr. Khan is entitled to receive a salary of (pound)9,430 per year or an
hourly salary of (pound)6.19. Mr. Khan also receives the right to a pension
contribution from Umicron equal to 1% of his basic salary. Mr. Khan is subject
to Umicron's data protection policy and is subject to the confidentiality
provisions of the employment agreement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDERS MATTERS
The following table sets forth certain information concerning the ownership of
the our common stock by (a) each person who, to the best of our knowledge,
beneficially owned on that date more than 5% of our outstanding common stock,
(b) each of our directors and executive officers, and (c) all current directors
and executive officers as a group. The following table is based upon an
aggregate of 60,000,000 shares of our common stock outstanding as of October 13,
2014.
To our knowledge, except as indicated in the footnotes to this table or pursuant
to applicable community property laws, the persons named in the table have sole
voting and investment power with respect to the shares of common stock
indicated.
Shares Percentage
Beneficially Beneficially
Name and Address of Beneficial Owner (1) Owned Owned (2)
---------------------------------------- ----- ---------
DIRECTORS AND EXECUTIVE OFFICERS
Luke Ruffell - Director, President, Chief Executive Officer, 26,896,552 44.83%
Interim Chief Financial Officer and Chairman of the Board of Directors
Suite R, Bristol Court, Martlesham Business Park, IP5 3RY, United Kingdom
Feroz Khan, Secretary
Suite R, Bristol Court, Martlesham Business Park, IP5 3RY, United Kingdom 103,448 0.17%
ALL OFFICERS AND DIRECTORS AS A GROUP 27,000,000 45.00%
5% SHAREHOLDERS
Luke Ruffell
Suite R, Bristol Court, Martlesham Business Park, IP5 3RY, United Kingdom 26,896,552 44.83%
45
----------
(1) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act. Pursuant to the rules of the SEC, shares of common
stock which an individual or group has a right to acquire within 60 days
pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be beneficially owned and
outstanding for the purpose of computing the percentage ownership of any
other person shown in the table.
(2) Based on 60,000,000 shares of our common stock outstanding.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
TRANSACTIONS WITH RELATED PERSONS
On October, 29, 2013, we entered into and consummated the transactions
contemplated by the Exchange Agreement with Umicron and the shareholders of
Umicron, including Luke Ruffell, Matthew Lummis and Feroz Khan. In accordance
with the terms of Exchange Agreement, we issued 26,896,552 shares of our common
stock to Luke Ruffell, 300,000 shares of our common stock to Matthew Lummis, and
103,448 shares of our common stock to Feroz Khan. In exchange, the Company
received 100% of the issued and outstanding capital stock of Umicron.
On October 5, 2013, Umicron entered into employment contracts with each of
Matthew Lummis, Luke Ruffell and Feroz Khan. Mr. Ruffell is a Director,
President, Chief Executive Officer and Chairman of the Board of Directors of the
Company. Mr. Lummis is the former Chief Financial Officer of the Company and Mr.
Khan is the Secretary of the Company. Pursuant to the employment contracts, they
are each entitled to receive a salary of (pound)9,430 per year or an hourly
salary of (pound)6.19 under their respective employment contracts.
Other than the transactions mentioned above, none of the directors or executive
officers of the Company, nor any person who owned of record or was known to own
beneficially more than 5% of the Company's outstanding shares of its Common
Stock, nor any associate or affiliate of such persons or companies, has any
material interest, direct or indirect, in any transaction that has occurred
during the past fiscal year, or in any proposed transaction, which has
materially affected or will affect the Company.
REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS
We 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
During the year ended June 30, 2014, we did not have any independent directors
on our board. 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
46
established by The New York Stock Exchange, Inc., the NASDAQ National Market,
and the Securities and Exchange Commission.
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 ACCOUNTING FEES AND SERVICES.
AUDIT FEES
The aggregate fees billed during the fiscal year ended June 30, 2013 for
professional services rendered by MaloneBailey, LLP, with respect to the audits
of our 2013 financial statements, as well as their quarterly reviews of our
interim financial statements and services normally provided by the independent
accountant in connection with statutory and regulatory filings or engagements
for these fiscal periods, were as follows:
2013
--------
Audit Fees and Audit Related Fees $ 7,900
Tax
Fees --
All Other
Fees --
--------
TOTAL $ 7,900
========
The aggregate fees billed during the fiscal year ended June 30, 2014 for
professional services rendered by MaloneBailey, LLP, with respect to the audits
of our 2014 financial statements, as well as their quarterly reviews of our
interim financial statements and services normally provided by the independent
accountant in connection with statutory and regulatory filings or engagements
for these fiscal periods, were as follows:
2014
--------
Audit Fees and Audit Related Fees $ 10,000
Tax
Fees --
All Other
Fees --
--------
TOTAL $ 10,000
========
In the above tables, "audit fees" are fees billed by our Company's external
auditor for services provided in auditing our Company's annual financial
statements for the subject year. "Audit-related fees" are fees not included in
47
audit fees that are billed by the auditor for assurance and related services
that are reasonably related to the performance of the audit review of our
company's financial statements. "Tax fees" are fees billed by the auditor for
professional services rendered for tax compliance, tax advice and tax planning.
"All other fees" are fees billed by the auditor for products and services not
included in the foregoing categories.
PRE-APPROVAL POLICIES AND PROCEDURES
We do not have a separately designated Audit Committee. The Board of Directors
pre-approves all services provided by our independent auditors. All of the above
services and fees were reviewed and approved by the Board of Directors either
before or after the respective services were rendered.
48
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibit
Number Description
------ -----------
2.1 Stock Exchange Agreement by and among the Company, Umicron and the
Selling Shareholders, dated October 29, 2013 (incorporated by reference
to our Current Report on Form 8-K filed on November 4, 2013).
3.1 Articles of Incorporation (incorporated by reference to our
Registration Statement on Form S-1 filed on August 27, 2010)
3.2 Bylaws (incorporated by reference to our Registration Statement on Form
S-1 filed on August 27, 2010)
10.1 Employment Contract between Umicron and Luke Ruffell, dated October
5, 2013 (incorporated by reference to our Current Report on Form 8-K
filed on November 4, 2013).
10.2 Employment Contract between Umicron and Feroz Khan, dated October 5,
2013 (incorporated by reference to our Current Report on Form 8-K filed
on November 4, 2013).
10.3 Lease Agreement, dated May 2, 2014, between Umicron Ltd. and Llia Ltd.
(incorporated by reference to our Quarterly Report on Form 10-Q filed
on May 20, 2014).
21 List of Subsidiaries - Umicron Ltd.
31.1* Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2* Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1* Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2* Certification of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
101* Interactive Data Files
----------
* Filed Herewith
49
SIGNATURES
Pursuant to the requirements 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.
MAKISM 3D CORP.
Date: October 14, 2014 By: /s/ Luke Ruffell
-----------------------------------------
Luke Ruffell
President, Chief Executive Officer,
Interim Chief Financial Officer and
Director
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
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/ Luke Ruffell President, Chief Executive Officer October 14, 2014
-------------------------- and Director
Luke Ruffell (Principal Executive Officer)
5
