Delaware | 87-0398271 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
Large accelerated filer | o | Accelerated filer | o | Non-accelerated filer | o | Smaller reporting company | x |
Page | |||||
PART I | |||||
Item 1.
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Business
|
4 | |||
Item 1A.
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Risk Factors
|
8 | |||
Item 1B.
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Unresolved Staff Comments
|
11 | |||
Item 2.
|
Properties
|
11 | |||
Item 3.
|
Legal Proceedings
|
11 | |||
Item 4.
|
Mine Safety Disclosures
|
11 | |||
PART II
|
|||||
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities
|
12 | |||
Item 6.
|
Selected Financial Data
|
13 | |||
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
14 | |||
Item 7A.
|
Quantitative and Qualitative Disclosures about Market Risk
|
18 | |||
Item 8.
|
Financial Statements and Supplementary Data
|
19 | |||
Item 9.
|
Changes in and Disagreements with Accountants and Financial Disclosure
|
42 | |||
Item 9A.
|
Controls and Procedures
|
42 | |||
Item 9B.
|
Other Information
|
43 | |||
PART III
|
|||||
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
44 | |||
Item 11.
|
Executive Compensation
|
47 | |||
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
49 | |||
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
50 | |||
Item 14.
|
Principal Accountant Fees and Services
|
51 | |||
PART IV
|
|||||
Item 15.
|
Exhibits and Financial Statement Schedules
|
52 |
·
|
That a broker or dealer approve a person’s account for transactions in penny stocks; and
|
·
|
The broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
|
·
|
Obtain financial information and investment experience objectives of the person; and
|
·
|
Make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
|
·
|
Sets forth the basis on which the broker or dealer made the suitability determination; and
|
·
|
That the broker or dealer received a signed, written agreement from the investor prior to the transaction.
|
·
|
During the evaluation of the effectiveness of our disclosure controls and procedures by our management, our newly appointed Chief Financial Officer (“CFO”), who was appointed by the Board of Directors on October 10, 2011, identified deficiencies in our internal control and disclosure control by determining that certain transactions had been recorded in error during the preceding periods. The detection of these errors was contained in the Company’s Current Report on Form 8-K as filed with the Commission on November 4, 2011.
|
·
|
The Company did not receive necessary documentation from the previous management of the acquired entity to appropriately record and report on the Merger dated June 21, 2011 in a timely manner. Upon review of the documents once received, the CFO determined that the accounting for the reverse merger in June, 2011 was not done in accordance with GAAP. This was reported to the SEC in Form 8-K filing on March 27, 2011.
|
Common Stock Price
|
|||||||||
2011
|
High
|
Low
|
|||||||
First Quarter Ended
|
March 31
|
$ | 1.32 | $ | 0.33 | ||||
Second Quarter Ended
|
June 30
|
$ | 2.81 | $ | 0.44 | ||||
Third Quarter Ended
|
September 30
|
$ | 3.63 | $ | 1.21 | ||||
Fourth Quarter Ended
|
December 31
|
$ | 4.87 | $ | 1.50 | ||||
2010
|
|||||||||
First Quarter Ended
|
March 31
|
$ | 9.90 | $ | 2.53 | ||||
Second Quarter Ended
|
June 30
|
$ | 7.70 | $ | 2.09 | ||||
Third Quarter Ended
|
September 30
|
$ | 3.85 | $ | 2.31 | ||||
Fourth Quarter Ended
|
December 31
|
$ | 2.75 | $ | 0.55 |
·
|
Youth Media (BVI) Ltd.
|
·
|
Youth Media (Hong Kong) Limited
|
·
|
Youth Media (Beijing) Limited
|
·
|
Rebel Crew Films, Inc.
|
Page | ||||
Reports of Independent Registered Public Accounting Firms
|
20 | |||
Consolidated Financial Statements
|
||||
Consolidated Balance Sheets
|
22 | |||
Consolidated Statements of Operations
|
23 | |||
Consolidated Statements of Stockholders’ Deficit
|
24 | |||
Consolidated Statements of Cash Flows
|
25 | |||
Notes to Consolidated Financial Statements
|
26 |
December 31,
2011
|
December 31,
2010
|
|||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$ | 99,713 | $ | 7,310 | ||||
Accounts receivable
|
206,545 | |||||||
Inventory
|
30,622 | |||||||
Prepaid expenses and other assets
|
33,234 | - | ||||||
Total current assets
|
370,114 | 7,310 | ||||||
Property and Equipment, Net
|
1,566,697 | 1,746 | ||||||
License, Net
|
82,353 | 88,236 | ||||||
Prepaid expenses
|
43,019 | - | ||||||
Total assets
|
$ | 2,062,183 | $ | 97,292 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
||||||||
Current liabilities
|
||||||||
Accounts payable and accrued expenses
|
$ | 368,908 | $ | 125,000 | ||||
Accrued legal and consulting fees
|
656,507 | - | ||||||
Advances payable - related party
|
951,034 | 402,389 | ||||||
Convertible note payable of discontinued operations
|
50,000 | - | ||||||
Notes payable
|
150,000 | - | ||||||
Current liabilities of discontinued operations
|
430,973 | - | ||||||
Advances payable -related party of discontinued operations
|
169,984 | - | ||||||
Total current liabilities
|
2,777,406 | 527,389 | ||||||
Total liabilities
|
2,777,406 | 527,389 | ||||||
Stockholders' deficit
|
||||||||
Preferred stock, $.001 par value: 2,000,000 shares authorized
|
||||||||
Common stock; $.001 par value; 100,000,000 shares authorized;
|
||||||||
32,678,650 shares issued and outstanding as of December 31, 2011
|
||||||||
27,085,571 shares issued and outstanding at December 31, 2010
|
32,679 | 27,086 | ||||||
Additional paid-in capital
|
9,251,529 | 45,132 | ||||||
Deficit accumulated during development stage
|
(9,999,431 | ) | (502,315 | ) | ||||
Total stockholders' deficit
|
(715,223 | ) | (430,097 | ) | ||||
Total liabilities and stockholders' deficit
|
$ | 2,062,183 | $ | 97,292 |
For the Year Ended December 31, 2011
|
For the Year Ended December 31, 2010
|
December 17, 2008 (Inception) Through December 31, 2011
|
||||||||||
Revenues
|
$ | 458,080 | $ | 7,000 | $ | 772,105 | ||||||
Costs and expenses:
|
||||||||||||
Cost of goods sold
|
443,925 | - | 443,925 | |||||||||
Operating expenses
|
255,026 | - | 497,101 | |||||||||
License maintenance fees
|
150,000 | 100,000 | 300,000 | |||||||||
Marketing and development
|
764,046 | 125,834 | 889,880 | |||||||||
Selling, general and administrative expenses
|
3,901,337 | 103,076 | 4,034,294 | |||||||||
Professional fees
|
805,852 | 149,655 | 971,326 | |||||||||
Impairment of goodwill
|
3,555,304 | - | 3,555,304 | |||||||||
Total costs and expenses
|
9,875,490 | 478,565 | 10,691,830 | |||||||||
Operating loss
|
(9,417,410 | ) | (471,565 | ) | (9,919,725 | ) | ||||||
Other expense
|
||||||||||||
Interest expense
|
(54,257 | ) | - | (54,257 | ) | |||||||
Total other expense
|
(54,257 | ) | - | (54,257 | ) | |||||||
Net loss from continuing operations
|
(9,471,667 | ) | (471,565 | ) | (9,973,982 | ) | ||||||
Net loss from discontinued operations
|
(25,449 | ) | - | (25,449 | ) | |||||||
Net loss
|
$ | (9,497,116 | ) | $ | (471,565 | ) | $ | (9,999,431 | ) | |||
Net loss per common share - basic and diluted:
|
||||||||||||
Continuing operations
|
$ | (0.32 | ) | $ | (0.02 | ) | ||||||
Discontinued operations
|
- | - | ||||||||||
$ | (0.32 | ) | $ | (0.02 | ) | |||||||
Weighted average common shares outstanding
|
29,331,788 | 18,951,030 |
Common Stock
|
Additional
|
Accumulated
|
Common Stock
|
Stockholders'
|
||||||||||||||||||||
Shares
|
Par Value
|
Paid-in Capital
|
(Deficit)
|
Subscribed
|
Deficit
|
|||||||||||||||||||
Balance - December 17, 2008
|
- | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||
Common stock subscribed
|
23,601,967 | - | - | - | 23,601,967 | 23,601,967 | ||||||||||||||||||
Subscription receivable
|
(23,601,967 | ) | - | - | - | (23,601,967 | ) | (23,601,967 | ) | |||||||||||||||
Net loss for the period
|
- | - | - | - | - | - | ||||||||||||||||||
Balance - December 31, 2008
|
- | - | - | - | - | - | ||||||||||||||||||
Proceeds from subscriptions receivable
|
11,412,090 | 11,412 | (7,245 | ) | - | - | 4,167 | |||||||||||||||||
Net loss for the period
|
- | - | - | (30,750 | ) | - | (30,750 | ) | ||||||||||||||||
Balance - December 31, 2009
|
11,412,090 | 11,412 | (7,245 | ) | (30,750 | ) | - | (26,583 | ) | |||||||||||||||
Proceeds from subscriptions receivable
|
12,189,877 | 12,190 | (7,739 | ) | - | - | 4,451 | |||||||||||||||||
Stock issued for services
|
3,483,604 | 3,484 | 60,116 | - | - | 63,600 | ||||||||||||||||||
Net loss for the period
|
- | - | - | (471,565 | ) | - | (471,565 | ) | ||||||||||||||||
Balance - December 31, 2010
|
27,085,571 | 27,086 | 45,132 | (502,315 | ) | - | (430,097 | ) | ||||||||||||||||
Proceeds from the issuance of common stock (pre merger)
|
164,321 | 164 | 149,836 | - | - | 150,000 | ||||||||||||||||||
Shares issued for services (pre merger)
|
136,934 | 137 | 124,863 | - | - | 125,000 | ||||||||||||||||||
Issuance of common stock in a business combination
|
3,042,977 | 3,043 | 2,774,735 | - | - | 2,777,778 | ||||||||||||||||||
Stock issued for services
|
63,712 | 64 | 108,566 | - | - | 108,630 | ||||||||||||||||||
Proceeds from the issuance of preferred stock subsequently converted to common stock, net of issuance costs
|
507,500 | 508 | 464,853 | - | - | 465,361 | ||||||||||||||||||
Issuance of common stock in lieu of fractional shares from reverse split
|
337 | - | - | - | - | - | ||||||||||||||||||
Issaunce of warrants
|
- | - | 18,139 | - | - | 18,139 | ||||||||||||||||||
Proceeds from the issuance of common stock, net of issuance costs
|
1,677,298 | 1,677 | 1,612,212 | - | - | 1,613,889 | ||||||||||||||||||
Common stock to be issued
|
- | - | 3,953,193 | - | - | 3,953,193 | ||||||||||||||||||
Net loss for the period
|
- | - | - | (9,497,116 | ) | - | (9,497,116 | ) | ||||||||||||||||
Balance - December 31, 2011
|
32,678,650 | $ | 32,679 | $ | 9,251,529 | $ | (9,999,431 | ) | $ | - | $ | (715,223 | ) |
·
Youth Media (BVI) Ltd.
|
|
·
Youth Media (Hong Kong) Limited
|
|
·
Youth Media (Beijing) Limited
|
|
·
Rebel Crew Films, Inc.
|
Consideration - issuance of securities
|
$ | 2,777,778 | ||
Cash
|
$ | 11,150 | ||
Prepaid expenses and other assets
|
3,876 | |||
Fixed assets
|
5,706 | |||
Accounts payable and accrued liabilities
|
(748,258 | ) | ||
Notes payable
|
(50,000 | ) | ||
Goodwill
|
3,555,304 | |||
Total purchase price
|
$ | 2,777,778 |
2011
|
2010
|
|||||||
Equipment & Installation
|
$ | 1,547,559 | $ | 1,312 | ||||
Office equipment
|
23,941 | - | ||||||
Computer equipment
|
11,985 | 479 | ||||||
Total Equipment
|
1,583,485 | 1,791 | ||||||
Less: accumulated depreciation
|
16,788 | 45 | ||||||
Property and equipment, net
|
$ | 1,566,697 | $ | 1,746 |
2011
|
2010
|
|||||||
License
|
$ | 100,000 | $ | 100,000 | ||||
Less: accumulated amortization
|
17,647 | 11,764 | ||||||
License, net
|
$ | 82,353 | $ | 88,236 |
Years ended December 31,
|
||||
2012
|
$ | 200,000 | ||
2013
|
200,000 | |||
2014
|
200,000 | |||
2015
|
200,000 | |||
2016
|
200,000 | |||
Thereafter
|
1,800,000 | |||
$ | 2,800,000 |
Oustanding Options
|
||||||||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||||||
Shares
|
Average
|
Aggregate
|
||||||||||||||||||
Number of
|
Average
|
Remainign
|
||||||||||||||||||
Available for
|
Exercise
|
Contractual
|
Intrinsic
|
|||||||||||||||||
Grant
|
Shares
|
Price
|
Life (years)
|
Value
|
||||||||||||||||
June 21, 2011
|
82,727 | 371,818 | 14.44 | 7.8 | - | |||||||||||||||
Grants
|
- | - | - | - | - | |||||||||||||||
Cancellations
|
86,360 | 86,360 | - | - | - | |||||||||||||||
December 31, 2011
|
169,087 | 285,458 | 14.44 | 7.3 | - | |||||||||||||||
Options exercisable at:
|
||||||||||||||||||||
June 21, 2011
|
371,818 | 14.44 | 7.3 | |||||||||||||||||
December 31, 2011
|
285,458 | 14.44 | 7.3 |
Outstanding |
Exercisable
|
|||||||||||||||||||||
Weighted
|
||||||||||||||||||||||
Average
|
Weighted
|
Weighted
|
||||||||||||||||||||
Remaining
|
Average
|
Average
|
||||||||||||||||||||
Exercise
|
Number
|
Contractual
|
Exercise
|
Number
|
Exercise
|
|||||||||||||||||
Price
|
Outstanding
|
Life (years)
|
Price
|
Exercisable
|
Price
|
|||||||||||||||||
$ | 9.90 | 7,955 | 1.66 | $ | 9.90 | 7,955 | $ | 9.90 | ||||||||||||||
9.90 | 4,773 | 1.75 | 9.90 | 4,773 | 9.90 | |||||||||||||||||
3.30 | 11,364 | 4.36 | 3.30 | 11,364 | 3.30 | |||||||||||||||||
1.00 | 24,000 | 4.82 | 1.00 | 24,000 | 1.00 | |||||||||||||||||
$ | 1.00 - $9.90 | 48,092 | 3.89 | 48,092 |
2011
|
2010
|
|||||||
Computed tax at the federal statutory rate of 34%
|
$ | (3,229,000 | ) | $ | - | |||
Impairment of nondeductible goodwill
|
1,209,000 | - | ||||||
Other
|
11,000 | - | ||||||
Valuation allowance
|
2,009,000 | - | ||||||
Provision for income taxes
|
$ | - | $ | - |
2011
|
2010
|
|||||||
Deferred tax assets:
|
||||||||
Accrued compensation
|
$ | 1,417,000 | $ | - | ||||
Net operating loss carryforwards
|
2,492,000 | - | ||||||
Deferred tax liabilities:
|
||||||||
Valuation allowance
|
(3,909,000 | ) | - | |||||
Net deferred tax assets (liabilities
|
$ | - | $ | - |
2011
|
||||
China Youth Media, Inc.
|
$ | 10,114 | ||
Youth Media (Hong Kong)
|
2,050 | |||
Youth Media (Beijing)
|
13,285 | |||
Net loss from discontinued operations
|
$ | 25,449 |
2011
|
||||
Accounts payable and accrued expense
|
$ | 430,973 | ||
Related party note payable
|
169,984 | |||
Convertible note payable
|
50,000 | |||
Total liabilities
|
$ | 650,957 |
For the Year | ||||||||
Ended December 31, | ||||||||
2011 | 2010 | |||||||
Net loss | $ | (5,719,703 | ) | $ | (4,272,657 | ) |
1.
|
Elimination of Acquisition costs incurred during the year ended December 31, 2011 of $319,000 which are assumed to have been incurred prior to January 1, 2010 for the purpose of presentation in the pro forma statement of operations.
|
2.
|
Recognition of an additional $77,000 and $246,000 of net loss from discontinued operations for the operations of China Youth Media, Inc., in the years ended December 31, 2011 and 2010, respectively. These loses are operational costs were associated of the subsidiaries that are in process of being dissolved (see Note 1) which is assumed to have begun as of January 1, 2010 for the purpose of pro forma presentation.
|
3.
|
Elimination of the $3,555,000 of impairment expense for the year ended December 31, 2011 as amount is related to the impairment of goodwill which is assumed to have occurred prior to January 1, 2010 for the purpose of pro forma presentation.
|
4.
|
Prior to the reverse merger, Midwest Energy Emissions Corp. was taxed as an S corporation and therefore income and losses were passed through to the stockholders. Upon completion of the reverse merger, Midwest Energy Emissions Corp. became a taxable C corporation. However, this pro forma does not include an income tax accrual due to the significant losses and a 100% valuation allowance applied against net deferred tax assets.
|
·
|
The Chief Financial Officer determined that the Company’s financial reporting review control did not detect that certain transactions had been recorded in error during the preceding periods. The detection of these errors was contained in the Company’s Current Report on Form 8-K as filed with the Commission on November 4, 2011.
|
·
|
The Company did not receive necessary documentation from the previous management of the acquired entity to appropriately record and report on the Merger dated June 21, 2011 in a timely manner. Upon review of the documents once received, the Chief Financial Officer determined that the accounting for the reverse merger in June 2011 was not recorded in accordance with U.S. GAAP. This was reported to the SEC on Form 8-K on March 27, 2012.
|
Name
|
Age
|
Position
|
||
John Norris, Jr.
|
62 |
CEO, Chairman, Director
|
||
Richard MacPherson
|
56 |
Director
|
||
Jay Rifkin
|
56 |
Director
|
||
Alan Kelley
|
59 |
President, COO
|
||
Richard Gross
|
41 |
Vice President & CFO
|
||
Marcus Sylvester
|
50 |
Vice President of Sales
|
Name, Position |
Year
|
Salary ($)
|
Stock Awards
($) (4)
|
All Other
Compensation
|
Total ($)
|
|||||||||||||
John Norris, Chairman & CEO (1) (5)
|
2011
|
$ | 30,000 | 2,805,000 | 60,000 | $ | 2,895,000 | |||||||||||
Alan Kelley, President & COO (2)
|
2011
|
$ | 40,000 | 525,000 | - | $ | 565,000 | |||||||||||
Rich Gross. Vice President & CFO (3)
|
2011
|
$ | 23,750 | 93,500 | - | $ | 117,250 | |||||||||||
Richard MacPerson (6)
|
2011
|
$ | - | - | 100,000 | $ | 100,000 | |||||||||||
Jay Rifken (7)
|
2011
|
$ | - | - | 20,625 | $ | 20,625 | |||||||||||
Jay Rifken
|
2010
|
$ | - | - | 70,000 | $ | 70,000 |
(1)
|
Mr. Norris was appointed Chief Executive Officer in June 2011 and Chairman of the Board in October 2011
|
(2)
|
Mr. Kelley was appointed Chief Operating Officer and President in November 2011
|
(3)
|
Mr. Gross was appointed Chief Financial Officer and Vice President in October 2011
|
(4)
|
Represents the dollar amount recognized for financial statement reporting purposes of shares to be issued to the executive officers computed in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions, see Note 13 to our consolidated financial statements. There can be no assurance the amounts determined in accordance with FASB ASC Topic 718 will ever be realized. The following table provides certain information concerning the shares to be issued to the executive officers as of December 31, 2011:
|
Number of
|
|||||
Shares to be
|
Share Issue
|
||||
Name
|
issued
|
Date
|
|||
John Norris
|
500,000 |
10/1/2012
|
|||
500,000 |
10/1/2013
|
||||
500,000 |
10/1/2014
|
||||
Alan Kelley
|
500,000 |
11/1/2012
|
|||
Rich Gross
|
50,000 |
10/10/2012
|
(5)
|
Mr. Norris, prior to employment, was hired as a consultant for the Company. He earned $60,000 of which $40,000 has been paid as of December 31, 2011.
|
(6)
|
Mr. MacPherson was appointed President as of the Merger on June 21, 2011 and served as such until November 1, 2011.
|
(7)
|
Mr. Rifkin was appointed President on September 30, 2005, and Chief Executive Officer and director nominee on December 29, 2005. He served as such until the Merger on June 21, 2011.
|
Director Compensation
|
||||||||||||||||||||
Fees Earned
|
All Other
|
|||||||||||||||||||
Name
|
of Paid in
|
Stock
|
Option
|
Compensation
|
Total ($)
|
|||||||||||||||
Cash ($)
|
Awards ($)
|
Awards ($)
|
($)
|
|||||||||||||||||
Richard MacPherson
|
$ | - | - | - | - | $ | - | |||||||||||||
Jay Rifkin
|
$ | - | - | - | - | $ | - |
Common Stock
|
Percentage of
|
|||||||
Beneficially
|
Common
|
|||||||
Name of Beneficial Owner (1)
|
Owned (2)
|
Stock (2)
|
||||||
John Norris
|
- | |||||||
Alan Kelley
|
- | |||||||
Rich Gross
|
- | |||||||
Richard MacPherson (3) | 21,467,305 | 65.69 | % | |||||
Jay Rifkin (4)
|
1,698,843 | 5.20 | % | |||||
Macaya Ecopreneur Ventures Corp (5)
|
2,738,682 | 8.38 | % | |||||
All named executive officers and directors
|
||||||||
as a group (5 persons)
|
23,166,148 | 70.89 | % |
(1)
|
Except as otherwise indicated, the address of each beneficial owner is c/o Midwest Energy Emissions Corp, 500 West Wilson Bridge Road, Suite 140, Worthington, OH 43085.
|
(2)
|
Applicable percentage ownership is based on 32,678,250 shares of common stock outstanding as of December 31, 2011 plus, each stockholder, any securities that stockholder has the right to acquire within 60 days of December 31, 2011 pursuant options, warrants, conversion privileges or other rights.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock that a person has the right to acquire beneficial ownership of upon the exercise or conversion of options, convertible stock, warrants or other securities that are currently exercisable or convertible or that will become exercisable or convertible within 60 days of December 31, 2011 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
|
(3)
|
Includes: (a) 21,467,305 shares, which as of December 31, 2011, were owned by 3253517 Nova Scotia Limited of which Mr. MacPherson is the sole managing member. The address for 3253517 Nova Scotia Limited is PO Box 730, 1300-1969 Upper Water Street, Halifax, NS Canada B3J 2V1.
|
(4)
|
Includes: (a) 361,585 shares owned by Mojo Music Inc. and 998,128 shares owned by Rebel Holdings, LLC of which Mr. Rifkin is the sole managing member of both companies; and (b) 339,130 shares owned directly by Mr. Rifkin. Mr. Rifkin’s address is 12237 Sunset Pkwy, Los Angeles, CA 90064.
|
(5)
|
Macaya Ecopreneur Ventures Corp.’s address is 141 Blackburn Avenue, Ottawa, Ontario K1N 8A6.
|
Number of securities to
be issued upon exercise
|
Weighted average
exercise price of
|
Number of securities
remaining available for
|
||||||||||
Plan Category
|
( a )
|
( b )
|
( c )
|
|||||||||
Equity compensation plans approved by | ||||||||||||
security holders | 285,458 | $ | 14.44 | 169,087 | ||||||||
Equity compensation plans not approved by | ||||||||||||
security holders (See Item 11 - Executive Compensation) | 2,050,000 | - | - |
MIDWEST ENERGY EMISSIONS CORP. | |||
Date: April 11, 2012
|
By:
|
/s/ JOHNNY F. NORRIS, JR. | |
Johnny F. Norris, Jr. | |||
Chairman and Chief Executive Officer |
Signature
|
Title
|
Date
|
||
/s/ JOHNNY F. NORRIS, JR.
|
|
|||
Johnny F. Norris, Jr.
|
Chairman and Chief Executive Officer | April 11, 2012 | ||
(Principal Executive Officer) | ||||
/s/ RICHARD MACPHERSON
|
|
|||
Richard MacPherson
|
Director | April 11, 2012 | ||
/s/ JAY RIFKIN
|
|
|
||
Jay Rifkin
|
Director | April 11, 2012 | ||
/s/ RICHARD H. GROSS | ||||
Richard H. Gross | Vice President and Chief Financial Officer | April 11, 2012 | ||
(Principal Financial Officer) |
BETWEEN: | MARCUS A. SYLVESTER, an individual residing at 713 S. Cardinal Street Gilbert |
AZ 85296, USA. (Hereinafter referred to as “ MS ”) | |
OF THE FIRST PART | |
AND: | MIDWEST ENERGY EMISSIONS CORP., a corporation under the laws of the State of North Dakota, (Hereinafter referred to as the “ COMPANY ”) |
|
(1)
|
“Agreement” means these articles of agreement and all amendments thereto;
|
|
(2)
|
“Confidential Information” has the meaning set out in Section 6.1;
|
|
(3)
|
“Effective Date” has the meaning set out in Section 10.1;
|
|
(4)
|
“Intellectual Property” means patents, patent applications, copyrights, trade secrets, know-how, trademarks, registered industrial designs and applications for same and other intellectual property recognized in any applicable jurisdiction;
|
|
(5)
|
“Term” has the meaning set out in Section 10.1;
|
|
(6)
|
“Services” means any services to be provided by MS as set forth in the Agreement.
|
|
(7)
|
“Employment Fees” mean monthly retainer and any and all commissions and management fees.
|
2.1
|
During the Term of this Agreement, as reasonably expected from a person fulfilling the position of a Vice President Sales & Marketing of said COMPANY, MS shall render to the COMPANY the following services (“SERVICES”) in relation to:
|
2.1.1
|
The overall sales strategy of the COMPANY;
|
2.1.2
|
Managing and growing the COMPANY sales network;
|
2.1.3
|
Being in charge of all sales teams, including manufacturers representatives;
|
2.1.4
|
Developing marketing strategies, forecast and new clients developments;
|
2.1.5
|
Developing and achieving the COMPANY annual sales budget.
|
2.2
|
During the term of this Agreement, the COMPANY shall appoint MS as Vice-President Sales & Marketing, or any other executive position, of said COMPANY.
|
2.3
|
MS agrees to diligently perform the Services in a diligent, professional and ethical manner and further agrees to devote such time, energy and attention to the performance of such Services as may be necessary to enable them to be carried out efficiently; provided, however, that in no event shall MS take any action that may subject either MS or the COMPANY to civil or criminal liability.
|
2.4
|
In performing the Services hereunder, MS shall comply with all laws, rules, regulations orders and ordinances of the United States of America and any other state or country with jurisdiction over MS or the Services.
|
2.5
|
Initially and for the foreseeable future, MS shall report to the President and at all times seek the guidance of the COMPANY’s President and or the CEO. This shall not preclude corporate reorganizations and changing reporting relationships.
|
2.6
|
MS shall use his best efforts to further the business interests of the COMPANY during the term of this Agreement in accordance with the terms hereof.
|
3.1
|
In consideration of the performance of the Services contemplated under Article 2 hereof, MS shall received from the COMPANY:
|
3.1.1
|
A monthly salary in the amount of $12,500.00 USD per month, paid bi-monthly. MS shall be eligible to participate in all corporate 401 K programs and health benefit plans as instituted by the firm, to be established within 30 days of the commencement of this employment contract.
|
3.1.2
|
For transactions completed and closed directly in relation to the efforts rendered by MS, the COMPANY will pay MS a commission. The ("Commission") shall be 5% of the value of the transaction (supply contract portion) for a period of one year after the contract is started between the Company and the client, namely a power plant utility or other coal burning facility. A Commission of 3% for the second year and 1% for the third year and onward of each transaction. Such Commission will be calculated on the amount of the total revenue of the supply portion of the contract for the specific yearly period. The Commission will be payable on a quarterly basis - subject to the COMPANY receiving the contracted revenue for the transaction as set forth in a supply agreement as negotiated by MS. A “management fee” of 1% of all sales will be paid to MS for his involvement in all ongoing sales management and efforts of client retention – which must be maintained at 80% on a year over year basis. The retainer amount of $12,500 per month will reduced to $8,500 per month should the combined retainer and commissions reach $25,000 per month by MS. This will take effect immediately upon the quarterly commission payments reaching the target amount. When the commissions and management fees reach $40,000 per month, then the retainer will be reduced to $1,000 per month. Furthermore, the 1% override commission will be capped at a maximum of $500,000 per annum, paid quarterly upon receipt of payment from clients.
|
3.1.3
|
For transactions whose contracts are signed or whose sale is substantially done by the time MS joins the company, a commission will not be paid during the first three years of the MS employment, but a management fee can be earned beginning in the 4
th
year of MS employment for those clients.
|
3.1.4
|
For sales which involve a commission paid to a contracted sales rep (such as a manufacturers rep), the sales commission paid to MS will be reduced by half of whatever is paid to the rep.
|
3.1.5
|
Yearly structured bonuses to be reviewed and approved by the Board of Directors during the Term of this Agreement.
|
|
4.1
|
In addition to the compensation payable to MS pursuant to Article 3 hereof, the COMPANY shall, at the discretion of MS, pay directly or reimburse MS for, its reasonable out-of-pocket expenses in connection with its performance of the Services, including, without limitation, travel related expenditures (airline tickets, meals, rental car & fuel, hotels, parking), customer entertainment and business meals, conference fees, cost of any outside services such as financial printers, couriers, business publications or similar services, telephone and mobile phone and text or email, computer and word processing expenses or any similar expenses associated with his performance of the Services.
|
|
4.2
|
All reimbursements shall be made promptly upon or as soon as possible after presentation by MS of a statement or proof of payment in connection therewith. All expenditures over $25 will be included with a monthly expense report for purposes of IRS reporting and tracking.
|
|
5.1
|
As determined by the Board of Directors of the COMPANY, MS shall be eligible to participate in any COMPANY stock option and incentive plan, which authorizes the grant of stock options and stock awards of the COMPANY common stock and other equity-based awards or any successor thereto for the VP of sales & marketing.
|
|
6.1
|
MS acknowledges that the COMPANY has advised it that it has confidential, proprietary and trade secret information and know-how relating to the COMPANY’s reduction of mercury from emissions products and services and that the Confidential Information is proprietary, and confidential. MS agrees to retain the Confidential Information in strict confidence, and MS shall not disclose the Confidential Information to any third party without the prior written consent of the COMPANY. MS shall not use the Confidential Information for any purpose other than furthering the Services contemplated under this Agreement (the “Limited Purpose”); shall not disassemble, decompile, or otherwise reverse-engineer the Confidential Information and any inventions, processes, or products disclosed under this Agreement; and, in preventing disclosure of Confidential Information to third parties, shall use the same degree of care as for its own information of similar importance, but no less than reasonable care. MS shall require that all parties to whom Confidential Information will be disclosed review the terms of this Agreement, shall require that its employees, agents, and representatives comply with the terms of this Agreement, and shall be responsible for all disclosures, copying, and uses of the Confidential Information by its employees, agents, and representatives.
|
|
6.2
|
Notwithstanding any other provisions of this Agreement, the COMPANY acknowledges that Confidential Information shall not include any information which
|
|
6.2.1
|
is now or hereafter through no act or failure to act on the part of either Party, become generally known or available to the public without breaching this Agreement;
|
|
6.2.2
|
evidently was in the possession of MS prior to the time of disclosure and was not acquired directly or indirectly from the COMPANY;
|
|
6.2.3
|
is disclosed to MS by a third party without an obligation of confidentiality;
|
|
6.2.4
|
is produced by or for MS independently of any information developed under this Agreement, provided that the person or persons developing same have not had access either directly or indirectly, to the information and provided such independent development is documented; or
|
|
6.1.5
|
is required by law to be disclosed.
|
|
6.3
|
The COMPANY may use all information contained in the Services. However, all intellectual property, including know-how, either arising from the Services or owned by MS prior to undertaking the Services, shall remain the property of MS.
|
|
7.1
|
Each Party shall indemnify and save harmless the other Party, to the fullest extent authorized by law, as the same exists or may hereafter be amended, from and against all claims, demands, losses, expenses, costs incurred or suffered, including lawyers fees, damages, actions, suits or proceedings, that are in any manner based upon, arising out of, or attributable to the execution of this Agreement or any part. Each Party shall have the right to defend any such action or proceeding with counsel of its own choosing.
|
|
7.2
|
The COMPANY hereby indemnify MS and his heirs and legal representatives against all costs, charges, and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal, or administrative proceeding to which he is made a party by reason of being or having been a Vice-President of Sales & Marketing of the COMPANY provided (a) MS acted within the scope of his or her duties as Vice-President of Sales & Marketing and in good faith with a view to the best interests of the COMPANY and (b) in the case of a criminal or administrative proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful.
|
|
8.1
|
The Parties represent that they have not disclosed or provided to anyone any unauthorized third party proprietary information, samples or documentation pertaining to the Services.
|
|
9.1
|
Each party represents and warrants that it has good and sufficient power, authority and right to enter into and deliver this Agreement each to the other.
|
|
9.2
|
Except as otherwise provided in this Agreement, each party disclaims all warranties respecting the Services either expressly or implied by law or otherwise, including all implied warranties of merchantability and fitness for a particular purpose and the other party hereby accepts such disclaimer.
|
|
10.1
|
This Agreement shall be effective from August 15th, 2011 and shall be valid for a period of three (3) years (“Term”) subject to the continued approval by the Board of the Company.
|
11.1
|
A party may terminate this Agreement for cause:
|
11.1.1
|
if the other party remains in default of any material provision hereof ninety (90) days (or such longer period of time as may be mutually agreed in writing) after written notice of such default is received by the defaulting party; or,
|
|
11.1.2
|
immediately upon written notice if the other party ceases to carry on its business or becomes the subject of any proceeding under state, provincial or federal law for the relief of debtors or otherwise becomes insolvent, bankrupt or makes an assignment for the benefit of creditors, or upon the appointment of a receiver for the other party or the reorganization of the other party for the benefit of creditors.
|
|
11.2
|
Termination by either party shall be without prejudice to any other rights to which such party may be entitled against the other party at law or in equity by reason of such other party’s default under this Agreement.
|
11.3
|
Subject to Article 11.1, termination of this Agreement will not relieve either party from any liability to the other party hereunder, including any obligation to pay in full any outstanding invoice and other monies due or accrued under this Agreement prior to or at the time that such termination becomes effective.
|
11.3.1
|
if Company terminates MS contract
without cause
during the term of this agreement,
the Company will pay MS (3) months of employment fees as a severance package and all stock
warrants & stock options are fully vested upon termination without cause.
|
11.4
|
Within 10 (ten) days of termination of this Agreement, each party shall return to the other party, at the other party’s expense, all of the other party’s Confidential Information, and other property, documentation and materials, and all copies thereof.
|
11.5
|
Articles 6.0, 7.0, 8.0, 9.0, 15.0, 17.0, and 18.1 shall survive termination and conclusion of this Agreement.
|
12.1
|
MS shall not assign or subcontract any portion of its rights, duties or obligations under this Agreement,
or assign this Agreement, unless the COMPANY, in its sole discretion, grants MS written permission to
do so. Notwithstanding any such consent, MS shall continue to be fully responsible and liable for full performance of all obligations assumed by it hereunder. The COMPANY shall have the right to assign this Agreement to any of it subsidiary or affiliated company, or to any third party in connection with the transfer of all or substantially all of the assets of the business unit relating to this Agreement, or the sale or transfer of the voting stock or shares of the COMPANY resulting in a change in its effective control.
|
13.1
|
No amendment to this agreement shall be effective unless reduced to writing and signed by the authorized representative of the parties.
|
14.1
|
All notices or other communications required by this Agreement shall be delivered or sent by an
acceptable means to the addresses and persons below. Acceptable means are:
|
14.1.1
|
delivery during normal business hours to the person responsible for receiving communications, in which case it is effective when delivered;
|
14.1.2
|
delivery by courier or registered mail, in which case it is effective when the delivery person obtains a signature accepting delivery; or
|
14.1.3
|
electronic transmission to the addressee’s office, in which case it is effective when receipt is electronically acknowledged.
|
In the case of MS:
MR. MARCUS A. SYLVESTER
713 S. Cardinal Street
Gilbert, AZ 85296, USA
Telephone: (480) 235-0974
E-mail: marcsylvester@cox.net
|
|
In the case of the COMPANY:
Corporate Secretary
15 North 23rd Street, Stop 9054,
Grand Forks, ND
58202-9054
Telephone: (701) 772-1230
Facsimile: (701) 746-9477
|
15.1
|
This Agreement shall be governed by and construed in accordance with the laws of the state of Delaware as applicable and shall be treated in all respects as a Delaware Company.
|
|
16.1
|
Neither party shall be liable to the other for defaults in performance of its obligations arising by reason of causes beyond its control and which by the exercise of reasonable diligence, such parties are unable to prevent. Such causes include, but are not limited to acts of God, labour disputes, governmental restraint, and actions taken by any governmental authority, national emergency and unusual weather conditions, provided that the party declaring the event of force majeure gives timely notice of such event to the other party. The date of delivery or of performance shall be extended for a period equal to the time lost by reason of the delay.
|
17.1
|
The parties shall attempt to resolve any dispute arising out of or pursuant to this Agreement by recourse to the dispute resolution methods identified in the following sequence, although steps may be by-passed by mutual consent.
|
17.1.1
|
negotiations,
|
17.1.2
|
non-binding mediation or conciliation,
|
17.1.3
|
non-binding mini-trial, or
|
17.1.4
|
binding arbitration.
|
17.2
|
If the parties cannot agree on any of the foregoing dispute resolution mechanisms, either party may, at any time, elect to have such dispute resolved by litigation in the proper judicial forum.
|
17.3
|
Any party may within 15 (fifteen) days take the dispute to the next step if the parties fail to agree on the appointment or procedure referred to in this Article.
|
17.4
|
When mediation or conciliation is selected by the parties, they shall jointly appoint one impartial expert mediator or conciliator to undertake the process according to mutually agreed upon procedures.
|
17.5
|
When a mini-trial is selected for resolution of a dispute, the parties shall jointly appoint one impartial third party who shall preside at a brief hearing at which the parties present their respective positions to the impartial third party and to the highest level manager available from each party authorized to settle the dispute. If the mini-trial does not lead the parties to a settlement of the dispute, either party may ask the third party to prepare and deliver to them within 15 (fifteen) days a non-binding award that recommends the most fair and reasonable full settlement of the dispute.
|
17.6
|
The arbitral award shall be in terms of money only, and shall not include punitive damages, costs or interim measures. The parties shall attempt to appoint jointly one impartial expert arbitrator. If the parties cannot agree within 30 (thirty) days on the choice of an arbitrator, each party shall appoint, at its own cost, one impartial expert arbitrator and those two arbitrators shall appoint an expert third arbitrator as chairperson of an arbitral tribunal.
|
17.7
|
When one of the steps 17.1(2), 17.1(3) or 17.1(4) is selected to resolve a dispute, the parties shall jointly enter into a contract with the required mediator or conciliator, third party, arbitrator or arbitrators, as the case may be, to pay the costs for the desired services and to bear their own costs of participating in the process involved. The contracts referred to and contemplated by this Article shall be in the form and content substantially identical to the Arbitration Agreement (G.T.T.: 25-4-94), the Mini-Trial Agreement (G.T.T.: 25-4-94) and the Mediation/Conciliation Agreement (G.T.T.: 07-02-94).
|
17.8
|
This Article 17.8 does not apply to issues respecting confidential information, intellectual property or any issue where injunctive relief may be sought. Either party may seek immediate relief on the foregoing issues in any court of competent jurisdiction.
|
18.1
|
This Agreement sets forth the entire Agreement concerning the Services, and shall supersede all communications, negotiations and agreements between the parties in relation to the subject matter herein.
|
18.2
|
This Agreement shall prevail to the benefit of and be binding upon the parties hereto, their successors and permitted assigns.
|
18.3
|
Unless otherwise indicated, nothing herein contained shall be construed as creating an employer and employee relationship, a partnership, joint venture or agency relationship by or between the parties hereto. Each party shall at all times be deemed an independent contractor.
|
18.4
|
MS shall be an independent contractor in all matters relating to the Services and this Agreement. MS shall not have, and shall not act as or hold itself out as a direct employee of the COMPANY. Nor shall MS have the authority or act as or hold itself out as having the authority to legally bind the COMPANY to any agreement or sale or to make representations and warranties on behalf of COMPANY. The COMPANY shall have no liability or responsibility with respect to income or other federal, state, and local taxes of any kind or withholding in connection with payments made to MS hereunder.
|
|
19.1
|
If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. No failure or delay by either party in exercising any right, power or privilege hereunder shall operate as a waiver of such right, power or privilege. Parties shall do such things, and execute such further documents, agreements and assurances, at the requesting party’s expense, during or after termination of this Agreement, in order to protect, perfect and enforce the rights granted herein, or to otherwise affect the
intentions and acknowledgements
of the parties.
|
19.2
|
It is understood that MS shall not directly compete with the Company for a period of 1 year from the time of termination of this agreement with any firm operating in the same field with competing offerings as the Company.
|
1.
|
I have reviewed this annual report on Form 10-K of Midwest Energy Emissions Corp.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: April 11, 2012
|
By:
|
/s/ JOHNNY F. NORRIS, JR. | |
JOHNNY F. NORRIS, JR. | |||
Chairman and Chief Executive Officer |
1.
|
I have reviewed this annual report on Form 10-K of Midwest Energy Emissions Corp.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: April 11, 2012
|
By:
|
/s/ RICHARD H. GROSS | |
RICHARD H. GROSS | |||
Vice President and Chief Financial Officer |
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
|
Date: April 11, 2012
|
By:
|
/s/ JOHNNY F. NORRIS, JR. | |
JOHNNY F. NORRIS, JR. | |||
Chairman and Chief Executive Officer |
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Corporation.
|
Date: April 11, 2012
|
By:
|
/s/ RICHARD H. GROSS | |
RICHARD H. GROSS | |||
Vice President and Chief Financial Officer |