10-Q 1 v131640_10q.htm Unassociated Document
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

o 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:   000-52074
4C Controls Inc.
(Exact Name of Registrant as Specified in its Charter)

Nevada
 
98-0446287
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification No.)

104 Summit Avenue
Summit NJ 07902-0080
(Address of principal executive offices)

(908) 273-4442 
(Registrant’s Telephone Number, Including Area Code)

N/A
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer  
o 
Accelerated Filer                       
o
Non-Accelerated Filer  
o
Smaller Reporting Company
x 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes x No o

As of November 11, 2008, the Issuer had 44,179,540 shares of its Common Stock outstanding.

 
 

 
TABLE OF CONTENTS
 
PART I: FINANCIAL INFORMATION
 
 
 
Item 1: Financial Statements
4
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
8
Item 3: Quantitative and Qualitative Disclosures about Market Risk
16
Item 4T: Controls and Procedures
16
 
 
PART II: OTHER INFORMATION
 
 
 
Item 1: Legal Proceedings
17
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
17
Item 3: Defaults Upon Senior Securities
17
Item 4: Submission of Matters to a Vote of Security Holders
17
Item 5: Other Information
17
Item 6: Exhibits
18
 
 
SIGNATURES
19

 
2

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This Report on Form 10-Q (this “Report”) includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs and other information that is not historical information and, in particular, appear in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Report. When used in this Report, the words “estimates,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should” and variations of these words or similar expressions (or the negative versions of any these words) are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, management’s examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, we can give no assurance that management’s expectations, beliefs and projections will be achieved.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the results referred to in the forward-looking statements contained in this Report. Important factors outside the scope of our control could cause our actual results to differ materially from the results referred to in the forward-looking statements we make in this Report. Without limiting the foregoing, if we are unable to acquire approvals or consents from third parties or governmental authorities with respect to our new business model, our plans to commence our new business may become irrevocably impaired.

All forward-looking statements included herein are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report. Except to the extent required by applicable laws and regulations, the Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.
 
Unless otherwise provided in this Report, references to the “Company,” the “Registrant,” the “Issuer,” “we,” “us,” and “our” refer to 4C Controls Inc. (formerly known as Amecs Inc.). 

 
3

 
PART I     FINANCIAL INFORMATION

4C Controls Inc. (Formerly known as Amecs Inc.)
(A Development Stage Company)
Balance Sheet

   
September 30
 
December 31,
 
   
2008
 
2007
 
ASSETS
 
(unaudited)
     
           
Current Assets
             
Cash
   
510,294
   
6,313
 
Prepaid expenses and other current assets
   
54,076
   
 
 
      Total Current Assets
   
564,370
   
6,313
 
               
Property & Equipment
   
15,071
   
-
 
Investment in BQT Solutions, Ltd.
   
3,677,116
   
-
 
     
3,692,187
   
-
 
               
        Total Assets
   
4,256,557
   
6,313
 
               
LIABILITIES AND STOCKHOLDERS' EQUITY
             
               
Current Liabilities
             
Accrued liabilities
   
1,180,341
   
74,392
 
Interest payable
   
10,546
   
-
 
Loan payable - related party
   
817,266
   
-
 
               
Total Current Liabilities and Total Liabilities
   
2,008,153
   
74,392
 
               
               
Stockholders' Equity (Deficiency)
   
2,248,404
   
(68,079
)
               
Total Liabilities and Stockholders' Equity (Deficiency)
   
4,256,557
   
6,313
 
 
 
4

 

(A Development Stage Company)
(Unaudited) Statement of Operations

           
Accumulated from
 
   
For the Three Months ended
 
For the Nine Months ended
 
December 28, 2004
 
   
September 30
 
September 30
 
(Date of Inception)
 
   
2008
 
2007
 
2008
 
2007
 
to September 30, 2008
 
                       
                       
Revenue
                               
Interest Income
   
3,210
   
 
   
3,210
   
 
   
3,210
 
                                 
Expenses
                               
Consulting Fees
                           
7,500
 
Deferred Compensation
   
506,990
         
506,990
         
506,990
 
Depreciation Expense
   
229
         
229
         
229
 
Director fees and expenses
   
296,815
         
314,882
         
314,882
 
Donated Services
                     
9,000
   
24,000
 
General & Administrative
   
682,953
   
3,114
   
830,108
   
1,023
   
836,922
 
Interest
   
26,101
   
-
   
30,664
   
-
   
30,664
 
Marketing and public relations
   
380,114
         
473,940
   
-
   
478,940
 
Professional fees
   
925,834
   
2,955
   
1,339,816
   
16,162
   
1,487,849
 
Stock option expense
   
36,423
   
-
   
40,286
   
-
   
40,285
 
Trade show
   
71,485
         
71,485
         
71,485
 
Equity in loss of unconsolidated subsidiary
   
13,692
         
13,692
         
13,692
 
                                 
Total expenses
   
2,940,636
   
6,069
   
3,622,092
   
26,185
   
3,813,438
 
                                 
Net Loss
   
(2,937,426
)
 
(6,069
)
 
(3,618,882
)
 
(26,185
)
 
(3,810,228
)
                                 
Net Loss Per Share
 
$
(0.07
)
$
-
 
$
(0.09
)
$
-
   
 
 
                                 
Weighted Average Shares Outstanding
   
42,805,360
   
42,053,550
   
42,367,978
   
42,053,550
   
 
 

*After giving effect to stock dividend.

 
5

 

(A Development Stage Company)
(Unaudited) Statement of Cash Flows

       
Accumulated from
 
   
For the Nine Months ended
 
December 28, 2004
 
   
September 30
 
(Date of Inception)
 
   
2008
 
2007
 
to September 30, 2008
 
               
Operating Activities
                   
Net loss
   
(3,618,882
)
 
(26,185
)
 
(3,810,228
)
Adjustments to reconcile net loss to net cash used in operating activities:
                   
 
                   
Amoritzation of deferred compensation
   
506,990
         
506,990
 
Depreciation
   
229
         
229
 
Issuance of stock options
   
40,285
         
40,285
 
Donated Services
               
24,000
 
Impairment
               
5,000
 
Equity in loss of unconsolidated subsidiary
   
13,692
         
13,692
 
Change in operating assets and liabilities
                   
Interest payable
   
10,546
   
-
   
10,546
 
Accrued expenses
   
1,105,949
   
(405
)
 
1,180,341
 
Prepaid expenses and other current assets
   
(54,076
)
 
-
   
(54,076
)
                           
Net Cash Used in Operating Activities
   
(1,995,267
)
 
(17,590
)
 
(2,083,221
)
                     
Investing Activities
                   
Investments in BQT Solutions, Ltd.
   
(3,690,808
)
       
(3,690,808
)
Office Equipment
   
(15,300
)
       
(15,300
)
Website development costs
                   
(5,000
)
Net Cash Used in Investing Activities
   
(3,706,108
)
 
-
   
(3,711,108
)
                     
Financing Activities
                   
Advances from a related party
   
1,398,535
   
734
   
1,432,554
 
Repayment to related party
               
(34,019
)
Repayments to a related party
   
-
   
(927
)
 
-
 
Net proceeds from issuance of common shares
   
4,806,821
   
-
   
4,906,088
 
Proceeds of Loan from related party
                   
Capital Stock-Donated
   
-
   
-
       
                           
Net Cash Provided by (used in) Financing Activities
   
6,205,356
   
(193
)
 
6,304,623
 
                     
Increase (Decrease) in Cash
   
503,981
   
(17,783
)
 
510,294
 
Cash- Beginning of Period
   
6,313
   
26,768
   
-
 
                           
Cash - End of Period
   
510,294
   
8,985
   
510,294
 
                     
                     
Supplemental disclosure of cash flow information
                   
Common Stock issued for deferred compensation
   
6,900,000
   
-
   
4,906,088
 
Profits from shareholder sales of stock capitalized to loan recievable
   
1,522,164
   
-
   
1,522,164
 
Treasury stock acquired through offset of loan to related party
   
940,895
   
-
   
940,895
 
 
 
6

 

4C Controls Inc. (Formerly known as Amecs Inc.)
(A Development Stage Company)
(Unaudited) Statement of Stockholders' Equity
For the Period from December 28, 2004 (Date of Inception) to September 30, 2008

   
Common Stock
 
Additional Paid-in
 
Treasury Stock
 
Donated
 
Deferred
 
Deficit Accumulated During the Development
     
   
Shares
 
Par
 
Capital
 
Shares
 
Value
 
Capital
 
Compensation
 
Stage
 
Total
 
Balance - December 28, 2004
 
#
 
Value ($)
 
($)
 
#
 
($)
 
($)
 
($)
 
($)
 
($)
 
(Date of Inception)
                                                       
Common stock issued for cash at
                                                       
$0.00001 per share
   
35,000,000
   
350
   
-
               
-
         
(300
)
 
50
 
Net loss for the period
   
-
   
-
   
-
   
 
   
 
   
-
   
 
   
(6,520
)
 
(6,520
)
Balance - December 31, 2004
   
35,000,000
   
350
   
-
               
-
         
(6,820
)
 
(6,470
)
Common stock issued for cash at
                                                       
$0.10 per share
   
7,053,550
   
70
   
100,695
                                 
100,765
 
Shares issuance costs
               
(1,548
)
                               
(1,548
)
Donated services
                                 
12,000
               
12,000
 
Net loss for the year
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
(48,442
)
 
(48,442
)
Balance - December 31, 2005
   
42,053,550
   
420
   
99,147
               
12,000
         
(55,262
)
 
56,305
 
Donated services
                                 
12,000
               
12,000
 
Net loss for the year
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
(42,707
)
 
(42,707
)
Balance - December 31, 2006
   
42,053,550
   
420
   
99,207
               
24,000
         
(97,969
)
 
25,598
 
Effect of stock dividend
                                                   
-
 
Net loss for the year
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
(93,677
)
 
(93,677
)
Balance - December 31, 2007
   
42,053,550
   
420
   
99,207
               
24,000
         
(191,646
)
 
(68,079
)
Sale of common stock
   
470,450
   
5
   
940,895
                                 
940,900
 
Net loss for the period
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
(176,119
)
 
(176,119
)
Balance - March 31, 2008
   
42,524,000
   
425
   
1,040,102
               
24,000
         
(367,765
)
 
696,702
 
Stock option grant -June 11 2008
               
22,564
                                 
22,564
 
Net loss for the period
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
(505,337
)
 
(505,337
)
Balance - June 30, 2008
   
42,524,000
   
425
   
1,062,666
               
24,000
         
(873,102
)
 
213,929
 
Shareholder profits from sale of security
               
1,522,164
                                 
1,522,164
 
Common stock granted to CTO July 11 2008
   
1,000,000
   
10
   
6,899,990
                     
(6,900,000
)
       
-
 
Amortization of deferred compensation
                                       
506,990
         
506,990
 
Issuance of common stock, net of costs
   
1,139,323
   
11
   
3,865,915
                                 
3,865,926
 
Stock option grant -August 22, 2008
               
17,721
                                 
17,721
 
Treasury Stock Aquired
                     
(470,450
)
 
(940,900
)
                   
(940,900
)
Net loss for the period
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
(2,937,426
)
 
(2,937,426
)
Balance - September 30, 2008
   
44,663,323
   
446
   
13,368,456
   
(470,450
)
 
(940,900
)
 
24,000
   
(6,393,010
)
 
(3,810,528
)
 
2,248,404
 

 
7

 

Notes to Financial Statements
(Unaudited)

NOTE A - BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X relating to smaller reporting companies.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”) for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the three and six-month periods ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ended December 31, 2008.

The balance sheet at December 31, 2007 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K/A for the year ended December 31, 2007 filed on March 31, 2008 and amended on September 19, 2008.

NOTE B - GOING CONCERN

The Company is in the development stage during which management has devoted most of its activities to the development of a business plan for the Company. As of September 30, 2008, the Company has an accumulated deficit of 3,996,071. The ability of the Company to continue as a going concern and to emerge from the development stage is dependent upon its successful execution of its plan of operations and ability to raise additional financing. There is no guarantee that the Company will be able to raise additional capital or sell any of its products and services at a profit. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE C - STOCKHOLDERS’ EQUITY
 
On December 18, 2007, the Board of Directors declared the payment of a stock dividend to the stockholders of record of the Company as of January 2, 2008. The stock dividend was paid on January 4, 2008. Each stockholder received six additional shares of the Company’s common stock for each one share of the Company’s common stock which they held on the record date. Following the payment of the stock dividend, the issued and outstanding share ownership of the Company increased from 6,007,650 shares of Company common stock to 42,053,550 shares of common stock. The Statement of Stockholder’s Equity has been changed to retroactively reflect the stock dividend. As of the date of the financial statements (unaudited) the Company had 44,192,873 shares of its common stock issued and outstanding. The company has raised capital via a subscription agreement during the quarter ending September 30, 2008.

 
8

 
 
Common stock, stock options and warrants issued to other than employees or directors in exchange for services are recorded on the basis of their fair value, as required by SFAS No. 123R, which is measured as of the date required by EITF Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”. In accordance with EITF 96-18, the non-employee stock options or warrants are measured at their fair value by using the Black-Scholes option pricing model as of the earlier of the date at which a commitment for performance to earn the equity instruments is reached (“performance commitment date”) or the date at which performance is complete (“performance completion date”). The stock-based compensation expenses are recognized on a straight-line basis over the shorter of the period over which services are to be received or the vesting period. Accounting for non-employee stock options or warrants which involve only performance conditions when no performance commitment date or performance completion date has occurred as of reporting date requires measurement at the equity instruments then-current fair value. Any subsequent changes in the market value of the underlying common stock are reflected in the expense recorded in the subsequent period in which that change occurs.

NOTE D - INVESTMENT IN BQT SOLUTIONS LTD.

As of September 30, 2008, the Company had made a cumulative investment of $3,690,808 (AUD $4,000,000) into BQT Solutions Ltd. (“BQT”) in consideration for 12,800,000 ordinary shares of BQT. The ownership of BQT shares as of the period covered by this Report represented approximately 19.8% of the issued and outstanding shares of BQT. The Company was also awarded 9,500,000 options with a strike price of AUD $0.10 and an expiration date of December 31, 2013. We have accounted for the investment in BQT on the Equity Method beginning September 22, 2008 (when we acquired 6,600,000 shares of BQT).

BQT is an Australian public company specializing in access control systems, biometric and smart card readers, CCTV, cameras and customized developments for selected clients. BQT’s strategy is to diversify and expand its activities in the security and surveillance technology sector. BQT intends to focus on commercializing its SMAX access control system and support sales of existing company technologies of biometrics, smart card readers, CCTV cameras and customized solutions for selected key clients. The SMAX Access Control Management System is a sophisticated, intelligent and cost effective security application that provides movement and access controls within a facility.

NOTE E - RELATED PARTY TRANSACTION

As of the nine months ending September 30, 2008, Rudana Investment Group AG (“Rudana”), the Company’s majority shareholder, and companies controlled by Rudana had loaned the Company a total of $817,266. The funds were used by the company for general corporate use and for purposes of financing its strategic alliance investment obligations in BQT Solutions Limited. These loans bear interest at 7.5% per annum and are due thirty (30) days after demand.

 
9

 

NOTE F - BASIC AND DILUTED NET LOSS PER SHARE

The Company reports income (loss) per share under the requirements of Statement of Financial Accounting Standards No. 128, “Earnings per Share”. Basic income (loss) per share includes the weighted average number of common shares outstanding during the year. Diluted income (loss) per share includes the weighted average number of shares outstanding and dilutive potential common shares, such as warrants and options. Since the Company had losses in the three months and nine months ended September 30, 2008, the stock options outstanding would have an anti-dilutive effect on net loss per share and as such are not included in the calculation.
 
NOTE G - NEW ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No. 141 (R), Business Combinations, and SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements. SFAS No. 141 (R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 160 clarifies that a non-controlling interest in a subsidiary should be reported as equity in the consolidated financial statement. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 141 (R) and SFAS No. 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. We have not yet determined the effect on our financial statements, if any, upon adoption of SFAS No. 141 (R) or SFAS No. 160.
 
NOTE H - EMPLOYEE OPTION GRANT

On June 11, 2008 the Company granted an option to purchase ten thousand (10,000) shares of the Company’s common stock to each of the following officers and directors of the Company and its subsidiaries: (i) Mr. Jean-Robert Martin; (ii) Mr. Philippe Aubay; (iii) Ms. Anne-Marie Pérus; (iv) Mr. Jean-Louis Recordon; (v) Dr. Augustine Fou; (vi) Mr. Gerald Sullivan; and (vii) Ms. Barbara Salz.  These options were granted at a purchase price of $5.10.  This purchase price was equal to the closing price of the Company’s common stock as quoted on the Nasdaq Over-the-Counter Bulletin Board on the day immediately preceding the grant. Using the Black Scholes options pricing model, the options were valued at $1.06 per share. The total options granted valuation on June 11, 2008 was $74,200. 
 
On August 22, 2008 the Company appointed Major General Khalid Abdulla Mabarak Al Buainain, Commander & Chief of UAE Air Force and Air Defense (Ret.), as Vice President for Middle East Military and Defense Security. The Company and Major General Khalid have agreed that Major General Khalid will be receive the following compensation: (i) $5,000 per month; (ii) stock options to purchase 500,000 shares of the Company’s common stock at an exercise price per share of $1.64; and (iii) a commission equal to three percent (3%) of the total sales price collected by the Company on any sales of the Company’s products to any individual or entity which Major General Khalid shall (a) initially introduce the Company to, and (b) which sales Major General Khalid shall facilitate as the Company may reasonably request. Major General Khalid will perform his services in the United Arab Emirates. Using the Black Scholes options pricing model, the options were valued at $0.33 per share. The vesting period is one year and the options expire five years from issuance. The total options granted valuation on August 22, 2008 was $165,859. 

 
10

 

NOTE I - CHIEF TECHNOLOGY OFFICER SERVICE AGREEMENT

On July 11, 2008, the Company entered into a Chief Technology Officer Services Agreement (the “Services Agreement”) with Dr. Riccardo Maggiora. The Company has also entered into a License Agreement (the “License Agreement”) with respect to certain intellectual property invented and/or developed by Dr. Maggiora.
 
Under the Services Agreement, Dr. Maggiora has agreed to serve as Chief Technology Officer for a three year period.  Dr. Maggiora has agreed to devote such time to his work as Chief Technology Officer as he deems reasonably necessary, with the Company acknowledging that Dr. Maggiora serves as an Assistant Professor at Politechnico di Torino and shall continue such service, and therefore the Company agrees that his services shall be rendered on a part-time basis. In consideration for services rendered to the Company, Dr. Maggiora has been granted a one time issuance of one million shares of the Company’s common stock.  Dr. Maggiora may sell his shares after an initial one year holding period, so long as such sale is made in accordance with applicable securities laws or pursuant to available exemptions therefrom.  Dr. Maggiora shall perform his services in Italy.  The Services Agreement contains provisions regarding protection of Company trade secrets, non-solicitation of Company employees or customers and non-competition with the Company during the term of the Agreement.  All discoveries and works made or conceived by Dr. Maggiora while working on Company matters which are not subject to intellectual property interests of any third parties, that relate to the Company’s present or anticipated activities, or are used or useable by the Company, shall be governed by the License Agreement described below. Either the Company or Dr. Maggiora may terminate the Services Agreement, with or without cause, upon ten days notice to the other party. 
 
Under the License Agreement, the Company has acquired exclusive rights to technologies in the field of intrusion detection systems, radar systems for border and pipeline surveillance, and technologies for monitoring and surveillance systems (collectively, the “Acquired Technologies”).  The License Agreement has granted to the Company the right to file patents on the Acquired Technologies, and all improvements and related know-how.  The Company shall pay to Dr. Maggiora a royalty of one-half percent of sales of products related to the Acquired Technologies which are sold by the Company or any sublicensee.  Starting in the second year of the License Agreement, there will be a minimum royalty payment to Dr. Maggiora of 250,000 Euros per year.  The License Agreement includes rights to sublicense all of the Acquired Technologies. The term of the Agreement is three years, which shall automatically renew for subsequent three year periods, unless for any reason the Company gives notice of non-renewal. The Company has also reserved the right to terminate the License Agreement after one year. The License Agreement may not be terminated by Dr. Maggiora except in the event of a breach of the Agreement by the Company which has not been cured within ninety days of notice of any breach. Dr. Maggiora has agreed to provide reasonable support and technical assistance during the term of the License Agreement with respect to the Company’s use of the Acquired Technologies and exercise of the Company’s rights under the License Agreement.

Shares of the Company closed at $6.09 per share on July 11, 2008.

 
11

 
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Report. This Report contains certain forward-looking statements and the Company's future operating results could differ materially from those discussed herein. Certain statements contained in this Report, including, without limitation, statements containing the words “believes”, “anticipates,” “expects” and the like, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). However, as the Company intends to issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, the Company is ineligible to rely on these safe harbor provisions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments, except as required by the Exchange Act.
 
We were incorporated in the State of Nevada on December 28, 2004 as Amecs Inc. On March 3, 2008, the Company announced a change in its business model. The Company now intends to pursue a new business providing high technology products and services in international security, surveillance, satellites, satellite images and access controls.

Plan of Operations

In connection with a change of control that occurred on December 18, 2007, we changed our name from “Amecs Inc.” to “4C Controls Inc.” on February 12, 2008. Our trading symbol on the over-the-counter bulletin board changed to FOUR.

The Company intends to position itself as a leading strategic high technology systems integrator through affiliations with international security and surveillance enterprises as well as offering proprietary services and products developed by the Company. The Company intends to design, manage and integrate state-of-the-art high technology solutions with comprehensive and fully integrated service offerings.

The Company’s strategy focuses on technology as the key driver of growth in the security market as the market shifts towards more integrated security solutions including:

•   
offering high technology security integrated solutions providing real-time early warning and reduction of time scales from threat-detection to termination in the field;

•   
designing, managing and integrating cutting edge high technology security solutions to offer comprehensive service and product offerings; and

•   
focusing on large scale geographic security and surveillance solutions in the following market sectors:
  
 
o
Electronic Surveillance and Access Control Markets: Biometric, Radio Frequency identification (“RFID”), Real Time Locating Systems (“RTLS”) and closed-circuit television (“CCTV”);
 
o
High Resolution Low Equatorial Synthetic Aperture Radar (“SAR”) Satellites;
 
o
Ground stations for Satellite Images; and
 
o
High performance ground radars for intrusion detection.

 
12

 
 
The Company intends to offer highly customized risk assessment and responsive solutions for broad scale areas, such as sovereign border security, coastal security and pipelines security. The Company intends to offer a range of cutting-edge security and surveillance solutions which include commercially available security products integrated with the Company’s proprietary security solutions. The Company expects to deploy multiple mode surveillance technologies over large scale geographic areas (including satellite images and ground radar systems) as well as offer sophisticated access control systems. The Company anticipates offering biometrics, smart card readers, CCTV cameras and access control customized solutions.

The Company expects to focus its satellite program on designing, building and operating small SAR satellites dedicated to earth observation and surveillance. Dr. Riccardo Maggiora, Chief Technology Officer of the Company, is a professor at Politechnico di Torino (“Polito”), one of the leading European technology and scientific research institutes. The Company has been working in a cooperative relationship with Polito through Professor Maggiora.

The Company also intends to establish satellite ground stations at commercially attractive locations for receiving, processing and analyzing high and medium resolution satellite images.  The Company expects to enter into strategic alliance agreements regarding the operation of the satellite ground stations. The Company is in the formative stage of designing and planning the ground station operations segment.

The Company has licensed proprietary technologies from Dr. Riccardo Maggiora, Chief Technology Officer of the Company, in the fields of intrusion detection systems, radar systems for sovereign border and pipeline surveillance, RFID and RTLS for monitoring and surveillance. The Company plans to acquire a highly qualified manufacturer of security and surveillance products. The completion of such acquisition would provide the Company with manufacturing capability for the technologies licensed from Dr. Maggiora.

Effective July 1, 2008, Philippe Aubay and Anne-Marie Pérus were appointed to the Company’s Board of Directors. Effective August 22, 2008, Mr. de Vergnies was appointed to the Company’s Board of Directors. Mr. de Vergnies has served as the Company Chief Executive Officer since July 1, 2008. On August 22, 2008, the Company created an Executive Committee consisting of Jean-Robert Martin, Olivier de Vergnies and Dr. Augustine Fou. The Executive Committee may take any action which the Company’s Board of Directors is permitted to take.
 
Effective July 1, 2008, the Company entered into an employment agreement with Olivier de Vergnies (the “de Vergnies Agreement”) regarding his service as the Company’s new Chief Executive Officer. Mr. de Vergnies’ compensation as the Company’s Chief Executive Officer will be 200,000 Euros per annum. The de Vergnies Agreement has a one year term, commencing on July 1, 2008 and ending on the first anniversary thereof, unless terminated sooner according to its terms. The de Vergnies Agreement shall automatically renew unless either party gives notice thirty (30) days prior to the expiration thereof. Mr. de Vergnies may terminate the de Vergnies Agreement on two weeks written notice. The Company may terminate the de Vergnies Agreement without cause at any time; however, the Company shall be required to pay Mr. de Vergnies’ salary for the remainder of the term. The Company may also terminate the de Vergnies Agreement at any time for cause, in which case Mr. de Vergnies shall not be entitled to any further compensation. The de Vergnies Agreement contains standard prohibitions on the disclosure of trade secrets and other confidential information. During the term of Mr. de Vergnies employment and for a period of one year thereafter he may not compete with the Company. Mr. de Vergnies has agreed to devote 100% of his professional time to the Company.

On July 11, 2008, the Company entered into a Chief Technology Officer Services Agreement (the “CTO Services Agreement”) with Dr. Riccardo Maggiora. The Company has also entered into a License Agreement (the “License Agreement”) with respect to certain intellectual property invented and/or developed by Dr. Maggiora. Under the CTO Services Agreement, Dr. Maggiora has agreed to serve as Chief Technology Officer for a three year period.  Dr. Maggiora has agreed to devote such time to his work as Chief Technology Officer as he deems reasonably necessary, with the Company acknowledging that Dr. Maggiora serves as an Assistant Professor at Politechnico di Torino and that he shall continue such service. In consideration for services to the Company, Dr. Maggiora has been granted a one-time issuance of one million shares of the Company’s common stock.  Dr. Maggiora may sell his shares after an initial one year holding period, so long as such sales are made in accordance with applicable securities laws or pursuant to available exemptions therefrom.  Dr. Maggiora shall perform his services in Italy.  The CTO Services Agreement contains customary provisions regarding protection of Company trade secrets, non-solicitation of Company employees or customers and non-competition with the Company during the term of the Agreement.  All discoveries and works made or conceived by Dr. Maggiora while working on Company matters which are not subject to intellectual property interests of any third parties, that relate to the Company’s present or anticipated activities, or are used or useable by the Company, shall be governed by the License Agreement described below. Either the Company or Dr. Maggiora may terminate the CTO Services Agreement, with or without cause, upon ten days notice to the other party. 
 
Under the License Agreement with Dr. Maggiora, the Company has acquired exclusive rights to technologies in the field of intrusion detection systems, radar systems for border and pipeline surveillance, and technologies for monitoring and surveillance systems (collectively, the “Acquired Technologies”).  The License Agreement has granted to the Company the right to file patents on the Acquired Technologies, and all improvements and related know-how.  The Company shall pay to Dr. Maggiora a royalty of one-half percent of sales of products related to the Acquired Technologies which are sold by the Company or any sublicensee.  Starting in the second year of the License Agreement, there will be a minimum royalty payment to Dr. Maggiora of 250,000 Euros per year.  The License Agreement includes rights to sublicense all of the Acquired Technologies. The term of the Agreement is three years, which shall automatically renew for subsequent three year periods, unless for any reason the Company gives notice of non-renewal. The Company has also reserved the right to terminate the License Agreement after one year. The License Agreement may not be terminated by Dr. Maggiora except in the event of a breach of the Agreement by the Company which has not been cured within ninety days of notice of any breach. Dr. Maggiora has agreed to provide reasonable support and technical assistance during the term of the License Agreement with respect to the Company’s use of the Acquired Technologies and exercise of the Company’s rights under the License Agreement.
 
 
13

 
 
On July 22, 2008, the Company received a shareholder loan in the amount of $987,000.00 from Rudana. This loan has an interest rate of seven and a half percent (7.5%) per annum, which together with the principal amount shall be repayable thirty (30) days after demand by Rudana. The Company utilized these funds for purposes of financing its strategic alliance with BQT Solutions Limited.

On August 18, 2008, the Company issued press releases disclosing the following:
   
·  
The Company has entered into a strategic alliance with Sire Contracting Company in Dubai, United Arab Emirates. Under the terms of the alliance, 4C Controls will be the exclusive provider of high technology security and surveillance solutions for all of Sire’s current projects.
The Company has appointed FBI Supervising Special Agent (Ret.) Dr. Philip Hayden as its Vice President, Security Assessment & Threats Analysis. Dr. Hayden comes to 4C Controls after a distinguished career with the Federal Bureau of Investigation. Dr. Philip Hayden has spent years involved in many aspects of law enforcement and security.  
 
The Company has changed its mailing address to 104 Summit Avenue, Summit NJ 07902-0080.

On September 2, 2008, the Company entered into a agreement (the “Agreement”) to acquire Zahra Technology LLC and its wholly owned subsidiary Zahra Security Systems and Electricals LLC (collectively, “Zahra”). Subsequent to the signing of the Agreement, the Company undertook due diligence of Zahra. The Company made assessments and determinations on the basis of such due diligence that the facts and circumstances regarding acquisition of Zahra were not as originally ascertained by the Company at the date of the signing of the Agreement. The Company endeavored to renegotiate the terms of the acquisition with Zahra but the parties could not agree on mutually acceptable terms. As such, the Company terminated the acquisition during the fourth quarter 2008. 

On August 29, 2008, the Company and Rudana mutually agreed to take action to rescind a Share Purchase Agreement (the “March Share Purchase Agreement”), entered into with Rudana on March 7, 2008, and cancel the March 2008 shares and warrants, and convert the rescinded purchase price to a shareholder loan. Pursuant to the March 2008 Share Purchase Agreement, and in consideration of US$940,900 (AUD$1 million) which was paid by Rudana directly to BQT Solutions Limited (“BQT Solutions”) on behalf of the Company as the first tranche of the Company’s planned investment in BQT Solutions and its subsidiaries, Rudana had been issued 470,450 shares of the Company’s common stock and 117,613 Warrants. The Warrants were exercisable at a purchase price of $0.25 per share. Rudana has tendered to the Company the shares and warrants it acquired pursuant to the March 2008 Share Purchase Agreement, and the Company has cancelled all such securities. The reason for the rescission is that the Company and Rudana agreed that the blended purchase price of the shares and warrants under the March 2008 Share Purchase Agreement did not fully reflect the growth and development which the Company has achieved within a relatively short period of time. The Company and Rudana agreed to convert the proceeds from the rescinded March 2008 Share Purchase Agreement into a shareholder loan in the amount of $940,900 at an interest rate of seven and half percent (7.5%) per annum, which together with the principal amount shall be repayable thirty (30) days after demand by Rudana.

As disclosed by the Company in a Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on October 3, 2008, the contents of which are incorporated herein by reference thereto, as of October 2, 2008, the Company has completed all payment tranches of the Securities Purchase Agreement with BQT Solutions and its subsidiaries entered into on March 3, 2008 and amended and restated on May 1, 2008. The Company has been issued an aggregate of 12.8 million ordinary shares of BQT Solutions in respect of a total investment of AUD $4 million. The investment represents approximately 19.8% of the issued and outstanding shares of BQT Solutions. The Company has also been issued options to purchase an additional 9.5 million shares of BQT Solutions at a purchase price of AUD $0.10 per share. Under the terms of investment in BQT Solutions, the Company has an outstanding obligation to make an equity capital infusion of AUD $14 million into BQT Satellites Limited. After giving effect to such capital infusion, the Company will own 40% of BQT Satellites. BQT Solutions will retain 20% ownership interest and Prime Asset Finance Ltd. will own 40% of BQT Satellites. Prime Asset Finance Ltd. is a wholly owned subsidiary of the Company’s majority shareholder, Rudana Investment Group AG.
 
 
14

 
 
The Company’s assets consist only of cash and nominal investments and as such the BQT Solutions strategic investment transactions do not have the effect of causing the Company to cease being a shell company, as defined in Rule 12b-2 promulgated under the Exchange Act. The Company expects to transition from such status after closing future transactions and will report the transition in accordance with the Exchange Act and the rules and regulations promulgated thereunder.
 
Revenues

During the quarter ended September 30, 2008, the Company had no revenues.

Research and Development

The Company has allocated 90,000 Euros for the fabrication of demonstration units of the proprietary technologies licensed from Dr. Maggiora. Future research and development efforts are expected to be conducted together with Politechnico di Torino, in Torino, Italy through Dr. Riccardo Maggiora, the Company’s Chief Technology Officer who is a professor at the Politechnico di Torino.

Plant and Equipment

The Company does not plan any expenditures on plant and equipment for the year ending December 31, 2008.

Employees

As of September 30, 2008, the Company had two full time employees, Mr. Olivier de Vergnies, Chief Executive Officer and Mr. Gerald Sullivan, who is the Chief Financial Officer. The other persons rendering services to the Company as of September 30, 2008 included Mr. Jean-Robert Martin, our Chairman; Dr. Riccardo Maggiora, Mr. Philippe Aubay, Ms. Anne-Marie Pérus, Mr. Jean-Louis Recordon and Ms. Barbara Salz, each of whom served on a part-time basis as of the period covered by this Report. The Company has not yet determined its anticipated employee and staff needs for the year ending December 31, 2008.

Liquidity and capital resources

During the quarter ended September 30, 2008 and to date, the primary source of capital has been loans from shareholders, and equity sales. Our operations to date have consumed substantial amounts of cash.  Our negative cash flow from operations is expected to continue and to accelerate in the foreseeable future as the Company invests in capital expenditures including service and production facilities.

As of the date of this Report, we have not yet generated any revenues from our business operations. Since inception, the Company has incurred total expenses of $3,796,536, including total expenses of $3,605,190 during the nine months ended September 30, 2008.

We will need to raise additional capital to implement our new business plan and continue operations. We are seeking alternative sources of financing, through private placement of securities and loans from our shareholders in order for us to maintain our operations. We cannot guarantee that we will be successful in raising additional cash resources for our operations or that we will stay in business after our new business plan has commenced.

Our consolidated cash balance at September 30, 2008 was $510,294. As of September 30, 2008, our total assets (consisting of cash and nominal investment in BQT Solutions, Ltd.) were $4,270,249 and our total liabilities were $2,008,153.


The Company previously issued a warrant to Arimathea Limited in consideration for international corporate development services to be rendered on behalf of the Company (the “Arimathea Warrant”). On May 29, 2008, the Company amended the warrant (the “First Amended Warrant”). During the period covered by this Report, the Company agreed to amend the Warrant again (the “Second Amended Warrant”). The Second Amended Warrant will have an exercise term of 3 years and will become exercisable only for the purchase of a number of shares equal to (i) 5% of the amount of capital raised by the Company from introductions made by Arimathea, divided by (ii) the original exercise price of $3.45 per share. The maximum number of shares that may be purchased under the Second Amended Warrant is approximately one million shares of Company common stock at a purchase price of $3.45 per share, assuming the Company raises $70 million attributable to introductions made by Arimathea. All other terms and conditions of the Warrant shall remain the same.
 
 
15

 
 

 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.
ITEM 4T.  CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company carried out, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) in ensuring that information required to be disclosed by the Company in its reports is recorded, processed, summarized and reported within the required time periods. In carrying out that evaluation, management identified a material weakness (as defined in Public Company Accounting Oversight Board Standard No. 2) in our internal control over financial reporting.

The material weakness identified by Management consisted of inadequate staffing and supervision within the bookkeeping and accounting operations of the Company. The relatively small number of employees who have bookkeeping and accounting functions prevents us from segregating duties within the Company’s internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. Accordingly, based on their evaluation of the Company’s disclosure controls and procedures as of September 30, 2008, the Company’s Chief Executive Officer and its Chief Financial Officer have concluded that, as of that date, the Company’s controls and procedures were not effective for the purposes described above. Subsequent to the period covered by this Report, the Company has initiated steps to remediate such procedures as soon as reasonably possible.

There was no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended September 30, 2008 that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting. Subsequent to the period covered by this Report, the Company has commenced such changes in its internal control over financial reporting. Such changes include the retention of a full-time employee to handle the Company’s bookkeeping and accounting functions.
 
 
16

 
PART II.   OTHER INFORMATION
ITEM 1.  LEGAL PROCEEDINGS
 
The Company is not, and has not been during the period covered by this Report, a party to any legal proceedings.
   
ITEM 2:  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
The following sets forth information pertaining to all securities of the Company sold within the period covered by this Report which were not registered under the Securities Act of 1933, as amended.

The Company entered into all of the following transactions in reliance upon the exemption from registration provided by the U.S. Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations promulgated thereunder, including Rule 903 of Regulation S.  All of the sales of the Company restricted securities were made only to non-U.S. persons (as such term is defined in Rule 902(k) of Regulation S) outside of the United States pursuant to securities purchase agreements which each contained representations and warranties from each purchaser providing the factual basis for the Company to reasonably rely upon Regulation S.  Each of the certificates issued in respect of the sales of unregistered securities contain restricted transfer legends prohibiting sale or transfer except (a) in an offshore transaction complying with Rule 903 or Rule 904 of Regulation S; (b) pursuant to the exemption from registration provided by Rule 144 promulgated under the Securities Act (if available) or another then available exemption under the Securities Act and state securities laws; (c) in a transaction that does not require registration under the Securities Act or any applicable state laws, or (d) pursuant to a registration statement which has been declared effective by the U.S. Securities and Exchange Commission and which continues to be effective at the time of transfer of such securities. During August and September of 2008 subscribers (i) purchased an aggregate of 766,000 shares at $3.00 a share for total proceeds of $2,298,000; (ii) purchased 80,000 shares at $3.50 a share for total proceeds of $280,000; and (iii) purchased an aggregate of 279,990 shares at $5.00 a share for total proceeds of $1,399,950.  The total of all sales of unrestricted securities in August and September of 2008 amounted to 1,125,990 shares which is equal to approximately 2.6% of all issued and outstanding shares after giving effect to all such issuances. 
 
ITEM 3:  DEFAULTS UPON SENIOR SECURITIES

Not Applicable.
ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
No matters were submitted to the vote of the Company’s security holders during the period covered by this Report.
ITEM 5:  OTHER INFORMATION

Not Applicable.

 
17

 
ITEM 6.   EXHIBITS
 
Exhibit 
 
Description
 
   
10.14
 
Form of Securities Purchase Agreement.
     
10.15
 
Strategic Alliance Agreement, by and between the Company and Sire Contracting Company, dated as of August 18, 2008.
     
10.16
 
Form of Amendment No. 2 to 4C Controls Inc. Common Stock Purchase Warrant “A-1.”
     
31.1
 
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
31.2
 
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
32.1
 
Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
   
32.2
 
Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 
18

 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
By: 
/s/ Olivier de Vergnies
 
Name: Olivier de Vergnies
 
Title:   Chief Executive Officer
 
 
 
 
By: 
/s/ Gerald Sullivan
 
Name: Gerald Sullivan
 
Title:   Chief Financial Officer

Dated: November 19, 2008
 
 
19