Notes to Consolidated Financial Statements
December 31, 2015 and 2014
Note 1. Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and liquidation of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that may be necessary in the event the Company cannot continue as a going concern.
Speedemissions, Inc. (“Speedemissions” or the “Company”) has experienced recurring net losses which have caused an accumulated deficit of $21,806,897 at December 31, 2015. We had a working capital deficit of $1,429,910 at December 31, 2015 compared to a working capital deficit of $1,041,752 at December 31, 2014.
Our revenues for the fiscal years ended December 31, 2015 and 2014, as well as revenues for 2016 to date, were below our expectations and internal forecasts primarily as a result of fewer vehicle emissions tests and safety inspections being performed at our stores.
Our revenues for the year ended December 31, 2015 and to date during 2016 have been insufficient to attain profitable operations and to provide adequate levels of cash flow from operations. Our near term liquidity and ability to continue as a going concern is dependent on our ability to generate sufficient revenues from our store operations to provide sufficient cash flow from operations to pay our current level of operating expenses, to provide for inventory purchases and to reduce past due amounts owed to vendors and service providers. No assurances may be given that the Company will be able to achieve sufficient levels of revenues in the near term to provide adequate levels of cash flow from operations. Should an increase in revenues not materialize, we will seek to further reduce operating costs to bring them in line with reduced revenue levels. If the Company is unable to achieve near term profitability and generate sufficient cash flow from operations, and if the Company is unable to sufficiently reduce operating costs, we would need to raise additional capital or obtain additional borrowings. We currently have very limited access to capital, including the public and private placement of equity securities and additional debt financing. No assurances can be given that additional capital or borrowings would be available to allow us to continue as a going concern. As a result of the Company’s history of losses and financial condition, there is substantial doubt about the ability of the Company to continue as a going concern.
On June 30, 2014, due to insufficient cash flow, we ceased making required monthly principal payments on our line of credit facility with TCA Global Credit Master Fund, LP (“TCA”) and were in default under the terms of the Credit Agreement at that time. On August 6, 2014, we received notice of Demand for Payment of $791,207 before the close of business on Monday, August 19, 2014. According to the notice, the demand was a result of failure to make timely payments. Also, demand was made of Richard Parlontieri personally, as guarantor, pursuant to the Validity Guaranty, dated June 8, 2012 and affirmed and ratified on October 23, 2013 (the “Guaranty”). Under the terms of the Guaranty, Mr. Parlontieri agreed that the Company would maintain ownership of all collateral and would refrain from disposing or encumbering any collateral without TCA’s express written consent. TCA alleged that Mr. Parlontieri had not complied with this agreement and was in default of the Guaranty. On December 8, 2014, using cash proceeds from the sale of five of our Utah stores, the Company paid all amounts due to TCA under the Credit Agreement, was released by TCA from any future claims related to previous alleged violations of the terms of the Credit Agreement and effectively terminated the Credit Agreement. Due to the Company’s financial position, we have been unable to secure a comparable long-term replacement revolving credit agreement and must rely primarily on cash flow from operations and short term financings at to fund working capital needs.
On April 16, 2015, the Company entered into a revolving loan agreement with Celtic Bank (“CB”), pursuant to which the Company initially borrowed $17,000 from CB. Under the terms of the revolving loan agreement, the Company agreed to repay the initial loan, plus interest, for a total amount of $18,955 by October 15, 2015. The Company made the required six monthly payments, as required, by the October 15, 2015 due date. As the Company repays the initial loan, it can and has borrowed new funds which created new six-month payment cycles on the previously outstanding principal plus the new funds borrowed. At their sole discretion, CB can increase the maximum availability under the revolving loan agreement above the $17,000 amount established upon the execution of the revolving loan agreement. Effective October 28, 2015, CB increased our borrowing limit to $27,300. Our credit limit with TCA was $1,300,000. At March 25, 2016, the outstanding balance on our revolving loan facility with CB was approximately $20,000 and our cash balances were approximately $19,000.
During the prior several years, we made reductions in employee headcount, the number of stores, same store operating expenses, corporate overhead and other operating expenses. At December 31, 2015, our primary source of liquidity for cash flows was cash received from our store operations. We are dependent on our revenues in the very near term to provide sufficient cash flow from operations to pay our current level of operating expenses, to provide for inventory purchases and to reduce past due amounts owed to landlords, vendors and service providers. No assurances may be given that the cash received from our store operations will be sufficient to cover our ongoing operating expenses. If the cash received from our store operations is not sufficient, we would need to obtain additional credit facilities or raise additional capital to continue as a going concern and to execute our business plan. There is no assurance that such financing or capital would be available or, if available, that we would be able to complete financing or a capital raise on satisfactory terms.
Our revenues during the years ended December 2015 and 2014, as well as to date in 2016, have been insufficient to attain profitable operations and to provide adequate levels of cash flow from operations. During the year ended December 31, 2015 and 2014, as well as to date in 2016, due to insufficient cash flow from operations and borrowing limitations under our line of credit facility, we have been extending landlords and vendors beyond normal payment terms. Until such vendors are paid within normal payment terms, no assurances can be given that required services and materials needed to support operations will continue to be provided. In addition, no assurances can be given that vendors will not pursue legal means to collect past due balances owed. Any interruption of services or materials would likely have an adverse impact on our operations and could impact our ability to continue as a going concern.
On December 13, 2013 and on January 10, 2014, the Circuit Court in the Twelfth Judicial Circuit in and for Sarasota County, Florida (the “Court”), entered an Order Granting Approval of Settlement Agreement (the “Order”) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933 (the “Securities Act”), in accordance with a Settlement Agreement (the “Settlement Agreement”) between the Company and IBC Funds, LLC, a Nevada limited liability company (“IBC”), in the matter entitled IBC Funds, LLC, vs. SpeedEmissions, Inc., Case Nos. 2013 CA 008762 NC and 2014 CA 000153 (the “Actions”). IBC commenced the Actions against us to recover an aggregate of $205,643 of past-due accounts payable, which IBC had purchased from certain of our vendors pursuant to the terms of separate claim purchase agreements between IBC and each of the respective vendors (the “Assigned Accounts), plus fees and costs (the “Claim”). The Assigned Accounts relate to certain research, technical, development and legal services. The Order provides for the full and final settlement of the Claim and the Action. The Settlement Agreement became effective and binding on December 13, 2013 and January 10, 2014, respectively.
The Settlement Agreement provides that in no event shall the number of shares of common stock issued by the Company to IBC or its designee in connection with the Settlement Agreement, when aggregated with all other shares of common stock then beneficially owned by IBC and its affiliates (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules and regulations thereunder), result in the beneficial ownership by IBC and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and the rules and regulations thereunder) at any time of more than 9.99% of the common stock of the Company.
Furthermore, the Settlement Agreement provides that, for so long as IBC or any of its affiliates hold any shares of common stock of the Company, the Company and its affiliates are prohibited from, among other things, voting any securities of the Company in favor of: (1) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries, (2) a sale or transfer of a material amount of the Company’s assets or its subsidiaries’ assets, (3) any material change in the Company’s present capitalization or dividend policy, (4) any other material change in the Company’s business or corporate structure, (5) a change in the Company’s charter, bylaws, or instruments corresponding thereto (6) causing a class of the Company’s securities to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association, (7) causing a class of the Company’s equity securities to become eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act, (8) terminating the Company’s transfer agent, (9) taking any action which would impede the purposes and objects of the Settlement Agreement or (10) taking any action, intention, plan or arrangement similar to any of those enumerated above. These prohibitions may not be modified or waived without further order of the Court.
Since April 1, 2015 and continuing to the date of this report, we have been unable to make all required payments to the federal government for payroll taxes withheld from employee paychecks and the associated matching employer payroll taxes. We also are in arrears during the same period to the state of Georgia for income taxes withheld from employee paychecks and sales taxes.
As of December 31, 2015, we owed approximately $250,000 and $29,000 to the federal and Georgia state governments, respectively. As of March 25, 2016, we owed approximately $295,000 and $27,000 to the federal and Georgia state governments, respectively. We proposed a payment plan to the federal government and made $10,000 payments on September 30, 2015, October 29, 2015 and January 12, 2016, but we have not reached an agreed payment schedule as of the date of this report.
We reached a payment agreement with the state of Georgia for the quarter ended June 30, 2015, which required four monthly payments of approximately $5,000 each. All payments were made in accordance with the payment agreement. We were required to pay the state of Georgia for withholding taxes for the quarter ended September 30, 2015, in the approximate amount of $14,500, by October 31, 2015. As of the date of this report, we have been unable to make this payment to the state of Georgia and are subject to late payment penalties, in addition to interest until the delinquent taxes are paid. We were able to timely make payment to the state of Georgia for the quarter ended December 31, 2015.
Note 2: Nature of Operations
Description of Business
The Company performs vehicle emissions testing and safety inspections in certain cities in which vehicle emissions testing is mandated by the Environmental Protection Agency (“EPA”). The federal government and a number of state and local governments in the United States mandate vehicle emissions testing as a method of improving air quality. As of December 31, 2015, the Company operated 22 vehicle emissions testing and safety inspection stations under the trade names of
Speedemissions
and
Auto Emissions Express
(Atlanta, Georgia and St. Louis, Missouri); and
Just Emissions
(Salt Lake City, Utah). The Company also operates three mobile testing units in the Atlanta, Georgia area. The Company manages its operations based on these four regions and has one reportable segment.
At its vehicle emissions testing and safety inspection stations, the Company uses computerized emissions testing equipment and safety inspection equipment that tests vehicles for compliance with emissions and safety standards.
Note 3: Significant Accounting Policies
Basis of Presentation
The Consolidated Financial Statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as codified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification.
The Company has evaluated subsequent events through the date of the filing its Form 10-K with the Securities and Exchange Commission. The Company is not aware of any significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the Company’s Consolidated Financial Statements.
Consolidation
The accompanying consolidated financial statements include the accounts of Speedemissions and non-operating subsidiaries, which are 100% owned by the Company. All significant intercompany accounts 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 reported amounts of revenues and expenses during the reporting periods. Significant estimates included in these financial statements relate to useful lives of property and equipment, the valuation allowance provided against deferred tax assets and the valuation of long-lived assets and goodwill. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized upon completion of testing services. The cost of emissions certificates is shown separately in the accompanying consolidated statements of operations.
The Company normally requires that the customer’s payment be made at the time of service. The Company does not have significant levels of accounts receivable.
Under current Georgia, Missouri, and Utah laws, if a vehicle fails an emissions test, it may be retested at no additional charge during a specified period after the initial test, as long as the subsequent test is performed at the same facility. The costs of such retests are not material. Accordingly, no accrual for retest is recorded by the Company.
Inventories
Inventories primarily consist of emissions and safety certificates and merchandise purchased for resale at our stores. Inventory in our stores is stated at the lower of weighted average cost or market.
Property and Equipment
Property and equipment are recorded at original cost and depreciated on a straight-line basis over their estimated useful lives, as follows: buildings, 15 years; emission testing equipment, five to seven years; furniture, fixtures and office equipment, three to five years, and vehicles three years.
The cost of repairs and maintenance is charged to maintenance expense as incurred.
Leasehold improvements are amortized using the straight-line method over the lesser of the remaining lease terms, including renewal periods expected to be exercised, or the estimated useful lives of the improvements.
Impairment of Long-Lived Assets
Property and Equipment
The Company reviews its assets for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. When indicators of impairment are present, the Company evaluates the carrying amount of such assets in relation to the operating performance and future estimated undiscounted net cash flows expected to be generated by the assets or underlying businesses. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Goodwill
Goodwill represents the excess of the purchase price paid over the estimated fair value of the assets acquired and liabilities assumed in the acquisition of a business. Goodwill is not amortized, but is tested for impairment at least annually as well as on an interim basis if an event occurs or circumstances change that could reduce the fair value of a reporting unit below its carrying value.
Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the assets might be impaired. In evaluating the goodwill on our balance sheet for impairment at December 31, 2015, we first assessed qualitative factors to determine whether it is more likely than not that the fair value of our acquired assets is less than the carrying amount of the acquired assets, as allowed under ASU 2011-08,
Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment
. We then utilized a discounted cash flow analysis to determine a reporting unit’s fair value. The methodology used in estimating discounted cash flows is inherently complex and involves significant management assumptions, including expected revenue growth and increases in expenses, to determine an appropriate discount rate and cash flows. Using discount rates for each reporting unit that were determined based on available market data and estimating cash flows for each reporting unit, our goodwill was not impaired during 2015 or as of December 31, 2015. Estimated cash flows extend into the future and, by their nature, are difficult to determine over an extended timeframe. Factors that have and may significantly affect the estimates, and ultimately their carrying amount in our financials, include, among others, competitive forces, customer behaviors and attrition, changes in revenue growth trends, cost structures and technology, government regulation and changes in discount rates or market sector conditions. Significant changes in these assumptions could affect the Company’s need to record additional impairment charges.
Income Taxes
Income tax expense (benefit) is computed utilizing the liability method. Deferred income tax assets and liabilities are determined based on the differences between the financial reporting and income tax basis of assets and liabilities and for income tax carryforwards given the provisions of the enacted tax laws. A valuation allowance is provided against deferred tax assets for which it is more likely than not that the asset will not be realized.
General and Administrative
General and administrative expenses consist of payroll and related expenses for employees involved in general corporate functions, including accounting and human relations, among others; costs associated with use by these functions of facilities and equipment, such as depreciation expense and rent; professional fees; and other general corporate costs.
Fair Value of Financial Instruments
The carrying amounts of cash, other current assets, accounts payable and accrued liabilities approximate their fair value because of the short-term nature of these accounts. Fair value of the equipment financing agreements and capital lease obligations approximate carrying value based upon current borrowing rates. The fair value of the Company’s note receivable and note payable also approximates the carrying value because outstanding balances can be repaid at any time.
Net Loss per Common Share
Basic net loss per common share is computed by dividing the net loss attributable to common shareholders for the period by the weighted-average number of common shares outstanding for the period. Diluted net loss per common share is computed by dividing the net loss for the period by the weighted-average number of common and potential common shares outstanding during the period, if the effect of the potential common shares is dilutive. Due to the Company’s net loss, potential dilutive common shares from options and warrants have been excluded from the weighted-average number of common shares outstanding as they are anti-dilutive.
Share-Based Compensation
The Company has several share-based compensation plans under which employees and non-employee directors receive stock options. Additionally the Company has issued shares of its common stock as compensation to employees and payments of services rendered by third parties. Share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant). Fair value of the award is calculated using the Black-Scholes model or based on the fair value of the shares issued for the services provided, whichever is more accurately determinable.
Recently Issued Accounting Pronouncements
In April 2014, the FASB issued ASC Update No. 2014-08 (Topic 205 and Topic 360),
Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity
. This ASC update modifies the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity's operations and financial results. This update also requires additional financial statement disclosures about discontinued operations, as well as disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation. The updated guidance is effective prospectively for years beginning on or after December 15, 2014. The adoption of the accounting pronouncement did not have a material effect on the accompanying consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers
, a new standard on revenue recognition. The new standard will supersede existing revenue recognition guidance and apply to all entities that enter into contracts to provide goods or services to customers. The guidance also addresses the measurement and recognition of gains and losses on the sale of certain non-financial assets, such as real estate, property and equipment. The new standard will become effective for us beginning with the first quarter of 2017 and can be adopted either retrospectively to each reporting period presented or as a cumulative effect adjustment as of the date of adoption. We are currently evaluating the impact of adopting this new guidance on our consolidated financial statements.
In June 2014, the FASB issued new authoritative accounting guidance related to the recognition of share-based compensation when an award provides that a performance target can be achieved after the requisite service period. This guidance may be applied either prospectively or retrospectively and is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early application is permitted. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company’s financial statements and disclosures.
In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, FASB Accounting Standards Codification Topic 842,
Leases
. In summary, Topic 842 requires organizations that lease assets, referred to as “lessees”, to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The amendments in ASU 2016-02 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Therefore, the amendments in ASU 2016-02 will become effective for the Company at the beginning of its 2019 fiscal year. The Company is currently assessing the impact of implementing the new guidance on its financial statements.
We have considered all other recently issued accounting pronouncements and do not believe the adoption of such pronouncements will have a material impact on our financial statements.
Note 4: Notes Receivable
On September 14, 2010, the Company settled a lawsuit originally filed in 2006 against a former manager. The Company alleged the manager, while employed by the Company, breached his fiduciary duty by purchasing property in Texas where one of the Company’s testing facilities he managed was located.
Under the provisions of the settlement agreement, the Company will receive the sum of $125,000 payable in monthly installments of $1,000 per month for 72 months. The balance of $53,000 will be due and payable to the Company on June 1, 2016. The note receivable is collateralized by a second lien on property owned by the former manager. The note receivable and gain from the settlement was computed and recorded at its present value of $106,881 using an interest rate equal to prime rate plus 0.5%, which was 3.75%, which approximates rates offered in the market for notes receivable with similar terms and conditions. The Company recognized a gain from the legal settlement in the amount of $106,881 during 2010.
During 2014, we sold the assets comprising six of our Houston, Texas stores for a combined amount of $220,000, consisting of $152,500 in cash and notes receivable for $67,500. The principal amount of the note is payable in equal monthly payments over a 12-month period with no interest.
The note
was paid in full during the year ended December 31, 2015.
During 2015, we sold equipment for $2,000 in cash plus a note receivable of $2,496. The principal amount of the note is payable in equal monthly payments over a 12-month period with no interest. The note was paid in full in January 2016.
The balance of notes receivable was $56,200 and $94,653 at December 31, 2015 and 2014, respectively.
Note 5: Property and Equipment
Property and equipment at December 31, 2015 and 2014 were as follows:
|
|
2015
|
|
|
2014
|
|
Buildings
|
|
$
|
30,754
|
|
|
$
|
30,754
|
|
Emissions testing equipment
|
|
|
947,493
|
|
|
|
957,035
|
|
Furniture, fixtures and office equipment
|
|
|
56,326
|
|
|
|
56,326
|
|
Vehicles
|
|
|
19,356
|
|
|
|
26,827
|
|
Leasehold improvements
|
|
|
158,757
|
|
|
|
158,757
|
|
|
|
|
1,212,686
|
|
|
|
1,229,699
|
|
Less accumulated amortization and depreciation
|
|
|
1,119,753
|
|
|
|
1,073,248
|
|
|
|
$
|
92,933
|
|
|
$
|
156,451
|
|
Note 6: Goodwill
The Company measures the fair value of reporting units using discounted future cash flows based on our forward-looking projections. Because the business is assumed to continue in perpetuity, the discounted future cash flow includes a terminal value. The long-term growth assumptions incorporated into the discounted cash flow calculation reflect our long-term view of the market. Each year, the Company re-evaluates the assumptions used to reflect changes in the business environment.
At December 31, 2015 and 2014, we compared the fair value of the individual reporting units for which the goodwill relates to their respective carrying amounts, including goodwill. In the opinion of management, goodwill was impaired as of December 31, 2014 but not as of December 31, 2015. The 2014 impairment related to the goodwill recorded from the acquisition of the six stores from Just, Inc. in September 2005, the acquisition of the five stores from AEE in November 2012 and the acquisition of the seven stores from AEE in December 2013.
The following schedule presents the valuation of goodwill as of December 31, 2015:
December 31, 2013
|
|
$
|
1,808,731
|
|
Just, Inc. goodwill impairment (six stores)
|
|
|
(365.378
|
)
|
Just, Inc sale of five of six stores
|
|
|
(694,673
|
)
|
Auto Emissions Express goodwill impairment (five stores)
|
|
|
(61,091
|
)
|
Auto Emissions Express goodwill impairment (seven stores)
|
|
|
(296,604
|
)
|
|
|
|
|
|
December 31, 2014 and 2015
|
|
$
|
390,985
|
|
Note 7: Accrued Liabilities
Accrued liabilities at December 31, 2015 and 2014 were as follows:
|
|
2015
|
|
|
2014
|
|
Professional fees
|
|
$
|
61,758
|
|
|
$
|
86,640
|
|
Accrued payroll
|
|
|
298,698
|
|
|
|
42,459
|
|
Accrued property taxes
|
|
|
39,838
|
|
|
|
79,585
|
|
Other
|
|
|
101,038
|
|
|
|
62,151
|
|
|
|
$
|
501,332
|
|
|
$
|
270,835
|
|
Note 8: Equipment Financing Agreements
On July 30, 2013, the Company entered into a 24-month equipment financing agreement with a financing company in the amount of $25,589. The financing agreement is secured by the equipment. The financing agreement bears interest at 30.5% per annum. This agreement was paid off during 2015.
Equipment financing agreements at December 31 consisted of the following:
|
|
2015
|
|
|
2014
|
|
Equipment financing agreements
|
|
$
|
-
|
|
|
$
|
10,292
|
|
Less current portion
|
|
|
-
|
|
|
|
10,292
|
|
Long-term portion
|
|
$
|
-
|
|
|
$
|
-
|
|
There are no future minimum debt payments required under non-cancelable equipment financing agreements at December 31, 2015:
Note 9: Notes Payable
Bridge Note Agreement
On November 11, 2010, the Company entered into a $55,000 bridge note agreement (the “Note”) with an affiliate, GCA Strategic Investment Fund, Limited (“GCA”). The funds received from the Note were used for general working capital purposes. The Note bore 0% interest and was due in full on November 11, 2012. The Note is subject to mandatory prepayment upon a change of control, as defined in the Note. In consideration for the receipt of the Note, the Company issued GCA 4,000,000 warrants to purchase the Company’s common stock at $0.50 per share. On April 15, 2011, the Board of Directors of the Company and GCA agreed to amend GCA’s 4,000,000 warrants whereby the exercise price of the warrants would be reduced to $0.016 from $0.50. The closing price of the Company’s common stock was $0.013 on April 14, 2011. The warrants were exercised on April 18, 2011 at the reduced exercise price of $0.016 per share. The Note was extended on November 6, 2012, establishing a new maturity date of November 6, 2013, and a maturity value of $60,000. The Note was extended again on November 6, 2013, establishing a new maturity date of November 6, 2014. In consideration for the 2014 date extension, the Company issued 800,000 shares of its common stock to GCA on August 14, 2014 and expensed the agreed value of the shares, or $20,000, during the quarter ended September 30, 2014. The Note had a balance due of $60,000 on December 31, 2015 and on December 31, 2014.
Promissory Note Agreements
On May 29, 2014, the Company entered into a promissory note agreement with Thomas Chorba, pursuant to which Thomas Chorba loaned the Company $50,000 for working capital purposes. Under the terms of the promissory note, the Company agreed to repay the loan, plus interest, for a total amount of $56,000 by December 31, 2015. Under the terms of the note, the Company will make 18 monthly payments of $3,111 each which yields an effective annual interest rate of 7.9%. The Company repaid the remaining balance on December 1, 2015 and, as a result, there was no outstanding balance as of December 31, 2015.
On November 5, 2014, the Company entered into a promissory note agreement with Dianna Parlontieri, wife of the Company’s President, Chief Executive Officer and Chief Financial Officer, pursuant to which Mrs. Parlontieri loaned the Company $20,000 for working capital purposes. Under the terms of the promissory note, the Company agreed to repay the loan, plus interest, for a total amount of $20,400 by December 15, 2014. Because the Company did not repay the loan in full by December 15, 2014, the Company is required to repay $1,700 on the 15th of each month, starting December 15, 2014, until the loan is re-paid in full. If any of the monthly payments are not paid on the respective due date then the monthly payment amount is subject to a default interest rate of 10% per annum. The Company is currently in default of the terms of this promissory note as it did not make the required repayment on December 15, 2014 and has not made any of the required monthly payments as of the date of this report. The Note had a balance due of $20,000 on December 31, 2015 and 2014.
Daily Payment Note Agreements
On May 30, 2014, the Company entered into a repayment agreement with TVT, pursuant to which the Company agreed to repay TVT $75,000 from a loan made by TVT to the Company, plus a fixed fee which the Company recorded as interest expense, for a total amount of $112,425 by October 27, 2014. Under the terms of the agreement, TVT was authorized to make daily bank debits of $1,099 on each available banking day during the term of the agreement which represented a fee rate of 49.9%. On September 16, 2014, the Company re-negotiated its agreement with TVT to obtain additional funding totaling $67,077. Under the terms of the amended agreement, the Company agreed to repay the remaining balance from the June 3, 2014 funding, plus the current funding, for a total of $100,000, plus a fixed fee which the Company recorded as interest expense, representing a total amount of $149,000 by April 30, 2015. Under the terms of the amended agreement, TVT was authorized to make daily bank debits of $1,199 on each available banking day during the term of the agreement. The Company repaid the remaining balance on May 1, 2015 and, as a result, there was no outstanding balance as of December 31, 2015.
On October 24, 2014, the Company entered into a merchant sales agreement with EN, pursuant to which the Company agreed to repay EN $50,000 from a loan made by EN to the Company, plus a fixed fee which the Company recorded as interest expense, for a total amount of $72,000 by March 2, 2015. Under the terms of the agreement, EN was authorized to make daily bank debits of $1,000 on each available banking day during the term of the agreement which represented a fee rate of 44.0%. The Company repaid the remaining balance on March 2, 2015 and, as a result, there was no outstanding balance as of December 31, 2015.
On November 18, 2014, the Company entered into a revenue-based factoring agreement with Samson Partners, LLC (“SP”), pursuant to which the Company agreed to repay SP $35,000 from a loan made by SP to the Company, plus a fixed fee which the Company recorded as interest expense, for a total repayment amount of $43,750 by February 9, 2015. Under the terms of the agreement, SP was authorized to make daily bank debits of $875 on each available banking day during the term of the agreement which represented a fee rate of 25.0%. The Company repaid the remaining balance on January 22, 2015 and, as a result, there was no outstanding balance of December 31, 2015.
On January 19, 2015, the Company entered into another revenue-based factoring agreement with SP, pursuant to which the Company agreed to repay SP $60,000 from a loan made by SP to the Company, plus a fixed fee which the Company recorded as interest expense, for a total repayment amount of $75,000 by May 1, 2015. Under the terms of the agreement, SP was authorized to make daily bank debits of $1,169 on each available banking day during the term of the agreement which represented a fee rate of 25.0%. The Company repaid the remaining balance on June 16, 2015 and, as a result, there was no outstanding balance as of December 31, 2015.
On March 6, 2015, the Company entered into another revenue-based factoring agreement with SP, pursuant to which the Company agreed to repay SP $60,000 from a loan made by SP to the Company, plus a fixed fee which the Company recorded as interest expense, for a total repayment amount of $76,800 by June 16, 2015. Under the terms of the agreement, SP was authorized to make daily bank debits of $1,169 on each available banking day during the term of the agreement which represented a fee rate of 28.0%. The Company repaid the remaining balance on June 16, 2015 and, as a result, there was no outstanding balance as of December 31, 2015.
On April 16, 2015, the Company entered into another revenue-based factoring agreement with SP, pursuant to which the Company agreed to repay SP $75,000 from a loan made by SP to the Company, plus a fixed fee which the Company will record as interest expense, for a total repayment amount of $104,175 by October 19, 2015. Under the terms of the agreement, SP is authorized to make daily bank debits of $827 on each available banking day during the term of the agreement which represents a fee rate of 38.9%. On August 21, 2015, the Company renegotiated its payment terms with SP reducing the daily payment from $827 to $500 and extending the due date from October 19, 2015 to November 27, 2015. The Company repaid the remaining balance on October 12, 2015 and, as a result, there was no outstanding balance of December 31, 2015.
On June 8, 2015, the Company entered into another revenue-based factoring agreement with SP, pursuant to which the Company agreed to repay SP $250,000 from a loan made by SP to the Company, plus a fixed fee which the Company will record as interest expense, for a total repayment amount of $337,500 by April 14, 2016. A portion of the proceeds were used to pay off the March 6, 2015 SP revenue-based factoring agreement described above. Under the terms of the agreement, SP is authorized to make daily bank debits of $1,600 on each available banking day during the term of the agreement which represents a fee rate of 34.8%. The agreement had a balance due of $90,160 on December 31, 2015.
On October 12, 2015, the Company entered into another revenue-based factoring agreement with SP, pursuant to which the Company agreed to repay SP $75,000 from a loan made by SP to the Company, plus a fixed fee which the Company will record as interest expense, for a total repayment amount of $101,250 by August 22, 2016. A portion of the proceeds were used to pay off the April 16, 2015 SP revenue-based factoring agreement described above. Under the terms of the agreement, SP is authorized to make daily bank debits of $469 on each available banking day during the term of the agreement which represents a fee rate of 35.0%. The agreement had a balance due of $57,282 on December 31, 2015.
Revolving Credit Facility
On June 8, 2012, the Company entered into a revolving line of Credit Agreement with TCA, pursuant to which TCA agreed to loan the Company up to a maximum of $2,000,000 for working capital purposes. In June 2012, the Company obtained a loan from TCA in the amount of $350,000 to use for working capital purposes and, in October 2012, the Company entered into the First Amendment to Credit Agreement with TCA (the “Amended Credit Agreement”) pursuant to which the Company received an additional loan in the amount of $550,000 to use for the purchase of five emissions testing stores owned by AEE. On October 23, 2013, the Company entered into the Second Amendment to Credit Agreement with TCA, pursuant to which TCA agreed to increase the revolving loan from $900,000 to $1,300,000 and, in connection therewith, the Company received an additional loan in the amount of $400,000 to finance the acquisition of the remaining seven emission testing centers owned by AEE and to provide working capital.
On June 30, 2014, due to insufficient cash flow, we ceased making required monthly principal payments on our line of credit facility with TCA and were in default under the terms of the Credit Agreement at that time. On August 6, 2014, we received notice of Demand for Payment of $791,207 before the close of business on Monday, August 19, 2014. According to the notice, the demand was a result of failure to make timely payments. Also, demand was made of Richard Parlontieri personally, as guarantor, pursuant to the Validity Guaranty, dated June 8, 2012 and affirmed and ratified on October 23, 2013. Under the terms of the Validity Guaranty, Mr. Parlontieri agreed that the Company would maintain ownership of all collateral and would refrain from disposing or encumbering any collateral without TCA’s express written consent. TCA alleged that Mr. Parlontieri had not complied with this agreement and was in default of the Validity Guaranty. On December 8, 2014, using cash proceeds from the sale of five of our Utah stores, the Company paid all amounts due to TCA under the Credit Agreement and was released by TCA from any future claims related to previous alleged violations of the terms of the Credit Agreement and effectively terminated the Credit Agreement.
On April 16, 2015, the Company entered into a revolving loan agreement with CB, pursuant to which the Company initially borrowed $17,000 from CB. Under the terms of the revolving loan agreement, the Company agreed to repay the initial loan, plus interest, for a total amount of $18,955 by October 15, 2015. The Company made the required six monthly payments, as required, by the October 15, 2015 due date. As the Company repays the initial loan, it can and has borrowed new funds which created new six-month payment cycles on the previously outstanding principal plus the new funds borrowed. At their sole discretion, CB can increase the maximum availability under the revolving loan agreement above the $17,000 amount established upon the execution of the revolving loan agreement. Effective October 28, 2015, CB increased our borrowing limit to $27,300. The revolving loan agreement had a balance due of $26,592 on December 31, 2015.
Note 10: Income Taxes
The Company follows the provisions of FASB accounting guidance on accounting for uncertain income tax positions. Accordingly, assets and liabilities are recognized for a tax position, based solely on its technical merits that is believed to be more likely than not to be fully sustainable upon examination. As of December 31, 2015 and 2014, there were no uncertain tax positions. Accrued interest relating to uncertain tax positions would be recorded as a component of interest expense and penalties related to uncertain tax positions would be recorded as a component of general and administrative expenses.
The tax years after 2011 remain open to examination by the taxing jurisdictions to which we are subject. Additionally, upon inclusion of the net operating loss carry forward tax benefits in future tax returns, the related tax benefit for the period in which the benefit arose may be subject to examination.
As of December 31, 2015, the Company had net operating loss carry forwards of approximately $16,140,000 that may be used to offset future taxable income. If not utilized, the net operating loss carry forwards will expire at various dates through 2035.
Differences between the income taxes incurred for 2015 and 2014 and the amount determined by applying the statutory federal income tax rate (34%) to the loss before income taxes were as follows:
|
|
2015
|
|
|
2014
|
|
Statutory rate
|
|
|
(34.0
|
)%
|
|
|
(34.0
|
)%
|
State income taxes, net of federal deduction
|
|
|
(4.0
|
)
|
|
|
(4.0
|
)
|
Valuation allowance
|
|
|
38.0
|
|
|
|
38.0
|
|
|
|
|
—
|
%
|
|
|
—
|
%
|
Deferred income taxes result from the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and for net operating loss carry forwards. A valuation allowance is provided against deferred tax assets for which it is more likely than not that the assets will not be realized. Significant components of the Company’s deferred tax assets as of December 31, 2015 and 2014 are as follows:
|
|
2015
|
|
|
2014
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating losses
|
|
$
|
5,975,000
|
|
|
$
|
5,817,000
|
|
Goodwill
|
|
|
761,000
|
|
|
|
714,000
|
|
Other
|
|
|
206,000
|
|
|
|
239,000
|
|
|
|
|
6,942,000
|
|
|
|
6,770,000
|
|
Valuation allowance
|
|
|
(6,942,000
|
)
|
|
|
(6,770,000
|
)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
Note 11: Net Loss per Common Share
Basic loss per common share (“EPS”) represents net loss divided by the weighted average number of common shares outstanding during a reported period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, including stock options, warrants, and contingently issuable shares such as the Company’s Series A preferred stock (commonly and hereinafter referred to as “Common Stock Equivalents”), were exercised or converted into common stock.
The following table sets forth the computation for basic and diluted net loss per common share for the year ended December 31, 2015 and 2014, respectively:
|
|
2015
|
|
|
2014
|
|
Net loss (A)
|
|
$
|
(488,994
|
)
|
|
$
|
(773,180
|
)
|
Weighted average common shares - basic (B)
|
|
|
109,091,759
|
|
|
|
85,845,293
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options (1)
|
|
|
—
|
|
|
|
—
|
|
Dilutive effect of stock warrants (1)
|
|
|
—
|
|
|
|
—
|
|
Dilutive effect of unrestricted Preferred
Series A Shares (2)
|
|
|
—
|
|
|
|
—
|
|
Weighted average common shares - diluted (C)
|
|
|
109,091,759
|
|
|
|
85,845,293
|
|
Net loss per share - basic (A/B)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
Net loss per share - diluted (A/C)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
(1)
|
As a result of the Company’s net loss for the year ended December 31, 2015 and 2014, aggregate Common Stock Equivalents of 431,000 in each year issuable under stock option plans that were potentially dilutive securities are anti-dilutive and have been excluded from the computation of weighted average common shares (diluted) for the year ended December 31, 2015 and 2014. These Common Stock Equivalents could be dilutive in future periods.
|
(2)
|
As a result of the Company’s net loss in the year ended December 31, 2015 and 2014, aggregate Common Stock Equivalents of 4,277,498 issuable under Series A convertible, redeemable preferred stock that were potentially dilutive securities are anti-dilutive and have been excluded from the computation of weighted average common shares diluted for the year ended December 31, 2015 and 2014. These Common Stock Equivalents could be dilutive in future periods.
|
Note 12: Commitments and Contingencies
Operating Leases
The Company leases office space, land and buildings for certain of its emissions testing stations. The leases generally require that the Company pay taxes, maintenance, and insurance. The leases for the emission testing stations are renewable, at the option of the Company, for specified periods. Management expects that, in the normal course of business, leases that expire will be renewed or replaced by other leases. Certain leases have been personally guaranteed by the President of the Company.
Certain leases contain scheduled base rent increases over the terms of the leases. The total amount of base rent payments is charged to expense on a straight-line basis over the lease terms. At December 31, 2015 and 2014, the excess of rent expense over cash payments was $36,453 and $51,958, respectively. Such amounts are included in the accompanying consolidated balance sheets as deferred rent.
Future minimum rental payments required under the non-cancelable operating leases were as follows at December 31, 2015:
Year Ending December 31
|
|
|
|
2016
|
|
$
|
269,529
|
|
2017
|
|
|
170,053
|
|
2018
|
|
|
107,284
|
|
2019
|
|
|
74,150
|
|
2020
|
|
|
72,412
|
|
2021 and later
|
|
|
192,437
|
|
|
|
$
|
885,865
|
|
Total rent expense under all operating leases totaled $787,312 in 2015 compared to $1,376,385 in 2014. Total rent income from sub-lease agreements on operating leases totaled $248,952 in 2015 compared to $323,142 in 2014
.
There is no future rent income from sub-lease agreements on operating leases as stores associated with operating leases were closed during 2015.
Capital Leases
The Company’s capital lease commitments relate to emissions testing and other related equipment. The Company records a capital lease asset and obligation equal to the present value of the lease payments. The Company held $143,850 in equipment under capital lease with accumulated depreciation of $84,933 at December 31, 2015.
Future minimum rental payments required under the non-cancelable capital leases were as follows at December 31, 2015:
Year Ending December 31
|
|
|
|
2016
|
|
$
|
32,107
|
|
2017
|
|
|
4,640
|
|
2018
|
|
|
4,640
|
|
2019
|
|
|
3,866
|
|
|
|
|
45,253
|
|
Less amounts representing interest
|
|
|
7,239
|
|
Present value of net minimum lease payments
|
|
|
38,014
|
|
Less current portion
|
|
|
27,326
|
|
Long-term capitalized lease obligations
|
|
$
|
10,688
|
|
Litigation
From time to time, the Company may be involved in claims that arise out of the normal course of its business. In the opinion of management, we are not currently involved in any legal proceedings which would have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Note 13: Preferred and Common Stock Transactions
Preferred Stock
The Company had 5,133 shares of Series A Convertible Preferred Stock (“Preferred A Stock”) outstanding at December 31, 2015 and 2014. Each share of Preferred A Stock is convertible into 833.33 shares of the Company’s common stock, or 4,277,498 shares of common stock in aggregate. GCA Strategic Investment Fund, Limited (“GCA”) held 3,724 shares of Preferred A Stock convertible into 3,103,333 shares of common stock as of December 31, 2015 and 2014. Global Capital Funding Group, LP held 1,409 shares of Preferred A Stock convertible into 1,174,166 shares of common stock as of December 31, 2015 and 2014. As of October 14, 2005, pursuant to an article of amendment, the Preferred A Stock ceased to accrue dividends. The Preferred A Stock had a liquidation preference equal to the purchase price of the remaining units of Preferred A Stock, or $5,133,000 at December 31, 2015 and 2014.
The Preferred A Stock contains certain contingent redemption features which could trigger its redemption. Since the contingent redemption features are outside the control of the Company, the fair value assigned to the Preferred A Stock has been classified outside of Shareholders’ Deficit in the Company’s consolidated balance sheets. The contingent redemption will occur only due to events such as a change of control, which is defined as a person or group of persons other than GCA that acquires a beneficial ownership of 33 1/3% or more of the outstanding shares of the Company’s common stock without the prior written consent of GCA, a transfer of substantially all of the assets of the Company, a merger, or certain other events. Should one of the contingent redemption instances occur, the Company would be required to redeem the Preferred A Stock at the greater of (i) the original issue price of $1,000 per share or (ii) the number of shares of common stock into which the redeemed shares may be converted multiplied by the market price of the common stock at the time of the change in control. Based on the 5,133 shares of Preferred A Stock currently outstanding, if this redemption were triggered, the Company would be required to pay the holders of these shares $5,133,000. The carrying value of the Preferred A Stock at December 31, 2015 and 2014 was $4,579,346. An accretion from the original value assigned to the Preferred A Stock of $4,579,346 has not been made since the contingent redemption features have no mandatory time for redemption and the probability of one of the contingent redemption features occurring cannot be determined.
In the event of liquidation, dissolution or winding up of the Company, preferred shareholders are entitled to be paid prior to any preference of any other payment or distribution.
Common Stock
On December 13, 2013, the Company made a partial issuance of 1,250,000 shares of its common stock to IBC pursuant to the terms of the Settlement Agreement whereby IBC assumed financial responsibility for certain of the Company’s trade accounts payable in the amount of $71,644 in exchange for shares of the Company’s common stock. Of the 1,250,000 shares issued, 500,000 shares were sold by IBC, at a price per share of $0.012, resulting in proceeds of $6,000 to IBC and reducing the Company’s obligation to IBC from $71,644 to $65,644. The remaining 750,000 shares were issued by the Company as a financing fee to IBC which the Company recognized an in the fourth quarter of 2013. The Settlement Agreement provides that in no event shall the total number of shares of common stock issued to IBC or its designee in connection with the Settlement Agreement, when aggregated with all other shares of common stock then beneficially owned by IBC and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and the rules and regulations thereunder), result in the beneficial ownership by IBC and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and the rules and regulations thereunder) at any time of more than 9.99% of the common stock of the Company.
During the seven-month period ending July 31, 2014, IBC assumed financial responsibility for an additional $133,984 of the Company’s trade accounts payable under the Settlement Agreement, bringing the total amount remaining from 2013 plus the additional amount assumed in 2014 to $199,628. During the period seven-month period ending July 31, 2014, the company issued 56,398,059 shares of its common stock to pay in full for the $199,628 of trade accounts payable assumed plus an additional 2,700,000 common shares valued at $14,220 for IBC consulting fees. The Company recognized $0 and $14,220 in expense related to the consulting services performed during the years ended December 31, 2015 and 2014, respectively.
On March 14, 2014, the Company issued a total of 1,500,000 shares of its common stock to ten Company employees for employment services previously rendered. For financial reporting purposes, the Company valued the shares based the market value of the shares on the March 14, 2014 issue date or $0.01 per share. The Company recognized $15,000 in expense related to these 1,500,000 shares during the quarter ended March 31, 2014.
On August 14, 2014, the Company issued 8,000,000 shares of its common stock to GCA for interest charges related to GCA’s note payable to the Company. For financial reporting purposes, the Company valued the shares based on the agreed amount of the interest charges or $20,000, which the Company recognized as an expense during the year ended December 31, 2014.
On August 14, 2014, the Company issued 2,000,000 shares of its common stock to a consultant for financial consulting services rendered. For financial reporting purposes, the Company valued the shares based the agreed value of the consulting services or $5,000, which the Company recognized as an expense during the year ended December 31, 2014.
On November 6, 2014, the Company issued 500,000 shares of its common stock to a Company employee for employment services previously rendered. For financial reporting purposes, the Company valued the shares based the market value of the shares on the November 6, 2014 issue date or $0.0024 per share. The Company recognized $1,200 in expense related to these 500,000 shares during the quarter ended December 31, 2014.
On December 8, 2014, as agreed under the line of credit settlement with TCA, the Company repurchased from TCA 2,074,689 shares of the Company’s common stock. These shares had been issued to TCA for investment banking fees on October 23, 2013 in conjunction with the Second Amended Credit Agreement. The Company paid $100,000 for the 2,074,689 shares.
On November 12, 2015, the Company issued the following amounts of common stock: 600,000 shares to its directors, 250,000 shares to an affiliated company, and 100,000 shares to a contract employee for services previously rendered. For financial reporting purposes, the Company valued the shares based the market value of the shares on the November 12, 2015 issue date or $0.001 per share. The Company recognized $950 in expense related to these 950,000 shares during the quarter ended December 31, 2015.
The Company is authorized to issue 250,000,000 shares of $0.001 par value common stock, of which 111,988,914 and 111,038,914 were issued with 109,914,225 and 108,964,225 shares outstanding as of December 31, 2015 and 2014, respectively. The total number of shares reserved for options and warrant conversions was 431,000 on December 31, 2015 and 2014.
Stock Incentive Plans
The Company has four stock incentive plans that authorize the Compensation Committee of the Board of Directors (“Compensation Committee”) to grant to eligible employees and non-employee directors’ stock options, restricted stock awards, unrestricted stock awards and performance stock rewards.
Under the Company’s 2001 Stock Option Plan (“2001 Plan”), the Compensation Committee is authorized to grant eligible employees and non-employee directors options to purchase up to 100,000 shares of the Company’s common stock. There were no options outstanding under the 2001 Plan as of December 31, 2015. The Company does not anticipate granting any additional options under the 2001 Plan in the future.
Under the Company’s 2005 Omnibus Stock Grant and Option Plan (“2005 Plan”), the Compensation Committee is authorized to grant eligible employees and non-employee directors options for up to 303,498 shares of the Company’s authorized common stock. Options granted under the 2005 Plan generally vested annually in three equal installments. There were 5,000 options outstanding under the 2005 Plan as of December 31, 2015. The Company does not anticipate granting any additional options under the 2005 Plan in the future.
Under the Company’s 2006 Stock Grant and Option Plan (“2006 Plan”), the Compensation Committee is authorized to grant eligible employees and non-employee directors options for up to 2,000,000 shares of the Company’s common stock. Options granted under the 2006 Plan vest annually in three equal installments. There were 54,000 options outstanding under the 2006 Plan as of December 31, 2015. The Company does not anticipate granting any additional options under the 2006 Plan in the future.
During the Company’s annual meeting on May 19, 2008, the shareholders approved and adopted the “2008 Plan”. The Compensation Committee may issue options for up to 5,000,000 shares of our common stock under the 2008 Plan. There were no options outstanding under the 2008 Plan as of December 31, 2015.
On June 14, 2010, the Compensation Committee of the Company approved common stock awards of 100,000 common shares from the Company’s 2008 Plan to each of the Company’s five directors. The common stock awards vested immediately. The Company did not grant common stock option awards in 2014. The Company recognized $10,500 in share-based compensation expense from the 500,000 common shares awarded to the Company’s directors in 2010. The common shares awarded vested immediately and the stock price was $0.021 on the date of the grant.
These plans do not allow for the exercise of options after ten years from the date of grant. There were 1,025,000 stock options available to be granted under these plans at December 31, 2015 and 2014. As of December 31, 2015 and 2014, options to purchase a total of 59,000 had been granted and were outstanding under these four plans. Options to purchase 59,000 common shares were exercisable as of December 31, 2015 and 2014, respectively.
The Company did not record any share-based compensation expense during the year ended December 31, 2015. The Company recorded $59,950 in share-based compensation expense during the year ended December 31, 2014. These expenses are included in the Company’s general and administrative and interest expenses in its Statements of Operations.
The Company did not grant stock options in 2015 or 2014. For stock option grants issued prior to 2014, the fair value for stock options was estimated at the date of grant using the Black-Scholes option pricing model, which requires management to make certain assumptions. Expected volatility was based on the Company’s historical stock price volatility. The Company based the risk-free interest rate on U.S. Treasury note rates. The expected term is based on the vesting period and an expected exercise term and forfeitures. The Company does not anticipate paying cash dividends in the foreseeable future and therefore used an expected dividend yield of 0%. The following table sets forth the options granted under Speedemissions stock option plans as of December 31, 2015 and 2014:
|
|
2015
|
|
|
2014
|
|
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
Options outstanding at January 1,
|
|
|
59,000
|
|
|
$
|
0.61
|
|
|
|
59,000
|
|
|
$
|
0.61
|
|
Granted
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Exercised/exchanged
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Expired
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Options outstanding at December 31,
|
|
|
59,000
|
|
|
$
|
0.61
|
|
|
|
59,000
|
|
|
$
|
0.61
|
|
The following table summarizes information about stock options outstanding at December 31, 2015:
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of
Exercise Prices
|
|
Number of Options
Outstanding
|
|
Weighted
Average Remaining
Contractual Life
|
|
Weighted
Average
Exercise Price
|
|
|
Number of Options
Exercisable
|
|
|
Weighted
Average
Exercise Price
|
|
$0.00 - $0.99
|
|
|
54,000
|
|
0.87 years
|
|
$
|
0.57
|
|
|
|
54,000
|
|
|
$
|
0.57
|
|
$1.00 - $1.99
|
|
|
5,000
|
|
0.00 years
|
|
$
|
1.00
|
|
|
|
5,000
|
|
|
$
|
1.00
|
|
$0.00 - $0.99
|
|
|
59,000
|
|
0.87 years
|
|
$
|
0.61
|
|
|
|
59,000
|
|
|
$
|
0.61
|
|
As of December 31, 2015, there was no unrecognized stock-based compensation expense related to non-vested stock options. The following table represents our non-vested stock options and activity for the years ended December 31, 2015 and 2014:
|
|
Number of
Options
|
|
|
Weighted Average
Grant Date
Fair Value
|
|
Non-vested options — December 31, 2013
|
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
|
—
|
|
|
|
|
|
Vested
|
|
|
—
|
|
|
|
—
|
|
Non-vested options — December 31, 2014
|
|
|
—
|
|
|
|
—
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
Vested
|
|
|
—
|
|
|
|
—
|
|
Non-vested options — December 31, 2015
|
|
|
—
|
|
|
$
|
—
|
|
The was no aggregate intrinsic value of options outstanding and exercisable at December 31, 2015 and 2014 based on the Company’s closing stock price of $0.001 and $0.002, respectively. The was no aggregate intrinsic value of options vesting during 2015 and 2014. Intrinsic value is the amount by which the fair value of the underlying stock exceeds the exercise price of the options.
Warrants
The fair value of each common stock warrant issued is estimated on the date of grant using the Black-Scholes option-pricing model.
There were no warrants granted during the years ended December 31, 2015 and 2014.
On June 5, 2013, a total of 600,000 warrants were granted by the Company to National Securities Corporation and its Senior Vice President, Vincent Calicchia, as an inducement to perform preliminary due diligence on a proposed future capital raise for the Company. Each warrant when exercised converts into one share of the Company’s common stock. The exercise price of each warrant is $0.010; the warrants fully vested when granted and expire on June 5, 2018. The closing price of the Company’s common stock on the date of the warrants’ grant was $0.007 per share. The fair value of the 600,000 warrants, calculated on the date of grant using Black-Scholes, was negligible and has not been separately accounted for. On September 26, 2013 and November 25, 2013, the Company issued 180,000 shares and 48,000 shares of its common stock, respectively, to Vincent Calicchia as a result of the exercise of previously granted warrants.
The following table represents our warrant activity for the years ended December 31, 2015 and 2014:
|
|
Number of
Warrants
|
|
Outstanding Warrants — December 31, 2013
|
|
|
372,000
|
|
Granted
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
Outstanding Warrants — December 31, 2014
|
|
|
372,000
|
|
Granted
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
Outstanding Warrants — December 31, 2015
|
|
|
372,000
|
|
All warrants issued were fully vested within the calendar year in which they were granted. As of December 31, 2015, there were 372,000 warrants to purchase common stock outstanding.
Note 14: Risks and Uncertainties
Regulatory Impact
The current and future demand for the Company’s services is substantially dependent upon federal, state and local legislation and regulations mandating air pollution controls and emissions testing. If any or all of these governmental agencies should change their positions or eliminate or revise their requirements related to air pollution controls and emissions testing (including a shift to centralized facilities versus decentralized facilities), the Company could experience a significant adverse impact on its financial position, results of operations and cash flows.
Arrangement with Shareholders
The Company is required to maintain a majority of independent directors on its Board of Directors and a majority of independent directors on both the Audit Committee and Compensation Committee.
If a person or group of persons other than GCA acquires beneficial ownership of 33 1/3% or more of the outstanding shares of common stock without the prior written consent of GCA, we could be required to redeem the Preferred A Stock at the greater of (i) the original issue price of $1,000 per share or (ii) the number of shares of common stock into which the redeemed shares may be converted multiplied by the market price of the common stock at the time of the change in control. Based on the 5,133 shares of Preferred A Stock currently outstanding, if this redemption were triggered we would be required to pay the holders of these shares an aggregate of at least $5,133,000. This restriction will likely deter any proposed acquisition of our stock and may make it more difficult for us to attract new investors, as any mandatory redemption of the preferred shares will materially adversely affect our ability to remain in business and significantly impair the value of our common stock.
Potential Control Relationship by Existing Shareholders
We have a large amount of outstanding common stock held by a single shareholder and a large amount of common stock that could be acquired by the same shareholder upon conversion of preferred stock, which if sold could have a negative impact on our stock price.
The Company had 111,988,914 shares of common stock issued and 109,914,225 shares outstanding as of December 31, 2015. As of December 31, 2015, our largest shareholder, GCA, and its affiliates, owned 17,421,861 shares of our common stock. GCA and its affiliates currently have the effective power to control the vote on substantially all significant matters without the approval of other shareholders. Upon the conversion of their Preferred A Stock, GCA could own up to 21,699,359 shares of our common stock.
Note 15: Significant Fourth Quarter Adjustments
During the fourth quarter of 2014, the Company reviewed the carrying amount of goodwill in relation to the operating performance and future estimated discounted net cash flows expected to be generated by the assets and underlying stores previously acquired. The Company determined that goodwill recorded from the its acquisition of five stores from AEE in 2012 was impaired due to a decline in operating performance and anticipated future performance at the stores located in Georgia. The impairment recognized was measured by the amount by which the carrying amount of the assets exceeded the fair value of the net assets. The fair value of the reporting unit was determined using discounted cash flow techniques. The amount of the goodwill impairment expensed during the fourth quarter of 2014, for these five stores acquired from AEE in 2012, was $61,091. See Note 6 to the Consolidated Financial Statements for additional information.
During the fourth quarter of 2014, the Company reviewed the carrying amount of goodwill in relation to the operating performance and future estimated discounted net cash flows expected to be generated by the assets and underlying stores previously acquired. The Company determined that goodwill recorded from the its acquisition of seven stores from AEE in 2013 was impaired due to a decline in operating performance and anticipated future performance at the stores located in Georgia. The impairment recognized was measured by the amount by which the carrying amount of the assets exceeded the fair value of the net assets. The fair value of the reporting unit was determined using discounted cash flow techniques. The amount of the goodwill impairment expensed during the fourth quarter of 2014, for these seven stores acquired from AEE in 2013, was $296,604. See Note 6 to the Consolidated Financial Statements for additional information.
During the fourth quarter of 2015, there were no significant adjustments.
*****
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2015 that our disclosure controls and procedures were effective at the reasonable assurance level.
We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. There were no significant changes in the company’s internal control over financial reporting or in other factors identified in connection with this evaluation that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment, management used the updated framework in the
Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. 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 rules of the Securities and Exchange Commission that permits us to provide only management’s report in this annual report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2015 that our internal control over financial reporting was effective.
Item 9B. Other Information
None
Part III
Item 10. Directors and Executive Officers and Corporate Governance
The information required by this Item relating to our directors is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2016 Annual Meeting of Shareholders. The information required by this Item relating to our executive officers is included in Part I, Item 1 “Business – Executive Officers.”
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference to the information contained in the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2016 Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference to the information contained in the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2016 Annual Meeting of Shareholders.
Item 13. Certain Relationships, Related Transactions, and Director Independence
The information required by this Item is incorporated herein by reference to the information contained in the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2016 Annual Meeting of Shareholders.
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated herein by reference to the information contained in the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2016 Annual Meeting of Shareholders.
Part IV
Item 15. Exhibits and Financial Statement Schedules
3.1
|
Articles of Incorporation of Speedemissions, Inc., as amended (incorporated by reference to Exhibit 3.1 to Form 10-KSB dated March 31, 2006)
|
|
|
3.2
|
Bylaws of Speedemissions, Inc. (incorporated by reference to Exhibit 3.2 of the Pre-Effective Registration Statement on Form SB-2, File No. 333-68730)
|
|
|
4.1
|
Certificate of Designation of Series A Convertible Preferred Stock, as amended (incorporated by reference to Exhibit 4.1 to Form 10-KSB dated March 31, 2006)
|
|
|
4.2
|
Certificate of Designation of Series B Convertible Preferred Stock, as amended (incorporated by reference to Exhibit 4.2 to Form 10-KSB dated March 31, 2006)
|
|
|
4.3
|
Registration Rights Agreement to Global Capital Advisors, LLC and GCA Strategic Investment Fund Limited dated January 26, 2005 (incorporated by reference to Exhibit 10.4 to Form 8-K dated February 2, 2005 and filed with the Commission on February 3, 2005)
|
|
|
4.4
|
Registration Rights Agreement between Speedemissions, Inc. and Global Capital Funding Group LP dated October 14, 2005 (incorporated by reference to Exhibit 10.10 to Form 8-K dated November 21, 2005 and filed with the Commission on November 23, 2005)
|
|
|
4.5
|
Registration Rights Agreement between Speedemissions, Inc. and GCA Strategic Investment Fund Limited dated October 14, 2005 (incorporated by reference to Exhibit 10.12 to Form 8-K dated November 21, 2005 and filed with the Commission on November 23, 2005)
|
|
|
10.1
|
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 of Pre-Effective Registration Statement on Form SB-2, File No. 333-109416 filed with the Commissions on October 3, 2003)
|
|
|
10.2
|
Employment Agreement with Richard A. Parlontieri dated September 15, 2003 (incorporated by reference to Exhibit 10.2 of Pre-Effective Registration Statement on Form SB-2, File No. 333-109416 filed with the Commission on October 3, 2003)
|
10.3
|
First Amendment to Employment Agreement with Richard A. Parlontieri dated December 19, 2003 (incorporated by reference to Exhibit 10.16 to the Company’s Form 10-KSB for the period ended December 31, 2003 and filed with the Commission on March 30, 2004)
|
|
|
10.4
|
Second Amendment to Employment Agreement with Richard A. Parlontieri dated October 23, 2006 (incorporated by reference to Exhibit 10.1 to Form 8-K dated October 23, 2006 and filed with the Commission on October 23, 2006)
|
|
|
10.5
|
Stock Purchase Agreement between Speedemissions, Inc. and Mr. Sticker, Inc. dated June 30, 2005 (incorporated by reference to Exhibit 10.1 to Form 8-K dated July 6, 2005 and filed with the Commission on July 7, 2005)
|
|
|
10.6
|
Stock Purchase Agreement between Speedemissions, Inc., Just, Inc. and Michael Duncan and Steve Malmgren dated September 7, 2005 (incorporated by reference to Exhibit 10.1 to Form 8-K dated September 12, 2005 and filed with the Commission on September 13, 2005)
|
|
|
10.7
|
Exchange Agreement between Speedemissions, Inc. and Global Capital Funding Group LP dated October 14, 2005 (incorporated by reference to Exhibit 10.9 to Form 8-K dated November 21, 2005 and filed with the Commission on November 23, 2005)
|
|
|
10.8
|
Exchange Agreement between Speedemissions, Inc. and GCA Strategic Investment Fund Limited dated October 14, 2005 (incorporated by reference to Exhibit 10.11 to Form 8-K dated November 21, 2005 and filed with the Commission on November 23, 2005)
|
|
|
10.9
|
Speedemissions, Inc. Amended and Restated 2005 Omnibus Stock Grant and Option Plan effective September 11, 2008 (incorporated by reference to Exhibit 4.1 to Form S-8, filed with the Commission on September 11, 2008)
|
|
|
10.10
|
Speedemissions, Inc. 2006 Stock Grant and Option Plan effective September 18, 2006 (incorporated by reference to Exhibit 4.2 to Form 10-QSB filed with the Commission on March 30, 2007)
|
|
|
10.11
|
Subscription and Securities Purchase Agreement between Speedemissions, Inc., and GCA Strategic Investment Fund dated January 21, 2004 (incorporated by reference to Exhibit 10.1 to Form 8-K dated January 21, 2004 and filed with the Commission on January 29, 2004)
|
|
|
10.12
|
Speedemissions, Inc. 2008 Stock Grant and Option Plan effective May 19, 2008 (incorporated by reference to Exhibit 10.25 to Form S-1/A filed with the Commission on June 19, 2008)
|
|
|
10.13
|
$55,000 Promissory Note to GCA Strategic Investment Fund Limited dated November 11, 2010 (incorporated by reference to Exhibit 10.25 to Form 10-Q dated November 12, 2010 and filed with the Commission on November 12, 2010)
|
|
|
10.14
|
Credit Agreement with TCA Global Credit Master Fund, LP dated June 8, 2012 (incorporated by reference to Exhibit 99.1 to Form 8-K dated June 8, 2012 and filed with the Commission on June 13, 2012)
|
|
|
10.15
|
Revolving Note with TCA Global Credit Master Fund, LP dated June 8, 2012 (incorporated by reference to Exhibit 99.2 to Form 8-K dated June 8, 2012 and filed with the Commission on June 13, 2012)
|
|
|
10.16
|
$60,000 Promissory Note to GCA Strategic Investment Fund Limited dated November 6, 2012
|
|
|
10.17
|
Second Amendment to Credit Agreement with TCA Global Credit Master Fund, LP, dated October 23, 2013 (incorporated by reference to Exhibit 10.1 to Form 8-K dated October 23, 2013 and filed with the Commission on October 25, 2013)
|
|
|
10.18
|
Replacement and Consolidated Revolving Note with TCA Global Credit Master Fund, LP, dated October 23, 2013 (incorporated by reference to Exhibit 10.2 to Form 8-K dated October 23, 2013 and filed with the Commission on October 25, 2013)
|
|
|
10.19
|
Sale Agreement with DEKRA Automotive North America, Inc., dated December 5, 2014 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the Commission on December 11, 2014, as amended on January 21, 2015)
|
|
|
10.20
|
Addendum to Sale Agreement with DEKRA Automotive North America, Inc., dated December 5, 2014 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the Commission on December 11, 2014, as amended on January 21, 2015)
|
10.21
|
$50,000 Promissory Note Agreement to Thomas Chorba dated May 29, 2014 (incorporated by reference to Exhibit 10.23 to the Form 10-K filed with the Commission on April 22, 2015)
|
|
|
10.22
|
$75,000 Repayment Agreement to TVT Capital, LLC dated May 30, 2014 (incorporated by reference to Exhibit 10.24 to the Form 10-K filed with the Commission on April 22, 2015)
|
|
|
10.23
|
$100,000 Repayment Agreement to TVT Capital, LLC dated September 16, 2014 (incorporated by reference to Exhibit 10.25 to the Form 10-K filed with the Commission on April 22, 2015)
|
|
|
10.24
|
$50,000 Merchant Sales Agreement to Entrepreneur Now, LLC dated October 24, 2014 (incorporated by reference to Exhibit 10.26 to the Form 10-K filed with the Commission on April 22, 2015)
|
|
|
10.25
|
$20,000 Promissory Note Agreement to Dianna Parlontieri dated November 5, 2014 (incorporated by reference to Exhibit 10.27 to the Form 10-K filed with the Commission on April 22, 2015)
|
|
|
10.26
|
$35,000 Factoring Agreement to Samson Partners, LLC dated November 18, 2014 (incorporated by reference to Exhibit 10.28 to the Form 10-K filed with the Commission on April 22, 2015)
|
|
|
10.27
|
$60,000 Factoring Agreement to Samson Partners, LLC dated January 15, 2015 (filed herewith)
|
|
|
10.28
|
$60,000 Factoring Agreement to Samson Partners, LLC dated March 6, 2015 (filed herewith)
|
|
|
10.29
|
$75,000 Factoring Agreement to Samson Partners, LLC dated April 16, 2015 (filed herewith)
|
|
|
10.30
|
$17,000 Line of Credit Agreement to Celtic Bank dated April 16, 2015 (filed herewith)
|
|
|
10.31
|
$250,000 Factoring Agreement to Samson Partners, LLC dated June 8, 2015 (filed herewith)
|
|
|
10.32
|
$75,000 Factoring Agreement to Samson Partners, LLC dated October 12, 2015 ((filed herewith)
|
|
|
23.1
|
Consent of Porter Keadle Moore, LLC
|
|
|
24
|
Power of Attorney (contained on signature pages herewith)
|
|
|
31.1
|
Rule 13a-14(a) Certification of the Chief Executive Officer
|
|
|
31.2
|
Rule 13a-14(a) Certification of the Chief Financial Officer
|
|
|
32.1
|
Section 906 Certification of Chief Executive Officer
|
|
|
32.2
|
Section 906 Certification of Chief Financial Officer
|
|
|
101
|
Interactive Data Files
|
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
Speedemissions, Inc.
|
|
|
|
|
Dated: March 30, 2016
|
|
|
/s/ Richard A. Parlontieri
|
|
|
By:
|
Richard A. Parlontieri, President
and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
Dated: March 30, 2016
|
|
|
/s/ Richard A. Parlontieri
|
|
|
By:
|
Richard A. Parlontieri, Chief Financial Officer and Chief
Accounting Officer
(Principal Financial and Accounting Officer)
|
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Parlontieri, his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
/s/ Richard A. Parlontieri
|
|
Dated: March 30, 2016
|
By:
|
Richard A. Parlontieri, Director,
President and Chief Executive Officer
(
Principal Executive Officer
)
|
|
|
|
|
|
|
|
/s/ William M. Hannan
|
|
Dated: March 30, 2016
|
By:
|
William M. Hannan, Director
|
|
|
|
|
|
|
|
/s/ Michael E. Guirlinger
|
|
Dated: March 30, 2016
|
By:
|
Michael E. Guirlinger, Director
|
|
|
|
|
|
|
|
/s/ Richard A. Parlontieri
|
|
|
By:
|
Richard A. Parlontieri, Chief Financial
Officer, Chief Accounting Officer and
Secretary
(
Principal Financial and Accounting
Officer
)
|
|
Dated: March 30, 2016
|
EXHIBIT INDEX
3.1
|
Articles of Incorporation of Speedemissions, Inc., as amended (incorporated by reference to Exhibit 3.1 to Form 10-KSB dated March 31, 2006)
|
|
|
3.2
|
Bylaws of Speedemissions, Inc. (incorporated by reference to Exhibit 3.2 of the Pre-Effective Registration Statement on Form SB-2, File No. 333-68730)
|
|
|
4.1
|
Certificate of Designation of Series A Convertible Preferred Stock, as amended (incorporated by reference to Exhibit 4.1 to Form 10-KSB dated March 31, 2006)
|
|
|
4.2
|
Certificate of Designation of Series B Convertible Preferred Stock, as amended (incorporated by reference to Exhibit 4.2 to Form 10-KSB dated March 31, 2006)
|
|
|
4.3
|
Registration Rights Agreement to Global Capital Advisors, LLC and GCA Strategic Investment Fund Limited dated January 26, 2005 (incorporated by reference to Exhibit 10.4 to Form 8-K dated February 2, 2005 and filed with the Commission on February 3, 2005)
|
|
|
4.4
|
Registration Rights Agreement between Speedemissions, Inc. and Global Capital Funding Group LP dated October 14, 2005 (incorporated by reference to Exhibit 10.10 to Form 8-K dated November 21, 2005 and filed with the Commission on November 23, 2005)
|
|
|
4.5
|
Registration Rights Agreement between Speedemissions, Inc. and GCA Strategic Investment Fund Limited dated October 14, 2005 (incorporated by reference to Exhibit 10.12 to Form 8-K dated November 21, 2005 and filed with the Commission on November 23, 2005)
|
|
|
10.1
|
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 of Pre-Effective Registration Statement on Form SB-2, File No. 333-109416 filed with the Commissions on October 3, 2003)
|
|
|
10.2
|
Employment Agreement with Richard A. Parlontieri dated September 15, 2003 (incorporated by reference to Exhibit 10.2 of Pre-Effective Registration Statement on Form SB-2, File No. 333-109416 filed with the Commission on October 3, 2003)
|
|
|
10.3
|
First Amendment to Employment Agreement with Richard A. Parlontieri dated December 19, 2003 (incorporated by reference to Exhibit 10.16 to the Company’s Form 10-KSB for the period ended December 31, 2003 and filed with the Commission on March 30, 2004)
|
|
|
10.4
|
Second Amendment to Employment Agreement with Richard A. Parlontieri dated October 23, 2006 (incorporated by reference to Exhibit 10.1 to Form 8-K dated October 23, 2006 and filed with the Commission on October 23, 2006)
|
|
|
10.5
|
Stock Purchase Agreement between Speedemissions, Inc. and Mr. Sticker, Inc. dated June 30, 2005 (incorporated by reference to Exhibit 10.1 to Form 8-K dated July 6, 2005 and filed with the Commission on July 7, 2005)
|
|
|
10.6
|
Stock Purchase Agreement between Speedemissions, Inc., Just, Inc. and Michael Duncan and Steve Malmgren dated September 7, 2005 (incorporated by reference to Exhibit 10.1 to Form 8-K dated September 12, 2005 and filed with the Commission on September 13, 2005)
|
|
|
10.7
|
Exchange Agreement between Speedemissions, Inc. and Global Capital Funding Group LP dated October 14, 2005 (incorporated by reference to Exhibit 10.9 to Form 8-K dated November 21, 2005 and filed with the Commission on November 23, 2005)
|
|
|
10.8
|
Exchange Agreement between Speedemissions, Inc. and GCA Strategic Investment Fund Limited dated October 14, 2005 (incorporated by reference to Exhibit 10.11 to Form 8-K dated November 21, 2005 and filed with the Commission on November 23, 2005)
|
|
|
10.9
|
Speedemissions, Inc. Amended and Restated 2005 Omnibus Stock Grant and Option Plan effective September 11, 2008 (incorporated by reference to Exhibit 4.1 to Form S-8, filed with the Commission on September 11, 2008)
|
|
|
10.10
|
Speedemissions, Inc. 2006 Stock Grant and Option Plan effective September 18, 2006 (incorporated by reference to Exhibit 4.2 to Form 10-QSB filed with the Commission on March 30, 2007)
|
|
|
10.11
|
Subscription and Securities Purchase Agreement between Speedemissions, Inc., and GCA Strategic Investment Fund dated January 21, 2004 (incorporated by reference to Exhibit 10.1 to Form 8-K dated January 21, 2004 and filed with the Commission on January 29, 2004)
|
|
|
10.12
|
Speedemissions, Inc. 2008 Stock Grant and Option Plan effective May 19, 2008 (incorporated by reference to Exhibit 10.25 to Form S-1/A filed with the Commission on June 19, 2008)
|
10.13
|
$55,000 Promissory Note to GCA Strategic Investment Fund Limited dated November 11, 2010 (incorporated by reference to Exhibit 10.25 to Form 10-Q dated November 12, 2010 and filed with the Commission on November 12, 2010)
|
|
|
10.14
|
Credit Agreement with TCA Global Credit Master Fund, LP dated June 8, 2012 (incorporated by reference to Exhibit 99.1 to Form 8-K dated June 8, 2012 and filed with the Commission on June 13, 2012)
|
|
|
10.15
|
Revolving Note with TCA Global Credit Master Fund, LP dated June 8, 2012 (incorporated by reference to Exhibit 99.2 to Form 8-K dated June 8, 2012 and filed with the Commission on June 13, 2012)
|
|
|
10.16
|
$60,000 Promissory Note to GCA Strategic Investment Fund Limited dated November 6, 2012
|
|
|
10.17
|
Second Amendment to Credit Agreement with TCA Global Credit Master Fund, LP, dated October 23, 2013 (incorporated by reference to Exhibit 10.1 to Form 8-K dated October 23, 2013 and filed with the Commission on October 25, 2013)
|
|
|
10.18
|
Replacement and Consolidated Revolving Note with TCA Global Credit Master Fund, LP, dated October 23, 2013 (incorporated by reference to Exhibit 10.2 to Form 8-K dated October 23, 2013 and filed with the Commission on October 25, 2013)
|
|
|
10.19
|
Sale Agreement with DEKRA Automotive North America, Inc., dated December 5, 2014 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the Commission on December 11, 2014, as amended on January 21, 2015)
|
|
|
10.20
|
Addendum to Sale Agreement with DEKRA Automotive North America, Inc., dated December 5, 2014 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the Commission on December 11, 2014, as amended on January 21, 2015)
|
|
|
10.21
|
$50,000 Promissory Note Agreement to Thomas Chorba dated May 29, 2014 (incorporated by reference to Exhibit 10.23 to the Form 10-K filed with the Commission on April 22, 2015)
|
|
|
10.22
|
$75,000 Repayment Agreement to TVT Capital, LLC dated May 30, 2014 (incorporated by reference to Exhibit 10.24 to the Form 10-K filed with the Commission on April 22, 2015)
|
|
|
10.23
|
$100,000 Repayment Agreement to TVT Capital, LLC dated September 16, 2014 (incorporated by reference to Exhibit 10.25 to the Form 10-K filed with the Commission on April 22, 2015)
|
|
|
10.24
|
$50,000 Merchant Sales Agreement to Entrepreneur Now, LLC dated October 24, 2014 (incorporated by reference to Exhibit 10.26 to the Form 10-K filed with the Commission on April 22, 2015)
|
|
|
10.25
|
$20,000 Promissory Note Agreement to Dianna Parlontieri dated November 5, 2014 (incorporated by reference to Exhibit 10.27 to the Form 10-K filed with the Commission on April 22, 2015)
|
|
|
10.26
|
$35,000 Factoring Agreement to Samson Partners, LLC dated November 18, 2014 (incorporated by reference to Exhibit 10.28 to the Form 10-K filed with the Commission on April 22, 2015)
|
|
|
10.27
|
$60,000 Factoring Agreement to Samson Partners, LLC dated January 15, 2015 (filed herewith)
|
|
|
10.28
|
$60,000 Factoring Agreement to Samson Partners, LLC dated March 6, 2015 (filed herewith)
|
|
|
10.29
|
$75,000 Factoring Agreement to Samson Partners, LLC dated April 16, 2015 (filed herewith)
|
|
|
10.30
|
$17,000 Line of Credit Agreement to Celtic Bank dated April 16, 2015 (filed herewith)
|
|
|
10.31
|
$250,000 Factoring Agreement to Samson Partners, LLC dated June 8, 2015 (filed herewith)
|
|
|
10.32
|
$75,000 Factoring Agreement to Samson Partners, LLC dated October 12, 2015 ((filed herewith)
|
|
|
23.1
|
Consent of Porter Keadle Moore, LLC
|
|
|
24
|
Power of Attorney (contained on signature pages herewith)
|
31.1
|
Rule 13a-14(a) Certification of the Chief Executive Officer
|
|
|
31.2
|
Rule 13a-14(a) Certification of the Chief Financial Officer
|
|
|
32.1
|
Section 906 Certification of Chief Executive Officer
|
|
|
32.2
|
Section 906 Certification of Chief Financial Officer
|
|
|
101
|
Interactive Data Files
|