UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2008
or
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 0-50090
AMERICAN POST TENSION, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3926203
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1179 Center Point Drive, Henderson, NV
(Address of principal executive offices)
Registrant?s telephone number, including area code: (702) 565-7866
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Name of each exchange on which registered Title of each class
OTC Bulletin Board Common Stock (par value $.0001 per share)
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant?s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. Yes [ ] No [X]
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See 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 [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(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 [ ] No [X]
The aggregate market value of voting and non-voting common equity held by
non-affiliates of the registrant on December 31, 2008 was $2,646,390. The
number of shares outstanding of the registrant?s of common stock on March
31, 2009 was as follows:
Common stock (par value $0.0001 per share) 34,366,600 shares.
AMERICAN POST TENSION, INC.
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2008
TABLE OF CONTENTS
PART I
Page No.
Item 1. Business ..................................................... 1
Item 1A. Risk Factors................................................. 4
Item 1B. Unresolved Staff Comments .................................. 13
Item 2. Properties ................................................... 13
Item 3. Legal Proceedings ............................................ 13
Item 4. Submission of Matters to a Vote of Security Holders .......... 13
PART II
Item 5. Market for Registrant?s Common Equity and Related Stockholder
Matters and Issuer Purchases of Equity Securities ............ 13
Item 6. Selected Financial Data ...................................... 15
Item 7. Management?s Discussion and Analysis of Financial Condition
and Results of Operations .................................... 16
Item 8. Financial Statements and Supplementary Data .................. 21
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ..................................... 36
Item 9A. Controls and Procedures ..................................... 36
Item 9B. Other Information ........................................... 38
PART III
Item 10. Directors and Executive Officers of the Registrant .......... 38
Item 11. Executive Compensation ...................................... 42
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters .................. 43
Item 13. Certain Relationships and Related Transactions and
Director Independence ....................................... 45
Item 14. Principal Accountant Fees and Services ...................... 46
PART IV
Item 15. Exhibits and Financial Statement Schedules .................. 47
Signatures ................................................... 48
Forward-Looking Information
This Annual Report on Form 10-K contains ?forward-looking statements?
within the meaning of Section 27A of the Securities Act of 1933, as amended
(theSecurities Act), and Section 21E of the Securities Exchange Act of 1934 as
amended (the Exchange Act). All statements in this Annual Report other than
statements of historical fact are forward-looking statements for purposes of
these provisions, including any statements of the plans and objectives for
future operations and any statement of assumptions underlying any of the
foregoing. Statements that include the use of terminology such as may, will,
expects, believes, ?plans, estimates, potential, or continue, or the
negative thereof or other and similar expressions are forward-looking
statements. These forward-looking statements involve risks and uncertainties,
and it is important to note that our actual results could differ materially
from those projected or assumed in such forward-looking statements. Among
the factors that could cause actual results to differ materially are the
factors detailed under Management?s Discussion and Analysis of Financial
Condition and Results of Operations, generally, and specifically therein under
the captions Liquidity and Capital Resources and Risk Factors as well as
elsewhere in this Annual Report on Form 10-K. All forward-looking statements
included in this document are made as of the date hereof, based on information
available to us as of the date hereof, and we assume no obligation to update
any forward-looking statement.
PART I
ITEM 1. BUSINESS
General
The company was originally formed as Magic Communications, Inc. (Magic)
as a New York corporation on January 16, 1997 and reincorporated as a Delaware
corporation in November 2002. It was formed for the purpose of offering
Internetkiosks where the public could access the Internet for a fee. Magic was
unable todevelop that business, and, from June 1997 until April 2007 Magic
engaged in the business of contracting with various locations such as malls,
gas stations, stores and office buildings to install pay phones that were an
alternative to those provided by the primary local service provider.
On April 12, 2007, Magic entered into a Merger Agreement with Post
Tension of Nevada, Inc. ?PTNV?)and PTNV Acquisition Corp., a Florida
corporation and a wholly-owned subsidiary of Magic (?Acquisition Corp.?). The
Merger Agreement provided that Acquisition Corp. would merge with and into
PTNV (the ?Merger?). As a result of the Merger, PTNV became a wholly-owned
subsidiary of Magic. Each outstanding share of PTNV common stock was converted
into the right to receive 10,160.064 shares of Magic?s common stock and the
PTNV stockholders received, in a tax-free exchange, 90 percent of the
resulting shares of Magic common stock. After the Merger, Magic changed its
name to American Post Tension, Inc. (?APTI? or the ?Company?) on September 24,
2007.
The transaction was treated as a capital transaction under which APTI was
treated as a non-business entity. Therefore, the accounting for the business
combination was identical to that resulting from a reverse merger, except no
goodwill or other intangible assets was recorded as a result of the Merger.
Accordingly, the Company did not recognize goodwill or any other intangible
assets in connection with the transaction and PTNV was treated as the
acquirer for accounting purposes. Therefore, the historic financial statements
prior to merger are those of PTNV and post merger, the financial statements
represent the consolidated financial position and operating results of American
Post Tension, Inc. and its wholly-owned subsidiary, Post Tension of Nevada, Inc.
All references to shares and per share amounts in the accompanying financial
statements have been restated to reflect the aforementioned share exchange.
Markets and Marketing
Post Tension of Nevada (?PTNV?) was established in 1987 in the Las Vegas
area. PTNV is one of the largest slab-on-grade contractors serving the western
United States. PTNV is a full service post tension contractor. Each year PTNV
installs millions of square feet of post tension foundations from four
full-service offices: Las Vegas, NV (corporate headquarters), Phoenix AZ, Tucson
AZ and Denver CO. We offer a full turn-key service to our customers, a concept
new to the post tension industry.
We are a well known and respected company with high saturation throughout
the western United States. Within the residential housing markets of Las Vegas,
Nevada and Phoenix, Arizona, we have a 70% market share and an 80% market share
in Denver, Colorado and Tucson, Arizona. In 1994, we became the first company to
provide post tension services in Arizona. Residential construction accounts for
the majority of our slab-on-ground revenues, while commercial construction is
much smaller at this time. We expanded our commercial workforce in 2008 by
hiring additional salespeople and draft engineers. Starting in Las Vegas, we are
attempting to generate sales in the high rise market, which is expected to see
$10 billion of new construction on the Las Vegas Strip in the next five years.
We can provide no assurance, however, that we will be successful in obtaining a
significant, or any, market share in the commercial construction market.
Industry
Today, a post-tension slab costs no more than rebar; in some instances,
even less. Post tensioning retards unwanted expansion movement and settling that
can damage interior and exterior walls. Post tension designs disburse the load
throughout the slab, not only on perimeter or load-bearing walls. Post
tensioning is an excellent solution for expansive soils. A post tension slab can
be used anywhere a rebar slab is used. It?s the effective, economical solution
wherever there is a need to control cracking, deflection and shifting. For more
than 30 years, post tension has demonstrated excellent performance, especially
in poor soil, which is common in most regions of the country. A post tension
slab starts with high-strength steel strand cable installed in a grid pattern
according to plans. Once the concrete has cured, the cables are ?tensioned? or
stressed, which pulls the slab into a state of constant compression. The result
is a reinforced concrete ?floating? slab that controls cracking, shifting and
deflection more effectively and economically than any other process. PTNV
purchases raw cable, anchors, rebar, wedges, stressing equipment and parts,
splice chucks, end protectors, dead-end spacers, pocket forms from a small
number of high quality suppliers. The company?s relationship with its suppliers
is excellent.
In addition to the slab-on-grade (?SOG?) post-tensioning products and
services described above, we also provide materials to our customers on a
freight-on-board (?FOB?) basis so the buyer assumes the responsibility for the
shipment and shipping charges of the materials purchased from us. Today, we
offer this service to clients in Utah and California. Our plans are to attempt
to expand the reach of our FOB business, although we cannot provide any
assurance that we will be able to increase this segment of our business in
accordance with our plans, if at all. It is our intention to expand our presence
in this market segment by expanding our workforce and marketing to this
potential customer base as well as acquiring other companies with an existing
presence in this market. At this time, we have no definitive plans to acquire
any other businesses, and we cannot provide assurances that we will be able to
acquire businesses in this area on terms that are favorable to us.
We have a reputation for providing superior services to our clients. Some
clients have been depending on us for 20 years, though there are no long term
contracts with them. However, we are currently negotiating with one of the
largest home builders in the United States to make us the exclusive provider of
post tension services to all concrete contractors used by the builder, in the
states of Nevada, Arizona and Colorado. We cannot provide any assurances that we
will be able to successfully negotiate this arrangement or that, if we are able
to negotiate such an arrangement, the arrangement will be on terms that we
prefer. The Company has 189 active customers. Most of them are contractors,
concrete suppliers and other subcontractors to the construction industry. The
top 10 customers accounted for $6,453,979 in our revenues for the twelve months
ended December 31, 2008.
Competition
Our competition in supplying full-service post tension technology and FOB
service to the target markets consists primarily of other post tension companies
located in the United States, some of which are owned by European companies. We
believe that we are the largest domestic owned post tension company in the
United States. Other smaller domestic companies have no distinct advantage,
other than geographic location, over PTNV. The two largest international
companies of which we are aware have more completed high rise projects, but we
do not believe that will significantly diminish our ability to provide full
service to similar projects in the future.
Of the 25 companies that belong to the Post Tensioning Institute, PTNV is
the third largest. Our two main competitors are Suncoast Post Tension, a Keller
Company, and DSI (Dywidag-Systems International) both owned by European
companies. Regionally, there are a handful of firms that provide similar
services. Throughout the entire United States there are approximately 40
companies like us. It is well known throughout the industry that both Suncoast
and DSI are able to handle larger high rise projects but struggle in the SOG
market because we offer labor as part of the total service and the others offer
only materials. When they compete in our markets they have to add the labor to
be competitive from a service perspective.
Organization/Employees
All subsidiaries and operating units operate independently with respect to
daily operations. Operating decisions must be approved by the business unit
and/or corporate senior management. At December 31, 2008, we employed
approximately 60 people with 5 at Corporate, and Operations consisting of 18 in
Las Vegas, 17 in Phoenix, Arizona, 14 in Tucson, Arizona, 3 in Denver, Colorado
and 3 in Commercial. Our operational employees in Las Vegas, excluding
management, are represented by the Laborers International Union of
North America, Local 782. We consider our employee and contractor relations to
be satisfactory. The number of employees we have at each location is dependent
upon the sales volume. Because our business in cyclical and seasonal in nature
we have and will continue to experience swings in the number of employees we
have. The table below presents our sales levels and the number of employees by
quarter to give the reader a better understanding of our employment swings.
First Second Third Fourth
2008
Revenue $3,040,941 $3,711,073 $3,499,340 $1,924,829
Employees 89 105 115 87
2007
Revenue $3,730,008 $4,881,033 $4,166,195 $2,192,690
Employees 110 117 112 79
Access to Our Information
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC?s website at http://www.sec.gov. The public may also read
and copy any document we file at the SEC?s public reference room located at 100
F Street, N.E., Washington, D.C. 20549 on official business days during the
hours of 10:00 am to 3:00 pm. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference room.
We encourage the public to read our periodic reports and statements. Copies
of these filings, as well as any future filings, may be obtained, at no cost by
writing to our Secretary/Treasurer, Sabatha Golay, at our principal executive
offices.
ITEM 1A. RISK FACTORS
In addition to the risks previously mentioned, the following important
factors could adversely impact our business. These factors could cause our
actual results to differ materially from the forward-looking and other
statements that we make in registration statements, periodic reports and other
filings with the SEC, and that we make from time to time in our news releases,
annual reports and other written communications, as well as oral forward-
lookingand other statements made from time to time by our representatives.
Risks Relating to Our Business
Our business is cyclical and is significantly affected by changes in general
andlocal economic conditions.
Our business can be substantially affected by adverse changes in general
economic or business conditions that are outside of our control, including
changes in:
- Short- and long-term interest rates;
- The availability of financing for homebuyers;
- Consumer confidence generally and the confidence of potential
homebuyers in particular;
- Federal mortgage financing programs and federal and state regulation
of lending practices;
- Federal and state income tax provisions, including provisions for
deduction of mortgage interest payments;
- Housing demand;
- The supply of available new or existing homes and other housing
alternatives, such as apartments and other rental residential
property;
- Employment levels and job and personal income growth;
- Real estate taxes.
Adverse changes in these conditions may affect our business nationally or
may be more prevalent or concentrated in particular regional or local areas in
which we operate.
Weather conditions and natural disasters, such as earthquakes, hurricanes,
tornadoes, floods, droughts, fires and other environmental conditions, can also
harm our homebuilding business on a local or regional basis. Civil unrest or
acts of terrorism can also have an adverse effect on our business.
Fluctuating component prices and shortages, as well as shortages or price
fluctuations in other building materials or commodities, can have an adverse
effect on our business.
The potential difficulties described above can cause demand for customers
homes to diminish or cause customers to take longer and incur more costs to
build homes.
The homebuilding industry is experiencing a severe downturn that may continue
for an indefinite period and adversely affect our business and results of
operations compared to prior periods.
In 2008, the U.S. homebuilding industry as a whole experienced a
significant and sustained decrease in demand for new homes and an oversupply of
new and existing homes available for sale, and this downturn continues in 2009.
In many markets, a rapid increase in new and existing home prices over the past
several years reduced housing affordability and tempered buyer demand. In
particular, investors and speculators reduced their purchasing activity and
instead stepped up their efforts to sell the residential property they had
earlier acquired. These trends, which were more pronounced in markets that had
experienced the greatest levels of price appreciation, resulted in overall
fewer home sales, greater cancellations of home purchase agreements by buyers,
higher inventories of unsold homes and the increased use by homebuilders,
speculators, investors and others of discounts, incentives and price
concessions to close home sales compared to the past several years.
Although the federal government has designed and proposed numerous
initiatives to move the homebuilding market towards stabilization, we are
uncertain as to how effective such initiatives will be on the overall market
conditions. The tightening of lending standards could lead to a further
deterioration in the overall homebuilding market due to stricter credit
standards, higher down payment requirements and additional credit verification
requirements. This deterioration could have an adverse impact on our results of
operations and financial condition. In addition, to the extent that homeowners
have used sub-prime or Alt A mortgages to finance the purchase of their homes
and are later unable to refinance or maintain those loans, additional
foreclosures and an oversupply of inventory may result in the market. This may
also contribute to additional deterioration in the market and have an adverse
impact on housing demand and our results of operations and financial condition.
Reflecting these demand and supply trends, we, like many other companies
with significant operations related to the residential home building market,
experienced a large drop in net new orders, slower price appreciation and a
reduction in our margins. We can provide no assurances that the homebuilding
market will improve in the near future, and it may weaken further. Continued
weakness in the homebuilding market would have an adverse effect on our
business and our results of operations as compared to those of earlier periods.
If new home prices decline, interest rates increase or there is a downturn in
the economy, some homebuyers may cancel their home purchases because the
required deposits are small and generally refundable, resulting in a negative
impact on our customers.
Home purchase contracts typically require only a small deposit, and in many
states, the deposit is fully refundable at any time prior to closing. If the
prices for new homes decline, interest rates increase or there is a downturn in
local, regional or the national economy, home builders may increase sales
incentives so homebuyers have financial incentive to terminate their existing
home purchase contracts with our customers in order to negotiate for a lower
price elsewhere or to explore other options. In 2008, many large homebuilders
experienced a large increase in the number of cancellations, in part because of
these reasons. Additional cancellations could have an adverse effect our
customers and thus on our business and our results of operations.
Home prices and sales activity in the particular markets and regions in which
we do business affect our results of operations because our business is
concentrated in these markets.
Home prices and sales activity in some of our key markets have declined
from time to time for market-specific reasons, including adverse weather, lack
of affordability or economic contraction due to, among other things, the failure
or decline of key industries and employers. If home prices or sales activity
decline in one or more of the key markets in which we operate, particularly in
Arizona or Nevada, our costs may not decline at all or at the same rate and, as
a result, our overall results of operations may be adversely affected.
Interest rate increases or changes in federal lending programs could lower
demand for our products.
We are highly dependent on the residential home construction market in Las
Vegas, Nevada, Phoenix, Arizona and Tucson, Arizona. In recent years,
historically low interest rates and the increased availability of specialized
mortgage products, including mortgage products requiring no or low down
payments, and interest-only and adjustable rate mortgages, have made home buying
more affordable for a number of customers. Increases in interest rates or
decreases in the availability of mortgage financing or of certain mortgage
programs have lead to higher down payment requirements or monthly mortgage
costs, or both, and have therefore reduced demand for residential housing.
Increased interest rates can also hinder our customers? ability to realize
their backlog because purchase contracts may provide a financing contingency.
Financing contingencies allow customers to cancel their home purchase contracts
in the event they cannot arrange for financing at the interest rates prevailing
when they signed their contracts.
Because the availability of Fannie Mae, Federal Home Loan Mortgage
Corporation, FHA and VA mortgage financing is an important factor in marketing
and selling many residential homes, any limitations or restrictions in the
availability of such government-backed financing could reduce new residential
home sales.
Our customers are subject to substantial legal and regulatory requirements
regarding the development of land, the homebuilding process and protection of
the environment, which can cause our customers to suffer delays and incur costs
associated with compliance and which can prohibit or restrict homebuilding
activity in some regions or areas.
The residential homebuilding business is heavily regulated and subject to
an increasing degree of local, state and federal regulations concerning zoning,
resource protection and other environmental impacts, building design,
construction and similar matters. These regulations often provide broad
discretion to governmental authorities that regulate these matters, which can
result in unanticipated delays or increases in the cost of a specified project
or a number of projects in particular markets. Our customers may also experience
periodic delays in homebuilding projects due to building moratoria in any of the
areas in which we operate.
Our customers are also subject to a variety of local, state and federal
statutes, ordinances, rules and regulations concerning the environment. These
laws and regulations may cause delays in construction and delivery of new homes,
and can prohibit or severely restrict homebuilding activity in certain
environmentally sensitive regions or areas. In addition, environmental laws may
impose liability for the costs of removal or remediation of hazardous or toxic
substances whether or not the developer or owner of the property knew of, or
wasresponsible for, the presence of those substances. The presence of those
substances on our customers? properties may prevent our customers from selling
homes.
We provide services in highly competitive markets, which could hurt our
future operating results.
We compete in each of our markets with a number of companies for customers,
materials, skilled management and labor resources. Our competitors include other
large national companies that provide the same or similar services and products,
as well as smaller regional competitors, based on long-standing relationships
with local labor, materials suppliers and home builders, and these competitors
can have an advantage in their respective regions or local markets. The current
national debate related to immigration reform could impact the related laws and
regulations in the markets in which we operate, and result in shortages of
skilled labor and higher labor and compliance costs, potentially affecting our
ability to compete. We generally are unable to pass on increases in costs to
customers. Sustained increases in our material and labor costs may, over time,
erode our margins, and pricing competition for materials and labor may restrict
our ability to pass on any additional costs, thereby decreasing our margins.
These competitive conditions can:
make it difficult for us to acquire new customers and enter into new
markets;
reduce our sales or profit margins; and
cause us to offer or increase our sales incentives, discounts or price
concessions.
Any of these competitive conditions can adversely affect our revenues,
increase our costs and/or impede the growth of our local or regional business.
Because of the seasonal nature of our business, our quarterly operating results
fluctuate.
We have experienced seasonal fluctuations in quarterly operating results.
Our customers typically do not commence significant construction on a home
before a home purchase contract has been signed with a homebuyer. Historically,
a significant percentage of home purchase contracts are entered into in the
spring and summer months, and a corresponding significant percentage of our
deliveries occur in the spring, summer and fall months. Construction of
residential homes typically requires approximately four months and weather
delays that often occur in late winter and early spring may extend this period.
As a result of these combined factors, we historically have experienced uneven
quarterly results, with lower revenues and operating income generally during the
first and fourth quarters of the year.
Our leverage may place burdens on our ability to comply with the terms of our
indebtedness, may restrict our ability to operate and may prevent us from
fulfilling our obligations.
The amount of our debt could have important consequences. For example, it
could:
limit our ability to obtain future financing for working capital,
capital expenditures, acquisitions, debt service requirements or other
requirements;
require us to dedicate a substantial portion of our cash flow from
operations to the payment of our debt and reduce our ability to use our
cash flow for other purposes;
impact our flexibility in planning for, or reacting to, changes in our
business;
make us more vulnerable in the event of a downturn in our business or
in general economic conditions.
Our ability to meet our debt service and other obligations will depend upon
our future performance. Our business is substantially affected by changes in
economic cycles. Our revenues and earnings vary with the level of general
economic activity and competition in the markets in which we operate. Our
business could also be affected by financial, political and other factors, many
of which are beyond our control. A higher interest rate on our debt could
adversely affect our operating results.
Our business may not generate sufficient cash flow from operations, and
borrowings may not be available to us under bank loans in an amount sufficient
to pay our debt service obligations or to fund our other liquidity needs. Should
this occur, we may need to refinance all or a portion of our debt on or before
maturity, which we may not be able to do on favorable terms or at all.
Our future growth may be limited if the economies of the markets in which we
currently operate contract, or if we are unable to enter new markets, find
appropriate acquisition candidates or adapt our products to meet changes in
demand. Our growth may also be limited by the consummation of acquisitions that
may not be successfully integrated, or our entry into new markets or our
offerings of new products that may not achieve expected benefits.
Our future growth and results of operations could be adversely affected if
the markets in which we currently operate or the products we currently offer to
potential customers, or both, do not continue to support the expansion of our
business. Our inability to grow in our existing markets, to expand into new
markets and/or adapt our products to meet changes in customer demand would limit
our ability to achieve growth objectives and would adversely impact our future
operating results. Similarly, if we do consummate acquisitions in the future, we
may not be successful in integrating the operations of the acquired businesses,
including their product lines, operations and corporate cultures, which would
limit our ability to grow and would adversely impact our future operating
results.
Homebuilding is subject to warranty and liability claims in the ordinary
course of business that can be significant.
As a supplier of services to homebuilders, we are subject to warranty and
construction defect claims arising in the ordinary course of business. We have
not recorded a warranty and other reserves for products we sell. Additionally,
the coverage offered by and the availability of general liability insurance for
construction defects are currently limited and costly. There can be no assurance
that coverage will not be further restricted and become more costly.
Inflation may result in increased costs that we may not be able to recoup if
demand declines.
Inflation can have a long-term impact on us because increasing costs of
materials and labor may require us to increase the sales prices of our products
in order to maintain satisfactory margins. However, inflation is often
accompanied by higher interest rates, which have a negative impact on housing
demand, in which case we may not be able to raise prices sufficiently to keep up
with the rate of inflation and our margins could decrease. A large portion of
our raw materials used in our products are produced by companies in China and a
further decline in the value of the U.S. dollar may result in higher prices for
raw materials such as wire strand that used to create out post tension cables,
the key component of our product offerings.
Future terrorist attacks against the United States or increased domestic and
international instability could have an adverse effect on our operations.
A future terrorist attack against the United States could cause a sharp
decrease in the number of new contracts signed for homes and an increase in the
cancellation of existing contracts. Accordingly, adverse developments in the war
on terrorism, future terrorist attacks against the United States, or increased
domestic and international instability could adversely affect our business.
We are dependent upon our suppliers for the components used in the systems we
design and install; and our major suppliers are dependent upon the continued
availability and pricing of steel strand and plastic parts and other raw
materials.
The raw materials and components used in our systems are purchased from a
limited number of manufacturers. In particular, Concrete Reinforcing Product,
USA Wire, Harris Supply Solutions and JDH Pacific, Inc. account for over 90% of
our purchases of raw materials and components. We are subject to market prices
for the components that we purchase for our installations, which are subject to
fluctuation. We cannot ensure that the prices charged by our suppliers will not
increase because of changes in market conditions or other factors beyond our
control. An increase in the price of components could result in an increase in
costs to our customers and could have a material adverse effect on our revenues
and demand for our services. Interruptions in our ability to procure needed
components, whether due to discontinuance by our suppliers, delays or failures
in delivery, shortages caused by inadequate production capacity or
unavailability, or for other reasons, would adversely affect or limit our sales
and growth.
Geographical business expansion efforts we make could result in difficulties in
successfully managing our business and could harm our financial condition.
As part of our business strategy, we may seek to expand by acquiring
competing businesses or customer contracts in our current or other geographic
markets. We face challenges in managing expanding product and service offerings
and in integrating acquired businesses with our own. We cannot accurately
predict the timing, size and success of our expansion efforts and the associated
capital commitments that might be required. We expect to face competition for
expansion candidates, which may limit the number of expansion opportunities
available to us and may lead to higher expansion costs. There can be no
assurance that we will be able to identify, acquire or profitably manage
additional businesses/contracts or successfully integrate acquired
businesses/contracts, if any, into our company, without substantial costs,
delays or other operational or financial difficulties. In addition, expansion
efforts involve a number of other risks, including:
- Failure of the expansion efforts to achieve expected results;
- Diversion of management attention and resources to expansion efforts;
- Failure to retain key customers or personnel of the acquired
businesses; and
- Risks associated with unanticipated events, liabilities or
contingencies.
Client dissatisfaction or performance problems at a single acquired business
could negatively affect our reputation.
The inability to acquire businesses on reasonable terms or successfully
integrate and manage acquired companies, or the occurrence of performance
problems at acquired companies, could result in dilution, unfavorable accounting
charges and difficulties in successfully managing our business.
Because our industry is highly competitive and has low barriers to entry, we
May lose market share to larger companies that are better equipped to weather
deterioration in market conditions due to increased competition.
Our industry is highly competitive and fragmented, is subject to rapid
change and has low barriers to entry. We may in the future compete for potential
customers in regional areas against competitors that are much larger with
significantly more financial resources. Some of these competitors may have
significantly greater financial, technical and marketing resources and greater
name recognition than we have.
We believe that our ability to compete depends in part on a number of
factors outside of our control, including:
- the ability of our competitors to hire, retain and motivate qualified
personnel;
- the price at which others offer comparable services and equipment;
- the extent of our competitors? responsiveness to client needs
If we are unable to attract, train and retain highly qualified personnel, the
quality of our services may decline and we may not successfully execute our
internal growth strategies.
Our success depends in large part upon our ability to continue to attract,
train, motivate and retain skilled and experienced employees. Qualified
technical employees periodically are in great demand and may be unavailable in
the time frame required to satisfy our customers? requirements. While we
currently have available expertise sufficient for the requirements of our
business, expansion of our business could require us to employ additional highly
skilled technical personnel, including engineers, drafters and project managers.
There can be no assurance that we will be able to attract and retain sufficient
numbers of highly skilled employees in the future. The loss of personnel or our
inability to hire or retain sufficient personnel at competitive rates of
compensation could impair our ability to secure and complete customer
engagements and could harm our business.
Our inability to obtain capital, use internally generated cash, or use shares of
our common stock or debt to finance future expansion efforts could impair the
growth and expansion of our business.
Reliance on internally generated cash or debt to finance our operations or
complete business expansion efforts could substantially limit our operational
and financial flexibility. The extent to which we will be able or willing to use
shares of common stock to consummate expansions will depend on our market value
from time to time and the willingness of potential sellers to accept it as full
or partial payment. Using shares of common stock for this purpose also may
result in significant dilution to our then existing stockholders. To the extent
that we are unable to use common stock to make future expansions, our ability to
grow through expansions may be limited by the extent to which we are able to
raise capital for this purpose through debt or equity financings. No assurance
can be given that we will be able to obtain the necessary capital to finance a
successful expansion program or our other cash needs. If we are unable to obtain
additional capital on acceptable terms, we may be required to reduce the scope
of any expansion. In addition to requiring funding for expansions, we may need
additional funds to implement our internal growth and operating strategies or to
finance other aspects of our operations. Our failure to (i) obtain additional
capital on acceptable terms, (ii) use internally generated cash or debt to
complete expansions because it significantly limits our operational or financial
flexibility, or (iii) use shares of common stock to make future expansions may
hinder our ability to actively pursue any expansion program we may decide to
implement.
Risks Relating to our Common Stock
Investing in our common stock involves a high degree of risk. You should
carefully consider risk factors before deciding whether to invest in shares of
our common stock.
We recently amended our bylaws to make it easier for our majority stockholders,
primarily Edward Hohman and John Hohman, to approve corporate actions that
require the consent of our stockholders.
We amended our bylaws to make it easier for our majority stockholders to
approve corporate actions without the need to call a meeting of all of our
stockholders to vote on such corporate actions. The Delaware corporation laws
that govern us require that certain corporate actions, such as a merger or sale
of the Company, changes to our Certificate of Incorporation, and other actions,
be approved by our stockholders prior to those actions becoming effective. Such
stockholder approval can be obtained either by holding a stockholder meeting or,
if our bylaws permit, by obtaining the written consent to such actions of
stockholders owning a sufficient number of shares of stock to approve the
actions (typically a majority of the outstanding shares of our stock). Our
bylaws previously permitted action to be approved by written consent of our
stockholders, but the bylaws required the written consent of all stockholders.
We believe that obtaining the written consent of all stockholders to approve
corporate action would be impracticable, due the time and cost that would be
required. Similarly, holding a meeting of stockholders to approve certain
actions would involve additional legal and other expenses to the Company.
Accordingly, our Board of Directors amended our bylaws to permit stockholder
approval of corporate actions by the written consent of the holders of a
majority of our outstanding voting shares, as permitted by Delaware law. On
August 3, 2007, our board approved, and the Company?s stockholders owning a
majority of the outstanding voting shares, approved an amendment to our
Certificate of Incorporation to change our name to American Post Tension, Inc.
Our stock price may be volatile, which could result in substantial losses for
investors.
The market price of our common stock is likely to be highly volatile and
could fluctuate widely in response to various factors, many of which are beyond
our control, including the following:
- technological innovations or new products and services by us or our
competitors;
- announcements or press releases relating to the construction sector or
to our business or prospects;
- additions or departures of key personnel;
- regulatory, legislative or other developments affecting us or the
construction industry generally;
- limited availability of freely-tradable ?unrestricted? shares of our
common stock to satisfy purchase orders and demand;
- our ability to execute our business plan;
- operating results that fall below expectations;
- volume and timing of customer orders;
- industry developments;
- economic and other external factors; and
- period-to-period fluctuations in our financial results.
In addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. These market fluctuations may also
significantly affect the market price of our common stock.
There may be a limited market for our securities and we may fail to qualify for
a NASDAQ or other listing.
Although we plan on applying for listing of our common stock on a national
market, such as the NASDAQ Capital Market or the American Stock Exchange, once
we meet the qualifications, there can be no assurance that our initial listing
application will be granted, when the required listing criteria will be met or
when, or if, our application will be granted. Thereafter, there can be no
assurance that trading of our common stock on such market will be sustained or
desirable. At the present time, we do not qualify for certain of the initial
listing requirements of the NASDAQ Capital Market or the American Stock
Exchange. In the event that our common stock fails to qualify for
initial or continued inclusion, our common stock would remain quoted on the OTC
Bulletin Board or become quoted in what are commonly referred to as the ?pink
sheets.? Under such circumstances, it may be more difficult to dispose of, or
toobtain accurate quotations, for our common stock, and our common stock would
become substantially less attractive to certain investors, such as financial
institutions and hedge funds.
We have issued substantial amounts of stock in private placements and if we
inadvertently failed to comply with the applicable securities laws, ensuing
rescission rights or lawsuits would severely damage our financial position.
The securities offered in our private placements (specifically shares
issued prior to, or contemporaneously with, the merger agreement completed
between us and Post Tension of Nevada, Inc.) were not registered under the
Securities Act or any state ?blue sky? law in reliance upon exemptions from such
registration requirements. Such exemptions are highly technical in nature and if
we inadvertently failed to comply with the requirements or any of such exemptive
provisions, investors would have the right to rescind their purchase of our
securities or sue for damages. If one or more investors were to successfully
seek such rescission or prevail in any such suit, we would face severe financial
demands that could materially and adversely affect our financial position.
Financings by the issuance of private placements in the future that may be
available to us under current market conditions may involve sale or issuance of
stock at prices below the prices at which our common stock currently is reported
on the OTC Bulletin Board or exchange on which our common stock may in the
future be listed.
Our common stock may be deemed a ?penny stock?, which would make it more
difficult for our investors to sell their shares.
Our common stock may be subject to the ?penny stock? rules adopted under
Section 15(g) of the Securities Exchange Act of 1934, which we refer to as the
?Exchange Act.? The penny stock rules apply to non-NASDAQ listed companies whose
common stock trades at less than $5.00 per share or that have tangible net worth
of less than $5,000,000 ($2,000,000 if the company has been operating for three
or more years). These rules require, among other things, that brokers, who trade
penny stock to persons other than ?established customers? complete specified
documentation, make suitability inquiries of investors and provide investors
with specified information concerning trading in the security, including a risk
disclosure document and quote information under some circumstances. Many brokers
have decided not to trade penny stocks because of the requirements of the penny
stock rules and, as a result, the number of broker-dealers willing to act as
market makers in these securities is limited. If we remain subject to the penny
stock rules for any significant period, that could have an adverse effect on the
market for our securities. If our securities are subject to the penny stock
rules, investors will find it more difficult to dispose of our securities.
Risks Relating to Our Company
The success of our business depends on the continuing contributions of Edward
Hohman, our Chairman and Chief Executive Officer and John Hohman, our Chief
Operating Officer, and other key personnel who may terminate their employment
with us at any time, and we will need to hire additional qualified personnel.
We rely heavily on the services of Edward Hohman, our Chairman and Chief
Executive Officer, John Hohman, our Chief Operating Officer, as well as several
other management personnel. Loss of the services of any of such individuals
would adversely impact our operations. None of our key personnel are party to
any employment agreements with us and management and other employees may
voluntarily terminate their employment at any time. We do not currently maintain
any ?key man? life insurance with respect to any of such individuals.
On March 12, 2008, our then Chief Financial Officer delivered to us a
notice of termination pursuant to the terms of our employment agreement with
him, resulting in the termination of his employment on April 4, 2008. In July,
2008, we entered into a consulting agreement with CF Consulting, LLC, based in
Florida, to provide contract CFO and corporate counsel services to us. Under
that agreement, CF Consulting, LLC has designated Robert Hipple to act as our
contract CFO, although he is not an officer, director or employee of the
Company.
Our Chief Executive Officer, Edward Hohman, and our Chief Operating Officer,
John Hohman, beneficially own a majority of the shares of our common stock,
which gives them control over all major decisions on which our stockholders may
vote and which may discourage an acquisition of the Company.
Edward Hohman, our Chief Executive Officer, beneficially owns approximately
38% of our outstanding common stock. John Hohman, our Chief Operating Officer,
beneficially owns approximately 38% of our outstanding common stock. The
interests of our Chief Executive Officer and Chief Operating Officer may differ
from the interests of other stockholders. As a result, Edward Hohman and John
Hohman will have the right and ability to control virtually all corporate
actions requiring stockholder approval, irrespective of how our other
stockholders may vote, including the following actions:
- election of our directors;
- the amendment of our Certificate of Incorporation or By-laws;
- the merger of our company or the sale of our assets or other corporate
transaction; and
- controlling the outcome of any other matter submitted to the
stockholders for vote.
This controlling stock ownership of Edward Hohman and John Hohman may discourage
a potential acquirer from seeking to acquire shares of our common stock or
otherwise attempting to obtain control of our company, which in turn could
reduce our stock price or prevent our stockholders from realizing a premium over
our stock price.
We are subject to the reporting requirements of the federal securities laws,
which impose additional burdens on us.
We are a public reporting company and, accordingly, subject to the
information and reporting requirements of the Exchange Act and other federal
securities laws, including compliance with the Sarbanes-Oxley Act of 2002. As a
public company, these new rules and regulations have increased our compliance
costs in 2008 and beyond and made certain activities more time-consuming and
costly.
As a public company, we also expect that these new rules and regulations
may make it more difficult and expensive for us to obtain director and officer
liability insurance in the future, and we may be required to accept reduced
policy limits and coverage or incur substantially higher costs to obtain the
same coverage. As a result, it may be more difficult for us to attract and
retain qualified persons to serve on our Board of Directors or as executive
officers.
It may be time-consuming, difficult and costly for us to develop and
implement the internal controls and reporting procedures required by the
Sarbanes-Oxley Act, when applicable to us. Since the departure of our former
Chief Financial Officer, no members of our management have significant
experience operating a company, whose securities are traded or listed on an
exchange, or with SEC rules and requirements, including SEC reporting practices
and requirements that are applicable to a publicly-traded company, and we have
retained an outside consulting firm to provide these services to us. We will
need to recruit, hire, train and retain additional financial reporting, internal
controls and other personnel in order to develop and implement appropriate
internal controls over financial reporting and disclosure controls and
procedures. As reported below under ?Controls and Procedures? Internal Control
Over Financial Reporting; Restatement of Consolidated Financial Statements,
Special Committee and Company Findings,? our Board of Directors determined that
we did not maintain effective controls to ensure the existence, completeness,
accuracy, valuation, and documentation of discussions between a former Chief
Financial Officer and our external counsel, auditors and consultants, which
resulted in the misstatement of our restricted stock-based compensation expense
and related disclosures, and in the need to restate our consolidated financial
statements for the quarter ended June 30, 2007 and for the quarter ended
September 30, 2007, both of which were done in 2008. If we are unable to comply
with the requirements of internal control over financial reporting required by
the Sarbanes-Oxley Act, when applicable, we may not be able to obtain the
independent accountant certifications or attestations required by the Sarbanes-
Oxley Act.
ITEM 1B. UNRESOLVED STAFF COMMENTS
This Item is not applicable.
ITEM 2. PROPERTIES
Our corporate headquarters are located at 1179 Center Point Drive,
Henderson, Nevada 89074, where we lease 16,000 square feet of office and
warehouse space. We lease 8,800 square feet of office and warehouse space at
2419 S. 49th Street, Phoenix, Arizona 85043, 6,000 square feet of office and
warehouse space at 1441 W. Miracle Mile, Tucson, Arizona 85705 and 6,400 square
feet of office and warehouse space at 9685 E. 102nd Avenue, Henderson, CO 80640
for our regional offices. The four previously mentioned locations are leased
from Edward Hohman, our Chairman and Chief Executive Officer, and John Hohman,
our Chief Operating Officer or entities owned or controlled by them. Edward
Hohman and John Hohman are the Company?s principal shareholders. Rents were paid
or accrued in favor of the shareholders, under one year operating leases with
options to renew for an additional year, in the amount of $248,160 and $247,480
for the twelve months ended December 31, 2008 and 2007.
ITEM 3. LEGAL PROCEEDINGS
We have been involved in various legal and governmental proceedings
incidental to our continuing business operations. As of December 31, 2008 there
were no continuing legal suits or any known pending litigation related to
claimed construction defects as a result of services and products provide to our
customers.
On October 26, 2008, the District Council of Iron Workers of the State of
California and Vicinity (?Ironworkers?) filed a charge with the National Labor
Relations Board alleging that Post Tension of Nevada, Inc. engaged in unfair
labor practices in its Phoenix operations. The General Counsel of the Board
issued a complaint and notice of hearing based on this charge alleging that Post
Tension committed certain unfair labor practices and that the employees had
engaged in an unfair labor practice strike. A hearing on this matter has been
held and briefs to the Administrative Law Judge were filed on April 1, 2009. The
primary issue is whether a strike by employees was an ?unfair labor
practice? strike or an ?economic? strike. Striking employees have made an offer
to return to work and several have returned to work and others will be returned
when work is available. If the strike is an unfair labor practice strike there
is approximately $30,000 in back wages due.
Ten of the striking employees and foremen have also filed charges with the
EEOC in Cases Nos. 540-2008-01783 through 540-2008-01793 alleging that they have
been discriminated against based on their national origin. A position statement
has been filed on behalf of the Company.
There are no legal disputes involving a labor organization at Post
Tension?s Henderson location. Laborers? Local 782 has been recognized as the
representative of the field and shop employees at the Henderson location and
PTNV and Local 782 bargained for a collective bargaining contract, which has
been signed. There are no charges pending before any administrative agency
concerning this bargaining relationship.
The Company is also participating in an on-going arbitration dispute with
our former Chief Financial Officer, who resigned from the Company in
March, 2008, as provided in the contract under which he was employed. The
Company also has filed a separate legal proceeding seeking damages from the
former CFO in a state court in Las Vegas. Neither the arbitration nor
the legal proceeding is expected to have a material effect on our
financial results.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our stockholders during the fourth
quarter of 2008.
PART II
ITEM 5. MARKET FOR REGISTRANT?S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock has been quoted on the OTC Bulletin Board since July 2006.
Our trading symbol is APTI. The following table sets forth the high and low bid
prices for our common stock for the periods indicated, as reported by the OTC
Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-
up, mark-down or commission, and may not represent actual transactions.
The table below sets forth, for the quarterly periods indicated, the range
of high and low closing prices and cash dividends declared per
2008 2007
Declared Declared
High Low Dividends High Low Dividends
1st Quarter $0.40 $0.20 $.00 $0.55 $0.17 $.00
2nd Quarter 0.20 0.12 .00 0.85 0.38 .00
3rd Quarter 0.24 0.04 .00 0.90 0.65 .00
4th Quarter 0.07 0.03 .00 0.68 0.32 .00
As of March 26, 2009, there were approximately 112 holders of record of our
common stock. We have not declared or paid any cash dividends on our common
stock and do not anticipate declaring or paying any cash dividends in the
foreseeable future. We currently expect to retain future earnings, if any, for
the development of our business. Dividends may be paid on our common stock only
if and when declared by our Board of Directors. We did not repurchase any shares
that were outstanding and we have no Treasury Stock.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table summarizes our equity compensation plans in effect as
of December 31, 2008.
Number of
Securities
(a) (b) Remaining Available
for
Number of Securities to be Weighted-average Future Issuance Under
Issued Upon Exercise of Exercise Price of Equity Compensation
Plans
Outstanding Options, Outstanding Options, (Excluding Securities
Warrants and Rights Warrants and Rights Reflected in Column(a))
Equity compensation plans
approved by stockholders none $n/a none
Equity compensation plans
not approved by
stockholders 100,000(1) $1.00 1,500,000(2)
-------------- --------- -----------------
Total 100,000(1) $1.00 1,500,000(2)
(1) Includes 50,000 shares of common stock underlying warrants issued to
each of our independent directors for their services as directors. The
warrants entitle the directors to purchase 50,000 shares of common stock
at a price of $1.00 per share.
(2) Includes 1,500,000 shares of common stock authorized for issuance
under our 2002 Non-statutory Stock Option Plan.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We did not purchase any outstanding shares of our stock during 2008.
Pursuant to an agreement dated as of January 4, 2008, John Hohman, our
Chief Operating Officer and a director, purchased 465,920 shares of common stock
from Kelly Hickel, who was at the time a director of the Company, for a price of
$93,184, or $0.20 per share. Pursuant to a separate agreement, also dated
January 4, 2008, Edward Hohman, our President and a director, purchased 465,920
shares of common stock from The Turnaround Group, LLC, a limited liability
company controlled by Mr. Hickel, for a price of $93,184, or $0.20 per share.
The shares purchased from Mr. Hickel and The Turnaround Group, LLC represent all
of the shares of common stock owned by them at the time of the purchases.
In September, 2008, Edward Hohman purchased 57,000 shares of common stock
on the open market at an average purchase price of $0.08. As a result, he now
holds a total of 13,229,000 common shares of the Company.
Because John Hohman and Edward Hohman may be deemed to be ?affiliated
purchasers,? as defined in SEC rules, the purchases are described in the
following table and are aggregated for purposes of the presentation in the
table.
Total Number of Maximum Dollar
Shares Value of Shares
Purchased as Part That May Yet Be
Total Number Average of Publicly Purchased Under
of Shares Price Paid Announced Plans the Plans or
Period Purchased per Share or Programs Programs
------------------------ ----------- --------- ---------------- ---------------
January, 2008 931,840 $ 0.20 -- $ --
September, 2008 57,000 $ 0.08 -- $ --
-------- -------- --------- ---------
Total 988,840 $ 0.19 -- --
ITEM 6. SELECTED FINANCIAL DATA
This item is not applicable.
ITEM 7. MANAGEMENT?S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Twelve Months Ended December 31, 2008 as compared to Twelve Months Ended
December 31, 2007
The following table sets forth, for the periods indicated, certain
information related to our operations, expressed in dollars and as a percentage
of our net sales:
Twelve Months Ended December 31,
2008 % 2007 %
------------ ------ ----------- ------
Net sales $ 12,176,183 100.0% $14,969,926 100.0 %
Cost of sales 11,114,864 91.3% 11,176,984 74.7 %
------------ ------ ----------- ------
Gross profit 1,061,319 8.7% 3,792,942 25.3 %
Operating Expenses:
Selling, general and administrative 3,894,990 32.0% 4,224,916 28.2 %
------------ ------ ----------- -------
Loss from operations (2,833,671) (23.3)% (431,974) (2.9)%
Other income (expense)
Interest income (expense), net (10,807) (0.1)% 149,319 1.0 %
Other income (expense), net 245,205 2.0 % 800,557 5.3 %
Merger related expenses and costs -- -- (3,246,768) (21.7)%
------------ ------ ----------- -------
Total other income (expense) 234,398 1.9% (2,296,892) (15.4)%
------------ ------ ----------- -------
Loss before provision for
income taxes (2,599,273) (21.4)% 2,728,866) (18.2)%
------------ ------ ----------- -------
Income tax (provision) benefit (38,246) (0.3)% 38,246 0.3 %
------------ ------ ----------- -------
Net loss $ (2,637,519) (21.7)%$(2,690,620) (17.9)%
Results of Operations
During the year ended December 31, 2008, the U.S. housing market was
impacted by a lack of consumer confidence, decreased housing affordability, and
large supplies of resale and new home inventories and related pricing pressures.
These factors contributed to weakened demand for new homes, slower sales, higher
cancellation rates, and increased price discounts and selling incentives to
attract homebuyers, compared with the years ended December 31, 2007 and 2006,
when we had experienced record growth in our operations. As a result, gross
margins recorded during the year ended December 31, 2008 decreased from the same
periods in the prior years.
We continue to operate our business with the expectation that these
difficult market conditions will continue to impact us for at least the near
term. We have adjusted our approach to land acquisition and construction
practices, continuing to shorten our pipeline, reduce production volumes, and
balance home price and profitability with sales volume. We are slowing down
planned inventory purchases and payments. However, we continue to purchase
economic quantities of inventory where it makes economic and strategic sense to
do so. We believe that these measures will help to strengthen our market
position and allow us to take advantage of opportunities that may develop in the
future.
Net sales
Net sales totaled $12,176,183 for the twelve months ended December 31,
2008, as compared to $14,969,926 for the same period in 2007, or a decrease of
18.7%. The Las Vegas Sun reported that new home sales are down 58 percent
in Las Vegas and permit activity is down 57 percent from a year ago. The year
to date 2008 metro Phoenix housing market continues at a pace 19% below that of
last year. Our revenue is derived from new construction of residential housing
and is directly related to new home sales and permits for new residential
construction. The decreased activity of new residential home construction has
been pronounced in Las Vegas, Nevada and Phoenix, Arizona and has resulted in
reduced sales level and gross margin.
Cost of sales
Cost of sales, including all installation expenses, during the twelve
months ended December 31, 2008 was 91.3% of net sales, as compared to 74.7% in
2007. We are anticipating competition to increase and downward pressure on our
gross margin during the next year as current and potential competitors seek new
revenue streams.
A breakdown of our components of costs of goods sold as a percentage of sales
by quarter between 2008 and 2007 is as follows:
First Second Third Fourth
2008
Sales $1,924,828 $3,499,340 $3,711,073 $3,040,941
Material 64% 67% 67% 92%
Labor 24% 20% 21% 20%
Other 2% 3% 5% 3%
--------- --------- --------- ----------
TOTAL 90% 90% 93% 115%
2007
Sales $3,730,008 $4,881,033 $4,166,195 $2,192,600
Material 54% 50% 52% 56%
Labor 21% 17% 19% 27%
Other 5% 1% 2% 5%
--------- --------- --------- ----------
TOTAL 76% 70% 72% 89%
Prices on steel strand, rebar and plastic all experienced significant price
increases starting in March 2008, which we were unable to pass on to customers.
Since then, prices have begun to return closer to historic levels as demand has
dropped considerably.
During the Fourth Quarter of 2008, it was discovered that the new
accounting software implemented at the end of 2007 contained a number of set-up
errors which resulted in overstating our inventory and otherwise creating
erroneous results. Although we maintain our inventories on a first-in, first-
out accounting system, the new accounting software was set up erroneously to
record our inventory on an average cost basis, resulting in higher inventory
valuations due to the increasing inventory material costs in 2008. In addition,
it was discovered that, in measuring the cost of extruding and fabricating steel
wire used in our post-tension services and sales, an average cost per foot for
extrusion, to include labor, plastic, grease and other materials, and for
fabrication, to include labor and other costs, was added to the cost of the
extruded and fabricated wire. At the same time, our cost of sales was
calculated by adding the material costs (including the add-on for costs of
extrusion and fabrication), the costs of direct labor and other fixed production
costs. This resulted in the double counting of the cost elements calculated in
the per foot add-on cost for fabricated and extruded wire. These 2008 errors
were corrected in the fourth quarter by the following adjustments:
Cost Double Counting in 2008 $ 1,407,617
Adjustment for FIFO vs Average cost $ (303,406)
----------
Total adjustment $ 1,104,211
A fourth quarter adjustment was made to increase cost of sales and to decrease
inventory by $1,104,211.
Also during the fourth quarter of 2008, the Company reversed a September 30,
2008 entry that was made to record inventory and a corresponding payable to a
vendor of $1,421,062 for inventory received from the vendor under a purchase
order that had been cancelled. The Company and the vendor agreed during the
fourth quarter to treat the inventory as a consignment.
Inventory was $3,212,092 at September 30, 2008 and $646,033 at December 31,
2008. The two fourth quarter adjustments totaling $2,525,273 were the primary
reason for the decrease.
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended December
31, 2008 were $3,894,990 or 32% of net sales as compared to $4,224,916 or 28.2%
of net sales during the same period of the prior year. We hired marketing
personnel to launch our Commercial Division, incurred continuing legal expenses
and incurred consulting fees related to being a public company. Our Chief
Executive Officer and Chief Operating Officer, who together own approximately
76% of the outstanding shares of common stock, had salaries of $500,000 per
year; however beginning in September, 2008, the salaries were reduced to
$250,000 per annum.
Provision for income taxes
The Company did not record a provision for income taxes prior to 2007, as
PTNV was an S corporation until April 2007. The Company recorded a Deferred Tax
Asset at December 31, 2007 of $38,246 to reflect the expected benefit of a 2007
loss carry-forward. For the year ended December 31, 2008, the Company wrote off
the Deferred Tax Asset and established a full valuation allowance against any
tax benefits of the prior and current year operating losses, because there is no
assurance that the net operating losses will be available for use by the
Company.
OUTLOOK
As a result of the increasingly challenging operating environment that
developed in 2007 and continued in 2008, we entered 2009 with a substantial
decrease in backlog compared to year-earlier levels. This substantial decrease
in our backlog reflects lower backlog levels in each of our regions and stems
largely from declining orders for new homes.
While it is too early to extrapolate our experience in the first three
months of 2009 to the remainder of the year, we do not expect current difficult
market conditions in U.S. housing markets to improve significantly, or at all,
in 2009. These conditions, which include an oversupply of new and resale home
inventories in certain markets, uncertainty in the relevant credit markets due
to the recent problems with sub-prime mortgages, lack of affordability in some
areas and greater competition, have encouraged many homebuilders and other
sellers of residential real estate to aggressively employ discounts, incentives
and price concessions to close home sales. Until the supply of unsold homes is
reduced and affordability improves, we expect the current oversupply of new and
resale homes to continue. Because the markets in which we operate have
experienced varying degrees of difficulty, we expect them to improve at
different rates with some markets recovering faster than others.
We believe the general health of the U.S. economy, including still
historically low interest rates but growing unemployment levels, and the
increased attention form the US and state governments to the economy in general
and the home-building industry in particular, bodes well for the eventual
recovery of the homebuilding industry and our long-term future financial
performance. However, in the near-term, economic data suggest that U.S. consumer
demand for residential housing at current prices remains soft. The U.S. Census
Bureau recently reported that single-family housing starts in December 2008 were
approximately 33.3% lower than in December 2007, while the median sales price
for new homes for December 2008 is approximately 37.8% below the year-earlier
period. Meanwhile, as speculative investors exit the market and consumers delay
or cancel home purchases, an oversupply of unsold inventory continues to produce
supply/demand imbalances. We believe it will take time for individual housing
markets to work through excess supply and that conditions will not improve until
late-2009 or 2010 at the earliest.
In light of the present operating environment, we anticipate that our unit
revenues, gross margins, net income and earnings per share in 2009 will remain
flat for our current operations. If current net order or selling price trends
worsen, or if economic factors, including inflation, interest rates, consumer
confidence or employment, deteriorate, our 2009 performance will likely worsen
as well. Entering the new year, we remain focused on the disciplines of our
operational business model to manage through this downturn. Specifically, we are
continuing to align our organization with anticipated flat unit sales volumes in
2009, and we are actively seeking opportunities to improve our cost structure
and maximize performance. Longer term, we believe that our disciplined operating
approach and strong financial position will allow us to capitalize on
improvements in the U.S. housing market as they occur.
Critical Accounting Policies and Estimates
The accompanying consolidated financial statements were prepared in
conformity with United States generally accepted accounting principles. When
more than one accounting principle, or the method of its application, is
generally accepted, we select the principle or method that is appropriate in our
specific circumstances (see Note 1 of our Consolidated Financial Statements).
Application of these accounting principles requires us to make estimates about
the future resolution of existing uncertainties; as a result, actual results
could differ from these estimates. In preparing these consolidated financial
statements, we have made our best estimates and judgments of the amounts and
disclosures included in the consolidated financial statements, giving due regard
to materiality.
Basis of Presentation.
The condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary. All significant inter-company balances and
transactions have been eliminated in consolidation.
Revenue and Cost Recognition
Revenues from fixed-price construction contracts are recorded using the
completed contract method whereby revenues are earned when the contract is
substantially completed. Contracts are considered substantially completed when
the concrete slab has been poured. Revenue from sales of materials only is
recorded upon shipment of the materials. Contract costs include all direct
material and labor as well as those indirect costs related to contract
performance such as indirect labor, supplies, tools, repairs, and depreciation.
Selling, general, and administrative costs are charged to expense as incurred.
Cash, Cash Equivalents and Concentration of Credit Risk
The Company considers all highly liquid temporary cash investments with an
original maturity of three months or less when purchased, to be cash
equivalents. Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist of cash. The Company maintains
its cash accounts at high quality financial institutions with balances, at
times, in excess of federally insured limits. As of December 31, 2008, the
Company held $268,260 in cash in excess of the federally insured limit
of $250,000. The Company has substantial cash balances which are invested in a
money market account with a bank.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheet for cash and cash
Equivalents and the line of credit approximate fair value based on the short-
term maturity of these instruments and the market interest rates.
Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount and do not bear
interest. The Company extends unsecured credit to its customers in the
ordinary course of business but mitigates the associated risks by performing
credit checks and actively pursuing past due accounts. An allowance for
doubtful accounts is established and determined based on managements
assessment of known requirements, aging of receivables, payment history, the
customer?s current credit worthiness and the economic environment. Trade
receivables are written off when deemed uncollectible. Recoveries of trade
receivables previously written off are recorded when received. The Company
follows the practice of filing statutory ?mechanics? liens on construction
projects where collection problems are anticipated. The liens serve as
collateral for those accounts receivable.
During 2008, it was determined that our allowance for doubtful accounts at the
end of 2007, a total of $240,275, was excessive. This amount was reduced at
the end of 2008 to $75,000, an amount deemed to be more in line with our actual
bad debt experience, and the resulting reduction of $110,956 was included in
Other Income.
Material and Supplies Inventory
Inventory consists of finished goods and is stated at the lower of cost or
market using the first-in first-out method. During 2008, it was discovered that
the operating software installed at the end of 2007, was actually reporting our
inventory on an average cost basis, resulting in substantial inventory
variances during the year. The results of this software error were corrected in
the amount of $1,104,211 at December 31, 2008, and the Company is engaged in a
complete re-installation of the software to correct this and other continuing
installation errors.
During 2008, a supplier of raw wire delivered a large shipment of wire to
our Nevada location, but we advised the supplier that the order for the wire had
been cancelled and that we would not take delivery. The supplier requested that
we hold the wire pending further instructions, which we have done. This wire is
not included in our inventory, and no payable has been recorded for the
supplies. During the year, we used a portion of the wire in our operations and
requested the supplier to invoice us for the wire used, at current prevailing
prices, which was done. We have now agreed upon a reduced price for the
remaining inventory and will add it to our inventory as a purchase at the agreed
reduced price as it is used.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are stated at cost. Depreciation is
computed using the straight-line method over the estimated useful lives of the
related assets, which range from 5 to 7 years. Leasehold improvements are
amortized over the lesser of the estimated life of the asset or the lease term.
The lease terms for buildings leased from shareholders are one year with options
to renew for an additional year. Expenditures for maintenance and repairs are
charged to operations as incurred. Renewals and betterments are capitalized.
Upon retirement or other disposition of equipment, the cost and related
accumulated depreciation are removed from the accounts and the resulting gains
or losses are reflected in earnings.
Equipment Under Capital Leases
Capital leases, which transfer substantially the entire benefits and risks
incident to the ownership of the property to the Company, are accounted for as
the acquisition of an asset and the incurrence of an obligation. Under this
method of accounting, the cost of the leased asset is amortized principally
using the straight-line method over its estimated useful life, the obligation
including interest thereon, is liquidated over the life of the lease.
Depreciation expense on equipment under a capital lease is included
with that of owned equipment.
Income Taxes
Income taxes are accounted for in accordance with the provisions of SFAS No.
109. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized as income in the
period that includes the enactment date. Valuation allowances are established,
when necessary, to reduce deferred tax assets to the amounts expected to be
realized, but no less than quarterly. Due to the uncertainty whether the
accumulated losses will be available to offset future revenues, no deferred tax
asset has been reported.
Related Parties
For the purposes of these financial statements, parties are considered to be
related if one party has the ability, directly or indirectly, to control the
party or exercise significant influence over the other party in making financial
and operating decisions, or vice versa, or where the Company and the party are
subject to common control or common significant influence. Related parties may
be individuals or other entities. John Hohman and Edward Hohman, our principal
executive officers and majority shareholders, are considered to be related
parties.
Basic and Diluted Earnings/(Loss) Per Share
Net earnings and loss per share is computed in accordance with Statement of
Financial Standards No. 128, Earnings Per Share (?SFAS No. 128??). SFAS No. 128
requires the presentation of both basic and diluted earnings per share. Basic
net earnings and loss per common share is computed using the weighted average
number of common shares outstanding during the period. Diluted loss per share
reflects the potential dilution that could occur through the potential effect
of common shares issuable upon the exercise of stock options, warrants and
convertible securities. The calculation assumes: (i) the exercise of stock
options and warrants based on the treasury stock method; and (ii) the
conversion of convertible preferred stock only if an entity records earnings
from continuing operations, as such adjustments would otherwise be anti-
dilutive to earnings per share from continuing operations.
Seasonality
Our quarterly installation and operating results may vary significantly
from quarter to quarter as a result of seasonal changes as well as weather.
Historically, sales are highest during the second and third quarters as a
result of more favorable weather conditions.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AMERICAN POST TENSION, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Reports of Independent Registered Public Accounting Firms......... F-1
Consolidated Balance Sheets as of December 31, 2008 and 2007 ..... F-3
Consolidated Statements of Operations for the Years
Ended December 31, 2008 and 2007 ............................... F-4
Consolidated Statements of Cash Flows for the Years
Ended December 31, 2008 and 2007 ............................... F-5
Consolidated Statements of Stockholders? Equity for
the Years Ended December 31, 2008 and 2007 ..................... F-6
Notes to Consolidated Financial Statements ....................... F-7
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
American Post Tension, Inc.
Henderson, Nevada
We have audited the consolidated balance sheet of American Post Tension,
Inc. as of December 31, 2008, and the related consolidated statements of
operations, shareholders? equity, and cash flows for the year then ended.
American Post Tension, Inc.?s management is responsible for these financial
statements. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The
company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
company?s internal control over financial reporting. Accordingly, we express
no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of American Post Tension, Inc. as of December 31, 2008, and the results of
its consolidated operations and its consolidated cash flows for the year
then ended in conformity with accounting principles generally accepted in the
United States of America.
/s/ Berman Hopkins Wright & LaHam, CPAs and Associated, LLP
Winter Park, Florida
April 13, 2009
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
American Post Tension, Inc.
Henderson, Nevada
We have audited the consolidated balance sheet of American Post Tension,
Inc. as of December 31, 2007, and the related consolidated statements of
operations, shareholders? equity, and cash flows for the year then ended.
These financial statements are the responsibility of the Company?s
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company?s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Post Tension, Inc.
as of December 31, 2007, and the results of its operations and its cash flows
for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
/s/ Tinter, Scheifley, Tang, LLP
Certified Public Accountants
Dillon, Colorado
March 31, 2008
AMERICAN POST TENSION, INC.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2008 2007
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents $ 472,280 $ 1,206,064
Accounts receivable, net of allowance for
doubtful accounts of $75,000 at December
31, 2008 and $240,275 at December 31, 2007 1,402,819 1,387,163
Other receivables -- 100,498
Inventory 646,033 1,691,623
Prepaid expenses 10,427 105,863
Deferred tax asset -- 38,246
----------- -----------
Total current assets 2,531,559 4,529,457
Property and equipment, net of accumulated
depreciation of $1,427,759 at December 31,
2008 and $1,247,806 at December 31, 2007 848,790 1,006,439
Other assets 11,230 --
----------- -----------
TOTAL ASSETS $ 3,391,579 $ 5,535,896
=========== ===========
LIABILITIES AND SHAREHOLDERS? EQUITY
Current liabilities:
Accounts payable and accrued expenses 121,813 $ 290,441
Shareholder loans -- 185,085
Line of credit-bank 840,000 --
----------- ------------
Total current liabilities 961,813 475,526
Shareholders? equity:
Preferred stock, $.0001 par value, authorized,
1,000,000 shares no shares outstanding at
December 31, 2008 and 2007 -- --
Common stock, $.0001 par value 50,000,000 shares
authorized, 34,366,600 and 34,291,600 shares
issued at December 31, 2008 and 2007,
respectively 3,436 3,429
Additional paid-in capital 5,174,707 5,167,799
Retained earnings (deficit) (2,748,377) (110,858)
----------- ------------
TOTAL SHAREHOLDERS? EQUITY 2,429,766 5,060,370
----------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS? EQUITY $ 3,391,579 $ 5,535,896
=========== ============
The accompanying notes are an integral part of the financial statements.
AMERICAN POST TENSION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2008 and 2007
2008 2007
------------- --------------
Sales $ 12,176,183 $ 14,969,926
Cost of sales 11,114,864 11,176,984
----------- -----------
Gross margin 1,061,319 3,792,942
Other costs and expenses
Selling, general and administrative expenses 3,894,990 4,224,916
----------- -----------
Loss from operations (2,833,671) (431,974)
Other income and (expense)
Merger related expenses and costs -- (3,246,768)
Other income, net 245,207 800,557
Interest income (expense), net (10,807) 149,319
------------ -----------
Total other income (expense) 234,398 (2,296,892)
------------ -----------
Net loss before income taxes $(2,599,273) $ (2,728,866)
Income tax (provision) benefit (38,246) 38,246
------------ -----------
Net income $(2,637,519) $ (2,690,620)
============ ===========
Net loss per share-basic $ (0.08) $ (0.08)
Net loss per share-diluted $ (0.08) $ (0.08)
Weighted average common shares outstanding
Basic 34,323,244 31,816,160
Diluted 34,323,244 31,816,160
The accompanying notes are an integral part of the financial statements.
AMERICAN POST TENSION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2008 and 2007
2008 2007
------------ -------------
Cash flows from operating activities:
Net loss $ (2,637,519) $ (2,690,620)
Adjustment to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation 180,154 188,190
Shares issued as part of merger -- 3,142,245
Shares issued to employees and Board 6,915 93,944
Deferred taxes 38,246 (38,246)
Changes in assets and liabilities:
Decrease in:
Accounts receivable 84,842 398,147
Inventory 1,045,590 1,060,714
Prepaid expenses and other assets 84,206 10,834
Decrease in:
Accounts payable and accrued expenses (168,628) (218,198)
----------- -------------
Total adjustments 1,271,325 4,637,630
----------- -------------
Net cash provided by (used in)
operating activities (1,366,194) 1,947,010
Cash flows from investing activities:
Distribution of property in lieu of cash
compensation -- 21,882
Net proceeds from the sale/retirement of
property and equipment -- (2,627)
Acquisition of property and equipment (22,505) (148,736)
----------- -------------
Net cash provided (used) in investing activities (22,505) (129,481)
Cash flows from financing activities:
Shareholder distributions -- (2,994,768)
Issuance of shares for net assets in merger -- 4,407
Repayment of notes payable -- (9,577)
Proceeds from line of credit, net 840,000 --
Repayment of shareholder loans (185,085) (548,705)
------------ -------------
Net cash provided by (used in)
financing activities 654,915 (3,548,643)
------------ -------------
Net decrease in cash and equivalents (733,784) (1,731,114)
Cash and cash equivalents, beginning of period 1,206,064 2,937,178
------------ -------------
Cash and cash equivalents, end of period $ 472,280 $ 1,206,064
Supplemental cash flow information
Cash paid for Income Taxes -- 29,426
Cash paid for interest 20,497 32,534
The accompanying notes are an integral part of the financial statements.
AMERICAN POST TENSION, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS? EQUITY
For the Years Ended December 31, 2008 and 2007
Additional Total
Common Paid-in Retained Shareholders
Shares Amount Capital (Deficit) Equity
# $ $ $ $
---------- -------- -------- ---------- -----------
Balances at 12/31/2006 25,400,160 $2,540 7,574 7,495,048 7,505,162
Issuance of common stock
for services 5,325,840 533 3,141,712 -- 3,142,245
Issuance of common stock
to employees 101,600 10 59,934 -- 59,944
Reclassification on
merger on 3,414,000 341 4,066 -- 4,407
Reclassification of prior
retained earnings -- -- 1,920,518 (1,920,518) --
Issuance of common stock
to Board members 50,000 5 33,995 -- 34,000
Net loss -- -- -- (2,690,620) (2,690,620)
Distributions -- -- -- (2,994,768) (2,994,768)
--------------------------------------------------------
Balances at 12/31/2007 34,291,600 3,429 5,167,799 (110,858) 5,060,370
Issuance of common stock
for services 25,000 2 2,913 -- 2,915
Issuance of common stock
for services 50,000 5 3,995 -- 4,000
Net loss -- -- -- (2,637,519)(2,637,519)
---------------------------------------------------------
Balances at 12/31/2008 34,366,600 3,436 5,174,707 (2,748,377) 2,429,766
=========================================================
The accompanying notes are an integral part of the financial statements.
AMERICAN POST TENSION, INC.
NOTES TO THE AUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2008
NOTE 1: ORGANIZATION AND NATURE OF BUSINESS
Company Overview
Post Tension of Nevada, Inc. (PTNV) was incorporated under the laws of the
State of Nevada on June 28, 1982. Headquartered in Henderson, NV the Company
operates in one distinct line of business. The Company provides a system of
concrete slab reinforcement known as ?post tensioning? that utilizes a lattice
of flexible cladded wire cable and adjustable anchors to strengthen a poured in
place concrete slab. The cable grid is set in place before the concrete pour and
is a replacement system from the standard re-bar reinforcement system. After the
concrete has cured, the unanchored cable ends are pulled to a specified tension
and then anchored. This system of concrete slab reinforcement has been in
general use since 1967 and is generally considered to be superior to re-bar
reinforcement.
The Company markets its services throughout the Southwestern United States
to local and national concrete supply companies and homebuilders. The work is
performed under fixed-price contracts for delivery and installation of the
system and in some cases, delivery of materials only. The Company has sales and
service locations in Henderson, NV, Phoenix and Tucson, AZ and in Denver, CO.
On April 12, 2007, the Company completed a reverse merger transaction with
Magic Communications, Inc. (Magic), which was originally formed as a New York
corporation on January 16, 1997 and reincorporated as a Delaware corporation in
November 2002. Magic conducted only limited operations prior to the reverse
merger and changed its name to American Post Tension, Inc. (APTI) on September
24, 2007.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary. All significant
inter-company balances and transactions have been eliminated in consolidation.
Use of Estimates. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reporting amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates.
Revenue and Cost Recognition. Revenues from fixed-price construction
contracts are recorded using the completed contract method whereby revenues are
earned when the contract is substantially completed. Contracts are considered
substantially completed when the concrete slab has been poured. Revenue from
sales of materials only is recorded upon shipment of the materials. Contract
costs include all direct material and labor as well as those indirect costs
related to contract performance such as indirect labor, supplies, tools,
repairs, and depreciation. Selling, general, and administrative costs are
charged to expense as incurred.
Cash, Cash Equivalents and Concentration of Credit Risk. The Company
considers all highly liquid temporary cash investments with an original maturity
of three months or less when purchased, to be cash equivalents. Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist of cash. The Company maintains its cash accounts at high
quality financial institutions with balances, at times, in excess of federally
insured limits. As of December 31, 2008, the Company held $268,260 in cash
in excess of the federally insured limit of $250,000. The Company has
substantial cash balances which are invested in a money market account with a
bank.
Fair Value of Financial Instruments. The carrying value of the Company?s
financial instruments, which include cash and cash equivalents, and the line of
credit, approximate their fair values due to the short-term maturity of these
instruments and market interest rates.
Accounts receivable. Trade accounts receivable are recorded at the invoiced
amount and do not bear interest. The Company extends unsecured credit to its
customers in the ordinary course of business but mitigates the associated risks
by performing credit checks and actively pursuing past due accounts. An
allowance for doubtful accounts is established and determined based on
managements? assessment of known requirements, aging of receivables, payment
history, the customer?s current credit worthiness and the economic environment.
Trade receivables are written off when deemed uncollectible. Recoveries of trade
receivables previously written off are recorded when received. The Company
follows the practice of filing statutory ?mechanics? liens on construction
projects where collection problems are anticipated. The liens serve as
collateral for those accounts receivable.
Material and Supplies Inventory. Inventory consists of finished goods and
is stated at the lower of cost or market using the first-in first-out method.
Equipment and Leasehold Improvements. Equipment and leasehold improvements
are stated at cost. Depreciation is computed using the straight-line method over
the estimated useful lives of the related assets, which range from 5 to 7 years.
Leasehold improvements are amortized over the lesser of the estimated life of
the asset or the lease term. The lease terms for buildings leased from
shareholders are one year with options to renew for an additional year.
Expenditures for maintenance and repairs are charged to operations as incurred.
Renewals and betterments are capitalized. Upon retirement or other disposition
of equipment, the cost and related accumulated depreciation are removed from the
accounts and the resulting gains or losses are reflected in earnings.
Equipment Under Capital Leases. Capital leases, which transfer
substantially the entire benefits and risks incident to the ownership of the
property to the Company, are accounted for as the acquisition of an asset and
the incurrence of an obligation. Under this method of accounting, the cost of
the leased asset is amortized principally using the straight-line method over
its estimated useful life, the obligation including interest thereon, is
liquidated over the life of the lease. Depreciation expense on equipment under a
capital lease is included with that of owned equipment.
Advertising Costs. Advertising costs are expensed as incurred and were
approximately $8,142 and $33,223,for the years ended December 31, 2008 and
2007, respectively.
Income Taxes. Income taxes are accounted for in accordance with the
provisions of SFAS No. 109. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized as income in the period that includes the enactment date. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the
amounts expected to be realized, but no less than quarterly. Prior to the
reverse merger with Magic, PTNV filed its income tax returns pursuant to the
provisions of Subchapter S of the Internal Revenue Code. As such, net income was
passed through to the benefit of the shareholders. This election terminated as a
result of the merger.
The Company applies the provisions of FASB, Interpretation No. 48, or FIN 48,
?Accounting for Uncertainty in Income Taxes ? an Interpretation of FASB
Statement 109.? FIN 48 prescribes a recognition threshold and a measurement
attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more likely than not to be sustained
upon examination by taxing authorities. The amount recognized is measured as
the largest amount of benefit that has a greater than 50% likelihood of being
realized upon ultimate settlement.
When applicable, the Company will include interest and penalties related to
uncertain tax positions in income tax expense.
Comprehensive Income. SFAS No. 130, Reporting Comprehensive Income,
establishes standards for reporting and display of comprehensive income, its
components and accumulated balances. Comprehensive income as defined includes
all changes in equity during a period from non-owner sources. The Company has
not identified any sources of comprehensive income for the periods presented.
Related Parties. For the purposes of these financial statements, parties
are considered to be related if one party has the ability, directly or
indirectly, to control the other party or exercise significant influence over
the party in making financial and operating decisions, or vice versa, or where
the Company and the party are subject to common control or common significant
influence. Related parties may be individuals or other entities. Edward Hohman
and John Hohman are considered to be related parties.
Segment reporting. SFAS No. 131 ?Disclosures about Segments of an
Enterprise and Related Information? establishes standards for reporting
information about operating segments on a basis consistent with the Company?s
internal organization structure as well as information about geographical areas,
business segments and major customers in financial statements. Starting from
2006, the Company operates in one reportable operating segment.
Basic and Diluted Earnings(Loss) Per Share. Net earnings and loss per
share is computed in accordance with Statement of Financial Standards No. 128,
Earnings Per Share (''SFAS No. 128??). SFAS No. 128 requires the presentation of
both basic and diluted earnings per share. Basic net earnings and loss per
common share is computed using the weighted average number of common shares
outstanding during the period. Diluted loss per share reflects the potential
dilution that could occur through the potential effect of common shares issuable
upon the exercise of stock options, warrants and convertible securities. The
calculation assumes: (i) the exercise of stock options and warrants based on the
treasury stock method; and (ii) the conversion of convertible preferred stock
only if an entity records earnings from continuing operations, as such
adjustments would otherwise be anti-dilutive to earnings per share from
continuing operations.
Equity-Based Compensation. The Company follows SFAS No. 123 (revised 2004),
?Share-Based Payment? (?SFAS 123(R)?), which requires the measurement and
recognition of compensation expense for all share-based payment awards made to
employees and directors including employee stock options based on estimated fair
values.
Stock-based compensation expense recognized under SFAS 123(R) for the year ended
December 31, 2008 and 2007 was $6,915 and $3,236,189, respectively, which
consisted of stock-based compensation expense related to the issuance of
restricted common stock to directors and to consultants for services performed
during each year.
Reclassifications. Certain prior year amounts have been reclassified to
correspond to current year presentation.
NOTE 3: RECENT ACCOUNTING PRONOUNCEMENTS
The Company has reviewed all recently issued, but not yet effective,
accounting pronouncements and does not believe the future adoption of any such
pronouncements may be expected to cause a material impact on its financial
condition or the results of its operations.
In December 2007, the FASB issued SFAS No. 141 (Revised 2007), ?Business
Combinations?, or SFAS No. 141R. SFAS No. 141R will change the accounting for
business combinations. Under SFAS No. 141R, an acquiring entity will be required
to recognize all the assets acquired and liabilities assumed in a transaction at
the acquisition-date fair value with limited exceptions. SFAS No. 141R will
change the accounting treatment and disclosure for certain specific items in a
business combination. SFAS No. 141R applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008.
Accordingly, any business combinations we engage in will be recorded and
disclosed following existing GAAP until January 1, 2009. The Company expects
SFAS No. 141R will have an impact on accounting for business combinations once
adopted but the effect is dependent upon acquisitions at that time. The adoption
of this Statement is not expected to have a material impact of the Company?s
financial statements.
In December 2007, the FASB issued SFAS No. 160, ?Non-controlling Interests
in Consolidated Financial Statements-An Amendment of ARB No. 51, or SFAS No.
160?. SFAS No. 160 establishes new accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after
December 15, 2008. The Company believes that SFAS 160 should not have a material
impact on our financial position or results of operations.
In May 2008, the FASB issued FAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles". FAS No. 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States. It is effective 60 days following the SEC's approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, "The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles". The adoption of this statement is not expected to have a material
effect on the Company's financial statements.
NOTE 4: ACCOUNTS RECEIVABLE
Accounts receivable as of December 31, 2008 and 2007, are summarized as
follows:
2008 2007
------------ ------------
Accounts receivable $ 1,477,819 $ 1,627,438
Allowance for doubtful accounts (75,000) (240,275)
------------ ------------
Net amount $ 1,402,819 $ 1,387,163
During 2008, it was determined that the total allowance for doubtful
accounts at the end of 2007 was greater than required, based on the actual bad
debt experience of the Company. Accordingly, the allowance account was reduced
to $75,000, a net reduction of $110,956, which has been included as Other
Income.
The Company?s top ten customers comprised 58% of sales during the twelve
month period ending December 31, 2007. The top ten customers comprised 53% of
sales during the twelve months ended December 31, 2008.
NOTE 6: PROPERTY AND EQUIPMENT, NET
As of December 31, the Company?s property and equipment, net of
depreciation, is comprised of:
December 31, December 31,
2008 2007
------------ ------------
Buildings $ 372,564 $ 372,564
Leasehold improvements 219,140 219,140
Transportation equipment 563,602 563,602
Machinery and equipment 960,814 946,356
Furniture, fixtures and office equipment 33,060 33,060
Computers 52,875 49,409
Software 74,494 69,913
---------- ----------
2,276,549 2,254,045
Less: Accumulated depreciation (1,427,759) (1,247,605)
---------- -----------
Total net fixed assets $ 848,790 $1,006,439
Depreciation and amortization related to property and equipment was
$188,190 during the twelve months ended December 31, 2007 and $180,154 during
the twelve months ended December 31, 2008.
NOTE 7: ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31, consisted of the
following:
December 31, 2008 December 31, 2007
------------ ------------
Accounts payable $ 81,301 $ 127,311
Accrued expenses -- 35,000
Payroll accrual and payroll taxes 36,972 119,297
Sales/Use tax 3,540 7,753
Accrued interest -- 1,080
---------- -----------
Total accounts payable and accrued expense $ 121,813 $ 290,441
NOTE 8: RELATED PARTY TRANSACTIONS
The Company leases substantially all of its office, maintenance and
warehouse facilities from Edward Hohman, President, and John Hohman, Chief
Operating Officer, who are the Company principal shareholders, under one-year
operating leases. Rents were paid or accrued in favor of the shareholders in
the amount of $248,160 during the twelve months ended December 31, 2008, and
$247,480 during the twelve months ended December 31, 2007.
NOTE 9: SHAREHOLDER LOANS AND LINE OF CREDIT
At December 31, 2007, the Company had loans due to its shareholders
aggregating $185,085. The loans bore interest at rates from 6.5% and 8% per
annum and were due in monthly installments aggregating $1,938. Those loans
were repaid in full on April 7, 2008.
During the year ended December 31, 2008, the Company entered into a line
of credit agreement with the Bank of Nevada in the total amount of $1,700,000,
which is guaranteed by our principal officers, Edward Hohman and John Hohman
and secured by assets of the Company. This line, which carries an interest
rate of 6% on outstanding balances, had $840,000 outstanding on it at
December 31, 2008. The line matures on July 24, 2009 and is renewable
annually.
NOTE 10: STOCKHOLDERS? EQUITY
PTNV was incorporated as a Subchapter S corporation. During April 2007 and
prior to the consummation of the Merger, the Company became a C corporation. As
a result of the Merger, PTNV became a wholly-owned subsidiary of APTI. Each
outstanding share of PTNV common stock was converted into the right to receive
10,160.064 shares of APTI?s common stock as set forth in the Merger Agreement.
Under the terms of the Merger Agreement at closing, APTI issued, and the PTNV
stockholders received, in a tax-free exchange, shares of APTI common stock such
that PTNV stockholders now own approximately 90% of the issued and outstanding
shares of the Company.
PTNV and Magic issued shares of their common stock to consultants and
advisors prior to, or contemporaneously with, the consummation of the Merger.
Including the shares issued by Magic to the PTNV consultants in exchange for
their shares of PTNV, Magic issued 5,325,840 shares of common stock to
consultants. In addition, PTNV issued 10 shares of common stock to employees
prior to the consummation of the Merger that were converted into 101,600 shares
of the Company upon the consummation of the Merger. The 5,325,840 shares of
common stock and 101,600 shares of common stock were valued their estimated fair
value based upon the trading price of the Company?s common stock as of the date
the commitment to issue the shares became evident.
PTNV reclassified $1,920,518 from retained earnings to additional paid in
capital when PTNV terminated is Subchapter S election in April 2007. PTNV prior
to the consummation of the Merger made distributions to shareholders in the
amount of $438,050 during the three months ended March 31, 2007 and $2,556,718
during the three months ended June 30, 2007. The distributions to shareholders
were recorded as a reduction to retained earnings.
During 2008, the Company issued a total of 75,000 shares, resulting in
total outstanding shares as of December 31, 2008 of 34,366,600. A total of
25,000 shares were issued to our independent director as the annual director
compensation of 25,000 shares. These shares were issued as of July 1, 2008
at an issue price of $0.1166 per share, at a discount to the then market
closing price of $0.14 per share to reflect the restricted nature of the
shares. An additional 50,000 shares were issued to CF Consulting, LLC as
part of the consulting agreement under which it provides principal financial
officer services to the Company. The shares were valued by agreement at
$4,000, or $0.08 per share. At the time of issue, the closing price of the
shares was $0.10 per share and the bid price was $0.08.
NOTE 11: STOCK OPTION PLAN
The Board of Directors of Magic, on November 24, 2002, adopted the
Company?s 2002 Non-Statutory Stock Option Plan (?Plan?) so as to provide a
critical long-term incentive for employees, non-employee directors, consultants,
attorneys and advisors of the Company and its subsidiaries, if any. The Board of
Directors believes that the Company?s policy of granting stock options to such
persons will continue to provide it with a critical advantage in attracting and
retaining qualified candidates. In addition, the Plan is intended to provide the
Company with maximum flexibility to compensate plan participants. It is expected
that such flexibility will be an integral part of the Company?s policy to
encourage employees, non-employee directors, consultants, attorneys and advisors
to focus on the long-term growth of stockholder value. The Board of Directors
believes that important advantages to the Company are gained by an option
program such as the 2002 Plan which includes incentives for motivating employees
of the Company, while at the same time promoting a closer identity of interest
between employees, non-employee directors, consultants, attorneys and advisors
on the one hand, and the stockholders on the other. As of December 31, 2008, no
options have been granted pursuant to the plan.
NOTE 12: INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, ?Accounting for Income Taxes (?SFAS No.109?). SFAS
No.109 requires the recognition of deferred tax assets and liabilities for both
the expected impact of differences between the financial statements and tax
basis of assets and liabilities, and for the expected future tax benefit to be
derived from tax loss and tax credit carry-forwards. SFAS No. 109 additionally
requires the establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets. Prior to the reverse merger in April, 2007,
the Company and its stockholders elected to be taxed under subchapter S of the
Internal Revenue Code. As a result, all income and losses were reported by the
Company?s stockholders. At the end of 2007, there was a total of $38,246
reported as a Deferred Tax Asset related to operating loss carry-forwards.
During 2008, the Company incurred additional operating losses; however, due to
uncertainty whether those operating losses will be available to offset future
revenues, the Company determined to eliminate the existing Deferred Tax Asset of
$38,426, and establish a full valuation allowance for the tax benefit of
operating losses which expire in 2028.
The following is a reconciliation of income taxes computed using the statutory
Federal rate to the income tax expense in the financial statements for December
31, 2008 and 2007.
Income tax benefit at the federal statutory rate 34%
Effect of operating losses (34)%
As of December 31, 2008 and 2007, the Company had net operating losses for
Federal income tax purposes totaling approximately $2,748,377 and $111,858,
respectively. The following is a schedule of deferred tax assets as of December
31, and 2008 and 2007:
December 31, 2008 December 31, 2007
Net operating loss $2,748,377 $ 110,858
Net deferred tax asset $ 948,190 $ 38,246
Valuation allowance $ (948,190) $ --
The change in the valuation allowance for 2008 was $948,190.
Under Sections 382 and 269 (the ?shell corporation? rule) of the Code
following an ?ownership change,? special limitations (?Section 382 Limitations?)
apply to the use by a corporation of its net operating loss, or NOL,
carry-forwards arising before the ownership change and various other
carry-forwards of tax attributes (referred to collectively as the ?Applicable
Tax Attributes?). The Company had NOL carry-forwards due to historical losses of
Magic of approximately $364,393 at December 31, 2006. This NOL carry-forward
will expire through calendar year 2026 if not utilized and is subject to review
and possible adjustment by the IRS. As a result of the Merger, the Company
experienced an ownership change, and Section 382 Limitations will apply to the
Applicable Tax Attributes of the Company.
The Company has adopted the provisions of FIN 48. As a result of the
implementation of FIN 48, the Company performed a comprehensive review of its
uncertain tax positions in accordance with recognition and measurement standards
established by FIN 48. In this regard, an uncertain tax position represents the
Company?s expected treatment of a tax position taken in a filed tax return, or
expected to be taken in a tax return, that has not been reflected in measuring
income tax expense for financial reporting purposes. The Company does not expect
any reasonably possible material changes to the estimated amount of liability
associated with uncertain tax positions through January 1, 2009. The Company?s
continuing policy is to recognize accrued interest and penalties related to
income tax matters in income tax expense.
NOTE 13: OTHER INCOME
The Company?s workman?s compensation insurance company, Employers Insurance
Company (?EIC?), went public. The Company was a member of EIC, and thus received
stock from EIC when it went public. The Company sold the shares in EIC on March
19, 2007 for net proceeds of $695,334, which resulted in a gain on sale of
stock. The gain was reflected on the Company?s condensed consolidated statements
of operations as ?other income? in 2007.
NOTE 14: NET INCOME (LOSS) PER SHARE
Net income (loss) per share is calculated in accordance with SFAS No. 128,
Earnings Per Share, which requires presentation of basic and diluted net
income (loss) per share. Basic net income (loss) per share excludes dilution,
and is computed by dividing net income (loss) by the weighted average number of
common shares outstanding during the period. During the twelve months ended
December 31, 2008 and for all prior periods, diluted net income (loss) per share
is computed in the same manner as basic net income (loss) per share after
assuming issuance of common stock for all potentially dilutive equivalent
shares, which includes (1) stock options (using the treasury stock method), and
(2) the effect of unvested shares of common stock outstanding. Anti-dilutive
instruments are not considered in this calculation.
The following is a reconciliation of the numerator and denominator of the
basic and diluted earnings per share computation for the twelve months ended
December 31, 2008 and 2007:
Twelve Months Ended
December 31,
2008 2007
NUMERATOR:
Income available to common shareholders $ (2,637,519) $(2,690,620)
Numerator for net income (loss) per
common share-basic and diluted $ (2,637,519) $(2,690,620)
DENOMINATOR:
Weighted average common shares 34,323,244 31,816,160
Effect of dilutive securities:
Options -- --
Restricted shares -- --
Denominator for net income per common share-
basic and diluted 34,323,244 31,816,160
Net income per common share:
Net income (loss) -basic $ (0.08) $ (0.08)
Net income (loss) -diluted $ (0.08) $ (0.08)
NOTE 15: INFORMATION ABOUT MAJOR CUSTOMERS
The Company had five major customers who individually comprised more than
10% of the Company revenues in 2007 and four in 2008. The table below outlines
the customers, the percentage of revenues for fiscal year ending December 31,
2008 and 2007, and the open Accounts Receivable as of December 31, 2008 and
2007.
2008
Total % of A/R as of
Major Customers Revenues Revenues 12/31
Customer A $ 912,559 14% $ 0
Customer B $ 891,279 14% $ 28,135
Customer C $ 824,454 13% $ 30,957
Customer D $ 682,719 11% $146,050
Customer E $ 607,329 9% $ 9,980
2007
Customer A $1,700,530 19% $139,800
Customer B $1,700,293 19% $ 77,375
Customer C $ 965,080 11% $118,870
Customer D $ 869,399 10% $ 39,487
Customer E $ 842,202 10% $ 21,180
The Company has 189 active customers. Most of them are contractors,
concrete suppliers and other subcontractors to the construction industry. The
top 10 customers accounted for $6,453,979 in our revenues for the twelve months
ended December 31, 2008.
NOTE 16: SUPPLEMENTAL FINANCIAL INFORMATION
A summary of additions and deductions related to the allowance for doubtful
accounts for the year ended December 31, 2006 and the twelve months ended
December 31, 2007 is as follows:
Balance at Balance at
Beginning End of
of Period Additions Deductions Period
---------- --------- ---------- ----------
Year ended December 31, 2007 $291,100 -- $ 50,925 $ 240,275
Year ended December 31, 2008 $240,275 -- $ 165,275 $ 75,000
The deductions in 2008 include bad debts of $54,319 and a reduction in the
allowance of $110,956, to reflect the Company?s actual bad debt experience.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On August 14, 2008, the Board of Directors of the Company approved a change
in our independent registered public accounting firm for the fiscal year ended
December 31, 2008 from Tinter Scheifley Tang, LLP. to Berman, Hopkins, Wright &
LaHam, CPAs & Associates, LLP. On August 14, 2008, we entered into an engagement
agreement with Berman, Hopkins, Wright & LaHam, CPAs & Associates, LLP. to audit
our financial statements as of December 31, 2008.
Tinter Scheifley Tang, LLP?s report on our financial statements dated March
31, 2008 for the fiscal year ended December 31, 2007 did not contain an adverse
opinion or disclaimer of opinion, or qualification or modification as to
uncertainty, audit scope, or accounting principles. During the fiscal year ended
December 31, 2007 and in the subsequent interim period through August 14, 2008,
there were no disagreements with Tinter Scheifley Tang, LLP on any matters of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures, which disagreements, if not resolved to the satisfaction of
Tinter Scheifley Tang, LLP, would have caused it to make reference to the
subject matter of the disagreement in connection with its report. During the
fiscal year ended December 31, 2007 and in the subsequent interim period through
August 14, 2008, there were no reportable events as defined in Item 304
(a)(1)(v) of SEC Regulation S-K.
During the fiscal year ended December 31, 2007 and in the subsequent
interim period through August 14, 2008, neither we nor anyone on our behalf
consulted Berman, Hopkins, Wright & LaHam, CPAs & Associates, LLP regarding the
application of accounting principles to a specified transaction, either
completed or proposed, the type of audit opinion that might be rendered on our
financial statements, or any matter that was either the subject of a
disagreement (as described above), as there were no such disagreements, with
Tinter Scheifley Tang, LLP, or a reportable event (as defined in Item 304
(a)(1)(v) of SEC Regulation S-K).
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of December 31, 2008, management assessed the effectiveness of the Company's
internal control over financial reporting based on the criteria for effective
internal control over financial reporting established in Internal Control?
Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission ("COSO") and SEC guidance on conducting such
assessments. Based on that evaluation, they concluded that, during the period
covered by this report, such internal controls and procedures were not
effective to detect the inappropriate application of US GAAP rules as more
fully described below. This was due to deficiencies that existed in the design
or operation of our internal control over financial reporting that adversely
affected our internal controls and that may be considered to be material
weaknesses.
The matters involving internal controls and procedures that the Company's
management considered to be material weaknesses under COSO and SEC rules were:
(1) lack of a functioning audit committee, resulting in ineffective
oversight in the establishment and monitoring of required internal controls
and procedures; (2) inadequate segregation of duties consistent with control
objectives; (3) insufficient written policies and procedures for accounting and
financial reporting with respect to the requirements and application of US GAAP
and SEC disclosure requirements; and (4) ineffective controls over period end
financial disclosure and reporting processes. The aforementioned material
weaknesses were identified by the Company's Chief Financial Officer in
connection with the preparation of our financial statements as of December 31,
2008.
Management believes that the material weaknesses set forth in items (2), (3)
and (4) above did not have an effect on the Company's financial results.
However, management believes that the lack of a functioning audit committee,
resulting in ineffective oversight in the establishment and monitoring of
required internal controls and procedures, can impact the Company's financial
statements for the future years.
We are committed to improving our financial organization. As part of this
commitment, we intend to create a position to segregate duties consistent with
control objectives and to increase our personnel resources and technical
accounting expertise within the accounting function when funds are available to
the Company, by: i) appointing one or more outside directors of our board of
directors to an audit committee of the Company resulting in a fully functioning
audit committee who will undertake the oversight in the establishment and
monitoring of required internal controls and procedures; and ii) preparing and
implementing sufficient written policies and checklists which will set forth
procedures for accounting and financial reporting with respect to the
requirements and application of US GAAP and SEC disclosure requirements.
Management believes that the appointment of one or more independent directors
to a fully functioning audit committee, will remedy the lack of a functioning
audit committee. In addition, management believes that preparing and
implementing sufficient written policies and checklists will remedy the
following material weaknesses: (i) insufficient written policies and
procedures for accounting and financial reporting with respect to the
requirements and application of US GAAP and SEC disclosure requirements; and
(ii) ineffective controls over period end financial close and reporting
processes. Further, management believes that the hiring of additional
personnel who have the technical expertise and knowledge will result in proper
segregation of duties and provide more checks and balances within the
department. Additional personnel will also provide the cross training needed
to support the Company if personnel turn over issues within the department
occur. Management believes that this, coupled with the appointment of
additional outside directors, will greatly decrease any control and procedure
issues the company may encounter in the future.
We will continue to monitor and evaluate the effectiveness of our internal
controls and procedures and our internal controls over financial reporting on
an ongoing basis and are committed to taking further action and implementing
additional enhancements or improvements, as necessary and as funds allow.
Internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company?s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies and procedures may deteriorate. A material weakness
is a control deficiency, 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.
Internal Control Over Financial Reporting; Restatement of Consolidated Financial
Statements, Special Committee and Company Findings
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Exchange Act). Our management assessed the effectiveness of our internal
control over financial reporting as of December 31, 2008 In making this
assessment, our management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (?COSO?) in Internal
Control-Integrated Framework.
This annual report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
Management?s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the SEC that permit us to provide
only management?s report in this annual report.
During 2007, PTNV and the Company issued shares of their common stock to
consultants and advisors prior to, or contemporaneously with, the consummation
of the Merger. Including the shares issued by the Company to the PTNV
consultants in exchange for their shares of PTNV, the Company issued 5,325,840
shares of common stock to consultants upon the consummation of the Merger. In
addition, PTNV issued 10 shares of common stock to employees prior to the
consummation of the Merger that were converted into 101,600 shares of the
Company upon the consummation of the Merger.
The 5,325,840 shares of common stock and 101,600 shares of common stock
were originally valued at $0.16 per share. On November 30, 2007, our Board of
Directors created a Special Committee comprised of the two independent directors
to work with the Company?s then-current Chief Financial Officer to conduct a
voluntary, internal review of the Company?s recording and valuation of stock
issued to employees and consultants. The Special Committee retained outside
counsel and a valuation expert to assist with this review. Based on the final
report issued by the Company?s retained valuation expert, the Special Committee
made a preliminary determination that the prior valuation of $0.16 per share
recorded by the Company should be adjusted to a revised fair market value of
$0.36 per share. The valuation expert?s calculation involved an average of fair
values determined independently by means of a market approach and a discounted
cash flow approach. Following that preliminary determination, the Board of
Directors reviewed the valuation expert?s report with the Company?s independent
accountant and, as a result of that review, determined that the valuation
recorded by the Company should be adjusted to a revised fair market based solely
upon a market approach in accordance with the valuation provisions of SFAS No.
141 ?Business Combinations?, whereby the market price for a reasonable period
before and after the date that the terms of the acquisition are agreed to and
announced are to be considered in determining the fair value of securities
issued. The revised valuation resulted in a fair market value of $.59 per share
which provided for an additional expense of $0.43 per share of common stock
issued results in an additional non-cash compensation expense of $2,333,799
during the three months ended June 30, 2007. Compensation expense is recorded in
accordance with Statement of Financial Accounting Standards No. 123(R) (revised)
?Share-Based Payment? (?SFAS No. 123(R)?).
All of the foregoing charges were non-cash and had no impact on our
reported net sales or cash or cash equivalents. There was no effect upon the
balance sheet accounts as reported in the 10-Q for the three months ended June
30, 2007 filed on August 14, 2007 (and as amended in Amendment No. 1 thereto,
also filed on August 14, 2007). These changes were made by amendments to our
Form 10-Q reports for the quarters ended June 30, 2007 and September 30, 2007,
which were filed with the SEC on July 22, 2008.
As a result of the work of the Special Committee and the additional
consultations with our independent registered public accounting firm, our Board
of Directors determined that we did not maintain effective controls to ensure
the existence, completeness, accuracy, valuation, and documentation of
discussions between a former Chief Financial Officer and our external counsel,
auditors and consultants, which resulted in the misstatement of our restricted
stock-based compensation expense and related disclosures. As a result of the
findings of the committee, our Board of Directors concluded that we needed to
amend the Quarterly Report on Form 10-Q for the quarter ended June 30, 2007
filed on August 14, 2007 (and as amended in Amendment No. 1 thereto, also filed
on August 14, 2007) to restate our condensed consolidated financial statements
for the quarter ended June 30, 2007 and the related disclosures. Our Board also
concluded that we needed to amend the Quarterly Report on Form 10-Q for the
quarter ended September 30, 2007 filed on November 14, 2007 to restate our
condensed consolidated financial statements for the quarter ended September 30,
2007 and the related disclosures. These amended reports were filed with the SEC
on July 22, 2008.
ITEM 9B. Other Information
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
Our directors and our executive officers during 2008 are as follows:
Name Age Position
Edward Hohman 52 President, Chief Executive Officer
John W. Hohman 53 Chief Operating Officer and Director
C. Dean Homayouni(1) 51 Former Chief Financial Officer
David Meyrowitz(2) 61 Former Director
Paul Lisak 64 Director
Sabatha Golay 34 Secretary and Treasurer
Each director holds office until the next annual meeting of stockholders or
until their successors have been duly elected and qualified. Executive officers
are elected annually and serve at the discretion of our Board of Directors.
(1) On March 12, 2008, Mr. Homayouni delivered to the Company a notice of
termination pursuant to the terms of our employment agreement with Mr.
Homayouni.
(2) On September 22, 2008, Mr. Meyrowitz submitted his resignation as a
member of the Board of directors.
In July, 2008, the Company entered into a consulting agreement with CF
Consulting, LLC to provide financial consulting services to the Company, and to
designate a contract Chief Financial Officer for the Company. Under that
Agreement, CF Consulting, LLC receives $6,500 per month for its services and
also received 50,000 shares of our common stock at the beginning of the
consulting period. CF Consulting, LLC designated Robert Hipple, an experienced
public company financial officer and counsel, to act as our contract CFO,
commencing in July 2008. Mr. Hipple is not an officer, director, or employee of
the Company, however.
EDWARD HOHMAN has been Chairman of the Board and President of Post Tension of
Nevada since 1988. Mr. Edward Hohman was a Journeyman Ironworker from 1974 to
1994, during which time he helped complete such major projects as the San Onofre
Power Plant, United Airlines Parking Garage LAX, Flamingo Hotel, Desert Inn
Hotel, Tropicana Hotel, Horseshoe Hotel and Caesars Palace Hotel. Mr. Edward
Hohman became Foreman in 1978 and a partner in Trojan Steel in 1981 through
1988.
JOHN W. HOHMAN has been Chief Operating Officer and a Director of Post Tension
of Nevada since 1988. Mr. John Hohman was a Journeyman Ironworker from 1973 to
1994, during which time he helped complete such major projects as the Steamboat
Springs Power Plant, St Mary?s Hospital in Phoenix, Fashion Show Mall in Las
Vegas and many highway and infrastructure projects. He became Foreman and then
Superintendent and then, in 1981, Area Superintendent. In 1990, Mr. John Hohman
started his own reinforcing steel company which was merged into Post Tension of
Nevada in 1993.
PAUL LISAK retired in 2002 as Los Angeles (?LA?) County?s Hazardous Materials
Control Manager, and from over 30 years service devoted to the administration
and management of public health, and management of hundreds of millions of
dollars in public funds. Mr. Lisak had been promoted to the aforementioned
position in 1994, after serving 10 years in LA County?s Hazardous
Waste/Materials Divisions as a supervisor and industrial hygienist. Prior to
that, in 1980, he had been promoted to Administrator of LA County?s Public
Health Labs, testing for communicable diseases and associated environmental
chemical and toxic analyses. He is currently on the board of Early Detection,
Inc. and Paradise Music & Entertainment, Inc. both publicly traded companies.
Our Board has considered the independence of its members in light of the
independence criteria defined by the applicable NASDAQ Stock Market, Inc.
Marketplace Rules (the ?NASDAQ Rules?). Only those directors who do not have any
of the categorical relationships that preclude them from being independent
within the meaning of applicable NASDAQ Rules are considered to be independent
directors. In connection with its independence considerations, the board has
reviewed the Company?s relationships with organizations with which our directors
or their family members are affiliated. Based on our review of the NASDAQ Rules,
we have determined that Mr. Paul Lisak is an ?independent? director of the
Company.
In consideration for his service on the Board, we have agreed to issue
25,000 shares of our Common Stock to Mr. Lisak and to issue to him warrants to
purchase 50,000 shares of our Common Stock at a price of $1.00 per share. We
also have agreed to issue an additional 25,000 shares of Common Stock and to
issue additional warrants as described above to each current or future
independent director in each year they are re-elected to the Board or otherwise
are serving as Board members. We also have agreed to pay each of them $1,000 for
each meeting of the Board or any committee thereof that they attend in person
and $500 for each meeting of the Board or any committee thereof that they attend
by telephonic or other electronic means and to reimburse their costs of
attending such meetings.
Board Meetings and Committees; Annual Meeting Attendance
No incumbent director attended fewer than 75% of our Special meetings. In
addition, the special committee of independent directors, referred to above
under the heading ?Internal Control Over Financial Reporting; Restatement of
Consolidated Financial Statements, Special Committee and Company Findings,? held
telephonic meetings, all of which were attended by both Mr. Meyrowitz and Mr.
Lisak. We do not have a formal policy with regard to board members? attendance
at annual stockholders? meetings.
We currently do not have standing committees of our Board of Directors. Our
current Board consists of the two directors who composed the Board of Directors
of Post Tension of Nevada prior to the Merger, namely Edward Hohman and John
Hohman, and one member added in connection with the Merger, namely Paul Lisak.
Audit Committee. We intend to establish an audit committee of the Board of
Directors, which will consist of independent directors. The audit committee
duties would be to recommend to our Board of Directors the engagement of
independent auditors to audit our financial statements and to review our
accounting and auditing principles. The audit committee would review the scope,
timing and fees for the annual audit and the results of audit examinations
performed by the internal auditors and independent public accountants, including
their recommendations to improve the system of accounting and internal controls.
The audit committee would at all times be composed exclusively of directors who
are, in the opinion of our Board of Directors, free from any relationship which
would interfere with the exercise of independent judgment as a committee member
and who possess an understanding of financial statements and generally accepted
accounting principles. In the absence of a formally established audit committee,
our audit committee is defined by the Sarbanes-Oxley Act of 2002 as the entire
Board of Directors.
The Board of Directors has determined that none of the board members can be
classified as an ?audit committee financial expert? as defined in applicable SEC
rules. The Board of Directors believes that attracting and retaining board
members who could be classified as an ?audit committee financial expert? is
unlikely at this time due to the high cost of attracting such director
candidates.
The Board of Directors has reviewed and discussed the audited financial
statements with management. The Board of Directors has also discussed with the
independent auditors the matters required to be discussed by the statement on
Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU
section 380), as adopted by the Public Company Accounting Oversight Board in
Rule 3200T. The Board of Directors has received the written disclosures and the
letter from the independent accountants required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), as adopted by the Public Company Accounting
Oversight Board in Rule 3600T, and has discussed with our independent accountant
the independent accountant?s independence. Based on the review and discussions
referred to in this paragraph, the Board of Directors recommended that the
audited financial statements be included in the company?s annual report on Form
10-K for the last fiscal year for filing with the SEC. As we have no formal
audit committee, according to SEC regulation, our entire Board of Directors acts
as our audit committee.
Compensation Committee. We intend to establish a compensation committee of
the Board of Directors. The compensation committee would review and approve our
salary and benefits policies, including compensation of executive officers. The
compensation committee would also administer our stock option plans and
recommend and approve grants of stock options under such plans.
Nominating Committee. We do not currently have a nominating committee of
the Board of Directors. We have not held an annual meeting of stockholders since
the Merger. The ownership of approximately 76% of our outstanding common stock
by John Hohman and Edward Hohman effectively ensures that they can nominate and
elect our board members.
Director Compensation
The following table sets forth director compensation as of December 31,
2008.
Name Stock Awards(1) All Other Compensation Total
David Meyrowitz -- $6,000 $ 6,000
Paul Lisak $2,915 $6,000 $ 8,915
(1) Based upon the aggregate grant date fair value calculated in
accordance with Statement of Financing Account Standards (?SFAS?) No.
123R, Share Based Payments.
(2) In consideration for their service on the Board, we have agreed to
issue 25,000 shares of Common Stock and to issue warrants to acquire
50,000 shares of Common Stock at a price of $1.00 per share to each
independent director of the Company, for each year they are elected to
the Board or otherwise are serving as Board members. We also have agreed
to pay each of them $1,000 for each meeting of the Board or any committee
thereof that they attend in person and $500 for each meeting of the Board
or any committee thereof that they attend by telephonic or other
electronic means and to reimburse their costs of attending such meetings.
Section 16(a) Beneficial Ownership Reporting Compliance
During our fiscal year ended December 31, 2008, the following persons were
required to file reports with the SEC: Edward Hohman; John W. Hohman; Paul
Lisak; and C. Dean Homayouni. Based on Company records and other information,
the Company believes that all SEC filing requirements under Section 16(a) of the
Exchange Act applicable to its directors, officers, and owners of more than 10%
of its common shares were complied with for 2008.
Code of Conduct
The Company adopted a Code of Ethics and filed it with the SEC as Exhibit
14 to the Company?s Current Report on Form 8-K filed June 28, 2007.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation Program Elements
The following table sets forth information concerning the compensation of
our Chief Executive Officers, our Chief Operating Officer and our Chief
Financial Officer who served in such capacities during the fiscal year that
ended December 31, 2008 and the fiscal year ended December 31, 2007 (the ?named
executive officers?).
Nonqualified
Non-Equity Deferred
Name and Stock Incentive Plan Compensation All Other
Principal Awards Option Compensation Earnings Comp
Total
Position Year Salary($) ($) Awards ($) ($) ($) ($)
(a) (b) (c) (e) (f) (g) (h) (i) (j)
Ed Hohman
Chairman, 2008 $432,692 $0 $0 $0 $0 $0
$432,692
CEO(1) 2007 $407,692 $0 $0 $0 $0 $0
$407,692
John Hohman
COO (2) 2008 $432,692 $0 $0 $0 $0 $0
$432,692
2007 $407,692 $0 $0 $0 $0 $0
$407,692
Dean
Homayouni 2008 $ 64,709 $0 $0 $0 $0 $0 $
64,709
CFO (3) 2007 $ 63,942 $16,667 $0 $0 $0 $0 $
70,609
(1) Edward Hohman?s salary was $500,000 during the years ended December 31,
2007 and 2008, until September 2008, when it was reduced to $250,000.
(2) John Hohman?s salary was $500,000 during the years ended December 31,
2007 and 2008, until September 2008, when it was reduced to $250,000.
(3) In connection with our employment of Dean Homayouni as our Chief
Financial Officer, the Company agreed to issue up to 500,000 shares of our
common stock to him. Mr. Homayouni?s Employment Agreement provided for
equity compensation to him in the form of 83,333 shares of our common stock
to be issued on January 2, 2008; 83,333 shares of our common stock to be
issued on the first anniversary date of the Employment Agreement; and an
additional 13,889 shares of common stock to be issued each month thereafter
for 24 months. Mr. Homayouni?s base cash compensation under his
employment agreement was $150,000 per year. On March 12, 2008, Mr. Homayouni
delivered to the Company a notice of termination pursuant to the terms of
his employment agreement. Mr. Homayouni has demanded arbitration of the
alleged disputed matters and has filed an arbitration claim for $150,000.
The Company also has filed an action against him.
In July, 2008, the Company entered into a consulting agreement with CF
Consulting, LLC to provide financial consulting services to the Company, and to
designate a contract Chief Financial Officer for the Company. Under that
Agreement, CF Consulting, LLC receives $6,500 per month for its services and
also received 50,000 shares of our common stock at the beginning of the
consulting period. CF Consulting, LLC designated Robert Hipple, an experienced
public company financial officer and counsel, to act as our contract CFO,
commencing in July 2008. Mr. Hipple is not an officer or employee of the
Company, however.
Outstanding Equity Awards at Fiscal Year-End
There were no stock awards held by Edward Hohman or John Hohman.
Option Grants
We have not granted any stock options to our Named Executive Officers or
our directors. We have issued warrants to purchase shares of our common stock to
our independent directors as described above under ?DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE:Director Compensation.?
Employment Agreements
We have not executed employment agreements with either Edward Hohman or
John Hohman. We did have an employment agreement with C. Dean Homayouni,
which provided for a three-year term of employment, subject to earlier
termination by us either with or without ?cause,? and by Mr. Homayouni either
with or without ?good reason,? as those terms are defined in the Employment
Agreement. In connection with our employment of Mr. Dean Homayouni as our new
Chief Financial Officer, the Company agreed to issue up to 500,000 shares of our
common stock to him. Mr. Homayouni?s Employment Agreement provides for equity
compensation to Mr. Homayouni in the form of 83,333 shares of our common stock
to be issued on January 2, 2008; 83,333 shares of our common stock to be issued
on the first anniversary date of the Employment Agreement; and an additional
13,889 shares of common stock to be issued each month thereafter for 24 months.
In the event that Mr. Homayouni?s employment is terminated by us or by him for
any reason, or in the event of a ?Change in Control?, all vested equity
compensation is due and payable to Mr. Homayouni. On March 12, 2008, Mr.
Homayouni delivered to the Company a notice of termination pursuant to the terms
of our employment agreement with him. Mr. Homayouni has demanded arbitration of
the disputed matters between the Company and him, as provided in our employment
agreement with him, and has filed an arbitration claim for $150,000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Security Ownership of Certain Beneficial Owners
The following table provides information regarding security holders who own
more than 5% of all outstanding shares of our common stock as of March 15, 2009:
Percentage of Outstanding
Name and Address of Beneficial Ownership Common Shares on
Beneficial Owner of Common Shares March 15, 2009(1)
Edward Hohman
31 Isleworth
Henderson, Nevada 89052 13,229,000(2) 38.58%
John Hohman
11038 North Pusch Ridge Vistas Drive
Oro Valley, Arizona 85737 13,178,500(2) 38.43%
(1) Based on 34,366,600 common shares outstanding.
(2) Edward Hohman, our Chief Executive Officer, beneficially owns, in the
aggregate, approximately 38% of our outstanding common stock. John Hohman,
our Chief Operating Officer, beneficially owns, in the aggregate,
approximately 38% of our outstanding common stock. The interests of our
Chief Executive Officer and Chief Operating Officer may differ from the
interests of other stockholders and their stock ownership may discourage a
potential acquirer from seeking to acquire shares of our common stock or
otherwise attempting to obtain control of our company, which in turn could
reduce our stock price or prevent our stockholders from realizing a
premium over our stock price. As a result of the large stock ownership,
Edward Hohman and John Hohman will have the right and ability to control
virtually all corporate actions requiring stockholder approval,
irrespective of how our other stockholders may vote, including the
following actions:
- election of our directors;
- The amendment of our Certificate of Incorporation or By-laws;
- The merger of our company or the sale of our assets or other corporate
transaction; and
- controlling the outcome of any other matter submitted to the
stockholders for vote.
Security Ownership of Management.
The table below shows the number of our common shares beneficially owned as
of March 15, 2009 by each of our Directors and each of our Executive Officers ,
as well as the number of shares beneficially owned by all of our Directors and
Executive Officers as a group. None of the Executive Officers or Directors has
been issued any Stock Options as of March 31, 2009.
Directors And Named Executive Exercisable Stock Percentage of
Officers Shares(1) Options Outstanding Shares
Edward Hohman 13,229,000 - 38.6%
John Hohman 13,178,500 - 38.4%
Paul Lisak 50,000 - -
Sabatha Golay 20,320
----------- ----------------- -----------------
All Directors and Executive
Officers as a group (6),
including the above 26,477,820 - 77.2%
Notes:
(1) All directors and executive officers listed in this table have sole
voting and investment power over the shares they beneficially own.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Transactions with related persons
We or one of our subsidiaries may occasionally enter into transactions with
a ?related party.? Related parties include our executive officers, directors,
nominees for director, 5% or more beneficial owners of our common shares and
immediate family members (as defined by SEC rule) of these persons. We refer to
transactions involving amounts in excess of 1% of our assets or $120,000,
whichever is less, and in which the related party has a direct or indirect
material interest as an ?interested transaction.?
At December 31, 2007, the Company had loans due to John Hohman and Ed
Hohman aggregating $185,085. The loans were due on April 15, 2008 and bore
interest at 7% per annum. Those loans were repaid in full on April 7, 2008.
Review, approval or ratification of transactions with related persons
Each interested transaction must be approved or ratified by a majority of
the Board of Directors. The Board of Directors will consider, among other
factors it deems appropriate, whether the interested transaction is on terms no
less favorable than terms generally available to an unaffiliated third-party
under the same or similar circumstances as well as the extent of the related
party?s interest in the transaction.
The Board of Directors has reviewed the following interested transactions
and has determined that such transactions are pre-approved or ratified, as
applicable, by the Board of Directors, even if such transactions involve amounts
in excess of 1% of our assets or $120,000, whichever is less:
- employment by the Company of an executive officer of the Company if:
(i) the related compensation is required to be reported in our proxy
statement or (ii) the compensation would have been reported in our proxy
statement if the executive officer was a named executive officer and the
executive officer is not an immediate family member of another executive
officer or director of the Company;
- compensation paid to a director if the compensation is required to be
reported in our proxy statement;
- any transaction where the related party?s interest arises solely from
the ownership of the Company?s
common shares and all holders of the Company?s common shares received
the same benefit on a pro rata basis; and
- any transaction involving a related party where the rates or charges
involved are determined by competitive bids.
The Company leases substantially all of its office, maintenance and
warehouse facilities from Edward Hohman, President, and John Hohman, Chief
Operating Officer, who are the Company?s principal shareholders or entities
controlled by them. Rents were paid or accrued in favor of the shareholders in
the amount of $248,160 during the twelve months ended December 31, 2008 and
$247,480 during the twelve months ended December 31, 2007. The leases are one
year with options to renew for an additional year. The leases were renewed for
the twelve months ending December 31, 2009 on the same terms that were in
effectfor the twelve months ended December 31, 2008.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit and Non-Audit Fees
The following table presents fees for professional audit services rendered
by Tinter Scheifley Tang, LLP for the audit of the Company?s annual financial
statements for the years ended December 31, 2008 and 2007, and fees billed for
other services rendered by Tinter Scheifley Tang, LLP during those periods.
2008 2007
Audit $ -- $16,619
Audit-Related -- --
------- --------
$ -- $16,619
The following table presents fees for professional audit services rendered
by Berman, Hopkins, Wright & LaHam, CPAs and Associates, LLP for the audit of
the Company?s annual financial statements for the year ended December 31, 2008
and 2007, and fees billed for other services rendered by Berman, Hopkins,
Wright& LaHam, CPAs and Associates, LP during those periods.
2008 2007
Audit $ 25,495 $ --
Audit-Related -- --
------- --------
$ 25,495 $ --
Audit services consisted principally of the audit of the consolidated financial
statements included in the Company?s Annual Report on Form 10-K and reviews of
the consolidated financial statements included in the Company?s Quarterly
Reports on Form 10-Q. The Company did not engage Tinter Scheifley Tang, LLP or
Berman, Hopkins, Wright & LaHam, CPAs and Associates, LLP to perform any other
services during the years ended December 31, 2008 and 2007.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit
Number Description
10.11* Lease Agreement dated January 1, 2008 between John and Edward
Hohman and American Post Tension, Inc. for property located in
Henderson, Colorado
10.12* Lease Agreement dated January 1, 2008 between Edward Hohman and
American Post Tension, Inc. for property located at 1179 Center Point
Drive, Henderson, Nevada.
10.13* Lease Agreement dated January 1, 2008 between J & W Arizona
Enterprises, LLC and American Post Tension, Inc. for property located
At 2419 S. 49th Avenue, Phoenix, Arizona
10.14* Lease Agreement dated January 1, 2008 between J & W Enterprises,
LLC and American Post Tension, Inc. for property located at 1411 W.
Miracle Mile, Tucson, Arizona
21* List of Subsidiaries
31.1* Section 302 Certification of Principal Executive Officer
31.2* Section 302 Certification of Principal Financial Officer
32.1* Section 906 Certification of Principal Executive Officer
32.2* Section 906 Certification of Principal Financial Officer
* filed herewith
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
onits behalf by the undersigned, thereunto duly authorized.
AMERICAN POST TENSION, INC.
By: /s/ Edward Hohman
----------------------
Edward Hohman
President and Chief Executive Officer
(Principal Executive Officer)
Dated: April 14, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
Signature Title Date
/s/ EDWARD HOHMAN
------------------
Edward Hohman Director, Chairman, and
Chief Executive Officer (Principal
Executive Officer) April 14, 2009
/s/ JOHN HOHMAN
------------------
John Hohman Director, Executive Vice President
and Chief Operating Officer April 14, 2009
/s/ PAUL LISAK
-------------------
Paul Lisak Director April 14, 2009
LIST OF EXHIBITS FILED
Exhibit
Number Description
21 Subsidiaries of the Registrant
31.1 Certification of Edward Hohman, President and Chief Executive
Officer of American Post Tension, Inc. Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Robert Hipple Contract Chief Financial Officer of
American Post Tension, Inc. Pursuant to Section 302 of the Sarbanes
Oxley Act of 2002
32.1 Certification of Edward Hohman, President and Chief Executive
Officer of American Post Tension, Inc. Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
32.2 Certification of Robert Hipple Contract Chief Financial Officer of
American Post Tension, Inc. Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002