0001165527-11-000074.txt : 20110425
0001165527-11-000074.hdr.sgml : 20110425
20110124081325
ACCESSION NUMBER: 0001165527-11-000074
CONFORMED SUBMISSION TYPE: 10-K/A
PUBLIC DOCUMENT COUNT: 4
CONFORMED PERIOD OF REPORT: 20091231
FILED AS OF DATE: 20110124
DATE AS OF CHANGE: 20110309
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: SavWatt USA, Inc.
CENTRAL INDEX KEY: 0001385305
STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211]
IRS NUMBER: 331148936
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-52402
FILM NUMBER: 11542623
BUSINESS ADDRESS:
STREET 1: 6801 EASTERN AVENUE
STREET 2: SUITE 203
CITY: BALTIMORE
STATE: MD
ZIP: 21224
BUSINESS PHONE: 866 641 3507
MAIL ADDRESS:
STREET 1: 6801 EASTERN AVENUE
STREET 2: SUITE 203
CITY: BALTIMORE
STATE: MD
ZIP: 21224
FORMER COMPANY:
FORMER CONFORMED NAME: LUDVIK CAPITAL INC
DATE OF NAME CHANGE: 20070112
FORMER COMPANY:
FORMER CONFORMED NAME: LUDVIK CAPITAL LLC
DATE OF NAME CHANGE: 20070105
10-K/A
1
g4764.txt
AMENDMENT NO. 2 TO FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 2 TO
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2009
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 000-52402
SAVWATT USA, INC
(formerly known as Ludvik Capital, Inc.)
(Exact name of registrant as specified in its charter)
Delaware 27-2478133
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
6801 Eastern Avenue, Suite 203, Baltimore, Maryland 21224
(Address of principal executive offices)
(866) 641-3507
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, $.0001 par value
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 by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that he registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [X]
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 the 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. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
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 Act). Yes [X] No [ ]
The aggregate marker 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 second fiscal quarter (June 30, 2009) was
approximately $537,028.
On August 25, 2010, 108,475,175 shares of the Registrant's common stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
TABLE OF CONTENTS
ITEMS PAGE
----- ----
PART I
Item 1. Business 4
Item 1A. Risk Factors 7
Item 2. Properties 21
Item 3. Legal Proceedings 21
Item 4. (Removed and reserved) 21
PART II
Item 5. Market For Common Equity and Related Stockholder Matters and
Issuer Purchases of Equity Securities 21
Item 6. Selected Financial Data 23
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 24
Item 8. Financial Statements 24
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Item 9A. Controls and Procedures 24
Item 9B. Other Information 24
PART III
Item 10. Directors, Executive Officers and Director Independence 26
Item 11. Executive Compensation 28
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 29
Item 13. Certain Relationships and Related Transactions 30
Item 14. Principal Accounting Fees and Services 30
PART IV
Item 15. Exhibits, Financial Statement Schedules 31
2
EXPLANATORY NOTE
This Amendment No. 2 on Form 10-K/A ("Amendment No. 2") amends Amendment
No. 1 to the Annual Report on Form 10-K of SavWatt USA, Inc. ("Company") for the
fiscal year ended December 31, 2009. Amendment No. 1 was filed with the
Securities and Exchange Commission ("SEC") on September 23, 2010. This Amendment
No. 2 is being filed for the purpose of responding to comments received from the
staff of the SEC.
Except as described above, this Amendment No. 2 does not amend any other
information set forth in Amendment No. 1 to our Annual Report on Form 10-K for
the fiscal year ended December 31, 2009. Accordingly, this Amendment No. 2 may
be relied on as the final Annual Report on Form 10-K for the fiscal year ended
December 31, 2009, and should be read in conjunction with the Company's other
filings made with the SEC in 2010. The filing of this Amendment No. 2 is not an
admission that the original Form 10-K or Amendment No. 1 to the original Form
10-K, when filed, included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein not misleading.
CAUTIONARY STATEMENT
This Form 10-K contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Some of the statements
contained in this Form 10-K for SavWatt USA, Inc., formerly known as Ludvik
Capital, Inc. ("Company"), discuss future expectations, contain projections of
results of operation or financial condition or state other "forward-looking"
information. These statements are subject to known and unknown risks,
uncertainties, and other factors that could cause the actual results to differ
materially from those contemplated by the statements. The forward-looking
information is based on various factors and is derived using numerous
assumptions.
Management expresses its expectations, beliefs and projections in good
faith and believes the expectations reflected in these forward-looking
statements are based on reasonable assumptions; however, Management cannot
assure current stockholders or prospective stockholders that these expectations,
beliefs and projections will prove to be correct. Such forward-looking
statements reflect the current views of Management with respect to the Company
and anticipated future events.
Management cautions current stockholders and prospective stockholders that
such forward-looking statements, including, without limitation, those relating
to the Company's future business prospects, demand for its products, revenues,
capital needs, expenses, development and operation costs, wherever they occur in
this Form 10-K, as well as in the documents incorporated by reference herein,
are not guarantees of future performance or results, but are simply estimates
reflecting the best judgment of Management and involve a number of risks and
uncertainties that could cause actual results to differ materially from those
suggested by such forward-looking statements.
Important factors that may cause actual results to differ from projections
include, for example:
* the success or failure of management's efforts to implement their
business strategy;
* the ability of the Company to raise sufficient capital to meet
operating requirements;
* the uncertainty of consumer demand for our products, services and
technologies;
* the ability of the Company to protect its intellectual property
rights;
* the ability of the Company to compete with major established
companies;
* the effect of changing economic conditions;
* the ability of the Company to attract and retain quality employees;
* the current global recession and financial uncertainty; and
* other risks which may be described in future filings with the SEC.
Words such as "anticipates," "expects," "intends," "plans," "believes,"
"seeks," "estimates," and variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are not
guarantees of future performance and are subject to certain risks, uncertainties
and assumptions that are difficult to predict. Therefore, actual results and
outcomes may differ materially from what is expressed or forecasted in any such
forward-looking statements. Unless required by law, the Company undertakes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
3
FOREWORD
The Company was incorporated on October 20, 2006, under the name of Ludvik
Capital, Inc. We changed our name to SavWatt USA, Inc. on April 5, 2010. On
January 12, 2007, we filed a Form 10 registration statement under section 12(g)
of the Securities Exchange Act of 1934, as amended ("Exchange Act"). As a
consequence of filing our Form 10, we became subject to the periodic reporting
requirements of the Exchange Act and were required to file Annual Reports of
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy
Statements pursuant to Regulation 14A and Schedule 14C Information Statements
pursuant to the Exchange Act.
Our prior management filed numerous Form 8-K Current Reports, but failed to
file the requisite Annual Reports on Form 10-K for the fiscal years ended
December 31, 2006, 2007, 2008 and 2009. In addition, our prior management failed
to file Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30
and September 30, 2007, for the quarters ended March 31, June 30 and September
30, 2008, for the quarters ended March 31, June 30 and September 30, 2009, and
for the quarter ended March 31, 2010.
As a result of prior management's failure to file the above described
periodic reports, our common stock is not eligible for quotation on the
Over-the-Counter Bulletin Board. Instead our common stock is quoted on the "Pink
Sheets." Our management is intent on taking all steps necessary to have our
common stock quoted on the Over-the-Counter Bulletin Board and has previously
filed the Form 10-K Annual Report for the Fiscal Years Ended December 31, 2006,
2007 AND 2008, and the Form 10-Q Quarterly Reports for 2007, 2008 and 2009. Our
management is filing this Form 10-K Annual Report for the Fiscal Year Ended
December 31, 2009, and will be filing the delinquent Form 10-Q Quarterly Reports
for the quarters ended March 31 and June 30, 2010. We are also seeking a market
maker to file a Form 211 with FINRA in order for us to obtain a new trading
symbol and have our shares quoted on the Over-the-Counter Bulletin Board.
PART I
ITEM 1. BUSINESS.
HISTORY
SavWatt USA, Inc. ("Company") was incorporated in the State of Delaware
under the name of "Ludvik Capital, Inc." on October 20, 2006. Our name was
change to SavWatt USA, Inc. on April 5, 2010. The Company was originally formed
for the purpose of becoming a successor and survivor corporation by merger with
Patriot Advisors, Inc. and Templar Corporation pursuant to a plan of
reorganization and merger approved by the United States Bankruptcy Court,
District of Maine, Case No. 04-20328. The Company's prior business plan was to
make investments in public and private companies by providing long-term debt and
equity investment capital to fund the growth, acquisitions and recapitalizations
of small and middle-market companies in a variety of industries, primarily
located in the Untied States. Our prior management was not successful in
carrying out its business plan.
CURRENT BUSINESS
The Company underwent a change in control on March 31, 2010, when Sutton
Global Associates, Inc. acquired approximately 50,723,310 shares or 46.8% of our
common stock. Sutton Global Associates, Inc. is controlled by our President,
Isaac H. Sutton. Under the guidance of Mr. Sutton, the Company adopted a new
business plan to capitalize on the largely unaddressed commercial and consumer
market for energy-efficient Light Emitting Diode ("LED") lighting by investing
in product and corporate marketing. With public relations and advertising
throughout the
4
media, a recognized, popular consumer LED brand will be cultivated, spearheading
and establishing a leading market share in the growing energy-efficient light
bulb sector during the next three to five years. We have the exclusive marketing
rights in the United States to sell LED street lighting for Unilumin, a Chinese
company (www.unilumin.com).
LEDs are an unprecedented, innovative type of lighting first introduced
almost half a century ago. Though initially too costly to implement, LED prices
are finally decreasing because of newly developed technology. LEDs are the most
efficient energy-saving devices on the market. Incandescent lighting, the
variety we employ today, can no longer be sold by 2012.
PRODUCTION
SavWatt will be sourcing LED products from factories in the FarEast. These
factories assemble LED bulbs, fixtures and apparatuses based on SavWatt's
specifications and bill of material requirements. UL or ETL certification for
these products and factories are supervised by SavWatt technicians. SavWatt has
plans in the near future to open an office in Shenzen, China to supervise
production schedules, shipment arrangements, samples and quality control
inspections. All factories contracted by SavWatt will go through a quality
control and performance test before becoming a master supplier for SavWatt
products. An agreement which each supplier will protect SavWatt as to use of our
brand, intellectual property and proprietary information to extent that is
enforceable in China.
We are a development stage enterprise and have had nominal operations since
inception.
Our fiscal year end is December 31.
HOW TO CONTACT US
The Company's principal executive offices are located at 6801 Eastern
Avenue, Suite 203, Baltimore, Maryland 21224. Our telephone number is (866)
641-3507.
COMPETITIVE BUSINESS CONDITIONS
The lighting industry is intensely competitive and many of our competitors
are large, well funded companies that have substantially larger staffs,
manufacturing and distribution facilities and financial resources that we have
at the present time. In the LED market, we compete with companies that
manufacture or sell nitride-based LED chips as well as those that sell LED
components. Competitors are offering new blue, green and white LEDs with
aggressive prices and improved performance. These competitors may reduce average
sales prices faster than we are able to reduce costs, and competitive pricing
pressures may accelerate the rate of decline of our average sales prices.
EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS
We purchase our products from overseas sources. As a result, our
international sales and purchases are subject to numerous U.S. and foreign laws
and regulations, including, without limitation, tariffs, trade barriers,
regulations relating to import-export control, technology transfer restrictions,
the International Traffic in Arms Regulation promulgated under the Arms Export
Control Act, the Foreign Corrupt Practices Act and the anti-boycott provisions
of the U.S. Export Administration Act. If we fail to comply with these laws and
regulations, we could be liable for administrative, civil or criminal
liabilities, and in the extreme case, we could be suspended or debarred from
government contracts or our export privileges could be suspended, which could
have a material adverse effect on our business.
International sales and purchases are also subject to a variety of other
risks, including risks arising from currency fluctuations, collection issues and
taxes. Our international sales are subject to variability as our selling prices
become less competitive in countries with currencies that are declining in value
against the U.S. Dollar and more competitive in countries with currencies that
5
are increasing in value against the U.S. Dollar. In addition, our international
purchases can become more expensive if the U.S. Dollar weakens against the
foreign currencies in which we are billed. We have not entered into any foreign
currency derivative financial instruments; however, we may choose to do so in
the future in an effort to manage or hedge our foreign exchange rate risk.
The Company's common stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"). As a result of
such registration, the Company is subject to Regulation 14A of the Exchange Act,
which regulates proxy solicitations. Section 14(a) requires all companies with
securities registered pursuant to Section 12(g) thereof to comply with the rules
and regulations of the Commission regarding proxy solicitations, as outlined in
Regulation 14A. Matters submitted to stockholders of the Company at a special or
annual meeting thereof or pursuant to a written consent will require the Company
to provide its stockholders with the information outlined in Schedules 14A or
14C of Regulation 14; preliminary copies of this information must be submitted
to the Commission at least 10 days prior to the date that definitive copies of
this information are forwarded to stockholders.
The Company is also required to file annual reports on Form 10-K and
quarterly reports on Form 10-Q with the Commission on a regular basis, and will
be required to disclose certain events in a timely manner, (e.g. changes in
corporate control; acquisitions or dispositions of a significant amount of
assets other than in the ordinary course of business; and bankruptcy) in a
Current Report on Form 8-K.
WE WILL BE SUBJECT TO THE REQUIREMENTS OF SECTION 404 OF THE SARBANES-OXLEY
ACT. IF WE ARE UNABLE TO TIMELY COMPLY WITH SECTION 404 OR IF THE COSTS RELATED
TO COMPLIANCE ARE SIGNIFICANT, OUR PROFITABILITY, STOCK PRICE AND RESULTS OF
OPERATIONS AND FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY AFFECTED.
The Company is required to comply with the provisions of Section 404 of the
Sarbanes-Oxley Act of 2002, which requires that we document and test our
internal controls and certify that we are responsible for maintaining an
adequate system of internal control procedures for the 2008 fiscal year. This
section also requires that our independent registered public accounting firm
opine on those internal controls and management's assessment of those controls.
We are currently evaluating our existing controls against the standards adopted
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
During the course of our ongoing evaluation and integration of the internal
controls of our business, we may identify areas requiring improvement, and we
may have to design enhanced processes and controls to address issues identified
through this review (see Item 9A, below for a discussion our internal controls
and procedures).
We believe that the out-of-pocket costs, the diversion of management's
attention from running the day-to-day operations and operational changes caused
by the need to comply with the requirement of Section 404 of the Sarbanes-Oxley
Act could be significant. If the time and costs associated with such compliance
exceed our current expectations, our results of operations and the future
Exchange Act filings of our Company could be materially adversely affected.
Aside from required compliance with federal and state securities laws,
regulations and rules, and federal, state and local tax laws, regulations and
rules, the Company is not aware of any other governmental regulations now in
existence or that may arise in the future that would have a material effect on
the business of the Company.
INTELLECTUAL PROPERTY RIGHTS
The Company presently holds no intellectual property rights. The Company
intends to seek copyright and trademark protection of its trade names and
products. The Company's success and ability to compete are dependent to a degree
on the Company's name and product recognition. Accordingly, the Company will
primarily rely on copyright, trade secret and trademark law to protect its
product and brand names of products or under which the Company conducts its
business. Effective trademark protection may not be available for the Company's
trademarks.
The Company's competitors or others may adopt product or service names
similar to the Company's, thereby impeding the Company's ability to build brand
identity and possibly leading to customer confusion. The Company's inability to
adequately protect its product, brand, trade names and trademarks would have a
6
material adverse effect on the Company's business, financial condition and
operating results. Despite any precautions the Company takes, a third party may
be able to copy or otherwise obtain and use the Company's technology or other
proprietary information without authorization or to develop similar technology
independently.
Policing unauthorized use of the Company's products are made especially
difficult by the global nature of the Internet and the difficulty in controlling
the ultimate destination or security of products or other data. The laws of
other countries may afford the Company little or no effective protection for the
Company's intellectual property.
EMPLOYEES
We currently have two full-time employees, including Michael Haug, our
Chief Executive Officer. We also have seven part-time consultants, including
Isaac H. Sutton, our President. We believe that our relations with our employees
are good. Our employees are not represented by a union or covered by a
collective bargaining agreement.
REPORTS TO SECURITY HOLDERS
The public may view and obtain copies of the Company's reports, as filed
with the Securities and Exchange Commission, at the SEC's Public Reference Room
at 100 F Street, NE, Room 1580, Washington, D.C. 20549. Information on the
Public Reference Room is available by calling the SEC at 1-800-SEC-0330.
Additionally, copies of the Company's reports are available and can be accessed
and downloaded via the internet on the SEC's internet site at
http://www.sec.gov.
ITEM 1A. RISK FACTORS.
Investing in the Company, involves a number of significant risks relating
to our business and investment objective. As a result, there can be no assurance
that we will achieve our investment objective.
BUSINESS RISKS
Business risks are risks that are associated with general business
conditions, the economy, and the operations of the Company. Business risks are
not risks associated with our specific investments or an offering of our
securities.
OUR RESULTS OF OPERATIONS, FINANCIAL CONDITION AND BUSINESS COULD BE HARMED IF
WE WERE UNABLE TO BALANCE CUSTOMER DEMAND AND CAPACITY.
As customer demand for our products changes, the Company must be able to
ramp up or adjust our production capacity to meet demand. We are continually
taking steps to address our manufacturing capacity needs for our products. If we
are not able to increase our capacity or if we increase our capacity too
quickly, our business and results of operations could be adversely impacted. If
we experience delays or unforeseen costs associated with adjusting our capacity
levels, we may not be able to achieve our financial targets.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY THE GLOBAL ECONOMIC DOWNTURN, THE
CONTINUING UNCERTAINTIES IN THE FINANCIAL MARKETS AND OUR, OR OUR CUSTOMERS' OR
SUPPLIERS' ABILITY TO ACCESS THE CAPITAL MARKETS.
The global economy is currently in a pronounced economic downturn. Global
financial markets are continuing to experience disruptions, including severely
diminished liquidity and credit availability, declines in consumer confidence,
declines in economic growth, increases in unemployment rates, and uncertainty
about economic stability. Given these uncertainties, there is no assurance that
there will not be further deterioration in the global economy, the global
financial markets and consumer confidence. We are unable to predict the likely
duration and severity of the current global economic downturn or disruptions in
the financial markets. If economic conditions deteriorate further, our business
and results of operations could be materially and adversely affected.
IF WE FAIL TO EVALUATE, IMPLEMENT AND INTEGRATE STRATEGIC OPPORTUNITIES
SUCCESSFULLY, OUR BUSINESS MAY SUFFER.
7
From time to time, we evaluate strategic opportunities available to us for
product, technology or business acquisitions. If we choose to make acquisitions,
we face certain risks, such as failure of the acquired business to meet our
performance expectations, diversion of management attention, retention of
existing customers of our current and acquired businesses, and difficulty in
integrating the acquired business's operations, personnel and financial and
operating systems into our current business.
We may not be able to adequately address these risks or any other problems
that arise from any future acquisitions. Any failure to successfully evaluate
strategic opportunities and address risks or other problems that arise related
to any acquisition could adversely affect our business, results of operations or
financial condition.
WE FACE SIGNIFICANT CHALLENGES MANAGING OUR GROWTH.
We will transform our business to support a global components and LED
lighting product customer base. In order to manage our growth and change in our
strategy effectively, we must continue to:
* maintain or contract for adequate manufacturing facilities and
equipment to meet customer demand;
* maintain a sufficient supply of raw materials to support our growth;
* expand research and development, sales and marketing, technical
support, distribution
* capabilities and administrative functions;
* expand the skills and capabilities of our current management team;
* add experienced senior level managers; and
* attract and retain qualified employees.
While we intend to focus on managing our costs and expenses during the
extremely challenging economic environment, over the long term, we expect to
invest substantially to support our growth and may have additional unexpected
costs. We may not be able to expand quickly enough to exploit potential market
opportunities.
In connection with our efforts to cost-effectively manage our growth, we
will initially produce our products overseas and will rely on subcontractors for
production capacity, logistics support and certain administrative functions,
such as payroll processing. If these service providers do not perform
effectively, we may not be able to achieve the expected cost savings and may
incur additional costs to correct errors or fulfill customer demand. Depending
on the function involved, such errors may also lead to business disruption,
processing inefficiencies or the loss of or damage to intellectual property
through security breach, or impact employee morale. Our operations may also be
negatively impacted if any of these service providers do not have the financial
capability to withstand the continuing financial downturn.
LITIGATION COULD ADVERSELY AFFECT OUR OPERATING RESULTS AND FINANCIAL CONDITION.
We may be involved in patent or trademark infringement litigation.
Defending against potential litigation will likely require significant attention
and resources and, regardless of the outcome, result in significant legal
expenses, which could adversely affect our results unless covered by insurance
or recovered from third parties. If our defenses are ultimately unsuccessful, or
if we are unable to achieve a favorable resolution, we could be liable for
damage awards that could materially adversely affect our results of operations
and financial condition.
OUR BUSINESS MAY BE IMPAIRED BY CLAIMS THAT WE, OR OUR CUSTOMERS, INFRINGE
INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Vigorous protection and pursuit of intellectual property rights
characterize our industry. These traits have resulted in significant and often
protracted and expensive litigation. Litigation to determine the validity of
patents or claims by third parties of infringement of patents or other
intellectual property rights could result in significant legal expense and
divert the efforts of our technical personnel and management, even if the
litigation results in a determination favorable to us. In the event of an
adverse result in such litigation, we could be required to:
* pay substantial damages;
* indemnify our customers;
* stop the manufacture, use and sale of products found to be infringing;
* incur asset impairment charges;
8
* discontinue the use of processes found to be infringing;
* expend significant resources to develop non-infringing products and
processes; and/or
* obtain a license to use third party technology.
There can be no assurance that third parties will not attempt to assert
infringement claims against us, or our customers, with respect to our products.
In addition, our customers may face infringement claims directed to the
customer's products that incorporate our products, and an adverse result could
impair the customer's demand for our products. We may also promise certain of
our customers that we will indemnify them in the event they are sued by our
competitors for infringement claims directed to the products we supply. Under
these indemnification obligations, we could be responsible for future payments
to resolve infringement claims against them. From time to time we receive
correspondence asserting that our products or processes are or may be infringing
patents or other intellectual property rights of others. If we believe the
assertions may have merit or in other appropriate circumstances, we will take
appropriate steps to seek to obtain a license or to avoid the infringement.
However, we cannot predict whether a license will be available; that we would
find the terms of any license offered acceptable; or that we would be able to
develop an alternative solution. Failure to obtain a necessary license or
develop an alternative solution could cause us to incur substantial liabilities
and costs and to suspend the manufacture of affected products.
In addition to patent protection, we also rely on trade secrets and other
non-patented proprietary information relating to our product development and
manufacturing activities. We try to protect this information through appropriate
efforts to maintain its secrecy, including requiring employees and third parties
to sign confidentiality agreements. We cannot be sure that these efforts will be
successful or that the confidentiality agreements will not be breached. We also
cannot be sure that we would have adequate remedies for any breach of such
agreements or other misappropriation of our trade secrets, or that our trade
secrets and proprietary know-how will not otherwise become known or be
independently discovered by others.
IF WE ARE UNABLE TO EFFECTIVELY DEVELOP, MANAGE AND EXPAND OUR DISTRIBUTION
CHANNELS FOR OUR PRODUCTS, OUR OPERATING RESULTS MAY SUFFER.
We have expanded into new business channels that are different from those
that we have historically operated in as we grow our business and sell LED
lighting products. If we are unable to effectively penetrate these new
distribution channels to ensure our products are reaching the appropriate
customer base, our financial results may be adversely impacted. In addition, if
we successfully penetrate these new distribution channels, we cannot guarantee
that customers will accept our products or that we will be able to manufacture
and deliver them in the time line established by our customers.
IF OUR PRODUCTS FAIL TO PERFORM OR FAIL TO MEET CUSTOMER REQUIREMENTS OR
EXPECTATIONS, WE COULD INCUR SIGNIFICANT ADDITIONAL COSTS, INCLUDING COSTS
ASSOCIATED WITH THE RECALL OF THOSE ITEMS.
The manufacture of our products involves highly complex processes. Our
customers specify quality, performance and reliability standards that we must
meet. If our products do not meet these standards, we may be required to replace
or rework the products. In some cases, our products may contain undetected
defects or flaws that only become evident after shipment. Even if our products
meet standard specifications, our customers may attempt to use our products in
applications they were not designed for or in products that were not designed or
manufactured properly, resulting in product failures and creating customer
satisfaction issues.
If we experience product quality, performance or reliability problems and
defects or failures, we may need to recall our products. These recalls could
result in significant losses due to:
* costs associated with the removal, collection and destruction of the
product recalled;
* payments made to replace recalled product;
* a rise in warranty expense and costs associated with customer support;
* the write down or destruction of existing inventory subject to the
recall;
* lost sales due to the unavailability of product for a period of time;
9
* delays, cancellations or rescheduling of orders for our products; or
* increased product returns.
We also may be the target of product liability lawsuits and could suffer
losses from a significant product liability judgment against us if the use of
our products at issue is determined to have caused injury. A significant product
recall or product liability case could also result in adverse publicity, damage
to our reputation, and a loss of customer confidence in our products.
THE MARKETS IN WHICH WE OPERATE ARE HIGHLY COMPETITIVE AND HAVE EVOLVING
TECHNICAL REQUIREMENTS.
The markets for our products are highly competitive. In the LED market, we
compete with companies that manufacture or sell nitride-based LED chips as well
as those that sell LED components. Competitors are offering new blue, green and
white LEDs with aggressive prices and improved performance. These competitors
may reduce average sales prices faster than we are able to reduce costs, and
competitive pricing pressures may accelerate the rate of decline of our average
sales prices.
AS A RESULT OF OUR CONTINUED EXPANSION IN LED COMPONENTS AND LED LIGHTING
PRODUCTS, OUR CUSTOMERS MAY REDUCE ORDERS.
Through acquisitions and organic growth, we intend to continue to expand in
new markets for LED lighting products. In these new markets, some of our
customers may perceive us as a competitor. In response, our customers may reduce
their orders for our products. This reduction in orders could occur faster than
our sales growth in these new markets, which could adversely affect our
business, results of operations or financial condition.
OUR OPERATING RESULTS ARE SUBSTANTIALLY DEPENDENT ON THE DEVELOPMENT AND
ACCEPTANCE OF NEW PRODUCTS.
Our future success may depend on our ability to develop new and lower cost
solutions for existing and new markets and for customers to accept those
solutions. We must introduce new products in a timely and cost-effective manner,
and we must secure production orders for those products from our customers. The
development of new products is a highly complex process, and we historically
have experienced delays in completing the development and introduction of new
products. The successful development and introduction of these products depends
on a number of factors, including the following:
* achievement of technology breakthroughs required to make commercially
viable devices;
* the accuracy of our predictions for market requirements and evolving
standards;
* acceptance of our new product designs;
* acceptance of new technology in certain markets;
* the availability of qualified research and development personnel;
* our timely completion of product designs and development;
* our ability to expand sales and influence key customers to adopt our
products;
* our ability to develop repeatable processes to manufacture new
products in sufficient
* quantities and at low enough costs for commercial sales;
WE ARE SUBJECT TO RISKS RELATED TO INTERNATIONAL PURCHASES AND SALES.
We purchase our products from overseas sources. As a result, our
international sales and purchases are subject to numerous U.S. and foreign laws
and regulations, including, without limitation, tariffs, trade barriers,
regulations relating to import-export control, technology transfer restrictions,
the International Traffic in Arms Regulation promulgated under the Arms Export
Control Act, the Foreign Corrupt Practices Act and the anti-boycott provisions
of the U.S. Export Administration Act. If we fail to comply with these laws and
regulations, we could be liable for administrative, civil or criminal
liabilities, and in the extreme case, we could be suspended or debarred from
10
government contracts or our export privileges could be suspended, which could
have a material adverse effect on our business.
International sales and purchases are also subject to a variety of other
risks, including risks arising from currency fluctuations, collection issues and
taxes. Our international sales are subject to variability as our selling prices
become less competitive in countries with currencies that are declining in value
against the U.S. Dollar and more competitive in countries with currencies that
are increasing in value against the U.S. Dollar. In addition, our international
purchases can become more expensive if the U.S. Dollar weakens against the
foreign currencies in which we are billed. We have not entered into any foreign
currency derivative financial instruments; however, we may choose to do so in
the future in an effort to manage or hedge our foreign exchange rate risk.
CHANGES IN OUR EFFECTIVE TAX RATE MAY HAVE AN ADVERSE EFFECT ON OUR RESULTS OF
OPERATIONS.
Our future effective tax rates may be adversely affected by a number of
factors including:
* changes in government administrations, such as the Presidency and
Congress of the
* U.S. as well as in the states and countries in which we operate,
including the highly predicted expiration of the so-called "Bush Tax
Cuts;"
* changes in tax laws or interpretation of such tax laws and changes in
generally
* accepted accounting principles;
* the jurisdiction in which profits are determined to be earned and
taxed;
* the resolution of issues arising from tax audits with various
authorities;
* changes in the valuation of our deferred tax assets and liabilities;
* adjustments to estimated taxes upon finalization of various tax
returns;
* increases in expenses not deductible for tax purposes, including
write-offs of
* acquired in-process research and development and impairment of
goodwill
* in connection with acquisitions;
* changes in available tax credits;
* the recognition and measurement of uncertain tax positions;
* the lack of sufficient excess tax benefits (credits) in our additional
paid in capital
* ("APIC") pool in situations where our realized tax deductions for
certain
* stock-based compensation awards (such as non-qualified stock options
and restricted
* stock) are less than those originally anticipated; and
* the repatriation of non-U.S. earnings for which we have not previously
provided for
* U.S. taxes, or any changes in legislation that may result in these
earnings being taxed
* within the U.S., regardless of our decision regarding repatriation of
funds.
For example, current proposals have been made by various U.S. governmental
bodies to change the U.S. tax laws that include, among other things, limiting
U.S. tax deductions for expenses related to un-repatriated foreign-source income
and modifying the U.S. foreign tax credit rules. Although the scope of the
proposed changes is unclear, it is possible that these or other changes in U.S.
tax laws could increase our U.S. income tax liability and adversely affect our
profitability. At this time, we cannot determine the timing that the proposed
changes, if enacted, are to become effective.
Any significant increase in our future effective tax rates could adversely
impact net income for future periods. In addition, the determination of our
income tax provision requires complex estimations, significant judgments and
significant knowledge and experience concerning the applicable tax laws. To the
11
extent our income tax liability materially differs from our income tax
provisions and accruals due to factors, including the above, which were not
anticipated at the time we estimated our tax provision, our net income or cash
flows could be adversely affected.
IN ORDER TO COMPETE, WE MUST ATTRACT, MOTIVATE AND RETAIN KEY EMPLOYEES, AND OUR
FAILURE TO DO SO COULD HARM OUR RESULTS OF OPERATIONS.
In order to compete, we must attract, motivate and retain executives and
other key employees, including those in managerial, technical, sales, marketing
and support positions. Hiring and retaining qualified executives, scientists,
engineers, technical staff and sales personnel are critical to our business, and
competition for experienced employees in our industry can be intense. To help
attract, motivate and retain key employees, we may use stock-based compensation
awards such as non-qualified stock options and restricted stock. If the value of
such stock awards does not appreciate, as measured by the performance of the
price of our common stock, or if our share-based compensation otherwise ceases
to be viewed as a valuable benefit, our ability to attract, retain and motivate
employees could be weakened, which could harm our business and results of
operations.
OUR OPERATIONS IN FOREIGN COUNTRIES, INCLUDING CHINA AND OTHER ASIAN COUNTRIES,
EXPOSE US TO CERTAIN RISKS INHERENT IN DOING BUSINESS INTERNATIONALLY, WHICH MAY
ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS OR FINANCIAL CONDITION.
As a result of our operations, manufacturing facilities and subcontract
arrangements in foreign countries that expose us to certain risks. For example,
fluctuations in exchange rates may affect our revenues, expenses and results of
operations as well as the value of our assets and liabilities as reflected in
our financial statements. We are also subject to other types of risks, including
the following:
* protection of intellectual property and trade secrets;
* tariffs and other barriers;
* timing and availability of export licenses;
* rising labor costs;
* disruptions in the infrastructure of the foreign countries where we
operate;
* difficulties in accounts receivable collections;
* difficulties in staffing and managing international operations;
* the burden of complying with foreign and international laws and
treaties; and
* the burden of complying with and changes in international taxation
policies.
In addition, abrupt political change, terrorist activity and armed conflict
pose a risk of general economic disruption in affected countries, which could
result in an adverse effect on our business and results of operations.
CATASTROPHIC EVENTS MAY DISRUPT OUR BUSINESS.
A disruption or failure of our systems or operations in the event of a
natural disaster or man-made catastrophic event could cause delays in completing
sales, continuing production or performing other critical functions of our
business, especially in the case of a single site for our operations and
assembly. A catastrophic event that results in the destruction or disruption to
our supply chain or any of our critical business or information technology
systems could severely affect our ability to conduct normal business operations
and, as a result, our operating results could be adversely affected.
OUR RESULTS OF OPERATIONS COULD VARY AS A RESULT OF THE METHODS, ESTIMATES AND
JUDGMENTS THAT WE USE IN APPLYING OUR ACCOUNTING POLICIES, INCLUDING CHANGES IN
THE ACCOUNTING REGULATIONS TO BE APPLIED.
The methods, estimates and judgments that we use in applying our accounting
policies have a significant impact on our results of operations. Such methods,
estimates and judgments are, by their nature, subject to substantial risks,
uncertainties and assumptions, and factors may arise over time that lead us to
change our methods, estimates and judgments. Changes in those methods, estimates
and judgments could significantly affect our results of operations.
12
Likewise, our results of operations may be impacted due to changes in the
accounting rules to be applied, such as the increased use of fair value
measurement rules and the potential requirement that U.S. registrants prepare
financial statements in accordance with International Financial Reporting
Standards.
RISK FACTORS RELATED TO OUR COMMON STOCK THERE IS NO LIQUID MARKET FOR OUR
COMMON STOCK.
Our shares are traded Over the Counter and the trading volume has
historically been very low. An active trading market for our shares may not
develop or be sustained. We cannot predict at this time how actively our shares
will trade in the public market or whether the price of our shares in the public
market will reflect our actual financial performance.
OUR COMMON STOCK PRICE HAS FLUCTUATED CONSIDERABLY AND STOCKHOLDERS MAY NOT BE
ABLE RESELL THEIR SHARES AT OR ABOVE THE PRICE AT WHICH SHARES WERE PURCHASED.
The market price of our common stock may fluctuate significantly. From July
2007, the day we began trading publicly as LDVK, until July 31, 2010 our share
prices per share have fluctuated in dramatic fashion. Our share price has
fluctuated in response to various factors. Speculation in the press or
investment community about our strategic position, financial condition, results
of operations, or significant transactions can also cause changes in our stock
price. In particular, speculation around our market opportunities for energy
efficient lighting may have dramatic effects on our stock price, especially as
various government agencies announce their planned investments in energy
efficient technology, including lighting.
OUR COMMON STOCK MAY BE CONSIDERED A "PENNY STOCK" AND MAY BE DIFFICULT TO SELL.
The SEC has adopted regulations which generally define "penny stock" to be
an equity security that has a market price of less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to specific exemptions. The
market price of our common stock has been for much of its trading history since
July 2007, and may continue to be less than $5.00 per share, and therefore may
be designated as a "penny stock" according to SEC rules. This designation
requires any broker or dealer selling these securities to disclose certain
information concerning the transaction, obtain a written agreement from the
purchaser and determine that the purchaser is reasonably suitable to purchase
the securities. These rules may restrict the ability of brokers or dealers to
sell our common stock and may affect the ability of investors to sell their
shares.
COMPLIANCE AND CHANGING REGULATIONS AND PUBLIC DISCLOSURE MAY RESULT IN
ADDITIONAL EXPENSE.
Changing laws, regulations and standards relating to corporate governance
and public disclosure may create uncertainty regarding compliance matters. New
or changed laws, regulations and standards are subject to varying
interpretations in many cases. As a result, their application in practice may
evolve over time. We are committed to maintaining high standards of corporate
governance and public disclosure. Complying with evolving interpretations of new
or changed legal requirements may cause us to incur higher costs as we revise
current practices, policies and procedures, and may divert management time and
attention from the achievement of revenue generating activities to compliance
activities. If our efforts to comply with new or changed laws, regulations and
standards differ from the activities intended by regulatory or governing bodies
due to uncertainties related to practice, our reputation might be harmed which
would could have a significant impact on our stock price and our business. In
addition, the ongoing maintenance of these procedures to be in compliance with
these laws, regulations and standards could result in significant increase in
costs.
OUR PRINCIPAL STOCKHOLDER HAS SIGNIFICANT VOTING POWER AND MAY TAKE ACTIONS THAT
MAY NOT BE IN THE BEST INTERESTS OF ALL OTHER STOCKHOLDERS.
The Company's majority shareholder is Sutton Global Associates, Inc.
("Sutton Global"), which owns approximately 47% of our common stock. Sutton
Global is beneficially owned and controlled by Isaac H. Sutton our Chairman and
13
President. Mr. Sutton has voting and dispositive control of the shares held by
Sutton Global. He may be able to exert significant control over our management
and affairs requiring stockholder approval, including approval of significant
corporate transactions. This concentration of ownership may expedite approvals
of Company decisions, or have the effect of delaying or preventing a change in
control, adversely affect the market price of our common stock, or be in the
best interests of all our stockholders.
YOU COULD BE DILUTED FROM THE ISSUANCE OF ADDITIONAL COMMON STOCK.
As of August 25, 2010, there were 108,475,175 shares of common stock issued
and outstanding and no shares of preferred stock outstanding. We are authorized
to issue up to 2,000,000,000 shares of common stock and 200,000,000 shares of
preferred stock. To the extent of such authorization, our Board of Directors
will have the ability, without seeking stockholder approval, to issue additional
shares of common stock or preferred stock in the future for such consideration
as the Board of Directors may consider sufficient. The issuance of additional
common stock or preferred stock in the future may reduce your proportionate
ownership and voting power.
RISKS RELATED TO OUR COMPANY
OUR RESULTS OF OPERATIONS, FINANCIAL CONDITION AND BUSINESS COULD BE HARMED IF
WE WERE UNABLE TO BALANCE CUSTOMER DEMAND AND CAPACITY.
As customer demand for our products changes, the Company must be able to
ramp up or adjust our production capacity to meet demand. We are continually
taking steps to address our manufacturing capacity needs for our products. If we
are not able to increase our capacity or if we increase our capacity too
quickly, our business and results of operations could be adversely impacted. If
we experience delays or unforeseen costs associated with adjusting our capacity
levels, we may not be able to achieve our financial targets.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY THE GLOBAL ECONOMIC DOWNTURN, THE
CONTINUING UNCERTAINTIES IN THE FINANCIAL MARKETS AND OUR, OR OUR CUSTOMERS' OR
SUPPLIERS' ABILITY TO ACCESS THE CAPITAL MARKETS.
The global economy is currently in a pronounced economic downturn. Global
financial markets are continuing to experience disruptions, including severely
diminished liquidity and credit availability, declines in consumer confidence,
declines in economic growth, increases in unemployment rates, and uncertainty
about economic stability. Given these uncertainties, there is no assurance that
there will not be further deterioration in the global economy, the global
financial markets and consumer confidence. We are unable to predict the likely
duration and severity of the current global economic downturn or disruptions in
the financial markets. If economic conditions deteriorate further, our business
and results of operations could be materially and adversely affected.
IF WE FAIL TO EVALUATE, IMPLEMENT AND INTEGRATE STRATEGIC OPPORTUNITIES
SUCCESSFULLY, OUR BUSINESS MAY SUFFER.
From time to time, we evaluate strategic opportunities available to us for
product, technology or business acquisitions. If we choose to make acquisitions,
we face certain risks, such as failure of the acquired business to meet our
performance expectations, diversion of management attention, retention of
existing customers of our current and acquired businesses, and difficulty in
integrating the acquired business's operations, personnel and financial and
operating systems into our current business.
We may not be able to adequately address these risks or any other problems
that arise from any future acquisitions. Any failure to successfully evaluate
strategic opportunities and address risks or other problems that arise related
to any acquisition could adversely affect our business, results of operations or
financial condition.
14
WE FACE SIGNIFICANT CHALLENGES MANAGING OUR GROWTH.
We will transform our business to support a global components and LED
lighting product customer base. In order to manage our growth and change in our
strategy effectively, we must continue to: o maintain or contract for adequate
manufacturing facilities and equipment to meet customer demand;
* maintain a sufficient supply of raw materials to support our growth;
* expand research and development, sales and marketing, technical
support, distribution
* capabilities and administrative functions;
* expand the skills and capabilities of our current management team;
* add experienced senior level managers; and
* attract and retain qualified employees.
While we intend to focus on managing our costs and expenses during the
extremely challenging economic environment, over the long term, we expect to
invest substantially to support our growth and may have additional unexpected
costs. We may not be able to expand quickly enough to exploit potential market
opportunities.
In connection with our efforts to cost-effectively manage our growth, we
will initially produce our products overseas and will rely on subcontractors for
production capacity, logistics support and certain administrative functions,
such as payroll processing. If these service providers do not perform
effectively, we may not be able to achieve the expected cost savings and may
incur additional costs to correct errors or fulfill customer demand. Depending
on the function involved, such errors may also lead to business disruption,
processing inefficiencies or the loss of or damage to intellectual property
through security breach, or impact employee morale. Our operations may also be
negatively impacted if any of these service providers do not have the financial
capability to withstand the continuing financial downturn.
LITIGATION COULD ADVERSELY AFFECT OUR OPERATING RESULTS AND FINANCIAL CONDITION.
We may be involved in patent or trademark infringement litigation.
Defending against potential litigation will likely require significant attention
and resources and, regardless of the outcome, result in significant legal
expenses, which could adversely affect our results unless covered by insurance
or recovered from third parties. If our defenses are ultimately unsuccessful, or
if we are unable to achieve a favorable resolution, we could be liable for
damage awards that could materially adversely affect our results of operations
and financial condition.
OUR BUSINESS MAY BE IMPAIRED BY CLAIMS THAT WE, OR OUR CUSTOMERS, INFRINGE
INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Vigorous protection and pursuit of intellectual property rights
characterize our industry. These traits have resulted in significant and often
protracted and expensive litigation. Litigation to determine the validity of
patents or claims by third parties of infringement of patents or other
intellectual property rights could result in significant legal expense and
divert the efforts of our technical personnel and management, even if the
litigation results in a determination favorable to us. In the event of an
adverse result in such litigation, we could be required to:
* pay substantial damages;
* indemnify our customers;
* stop the manufacture, use and sale of products found to be infringing;
* incur asset impairment charges;
* discontinue the use of processes found to be infringing;
* expend significant resources to develop non-infringing products and
processes; and/or
* obtain a license to use third party technology.
15
There can be no assurance that third parties will not attempt to assert
infringement claims against us, or our customers, with respect to our products.
In addition, our customers may face infringement claims directed to the
customer's products that incorporate our products, and an adverse result could
impair the customer's demand for our products. We may also promise certain of
our customers that we will indemnify them in the event they are sued by our
competitors for infringement claims directed to the products we supply. Under
these indemnification obligations, we could be responsible for future payments
to resolve infringement claims against them. From time to time we receive
correspondence asserting that our products or processes are or may be infringing
patents or other intellectual property rights of others. If we believe the
assertions may have merit or in other appropriate circumstances, we will take
appropriate steps to seek to obtain a license or to avoid the infringement.
However, we cannot predict whether a license will be available; that we would
find the terms of any license offered acceptable; or that we would be able to
develop an alternative solution. Failure to obtain a necessary license or
develop an alternative solution could cause us to incur substantial liabilities
and costs and to suspend the manufacture of affected products.
In addition to patent protection, we also rely on trade secrets and other
non-patented proprietary information relating to our product development and
manufacturing activities. We try to protect this information through appropriate
efforts to maintain its secrecy, including requiring employees and third parties
to sign confidentiality agreements. We cannot be sure that these efforts will be
successful or that the confidentiality agreements will not be breached. We also
cannot be sure that we would have adequate remedies for any breach of such
agreements or other misappropriation of our trade secrets, or that our trade
secrets and proprietary know-how will not otherwise become known or be
independently discovered by others.
IF WE ARE UNABLE TO EFFECTIVELY DEVELOP, MANAGE AND EXPAND OUR DISTRIBUTION
CHANNELS FOR OUR PRODUCTS, OUR OPERATING RESULTS MAY SUFFER.
We have expanded into new business channels that are different from those
that we have historically operated in as we grow our business and sell LED
lighting products. If we are unable to effectively penetrate these new
distribution channels to ensure our products are reaching the appropriate
customer base, our financial results may be adversely impacted. In addition, if
we successfully penetrate these new distribution channels, we cannot guarantee
that customers will accept our products or that we will be able to manufacture
and deliver them in the time line established by our customers.
IF OUR PRODUCTS FAIL TO PERFORM OR FAIL TO MEET CUSTOMER REQUIREMENTS OR
EXPECTATIONS, WE COULD INCUR SIGNIFICANT ADDITIONAL COSTS, INCLUDING COSTS
ASSOCIATED WITH THE RECALL OF THOSE ITEMS.
The manufacture of our products involves highly complex processes. Our
customers specify quality, performance and reliability standards that we must
meet. If our products do not meet these standards, we may be required to replace
or rework the products. In some cases, our products may contain undetected
defects or flaws that only become evident after shipment. Even if our products
meet standard specifications, our customers may attempt to use our products in
applications they were not designed for or in products that were not designed or
manufactured properly, resulting in product failures and creating customer
satisfaction issues.
If we experience product quality, performance or reliability problems and
defects or failures, we may need to recall our products. These recalls could
result in significant losses due to: o costs associated with the removal,
collection and destruction of the product recalled;
* payments made to replace recalled product;
* a rise in warranty expense and costs associated with customer support;
* the write down or destruction of existing inventory subject to the
recall;
* lost sales due to the unavailability of product for a period of time;
* delays, cancellations or rescheduling of orders for our products; or
* increased product returns.
We also may be the target of product liability lawsuits and could suffer
losses from a significant product liability judgment against us if the use of
our products at issue is determined to have caused injury. A significant product
16
recall or product liability case could also result in adverse publicity, damage
to our reputation, and a loss of customer confidence in our products.
THE MARKETS IN WHICH WE OPERATE ARE HIGHLY COMPETITIVE AND HAVE EVOLVING
TECHNICAL REQUIREMENTS.
The markets for our products are highly competitive. In the LED market, we
compete with companies that manufacture or sell nitride-based LED chips as well
as those that sell LED components. Competitors are offering new blue, green and
white LEDs with aggressive prices and improved performance. These competitors
may reduce average sales prices faster than we are able to reduce costs, and
competitive pricing pressures may accelerate the rate of decline of our average
sales prices.
AS A RESULT OF OUR CONTINUED EXPANSION IN LED COMPONENTS AND LED LIGHTING
PRODUCTS, OUR CUSTOMERS MAY REDUCE ORDERS.
Through acquisitions and organic growth, we intend to continue to expand
in new markets for LED lighting products. In these new markets, some of our
customers may perceive us as a competitor. In response, our customers may reduce
their orders for our products. This reduction in orders could occur faster than
our sales growth in these new markets, which could adversely affect our
business, results of operations or financial condition.
OUR OPERATING RESULTS ARE SUBSTANTIALLY DEPENDENT ON THE DEVELOPMENT AND
ACCEPTANCE OF NEW PRODUCTS.
Our future success may depend on our ability to develop new and lower cost
solutions for existing and new markets and for customers to accept those
solutions. We must introduce new products in a timely and cost-effective manner,
and we must secure production orders for those products from our customers. The
development of new products is a highly complex process, and we historically
have experienced delays in completing the development and introduction of new
products. The successful development and introduction of these products depends
on a number of factors, including the following:
* achievement of technology breakthroughs required to make commercially
viable devices;
* the accuracy of our predictions for market requirements and evolving
standards;
* acceptance of our new product designs;
* acceptance of new technology in certain markets;
* the availability of qualified research and development personnel;
* our timely completion of product designs and development;
* our ability to expand sales and influence key customers to adopt our
products;
* our ability to develop repeatable processes to manufacture new
products in sufficient
* quantities and at low enough costs for commercial sales;
WE ARE SUBJECT TO RISKS RELATED TO INTERNATIONAL PURCHASES AND SALES.
We purchase our products from overseas sources. As a result, our
international sales and purchases are subject to numerous U.S. and foreign laws
and regulations, including, without limitation, tariffs, trade barriers,
regulations relating to import-export control, technology transfer restrictions,
the International Traffic in Arms Regulation promulgated under the Arms Export
Control Act, the Foreign Corrupt Practices Act and the anti-boycott provisions
of the U.S. Export Administration Act. If we fail to comply with these laws and
regulations, we could be liable for administrative, civil or criminal
liabilities, and in the extreme case, we could be suspended or debarred from
government contracts or our export privileges could be suspended, which could
have a material adverse effect on our business.
International sales and purchases are also subject to a variety of other
risks, including risks arising from currency fluctuations, collection issues and
taxes. Our international sales are subject to variability as our selling prices
become less competitive in countries with currencies that are declining in value
against the U.S. Dollar and more competitive in countries with currencies that
17
are increasing in value against the U.S. Dollar. In addition, our international
purchases can become more expensive if the U.S. Dollar weakens against the
foreign currencies in which we are billed. We have not entered into any foreign
currency derivative financial instruments; however, we may choose to do so in
the future in an effort to manage or hedge our foreign exchange rate risk.
CHANGES IN OUR EFFECTIVE TAX RATE MAY HAVE AN ADVERSE EFFECT ON OUR RESULTS OF
OPERATIONS.
Our future effective tax rates may be adversely affected by a number of
factors including: o changes in government administrations, such as the
Presidency and Congress of the
* U.S. as well as in the states and countries in which we operate,
including the highly predicted expiration of the so-called "Bush Tax
Cuts;"
* changes in tax laws or interpretation of such tax laws and changes in
generally
* accepted accounting principles;
* the jurisdiction in which profits are determined to be earned and
taxed;
* the resolution of issues arising from tax audits with various
authorities;
* changes in the valuation of our deferred tax assets and liabilities;
* adjustments to estimated taxes upon finalization of various tax
returns;
* increases in expenses not deductible for tax purposes, including
write-offs of
* acquired in-process research and development and impairment of
goodwill
* in connection with acquisitions;
* changes in available tax credits;
* the recognition and measurement of uncertain tax positions;
* the lack of sufficient excess tax benefits (credits) in our additional
paid in capital
* ("APIC") pool in situations where our realized tax deductions for
certain
* stock-based compensation awards (such as non-qualified stock options
and restricted
* stock) are less than those originally anticipated; and
* the repatriation of non-U.S. earnings for which we have not previously
provided for
* U.S. taxes, or any changes in legislation that may result in these
earnings being taxed
* within the U.S., regardless of our decision regarding repatriation of
funds.
For example, current proposals have been made by various U.S. governmental
bodies to change the U.S. tax laws that include, among other things, limiting
U.S. tax deductions for expenses related to un-repatriated foreign-source income
and modifying the U.S. foreign tax credit rules. Although the scope of the
proposed changes is unclear, it is possible that these or other changes in U.S.
tax laws could increase our U.S. income tax liability and adversely affect our
profitability. At this time, we cannot determine the timing that the proposed
changes, if enacted, are to become effective.
Any significant increase in our future effective tax rates could adversely
impact net income for future periods. In addition, the determination of our
income tax provision requires complex estimations, significant judgments and
significant knowledge and experience concerning the applicable tax laws. To the
extent our income tax liability materially differs from our income tax
provisions and accruals due to factors, including the above, which were not
anticipated at the time we estimated our tax provision, our net income or cash
flows could be adversely affected.
IN ORDER TO COMPETE, WE MUST ATTRACT, MOTIVATE AND RETAIN KEY EMPLOYEES, AND OUR
FAILURE TO DO SO COULD HARM OUR RESULTS OF OPERATIONS.
18
In order to compete, we must attract, motivate and retain executives and
other key employees, including those in managerial, technical, sales, marketing
and support positions. Hiring and retaining qualified executives, scientists,
engineers, technical staff and sales personnel are critical to our business, and
competition for experienced employees in our industry can be intense. To help
attract, motivate and retain key employees, we may use stock-based compensation
awards such as non-qualified stock options and restricted stock. If the value of
such stock awards does not appreciate, as measured by the performance of the
price of our common stock, or if our share-based compensation otherwise ceases
to be viewed as a valuable benefit, our ability to attract, retain and motivate
employees could be weakened, which could harm our business and results of
operations.
OUR OPERATIONS IN FOREIGN COUNTRIES, INCLUDING CHINA AND OTHER ASIAN COUNTRIES,
EXPOSE US TO CERTAIN RISKS INHERENT IN DOING BUSINESS INTERNATIONALLY, WHICH MAY
ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS OR FINANCIAL CONDITION.
As a result of our operations, manufacturing facilities and subcontract
arrangements in foreign countries that expose us to certain risks. For example,
fluctuations in exchange rates may affect our revenues, expenses and results of
operations as well as the value of our assets and liabilities as reflected in
our financial statements. We are also subject to other types of risks, including
the following:
* protection of intellectual property and trade secrets;
* tariffs and other barriers;
* timing and availability of export licenses;
* rising labor costs;
* disruptions in the infrastructure of the foreign countries where we
operate;
* difficulties in accounts receivable collections;
* difficulties in staffing and managing international operations;
* the burden of complying with foreign and international laws and
treaties; and
* the burden of complying with and changes in international taxation
policies.
In addition, abrupt political change, terrorist activity and armed conflict
pose a risk of general economic disruption in affected countries, which could
result in an adverse effect on our business and results of operations.
CATASTROPHIC EVENTS MAY DISRUPT OUR BUSINESS.
A disruption or failure of our systems or operations in the event of a
natural disaster or man-made catastrophic event could cause delays in completing
sales, continuing production or performing other critical functions of our
business, especially in the case of a single site for our operations and
assembly. A catastrophic event that results in the destruction or disruption to
our supply chain or any of our critical business or information technology
systems could severely affect our ability to conduct normal business operations
and, as a result, our operating results could be adversely affected.
OUR RESULTS OF OPERATIONS COULD VARY AS A RESULT OF THE METHODS, ESTIMATES AND
JUDGMENTS THAT WE USE IN APPLYING OUR ACCOUNTING POLICIES, INCLUDING CHANGES IN
THE ACCOUNTING REGULATIONS TO BE APPLIED.
The methods, estimates and judgments that we use in applying our
accounting policies have a significant impact on our results of operations. Such
methods, estimates and judgments are, by their nature, subject to substantial
risks, uncertainties and assumptions, and factors may arise over time that lead
us to change our methods, estimates and judgments. Changes in those methods,
estimates and judgments could significantly affect our results of operations.
Likewise, our results of operations may be impacted due to changes in the
accounting rules to be applied, such as the increased use of fair value
measurement rules and the potential requirement that U.S. registrants prepare
financial statements in accordance with International Financial Reporting
Standards.
19
RISK FACTORS RELATED TO OUR COMMON STOCK
THERE IS NO LIQUID MARKET FOR OUR COMMON STOCK.
Our shares are traded Over the Counter and the trading volume has
historically been very low. An active trading market for our shares may not
develop or be sustained. We cannot predict at this time how actively our shares
will trade in the public market or whether the price of our shares in the public
market will reflect our actual financial performance.
OUR COMMON STOCK PRICE HAS FLUCTUATED CONSIDERABLY AND STOCKHOLDERS MAY NOT BE
ABLE RESELL THEIR SHARES AT OR ABOVE THE PRICE AT WHICH SHARES WERE PURCHASED.
The market price of our common stock may fluctuate significantly. From July
2007, the day we began trading publicly as LDVK, and July 31, 2010, the high and
low price for our common stock has been $11.50 and $0.0035 per share,
respectively. Our share price has fluctuated in response to various factors.
Speculation in the press or investment community about our strategic position,
financial condition, results of operations, or significant transactions can also
cause changes in our stock price. In particular, speculation around our market
opportunities for energy efficient lighting may have dramatic effects on our
stock price, especially as various government agencies announce their planned
investments in energy efficient technology, including lighting.
OUR COMMON STOCK MAY BE CONSIDERED A "PENNY STOCK" AND MAY BE DIFFICULT TO SELL.
The SEC has adopted regulations which generally define "penny stock" to be
an equity security that has a market price of less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to specific exemptions. The
market price of our common stock has been for much of its trading history since
July 2007, and may continue to be less than $5.00 per share, and therefore may
be designated as a "penny stock" according to SEC rules. This designation
requires any broker or dealer selling these securities to disclose certain
information concerning the transaction, obtain a written agreement from the
purchaser and determine that the purchaser is reasonably suitable to purchase
the securities. These rules may restrict the ability of brokers or dealers to
sell our common stock and may affect the ability of investors to sell their
shares.
COMPLIANCE AND CHANGING REGULATIONS AND PUBLIC DISCLOSURE MAY RESULT IN
ADDITIONAL EXPENSE.
Changing laws, regulations and standards relating to corporate governance
and public disclosure may create uncertainty regarding compliance matters. New
or changed laws, regulations and standards are subject to varying
interpretations in many cases. As a result, their application in practice may
evolve over time. We are committed to maintaining high standards of corporate
governance and public disclosure. Complying with evolving interpretations of new
or changed legal requirements may cause us to incur higher costs as we revise
current practices, policies and procedures, and may divert management time and
attention from the achievement of revenue generating activities to compliance
activities. If our efforts to comply with new or changed laws, regulations and
standards differ from the activities intended by regulatory or governing bodies
due to uncertainties related to practice, our reputation might be harmed which
would could have a significant impact on our stock price and our business. In
addition, the ongoing maintenance of these procedures to be in compliance with
these laws, regulations and standards could result in significant increase in
costs.
OUR PRINCIPAL STOCKHOLDER HAS SIGNIFICANT VOTING POWER AND MAY TAKE ACTIONS THAT
MAY NOT BE IN THE BEST INTERESTS OF ALL OTHER STOCKHOLDERS.
The Company's majority shareholder is Sutton Global Associates, Inc.
("Sutton Global"), which owns approximately 47% of our common stock. Sutton
Global is beneficially owned and controlled by Isaac H. Sutton our Chairman and
President. Mr. Sutton has voting and dispositive control of the shares held by
Sutton Global. He may be able to exert significant control over our management
and affairs requiring stockholder approval, including approval of significant
corporate transactions. This concentration of ownership may expedite approvals
20
of Company decisions, or have the effect of delaying or preventing a change in
control, adversely affect the market price of our common stock, or be in the
best interests of all our stockholders.
YOU COULD BE DILUTED FROM THE ISSUANCE OF ADDITIONAL COMMON STOCK.
As of August 25, 2010, there were 108,475,175 shares of common stock issued
and outstanding and no shares of preferred stock outstanding. We are authorized
to issue up to 2,000,000,000 shares of common stock and 200,000,000 shares of
preferred stock. To the extent of such authorization, our Board of Directors
will have the ability, without seeking stockholder approval, to issue additional
shares of common stock or preferred stock in the future for such consideration
as the Board of Directors may consider sufficient. The issuance of additional
common stock or preferred stock in the future may reduce your proportionate
ownership and voting power.
ITEM 2. PROPERTIES.
The Company does not own any real estate.
On July 1, 2010, the Company relocated its principal executive offices from
New York City to 6801 Eastern Avenue, Suite 203, Baltimore, Maryland 21224. Our
new offices contain approximately 2,000 square feet under a written lease for a
term of three years at an annual rent of $23,000.
ITEM. 3 LEGAL PROCEEDINGS.
The Company is not the subject of any pending legal proceedings to the
knowledge of management, nor is there any presently contemplated against the
Company by any federal, state, or local government agency. Further, to the
knowledge of management, no director or executive officer is a party to any
action in which his interest is adverse to the Company.
ITEM 4. (REMOVED AND RESERVED)
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
As of the date of this Annual Report, the Company's Common Stock is quoted
on the Pink Sheets under the symbol "LDVK.PK." The market for the Company's
Common Stock is limited, volatile and sporadic and the price of the Company's
Common Stock could be subject to wide fluctuations in response to quarterly
variations in operating results, news announcements, trading volume, sales of
Common Stock by officers, directors and principal shareholders of the Company,
general market trends, changes in the supply and demand for the Company's
shares, and other factors. Our Common Stock was not traded on any exchange or
quoted on any quotation service in 2006. The following table sets forth the high
and low sales prices for each quarter relating to the Company's Common Stock for
the last two fiscal years. These quotations reflect inter-dealer prices without
retail mark-up, markdown, or commissions, and may not reflect actual
transactions.
21
Fiscal 2007 High Low
----------- ---- ---
First Quarter (1) $ 10.00 $ 5.50
Second Quarter (1) $ 15.00 $ 5.50
Third Quarter (1) $ 6.00 $ .675
Fourth Quarter (1) $ 1.25 $ .080
Fiscal 2008 High Low
----------- ---- ---
First Quarter (1) $ .65 $ .02
Second Quarter (1) $ .40 $ .04
Third Quarter (1) $ .40 $ .04
Fourth Quarter (1) $ .19 $ .01
Fiscal 2009 High Low
----------- ---- ---
First Quarter (2) $ .130 $ .0100
Second Quarter (1) $ .020 $ .0021
Third Quarter (1) $ .015 $ .0023
Fourth Quarter (1) $ .012 $ .0024
----------
(1) This represents the closing bid information for the stock on the Pink
Sheets. The bid and ask quotations represent prices between dealers and do
not include retail markup, markdown or commission. They do not represent
actual transactions and have not been adjusted for stock dividends or
splits.
(2) This represents the closing price for the stock on the Pink Sheets.
Our common stock is considered a "penny stock." The application of the
"penny stock" rules to our common stock could limit the trading and liquidity of
the common stock, adversely affect the market price of our common stock and
increase your transaction costs to sell those shares. The Commission has adopted
regulations which generally define a "penny stock" to be any equity security
that has a market price (as defined) of less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exceptions.
Shareholders should be aware that, according to SEC Release No. 34-29093
dated April 17, 1991, the market for penny stocks has suffered in recent years
from patterns of fraud and abuse. Such patterns include (1) control of the
market for the security by one or a few broker-dealers that are often related to
the promoter or issuer; (2) manipulation of prices through prearranged matching
of purchases and sales and false and misleading press releases; (3) boiler room
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (4) excessive and undisclosed
bid-ask differential and markups by selling broker dealers; and (5) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
occurrence of these patterns or practices could increase the volatility of our
share price.
Our management is aware of the abuses that have occurred historically in
the penny stock market.
HOLDERS
As of August 25, 2010, there were approximately 125 shareholders of record
of the Company's Common Stock.
DIVIDENDS
The Company has not declared any cash dividends with respect to its common
stock or preferred stock during the last two fiscal years and does not intend to
declare dividends in the foreseeable future. There are no material restrictions
22
limiting or that are likely to limit the Company's ability to pay dividends on
its outstanding securities.
RECENT ISSUANCE OF UNREGISTERED SECURITIES
On August 17, 2007, the Company effected a 2:1 forward stock split of its
issued and outstanding shares of common stock. The share numbers below have been
adjusted for such stock split. Since October 20, 2006, the Company has issued
the following common stock without registration under the Securities Act of
1933:
On February 7, 2007 the United States Bankruptcy Court for the District of
Maine entered an order confirming the December 12, 2006 agreement with the
Debtor whereby, there were 40,000,000 (post forward stock split) unrestricted
shares of the Company's Common Stock issued to creditors and plan participants.
On June 19, 2007, the Company issued 24,196 common shares for the
acquisition of CyberSentry. This investment was assessed to have no value.
On July 30, 2007, the Company issued 2,055,710 shares of common stock to
unrelated parties for $10,000 in services.
October 1, 2007, the Company issued 4,325,000 shares of common stock for
$64,875 which was for repayment of advisory fees payable to a related party,
Ludvik Nominees Pty Ltd., an entity controlled by Frank Kristan, who at time of
issuance was the President of the Company.
On October 3, 2007, the Company issued 10,000,000 shares of common stock
for $150,000 which was for repayment of advisory fees payable to a related
party, Ludvik Nominees Pty Ltd.
On January 15, 2008, the Company issued 15,000,000 shares of common stock
for $225,000 which was for repayment of advisory fees payable to a related
party, Ludvik Nominees Pty Ltd.
June 27, 2008, the Company issued 3,069,269 shares of common stock for
$44,375 which was for repayment of advisory fees payable to a related party,
Ludvik Nominees Pty Ltd.
On February 1, 2009, the Company issued 5,000,000 common shares to an
unrelated party, for $50,000 in services.
From May 31, 2010 through July 30, 2010 the Company sold 29,000,000 Common
Shares for $290,000.
The Company did not utilize or engage a principal underwriter in connection
with any of the above securities transactions. The 40,000,000 shares issued on
February 7, 2007, were issued based on a court order issued by the United States
Bankruptcy Court, District of Maine, Case No. 04-20328, issued pursuant to
Section 1145 of the Bankruptcy Code, and, therefore, did not require
registration under Section 5 of the Securities Act of 1933, as amended.
Management believes that, except for the 40,000,000 shares issued pursuant
to the bankruptcy preceding, all of above shares of common stock were issued
pursuant to the exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable.
23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
CAUTIONARY FORWARD - LOOKING STATEMENT
The following discussion should be read in conjunction with our financial
statements and related notes.
Certain matters discussed herein may contain forward-looking statements
that are subject to risks and uncertainties. Such risks and uncertainties
include, but are not limited to, the following:
* the volatile and competitive nature of our industry,
* the uncertainties surrounding the rapidly evolving markets in which we
compete,
* the uncertainties surrounding technological change of the industry,
* our dependence on its intellectual property rights,
* the success of marketing efforts by third parties,
* the changing demands of customers and
* the arrangements with present and future customers and third parties.
Should one or more of these risks or uncertainties materialize or should
any of the underlying assumptions prove incorrect, actual results of current and
future operations may vary materially from those anticipated. See also the
disclosures under "Cautionary Statement" following the Table of Contents in this
Annual Report.
RESULTS OF OPERATIONS - AS OF DECEMBER 31, 2009 AND 2008
There have been limited operations since inception until December 31, 2006.
The Company was formed pursuant to a court order in the United States Bankruptcy
Court, District of Maine in Case No. 04-20328. The Company had no operations and
had $-0- in cash and cash equivalents as of December 31, 2009, 2008, 2007 and
2006. In 2009 and 2008, the Company incurred expenses related to professional
fees and consulting compensation to Ludvik Nominees Pty., Ltd., a company
controlled by our then President, Frank Kirstan.
ITEM 8. FINANCIAL STATEMENTS.
Our financial statements and supplementary data may be found beginning at
Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
On June 2, 2010, the Company engaged Sherb & Co. LLP as its first
certifying auditors. Sherb & Co. is located at 805 Third Avenue, New York, New
York.
ITEM 9A. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Since the Company has securities registered pursuant to Section 12(g) of
the Securities Exchange Act of 1934 ("Exchange Act"), the Company is responsible
for maintaining, and management is responsible for evaluating, the effectiveness
of, disclosure controls and procedures as provided in Rule 13a-15(e) of the
Exchange Act. Item 307 of the SEC's Regulation S-K requires that our principal
executive and principal financial officer evaluate the effectiveness of the
design and operation of our disclosure controls and procedures. The term
"disclosure controls and procedures," as defined in Rules 13a-15(e) under the
Securities and Exchange Act of 1934, as amended ("Exchange Act"), means controls
and other procedures of a company that are designed to ensure that information
required to be disclosed by the company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Securities and Exchange Commission's rules and
forms. Disclosure controls and procedures also include, without limitation,
controls and procedures designed to ensure that information required to be
24
disclosed by a company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the company's management,
including its principal executive and principal financial officers, or persons
performing similar functions, as appropriate, to allow timely decisions
regarding required disclosure. Unfortunately, our prior management, which was in
control of the Company during fiscal year 2009, did not have any such controls
in place during our fiscal year ended December 31, 2009. Therefore, we conclude
that our disclosure controls and procedures were ineffective as of December 31,
2009, as evidenced by, among others things, the late filing of our Exchange Act
reports.
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. A company's internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A
company's internal control over financial reporting includes those policies and
procedures that:
(1) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our
assets;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with U.S. GAAP, and that our receipts and expenditures are being made
only in accordance with the authorization of our management and
directors; and
(3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Unfortunately, our prior management did not evaluate our internal control
over financial reporting as of December 31, 2009, because the Company had no
such internal control over financial reporting. Notwithstanding the Company's
lack of internal control over financial reporting, our prior principal executive
and principal financial officers did not make any such evaluation. Therefore, it
follows that our internal control over financial reporting was ineffective at
the end of our fiscal year ended December 31, 2009.
CHANGES IN INTERNAL CONTROL
No changes to our nonexistent internal control over financial reporting
were made during the fiscal year ended December 31, 2009.
25
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The Company's directors and executive officers, and their ages as of August 16,
2010 are as follows:
Name Period Age Position(s)
---- ------ --- -----------
Frank Kristan 10/20/2006 to 3/31/2010 51 Chairman of the Board of
Directors President and Chief
Executive Officer Secretary
and Treasurer.
Isaac H. Sutton 3/31/2010 to Present 56 Chairman of the Board of
Directors President and
Secretary.
Michael Haug 7/1/2010 to present 43 Chief Executive Officer.
MICHAEL F. HAUG, 43, CHIEF EXECUTIVE OFFICER
As an experienced insurance and financial representative since 1993,
Michael has worked for well known companies such as Liberty Mutual, John
Hancock, and AIG. He also formed his own insurance agencies called Financial
Solutions in 1999 and Z-Group International in 2007. In 2007 Michael became
heavily involved in commercial lighting, working as consultant to Global Green
Works and later AEI lighting. A graduate of The University of Baltimore in 1990
in Business Administration, Michael has always had a passion for businesses to
improve their Leadership in Energy & Environmental Design (LEED). His motivation
and mission in life has been green projects and energy efficient lighting.
Michael is proud to bring lighting education to the forefront. He has helped
municipalities, private enterprises, and schools save money and energy by
increasing their awareness of energy efficient lighting. Michael also has been
affiliated with many LEED programs to stay on top of the ever changing energy
environment. This diversification has helped propel Michael to the top of the
financial and energy lighting work place.
ISAAC H. SUTTON, 56, PRESIDENT AND SOLE DIRECTOR
Mr. Sutton is a media-savvy strategic marketing executive. He combines
in-depth global marketing experience with practical business knowledge. His
experience includes founding positions at Aprica Juvenile Products, Fusen Usagi,
Inc., Exus Networks, Inc., Starinvest Group, Inc., and, presently, GoIP Global,
Inc. His career began at I.S. Sutton & Sons, Inc., an importer of products from
the Far East. In 1978, he managed a major Ronald McDonald import Doll Promotion
for one year overseas at the age of 24. Examples of his innovative marketing
work and vision can be seen in the companies he founded. His goal-driven
accomplishments in Uzbekistan drew upon his considerable aptitudes to
successfully implement a World Bank project designed to assist the country in
increasing its GNP for cotton. Media and information has been Ike's vision and
goal during the past several years. Rooted in the belief that technology can
facilitate supplying knowledge and information throughout the world
inexpensively, GoIP was founded. Based on this premise and the licensing of
various worldwide technologies, GoIP will deliver information and education over
cell phones. From 2001 through 2006, Ike was the CEO of Starinvest Group, Inc.,
a public company elected to be a "Business Development Company," one of less
than 50 in the United States. Mr Sutton earned his Bachelor of Arts degree from
Pace University in New York.
FRANK KRISTAN, 51, FORMER PRESIDENT
Mr. Kristan served as the Company's President and Chief Executive Officer
from October 20, 2006, until March 31, 2010. Mr. Kristan is currently a
part-time consultant to the Company in charge of new business development. Mr.
Kristan is the President of Ludvik Nominees Pty Ltd and was formerly the
President and CEO of Patriot Advisors, Inc. Patriot Advisors provided business
advisory services to investment funds, corporations and individuals. From 1994
26
to 2004, Patriot Advisors managed funds on behalf of private companies,
producing an internal rate of return in excess of 25% per annum during that
period. At the time Mr. Kristan concluded his involvement with the funds, total
assets under management exceeded $50 million. Patriot Advisors had also
performed on guarantees to deliver financing in excess of $ 50 million. Over the
ten year period, Patriot Advisors had focused its business advisory and
management efforts primarily on companies in the technology, telecommunications
and internet related industries. Prior to forming Patriot Advisors, Mr. Kristan
was the Principal and CEO of Kristan Associates, a financial consulting firm
providing business advisory services for the telecommunications and financial
services industries. Mr. Kristan began his career at Affiliated Computer Systems
where he provided computer and operational advisory services to banking and
financial services institutions involved in merger and acquisition transactions.
Mr. Kristan earned his BS in Mathematics from University of Western Australia.
DIRECTORSHIPS
No Director of the Company or person nominated or chosen to become a
Director holds any other directorship in any company with a class of securities
registered pursuant to Section 12 of the 1934 Act or subject to the requirements
of Section 15(d) of such Act or any other company registered as an investment
company under the Investment Company Act of 1940.
EMPLOYMENT CONTRACTS
On July 1, 2010, the Company entered into an employment contract with
Michael Haug, our Chief Executive Officer, for a one year term with a base
salary of $84,000 per year. In addition, the Company agreed to issue 2,000,000
shares of common stock to Mr. Haug as a signing bonus and such shares vest at
the end of the term of the agreement and have not been issued to date. Mr. Haug
will also be entitled to participate in the Company's health care and bonus
plans when implemented but not later than December 31, 2010.
SIGNIFICANT EMPLOYEES
No other significant employees exist.
FAMILY RELATIONSHIPS
There are no family relationships between or among our officers and
directors.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past ten years, no present director, executive officer or person
nominated to become a director or an executive officer of the Company:
(1) was a general partner or executive officer of any business against
which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; or
(4) was found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a Federal or state securities or
commodities law, and the judgment has not been reversed, suspended or
vacated.
27
AUDIT COMMITTEE FINANCIAL EXPERT AND IDENTIFICATION OF AUDIT COMMITTEE
The Company has no separately designated standing audit committee or other
committee performing similar functions. The Board of Directors acts as the audit
committee. None of the directors qualifies as an Audit Committee Financial
Expert.
MATERIAL CHANGES TO THE METHOD BY WHICH THE SHAREHOLDERS MAY RECOMMEND NOMINEES
TO THE BOARD OF DIRECTORS
None.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent of the
Company's Common Stock, to file initial reports of beneficial ownership on Form
3, changes in beneficial ownership on Form 4 and an annual statement of
beneficial ownership on Form 5, with the SEC. Such executive officers, directors
and greater than ten percent shareholders are required by SEC rules to furnish
the Company with copies of all such forms that they have filed. No one on the
Company's management team was delinquent on such filings in 2009.
CODE OF BUSINESS CONDUCT AND ETHICS
The Company has adopted a Code of Business Conduct and Ethics
applicable to its officers, including its principal executive officer, principal
financial officer, principal accounting officer or controller and any other
persons performing similar functions. The Code will be provided free of charge
by the Company to interested parties upon request. Requests should be made in
writing and directed to the Company at the following address: 6801 Eastern
Avenue, Suite 203, Baltimore, Maryland 21224.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the aggregate compensation paid by the
Company to Frank Kristan, who was the only officer or director of the Company
during the periods indicated:
SUMMARY COMPENSATION TABLE
Non-Equity
Incentive Nonqualified All
Name and Plan Deferred Other
Principal Stock Option Compen- Compen- Compen-
Position Year Salary Bonus Awards Awards sation sation sation(1) Totals(1)
----------- ---- ------ ----- ------ ------ ------ ------ --------- ---------
Frank 2009 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $360,000 $360,000
Kristan, 2008 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $360,000 $360,000
President 2007 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $360,000 $360,000
and CEO
----------
(1) Represents consulting fees paid to Ludvik Nominees Pty. Ltd., a company
owned and controlled by Mr. Kristan. For the year ended December 31, 2008
and 2007, respectively, the Company issued 18,069,269 and 14,325,000 shares
to Ludvik Nominees Pty. Ltd. valued at $9,027,708 and $14,468,251, in which
$269,375 and $214,875 was for repayment of advisory fees and $8,756,669 and
$14,253,376 was recorded as stock based compensation.
STOCK OPTIONS AND WARRANTS
There were no stock options or warrants outstanding on December 31, 2009
OPTION/SAR GRANTS TABLE
There were no stock options/SARS granted under the Company's stock option
plans to executive officers and directors during fiscal 2009.
28
AGGREGATE OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
There were no exercises of stock options/SAR by executive officers during
fiscal 2009.
LONG-TERM INCENTIVE PLAN AWARDS
There were no long-term incentive plan awards made during fiscal 2009.
COMPENSATION OF DIRECTORS
The Company has no formal or standard compensation arrangement with the
members of its Board of Directors or with committee members.
REPRICING OPTIONS
During the fiscal year ended December 31, 2009, the Company did not reprice
any stock options.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following tables set forth certain information regarding beneficial
ownership of the Company's capital stock as of August 16, 2010 by (i) each
person who is known by the Company to beneficially own more than five percent of
any class of the Company's capital stock, (ii) each of the Company's directors
and executive officers, and (iii) all directors and executive officers of the
Company as a group.
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
-------------- ---------------- -------------------- --------
Common Stock Isaac H. Sutton (1) 50,723,310 46.8%
Sutton Global Associates, Inc.
475 Park Ave South 30th FL
New York, New York 10016
Common Stock Frank Kristan (2) 8,538,490 7.9%
Ludvik Nominees Pty., Ltd
1220 N Market Street
Wilmington, DE 19901
Common Stock Michael Haug 0 0.00%
6801 Eastern Ave.
Suite 203
Baltimore, Maryland 21224
Common Stock The Expanse Enterprises, LLC (3) 12,000,000 11.60%
an Illinois limited liability
company
918 Knollwood
Buffalo Grove, IL 60089
Common Stock BuzzBahn LLC (4) 12,000,000 11.60%
6800 Jericho Turnpike
Syosset, NY 11791
Common Stock All Executive Officers and 50,723,310 46.80%
Directors as a Group (1 person)
----------
(1) Mr. Sutton has sole voting and dispositive power over these shares since he
owns a majority of the common stock of Sutton Global Associates, Inc.
(2) Mr. Kristan is the controlling member of Lud,vik Nominees Pty., Ltd. and
has sole voting and dispositive power over these shares.
(3) Ryan Goulding has sole voting and dispositive power over these shares as he
has a controlling interest in The Expanse Enterprises, LLC an Illinois
limited liability company.
(4) David Miller has sole voting and dispositive power over these shares as he
is the managing member of BuzzBahn LLC.
29
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE.
Ludvik Nominees, Pty, Ltd. was the exclusive adviser to Company for the
period October 10, 2006 through March 31, 2010. Ludvik Nominees Pty Ltd is 100%
owned by Frank Kristan, our former President and Chief Executive Officer. During
the period from inception to March 31, 2010 Ludvik Nominees was an advisor to
the Company, fees were charged quarterly. A total of $2,017,417 including
interest was billed. $484,250 was converted to 32,394,269 shares and $1,503,167
remains owing.
Mr Isaac H. Sutton the Company's President and Sole Director is also a
shareholder in SavWatt Industries, LLC and a debtor of the Company. Mr Isaac H.
Sutton the Company's President and Sole Director is a beneficial owner in Sutton
Global Associates, Inc and GoIP Global, Inc both companies which have provided
short term loans to the Company. Mr Sutton has entered into a consulting
agreement at $60,000 per annum.
We do not have any independent directors or director committee members.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
INDEPENDENT PUBLIC ACCOUNTANTS
On June 2, 2010, the Company engaged Sherb & Co. LLP, 805 Third Avenue, New
York, New York as its certifying auditors to audit the Company's financial
statements for the fiscal years ended December 31, 2009, 2008, 2007 and 2006.
Prior to such engagement, the Company had not engaged a certifying audit firm.
(1) Audit Fees. For the fiscal years ended December 31, 2009, the Company's
auditors charged us $2,500 for services rendered for the audit of our annual
financial statements.
(2) Audit-Related Fees. For the fiscal year ended December 31, 2009, our
auditors charged us approximately $1,700 for review services for the three
quarters in 2009.
(3) Tax Fees. Our auditors did not provide tax compliance, tax advice, or
tax planning advice for the fiscal year ended December 31, 2009
(4) All Other Fees. None.
(5) Audit Committee's Pre-Approval Policies and Procedures. The Company had
no audit committee during the fiscal year ended December 31, 2009; hence, there
were no pre-approval policies or procedures in effect during such fiscal year.
30
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
See the Exhibts Index below for a list of exhibits attached hereto or
incorporated by reference pursuant to Item 601 of Regulation S-B.
EXHIBIT INDEX
Exhibit Description
------- -----------
14* Code of Business Conduct Ethics
21* Subsidiaries of the Company
31.1** Certification of Principal Executive and Principal Officer
Pursuant to 18 U.S.C. Section 1350
32.1** 906 Certification of Principal Executive and Financial Officer
----------
* Exhibits incorporated herein by reference to Company's Form 10-K for the
fiscal Year Ended December 31, 2006, filed with the Commission on August
17, 2010.
** Filed herewith
31
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this Amendment No. 2 to the Annual Report
on Form 10-K for the fiscal year ended December 31, 2009 to be signed on its
behalf by the undersigned, thereunto duly authorized.
SavWatt USA, Inc.
Dated: January 24, 2011 /s/ Isaac H. Sutton
------------------------------------------
By: Isaac H. Sutton
Its: President and Chief Financial Officer
In accordance with the Securities Exchange Act of 1934, this Amendment No.
2 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2009
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Dated: January 24, 2011 /s/ Isaac H. Sutton
------------------------------------------
By: Isaac H. Sutton
Its: President, Chief Financial Officer
and Director (Principal Executive Officer)
(Principal Financial Officer and
(Principal Accounting Officer)
32
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of SavWatt USA, Inc.
(f/k/a Ludvik Capital, Inc.
(A Development Stage Company):
We have audited the accompanying balance sheets of SavWatt USA, Inc. f/k/a
Ludvik Capital, Inc. (A Development Stage Company) as of December 31, 2009 and
December 31, 2008, and the related statements of operations, stockholders'
deficit, and cash flows for the years ended December 31, 2009 and 2008 and for
the period from inception, October 20, 2006 through December 31, 2009. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
controls over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. 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 SavWatt USA, Inc. f/k/a Ludvik
Capital, Inc. at December 31, 2009 and 2008, and the results of operations and
cash flows from inception, October 20, 2006 through December 31, 2009, in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred significant losses from
operations. These issues raise substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 2. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Sherb & Co., LLP
----------------------------
Certified Public Accountants
New York, New York
August 10, 2010
F-1
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(A Development Stage Company)
BALANCE SHEETS
--------------------------------------------------------------------------------
December 31, December 31,
2009 2008
------------ ------------
ASSETS
TOTAL ASSETS $ -- $ --
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Shareholder loan payable $ 685,750 $ 325,750
Accrued interest - shareholder 429,082 244,646
------------ ------------
TOTAL LIABILITIES 1,114,832 570,396
------------ ------------
STOCKHOLDERS' DEFICIT
Common stock, $0.0001 par value, 100,000,000 shares
authorized, 79,474,175 and 74,474,175 shares issued
and outstanding, respectively 7,947 7,447
Additional paid-in capital 35,256,348 34,856,847
Accumulated deficit during development stage (36,379,127) (35,434,690)
------------ ------------
TOTAL STOCKHOLDERS' DEFICIT (1,114,832) (570,396)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ -- $ --
============ ============
F-2
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
From Inception
For The Year Ended (October 20, 2006)
-------------------------------- through
December 31, December 31, December 31,
2009 2008 2009
------------ ------------ ------------
REVENUES $ -- $ -- $ --
------------ ------------ ------------
EXPENSES
General and administrative -- -- 17,411
Professional fees 410,000 360,000 1,232,600
Stock based compensation 350,001 8,756,668 34,700,044
------------ ------------ ------------
Total Expenses 760,001 9,116,668 35,950,055
------------ ------------ ------------
LOSS FROM OPERATIONS (760,001) (9,116,668) (35,950,055)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest income -- -- 10
Interest expense (184,436) (156,302) (429,082)
------------ ------------ ------------
Total Other Income (Expense) (184,436) (156,302) (429,072)
------------ ------------ ------------
NET LOSS $ (944,437) $ (9,272,970) $(36,379,127)
============ ============ ============
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.012) $ (0.128)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, BASIC AND DILUTED 79,049,517 72,402,038
============ ============
F-3
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
From Inception
For The Year Ended (October 20, 2006)
-------------------------------- through
December 31, December 31, December 31,
2009 2008 2009
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (944,437) $ (9,272,970) $(36,379,127)
Adjustments to reconcile net loss to net
cash used in operating activities:
Stock issued for services 50,000 -- 60,001
Stock based compensation 350,001 8,756,668 35,216,156
Changes in operating assets and liabilities:
Accounts payable -- -- --
Shareholder loan payable 360,000 360,000 810,000
Accrued interest 184,436 156,302 272,780
------------ ------------ ------------
Net cash used in operating activities -- -- (20,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock -- -- 20,000
------------ ------------ ------------
Net cash provided by financing activities -- -- 20,000
------------ ------------ ------------
NET DECREASE IN CASH -- -- --
CASH, BEGINNING OF PERIOD -- -- --
------------ ------------ ------------
CASH, END OF PERIOD $ -- $ -- $ --
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ -- $ -- $ --
============ ============ ============
Income taxes paid $ -- $ -- $ --
============ ============ ============
Stock issued for repayment of shareholder loan $ -- $ 269,375 $ 214,875
============ ============ ============
Subscription receivable $ -- $ -- $ 20,000
============ ============ ============
F-4
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIT
--------------------------------------------------------------------------------
Deficit
Accumulated
Common Stock Additional During Total
--------------------- Paid-in Development Stockholders'
Shares $ Capital Stage Deficit
------ ---- ------- ----- -------
Balance, October 20, 2006 (Inception) -- $ -- $ -- $ -- $ --
Stock issued upon merger in accordance with
Bankruptcy Court order ($.0005 per share) 40,000,000 4,000 16,000 -- 20,000
Net loss for the year ended December 31, 2006 -- -- -- (106,914) (106,914)
---------- ---------- ----------- ------------ ------------
Balance, December 31, 2006 40,000,000 $ 4,000 $ 16,000 $ (106,914) $ (86,914)
Stock issued in connection with acquisition 24,196 2 (2) -- --
Stock issued for services ($5.52 per share) 2,055,710 205 11,349,795 -- 11,350,000
Stock issued to retire debt - Shareholder loans
($1.01 per share) 14,325,000 1,433 14,466,818 -- 14,468,251
Net loss for the year ended December 31, 2007 -- -- -- (26,054,806) (26,054,806)
---------- ---------- ----------- ------------ ------------
Balance, December 31, 2007 56,404,906 $ 5,640 $25,832,611 $(26,161,720) $ (323,469)
Stock issued to retire debt - Shareholder loans
($.52 per share and $.40 per share) 18,069,269 1,807 9,024,236 -- 9,026,043
Net loss for the year ended December 31, 2008 -- -- -- (9,272,970) (9,272,970)
---------- ---------- ----------- ------------ ------------
Balance, December 31, 2008 74,474,175 $ 7,447 $34,856,847 $(35,434,690) $ (570,396)
Stock issued for services ($.80 per share) 5,000,000 500 399,501 -- 400,001
Net loss for the period ended December 31, 2009 -- -- -- (944,437) (944,437)
---------- ---------- ----------- ------------ ------------
Balance, December 31, 2009 79,474,175 $ 7,947 $35,256,348 $(36,379,127) $ (1,114,832)
========== ========== =========== ============ ============
F-5
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(A Development Stage Company)
Notes to Financial Statements
From Inception, October 20, 2006 through December 31, 2009
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Ludvik Capital, Inc. (hereinafter "the Company") was incorporated on October 20,
2006 under the laws of the State of Delaware for the purpose of becoming a
successor corporation by merger with Patriot Advisors, Inc. and Templar
Corporation, pursuant to a plan of reorganization and merger approved by the
United States Bankruptcy Court, District of Maine in Case No. 04-20328 whereby
Ludvik Capital, Inc is the continuing entity.
The Company's business plan consisted of investing in public and private
companies, providing long term equity and debt investment capital to fund growth
and acquisitions and recapitalizations of small and middle market companies in a
variety of industries primarily located in the United States.
Since inception, the Company has had minimal operations and no revenues earned.
On April 5, 2010, the Company amended its articles of incorporation and changed
its name to SavWatt USA, Inc.
SavWatt USA, Inc. ("SavWatt") business plan is to capitalize on the largely
unaddressed commercial and consumer market for energy-efficient LED lighting by
investing in product and corporate marketing. With public relations and
advertising throughout the media, a recognized, popular consumer LED brand will
be cultivated, spearheading and establishing a leading market share in the
growing energy-efficient bulb sector during the next three to five years.
SavWatt has the exclusive marketing rights in the United States to sell LED
street lighting for Unilumin (www.unilumin.com).
The Company is a development stage enterprise.
The Company's year end is December 31.
The Company's corporate headquarters were originally located in Virginia but are
currently located in Baltimore, MD.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in
understanding the accompanying financial statements. The financial statements
and notes are representations of the Company's management, which is responsible
for their integrity and objectivity. These accounting policies conform to
accounting principles generally accepted in the United States of America and
have been consistently applied in the preparation of the financial statements.
Accounting Method
The Company's financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America.
F-6
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(A Development Stage Company)
Notes to Financial Statements
From Inception, October 20, 2006 through December 31, 2009
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Development Stage Activities
The Company has been in the development stage since its formation and has not
realized any revenue from operations. The Company is a shell corporation which
is currently engaged in starting up the business of offering LED lighting for
consumers
Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As reflected in the financial
statements, the Company incurred net losses of $36,379,127 for the period from
inception, October 20, 2006 through December 31, 2009. In addition, the Company
had an accumulated deficit of $36,379,127 at December 31, 2009. Since its
inception, the Company has not generated any revenues and has minimal cash
resources.
These circumstances raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Management's efforts have been directed towards the development and
implementation of a plan to generate sufficient revenues to cover all of its
present and future costs and expenses.
Management is taking steps to address this situation. The Company has determined
that it cannot continue with its business operations as outlined in its original
business plan because of a lack of financial resources; therefore, management
has redirected their focus towards identifying and pursuing options regarding
the development of a new business plan and direction. The Company intends to
explore various business opportunities that have the potential to generate
positive revenue, profits and cash flow in order to financially accommodate the
costs of being a publicly held company. The Company is in the process of raising
capita by implementing its business plan in Led lighting and expects to generate
sufficient revenue by the fourth quarter of 2010 with a positive cash flow.
Until then, the Company the Company will not have the required capital resources
or credit lines available that are sufficient to fund operations.
The Company has minimal operating costs and expenses at the present time due to
its limited business activities. The Company, however, will be required to raise
additional capital over the next twelve months to meet its current
administrative expenses, and it may do so in connection with or in anticipation
of possible acquisition transactions. This financing may take the form of
additional sales of its equity securities and/or loans from its directors. There
is no assurance that additional financing will be available, if required, or on
terms favorable to the Company.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
The accompanying financial statements have been prepared, in accordance with
accounting principles generally accepted in the United States ("U.S. GAAP") and
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "SEC").
F-7
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(A Development Stage Company)
Notes to Financial Statements
From Inception, October 20, 2006 through December 31, 2009
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
short-term debt with original maturities of three months or less to be cash
equivalents.
Fair Value of Financial Instruments
The Company's financial instruments may include cash, subscription receivable,
loans payable and related accrued interest, and accounts payable. All such
instruments are accounted for on a historical cost basis, which, due to the
short maturity of these financial instruments, approximates fair value at
December 31, 2009 and 2008, respectively.
Revenue Recognition
Revenue is recognized when all of the following criteria are met: (1) persuasive
evidence that an arrangement exists; (2) delivery has occurred or services have
been rendered; (3) the seller's price to the buyer is fixed and determinable;
and, (4) collectability is reasonably assured. The Company has not earned any
revenue since inception.
Use of Estimates
The process of preparing financial statements in conformity with accounting
principles generally accepted in the United States of America requires the use
of estimates and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements. Accordingly,
upon settlement, actual results may differ from estimated amounts.
Provision for Taxes
Income taxes are provided based upon the liability method of accounting. Under
this approach, deferred income taxes are recorded to reflect the tax
consequences in future years of differences between the tax basis of assets and
liabilities and their financial reporting amounts at each year-end. A valuation
allowance is recorded against the deferred tax asset if management does not
believe the Company has met the "more likely than not" standard to allow
recognition of such an asset.
Basic and Diluted Earnings (Loss) Per Share
Basic earnings per share is calculated on the weighted effect of all common
shares issued and outstanding, and is calculated by dividing net income
available to common stockholders by the weighted average shares outstanding
during the period. Diluted earnings per share, which is calculated by dividing
net income available to common stockholders by the weighted average number of
common shares used in the basic earnings per share calculation, plus the number
of common shares that would be issued assuming conversion of all potentially
dilutive securities outstanding, is not presented separately as it is
anti-dilutive.
The average number of common shares outstanding from inception through the year
ended December 31, 2009 has been retroactively adjusted for the 2:1 forward
stock split effective August 17, 2007.
Stock Based Compensation - The Company accounts for stock based compensation
transactions with employees under the provisions of ASC Topic No. 718,
"Compensation, Stock Compensation" ("Topic No. 718"). Topic No. 718 requires the
recognition of the fair value of equity-based compensation in net income. The
fair value of the Company's equity instruments are estimated using a
Black-Scholes option valuation model. This model requires the input of highly
subjective assumptions and elections including expected stock price volatility
and the estimated life of each award. In addition, the calculation of
F-8
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(A Development Stage Company)
Notes to Financial Statements
From Inception, October 20, 2006 through December 31, 2009
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
equity-based compensation costs requires that the Company estimate the number of
awards that will be forfeited during the vesting period. The fair value of
equity-based awards granted to employees is amortized over the vesting period of
the award and the Company elected to use the straight-line method for awards
granted after the adoption of Topic No. 718.
The Company accounts for equity based transactions with non-employees under the
provisions of ASC Topic No. 505-50, "Equity-Based Payments to Non-Employees"
("Topic No. 505-50"). Topic No. 505-50 establishes that equity-based payment
transactions with non-employees shall be measured at the fair value of the
consideration received or the fair value of the equity instruments issued, which
ever is more reliably measurable. When the equity instrument is utilized for
measurement the fair value of the equity instrument is estimated using the
Black-Scholes option valuation model. In general, the Company recognizes an
asset or expense in the same manner as if it was to receive cash for the goods
or services instead of paying with or using the equity instrument.
Forward stock split
All references to the Company's outstanding shares, and options, have been
adjusted to give effect to the 2 for 1 forward stock split effective August 17,
2007.
Recently Issued Accounting Pronouncements Affecting the Company The Financial
Accounting Standards Board's ("FASB") Accounting Standards Codification (ASC)
became effective on July 1, 2009. At that date, the ASC became FASB's officially
recognized source of authoritative U.S. generally accepted accounting principles
("GAAP") applicable to all public and non-public non-governmental entities,
superseding existing FASB, American Institute of Certified Public Accountants
("AICPA"), Emerging Issues Task Force ("EITF") and related literature. Rules and
interpretive releases of the SEC under the authority of federal securities laws
are also sources of authoritative GAAP for SEC registrants. All other accounting
literature is considered non-authoritative. The switch to the ASC affects the
way companies refer to U.S. GAAP in financial statements and accounting
policies. Citing particular content in the ASC involves specifying the unique
numeric path to the content through the Topic, Subtopic, Section and Paragraph
structure.
In February 2010, the FASB issued Accounting Standards Update (ASU) No.
2010-08--Technical Corrections to Various Topics. This update's purpose is to
eliminate GAAP inconsistencies, update outdated provisions, and provide needed
clarifications. The adoption of ASU No. 2010-08 will not have a material impact
on the Company's financial statements.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, could have a material
effect on the accompanying financial statements.
NOTE 3 - FAIR VALUE MEASUREMENTS
The Company adopted FASB ASC 820-Fair Value Measurements and Disclosures, for
assets and liabilities measured at fair value on a recurring basis. ASC 820
establishes a common definition for fair value to be applied to existing
generally accepted accounting principles that require the use of fair value
measurements establishes a framework for measuring fair value and expands
disclosure about such fair value measurements. The adoption of ASC 820 did not
have an impact on the Company's financial position or operating results, but did
expand certain disclosures.
ASC 820 defines fair value as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Additionally, ASC 820 requires the use of
F-9
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(A Development Stage Company)
Notes to Financial Statements
From Inception, October 20, 2006 through December 31, 2009
NOTE 3 - FAIR VALUE MEASUREMENTS (continued)
valuation techniques that maximize the use of observable inputs and minimize the
use of unobservable inputs. These inputs are prioritized below:
Level 1: Observable inputs such as quoted market prices in active
markets for identical assets or liabilities
Level 2: Observable market-based inputs or unobservable inputs that are
corroborated by market data
Level 3: Unobservable inputs for which there is little or no market
data, which require the use of the reporting entity's own
assumptions.
The Company did not have any Level 1, Level 2 or Level 3 assets or liabilities
as of December 31, 2009 and 2008.
The Company discloses the estimated fair values for all financial instruments
for which it is practicable to estimate fair value. As of December 31, 2006, the
fair value short-term financial instruments including subscriptions receivable,
loans payable, accounts payable and accrued expenses, approximates book value
due to their short-term duration.
In addition, the Financial Accounting Standards Board ("FASB") issued, "The Fair
Value Option for Financial Assets and Financial Liabilities," effective for
January 1, 2008. This guidance expands opportunities to use fair value
measurements in financial reporting and permits entities to choose to measure
many financial instruments and certain other items at fair value. The Company
did not elect the fair value option for any of its qualifying financial
instruments
NOTE 4 - INCOME TAXES
At December 31, 2009 and December 31, 2008 the Company had a deferred tax asset
of approximately $431,000 and $224,000, respectively, calculated at a combined
federal and state expected rate of 38%. As management of the Company cannot
determine that it is more likely than not that the Company will realize the
benefit of the net deferred tax asset, a valuation allowance equal to the net
deferred tax asset has been recorded.
The significant components of the deferred tax assets at December 31, 2009 and
December 31, 2008 are as follows:
December 31, December 31,
2009 2008
---------- ----------
Deferred tax asset-net operating losses $ 171,000 $ 100,000
Accrued compensation 260,000 124,000
Deferred tax asset valuation allowance (431,000) (224,000)
---------- ----------
Net deferred tax asset $ -- $ --
========== ==========
F-10
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(A Development Stage Company)
Notes to Financial Statements
From Inception, October 20, 2006 through December 31, 2009
NOTE 4 - INCOME TAXES (continued)
The reconciliation between the statutory federal income tax rate of 35% to the
actual rate is as follows:
December 31, December 31,
2009 2008
------------ ------------
Expected Federal tax (benefit) $ (321,000) $ (3,153,000)
Expected State tax (benefit), net of federal (38,000) (371,000)
Permanent differences 152,000 3,430,000
Change in valuation allowance 207,000 94,000
------------ ------------
Effective tax rate $ -- $ --
============ ============
At December 31, 2009 and December 31, 2008, the Company had a net operating loss
carry forward of $449,000 and $264,000, respectively, which expires in the year
2029 and 2028, respectively.
NOTE 5 - RELATED PARTY DEBT AND TRANSACTIONS
On December 14th 2006, the Company entered into an Advisory Agreement with
Ludvik Nominees Pty Ltd (a Company 100% owned by Frank Kristan) for services to
be rendered which were payable based on 3% assets under management and 20% of
net profits of Ludvik Capital. The term of the agreement was approximately 11
years, maturing on December 31, 2017.
Frank Kristan served as President and Chief Executive Officer of the Company
from inception, October 20, 2006 through March 31, 2010 and is also the
President of Ludvik Nominees Pty Ltd.
On March 31, 2010 the original 2006 agreement was terminated and a settlement
agreement was created to resolve any outstanding obligations with respect to the
2006 agreement. In accordance with the settlement agreement both parties agreed
that since advisory fees under the December 14th 2006 Agreement were based on
the assets under management that had no value, the Advisor had the option to get
paid a fee of $30,000 per month starting October 2006 including interest.
Furthermore, the remaining principal balance plus accrued interest as of March
31, 2010 was rolled over into a Secured Convertible Note amounting to
$1,503,167.
From the period from inception, October 20, 2006 through the termination of the
original agreement, March 31, 2010, the Company issued its advisors 32,394,269
shares of common stock as payment for services amounting to $484,250 (as
described in detail in Note 7-Subsequent Events).
The parties agreed that following components made up the balance of the Secured
Convertible Note as of March 31, 2010:
Advisory Fees $ 1,290,000
Accrued Interest 727,417
Payment for shares issued (484,250)
-----------
Amount payable at March 31, 2010 $ 1,503,167
===========
F-11
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(A Development Stage Company)
Notes to Financial Statements
From Inception, October 20, 2006 through December 31, 2009
NOTE 5 - RELATED PARTY DEBT AND TRANSACTIONS (continued)
This note is payable on June 30, 2010 and bears an interest rate of 12% per
annum payable at the end of the term. The outstanding balance and accrued
interest, all or in part, is convertible at the option of the holder into the
Company's common stock at a conversion price of 50% of the stock price, with a
minimum of $.01 per share.
The Company has recorded an accrual for advisory fees amounting to $685,750 and
$325,750 and an interest accrual amounting to $429,082 and $244,646 for the
years ended December 31, 2009 and 2008, respectively.
NOTE 6 - EQUITY TRANSACTIONS
On October 20, 2006, Ludvik Capital, Inc. was formed to be the successor
corporation by merger of Patriot Advisors, Inc. and Templar Corporation.
The Company is authorized to issue 100,000,000 shares of $0.0001 par value
common stock. As of December 31, 2006 the Company had 40,000,000 shares of
common stock issued and outstanding.
Pursuant to a court order in the US bankruptcy court and December 12th Stock
Purchase Agreement between the Company and Ludvik Nominees Pty Ltd, Patriot
Advisors, Inc. and Templar Corporation merged with the Ludvik Capital, Inc,
whereby the surviving corporation became the registrant, Ludvik Capital, Inc.
Ludvik Nominees Pty Ltd was issued 40,000,000 shares (post forward stock split),
of which approximately 18 million shares of Ludvik common stock were issued to
old creditors of Patriot Advisors and Templar Corp as payment for past
outstanding services and approximately 22 million shares of Ludvik common stock
were held by Ludvik Nominees Pty Ltd. for the initial capital of $20,000.
The Company has evaluated subsequent events from the balance sheet date, as of
December 31, 2006 through August 25, 2010, the date which the financial
statements were available to be issued.
On February 7, 2007 the United States Bankruptcy Court for the District of Maine
entered an order confirming the December 12, 2006 agreement with the Debtor
whereby, there were 40,000,000 (ppost forward stock split) unrestricted shares
of the Company's Common Stock issued to creditors and plan participants.
On June 19, 2007, the Company issued 24,196 common shares for the acquisition of
CyberSentry. This investment was assessed to have no value.
On July 30, 2007, the Company issued 2,055,710 shares of common stock to
unrelated parties, valued at $5.52 per share for $10,000 in services and an
additional 11,340,000 was recorded as stock based compensation in the Company's
statement of operations.
On August 17, 2007, the Company effected a 2:1 forward stock-split of its issued
and outstanding common stock. The issued and outstanding share capital increased
from 21,042,098 shares of common stock to 42,084,196 shares of common stock. All
per share amounts have been retroactively restated to reflect the forward
stock-split.
F-12
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(A Development Stage Company)
Notes to Financial Statements
From Inception, October 20, 2006 through December 31, 2009
NOTE 6 - EQUITY TRANSACTIONS (continued)
On October 1, 2007, the Company issued 4,325,000 shares of common stock at $1.01
per share, totaling $4,368,250, in which $64,875 was for repayment of advisory
fees payable to a related party, Ludvik Nominees Pty Ltd, and $4,303,375 was
recorded as stock based compensation in the statement of operations.
On October 3, 2007, the Company issued 10,000,000 shares of common stock at
$1.01 per share, totaling $10,100,000 in which $150,000 was for repayment of
advisory fees payable to a related party, Ludvik Nominees Pty Ltd, and
$9,950,000 was recorded as stock based compensation in the statement of
operations.
On January 15, 2008, the Company issued 15,000,000 shares of common stock at
$.52 per share, totaling $7,800,000 in which $225,000 was for repayment of
advisory fees payable to a related party, Ludvik Nominees Pty Ltd, and
$7,575,000 was recorded as stock based compensation in the statement of
operations.
On June 27, 2008, the Company issued 3,069,269 shares of common stock at $.40
per share, totaling $1,227,708 in which $44,375 was for repayment of advisory
fees payable to a related party, Ludvik Nominees Pty Ltd, and $1,181,669 was
recorded as stock based compensation in the statement of operations.
On February 1, 2009, the Company issued 5,000,000 common shares to an unrelated
party, valued at $.80 per share for $50,000 in services and an additional
350,001 was recorded as stock based compensation in the Company's statement of
operations.
As of December 31, 2009 the Company has 79,474,175 shares of common stock issued
and outstanding.
NOTE 7 - SUBSEQUENT EVENTS
On March 31, 2010, Frank Kristan resigned as President and Director of the
Company. At that time, Isaac H. Sutton was elected to the Board of Directors and
currently serves as the Company's new President and sole director. In addition,
Mr. Sutton currently has a consulting agreement for $60,000 per annum
On March 31, 2010, the Company terminated the advisory agreement with Ludvik
Nominees Pty Ltd. The remaining principal balance plus accrued interest due to
the Company's shareholders and advisors as of March 31, 2010 was rolled over
into a Secured Convertible Note amounting to $1,503,167.
..
On April 5, 2010, the Company amended its Articles of Incorporation changing the
name of the Company to SavWatt USA, Inc and increasing the authorized capital
stock to 2,000,000,000 shares of Common Stock and 200,000,000 shares of
Preferred Stock, par value $.0001 per share.
From the period, April 1, 2010 - July 31, 2010, the Company has funded SavWatt
Industries, LLC, a related party $199,300 which is payable and due upon demand.
Isaac H Sutton, The Company's President and Sole Director from March 31, 2010
until the present, is a 50% shareholder in SavWatt Industries, LLC.
During the Period of April 1, 2010 - July 31, 2010 the Company received short
term funding from GoIP Global, Inc and Sutton Global Associates, Inc., which are
also related parties. These companies are controlled by Isaac H. Sutton the
Company's President and Sole Director. As of July 31, 2010 the Company owes
these two companies $83,500.
From May 31, 2010 through July 30, 2010 the Company sold 29,000,000 Common
Shares for $290,000.
As of June 30, 2010 accrued interest pertaining to the related party secured
convertible note payable amounted to approximately $45,000. As of the date of
the filing of this report, the Company has yet to make any payments against this
debt and therefore, is currently in default.
F-13
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(A Development Stage Company)
Notes to Financial Statements
From Inception, October 20, 2006 through December 31, 2009
NOTE 7 - SUBSEQUENT EVENTS (continued)
On July 1, 2010, the Company entered into an employment agreement with Michael
Haug, as the Company's CEO, which responsibilities include running the daily
operations of SavWatt USA, Inc. The term of the agreement is for one year, and
may be renewed upon mutual agreement by the Company and the employee.
F-14
EX-31.1
3
ex31-1.txt
SECTION 302 CERTIFICATION
Exhibit 31.1
SAVWATT USA, INC.
A Delaware Corporation
CERTIFICATION OF PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICER
Section 302 Certification
I, Isaac H. Sutton, certify that:
1. I have reviewed this Amendment No. 2 to Annual Report on Form 10-K of
SavWatt USA, Inc., a Delaware Corporation (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Dated: January 24, 2011 /s/ Isaac H. Sutton
-------------------------------------
By: Isaac H. Sutton
Its: President and Chief Financial Officer
(Principal Executive Officer)
(Principal Financial Officer
EX-32.1
4
ex32-1.txt
SECTION 906 CERTIFICATION
Exhibit 32.1
SAVWATT USA, INC.
A Delaware Corporation
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Amendment No. 2 to the Annual Report of SavWatt USA,
Inc. ("Company") on Form 10-K for the year ended December 31, 2009, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Isaac H. Sutton, President and Chief Financial Officer, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Dated: January 24, 2011 /s/ Isaac H. Sutton
-------------------------------------
By: Isaac H. Sutton
Its: President and Chief Financial Officer
(Principal Executive Officer)
(Principal Financial Officer
CORRESP
5
filename5.txt
SavWatt USA, Inc.
6801 Eastern Avenue, Suite 203
Baltimore, Maryland 21224
(866) 641-3507
January 24, 2010
Securities and Exchange Commission
Division of Corporation Finance
100 F Street, NE
Washington, D.C. 20549
Attention: Mr. Dale Welcome
Accounting Branch
Division of Corporation Finance
Re: SavWatt USA, Inc. Form 10-K for the Fiscal Year Ended December 31, 2009
Form 10-K/A for the Fiscal Year Ended December 31, 2009
Form 10-Q for the Fiscal Quarters Ended March 31, 2010, June 30, 2010
and September 30, 2010
Form 10-Q/A for the Fiscal Quarter Ended September 30, 2010
File No. 000-52402
Dear Madam or Sir,
This letter is in response to your letter to me of December 22, 2010,
regarding the above referenced matter ("Comment Letter"). SavWatt USA, Inc.
("Company") is filing amendments to the referenced documents along with this
letter. As you know, our current management team was not involved with the
Company until March 31, 2010, when the undersigned gained control of the
Company. Hence, our current management team had no participation in the
operational or financial management of the Company until March 31, 2010.
Our responses to the Comment Letter follow:
RESPONSE TO COMMENTS #1, 2 AND 3:
We have amended Item 9A of our Form 10-K/A to state that we had no
disclosure controls and procedures as required by Rule 13a-15(e) of the Exchange
Act in place at December 31, 2009, that such non-existent controls and
procedures were ineffective and that no changes to such controls and procedures
occurred in 2009. We have similarly updated our disclosure in management's
report on the effectiveness of internal control over financial reporting.
RESPONSE TO COMMENT #4:
Between April 1, 2010 and September 30, 2010, the Company borrowed an
aggregate of $172,775 from GoIP Global, Inc. and Sutton Global Associates for
working capital purposes. The latter two companies are controlled by our
President, Isaac H. Sutton.
Between April 1, 2010, and September 30, 2010, the Company advanced monies
to SavWatt Industries, a company controlled by Isaac H. Sutton, our President,
to assist the latter company with product development and design related to the
products that the Company is now in process of manufacturing and selling. The
Company is considering a possible acquisition of SavWatt Industries or its
assets.
We review all receivables from related parties at the end of each fiscal
quarter based upon financial data on such related parties and their performance
under the terms of their obligations to the Company. If after such review, we
believe that such receivables are impaired or uncollectable in whole or in part,
we will make appropriate adjustments to such accounts. We will continue this
review policy in the future.
RESPONSE TO COMMENT #5:
Evaluation of Disclosure Controls and Procedures
We have revised our Form 10-Q filings for the fiscal quarters ended March
31, 2010, and June 30, 2010 to state that our disclosure controls and procedures
were evaluated at the end of each interim period and that they were nonexistent
and, therefore, ineffective. We have revised our Form 10-Q (as amended) for the
fiscal quarter ended September 30, 2010, to state that our disclosure controls
and procedures were evaluated as of September 30, 2010, and determined to have
been effective on such date. We have also deleted the reference to internal
control over financial reporting is this section.
RESPONSE TO COMMENT #6:
We have removed management's report on the effectiveness of internal
control over financial reporting from our Form 10-Qs for the fiscal quarters
ended March 31, 2010, June 30, 2010, and September 30, 2010
General Amendments to Our Filing
In addition to the amendments and revisions described above, we have
updated the certifications required by Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002.
2
We acknowledge that:
* the Company is responsible for the adequacy and accuracy of the
disclosure in these filings;
* staff comments or changes to disclosure in response to staff comments
do not foreclose the Commission from taking any action with respect to
the filings;
* the Company may not assert staff comments as a defense in any
proceeding initiated by the Commission from taking any action with
respect to the filings; and
* the Company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States
Please address any further comments to our attorney, David E. Wise, Esq.
Mr. Wise's contact information is set forth below:
Law Offices of David E. Wise, P.C.
Attorney at Law
The Colonnade
9901 IH-10 West, Suite 800
San Antonio, Texas 78230
Telephone: (210) 558-2858
Facsimile: (210) 579-1775
Email: wiselaw@gvtc.com
Sincerely,
By: /s/ Isaac H. Sutton
-------------------------------------
Isaac H. Sutton
President and Chief Financial Officer