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EXCEL - IDEA: XBRL DOCUMENT - T3M INC. | Financial_Report.xls |
EX-32.1 - EX-32.1 - T3M INC. | a59588exv32w1.htm |
EX-32.2 - EX-32.2 - T3M INC. | a59588exv32w2.htm |
EX-31.1 - EX-31.1 - T3M INC. | a59588exv31w1.htm |
EX-31.2 - EX-31.2 - T3M INC. | a59588exv31w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 30, 2011
OR
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 333-150888
T3 MOTION, INC.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) |
20-4987549 (I.R.S. Employer Identification No.) |
|
2990 Airway Avenue, Suite A | 92626 | |
Costa Mesa, California | (Zip Code) | |
(Address of principal executive offices) |
(714) 619-3600
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
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 þ NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). YES
þ 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 þ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). YES o NO þ
As
of August 15, 2011 the number of shares outstanding of the Registrants Common Stock, par
value $0.001 per share was 12,881,027.
T3 MOTION, INC.
INDEX TO FORM 10-Q
June 30, 2011
INDEX TO FORM 10-Q
June 30, 2011
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EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
2
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. | Financial Statements |
T3 MOTION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 5,255,347 | $ | 123,861 | ||||
Restricted cash |
10,000 | 10,000 | ||||||
Accounts receivable, net of reserves of $47,626 and $50,000, respectively |
839,715 | 595,261 | ||||||
Related party receivables |
39,420 | 35,722 | ||||||
Inventories |
978,934 | 1,064,546 | ||||||
Prepaid expenses and other current assets |
754,406 | 251,467 | ||||||
Total current assets |
7,877,822 | 2,080,857 | ||||||
Property and equipment, net |
407,018 | 564,700 | ||||||
Deposits |
934,392 | 934,359 | ||||||
Total assets |
$ | 9,219,232 | $ | 3,579,916 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 725,620 | $ | 1,335,761 | ||||
Accrued expenses |
730,423 | 1,483,220 | ||||||
Related party payables |
| 51,973 | ||||||
Note payable |
| 243,468 | ||||||
Derivative liabilities |
534,217 | 9,633,105 | ||||||
Related party notes payable, net of debt discounts |
215,122 | 4,391,121 | ||||||
Total current liabilities |
2,205,382 | 17,138,648 | ||||||
Long-term liabilities: |
||||||||
Related party notes payable |
1,000,000 | 2,121,000 | ||||||
Total liabilities |
3,205,382 | 19,259,648 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity (deficit): |
||||||||
Series A convertible preferred stock, $0.001 par value; 20,000,000
shares authorized; none and 11,502,563 shares issued and outstanding, respectively |
| 11,503 | ||||||
Common stock, $0.001 par value; 150,000,000 shares authorized; |
||||||||
12,881,027
and 5,065,896 shares issued and outstanding, respectively |
12,881 | 5,066 | ||||||
Additional paid-in capital |
56,688,845 | 29,419,540 | ||||||
Accumulated deficit |
(50,692,245 | ) | (45,120,210 | ) | ||||
Accumulated other comprehensive income |
4,369 | 4,369 | ||||||
Total stockholders equity (deficit) |
6,013,850 | (15,679,732 | ) | |||||
Total liabilities and stockholders equity (deficit) |
$ | 9,219,232 | $ | 3,579,916 | ||||
See accompanying notes to condensed consolidated financial statements
3
Table of Contents
T3 MOTION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS (UNAUDITED)
COMPREHENSIVE LOSS (UNAUDITED)
Three Months Ended Ended June 30, | Six Months Ended Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net revenues |
$ | 1,330,966 | $ | 1,428,532 | $ | 2,327,528 | $ | 2,577,958 | ||||||||
Cost of net revenues |
1,178,864 | 1,221,824 | 2,135,796 | 2,349,273 | ||||||||||||
Gross profit |
152,102 | 206,708 | 191,732 | 228,685 | ||||||||||||
Operating Expenses: |
||||||||||||||||
Sales and marketing |
332,259 | 442,603 | 644,009 | 870,257 | ||||||||||||
Research and development |
226,647 | 431,961 | 460,559 | 752,467 | ||||||||||||
General and administrative |
925,335 | 887,571 | 1,746,880 | 1,916,984 | ||||||||||||
Total operating expenses |
1,484,241 | 1,762,135 | 2,851,448 | 3,539,708 | ||||||||||||
Loss from operations |
(1,332,139 | ) | (1,555,427 | ) | (2,659,716 | ) | (3,311,023 | ) | ||||||||
Other income (expense): |
||||||||||||||||
Interest income |
1,778 | 324 | 1,821 | 1,227 | ||||||||||||
Other income, net |
831,487 | 1,120,226 | 1,823,181 | 1,875,781 | ||||||||||||
Interest expense |
(169,507 | ) | (1,011,310 | ) | (473,452 | ) | (1,693,111 | ) | ||||||||
Total other income, net |
663,758 | 109,240 | 1,351,550 | 183,897 | ||||||||||||
Loss before provision for income tax |
(668,381 | ) | (1,446,187 | ) | (1,308,166 | ) | (3,127,126 | ) | ||||||||
Provision for income tax |
| | 800 | 800 | ||||||||||||
Net loss |
(668,381 | ) | (1,446,187 | ) | (1,308,966 | ) | (3,127,926 | ) | ||||||||
Deemed dividend to preferred
stockholders |
(3,398,269 | ) | (600,309 | ) | (4,263,069 | ) | (2,273,191 | ) | ||||||||
Net loss attributable to common stockholders |
$ | (4,066,650 | ) | $ | (2,046,496 | ) | $ | (5,572,035 | ) | $ | (5,401,117 | ) | ||||
Other comprehensive income: |
||||||||||||||||
Foreign currency translation income |
| 319 | | 524 | ||||||||||||
Comprehensive loss |
$ | (668,381 | ) | $ | (1,445,868 | ) | $ | (1,308,966 | ) | $ | (3,127,402 | ) | ||||
Net loss per share: basic and diluted |
$ | (0.47 | ) | $ | (0.42 | ) | $ | (0.81 | ) | $ | (1.16 | ) | ||||
Weighted average number of common shares
outstanding: |
||||||||||||||||
Basic and diluted |
8,672,880 | 4,853,847 | 6,879,353 | 4,680,435 | ||||||||||||
See accompanying notes to condensed consolidated financial statements
4
Table of Contents
T3 MOTION, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 2011 (UNAUDITED)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 2011 (UNAUDITED)
Accumulated | Total | |||||||||||||||||||||||||||||||
Preferred | Common | Additional | Other | Stockholders | ||||||||||||||||||||||||||||
Preferred | Stock | Common | Stock | Paid-in | Accumulated | Comprehensive | Equity | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Income | (Deficit) | |||||||||||||||||||||||||
BALANCE December 31, 2010 |
11,502,563 | $ | 11,503 | 5,065,896 | $ | 5,066 | $ | 29,419,540 | $ | (45,120,210 | ) | $ | 4,369 | $ | (15,679,732 | ) | ||||||||||||||||
Conversion of preferred stock to common stock |
(11,502,563 | ) | (11,503 | ) | 2,872,574 | 2,873 | 8,630 | | | | ||||||||||||||||||||||
Conversion of notes payable and accrued interest to common stock units |
| | 1,771,128 | 1,771 | 6,197,178 | | | 6,198,949 | ||||||||||||||||||||||||
Issuance of common stock units, net of offering costs of $2,100,659 |
| | 3,171,429 | 3,171 | 8,996,171 | | | 8,999,342 | ||||||||||||||||||||||||
Reclassification of derivative liability to equity due to conversion of preferred stock to common stock |
| | | | 4,182,992 | | | 4,182,992 | ||||||||||||||||||||||||
Reclassification of conversion feature derivative liability to equity
due to conversion of related party notes payable |
| | | | 702,605 | | | 702,605 | ||||||||||||||||||||||||
Preferred stock dividend |
| | | | 4,263,069 | (4,263,069 | ) | | | |||||||||||||||||||||||
Reclassification of derivative liability to equity due to price
adjustments on warrants |
| | | | 2,388,503 | | | 2,388,503 | ||||||||||||||||||||||||
Share-based
compensation expense |
| | | | 416,585 | | | 416,585 | ||||||||||||||||||||||||
Relative fair
value of warrants issued with related party notes payable |
| | | | 113,572 | | | 113,572 | ||||||||||||||||||||||||
Net loss |
| | | | (1,308,966 | ) | | (1,308,966 | ) | |||||||||||||||||||||||
BALANCE June 30, 2011 (unaudited) |
| $ | | 12,881,027 | $ | 12,881 | $ | 56,688,845 | $ | (50,692,245 | ) | $ | 4,369 | $ | 6,013,850 | |||||||||||||||||
See accompanying notes to condensed consolidated financial statements
5
Table of Contents
T3 MOTION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, | ||||||||
2011 | 2010 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net loss |
$ | (1,308,966 | ) | $ | (3,127,926 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Depreciation and amortization |
159,722 | 183,640 | ||||||
Warranty expense |
50,214 | 49,134 | ||||||
Share-based compensation expense |
416,585 | 416,272 | ||||||
Change in fair value of derivative liabilities |
(1,824,788 | ) | (1,867,179 | ) | ||||
Amortization of debt discounts |
137,573 | 1,430,524 | ||||||
Change in operating assets and liabilities: |
||||||||
Accounts and other receivables |
(244,454 | ) | (104,112 | ) | ||||
Inventories |
85,612 | (250,012 | ) | |||||
Prepaid expenses and other current assets |
(502,939 | ) | (197,591 | ) | ||||
Deposits |
(33 | ) | 31,838 | |||||
Purchase of certificate of deposit |
| (10,000 | ) | |||||
Accounts payable and accrued expenses |
(835,203 | ) | 170,767 | |||||
Related party payables |
(51,973 | ) | (104,931 | ) | ||||
Net cash used in operating activities |
(3,918,650 | ) | (3,379,576 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Loans/advances to related parties |
(3,698 | ) | (20,216 | ) | ||||
Purchases of property and equipment |
(2,040 | ) | (32,295 | ) | ||||
Repayment of loans/advances to related parties |
| 17,910 | ||||||
Net cash used in investing activities |
(5,738 | ) | (34,601 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Loans/advances from related parties |
| 50,000 | ||||||
Proceeds from related party notes payable |
1,300,000 | | ||||||
Proceeds from sale of common stock units, net of offering costs |
8,999,342 | | ||||||
Recission of common stock |
| (250,000 | ) | |||||
Proceeds from the sale of preferred stock, net of issuance costs |
| 1,155,000 | ||||||
Repayment of note payable |
(243,468 | ) | | |||||
Repayment of related party notes payable |
(1,000,000 | ) | | |||||
Net cash provided by financing activities |
9,055,874 | 955,000 | ||||||
Effect of exchange rate on cash |
| 524 | ||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
5,131,486 | (2,458,653 | ) | |||||
CASH AND CASH EQUIVALENTS beginning of period |
123,861 | 2,580,798 | ||||||
CASH AND CASH EQUIVALENTS end of period |
$ | 5,255,347 | $ | 122,145 | ||||
See accompanying notes to condensed consolidated financial statements
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Table of Contents
T3 MOTION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Continued
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Continued
Six Months Ended June 30, | ||||||||
2011 | 2010 | |||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION: |
||||||||
Cash paid during the period for: |
||||||||
Interest |
$ | 266,838 | $ | 39,118 | ||||
Income taxes |
$ | 800 | $ | 800 | ||||
Supplemental disclosure of non cash activities: |
||||||||
Conversion of notes payable and accrued interest to common stock units |
$ | 6,198,949 | $ | | ||||
Reclassification of conversion feature derivative liability to equity due to
conversion of related party notes payable to common stock units |
$ | 702,605 | $ | | ||||
Reclassification of derivative liability to equity due to price adjustments on
warrants |
$ | 2,388,503 | $ | | ||||
Conversion option of preferred stock and warrants issued with preferred
stock recorded as derivative liabilities |
$ | | $ | 1,401,360 | ||||
Reclassification of derivative liability to equity due to conversion of
preferred stock to common stock |
$ | 4,182,992 | $ | 1,121,965 | ||||
Debt discount and warrant liability recorded upon issuance of warrants |
$ | | $ | 563,103 | ||||
Amortization of preferred stock discount related to conversion feature and
warrants |
$ | 4,263,069 | $ | 2,273,191 | ||||
Debt
discount based on relative fair value of warrant issued in connection with related party
notes payable |
$ | 113,572 | $ | | ||||
Conversion of preferred stock to common stock |
$ | 11,503 | $ | 4,000 | ||||
Deposits for equipment |
$ | | $ | 470,599 | ||||
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Table of Contents
T3 MOTION, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
T3 Motion, Inc. was incorporated on March 16, 2006, under the laws of the state of Delaware.
T3 Motion and its wholly-owned subsidiary, T3 Motion, Ltd. (UK) (collectively, the Company), develop
and manufacture personal mobility vehicles powered by electric motors. The Companys initial
product, the T3 Series, is an electric, three-wheel stand-up vehicle (ESV) that is directly
targeted to the law enforcement and private security markets. Substantially all of the Companys
revenues to date have been derived from sales of the T3 Series ESVs and related accessories.
The
Company has entered into a distribution agreement with CT&T Co.,
Ltd, (CT&T) pursuant to which the Company
has the exclusive right to market and sell the CT Series Micro Car, which is a low speed,
four-wheel electric car, in the U.S. to the government, law enforcement and security markets.
The Company is currently developing the R3, an Electric/Hybrid Vehicle, which is a plug-in
hybrid vehicle that features a single, wide-stance wheel with two high-performance tires sharing
one rear wheel. The Company has entered into a Letter of Intent with Panoz Automotive to provide
engineering services and limited production for the launch of the R3. The Company anticipates
introducing the R3 Vehicle in late 2011.
Interim Unaudited Condensed Consolidated Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with the Securities and Exchange Commission (SEC) regulations for interim financial
information. The principles for condensed interim financial information do not require the
inclusion of all of the information and footnotes required by accounting principles generally
accepted in the United States of America (GAAP) for complete financial statements. Therefore,
these financial statements should be read in conjunction with the Companys Annual Report on Form
10-K for the year ended December 31, 2010. The condensed consolidated financial statements included
herein are unaudited; however, in the opinion of management, they contain all normal recurring
adjustments necessary for a fair presentation of the consolidated results for the interim periods.
The results of operations for the six months ended June 30, 2011 are not necessarily indicative of
the results that may be expected for the entire fiscal year.
The Company has evaluated subsequent events through the filing date of this quarterly report
on Form 10-Q, and determined that no subsequent events have occurred that would require recognition
in the condensed consolidated financial statements or disclosure in the notes thereto other than as
disclosed in the accompanying notes.
The Companys condensed consolidated financial statements have been prepared using the accrual
method of accounting in accordance with GAAP and have been prepared on a going concern basis, which
contemplates the realization of assets and the settlement of liabilities in the normal course of
business.
8
Table of Contents
The Company has incurred significant operating losses and
has used substantial amounts of working capital in its operations since its inception (March 16, 2006). The Company
has an accumulated deficit of $(50.7) million as of June 30, 2011, and has a net loss of $(1.3) million and used cash
in operations of $(3.9) million for the six months ended June 30, 2011. These factors raise substantial doubt about
the Companys ability to continue as a going concern.
The Company expects to continue to incur substantial additional operating losses from costs related to the
continuation of product and technology development and administrative activities. The Company believes that its
working capital at June 30, 2011 of $5.6 million, together with the revenues from the sale of its products, the implementation of its
cost reduction strategy for material, production and service costs and the recent $11.1 million Public Offering, is
sufficient to sustain its planned operations into the second quarter of 2012; however, the Company cannot assure
you of this and may require additional debt or equity financing in the future to maintain operations.
The Company anticipates that it will pursue raising additional debt or equity financing to fund its new product
development and expansion plans. The Company cannot make any assurances that management's cost reduction
strategies will be effective or that any additional financing will be completed on a timely basis, on acceptable terms
or at all. Managements inability to successfully implement its cost reduction strategies or to complete any other
financing will adversely impact the Company's ability to continue as a going concern.
Public Offering of the Companys Securities
On May 19, 2011, the Company consummated the $11.1 million Public Offering and received net proceeds of $8,999,342, after deducting
commissions and offering costs. In connection with the Public Offering, the Company sold to the
underwriters, for a purchase price of $100, a share purchase warrant to purchase up to an
additional 142,857 shares of common stock, at an exercise price of $4.38 per share.
The transaction resulted in the issuance of 3,171,429 units, at $3.50 per unit, of the
Companys securities. Each unit consists of one share of the Companys common stock, one Class H
warrant and one Class I warrant. Each warrant grants the holder the right to purchase one share of
the Companys common stock. In connection with the Public Offering, the Company effected a
one-for-10 reverse stock split of its common stock, which allowed it to meet the minimum share
price requirement of the NYSE Amex, LLC, (the AMEX). The Company has entered into agreements
offering contractual rights to investors that purchased $500,000 or more of our units in
the Public Offering or converted at least $500,000 of existing securities into substantially
identical units. The agreements with such investors grant them approval rights to certain change of
control transactions. Such agreements will also grant them approval rights, subject to certain
exceptions, to financings at a per share purchase price below the exercise price of their warrants.
The Company effected a one-for-10 reverse stock split of its common stock after the
effectiveness of the registration statement and prior to the closing of the Public Offering,
which allowed it to meet the minimum share price requirement to list on the NYSE Amex, LLC
(AMEX). All information included in this quarterly filing has been adjusted to reflect the
effect of the reverse stock split.
In connection with the Public Offering and AMEX listing, Vision Opportunity Master Fund, Ltd.
and Vision Capital Advantage Fund (collectively Vision); and Ki Nam, our Chief Executive Officer,
converted their $3.5 million and $2.1 million debentures plus accrued interest, respectively, into
1,138,885 and 632,243 units substantially identical to the units sold in the Public Offering. The
registration statement registering such securities for resale was declared effective by the SEC on
June 30, 2011.
In connection with the Public Offering and AMEX listing, the Companys preferred stockholders
have converted all outstanding Series A Convertible Preferred Stock (Series A Preferred) into
2,872,574 shares of the Companys common stock. Included in this conversion were of 9,370,698 and
976,865 shares of Series A Preferred held by Vision and Mr. Nam of 9,370,698 and 976,865,
respectively, which converted into 2,340,176 and 243,956 shares of common stock, respectively. The
registration statement registering such securities for resale was
declared effective by the SEC on June 30,
2011.
9
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Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of T3
Motion, Inc. and its wholly owned subsidiary, T3 Motion Ltd. (UK) (the Subsidiary). All
significant inter-company accounts and transactions are eliminated in consolidation.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities at the date of the condensed
consolidated financial statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates include, but are not limited to; collectibility of
receivables, recoverability of long-lived assets, realizability of inventories, warranty accruals,
valuation of share-based transactions, valuation of derivative liabilities and realizability of
deferred tax assets. The Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results could differ from those estimates.
Concentrations of Credit Risk
Cash and Cash Equivalents
The Company maintains its non-interest bearing transactional cash accounts at financial
institutions for which the Federal Deposit Insurance Corporation (FDIC) provides unlimited
insurance coverage through December 31, 2012. For interest bearing cash accounts, from time to
time, balances exceed the amount insured by the FDIC. The Company has not experienced any losses in
such accounts and believes it is not exposed to any significant credit risk related to these
deposits. At June 30, 2011, the Company had approximately $4.9 million in cash deposits in excess
of the FDIC limit.
The Company considers cash equivalents to be all short-term investments that have an initial
maturity of 90 days or less and are not restricted. The Company invests its cash in short-term
money market accounts.
Restricted Cash
Under a credit card processing agreement with a financial institution, the Company is required
to maintain a security deposit as collateral. The amount of the deposit is at the discretion of the
financial institution and as of June 30, 2011 was $10,000.
Accounts Receivable
The Company performs periodic evaluations of its customers and maintains allowances for
potential credit losses as deemed necessary. The Company generally does not require collateral to
secure accounts receivable. The Company estimates credit losses based on managements evaluation of
historical bad debts, customer concentrations, customer credit-worthiness, current economic trends
and changes in customer payment patterns when evaluating the adequacy of its allowance for doubtful
accounts. At June 30, 2011 and December 31, 2010, the Company had an allowance for doubtful
accounts of $47,626 and $50,000, respectively. Although the Company expects to collect amounts due,
actual collections may differ from the estimated amounts.
As of June 30, 2011 and December 31, 2010, no single customer accounted for more than 10% and
two customers accounted for approximately 51% of total accounts receivable, respectively. No
single customer accounted for more than 10% and one customer accounted for approximately 15% of
net revenues for the three months ended June 30, 2011 and 2010, respectively, and no single
customer accounted for more than 10% of net revenues and one customer accounted for 10% of net
revenues for the six months ended June 30, 2011 and 2010, respectively.
10
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Accounts Payable
As of June 30, 2011, one vendor accounted for approximately 17% of total accounts payable, and
as of December 31, 2010, no single vendor accounted for more than 10% of total accounts payable.
Two vendors accounted for approximately 19% and one vendor accounted for approximately 12% of
purchases for the three months ended June 30, 2011 and 2010, respectively, and three vendors
accounted for approximately 44% of purchases and two vendors accounted for 28% of purchases for the
six months ended June 30, 2011 and 2010, respectively.
Fair Value of Financial Instruments
The Companys financial instruments consist of cash and cash equivalents, restricted cash,
accounts receivable, related party receivables, accounts payable, accrued expenses, related party
payables, related party notes payable and derivative liabilities. The carrying value
for all such instruments except related party notes payable and derivative liabilities approximates
fair value due to the short-term nature of the instruments. The Company cannot determine the fair
value of its related party notes payable due to the related party nature and instruments similar to
the notes payable could not be found. The Companys derivative liabilities are recorded at fair
value (see Note 6).
The Company determines the fair value of its financial instruments based on a three-level
hierarchy for fair value measurements under which these assets and liabilities must be grouped,
based on significant levels of observable or unobservable inputs. Observable inputs reflect market
data obtained from independent sources, while unobservable inputs reflect the Companys market
assumptions. This hierarchy requires the use of observable market data when available. These two
types of inputs have created the following fair-value hierarchy:
Level 1 Valuations based on unadjusted quoted market prices in active markets for
identical securities. Currently the Company does not have any items classified as Level 1.
Level 2 Valuations based on observable inputs (other than Level 1 prices), such as
quoted prices for similar assets at the measurement date; quoted prices in markets that are not
active; or other inputs that are observable, either directly or indirectly. Currently the
Company does not have any items classified as Level 2.
Level 3 Valuations based on inputs that are unobservable and significant to the overall
fair value measurement, and involve management judgment. The Company used the
Black-Scholes-Merton option pricing model to determine the fair value of the instruments.
If the inputs used to measure fair value fall in different levels of the fair value hierarchy,
a financial securitys hierarchy level is based upon the lowest level of input that is significant
to the fair value measurement.
The
Companys cash equivalents consist of short-term investments in
money market funds which are carried at fair value, and are
classified as Level 1 assets.
Revenue Recognition
The Company recognizes revenues when there is persuasive evidence of an arrangement, product
delivery and acceptance have occurred, the sales price is fixed or determinable and collectability
of the resulting receivable is reasonably assured.
For all sales, the Company uses a binding purchase order as evidence of an arrangement. The
Company ships with either FOB Shipping Point or Destination terms. Shipping documents are used to
verify delivery and customer acceptance. For FOB Destination, the Company records revenue when
proof of delivery is confirmed by the shipping company. The Company assesses whether the sales
price is fixed or determinable based on the payment terms associated with the transaction and
whether the sales price is subject to refund. The Company offers a standard
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product warranty to its
customers for defects in materials and workmanship for a period of one year or 2,500 miles,
whichever comes first (see Note 9), and has no other post-shipment obligations. The Company
assesses collectibility based on the creditworthiness of the customer as determined by evaluations
and the customers payment history.
All amounts billed to customers related to shipping and handling are classified as net
revenues, while all costs incurred by the Company for shipping and handling are classified as cost
of net revenues.
The Company does not enter into contracts that require fixed pricing beyond the term of the
purchase order. All sales via distributor agreements are accompanied by a purchase order. Further,
the Company does not allow returns of unsold items.
The Company has executed various distribution agreements whereby the distributors agreed to
purchase T3 Series packages (one T3 Series, two power modules, and one charger per package). The
terms of the agreements require minimum re-order amounts for the vehicles to be sold through the
distributors in specified geographic regions. Under the terms of the agreements, the distributor
takes ownership of the vehicles and the Company deems the items sold at delivery to the
distributor.
Share-Based Compensation
The Company maintains a stock option plan (see Note 8) and records expenses attributable to
the stock option plan. The Company amortizes stock-based compensation from the date of grant on a
straight-line basis over the requisite service (vesting) period for the entire award using the
Black-Scholes-Merton option pricing model.
The Company accounts for equity instruments issued to consultants and vendors in exchange for
goods and services in accordance with the accounting standards. The measurement date for the fair
value of the equity instruments issued is determined at the earlier of (i) the date at which a
commitment for performance by the consultant or vendor is reached or (ii) the date at which the
consultant or vendors performance is complete. In the case of equity instruments issued to
consultants, the fair value of the equity instrument is recognized over the term of the consulting
agreement.
In accordance with the accounting standards, an asset acquired in exchange for the issuance of
fully vested, non-forfeitable equity instruments should not be presented or classified as an offset
to equity on the grantors balance sheet once the equity instrument is granted for accounting
purposes. Accordingly, the Company records the fair value of the fully vested, non-forfeitable
common stock issued for future consulting services as prepaid expense in its consolidated balance
sheets.
Upon the exercise of common stock options, the Company issues new shares from its authorized
shares.
Loss Per Share
Basic loss per share is computed by dividing loss applicable to common stockholders by the
weighted average number of common shares assumed to be outstanding during the period of
computation. Diluted loss per share is computed similar to basic loss per share except that the
denominator is increased to include the number of additional common shares that would have been
outstanding if the potential shares had been issued and if the additional common shares were
dilutive. Options, warrants and shares associated with the conversion of debt and preferred stock
to purchase approximately 12.1 million and 5.3 million shares of common stock were outstanding at
June 30, 2011 and 2010, respectively, but were excluded from the computation of diluted earnings
per share due to the net losses for the periods.
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Net loss |
$ | (668,381 | ) | $ | (1,446,187 | ) | $ | (1,308,966 | ) | $ | (3,127,926 | ) | ||||
Deemed
dividend to preferred stockholders |
(3,398,269 | ) | (600,309 | ) | (4,263,069 | ) | (2,273,191 | ) | ||||||||
Net loss attributable to
common stockholders |
$ | (4,066,650 | ) | $ | (2,046,496 | ) | $ | (5,572,035 | ) | $ | (5,401,117 | ) | ||||
Weighted average number of
common shares outstanding: |
||||||||||||||||
Basic and diluted |
8,672,880 | 4,853,847 | 6,879,353 | 4,680,435 | ||||||||||||
Net loss per share: |
||||||||||||||||
Basic and diluted |
$ | (0.47 | ) | $ | (0.42 | ) | $ | (0.81 | ) | $ | (1.16 | ) | ||||
Business Segments
The Company currently only has one reportable business segment due to the fact that the
Company derives its revenue primarily from one product. The CT Micro Car is not included in a
separate business segment due to nominal net revenues during the three and six months ended June
30, 2011. The revenue from domestic sales and international sales are shown below:
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Product | Net revenues | Net revenues | Net revenues | Net revenues | ||||||||||||
T3 Series domestic |
$ | 1,009,158 | $ | 1,313,011 | $ | 1,732,541 | $ | 2,379,590 | ||||||||
T3 Series International |
321,808 | 115,521 | 594,987 | 177,218 | ||||||||||||
CT Series domestic |
| | | 21,150 | ||||||||||||
$ | 1,330,966 | $ | 1,428,532 | $ | 2,327,528 | $ | 2,577,958 | |||||||||
NOTE 2 INVENTORIES
Inventories consist of the following:
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Raw materials |
$ | 809,910 | $ | 788,496 | ||||
Work-in-process |
98,479 | 212,723 | ||||||
Finished goods |
70,545 | 63,327 | ||||||
$ | 978,934 | $ | 1,064,546 | |||||
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NOTE 3 PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Prepaid inventory |
$ | 582,581 | $ | 148,410 | ||||
Prepaid expenses and other current assets |
171,825 | 103,057 | ||||||
$ | 754,406 | $ | 251,467 | |||||
NOTE 4 NOTE PAYABLE
Note payable consisted of the following:
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Note payable to Preproduction
Plastics, Inc., interest payable monthly at
6% per annum, monthly payments of $50,000
plus interest, due May 2011 |
| $ | 243,468 |
In accordance with a settlement agreement (see Note 9), the Company agreed to pay
compensatory damages, attorneys fees and costs totaling $493,468, to Preproduction Plastics, Inc.,
which was payable in monthly payments of $50,000 each, plus interest accruing at 6% per annum from
the date of the settlement. In May 2011, the Company repaid the outstanding note balance and related accrued interest. During the three and six months ended June 30, 2011, the
Company recorded $512 and $4,014 of interest expense, respectively.
NOTE 5 RELATED PARTY NOTES PAYABLE
Related party notes payable, net of discounts, consisted of the following:
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Note payable
to Immersive Media Corp. (Immersive), 19% interest rate,
net of unamortized
discount of $0 and $108,879, respectively. |
$ | | $ | 891,121 | ||||
Note payable to Vision Opportunity Master Fund, Ltd., 10% interest rate. |
| 3,500,000 | ||||||
Note payable to Ki Nam, 12% interest rate, due April 25,
2012, net of unamortized discount of $84,878 and $0, respectively. |
215,122 | 1,121,000 | ||||||
Note payable to Alfonso and Mercy Cordero, 10% interest rate, due October 1, 2013 |
1,000,000 | 1,000,000 | ||||||
1,215,122 | 6,512,121 | |||||||
Less: current portion |
(215,122 | ) | (4,391,121 | ) | ||||
$ | 1,000,000 | $ | 2,121,000 | |||||
Immersive Note
On December 31, 2007, the Company issued a 12% secured promissory note in the principal amount
of $2,000,000 to Immersive, one of the Companys stockholders. On March 31, 2008, the Company
repaid $1,000,000 of the principal amount. The note was originally due December 31, 2008 and was
secured by all of the Companys assets (see amendments below).
In connection with the issuance of the promissory note, the Company issued a warrant to
Immersive for the
purchase of 69,764 shares of the Companys common stock at an exercise price of $10.80 per
share. The warrants were immediately exercisable. The Company recorded a debt discount of $485,897
related to the fair value of the
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warrants, which was calculated using the Black-Scholes Merton
option pricing model. The debt discount was amortized to interest expense over the original term of
the promissory note.
First Amendment to Immersive Note
On December 19, 2008, the Company amended the terms of the promissory note with Immersive to,
among other things, extend the maturity date of the outstanding balance of $1,000,000 from December
31, 2008 to March 31, 2010 and give Immersive the option to convert the promissory note during the
pendency and prior to the closing of an equity offering into units of the Companys securities at
an original conversion price of $16.50 per unit. Each unit consists of one share of the Companys
common stock and a warrant to purchase one share of the Companys
common stock at an exercise price of $20.00 per share.
In the event the Company issues common stock or common stock equivalents for cash consideration in
a subsequent financing at an effective price per share less than the original conversion price, the
conversion price will reset to such effective price per share. The amended terms of the note resulted in terms that were
substantially different from the terms of the original note. As a result, the modification was
treated as an extinguishment of debt during the year ended December 31, 2008. There was no gain or
loss recognized in connection with the extinguishment. At the date of the amendment, the Company
did not record the value of the conversion feature as the conversion option was contingent on a
future event.
In December 2009, the
Company issued 2,000,000 shares of its Series A Preferred
in connection with an equity offering. As a result of the December 2009
equity offering, the Company recorded the estimated fair value of the conversion feature of $1,802
as a debt discount and amortized such amount to interest expense through the maturity of the note
on March 31, 2010. The Company recorded the corresponding amount as a derivative liability and any
change in fair value of the conversion feature was recorded through earnings.
As consideration for extending the terms of the promissory note in December 2008, the Company
agreed to issue warrants to Immersive for the purchase of up to 25,000 shares of the Companys
common stock at an exercise price of $20.00 per share, subject to adjustment. For every three
months that the promissory note was outstanding, the Company issued Immersive a warrant to purchase
5,000 shares of the Companys common stock. During the year ended December 31, 2009, the Company
issued warrants to Immersive to purchase 20,000 shares of the Companys common stock. The Company
recorded a debt discount of $139,778 based on the estimated fair value of the warrants issued
during the year ended December 31, 2009. As a result of the December 2009 equity offering, the
exercise price of the warrants was adjusted to $5.00 per share (see Note 6 for a discussion on
derivative liabilities). During the year ended December 31, 2010, the Company issued the remaining
5,000 warrants under the note. The Company recorded an additional debt discount of $15,274 based on
the estimated fair value of the 5,000 warrants issued during the year ended December 31, 2010.
During the three months ended March 31, 2010, the Company amortized $56,539 of the debt
discounts to interest expense. As of March 31, 2010, prior to the second amendment to the
Immersive note (see below), the debt discounts were fully amortized to interest expense.
Second Amendment to Immersive Note
On March 31, 2010, Immersive agreed to extend the note to April 30, 2010. As consideration for
extending the note, the Company agreed to exchange Immersives Class A warrants to purchase up to
69,764 shares of the Companys common stock at an exercise price of $10.80 per share and its Class
D warrants to purchase up to 25,000 shares of the Companys common stock at an adjusted exercise
price of $7.00 per share, for Class G warrants to purchase up to 69,764 shares and 25,000 shares of
the Companys common stock, respectively, each with an exercise price of $7.00 per share. The
Company recorded a debt discount and derivative liability of $1,898 based on the incremental
increase in the estimated fair value of the re-pricing of the 25,000 warrants. The Company recorded
an additional debt discount and derivative liability in the amount of $216,811 based on the
estimated fair value of the 69,764 warrants issued. The total debt discount was amortized in April
2010. The amended terms did not result in terms that were substantially different from the terms of
the original note. Therefore, there was no extinguishment of debt as a result of the second
amendment.
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The note and accrued interest were not repaid in full by April 30, 2010. As a result, per the
agreement, the maturity date was extended to March 31, 2011 and the Company issued Class G warrants
to purchase up to 104,000 shares of the Companys common stock at an exercise price of $7.00 per
share. The interest rate, which compounded annually, was also amended to 15.0%. The Company
recorded interest expense of $63,361 and $67,500, related to the stated rate of interest during the
six months ended June 30, 2011 and 2010, respectively, and had accrued interest of $0 and $110,000
at June 30, 2011 and December 31, 2010, respectively. The terms of the Class G warrants issued to
Immersive are substantially similar to prior Class G warrants issued by the Company. The Company
recorded a debt discount of $329,120 related to the fair value of the warrants issued. Amortization
of this debt discount was $0 and $108,879, $0 and $46,891 for the three and six months ended June
30, 2011 and 2010, respectively.
Third Amendment to Immersive Note
On March 30, 2011, Immersive agreed to extend the note to April 30, 2011. As
consideration for extending the note, the Company agreed to increase the interest rate to 19% per
annum compounded annually commencing on April 1, 2011. The amended terms of the note did not result
in terms that were substantially different from the terms of the original note, therefore there was
no extinguishment of debt.
Fourth Amendment to Immersive Note
On April 30, 2011, Immersive agreed to extend the note to May 20, 2011. All terms of the
note remained the same.
Repayment of Immersive Note
On May 20, 2011, the Company repaid Immersive the principal and accrued interest balance of
$1,127,861 due under the note.
Revaluation of Immersive derivative liabilities
As
a result of the Public Offering, the exercise price of the outstanding Series G common stock purchase warrants held by Immersive were adjusted (see Note 6).
Vision Opportunity Master Fund, Ltd. Bridge Financing
December 30, 2009 10% Convertible Debenture
On December 30, 2009, the Company sold $3,500,000 principal amount of 10% secured convertible
debentures (the Debentures) and warrants to Vision in a private placement pursuant to a
Securities Purchase Agreement (the Purchase Agreement).
The Debentures accrued interest on the unpaid principal balance at a rate equal to 10% per
annum. The maturity date of the Debentures was December 30, 2010 (see below). At any time after the
240th calendar day following the issue date, the Debentures were convertible into units of
Company securities at a conversion price of $1.00 per unit, subject to adjustment. Each unit
consisted of one share of the Companys Series A Preferred and a warrant to purchase one share of the
common stock. As a result of the 240th day passing, the Company recorded an additional debt
discount and corresponding derivative liability in the amount of $275,676 during the year ended
December 31, 2010 (see Note 6). The Company may redeem the Debentures in whole or part at any time
after June 30, 2010 for cash in an amount equal to 120% of the principal amount plus accrued and
unpaid interest and certain other amounts due in respect of the
Debentures. Interest on the
Debentures was payable in cash on the maturity date or, if sooner, upon conversion or redemption of
the Debentures. In the event of a default under the terms of the Debentures, the interest rate
increases to 15% per annum. The Company recorded interest expense of $47,639, $87,500, and $135,139
and $175,000 related to the stated rate of interest, for the three and six months ended June 30,
2011 and 2010, respectively, and had accrued interest of $0 and $350,959 as of June 30, 2011 and
December 31, 2010, respectively.
The Purchase Agreement provided that during the 18 months following December 30, 2009, if the
Company or
its wholly owned subsidiary, T3 Motion, Ltd., a company incorporated under the laws of the
United Kingdom (the Subsidiary), issue common stock, common stock equivalents for cash
consideration, indebtedness, or a
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combination of such securities in a subsequent financing (the
Subsequent Financing), Vision may participate in such Subsequent Financing in an amount
equal to Visions then percentage ownership of the Companys common stock.
The Purchase Agreement also provided that from December 30, 2009 to the date that the
Debentures are no longer outstanding, if the Company effected a Subsequent Financing, Vision may
elect, in its sole discretion, to exchange some or all of the Debentures then held by Vision for
any securities issued in a Subsequent Financing on a $1.00 for $1.00 basis (the Exchange);
provided, however, that the securities issued in a Subsequent Financing will be irrevocably
convertible, exercisable, exchangeable, or resettable (or any other similar feature) based on the
price equal to the lesser of (i) the conversion price, exercise price, exchange price, or reset
price (or such similar price) in such Subsequent Financing and (ii) $1.00 per share of common
stock. Vision was obligated to elect the Exchange on a $0.90 per $1.00 basis (not a $1.00 for $1.00
basis) if certain conditions regarding the Subsequent Financing and other matters were met.
Also pursuant to the Purchase Agreement, Vision received Class G common stock purchase
warrants (the Class G Warrants). Pursuant to the terms of the Class G Warrants, Vision is
entitled to purchase up to an aggregate of 350,000 shares of the Companys common stock at an
exercise price of $7.00 per share, subject to adjustment. The Class G Warrants have a term of five
years after the issue date of December 30, 2009.
In connection with the sale of the Debentures, the subsidiary entered into a subsidiary
guarantee (Subsidiary Guarantee) for Visions benefit with respect to the Companys obligations
due under the Debentures. In addition, the Company and the Subsidiary also entered into a security
agreement (Security Agreement) granting Vision a security interest in certain of the Companys
property to secure the prompt payment, performance, and discharge in full of all obligations under
the Debentures and the Subsidiary Guarantee.
Amendment to December 30, 2009 10% Convertible Debenture
On December 31, 2010, the Company and Vision amended the Debenture to extend the maturity date
from December 31, 2010 to March 31, 2011. All other provisions of the Debenture remained unchanged.
The amended terms of the Debenture did not result in terms that were substantially different from
the terms of the original Debenture, therefore there was no extinguishment of debt.
Second Amendment to December 30, 2009 10% Convertible Debenture
On March 31, 2011, the Company and Vision amended the Debenture to extend the maturity
date from March 31, 2011 to June 30, 2011. All other provisions of the Debenture remained
unchanged. The amended terms of the Debenture did not result in terms that were substantially
different from the terms of the original Debenture, therefore there was no extinguishment of debt.
Conversion of 10% Convertible Debenture Upon Closing of May Public Offering
In connection with the Public Offering and the AMEX Listing, the $3.5 million principal amount
of the Debentures plus accrued interest of $486,098 was converted into 1,138,885 units of the
Companys securities on May 19, 2011.
Debt Discounts and Amortization
The debt discount recorded on the Debentures was allocated between the warrants and conversion
feature in the amount of $1,077,652 and $1,549,481, respectively. In addition, the Company recorded
an additional debt discount during the year ended December 31, 2010 of $275,676 (see above). The
debt discounts were amortized through the original maturity of the Debentures of December 30, 2010.
During the three and six months ended June 30, 2011 and 2010, the Company amortized $0, $610,073,
$0 and $1,108,384, respectively, of the debt discounts to interest expense.
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Ki Nam Note
2009
Derivative Warrants
As
a result of the Public Offering, the exercise price of the
outstanding 27,478 purchase warrants held by Ki Nam, Chairman and Chief Executive Officer,
were adjusted to $7.87 per share.
2010 Note
On February 24, 2011, the Company entered into a loan agreement with Ki Nam, its Chairman and
Chief Executive Officer (the 2010 Note), for previous advances to the Company. The agreement allowed Mr. Nam to
advance up to $2.5 million for operating requirements. The 2010 Note bore interest at
10% per annum and was due on March 31, 2012, subject to an automatic one year extension. During
the year ended December 31, 2010, Mr. Nam advanced $1,511,000 to the Company to be used for
operating requirements. During October 2010, the Company repaid $390,000 of the advances, leaving a
balance of $1,121,000 outstanding as of December 31, 2010. During the six months ended June 30,
2011, Mr. Nam advanced $1,000,000 to the Company to be used for operating requirements. The
Company recorded interest expense of $32,529 and $68,095 for the three and six months ended June
30, 2011, respectively. The Company had accrued interest of $0 as of June 30, 2011 and $23,756 as of December 31,
2010, respectively.
Conversion of 2010 Note Upon Closing of May Public Offering
The outstanding balance of the 2010 Note of $2,121,000 plus accrued interest of $91,851
was converted into 632,243 units of the Companys securities upon completion of the Public Offering
which was completed on May 19, 2011.
2011 Note
On June 30, 2011, the Company entered into a loan agreement with Mr. Nam for previous
advances of $300,000 (the 2011 Note). The 2011 Note bears interest at 12% per annum and matures on
April 25, 2012; subject to an automatic one year extension. Interest payments are due monthly
commencing on July 1, 2011. In connection with the 2011 Note, the Company granted Mr. Nam warrants
to purchase 50,000 share of common stock. The exercise price per share of the common stock under
these warrants is $3.50 and the warrants expire on April 25,
2016. The Company recorded a debt discount of
$113,572 upon the issuance in connection with the 2011 Note. The debt
discount of $113,572 is based on the relative fair value of the
warrants which was calculated based on the Black-Scholes-option
pricing model using the assumptions of five years expected life, 2.1%
risk-free interest rate, and 148% expected volatility. The Company recorded
interest expense of $28,694 for the three and six months ended
June 30, 2011, respectively. The unamortized
discount as of June 30, 2011 is $84,878.
Lock Up Agreement
On May 16, 2011, Mr. Nam entered into a lock-up agreement pursuant to which he has
agreed not to sell any shares of our common stock for 12 months, subject to certain exceptions.
Alfonso Cordero and Mercy Cordero Note
On January 14, 2011, the Company issued a 10% unsecured promissory note (the Note) dated
September 30, 2010 in the principal amount of $1,000,000 that matures on October 1, 2013 to Alfonso
G. Cordero and Mercy B. Cordero, Trustees of the Cordero Charitable Remainder Trust (the
Noteholder) for amounts previously loaned to the Company in October 2010. The Note was dated as
of September 30, 2010. Interest payments of $8,333 are due on the first day of each calendar month
commencing November 1, 2010 and continuing each month thereafter. The Company recorded interest
expense of $25,000 and $50,000 for the three and six months ended June 30, 2011 and had accrued
interest of $0 and $24,277 as of June 30, 2011 and December 31, 2010, respectively.
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The
Company may prepay the Note in full, but not in part. The Company will be in default under
the Note upon: (1) failure to timely make payments due under the Note; and (2) failure to perform
other agreements under the Note within 10 days of request from the Noteholder. Upon such event of
default, the Noteholder may declare the Note
immediately due and payable. The applicable interest rate upon default will be
increased to 15% or the maximum rate allowed by law. On May 19, 2011, the Company paid
the outstanding accrued interest of $59,290, and at June 30, 2011 is in
compliance with all terms of the Note.
NOTE 6 DERIVATIVE LIABILITIES
The
Company applies the accounting standard that provides guidance for determining whether
an equity-linked financial instrument, or embedded feature, is indexed to an entitys own stock.
The standard applies to any freestanding financial instruments or embedded features that have the
characteristics of a derivative, and to any freestanding financial instruments that are potentially
settled in an entitys own common stock.
During 2010, the Company issued 104,000 warrants, respectively, related to convertible debt
(see Note 5). During 2010, the Company exchanged 69,764 of Class A warrants and 25,000 of Class B
warrants for 94,764 Class G warrants (see Note 5). The Company also recorded an additional
derivative liability of $275,676 related to the Vision Debentures during the year ended December
31, 2010 (see Note 5). The Company estimated the fair value of the warrants and conversion options
at the dates of issuance and recorded a debt discount and corresponding derivative liability of
$838,779 during 2010. The debt discount was amortized over the remaining life of the related debt.
The change in fair value of the derivative liability is recorded through earnings at each reporting
date.
As
a result of the Public Offering, the exercise price of the above noted purchase
warrants have been reduced due to the price protection clause. Accordingly, the fair value of the
related derivative liabilities has been adjusted.
During 2010, the Company issued additional warrants of 231,000, related to Preferred Stock
(see Note 7). The Company estimated the fair value of the warrants of $716,236 at the date of
issuance and recorded a discount on the issuance of the equity and a corresponding derivative
liability. The discount is recorded as a deemed dividend with a reduction to retained earnings. The
change in fair value of the derivative is recorded through earnings at each reporting date.
During
2010, the Company recorded a discount on the issuance of Series A Preferred and a
corresponding derivative liability of $685,124, related to the anti-dilution provision of the
Series A Preferred issued. The discount is recorded as a deemed dividend with a reduction to retained
earnings during the 24-month period that the anti-dilution provision is outstanding. The change in
fair value of the derivative liabilities is recorded through earnings at each reporting date.
During the three and six months ended June 30, 2011 and 2010, the amortization of the
discounts related to the Series A Preferred anti-dilution provision and warrants issued was
$3,398,269, $600,309, $4,263,069 and $2,273,191, respectively, which was recorded as a deemed
dividend.
On
March 22, 2010, one of the Companys preferred stockholders
exercised its option to
convert its 2,000,000 Series A Preferred into 400,000 shares of common stock (see Note 7). As a
result of the conversion, the Company reclassified the balance of the derivative liability of
$1,121,965 to additional paid-in capital and the balance of the discount of $1,099,742 as a deemed
dividend.
In connection with the Public Offering and AMEX listing on May 19, 2011, the Companys
preferred stockholders converted all outstanding Series A Preferred into
2,872,574 shares of the Companys common stock. Included in the conversion of the Series A Preferred are shares held by Vision and Mr. Nam of 9,370,698 and 976,865,
respectively, which converted into 2,340,176 and 243,956 shares of common stock, respectively.
These shares of common stock were registered on June 30, 2011.
As a result of the conversion of the Series A Preferred, the
Company reclassified the balance of the conversion feature derivative liabilities at the
date of conversion of $4,182,992 to additional paid-in
capital and recorded the remaining balance of the preferred stock
discount at the date of conversion as a deemed dividend.
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As of June 30, 2011 and December 31, 2010, the unamortized discount related to the conversion
feature of the Series A Preferred was $0 and $4,263,068, respectively.
On May 19, 2011, the Company entered into agreements with certain holders of Class G warrants
to amend their
Class G warrants such that the price-based anti-dilution provisions would be removed. In
exchange, the exercise price of the warrants was fixed at $5.00 per share. As a result of the agreements, the
Company reclassified the fair value of the derivative liabilities
related to these warrants on the date of the agreements of $2,388,503 to additional paid-in capital.
On May 19, 2011, Vision converted the Debentures into units of the Companys
securities. As a result of the conversion, the Company reclassified the remaining derivative
balance related to the conversion feature of $702,605 to additional paid-in capital.
The common stock purchase warrants were not issued with the intent of effectively hedging any
future cash flow, fair value of any asset, liability or any net investment in a foreign operation.
The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value
of these warrants will be recognized currently in earnings until such time as the warrants are
exercised or expire. These common stock purchase warrants do not trade in an active securities
market, and as such, the Company estimates the fair value of these warrants and embedded conversion
features using the Black-Scholes-Merton option pricing model using the following assumptions:
June 30, | ||||
2011 | ||||
(unaudited) | ||||
Annual dividend yield |
| |||
Expected life (years) |
0.11-4.08 | |||
Risk-free interest rate |
0.19%-2.24 | % | ||
Expected volatility |
144%-156 | % |
Expected volatility is based primarily on historical volatility of the Company, using weekly
pricing observations, and the Companys peer group, using daily pricing observations. Historical
volatility was computed for recent periods that correspond to the expected term. The Company
believes this method produces an estimate that is representative of its expectations of future
volatility over the expected term of these warrants.
The Company currently has no reason to believe future volatility over the expected remaining
life of these warrants is likely to differ materially from historical volatility. The expected life
is based on the remaining term of the warrants. The risk-free interest rate is based on one-year to
five-year U.S. Treasury securities consistent with the remaining term of the instrument.
During the three and six months ended June 30, 2011 and 2010, the Company recorded other
income of $835,051, $1,113,452, $1,824,788 and $1,867,179, respectively, related to the change in
fair value of the warrants and embedded conversion options and is included in other income, net in
the accompanying condensed consolidated statements of operations.
The following table presents the Companys warrants and embedded conversion options measured
at fair value on a recurring basis:
Level 3 | Level 3 | |||||||
Carrying Value | Carrying Value | |||||||
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Embedded conversion options |
$ | | $ | 5,991,957 | ||||
Warrants |
534,217 | 3,641,148 | ||||||
$ | 534,217 | $ | 9,633,105 | |||||
Decrease in fair value |
$ | 1,824,788 | ||||||
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The following table provides a reconciliation of the beginning and ending balances for the
Companys liabilities measured at fair value using Level 3 inputs (unaudited):
2011 | 2010 | |||||||
Beginning balance, January 1, |
$ | 9,633,105 | $ | 11,824,476 | ||||
Issuance of warrants and conversion option |
| 1,964,465 | ||||||
Reclassification of equity due to conversion of related party
notes payable to common stock units |
(702,605 | ) | | |||||
Reclassification to equity due to conversion of preferred
stock to common stock |
(4,182,992 | ) | (1,121,965 | ) | ||||
Reclassification
of equity due to exercise price adjustments on warrants |
(2,388,503 | ) | | |||||
Change in fair value |
(1,824,788 | ) | (1,867,179 | ) | ||||
Ending balance, June 30, |
$ | 534,217 | $ | 10,799,797 | ||||
NOTE 7 EQUITY
Series A Convertible Preferred Stock
The Companys Board of Directors has authorized 20,000,000 shares of Series A Preferred.
Except as otherwise provided in the Certificate of Designation of the Series A Preferred (the
Designation) or the Companys by-laws, each holder of shares of Series A Preferred shall have no
voting rights. As long as any shares of Series A Preferred are outstanding, however, the Company
shall not, without the affirmative vote of the holders of a majority of the then outstanding shares
of the Series A Preferred, (a) alter or change adversely the powers, preferences, or rights given
to the Series A Preferred or alter or amend the Designation, (b) authorize or create any class of
stock ranking as to dividends, redemption or distribution of assets upon a liquidation senior to or
otherwise pari passu with the Series A Preferred, (c) amend its certificate of incorporation or
other charter documents in any manner that adversely affects any rights of the holders of Series A
Preferred, (d) increase the number of authorized shares of the Series A Preferred, or (e) enter
into any agreement with respect to any of the foregoing.
Each share of Series A Preferred is convertible at any time and from time to time after the
issue date at the holders option into two shares of the Companys common stock (subject to
beneficial ownership limitations).
Holders of Series A Preferred are restricted from converting their shares into common stock if
the number of shares of common stock to be issued pursuant to such conversion would cause the
number of shares of common stock beneficially owned by such holder, together with its affiliates,
at such time to exceed 4.99% of the then issued and outstanding shares of common stock; provided,
however, that such holder may waive this limitation upon 61 days notice to the Company (the
Conversion Limitation). There are no redemption rights.
The
conversion price of the Series A Preferred (the Conversion
Price) shall be proportionately reduced for a stock dividend, stock split,
subdivision, combination or similar arrangements. The Conversion Price will also be reduced for any
sale of common stock (or options, warrants or convertible debt or other derivative securities) at a
purchase price per share less than the Conversion Price, subject to certain excepted issuances. The
Conversion Price will be reduced to such purchase price if such issuance occurs within the first 12
months of the original issuance date. The Conversion Price will be reduced to a price derived using
a weighted-average formula if the issuance occurs after the first 12 months but before the 24 month
anniversary of the original issuance date.
If, at any time while the Series A Preferred is outstanding, (A) the Company effects any
merger or consolidation of the Company with or into another person, (B) the Company effects any
sale of all or substantially all of its assets in one transaction or a series of related
transactions, (C) any tender offer or exchange offer (whether by the Company or another person) is
completed pursuant to which holders of common stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any reclassification of
the common stock or any compulsory share exchange pursuant to which the common stock is effectively
converted into
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or exchanged for other securities, cash or property (in any such case, a
Fundamental Transaction), then, upon any subsequent conversion of Series A Preferred, the holders
shall have the right to receive, for each Conversion Share
(as defined in Section 1 of the Series A Certificate) that would have been issuable upon such
conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and
amount of securities, cash or property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of one share of common stock.
On
March 22, 2010, one of the Companys preferred stockholders
exercised its option to
convert its 2,000,000 Series A Preferred Shares into 400,000 shares of common stock.
During 2010, under the terms of the offering, the Company issued and sold 1,155,000 shares of
Series A Preferred in a private placement In connection with the financing, the Company issued
five-year warrants to purchase 231,000 shares of common stock, exercisable at $7.00 per share. The
warrants are exercisable for five years (See Note 6 for additional discussion).
In
connection with the Public Offering and AMEX listing on May 19,
2011, the Designation was
amended to remove the Conversion Limitation and the Companys Series A preferred stockholders
converted all outstanding Series A Preferred into 2,872,574 shares of the
Companys common stock. Included in the conversion of the Series A Preferred are
shares held by Vision and Mr. Nam of 9,370,698 and 976,865, respectively, which converted into
2,340,176 and 243,956 shares of the Companys common stock respectively. The shares of common stock
were registered on June 30, 2011.
Common Stock
In September 2008, the Company sold to Piedmont Select Equity Fund (Piedmont) 12,500 shares
of its common stock at $20.00 per share for an aggregate price of $250,000. In December 2008, the
Company entered into a rescission agreement with Piedmont in which
the Company agreed to rescind Piedmonts stock purchase so long as affiliates of Piedmont were to purchase at least $250,000 of
Company equity securities. In March 2010, two investors affiliated with Piedmont purchased an
aggregate of 250,000 shares of the Companys Series A Preferred at $1.00 per share and
warrants to purchase 50,000 shares of Company common stock for a purchase price of $250,000.
Concurrent with the closing of such offering, the Company rescinded the purchase of the 12,500
shares of common stock. Piedmont delivered the 12,500 shares to the Company
and the Company returned the original purchase price of $250,000 to Piedmont.
On
May 16, 2011, the Company raised gross proceeds of $11.1 million in a public offering of its securities. The
offering closed on May 19, 2011, and the Company received net
proceeds of $8,999,342 after
deducting commissions and offering costs. In connection with the offering, the underwriters
exercised their share purchase warrant options of $100 for the
purchase up to an additional 142,857 shares of common stock at an
exercise price of $4.38 per share.
The
Public Offering resulted in the issuance of 3,171,429 units of the Companys securities. Each
unit consists of one share of the Companys common stock, one Class H warrant and one Class I
warrant. Each warrant grants the holder the right to purchase one share of the Companys common
stock. In connection with the offering, the Company effected a one-for-10 reverse stock split of
its common stock, which allowed it to meet the minimum share price requirement of the AMEX. The
Company has entered into agreements offering contractual rights to
investors that purchased
$500,000 or more of our units in the offering or converted at least $500,000 of existing
securities into substantially identical units. The agreements with such investors grant them
approval rights to certain change of control transactions. Such agreements will also grant them
approval rights, subject to certain exceptions, to financings at a per share purchase price below
the exercise price of their warrants.
On
June 30, 2011, the Company registered the resale by certain selling stockholders of (i)
1,771,128 shares of common stock, 1,771,128 Class H warrants and 1,771,128 Class I warrants
comprising units issued upon conversion of certain debt; (ii) 3,542,256 shares of common stock
underlying such Class H and Class I warrants; and (iii) 3,942,193 additional shares of common
stock, including shares underlying other outstanding warrants. Each Class H warrant entitles the
holder to purchase one share of the Companys common stock at an exercise price of $3.00 at any
time between August 19, 2011 and May 13, 2013. Each Class I warrant entitles the holder to
purchase one share of the Companys common stock at an exercise price of $3.50 at any time between
August 19, 2011 and May 13, 2016.
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NOTE 8 STOCK OPTIONS AND WARRANTS
Stock Option/Stock Issuance Plan
On
August 15, 2007, the Company adopted the 2007 Stock Option/Stock Issuance Plan (the 2007
Plan), under which stock awards or options to acquire shares of the Companys common stock may be
granted to employees, nonemployee members of the Companys board of directors, consultants or other
independent advisors who provide services to the Company. The 2007 Plan is administered by the
board of directors. The 2007 Plan permits the issuance of up to 745,000 shares of the Companys
common stock. Options granted under the 2007 Plan generally vest 25% per year over four years and
expire 10 years from the date of grant. The 2007 Plan was terminated with respect to the issuance
of new options or awards upon the adoption of the 2010 Stock Option/Stock Issuance Plan (the 2010
Plan); no further options or awards may be granted under the 2007 Plan.
During 2010, the Company adopted the 2010 Plan, under which stock awards or options to acquire
shares of the Companys common stock may be granted to employees, nonemployee members of the
Companys board of directors, consultants or other independent advisors who provide services to the
Company. The 2010 Plan is administered by the Companys board of directors. The 2010 Plan permits
the issuance of up to 650,000 shares of the Companys common stock. Options granted under the 2010
Plan generally vest 25% per year over four years and expire 10 years from the date of grant.
The following table sets forth the share-based compensation expense (unaudited):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Stock compensation expense cost of net
revenues |
$ | 11,190 | $ | 11,862 | $ | 23,333 | $ | 37,172 | ||||||||
Stock compensation expense sales and
marketing |
24,456 | 33,675 | 49,680 | 79,508 | ||||||||||||
Stock compensation expense research and
development |
25,715 | 15,428 | 48,870 | 61,259 | ||||||||||||
Stock compensation expense general and
administrative |
162,302 | 62,846 | 294,702 | 238,333 | ||||||||||||
Total stock compensation expense |
$ | 223,663 | $ | 123,811 | $ | 416,585 | $ | 416,272 | ||||||||
A summary of common stock option activity under the 2007 Plan and the 2010 Plan for the
six months ended June 30, 2011 is presented below (unaudited):
Weighted- | ||||||||||||||||
Weighted- | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Number of | Exercise | Contractual | Intrinsic | |||||||||||||
Shares | Price | Life | Value | |||||||||||||
Options outstanding January 1, 2011 |
649,090 | $ | 5.72 | |||||||||||||
Options granted |
330,000 | 5.00 | ||||||||||||||
Options exercised |
| | ||||||||||||||
Options forfeited |
(31,739 | ) | 5.03 | |||||||||||||
Options cancelled |
| | ||||||||||||||
Total options outstanding June 30, 2011 |
947,351 | $ | 5.49 | 8.36 | $ | | ||||||||||
Options exercisable June 30, 2011 |
332,723 | $ | 6.37 | 6.61 | $ | | ||||||||||
Options vested and expected to vest June 30, 2011 |
930,436 | $ | 5.50 | 8.34 | $ | | ||||||||||
Options available for grant under the 2010 Plan at June 30, 2011 |
61,049 | |||||||||||||||
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The weighted average fair value per share of options granted during the six months ended June 30,
2011 was $3.95.
The following table summarizes information about stock options outstanding and exercisable at
June 30, 2011 (unaudited):
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted- | ||||||||||||||||||||
Average | Weighted- | |||||||||||||||||||
Remaining | Weighted | Average | ||||||||||||||||||
Exercise | Number of | Contractual | Average | Number of | Exercise | |||||||||||||||
Prices | Shares | Life | Exercise Price | Shares | Price | |||||||||||||||
$5.00 |
653,851 | 9.20 | $ | 5.00 | 47,541 | $ | 5.00 | |||||||||||||
$6.00 |
193,500 | 6.53 | $ | 6.00 | 185,182 | $ | 6.00 | |||||||||||||
$7.70 |
100,000 | 6.45 | $ | 7.70 | 100,000 | $ | 7.70 | |||||||||||||
947,351 | 8.36 | $ | 5.49 | 332,723 | $ | 6.37 | ||||||||||||||
Summary of Assumptions and Activity
The fair value of each option award is estimated on the date of grant using the
Black-Scholes-Merton option pricing model for service and performance based awards, and a binomial
model for market based awards. The Company has only granted service based awards. In estimating
fair value, expected volatilities used by the Company were based on the historical volatility of
the underlying common stock of its peer group, and other factors such as implied volatility of
traded options of a comparable peer group. The expected life assumptions for all periods were
derived from a review of annual historical employee exercise behavior of option grants with similar
vesting periods of a comparable peer group. The risk-free rate used to calculate the fair value is
based on the expected term of the option. In all cases, the risk-free rate is based on the U.S.
Treasury yield bond curve in effect at the time of grant.
The assumptions used to calculate the fair value of options and warrants granted are evaluated
and revised, as necessary, to reflect market conditions and experience. The following table
presents details of the assumptions used to calculate the weighted-average grant date fair value of
common stock options and warrants granted by the Company, along with certain other pertinent
information:
June 30, | ||||
2011 | ||||
(unaudited) | ||||
Expected term ( in years) |
6.02 | |||
Expected volatility |
205 | % | ||
Risk-free interest rate |
2.6 | % | ||
Expected dividends |
| |||
Forefeiture rate |
2.8 | % |
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At June 30, 2011, the amount of unearned stock-based compensation currently estimated to be
expensed from fiscal 2011 through 2015 related to unvested common stock options is approximately
$2.1 million. The weighted-average period over which the unearned stock-based compensation is
expected to be recognized is approximately 3.1 years. If there are any modifications or
cancellations of the underlying unvested common stock options, the Company may be required to
accelerate, increase or cancel any remaining unearned stock-based compensation expense. Future
stock-based compensation expense and unearned stock-based compensation will increase to the extent
that the Company grants additional common stock options or other equity awards.
Warrants
From time to time, the Company issues warrants to purchase shares of the Companys common
stock to investors, note holders and non-employees for services rendered or to be rendered in
the future (See Notes 5 and 7). Such warrants are issued outside of the Plan. A summary of the
warrant activity for the six months ended June 30, 2011 is presented below (unaudited):
Weighted- | Weighted-Average | |||||||||||||||
Exercise | Contractual | Aggregate Intrinsic | ||||||||||||||
Number of Shares | Price | Life (in years) | Value | |||||||||||||
Warrants outstanding January 1,
2011 |
1,069,615 | $ | 5.14 | |||||||||||||
Warrants granted |
10,077,971 | 3.27 | ||||||||||||||
Warrants exercised |
| | ||||||||||||||
Warrants cancelled |
| | ||||||||||||||
Warrants outstanding and exercisable-
June 30, 2011 |
11,147,586 | $ | 3.45 | 3.46 | $ | | ||||||||||
NOTE 9 COMMITMENTS AND CONTINGENCIES
Warranties
The Companys warranty policy generally provides coverage for components of the vehicle, power
modules, and charger system that the Company produces. Typically, the coverage period is the
lesser of one calendar year or 2,500 miles, from the date of sale. Provisions for estimated
expenses related to product warranties are made at the time products are sold. These estimates are
established using estimated information on the nature, frequency, and average cost of claims.
Revision to the reserves for estimated product warranties is made when necessary, based on changes
in these factors. Management actively studies trends of claims and takes action to improve vehicle
quality and minimize claims.
The following table presents the changes in the product warranty accrual for the six months
ended June 30 (unaudited):
2011 | 2010 | |||||||
Beginning balance, January 1, |
$ | 165,641 | $ | 235,898 | ||||
Charged to cost of revenues |
50,214 | 49,134 | ||||||
Usage |
(54,425 | ) | (93,666 | ) | ||||
Ending balance, June 30, |
$ | 161,430 | $ | 191,366 | ||||
Legal Contingency
Preproduction Plastics, Inc. v. T3 Motion., Inc. Ki Nam and Jason Kim (Orange County Superior
Court Case No. 30.2009-00125358): On June 30, 2009, Preproduction Plastics, Inc. (Plaintiff)
filed suit in Orange County Superior Court, alleging causes of actions against T3 Motion, Inc., Ki
Nam, the Companys CEO, and Jason Kim, the Companys former COO (collectively the Defendants) for
breach of contract, conspiracy, fraud and common counts, arising out of a purchase order allegedly
executed between Plaintiff and the Company. On August 24, 2009,
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Defendants filed a Demurrer to the
Complaint. Prior to the hearing on the Demurrer, Plaintiff filed a First Amended Complaint against
Defendants for breach of contract, fraud and common counts, seeking compensatory damages of
$470,599, attorneys fees, punitive damages, interest and costs. On October 27, 2009, Defendants
filed a Demurrer, challenging various causes of action in the First Amended Complaint. The Court
denied the Demurrer on December 4, 2009. On December 21, 2009, Defendants filed an answer to the
First Amended Complaint, and trial was set for July 30, 2010. On or about July 29, 2010, the case
was settled in its entirety. The Company agreed to pay compensatory damages, attorneys fees and
costs totaling $493,468, through monthly payments of $50,000, with 6%
interest accruing from the date of the settlement. Periodic payments
were expected to be made
through May 2011. The first payment of $50,000 was made on August 3, 2010 and subsequent principal
payments totaling $200,000 were made by the Company through
December 31, 2010. The Company recorded the
entire settlement amount of $493,468 as a note payable, $470,599 as a deposit on fixed assets and
the remaining $22,869 as a charge to legal expense. At December 31, 2010, the remaining settlement
amount of $243,468 is recorded as a note payable in the accompanying condensed consolidated balance
sheet. The Company has recorded accrued interest of $0 and $4,126 at June 30, 2011 and December 31,
2010, respectively.
In
May 2011, the Company repaid the outstanding note balance and related
accrued interest. The case was
dismissed on June 22, 2011. During the three and six months ended June 30, 2011, the Company
recorded $512 and $4,014 of interest expenses, respectively.
In the ordinary course of business, the Company may face various claims brought by third
parties in addition to the claim described above and may, from time to time, make claims or take
legal actions to assert the Companys rights, including intellectual property rights as well as
claims relating to employment and the safety or efficacy of the Companys products. Any of these
claims could subject us to costly litigation and, while the Company generally believes that it has
adequate insurance to cover many different types of liabilities, the insurance carriers may deny
coverage or the policy limits may be inadequate to fully satisfy any damage awards or settlements.
If this were to happen, the payment of such awards could have a material adverse effect on the
consolidated operations, cash flows and financial position. Additionally, any such claims, whether
or not successful, could damage the Companys reputation and business. Management believes the
outcome of currently pending claims and lawsuits will not likely have a material effect on the
consolidated operations or financial position.
Indemnities and Guarantees
During the normal course of business, the Company has made certain indemnities and guarantees
under which it may be required to make payments in relation to certain transactions. These
indemnities include certain agreements with the Companys officers under which the Company may be
required to indemnify such person for liabilities arising out of their employment relationship. In
connection with its facility leases, the Company has indemnified its lessors for certain claims
arising from the use of the facilities. The duration of these indemnities and guarantees varies,
and in certain cases, is indefinite. The majority of these indemnities and guarantees do not
provide for any limitation of the maximum potential future payments the Company would be obligated
to make. Historically, the Company has not been obligated to make significant payments for these
obligations and no liability has been recorded for these indemnities and guarantees in the
accompanying condensed consolidated balance sheets.
NOTE 10 RELATED PARTY TRANSACTIONS
The following reflects the activity of the related party transactions for the respective
periods.
Controlling Ownership
Mr. Nam, the Companys Chief Executive Officer and Chairman of the Board of Directors,
together with his children, owns 29.3% of the outstanding shares of the Companys common stock.
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Accounts Receivable
As of June 30, 2011 and December 31, 2010, the Company has receivables of $35,722, due from
Graphion Technology USA LLC (Graphion) related to consulting services rendered and/or fixed
assets sold to Graphion. Graphion
is wholly owned by Mr. Nam. The amounts due are non-interest bearing and are due upon demand.
As of June 30, 2011 and December 31, 2010, there were outstanding related party receivables of
$3,698 and $0, respectively, due from Mr. Nam, which represents the rental obligation of Mr. Nam
for his month-to-month lease of excess warehouse space at the Companys facility in Costa Mesa, CA.
Related Party Payables
The Company purchases batteries and research and development parts and services from Graphion.
During the six months ended June 30, 2011 and 2010, the Company purchased no parts and services and
had an outstanding accounts payable balance of $0 and $51,973 at June 30, 2011 and December 31,
2010, respectively. During the three and six months ended June 30, 2010, the Company purchased
$100,000 of parts and services from Graphion.
Accrued Salary
As of June 30, 2011 and December 31, 2010, the Company owed Mr. Nam $0 and $40,000,
respectively, of salary pursuant to his employment agreement which is included in accrued expenses.
Notes Payable see Note 5
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
This quarterly report on Form 10-Q contains certain statements that may be deemed to be
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. All statements, other
than statements of historical facts, included in this report are forward-looking statements. When
used in this report, the words may, will, should, would, anticipate, estimate,
expect, plan, project, continuing, ongoing, could, believe, predict, potential,
intend, and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are subject to risks and uncertainties that could cause actual results
to differ materially from those projected. These risks and uncertainties include, but are not
limited to, changes in sales or industry trends, competition, retention of senior management and
other key personnel, availability of materials or components, ability to make continued product
innovations, casualty or work stoppages at the Companys facilities, adverse results of lawsuits
against the Company and currency exchange rates. Forward-looking statements are based on
assumptions and assessments made by the Companys management in light of their experience and their
perception of historical trends, current conditions, expected future developments and other factors
they believe to be appropriate. Readers of this report are cautioned not to place undue reliance on
these forward-looking statements, as there can be no assurance that these forward-looking
statements will prove to be accurate. Management undertakes no obligation to update any
forward-looking statements. This cautionary statement is applicable to all forward-looking
statements contained in this report. Readers should carefully review the risks described in other
documents we file from time to time with the Securities and Exchange Commission (SEC), including
the recently filed Annual Report on Form 10-K for the year ended December 31, 2010.
Overview
T3 Motion, Inc. was incorporated on March 16, 2006, under the laws of the state of Delaware.
T3 Motion and its wholly-owned subsidiary, T3 Motion, Ltd. (collectively, the Company), develop
and manufacture personal mobility vehicles powered by electric motors. The Companys initial
product, the T3 Series, is an electric, three-wheel stand-up vehicle (ESV) that is directly
targeted to the law enforcement and private security markets. Substantially all of the Companys
revenues to date have been derived from sales of the T3 Series ESVs and related accessories.
The Company has entered into a distribution agreement with CT&T pursuant to which the Company
has the exclusive right to market and sell the CT Series Micro Car, which is a low speed,
four-wheel electric car, in the U.S. to the government, law enforcement and security markets.
The Company is currently developing the R3, an Electric/Hybrid Vehicle, which is a plug-in
hybrid vehicle that features a single, wide-stance wheel with two high-performance tires sharing
one rear wheel. The Company has entered into a Letter of Intent with Panoz Automotive to provide
engineering services and limited production for the launch of the R3. The Company anticipates
introducing the R3 Vehicle in late 2011.
The Companys condensed consolidated financial statements have been prepared using the accrual
method of accounting in accordance with GAAP and have been prepared on a going concern basis, which
contemplates the realization of assets and the settlement of liabilities in the normal course of
business.
The Company expects to continue to incur substantial additional operating losses from costs
related to the continuation of product and technology development and administrative activities.
The Company believes that its working capital at June 30, 2011, together with the revenues from the
sale of its products, the implementation of its
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cost reduction strategy for material, production and service costs and the recent $11.1
million Public Offering, is sufficient to sustain its planned operations into the second quarter of
2012.
The
Company will need to seek additional financing sources to fund its product development
activities, and will be required to obtain substantial funding to commercialize any products that
it may successfully develop.
The Company anticipates that it will pursue raising additional debt or equity financing to
fund its new product development and expansion plans. The Company cannot make any assurances that
managements cost reduction strategies will be effective or that any additional financing will be
completed on a timely basis, on acceptable terms or at all. If the Company is unable to complete a
debt or equity offering, or otherwise obtain sufficient financing when and if needed, it may be
required to reduce, defer or discontinue one or more of its product development programs.
Public Offering of the Companys Securities
On May 19, 2011, the Company consummated a $11.1 million Public Offering and received net
proceeds of $8,999,342, after deducting
commissions and offering costs. In connection with the Public Offering, the Company sold to the
underwriters, for a purchase price of $100, a share purchase warrant to purchase up to an
additional 142,857 shares of common stock at an exercise price of $4.38 per share.
The transaction resulted in the issuance of 3,171,429 units, at $3.50 per unit, of the
Companys securities. Each unit consists of one share of the Companys common stock, one Class H
warrant and one Class I warrant. Each warrant grants the holder the right to purchase one share of
the Companys common stock. In connection with the Public Offering, the Company effected a
one-for-10 reverse stock split of its common stock, which allowed it to meet the minimum share
price requirement of the NYSE Amex, LLC, (the AMEX). The Company has entered into agreements
offering contractual rights to investors that purchased $500,000 or more of our units in the
Public Offering or converted at least $500,000 of existing securities into substantially identical units.
The agreements with such investors grant them approval rights to certain change of control
transactions. Such agreements will also grant them approval rights, subject to certain exceptions,
to financings at a per share purchase price below the exercise price of their warrants.
The Company effected a one-for-10 reverse stock split of its common stock after the
effectiveness of the registration statement and prior to the closing of the Public Offering, which
allowed it to meet the minimum share price requirement to list on the NYSE Amex, LLC (AMEX). All
information included in this quarterly filing has been adjusted to reflect the effect of the
reverse stock split.
In connection with the Public Offering and AMEX listing, Vision Opportunity Master Fund, Ltd.
and Vision Capital Advantage Fund (collectively Vision); and Ki Nam, our Chief Executive Officer,
converted their $3.5 million and $2.1 million debentures plus accrued interest, respectively, into
1,138,885 and 632,243 units substantially identical to the units sold in the Public Offering. The
registration statement registering such securities for resale was declared effective by the SEC on
June 30, 2011.
In connection with the Public Offering and AMEX listing, the Companys preferred stockholders
have converted all outstanding Series A Convertible Preferred Stock (Series A Preferred) into
2,872,574 shares of the Companys common stock. Included in this conversion were of 9,370,698 and
976,865 shares of Series A Preferred held by Vision and Mr. Nam of 9,370,698 and 976,865,
respectively, which converted into 2,340,176 and 243,956 shares of common stock, respectively. The
registration statement registering such securities for resale was
declared effective by the SEC on June 30,
2011.
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Lock Up Agreement
On May 16, 2011, Vision and Ki Nam entered into lock-up agreements pursuant to which such
parties have agreed not to sell any shares of our common stock for 12 months, subject to
exceptions.
Critical Accounting Policies and Estimates
Our managements discussion and analysis of our financial condition and results of operations
are based on our unaudited condensed consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of America (GAAP).
The preparation of these financial statements requires us to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements as well as the reported net sales and expenses
during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. We
base our estimates on historical experience and on various other factors that we believe are
reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions.
A summary of these policies can be found in the Managements Discussion and Analysis section
of the Companys Annual Report on Form 10-K for the year ended December 31, 2010. The following is
an update to the critical accounting policies and estimates.
Concentrations of Credit Risk
Cash and Cash Equivalents
The Company maintains its non-interest bearing transactional cash accounts at financial
institutions for which the Federal Deposit Insurance Corporation (FDIC) provides unlimited
insurance coverage through December 31, 2012. For interest bearing cash accounts, from time to
time, balances exceed the amount insured by the FDIC. The Company has not experienced any losses in
such accounts and believes it is not exposed to any significant credit risk related to these
deposits. At June 30, 2011, the Company had approximately $4.9 million in cash deposits in excess
of the FDIC limit.
The Company considers cash equivalents to be all short-term investments that have an initial
maturity of 90 days or less and are not restricted. The Company invests its cash in short-term
money market accounts.
Restricted Cash
Under a credit card processing agreement with a financial institution, the Company is required
to maintain a security deposit as collateral. The amount of the deposit is at the discretion of the
financial institution and as of June 30, 2011 was $10,000.
Accounts Receivable
The Company performs periodic evaluations of its customers and maintains allowances for
potential credit losses as deemed necessary. The Company generally does not require collateral to
secure accounts receivable. The Company estimates credit losses based on managements evaluation of
historical bad debts, customer concentrations, customer credit-worthiness, current economic trends
and changes in customer payment patterns when evaluating the adequacy of its allowance for doubtful
accounts. At June 30, 2011 and December 31, 2010, the Company had an allowance for doubtful
accounts of $47,626 and $50,000, respectively. Although the Company expects to collect amounts due,
actual collections may differ from the estimated amounts.
As of June 30, 2011 and December 31, 2010, no single customer accounted for more than 10%and two customers accounted for approximately 51% of total accounts receivable, respectively. No
single customer accounted for more than 10% and one customer accounted for approximately 15% of
net revenues for the three months ended June 30, 2011 and 2010, respectively, and no single customer accounted for more
than 10% of net revenues and one customer accounted for 10% of net revenues for the six months
ended June 30, 2011 and 2010 respectively.
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Accounts Payable
As of June 30, 2011, one vendor accounted for approximately 17% of total accounts payable, and
as of December 31, 2010, no single vendor accounted for more than 10% of total accounts payable.
Two vendors accounted for approximately 19% and one vendor accounted for approximately 12% of
purchases for the three months ended June 30, 2011 and 2010, respectively, and three vendors
accounted for approximately 44% of purchases and two vendors accounted for 28% of purchases for the
six months ended June 30, 2011 and 2010, respectively.
Fair Value of Financial Instruments
The Companys financial instruments consist of cash and cash equivalents, restricted cash,
accounts receivable,
related party receivables, accounts payable, accrued expenses, related party payables, note
payable, related party notes payable and derivative liabilities. The carrying value for all such
instruments except related party notes payable and derivative liabilities approximates fair value
due to the short-term nature of the instruments. The Company cannot determine the fair value of its
related party notes payable due to the related party nature and because instruments similar to the
notes payable could not be found. The Companys derivative liabilities are recorded at fair value.
The Company determines the fair value of its financial instruments based on a three-level
hierarchy for fair value measurements under which these assets and liabilities must be grouped,
based on significant levels of observable or unobservable inputs. Observable inputs reflect market
data obtained from independent sources, while unobservable inputs reflect the Companys market
assumptions. This hierarchy requires the use of observable market data when available. These two
types of inputs have created the following fair-value hierarchy:
Level 1 Valuations based on unadjusted quoted market prices in active markets for identical
securities. Currently, the Company does not have any items classified as Level 1.
Level 2 Valuations based on observable inputs (other than Level 1 prices), such as quoted
prices for similar assets at the measurement date; quoted prices in markets that are not active; or
other inputs that are observable, either directly or indirectly. Currently the Company does not
have any items classified as Level 2.
Level 3 Valuations based on inputs that are unobservable and significant to the overall
fair value measurement, and involve management judgment. The Company used the Black-Scholes-Merton
option pricing model to determine the fair value of the financial instruments.
If the inputs used to measure fair value fall in different levels of the fair value hierarchy,
a financial securitys hierarchy level is based upon the lowest level of input that is significant to the fair value
measurement.
The
Companys cash equivalents consist of short-term investments in
money market funds which are carried at fair value and are classified
as Level 1 assets.
Revenue Recognition
The Company recognizes revenues when there is persuasive evidence of an arrangement, product
delivery and acceptance have occurred, the sales price is fixed or determinable and collectibility
of the resulting receivable is reasonably assured.
For all sales, the Company uses a binding purchase order as evidence of an arrangement.
Delivery occurs when goods are shipped to customers. The Company ships with either FOB Shipping
Point or Destination terms. Shipping documents are used to verify delivery and customer acceptance.
For FOB Destination, the Company records revenue when proof of delivery is confirmed by the
shipping company. The Company assesses whether the sales price is
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fixed or determinable based on the payment terms associated with the transaction and whether
the sales price is subject to refund. The Company offers a standard product warranty to its
customers for defects in materials and workmanship for a period of one year or 2,500 miles,
whichever comes first, and has no other post-shipment obligations. The Company assesses
collectibility based on the creditworthiness of the customer as determined by evaluations and the
customers payment history.
All amounts billed to customers related to shipping and handling are classified as net
revenues, while all costs incurred by the Company for shipping and handling are classified as cost
of revenues.
The Company does not enter into contracts that require fixed pricing beyond the term of the
purchase order. All sales via distributor agreements are accompanied by a purchase order. Further,
the Company does not allow returns of unsold items.
The Company has executed various distribution agreements whereby the distributors agreed to
purchase T3 Series packages (one T3 Series, two power modules, and one charger per package). The
terms of the agreements require minimum re-order amounts for the vehicles to be sold through the
distributors in specified geographic regions. Under the terms of the agreements, the distributor
takes ownership of the vehicles and the Company deems the items sold at delivery to the
distributor.
Business Segments
The Company currently only has one reportable business segment due to the fact that the
Company derives its revenue primarily from one product. The CT Micro Car is not included in a
separate business segment due to nominal net revenues during the three and six months ended June
30, 2011. The revenue from domestic sales and, international sales are shown below:
For the Three Months Ended June 30, | For the Six Months Ended June 30,} | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Product | Net revenues | Net revenues | Net revenues | Net revenues | ||||||||||||
T3 Series domestic |
$ | 1,009,158 | $ | 1,313,011 | $ | 1,732,541 | $ | 2,379,590 | ||||||||
T3 Series International |
321,808 | 115,521 | 594,987 | 177,218 | ||||||||||||
CT Series domestic |
| | | 21,150 | ||||||||||||
$ | 1,330,966 | $ | 1,428,532 | $ | 2,327,528 | $ | 2,577,958 | |||||||||
Derivative Liabilities
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The Company applies the accounting standard that provides guidance for determining whether an
equity-linked financial instrument, or embedded feature, is indexed to an entitys own stock. The
standard applies to any freestanding financial instruments or embedded features that have the
characteristics of a derivative, and to any freestanding financial instruments that are potentially
settled in an entitys own common stock.
During 2010, the Company issued 104,000 warrants, respectively, related to convertible debt.
During 2010, the Company exchanged 69,764 of Class A warrants and 25,000 of Class B warrants for
94,764 Class G warrants. The Company also recorded an additional derivative liability of $275,676
related to the Vision Debentures during the year ended December 31, 2010. The Company estimated the fair value of the warrants and
conversion options at the dates of issuance and recorded a debt discount and corresponding
derivative liability of $838,779 during 2010. The debt discount was amortized over the remaining
life of the related debt. The change in fair value of the derivative liability is recorded through
earnings at each reporting date.
As a result of the Public Offering in May 2011, the exercise price of the above noted purchase
warrants have been reduced due to the price protection clause. Accordingly, the fair value of the
related derivative liabilities has been adjusted.
During
2010, the Company issued additional warrants of 231,000, related to
Series A Preferred.
The Company estimated the fair value of the warrants of $716,236 at the date of issuance and
recorded a discount on the issuance of the equity and a corresponding derivative liability. The
discount is recorded as a deemed dividend with a reduction to retained earnings. The change in fair
value of the derivative is recorded through earnings at each reporting date.
During
2010, the Company recorded a discount on the issuance of Series A Preferred and a
corresponding derivative liability of $685,124, related to the anti-dilution provision of the
Series A Preferred issued. The discount is recorded as a deemed dividend with a reduction to retained
earnings during the 24-month period that the anti-dilution provision is outstanding. The change in
fair value of the derivative liabilities is recorded through earnings at each reporting date.
During the three and six months ended June 30, 2011 and 2010, the amortization of the
discounts related to the Series A Preferred anti-dilution provision and warrants issued was
$3,398,269, $600,309, $4,263,069 and $2,273,191, respectively, which was recorded as a deemed
dividend.
On March 22, 2010, one of the Companys preferred stockholders exercised their option to
convert their 2,000,000 preferred shares into 400,000 shares of common stock. As a result of the
conversion, the Company reclassified the balance of the derivative liability of $1,121,965 to
additional paid-in capital and the balance of the discount of $1,099,742 as a deemed dividend.
In connection with the Public Offering and AMEX listing on May 19, 2011, the Companys
preferred stockholders converted all outstanding Series A Preferred into
2,872,574 shares of the Companys common stock. Included in the conversion of the Series A Preferred are shares held by Vision and Mr. Nam of 9,370,698 and 976,865,
respectively, which converted into 2,340,176 and 243,956 shares of common stock, respectively.
These shares of common stock were registered on June 30, 2011. As a result of the conversion of
the Series A Preferred, the Company reclassified the balance of
the conversion feature derivative
liabilities at the date of conversion of $4,182,992 to additional paid-in capital and recorded the
remaining balance of the preferred stock discount at the date of conversion as a deemed dividend.
As of June 30, 2011 and December 31, 2010, the unamortized discount related to the conversion
feature of the Series A Preferred was $0 and $4,263,068, respectively.
On May 19, 2011, the Company entered into agreements with certain holders of Class G warrants
to amend their Class G warrants such that the price-based anti-dilution provisions would be
removed. In exchange, the exercise price of the warrants was fixed at $5.00 per share. As a
result of the agreements, the Company reclassified the fair value of the derivative liabilities
related to these warrants on the date of the agreements of $2,388,503 to additional paid-in capital.
On May 19, 2011, Vision converted the Debentures into units of the Companys securities. As a
result of the conversion, the Company reclassified the remaining derivative balance of $702,605 to
additional paid-in capital.
During the three and six months ended June 30, 2011 and 2010, the Company recorded other
income of $835,051, $1,113,452, $1,824,788 and $1,867,179, respectively, related to the change in
fair value of the warrants and embedded conversion options and is included in other income, net in
the accompanying condensed consolidated statements of operations.
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Loss Per Share
Basic loss per share is computed by dividing loss applicable to common stockholders by the
weighted average number of common shares assumed to be outstanding during the period of
computation. Diluted loss per share is computed similar to basic loss per share except that the
denominator is increased to include the number of additional common shares that would have been
outstanding if the potential shares had been issued and if the additional common shares were
dilutive. Options, warrants and shares associated with the conversion of debt and preferred stock
to purchase approximately 12.1 million and 5.3 million shares of common stock were outstanding at
June 30, 2011 and 2010, respectively, but were excluded from the computation of diluted earnings
per share due to the net losses for the periods.
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Net loss |
$ | (668,381 | ) | $ | (1,446,187 | ) | $ | (1,308,966 | ) | $ | (3,127,926 | ) | ||||
Deemed
dividend to preferred stockholders |
(3,398,269 | ) | (600,309 | ) | (4,263,069 | ) | (2,273,191 | ) | ||||||||
Net loss
attributable to common stockholders |
$ | (4,066,650 | ) | $ | (2,046,496 | ) | (5,572,035 | ) | (5,401,117 | ) | ||||||
Weighted
average number of common shares outstanding: |
||||||||||||||||
Basic and diluted |
8,672,880 | 4,853,847 | 6,879,353 | 4,680,435 | ||||||||||||
Net loss per share: |
||||||||||||||||
Basic and diluted |
$ | (0.47 | ) | $ | (0.42 | ) | (0.81 | ) | (1.16 | ) | ||||||
Commitments and Contingencies
Preproduction Plastics, Inc. v. T3 Motion., Inc. Ki Nam and Jason Kim (Orange County Superior
Court Case No. 30.2009-00125358): On June 30, 2009, Preproduction Plastics, Inc. (Plaintiff)
filed suit in Orange County Superior Court, alleging causes of actions against T3 Motion, Inc., Ki
Nam, the Companys CEO, and Jason Kim, the Companys former COO (collectively the Defendants) for
breach of contract, conspiracy, fraud and common counts, arising out of a purchase order allegedly
executed between Plaintiff and the Company. On August 24, 2009, Defendants filed a Demurrer to the
Complaint. Prior to the hearing on the Demurrer, Plaintiff filed a First Amended Complaint against
Defendants for breach of contract, fraud and common counts, seeking compensatory damages of
$470,599, attorneys fees, punitive damages, interest and costs. On October 27, 2009, Defendants
filed a Demurrer, challenging various causes of action in the First Amended Complaint. The Court
denied the Demurrer on December 4, 2009. On December 21, 2009, Defendants filed an answer to the
First Amended Complaint, and trial was set for July 30, 2010. On or about July 29, 2010, the case
was settled in its entirety. The Company agreed to pay compensatory damages, attorneys fees and
costs totaling $493,468, through monthly payments of $50,000, with 6% interest accruing from the
date of the settlement. Periodic payments were expected to be made through May 2011. The first
payment of $50,000 was made on August 3, 2010 and subsequent principal payments totaling $200,000
were made by the Company through December 31, 2010. The Company recorded the entire settlement
amount of $493,468 as a note payable, $470,599 as a deposit on fixed assets and the remaining
$22,869 as a charge to legal expense. At December 31, 2010, the remaining settlement amount of
$243,468 is recorded as a note payable in the accompanying condensed consolidated balance sheet.
The Company has recorded accrued interest of $0 and $4,126 at June 30, 2011 and December 31, 2010,
respectively.
In May 2011, the Company repaid the outstanding note balance and related accrued interest,
The case was dismissed on June 22, 2011. During the three and six months ended June 30, 2011, the
Company recorded $512 and $4,014 of interest expenses, respectively.
In the ordinary course of business, the Company may face various claims brought by third
parties in addition to the claim described above and may from time to time, make claims or take
legal actions to assert the Companys rights, including intellectual property rights as well as
claims relating to employment and the safety or efficacy of the Companys products. Any of these
claims could subject us to costly litigation and, while the Company generally believes that it has
adequate insurance to cover many different types of liabilities, the insurance carriers may deny
coverage or the policy limits may be inadequate to fully satisfy any damage awards or settlements.
If this were to
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happen, the payment of such awards could have a material adverse effect on the consolidated
operations, cash flows and financial position. Additionally, any such claims, whether or not
successful, could damage the Companys reputation and business. Management believes the outcome of
currently pending claims and lawsuits will not likely have a material effect on the consolidated
operations or financial position.
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Results of Operations
The following table sets forth the results of our operations for the three and six months
ended June 30, 2011 and 2010 (unaudited):
Three Months Ended Ended June 30, | Six Months Ended Ended June 30,} | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net revenues |
$ | 1,330,966 | $ | 1,428,532 | $ | 2,327,528 | $ | 2,577,958 | ||||||||
Cost of net revenues |
1,178,864 | 1,221,824 | 2,135,796 | 2,349,273 | ||||||||||||
Gross profit |
152,102 | 206,708 | 191,732 | 228,685 | ||||||||||||
Operating Expenses: |
||||||||||||||||
Sales and marketing |
332,259 | 442,603 | 644,009 | 870,257 | ||||||||||||
Research and development |
226,647 | 431,961 | 460,559 | 752,467 | ||||||||||||
General and administrative |
925,335 | 887,571 | 1,746,880 | 1,916,984 | ||||||||||||
Total operating expenses |
1,484,241 | 1,762,135 | 2,851,448 | 3,539,708 | ||||||||||||
Loss from operations |
(1,332,139 | ) | (1,555,427 | ) | (2,659,716 | ) | (3,311,023 | ) | ||||||||
Other income (expense): |
||||||||||||||||
Interest income |
1,778 | 324 | 1,821 | 1,227 | ||||||||||||
Other income, net |
831,487 | 1,120,226 | 1,823,181 | 1,875,781 | ||||||||||||
Interest expense |
(169,507 | ) | (1,011,310 | ) | (473,452 | ) | (1,693,111 | ) | ||||||||
Total other income, net |
663,758 | 109,240 | 1,351,550 | 183,897 | ||||||||||||
Loss before provision for income tax |
(668,381 | ) | (1,446,187 | ) | (1,308,166 | ) | (3,127,126 | ) | ||||||||
Provision for income tax |
| | 800 | 800 | ||||||||||||
Net loss |
(668,381 | ) | (1,446,187 | ) | (1,308,966 | ) | (3,127,926 | ) | ||||||||
Deemed
dividend to preferred stockholders |
(3,398,269 | ) | (600,309 | ) | (4,263,069 | ) | (2,273,191 | ) | ||||||||
Net loss attributable to common stockholders |
$ | (4,066,650 | ) | $ | (2,046,496 | ) | $ | (5,572,035 | ) | $ | (5,401,117 | ) | ||||
Other comprehensive income: |
||||||||||||||||
Foreign currency translation income |
| 319 | | 524 | ||||||||||||
Comprehensive loss |
$ | (668,381 | ) | $ | (1,445,868 | ) | $ | (1,308,966 | ) | $ | (3,127,402 | ) | ||||
Net loss per share: basic and diluted |
$ | (0.47 | ) | $ | (0.42 | ) | $ | (0.81 | ) | $ | (1.16 | ) | ||||
Weighted
average number of common shares outstanding: |
||||||||||||||||
Basic and diluted |
8,672,880 | 4,853,847 | 6,879,353 | 4,680,435 | ||||||||||||
Net revenues. Net revenues are primarily from sales of the T3 Series, T3i Series, power
modules, chargers, related accessories and service. Net revenues decreased ($97,566), or (6.8%), to
$1,330,966 for the three months ended June 30, 2011 and decreased ($250,430), or (9.7%) to
$2,327,528 for the six months ended June 30, 2011 compared to the same periods of the prior year.
The decrease was primarily due to certain of our customers deferring purchasing decisions, thereby
lengthening our sales cycles, as well as vendor supply issues resulting in orders placed by
customers not being shipped during the quarter coupled with our short supply of cash to adequately
purchase parts in a timely and cost-effective manner to meet our orders. The delays in our parts
due to our increased vendor lead times along with our inadequate cash position, has resulted in an
increased backlog. To date, we have not experienced
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significant cancelled orders. The decreases were offset in part by expansion into new markets,
increase in orders placed due to the slight economic recovery, achieving a higher average selling
price per unit and an increase in service and parts revenue. We anticipate that the net proceeds
from the Public Offering will reduce our delays and also allow us to place orders with our vendors
in accordance with their current lead times. This should return our lead times back to our
standard of approximately 2-4 weeks. Our backlog at June 30, 2011 was approximately $4.4 million
compared to $1.0 million as of June 30, 2010.
Cost of net revenues. Cost of net revenues consisted of materials, labor to produce vehicles and
accessories, warranty and service costs and applicable overhead allocations. Cost of net revenues
decreased ($42,960), or (3.5%), to $1,178,864 for the three months ended June 30, 2011 and
decreased ($213,477), or (9.1%), to $2,135,796 for the six months ended June 30, 2011 compared to
the same periods of the prior year. This decrease in cost of net revenues is primarily attributable
to managements cost reduction strategy. The decrease was offset in part by increased shipping
costs due to our cash position and the inability to purchase product at the appropriate lead times
to prevent overnight or air freight charges, thereby increasing our costs.
Gross profit. Managements efforts to continue to source lower product costs and increase
production efficiencies, was offset in part by cash constraints resulting in increased shipping
costs, and vendor supply issues, resulting in gross profit of $152,102 for the three months ended
June 30, 2011, compared to a gross profit of $206,708 for the same period of the prior year and
achieved a gross profit of $191,732 for the six months ended June 30, 2011, compared to gross
profit of $228,685 for the same period of the prior year. Management has and will continue to
evaluate the processes and materials to reduce the costs of net revenues over the next periods.
Gross profit margin was 11.4% and 14.5%, respectively, for the three months ended June 30, 2011 and
2010 and 8.2% and 8.9% for the six months ended June 30, 2011 and 2010, respectively.
Sales and marketing. Sales and marketing decreased by ($110,344), or (24.9%), to $332,259 for
the three months ended June 30, 2011, compared to the same period of the prior year and decreased
by ($226,248), or (26.0%) for the six months ended June 30, 2011 compared to the same period of the
prior year. The decrease in sales and marketing expense was attributable to a reduction in
salaries and commissions due to restructuring of commission plans and decreased sales along with
decreases in trade show and travel expenses.
Research and development. Research and development costs include development expenses such as
salaries, consultant fees, cost of supplies and materials for samples and prototypes, as well as
outside services costs. Research and development expense decreased by ($205,314), or (47.5%), to
$226,647 for the three months ended June 30, 2011 compared to the same period of the prior year and
decreased by ($291,908), or (38.8%), to $460,559 for the six months ended June 30, 2011 compared
to the prior year. The decrease was due in large part to a reduction in salaries and employee
costs as well as a reduction in material costs due to the completion of the electric/hybrid vehicle
prototype during the first quarter of 2011.
General and administrative. General and administrative expenses increased by $37,764, or 4.3%,
to $925,335, for the three months ended June 30, 2011 compared to the same period of the prior year
and decreased ($170,104), or (8.9%), to $1,746,880 for the six months ended June 30, 2011 compared
to the prior year. The increase during the three months ended June 30, 2011 was due to increased
travel costs incurred as a result of the offering along with the implementation of the Companys
investor relations strategy. The decrease during the six months ended June 30, 2011 was due to a decrease in compliance expenses, offset in part by
increased costs associated with travel incurred as a result of the offering and the implementation
of the Companys investor relations strategy.
Other income, net. Other income, net increased by $554,518, or 507.6%, to $663.758
for the three months ended June 30, 2011 and increased by $1,167,653, or 634.9%, to $1,351,550 for
the six month ended June 30, 2011 compared to the prior year. The increase was primarily due to a decrease
in interest expense due to the conversion of certain notes payable into the Companys
common stock, a decrease in debt discount amortization from the prior year and decreased interest
due to the Company paying off $1.0 million of debt. These decreases were offset in part by the
decrease in the gain on change in fair value of the mark-to-market of the Companys derivative liabilities due to
the reclassification of the derivatives to equity as a result of the transactions associated with
the Amex listing.
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Deemed dividend. Deemed dividend increased by $2,797,960 or 466.1%, to $3,398,269 for the
three months ended June 30, 2011 compared to the same period of the prior year and increased by $1,989,878,
or 87.5%, to $4,263,069 for the six months ended June 30, 2011 compared to the same period of the
prior year. The deemed dividend is the result of the amortization of the discount on the Series A
convertible preferred stock. The increase was attributable to the conversion of 11,502,263 shares
of Series A Preferred stock into 2,872,574 shares of common stock resulting in full amortization of the
preferred stock deemed dividend during the three months ended June 30, 2011.
Net loss attributable to common stockholders. Net loss attributable to common stockholders for
the three months ended June 30, 2011, was ($4,066,650), or ($0.47) per basic and diluted share
compared to a loss of ($2,046,496), or ($0.42) per basic and diluted share, for the same period of
the prior year. Net loss attributable to common stockholders for the six months ended June 30,
2011, was ($5,572,035), or ($0.81) per basic and diluted share compared to a loss of ($5,401,117),
or ($1.16) per basic and diluted share, for the same period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
Our principal capital requirements are to fund our working capital requirements, invest in
research and development and capital equipment, to make debt service payments and the continued
costs of public company filing requirements. We have historically funded our operations through
debt and equity financings. On May 19, 2011, we have completed the Public Offering raising net
proceeds of approximately $9.0 million, after deduction of underwriting discounts and offering
expenses.
For the year ended December 31, 2010, our independent registered public accounting
firm noted in its report that we have incurred losses from operations and have an accumulated
deficit and working capital deficit of approximately $(45.1) million and $(15.1) million,
respectively, as of December 31, 2010, which raises substantial doubt about our ability to continue
as a going concern. The Company has incurred significant operating losses and has used
substantial amounts of working capital in its operations since its inception (March 16, 2006). The
Company has an accumulated deficit of $(50.7) million and
working capital of $5.6 million as of June 30, 2011, and has a net loss of
$(1.3) million and used cash in operations of $(3.9) million for the six months ended June 30,
2011. These factors raise substantial doubt about the Companys ability to continue as a going
concern.
The Company expects to continue to incur substantial additional operating losses from costs
related to the continuation of product and technology development and administrative activities.
The Company believes that its working capital at June 30, 2011 of $5.6 million, together with the revenues from the
sale of its products, the implementation of its cost reduction strategy for material, production
and service costs and the recent $11.1 million Public Offering, is sufficient to sustain its
planned operations into the second quarter of 2012; however, the Company cannot assure you of this
and may require additional debt or equity financing in the future to maintain operations.
The Company anticipates that it will pursue raising additional debt or equity financing to fund its
new product development and expansion plans. The Company cannot make any assurances that
managements cost reduction strategies will be effective or that any additional financing will be
completed on a timely basis, on acceptable terms or at all. Managements inability to successfully
implement its cost reduction strategies or to complete any other financing will adversely impact
the Companys ability to continue as a going concern.
During 2011, the Company has received proceeds from related-party loans of $1.3
million, completed a public offering raising $9.0 million (net of offering costs), converted
related party notes payable outstanding balances of $5.6 million, plus accrued interest of $578k, into
equity and paid off the outstanding balance of the $1.0 million related to the note to Immersive.
In light of these plans, management is confident in the Companys ability to continue as a going
concern. These condensed consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Until management achieves our cost reduction strategy and is able to generate sales to realize
the benefits of the strategy and sufficiently increases cash flow from operations, we will require
additional capital to meet our working capital requirements, debt service, research and
development, capital requirements and compliance requirements. We will continue to raise
additional equity and/or financing to meet our working capital requirements.
Our principal sources of liquidity are cash and receivables. As of June 30, 2011, cash and
cash equivalents were $5,255,347 or 57.0% of total assets compared to $123,861, or 3.5% of total
assets as of December 31, 2010.
Cash Flows
For the six months ended June 30, 2011 and 2010
Net cash used in operating activities for the six months ended June 30, 2011 and 2010 were
($3,918,650) and ($3,379,576), respectively. Net cash flows used were primarily due to a net loss
of ($1,308,966), net non-cash reconciling items of ($1,060,694), a decrease in accounts payable and
accrued expenses of $(835,203) and an increase in prepaid expenses and other current assets of ($502,939).
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For the six months ended June 30, 2010, cash flows used in operating activities related
primarily to the net loss of ($3,127,926), offset by net non-cash reconciling items of $212,391.
Net cash flows used were due in part by increases in accounts receivable, inventories, and other
current assets of $104,112, $250,012 and $197,591, respectively, a purchase of a certificate of
deposit for $10,000, an increase in accounts payable and deposits of $170,767 and $31,838,
respectively and a decrease in related party payables of $104,931.
Net cash used in investing activities of $5,738 for the six months ended June 30, 2011
primarily related to an advance to related parties of $3,698.
Net cash used in investing activities of $34,601 for the six months ended June 30, 2010
related primarily to purchases of property and equipment of $32,295 and loans to related parties of
$20,216, offset by repayment of loans to related parties of $17,910.
Net cash provided by financing activities of $9,055,874 for the six months ended June 30, 2011
related primarily to proceeds of $8,999,342 proceeds from sale of units of the Companys securities, net of
issuance costs, proceeds from related party note payables of $1,300,000 offset by the payment of
$1,000,000 related party notes payable.
Net cash provided by financing activities was $955,000 for the six months ended June 30, 2010.
For the six months ended June 30, 2010, cash flows provided by financing activities related to
proceeds from the sale of preferred stock of $1,155,000, and a related party payable for $50,000,
offset by payments for a common stock rescission of $250,000.
Off-Balance Sheet Arrangements
We have not entered into any other financial guarantees or other commitments to guarantee the
payment obligations of any third parties. We have not entered into any derivative contracts that
are indexed to our shares and classified as stockholders equity that are not reflected in our
financial statements. Furthermore, we do not have any retained or contingent interest in assets
transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to
such entity. We do not have any variable interest in any unconsolidated entity that provides
financing, liquidity, market risk or credit support to us or engages in leasing, hedging or
research and development services with us.
Warrants
From time to time, we issue warrants to purchase shares of the Companys common stock to
investor, note holders and to non-employees for services rendered or to be rendered in the future.
Warrants issued in conjunction with equity are recorded to equity as exercised.
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The following table is the warrants issued and outstanding as of June 30, 2011:
Warrants Exercisable | Exercise Price | Expiration | ||||
12,000
|
$ | 15.40 | 3/31/2013 | |||
27,478
|
$ | 7.87 | 12/29/2014 | |||
195,373
|
$ | 5.00 | 12/29/2014 | |||
400,000
|
$ | 5.00 | 12/30/2014 | |||
160,000
|
$ | 5.00 | 2/2/2015 | |||
71,000
|
$ | 5.00 | 3/22/2015 | |||
94,764
|
$ | 4.68 | 3/31/2015 | |||
104,000
|
$ | 4.68 | 4/30/2015 | |||
5,000
|
$ | 7.00 | 8/25/2015 | |||
3,171,429
|
$ | 3.00 | 5/13/2013 | |||
3,171,429
|
$ | 3.50 | 5/13/2016 | |||
1,138,885
|
$ | 3.00 | 5/13/2013 | |||
1,138,885
|
$ | 3.50 | 5/13/2016 | |||
632,243
|
$ | 3.00 | 5/13/2013 | |||
632,243
|
$ | 3.50 | 5/13/2016 | |||
50,000
|
$ | 4.38 | 5/13/2016 | |||
21,429
|
$ | 4.38 | 5/13/2016 | |||
21,428
|
$ | 4.38 | 5/13/2016 | |||
50,000
|
$ | 4.38 | 5/13/2016 | |||
50,000
|
$ | 3.50 | 4/25/2016 |
The exercise price and the number of shares issuable upon exercise of the warrants will
be adjusted upon the occurrence of certain events, including reclassifications, reorganizations or
combinations of the common stock. At all times that the warrants are outstanding, we will authorize
and reserve at least that number of shares of common stock equal to the number of shares of common
stock issuable upon exercise of all outstanding warrants.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Regulations under the Securities Exchange Act of 1934, as amended (the Exchange Act)
require public companies to maintain disclosure controls and procedures, which are defined to
mean a companys controls and other procedures that are designed to ensure that information
required to be disclosed in the reports that it files or submits under the Exchange Act s recorded,
processed, summarized and reported, within the time periods specified in the SECs rules and forms.
We conducted an evaluation, with the participation of our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of June 30, 2011,
to ensure that information required to be disclosed by us in the reports filed or submitted by us
under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the Securities Exchange Commissions rules and forms, including to ensure that
information required to be disclosed by us in the reports filed or submitted by us under the
Exchange Act is accumulated and communicated to our management, including our principal executive
and principal financial officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that as of June 30, 2011, our disclosure
controls and procedures were not effective at the reasonable assurance level due to the material
weaknesses described below.
In light of the material weaknesses described below, we performed additional analysis and
other procedures to ensure our financial statements were prepared in accordance with generally
accepted accounting principles. Accordingly, we believe that the financial statements included in
this report fairly present, in all material respects, our financial condition, results of
operations and cash flows for the periods presented.
A material weakness is a control deficiency (within the meaning of the Public Company
Accounting Oversight Board (PCAOB) Auditing Standard No. 5) or combination of control
deficiencies, that results in more than a remote likelihood that a material misstatement of the
annual or interim financial statements will not be prevented or detected. Management has identified
the following four material weaknesses which have caused management to conclude that, as of June
30, 2011, our disclosure controls and procedures were not effective at the reasonable assurance
level:
1. We do not have written documentation of our internal control policies and procedures.
Management evaluated the impact of our failure to have written documentation of our internal
controls and procedures on our assessment of our disclosure controls and procedures and has
concluded that the control deficiency that resulted represented a material weakness.
2. We do not have sufficient segregation of duties within accounting functions, which is a
basic internal control. Due to our size and nature, segregation of all conflicting duties may
not always be possible and may not be economically feasible. However, to the extent possible,
the initiation of transactions, the custody of assets and the recording of transactions should
be performed by separate individuals. Management evaluated the impact of our failure to have
segregation of duties on our assessment of our disclosure controls and procedures and has
concluded that the control deficiency that resulted represented a material weakness.
3. We did not maintain sufficient accounting resources with adequate training in the
application of GAAP commensurate with our financial reporting requirements and the complexity of
our operations and transactions, specifically related to the accounting and reporting of debt
and equity transactions, including derivative instruments.
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4. We have had, and continue to have, a significant number of audit adjustments. Audit
adjustments are the result of a failure of the internal controls to prevent or detect
misstatements of accounting information. The failure could be due to inadequate design of the
internal controls or to a misapplication or override of controls. Management evaluated the
impact of our significant number of audit adjustments and has concluded that the
control deficiency that resulted represented a material weakness.
Management has reviewed the financial statements and underlying information included herein
in detail and believes the procedures performed are adequate to fairly present our financial
position, results of operations and cash flows for the periods presented in all material
respects.
Remediation of Material Weaknesses
We are attempting to remediate the material weaknesses in our disclosure controls and procedures
identified above by refining our internal procedures (see below).
Changes in Internal Control over Financial Reporting
We have also initiated the following corrective actions, which management believes are reasonably
likely to materially affect our controls and procedures as they are designed to remediate the
material weaknesses as described above:
| We are in the process of further enhancing our internal finance and accounting organizational structure, which includes hiring additional resources. | ||
| We are in the process of further enhancing the supervisory procedures to include additional levels of analysis and quality control reviews within the accounting and financial reporting functions. | ||
| We are in the process of strengthening our internal policies and enhancing our processes for ensuring consistent treatment and recording of reserve estimates and that validation of our conclusions regarding significant accounting policies and their application to our business transactions are carried out by personnel with an appropriate level of accounting knowledge, experience and training. |
We do not expect to have fully remediated these material weaknesses until management has
tested those internal controls and found them to have been remediated. We expect to complete this
process during managements annual testing for fiscal 2011.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings.
Preproduction Plastics, Inc. v. T3 Motion., Inc. Ki Nam and Jason Kim (Orange County Superior
Court Case No. 30.2009-00125358): On June 30, 2009, Preproduction Plastics, Inc. (Plaintiff)
filed suit in Orange County Superior Court, alleging causes of actions against T3 Motion, Inc., Ki
Nam, the Companys CEO, and Jason Kim, the Companys former Chief Operating Officer (collectively
Defendants) for breach of contract, conspiracy, fraud and common counts, arising out of a
purchase order allegedly executed between Plaintiff and the Company. In July 2010, the case was
settled in its entirety and the Company agreed to pay compensatory damages, attorneys fees and
costs totaling $493,468, through monthly payments of $50,000, with 6% interest accruing from the
date of the settlement. Periodic payments are expected to be made through May 2011. The first
payment of $50,000 was made on August 3, 2010 and subsequent principal payments totaling $200,000
were made by the Company through December 31, 2010. Company recorded the entire settlement amount
of $493,468 as a note payable, $470,599 as a deposit on fixed assets and the remaining $22,869 as a
charge to legal expense. At December 31, 2010, the remaining settlement amount of $243,468 is
recorded as a note payable in the accompanying condensed consolidated balance sheet. The Company
has recorded accrued interest of $0 and $4,126 at June 30, 2011 and December 31, 2010, respectively.
As of June 30, 2011, the Company has paid the balance in full and the case was dismissed on
June 22, 2011. During the three and six months ended June 30, 2011, the Company recorded $512
and $4,014 of interest expense, respectively.
Other than as described above, there have been no material developments during the six months
ended June 30, 2011 in any material pending legal proceedings to which the Company is a party or of
which any of our property is the subject.
Item 1A. Risk Factors
Risks Related to Our Company and Our Industry
There were no material changes from the risk factors previously disclosed in our 2010 Annual Report
on Form 10-K, as filed with the Unites States Securities and Exchange Commission, or the SEC, on
June 30, 2011.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. (Removed and Reserved)
Item 5. Other Information.
On June 30, 2011, the Company registered the resale by the selling stockholders of (i)
1,771,128 shares of common stock, 1,771,128 Class H warrants and 1,771,128 Class I warrants
comprising units issued upon conversion of certain debt; (ii) 3,542,256 shares of common stock
underlying such Class H and Class I warrants; and (iii) 3,942,193 additional shares of common
stock, including shares underlying other outstanding warrants. Each Class H warrant entitles the
holder to purchase one share of the Companys common stock at an exercise price of $3.00 at any
time between August 19, 2011 and May 13, 2013. Each Class I warrant entitles the holder to
purchase one share of the Companys common stock at an exercise price of $3.50 at any time between
August 19, 2011 and May 13, 2016.
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Item 6. Exhibits.
INDEX TO EXHIBITS
Exhibit | ||
Number | Description | |
3.1
|
Amended and Restated Certificate of Incorporation, as currently in effect(1) | |
3.2
|
Bylaws(1) | |
3.3
|
Amendment to Bylaws, dated January 16, 2009(2) | |
3.4
|
Amendment to Certificate of Incorporation(3) | |
3.5
|
Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock(3) | |
31.1
|
Section 302 Certificate of Chief Executive Officer* | |
31.2
|
Section 302 Certificate of Chief Financial Officer* | |
32.1
|
Section 906 Certificate of Chief Executive Officer* | |
32.2
|
Section 906 Certificate of Chief Financial Officer* | |
101.INS**
|
XBRL Instance Document | |
101.SCH**
|
XBRL Taxonomy Extension Schema Document | |
101.CAL**
|
XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB**
|
XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE**
|
XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF**
|
XBRL Taxonomy Extension Definition Linkbase Document |
* | Filed herewith. | |
** | XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections. | |
(1) | Filed with the Companys Registration Statement on Form S-1 filed on May 13, 2008. | |
(2) | Filed with the Companys Current Report on Form 8-K filed on January 20, 2009. | |
(3) | Filed with the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 and filed on November 16, 2009. |
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 15, 2011 | T3 MOTION, INC. (Registrant) |
|||
By: | /s/ Ki Nam | |||
Ki Nam | ||||
Chairman of the Board and Chief Executive Officer | ||||
Date: August 15, 2011 | T3 MOTION, INC. (Registrant) |
|||
By: | /s/ Kelly Anderson | |||
Kelly Anderson | ||||
Executive Vice President and Chief Financial Office |
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