ICP Solar Technologies Inc

[gamood]

Form 10QSB for FC FINANCIAL SERVICES INC

23-Oct-2006

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

FORWARD-LOOKING STATEMENTS

The information in this discussion contains forward-looking statements. These forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks discussed below, and, from time to time, in other reports we file with the United States Securities and Exchange Commission (the "SEC"), including our Annual Report on Form 10-KSB for the year ended November 30, 2005 and our Current Reports on Form 8-K.

INTRODUCTION

We were incorporated in the State of Nevada on November 19, 2003. Prior to completing the acquisition of ICP Solar Technologies Inc. ("ICP"), we were in the business of providing indirect financing of installment contracts for automobile purchases and leases. On September 29, 2006 we acquired through our wholly owned subsidiary all of the issued and outstanding shares of ICP. ICP is a company engaged in the manufacturing, distribution and marketing of solar panel based products. In order to focus our resources on developing ICP's technology and business, we no longer intend to proceed with automobile financing business activities.

We have not earned any revenues to date. Following the completion of our acquisition of ICP, our business plan is to focus on the development, manufacturing and marketing of the solar power products developed by ICP. ICP manufactures, markets, and sells solar panel based products to the consumer goods, Original Equipment Manufacturers ("OEM") and integrated building materials markets through its distribution channels in over 100 countries. We intend to increase our addressable markets, boost sales and solidify our brand through strategic partnerships with best practice distribution partners worldwide. Strategic partnerships for both distribution channel and technology are expected to be key drivers of our expansion plans, as well as web-enabled internal processes for real time accuracy and reporting.

RECENT CORPORATE DEVELOPMENTS

Since the completion of our last fiscal quarter ended May 31, 2006, we have experienced the following significant corporate developments:

1. On September 29, 2006, we entered into a share purchase agreement (the "Share Purchase Agreement") among ICP Solar Technologies Inc. ("ICP"), Sass Peress, the Peress Family Trust, the Sass Peress Family Trust, Eastern Liquidity Partners Ltd., Arlene Ades, and Joel Cohen (collectively the "ICP Stockholders") Taras Chebountchak and Orit Stolyar (together the "FC Principals"), and 1260491 Alberta Inc., our wholly owned subsidiary ("Exchangeco"). Under the terms of the Share Purchase Agreement we acquired, through our wholly owned subsidiary Exchangeco, all of the outstanding shares of ICP. Closing of the acquisition took place on September 29, 2006, see "Share Purchase Agreement, below. On the Closing Date our wholly owned subsidiary Exchangeco issued the following Exchangeable Shares which are convertible into shares of FC:

Name of Stockholder Number and Class of Shares
Eastern Liquidity Partners Ltd. 301,497 Class A Exchangeable Shares
The Sass Peress Family Trust 440,529 Class A Exchangeable Shares
The Peress Family Trust 6,626,787 Class A Exchangeable Shares
Sass Peress 11,222,995 Class A Exchangeable Shares
Arlene Ades 879,706 Class A Exchangeable Shares
Joel Cohen 529,486 Class A Exchangeable Shares


2. Also on September 29, 2006, as a condition of closing of the transactions contemplated in the Share Purchase Agreement FC and the FC Principals entered into the Exchange and Voting Trust Agreement (the "Voting Trust Agreement") with the ICP Stockholders and the Trustee on September 29, 2006. Pursuant to the terms of the Voting Trust Agreement the FC Principals agreed to deposit with the Trustee 20,000,000 shares of the common stock of FC held by them (the "Trust Shares") for the purpose of creating a voting trust for the benefit of the ICP Stockholders. As a further condition of closing of the transactions contemplated in the Share Purchase Agreement FC and the FC Principals entered into the Exchangeable Share Support Agreement (the "Support Agreement") with the Trustee and the ICP Stockholders on September 29, 2006, setting out certain additional terms and conditions of the Trust Shares deposited with the Trustee, see ""Exchangeable Share Support Agreement" and "Exchange and Voting Trust Agreement", below.

3. Also on September 29, 2006, in connection with our entry into the Share Purchase Agreement, Taras Chebountchak and Orit Stolyar submitted for cancellation 4,222,750 of the FC shares held by them and transferred 20,000,000 of the FC shares held by them to the Trustee under the terms of the Voting Trust Agreement.

4. On September 1, 2006, we amended and restated our bylaws. The amendment to the bylaws was for the purpose of updating and removing certain outdated and redundant provisions that existed in our prior bylaws. The changes that were made in the amended bylaws encompass among other things the following: (i) expanded provisions with respect to shareholders' meetings including reduction of quorum requirements and amendments to actions by majority stockholder consent; (ii) amendments to corporate governance and committees, and directors' meetings; (iii) expanded provisions with respect to officers and their duties; (iv) changes to provisions with respect to share certificates; (v) the addition of certain dividend provisions; and (vi) addition of notice provisions and other provisions.

5. In June, 2006, our board of directors approved an offering to investors (the "Note Offering") of up to 3,000 units at a price of $1,000 US per unit for gross proceeds of up to $3,000,000 pursuant to Regulation S of the Securities Act of 1933, with each Unit consisting of one 8% Convertible Note in the principal amount of $1,000 US, and one thousand share purchase warrants (the "Warrants"), with each Warrant entitling the holder thereof to purchase one additional share of our common stock for a period of 18 months following the closing of the Note Offering. On July 11, 2006, we completed the issuance of 2,500 units for gross proceeds of $2,500,000 to three subscribers pursuant to Regulation S of the Securities Act of 1933. See "Unregistered Sales Of Equity Securities And Use Of Proceeds", below.

6. In May, 2006, our board of directors approved an offering (the "Offering") of up to 5,000,000 units at $1.00 per unit for gross proceeds of up to $5,000,000, with each unit consisting of one share and one share purchase warrant entitling the holder to purchase one share of our common stock at a price of $1.00 per share exercisable eighteen months from the date of the issuance. On May 15, 2006, we completed the issuance of 1,000,000 units for gross proceeds of $1,000,000 in connection with the Offering to a subscriber pursuant to Regulation S of the Securities Act of 1933. On July 11, 2006, we completed the issuance of 1,500,000 units for gross proceeds of $1,500,000 to four subscribers pursuant to Regulation S of the Securities Act of 1933. See "Unregistered Sales Of Equity Securities And Use Of Proceeds", below.

7. On May 16, 2006, FC entered into a loan agreement (the "Loan Agreement") with ICP pursuant to which FC loaned to ICP US$1,000,000 (the "Loan"). The Loan was evidenced by a promissory note executed by ICP on May 16, 2006. Pursuant to FC's entry into the Loan Agreement with ICP, on May 16, 2006, FC entered into a Share Pledge Agreement with the ICP Stockholders and received a guarantee from the ICP Stockholders pursuant to a Guarantee Agreement dated May 16, 2006. On July 4, 2006 FC entered into an amendment to its loan agreement (the "Amended Loan Agreement") with ICP. Pursuant to the terms of the Amended Loan Agreement FC increased the principal amount of the Loan to $1,500,000. In connection with FC's entry into the Amended Loan Agreement with ICP, the corresponding amendments were made to the terms of the limited course guarantee (the "Guarantee") granted in favor of FC by Sass Peress, Peress Family Trust, Arlene Ades and Joel Cohen on May 16, 2006. The Loan was repaid by ICP on September 29, 2006 following the closing of the acquisition of ICP by FC.

Share Purchase Agreement

On September 29, 2006, we entered into a share purchase agreement (the "Share Purchase Agreement") among ICP Solar Technologies Inc. ("ICP"), Sass Peress, the Peress Family Trust, the Sass Peress Family Trust, Eastern Liquidity Partners Ltd., Arlene Ades, and Joel Cohen (collectively the "ICP Stockholders") Taras Chebountchak and Orit Stolyar (together the "FC Principals"), and 1260491 Alberta Inc., our wholly owned subsidiary ("Exchangeco"). Under the terms of the Share Purchase Agreement we acquired, through our wholly owned subsidiary Exchangeco, all of the outstanding shares of ICP. Closing of the Share Purchase Agreement was subject to the following terms and conditions:

(a) The ICP Stockholders agreed to transfer all of the outstanding shares of ICP held by them to Exchangeco on September 29, 2006 (the "Closing Date");

(b) FC agreed to enter into and cause Exchangeco to enter into on the Closing Date: (i) the Exchange and Voting Trust Agreement with the FC Principals, the ICP Stockholders and Equity Transfer & Trust Company (the "Trustee"), and (ii) the Exchangeable Share Support Agreement with the FC Principals, the ICP Stockholders and the Trustee;

(c) Exchangeco issued 20,000,000 Class A Exchangeable Shares (the "Exchangeable Shares") in the capital stock of Exchangeco to the ICP Stockholders on the Closing Date pursuant to the terms of the Exchange and Voting Trust Agreement and the Exchangeable Share Support Agreement;

(d) FC agreed to reserve for issuance 20,000,000 shares of its common stock for issuance to holders of Exchangeable Shares on the terms and conditions of the Exchangeable Shares;

(e) The FC Principals caused 4,222,750 of the issued and outstanding shares of FC held by them to be cancelled and to transfer 20,000,000 of their shares to the Trustee to be voted and cancelled in accordance with the terms of the Exchange and Voting Trust Agreement and the Exchangeable Share Support Agreement; and

(f) FC completed a private placement of units pursuant to Regulation S of the Securities Act of 1933 for gross proceeds of $5,000,000, on the following terms: (i) FC issued 2,500,000 units, at a price of $1.00 per unit, with each unit consisting of one FC share and one share purchase warrant entitling the holder thereof to purchase an additional FC share for a period of 18 months following the closing of the private placement at a price of $1.00 per share; and (ii) 2,500 units of FC at a price of $1,000 per unit, each unit consisting of one 8% convertible note in the principal amount of $1,000 and one share purchase warrant entitling the holder thereof to purchase an additional 1,000 FC shares for a period of 18 months following the closing of the private placement at a price of $1.00 per share.

As additional consideration for FC and the FC Principals entering into the Share Purchase Agreement, each of the ICP Stockholders agreed that they will not sell in any 90 day period, during the two year period following closing, an amount of shares in excess of the amounts specified in Rule 144(e) promulgated under the Securities Act of 1933. In addition, FC agreed not to file any registration statement on Form S-8 prior to October 1, 2007 without the prior consent of the FC Principals. The parties further agreed that following the Closing Date they will take such steps as may be necessary, including the filing of an information statement pursuant to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 thereunder, to appoint the nominees of ICP to the board of FC. The agreement is governed by the laws of the State of Nevada.

Exchange and Voting Trust Agreement

As a condition of closing of the transactions contemplated in the Share Purchase Agreement FC and the FC Principals entered into the Exchange and Voting Trust Agreement (the "Voting Trust Agreement") with the ICP Stockholders and the Trustee on September 29, 2006. Pursuant to the terms of the Voting Trust Agreement the FC Principals agreed to deposit with the Trustee 20,000,000 shares of the common stock of FC held by them (the "Trust Shares") for the purpose of creating a voting trust for the benefit of the ICP Stockholders. The Voting Trust Agreement included the following terms and conditions:

(a) The Trustee, as the holder of record of the Trust Shares, is entitled to all of the voting rights, including the right to vote in person or by proxy the Trust Shares on any matters, questions,

proposals or propositions whatsoever that may properly come before the stockholders of FC or at a meeting of FC stockholders or in connection with respect to all written consents sought by FC from its stockholders (the "Voting Rights"). The Voting Rights shall be and remain vested in and exercised by the Trustee. As further set out in the Voting Trust Agreement, the Trustee shall exercise the Voting Rights only on the basis of instructions received from the ICP Stockholders entitled to instruct the Trustee as to the voting thereof at the time at which the stockholders meeting is held or a stockholders' consent is sought;

(b) FC agreed to deliver to the ICP Stockholders copies of all proxy materials, information statements and reports that are distributed to FC stockholders;

(c) the FC Principals, the Trustee and the ICP Stockholders are not entitled to receive any dividend payments in respect of the Trust Shares and the FC Principals waived any rights to receive dividends in respect of the Trust Shares;

(d) upon exercise of any exchange rights under the terms of the Exchangeable Shares, redemption of Exchangeable Shares or the occurrence of an insolvency event under the terms of the Exchangeable Shares (the "Exchange Rights") pursuant to which the ICP Stockholders shall receive FC shares, the equivalent number of Voting Rights beneficially held on behalf of each ICP Stockholder by the Trustee are deemed surrendered;

(e) In its capacity as trustee, the Trustee does not have any powers of disposition over the Trust Shares except as expressly required under the Voting Trust Agreement;

(f) At such time as either Exchangeco or FC acquires Exchangeable Shares from an ICP Stockholder it agrees to provide the Trustee with an officer's certificate specifying: (i) the former voting trust beneficiary under the agreement, (ii) the number of Exchangeable Shares acquired; (iii) the form of acquisition and (iv) the date of acquisition, and the Trustee must deliver to FC the equivalent number of Trust Shares for cancellation; and

(g) FC may refuse to issue any shares of its common stock to holders of Exchangeable Shares not made in accordance with the provisions of Regulation S of the Securities Act of 1933 or under an applicable exemption.

The parties further agreed to indemnify the Trustee against all costs and expenses incurred as a result of the Trustee's entry into the Voting Trust Agreement and the transactions contemplated thereby. The agreement terminates on the earliest of the following events: (i) no outstanding Exchangeable Shares are held by the ICP Stockholders; and (ii) each of FC and Exchangeco elects in writing to terminate the agreement in accordance with paragraph III7(e) of Exchangeable share provisions. The agreement is governed by the laws of the Province of Ontario and the laws of Canada applicable therein.

Exchangeable Share Support Agreement

As a condition of closing of the transactions contemplated in the Share Purchase Agreement FC and the FC Principals entered into the Exchangeable Share Support Agreement (the "Support Agreement") with the Trustee and the ICP Stockholders on September 29, 2006. The Support Agreement included the following terms and conditions:

(a) FC agreed: (i) not to declare or pay any dividend on the FC shares of common stock (the "FC Shares") unless Exchangeco shall simultaneously declare or pay, as the case may be, an equivalent dividend on the Exchangeable Shares, (ii) to advise Exchangeco in advance of the declaration by FC of any dividends, (iii) to take all actions necessary to enable Exchangeco to pay and perform its obligations with respect to the Exchangeable Shares and cause the FC Shares to be delivered to the holders of Exchangeable Shares in accordance with the terms of the Exchangeable Shares;

(b) FC agreed to reserve for issuance at all times while Exchangeable Shares remain outstanding the greater of: (i) 20,000,000 FC Shares, or (ii) the number of Exchangeable Shares issuable on exercise of all rights to acquire Exchangeable Shares outstanding from time to time.

(c) FC agreed to deliver FC Shares to any holder of Exchangeable Shares on exercise of any exchange rights under the terms of the Exchangeable Shares, subject to FC refusal to issue any shares of its common stock to holders of Exchangeable Shares not made in accordance with the provisions of Regulation S of the Securities Act of 1933 or under an applicable exemption.

(d) FC agreed to issue to the holders of Exchangeable Shares the economic equivalent of any distribution of FC Shares to the FC stockholders by way of dividend or other distribution, or any options or warrants to the FC stockholders.

(e) FC agreed that it will appoint and cause to be appointed proxy holders with respect to all Exchangeable Shares held by it and its affiliates for the sole purpose of attending each meeting of holders of Exchangeable Shares in order to be counted as part of the quorum for each such meeting. FC further agreed that it will not, and will cause its affiliates not to, exercise any voting rights which may be exercisable by holders of Exchangeable Shares or pursuant to the provisions of the Business Corporations Act (Alberta) (or any successor or other corporate statute by which Exchangeco may in the future be governed) with respect to any Exchangeable Shares held by it or by its affiliates in respect of any matter considered at any meeting of holders of Exchangeable Shares.

The Support Agreement terminates at such time as no Exchangeable Shares are held by any person or entity other than FC or its affiliates. The agreement may only be modified by an agreement in writing between Exchangeco, FC and the holders of Exchangeable Shares in accordance with paragraph III7(e) of Exchangeable Share provisions. The agreement is governed by the laws of the State of Nevada.

ICP SOLAR TECHNOLOGIES INC.

ICP was founded in 1988. Headquartered in Montreal, Canada, ICP manufactures, markets, and sells solar panel based products to the consumer goods, Original Equipment Manufacturers ("OEM") and integrated building materials markets through its distribution channels in over 100 countries. ICP has a 20,000 square foot manufacturing facility in the United Kingdom, which produces amorphous silicon based solar cells that ICP integrates into various products.

ICP operates through its wholly owned subsidiaries: ICP Solar Technologies (UK) Ltd. (Wales) and ICP Global Technologies Inc. (CBCA).

MARKET AND PRODUCTS

ICP operates in the following three main market verticals:

1. Consumer Goods,
2. Original Equipment Manufacturers ("OEM"), and
3. Integrated Building Materials.

The following is a list of ICP's current products on the market or in development:

º SunseiTM 12V Solar Chargers (from 135mAmps to 8Amp sizes, Charge Controllers, Mounting and Expansion Kits, Coleman solar chargers from 100mAmps to 3.6Amps, 4A Charge Controller).

º Cut Solar Cells (from 54mm to 600mm in size VW Solar Charger, Winnebago Solar Charger for RV Roof).

º Solar Slate (in development).

Consumer Goods

The consumer goods market makes up approximately 10% of the solar panel industry. The consumer goods market is comprised of larger retail chain stores and specialty stores. ICP sells its integrated solar energy systems and other solar products under two main brands: SunseiTM its proprietary brand and Coleman®, (for which it is the holder of a license), to the consumer goods market. SunseiTM is positioned as our premium brand and Coleman® is ICP's value brand line.

ICP's products under the Coleman® brand are distributed to large retail chains such as Costco, Wal-Mart, Target, Sam's Club, LeRoy Merlin. ICP believes that consumers in the large retail chain space are cost conscious purchasers who also look for quality products. ICP plans to continue to develop this segment through additional retail chains, but there can be no assurances that ICP will be able to sign on additional retail chains.

ICP sells its SunseiTM brand to specialty retailers in the marine market or battery market such as West Marine and Battery Alliance. ICP's current product line is composed of turn key portable panel systems used for camping, yachting, battery recharging and other portable use.

ICP's online market is composed of its own online shopping website at www.solarchargers.com and other third party online shopping websites. The third party online shopping websites include Amazon.com, Samsclub.com, Costco.com, Westmarine.com and HomeDepot.com.

OEM Market

In 2003, ICP entered into the OEM market, and is presently focusing on the automotive sector and the garden light sector. ICP currently supplies some of the leading solar garden light makers in China. ICP also has entered the automotive sector with a product that is used to allow a car battery to retain its electric charge when the car engine is not turned on for extended periods of time. The product consists of a proprietary small portable charger that is affixed onto the inside of the windshield of a car and plugged into the cigarette lighter or OBD (on-board diagnostic). ICP also supplies Winnebago, the leading worldwide RV manufacturer, with outdoor roof-mounted solar panels.

Integrated Building Material Market

The Integrated Building Material market is the largest segment of the solar panel industry. ICP has a patented roof-tile technology that we hope to finalize development of, over the next six months and subsequently enter the building materials market.

Our new patented technology for a thin film amorphous solar cell can be seamlessly integrated into roofing lines for homes, buildings and other structures. Unlike standard poly-crystalline solar cell based panels that can interfere with the esthetics of a roof line, the thin film integrated tiles seamless integrates into roofing lines. Although the required panel area per kilowatt of electricity generated for amorphous panels is twice that of poly-silicon panels, the overall costs of power generation for amorphous based systems is less than that of poly-silicon based systems. Amorphous solar cells can generate more power on a watt for watt basis than traditional solar cells and utilize only 5% of the raw material used to make traditional poly-silicon cells. We believe that these panels can be sold to both the grid connected and off grid sectors of the market.

Our amorphous solar tiles are expected to be available on the market within the next nine to twelve months, pending final development and certification. However, there can be no assurances that the final development will be successful nor that we will be able to commercialize the amorphous solar tiles at a profit, if at all.

BUSINESS STRATEGY

We plan to expand our client base with large retail chains and specialty retailers in addition to further penetrating our existing clients. We intend to work closely with our sales agents as part of its overall sales growth strategy. We also plans to utilize the Internet for marketing and sales of our products.

As an immediate short-term strategy, we expect to finalize the thin film roof tile technology and to engage in full scale commercialization within the next nine months. Our strategy is to gain market share by positioning the final product through the OEM channel with global installer partners for a variety of applications. At the present time,

we have identified potential marketing partners for the thin film roof tile technology and, although there can be no assurances, we expect strong demand upon commercialization. We intend to continue to market our existing products to the rural areas of developing countries. ICP has a history of installing panels in such countries as Kenya and we expect to expand our presence in the rural sectors in South America, Africa and Asia. We plan to continue to reduce our costs with respect to our products by improving efficiency and innovating new technologies.

SOLAR ENERGY INDUSTRY

The electric power industry is one of the world's largest industries. With the recent deregulation, the advent of economic, environmental and national security issues, and technological advances, new opportunities exist for new entrants into the electric power industry. As electric power has become vital component of the world's economy as a result of the increasing dependence on electricity-reliant technology, reliable electricity has become critical to economic growth.

Traditionally, sources of fuel for generating electricity include coal, natural gas, oil, nuclear power, and renewable resources. However, the following factors have made increasing reliance on the traditional sources unattractive:

(a) Environmental regulations. Recent environmental regulations seek to limit emissions by fossil fuel including international treaties and national and regional air pollution regulations to restrict the release of greenhouse gasses;

(b) Infrastructure reliability. Investment in electricity transmission and distribution infrastructure has not kept pace with increased demand. Expanding the aging infrastructure will be capital intensive and time consuming, and may be restricted by environmental concerns; and

(c) Fossil fuel supply constraints and cost pressures. The supply of fossil fuels is finite. Depletion of fossil fuels may impact prices and infrastructure requirements over this century. Political instability, labor unrest, war and the threat of terrorism in oil producing regions have disrupted oil production, increased the volatility of fuel prices and raised concerns over foreign dependency.

As a result of these challenges, we believe that future demand for electricity will not be met through traditional fossil fuel-based technologies alone. The solar panel industry is a growing market and the use of solar energy has been around for more than 100 years, but only in the past few decades, increased efficiency as a result of new technologies is making solar energy a more viable . . .