UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-K
 
 (Mark
One)
  o
                  ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For the
fiscal year ended
  x
                TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For the
transition period for the fiscal year ended December 31, 2008 (due to the change
in fiscal year)
  Commission File No.333-1308
 
 Confederate
Motors, Inc.
 
  DELAWARE
                            
                            26-4182621(State
      or other jurisdiction of
                              incorporation
      or organization)
                            
                            (IRS
      Employer Identification No.)2222
      5th
      Avenue South
                              Birmingham,
      Alabama
                            
                            35233(Address
      of principal executive offices)
                            
                            (Zip
      Code)
  (205)
324-9888
 (Registrant’s
telephone number, including area code)
  Securities
      registered under Section 12(b) of the Exchange Act:Title
      of each class registered:
                      
                      Name
      of each exchange on which registered:None
                      
                      NoneSecurities
      registered under Section 12(g) of the Exchange Act:
  Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.       
Yes o    No x
  Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.    Yes o     No x
  Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes o No o
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). o Yes o No
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.   o
   
  
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
  Large
      accelerated filer
              o
              
              Accelerated
      filer
              oNon-accelerated
      filer
                (Do
      not check if a smaller reporting company)
              o
              
              Smaller
      reporting company
              x
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o No
x
  Revenues
for year ended December 31, 2008: $2,055,500
  The
aggregate market value of the registrant’s voting common stock held by
non-affiliates as of December 31, 2008 based upon the closing price reported for
such date on the OTC Bulletin Board was US $6,720,140.
 
 As of May
15, 2009, the registrant had 11,050,000 shares of its common stock issued and
outstanding.
 
 Documents Incorporated by
Reference: None.
   
  TABLE
OF CONTENTS
  PAGEPART
      IITEM
      1.
                    
                    Business
                    
                    1ITEM
      1A.
                    
                    Risk
      Factors
                    
                    8ITEM
      2.
                    
                    Properties
                    
                    8ITEM
      3.
                    
                    Legal
      Proceedings
                    
                    8ITEM
      4.
                    
                    Submission
      of Matters to a Vote of Security Holders
                    
                    8PART
      IIITEM
      5.
                    
                    Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                    
                    8ITEM
      6.
                    
                    Selected
      Financial Data
                    
                    10ITEM
      7.
                    
                    Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
                    
                    10ITEM
      7A.
                    
                    Quantitative
      and Qualitative Disclosures About Market Risk
                    
                    13ITEM
      8.
                    
                    Financial
      Statements and Supplementary Data
                    
                    14ITEM
      9.
                    
                    Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                    
                    30ITEM
      9A(T).
                    
                    Controls
      and Procedures
                    
                    30ITEM
      9B.
                    
                    Other
      Information
                    
                    30PART
      IIIITEM
      10.
                    
                    Directors,
      Executive Officers and Corporate Governance
                    
                    31ITEM
      11.
                    
                    Executive
      Compensation
                    
                    33ITEM
      12.
                    
                    Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                    
                    35ITEM
      13.
                    
                    Certain
      Relationships and Related Transactions, and Director
      Independence
                    
                    35ITEM
      14.
                    
                    Principal
      Accounting Fees and Services
                    
                    36PART
      IVITEM
      15.
                    
                    Exhibits,
      Financial Statement Schedules
                    
                    36SIGNATURES
   
 
 PART
I
 
  ITEM
1.      BUSINESS
  Description of
Business
 
 Historical
Development
 
 We were
incorporated in Louisiana in March 2003. Our principal executive offices are
located at 2222 5th Avenue South, Birmingham, Alabama 35233.  French
Peak Resources Inc., which has changed its name to Confederate Motors, Inc., is
a publicly traded shell company incorporated in the State of Delaware in May of
2005, with its common stock quoted on the FINRA OTC Bulletin Board under the
symbol CFED.
 Industry
Overview
 
 The High
Performance Street Motorcycle Industry is a niche market targeting the
ultra-high net worth individuals (UHNWIs), defined as those who reside in
households with a net worth or wealth of $30 million or more. Globally this
market comprised approximately 95,000 households in 2006 and approximately
38,400 in North America as reported in the 11th Annual World Wealth Report from
Merrill Lynch/Capgemini. The market size is comprised of over 4,500 individual
motorcycle enthusiasts throughout the continental US, Western Europe and Middle
East with a net worth in excess of $30 million in liquid assets.
  In the
past, the motorcycle industry has been subject to significant changes in demand
due to changing social and economic conditions affecting discretionary consumer
income, such as employment levels, business conditions, taxation rates, fuel
costs, interest rates and other factors. The factors underlying such changes in
demand are beyond our control, and demand for our products may be adversely
affected by a sustained economic downturn, which could have a further negative
impact on our business, prospects, result of operations or financial
condition.
 
 Our
Motorcycle Business
 
 We are an
uncompromising motorcycle design and craft enterprise. We trace our brand
history to 1991. We produce three distinct model lines, which are unique,
technically and aesthetically.  Each offers value to our intended
client in a different manner.  The vehicle line includes a hot rod
roadster, a hot rod street fighter and a hot rod speedster.  Our
products are sold in the US, Western Europe and the Middle East.  Our
manufacturing operations are based in Birmingham, AL, consisting primarily of
motorcycle assembly.  Vertical integration is very limited, resulting
in a relatively low fixed cost structure.  All motorcycles are
designed and manufactured by hand at our home office located at 2222 5th Avenue
South, Birmingham, Alabama, 35233 under the direction of CEO and founder H.
Matthew Chambers.
 
 Our
Motorcycle Lines
 
 It was
the foundational cornerstone of the Confederate brand that the vehicle line
illuminate and inform the heritage of the American hot rod motorcycle
tradition.  The original Hellcat was inspired by the post WWII fighter
pilot who, upon return from his service to our country, promptly bought an
American V-Twin motorcycle, stripped it to its barest essentials and souped up
the motor to the farthest extent possible without compromising
reliability.  This formula, along with Bauhaus influenced minimalist
avant-guard holistic American true to concept design DNA has consistently been
applied to our vehicle line extension. The big displacement V-Twin American
street motorcycle market is traditionally segmented into three categories as
follows: cruisers, custom and touring.  In furtherance of our American
design initiative, we have sought to redefine the segmentation of American
street machines.  We categorize our overall vehicle line as
roadburners. This term is used to define ultimate street
motorcycling.  We believe the Confederate roadburner offers the
following:  the most explosive low end power (torque) to weight ratio
of any vehicle on the planet; the most full-blooded, sensory overloaded,
accurate, precise, voluminous, integrative feedback of information; the most
overbuilt robust chassis crafted to withstand many lifecycles of the most
grueling hard core use; a primal connection between our client and his machine
that is self enriching in a timeless priceless manner; maximum solidity and
stability (the machines feel like they are carved from solid granite) and
absolute minimum overall weight, packaged as low and forward as possible with
the lightest unsprung weight possible.
  -1-
  Hellcat
Combat
 
 The
Hellcat Combat is presented as a limited edition variant of the second and final
generation of the Hellcat series.  Combat is a co-branding term that
illustrates a higher performance edition of the model so defined. The Combat
features a design specific hand ported and polished head design, special
camshaft grind, returned intake system, which harmoniously result in a 12% gain
in rear wheel horsepower and a 4% increase in rear wheel torque.
 
 Wraith
 
 Conceived
as a counterpoint to the golden era of the 1930’s, which inspired beginning
design work on the Hellcat, we chose the pre-16 era of motoring and the
courageous free spirited nature of the board track racer as our inspirational
starting point. The Wraith is the first production motorcycle to utilize a
chassis design specified for manufacture from structural carbon
fiber.
 
 Fighter
 
 The
Fighter was the featured item in the Neiman-Marcus Christmas fantasy gift
catalogue. The Fighter features a thin wall 5-inch outer diameter titanium
chassis, our triple load path modular architecture, and a new echo of negative
spatial aesthetics through the industry’s largest diameter mating surface
architecture and bearing diameter scale in history.
 
 Motorcycle
Lines in Development
  Renovatio
 
 We
believe Renovatio will reinforce our body of work as true to concept fierce
American avant guard minimal purity. Conceived by the leader of our conceptual
design team, Ed Jacobs, the motorcycle is at once primitive, bohemian, and yet
highly technical.
 
 Other
Business Operations
 
 Motorcycle
Related Product Offerings
 
 As a
contextual component of our factory technical service structure, we offer a
select variety of wearing apparel and other related retail products displaying
the Confederate name.  This has the effect of providing enjoyment for
our customers and displaying our name in the current market.
 
 Our
Business Strategy
  Strengthen
our position in our core market
 
 We intend
to maintain and strengthen our niche position in our target
market.  To this end we will continue to evolve our new modular,
robust light-weight chassis architecture presently deployed on the Wraith and
soon to be released Fighter.  We continuously seek to strengthen our
position in our core market by upgrading our motorcycle lines with evolutionary
technical and design innovations.
 
 In
particular, we have made the following innovations to our motorcycles in the
recent past:
 
 ●       We
have lowered total mass by 20%
 ●       We
have increased structural torsion and bend rigidity by 25%
 ●       We
have shifted mass forward in the chassis by 10%
 ●       We
have introduced engine counter-balance shafts that remove the unpleasant
vibration and allow just the right amount of pulsation to remain
 ●       We
have introduced lighter unsprung weight in the form of lighter carbon fiber
wheel technology; lighter aluminum/ceramic matrix disc brake technology and
carbon fiber suspension technology.
  Expand
our product offering
 
 We will
continue to develop and introduce new products to appeal to the changing needs
of our target client and to bring new clients to the Confederate
brand.  We believe we can expand our traditional market niche by
combining hot rod street credibility, avant-guard American design and world
leading hand craftsmanship.  We believe the Wraith and Fighter are
profound examples of timeless iconic design.  Each is capable of
creating initial shock and awe.  Further in, each is imminently
alluring as the minimalist purity of the organic creative solutions avail
themselves.  We believe that a modular version of each crafted in
aluminum with standard Hellcat derived front suspension as a simple roadster and
speedster will be a direct bullseye for our target audience on or before
2010.  We believe that the aesthetics of our fresh architecture
simplified to a slightly more conventional level marketed four and 1/2 years
after the launch of the Wraith and Fighter respectively, will both solidify and
grow our present target audience and open our Confederate brand to the more than
9.5 million people in the world with a net worth greater than $1
million.
 
 -2-
  Strengthen
our Distribution Network
 
 We believe our US sales deployment strategy will create the most proximate
relationship between our target client and our Confederate team.  A
direct line from our CEO, the factory technical team, the factory parts
specialist and the factory sales group with our target client facilitates the
most straight forward communication.  We believe this honest
communication is at the very core of our authenticity.
 
 We plan
to open a small servicing center, retail environment, and design boutique in Los
Angeles this winter.  This facility will serve as a template for
expansion as demand for our motorcycles increases.  This location will
serve as our West Coast warehouse for media and film public relations product
placement facilitation.
 
 We have
also entered into an agreement with Confederate Motors Middle East to open a
retail center in Dubai the largest city in the United Arab
Emirates.  This center opened on October 22, 2008 and extended our
distribution to UHNWIs in the Middle East.
 
 Strengthen
Our Global Brand
 
 Since our
founding, we have undertaken a coordinated consistent marketing effort to inform
the public of the traditional strengths of the Confederate brand and to increase
the visibility of the Confederate brand.  During the month of October
we launched our most significant media campaign in our
history.  First, on October 6, the Fighter was presented in the
Neiman-Marcus Christmas fantasy gift catalogue and displayed in
Houston.  Two weeks later, a similar event was hosted in New
York.   Our new web and print media campaign will launch in
2009.  Our Confederate Dubai distribution center launched on October
22, 2008.  We appeared on the Today Show.   We will
launch the C3 Hellcat in Winter 2009.
  For calendar year 2010, we will launch the Tough Romantics campaign to showcase
a new simplified version of the Wraith and Fighter as our unique vision of the
perfected American roadster and speedster.
 
 In 2011,
we will launch the Establishment RIP campaign, showcasing
Renovatio.
  We
believe thorough execution of these three campaigns will strengthen the brand
recognition and customer loyalty that we currently enjoy.
 
 Expand
our Motorcycle Related Product Offerings
 
 As a contextual component of our factory technical service structure, we believe
we can best build client loyalty with our target niche through the offering of
select very high-end garage accoutrement.  We will offer tool chests
and tooling, wall art and poster artifacts, signage, motorcycle display stands,
workstands, flooring, lighting, furnishings, refrigeration, high fidelity video
and garage door technology.  This will have the effect of establishing
an inner motoring sanctuary for our client as well as providing a built-in
service center where we can train and instruct our client concerning his
motorcycle while maintaining his motorcycle in the most convenient location for
him.
 
 Increase
our Production Efficiency
 
 Our
benchmark is Stradivari. The trained ear can detect his craftsmanship.
Unfortunately, his structural craft approach died with him. Our challenge is to
uncompromisingly invest in the structure, systems, tooling, technology,
training, plant, engagement, inspiration and faith to create the ultimate
qualitative approach with consistency to assure that continuous maximum
improvement is cultivated and nurtured. We must assure that each individual
allowed to be team member shall fully engage and be thoroughly inspired. Intense
and focused thought must be elicited from each team member to assure each and
every machine is the best it can possibly be. Only a 100 point machine is
acceptable. Only the very finest craft person with the deepest of shared brand
commitment shall be allowed on our team.
 
 We shall
pursue long-term strategic alliances with our vendor base of suppliers, seeking
to develop a co-conspiratorial depth of brand commitment equal to that of our
direct team member base.
 
 -3-
  We shall
rally to the simple shared goal of designing and crafting the finest motorcycles
the world has ever known.
 
 Develop
our Internet Business
 
 As our
current and only web presence, confederate.com encompasses a
wealth of information on our brand and products. Activity on our website has
increased from approximately 14,000 unique visitors per month in 2005 to
approximately 42,500 per month in 2008.  These statistics show a
marked increase in traffic and point to an improvement in quality and relevance
of referrals to our site.  Going forward our plan is to spread and
better organize and classify information about our products and brand by
separating information across a total of three web presences, in order to pull
in more web traffic and widen our sales demographic. The goal of this
diversification is not just intended to increase motorcycle sales but
specifically to create an entirely new revenue stream in apparel, parts, and
accessories sales.
  We anticipate that confederate.com will be a
more streamlined and informative site where the motorcycle consumer will be able
to review specs, details, and product photos. This site will essentially serve
as a “nuts and bolts” information source on Confederate
motorcycles.
 
 We intend
motocg.com will serve
as the sales arm for motorcycle transactions and pre-sale support as well as the
following new ecommerce sales lines:
 
 ●       high
end apparel, including- t-shirt, riding shirt, leather jacket, jeans, belts,
hats
  ●       men’s
accessories, including- hand made leather journal, tool kit, pens, luxury
timepieces
  ●       motorcycle
parts and riding accessories, including- helmets, boots, gloves
  ●       Garage
accoutrement, including motoring art, flooring, tool chest, tooling, singage,
motoring displays, beverage refrigeration, lighting, seating, bedding,
etc.
 
 Our third
domain maninrevolt.com
will be home to all creative content including feature editorials, video and
multimedia, music, and user submitted content.
 
 All three sites will send traffic to and from each other, increasing our overall
web traffic at least three-fold.  It grants the customer the
opportunity to investigate our company and products to the extent and depth they
choose to, as opposed to presenting it all in a single and perhaps too
dauntingly large site.  Specifically, the distinction between confederate.com and motocg.com is that
CONFEDERATE (in the public’s perception) becomes the dedicated MANUFACTURER,
while MOTOCG is strictly sales and ecommerce component.  This opens
the potential product pool up to a myriad of future directions which we will
strategically transition into the ultimate online luxury personal shopper for
men – by selling only the finest hand selected, tasteful products for the most
discerning male consumer.
 
 Motorcycle
Related Products
 
 Simultaneous
with our
’09 man-in-revolt campaign, we will launch the limited production man-in-revolt
t-shirt. We are presently in negotiation sourcing an ‘09 man-in-revolt
motorcycle leather jacket.  For 2010, the Tough Romantics campaign
launch will include additional apparel items.  MotoCG, our garage
accoutrement concept, will offer a full sanctuary design service for our target
audience.  The service is scheduled for the Establishment RIP campaign
launch in October 2011. See –
“Expand our Motorcycle Related Product
Offerings”.
  After
Sales Support and Service
 
 Our structural factory direct to client maintenance and service model is
scheduled for deployment simultaneously with the launch of our establishment RIP
campaign in 2011.
 
 Product
Research and Development
 
 Research
 
 We
believe
the fundamentals of contextual strategic Confederate conceptual vehicle design
DNA is thoroughly known to the brain trust of our team.  The
architecture of each future model going into the foreseeable future is well
established. Refinement of aesthetics, dynamics, modularity, manufacturability,
craft quality, validation, scalability, and repeatability remain for
exploitation through a thoroughly executed developmental process. We believe
that we can continue successful product development by leveraging an experienced
engineering team.
  -4-
  Development
 
 We believe
C3 Hellcat development converge on Wraith-Fighter production in a synergistic
holistic manner with the goal of 3 very unique non-cannibalizing vehicle line
products which each appeal to our target audience in an entirely individualistic
manner.  In early 2011, each line will be modular.  Each
line will utilize the same powertrain, the same triple load path architecture
and the same core mounting geometry.  Confederate design development
utilizes the most current computer aided design (CAD), computer driven milling
machines (CAM) and rapid prototyping technology.  We believe we are
lean and thrifty in the manner in which we execute against our design
strategy. 
 In
conclusion, we believe we have completed research for our American motorcycle
design renaissance, concluding with Renovatio.  Developmental and
validation work is ongoing.  We believe Hellcat, Wraith and Fighter
architecture are timeless for the ages.
 Distribution
 
 We
believe the acutely targeted nature of our market niche is best supported
through a strategic distribution channel which is as proximate to our brand as
possible.  The deepest understanding of our family of clients is
sought through maximization of contact.
 
 We
operate a nuanced web environment which is the foundation of our distribution
effort.  For the North American market, sales are directed to our
sales staff at our factory.  Our Los Angeles CM experience, design and
public relations center will open in 2009. Our New York CM experience, design
and public relations center will open in 2010. These Confederate stores will be
positioned to best illuminate and inform the vision and values of the
Confederate brand, its conviction and authenticity through thoroughly considered
experiential environmental design.  Direct owner’s garage maintenance
and service will be deployed from these branches as well as the factory base of
operations.  An aggressive public relations effort aimed at our target
client in these two key early-adoptive markets will be
deployed.  Maninrevolt.com will launch and be deployed as one of the
leading men’s luxury lifestyle and fashion retail websites.  Execution
of a thorough long-term strategy for integral partnership with all forms of the
film and television industry will be deployed.  A quarterly direct and
email campaign will inform and illuminate our brand evolution to our family of
clients.  A special online owner’s web based information center will
be coherently orchestrated to best bond a long-term relationship with our family
of clients.
 
 Similarly,
we believe this concept of strategic brand centric distribution will best serve
our acutely targeted family of clients and future clients in the all important
European and Middle Eastern marketplace.  These two independent
distribution agents will operate from their respective home bases in Milan and
Dubai.  The garage accoutrement/synergistic home based service model
will be adopted.  Concept store design and apparel sales will be
consistent with the North American LA/NYC model.  Web design and
navigation will be coordinated for world-wide client friendly culturally diverse
access. See –“Strengthen our Distribution
Network”.
 
 Marketing
Activities
 
 Brand
Development
 
 We
believe the Confederate motorcycle brand is perceived to be one of the most
authentic in the motoring industry.  This belief is predicated upon
the absolute consistency of the brand message since its launch in the December
issue of Motorcyclist Magazine in 1993.  The brand exists to
communicate a cerebral and spiritual rebel initiative inspired by fierce
American pure objective individuality through the creation of uncompromised
handcrafted motoring works of art.  From the outset, we have
challenged the establishmentarian view of what honest new world American
industrial and mechanical design can be.  We shall continue along this
chosen path.
 
 Over the
past 5 years, we have developed a new corporate identity and standardized our
corporate logo, lettering and promotional and marketing materials worldwide. At
its foundation, our CM circular identity communicates the influence upon us of
the art nouveau movement convergent with the Bauhaus school.  Our
David breaking out of his box illuminates and informs man’s universal struggle
to discover the who, what and why of his individual existence.
 
 Our 2009
Man in Revolt campaign will formally launch our new logo system representative
of the Man in Revolt.  Because within all of us, the Goliath competes
with David, the Caravaggio image of his own head held by David representing the
collectivist beast will feature as well.  This will echo our
rebellious spirit, flawed nature and our desire to communicate through
exceptional motoring works of art.  The campaign fluently informs our
long-term consistent brand mantra, the art of rebellion. The third distinct
production example of our contextual strategic design, the ti-Fighter, will be
the new product which is formally being launched as the centerpiece of the
annual campaign.  The Fighter solidly grounds the authenticity of our
brand.  It is entirely unique and distinctive from our other model
offerings.  Yet, it is transparently from the same brand
family.  The Fighter is minimalist, pure, fiercely American avant
guard and is clearly influenced by the Bauhaus school.  The new
machine obviously is technically brilliant yet is harmoniously balanced with the
primitive.  The Fighter communicates conceptual truth and
honesty.  It is very impactful.  The Fighter builds on our
already substantial design legacy. We believe that critical journalists and the
design community worldwide, upon first experiencing the ti-Fighter, will
instinctively know such a motorcycle could only come from the brand which gave
the world the C1 and C2 Hellcat and the B120 Wraith.  This is the
hallmark of great contextual strategic design.
  -5-
 
 Our 2009 campaign began with the Fighter presentation in the Neiman Marcus
Christmas gift guide.  The starting line is October 6. Scheduling for
Wraith road testing to appear in the June/July trades in
late March is booked. The Fighter is likewise scheduled for Christmas
release in numerous lifestyle and luxury journals. On October 22, we opened our
first Confederate experience center in Dubai. In the spring/summer of 2009 we
will open experience centers in Los Angeles and Milan. Throughout our 2009
campaign we will aggressively pursue film and television coverage in the Los
Angeles area from the vantage point of our West Coast Confederate
location.  This effort will be deployed with a PR fleet of 4
motorcycles on the West Coast.  The most sophisticated direct mail
campaign in our history will initiate on or around November 15.  A
short promo piece and a nuanced catalogue documenting our brand and our
offerings have been in the design phase for over six months. The campaign will
target the 20,000 inquiries we presently have in our database as well as the
1,500+ visits per day we average on our website.
 A new
position, director of provenance, will be appointed within the next few
months.  This new team member will be charged with building a
documented recorded memorialized storyline around each machine we build, its new
owner, and the position of our enterprise at the time of the creation of the new
machine.  This new team member will also be responsible for mining the
storied history of our enterprise effort for posterity.
 
 In 2010
we
will launch the C3 Hellcat.  This modular motorcycle will be more
simple, scalable, slightly more conventional than our current vehicle line
up.
  In 2011
we will launch the Establishment RIP campaign, with the production
Renovatio.
 
 We
believe that moving into calendar year 2012, our brand will possess iconic
contextual strategic design across a broad fresh line, solid perceived brand
authenticity and substantial pricing power.  We believe these facts
will translate into substantial growth, margins and profitability.
  Media
 
 As we
enjoy widespread media attention through our product design and innovations, we
do not invest substantially in paid advertising. We believe that our motorcycles
are aspirational products that create a significant demand “pull”. The primary
source of publicity comes from articles written about Confederate in a broad
range of motorcycle publications and the luxury goods press. Articles and
broadcast segments featuring Confederate have appeared in Forbes, The New York Times, Fast
Company, The Robb Report, The Men’s Journal, DuPont Registry, GQ, Maxim, Popular
Science, I.D. (which deemed the Wraith the “Worlds Sexiest Motorcycle”)
and have recently been featured in the TNT Network’s series “Lucky Chance”. In
addition, Confederate enthusiasts, including Hollywood celebrities, music stars
and international athletes, add to the overall brand equity and
exposure.
  Production
 
 Confederate
manufacturing specifications are not vertically integrated. Enterprise fixed
cost per production unit is low.  Internal manufacturing capacity is
focused on use of current high technology solutions to facilitate creation of
efficient designs for thrifty and accurate communication to our
co-conspiratorial vendor network of outside manufacturers.  Our
strategic goal is to integrate a limited manufacturing operation with an evolved
proximate co-conspiratorial high value-added network of suppliers.  We
believe simple, thrifty, increased production efficiency will be the result of
our effort.
 
 Assembly
Operations
 
 Our production
facilities are located in Downtown Birmingham, Alabama. 8,000 square feet are
presently being utilized.  Proximate to our facilities numerous low
cost manufacturing space is available for future expansion. Our motorcycle
production is fundamentally an assembly and testing process.  As a
part of the production process, each finished motorcycle is subjected to
rigorous quality checks, including static and dynamic
testing.
  We are
continuously considering the core disciplines and fundamentals which organically
create structurally great craftsmanship. We use a simple preference system
deployable at the moment in which each necessary part and component has
undergone a thorough uncompromising quality test and is staged for final
assembly of a pre-sold motorcycle. A democratically determined autocratically
enforced evolving codified craft sequence is deployed. All objective build data
is electronically and paper filed. A subjective rigorous post build real world
physical test of each motorcycle is performed and recorded. When the motorcycle
is 100% validated it is prepared for shipment to its new owner.
 
 -6-
  In early
2008 we implemented an ambitious initiative to improve our ability to more
exactingly control inventory sequencing. We have introduced a production
software system that allows us to monitor the flow of all production-related
information from initial order to final motorcycle delivery. This system helps
to optimize warehouse inventory volume levels and facilitates the generation of
orders for purchasing materials and components.
  Future
production
of the Fighter, Wraith and Hellcat are strategically planned to maintain
efficiency at relatively low volumes. This is because the new vehicle line will
share common components across the line. To further simplify future production
and reduce costs, we plan to deploy a platform approach to production. Under the
platform approach, a motorcycle is divided into a discrete number of key
components (platforms) that are in turn made up of sub-components. Key suppliers
are made responsible for the platform and managing suppliers thereof. We believe
this will improve our ability to negotiate competitive prices and improve
quality. 
 Supplies
and Suppliers
 
 We
require a wide variety of parts, components, and tools to manufacture our
motorcycles. We currently source our parts and components from a broad range of
suppliers. Our top 5 parts and components suppliers account for approximately
60% of our parts and procurement spending.Our largest suppliers
include: Jim’s (engines); R&R (engines); Blackstone Tek (carbon fiber); Weco
(machining); Metmachex (swingarm); and Brembo (brakes).
 The
majority of our key suppliers have worked with us for over 3 years. Our typical
contract relationship is through rolling purchase orders with 90-day change,
escape provisions. We contract with our vendors on a non-exclusive basis,
allowing us to replace vendors at any time.
 
 Motorcycle
raw materials and components are available from a variety of
sources.  Our policy has been to identify at least two sources of
supply for each component so that we may switch promptly to the alternative
supplier should the need arise.
 
 Competition
 
 The world
custom motorcycle market is highly competitive.  Our principal
competitors are custom bike manufacturers, and, to a more limited extent,
Harley-Davidson of the United States and three European manufacturers (Ducati,
Triumph and BMW). Most of our competitors have substantially greater financial
resources, are more diversified and have significantly higher sales volumes
(allowing for greater economies of scale) and market share than us. Certain of
our competitors may also have shorter product development cycles and may be able
to bring new products to market more quickly than we can.
 
 Insurance
 
 The
nature of our retail business exposes us to a low degree of risk of liability.
Of primary concern are product and design flaws which may expose us to claims by
customers or third parties for product liability, personal injury or property
damage. We manage our exposure through a combination of qualified self-insurance
and risk transfer to insurance companies.
 
 Government
Regulation
 
 None
  Seasonality
 
 The high
performance street motorcycle industry is not generally subject to the normal
ebbs and flows associated with general commerce.  There is a slight
increase in sales corresponding to the end of the year holiday
season.
 
 Facilities
 
 We lease
our headquarters and manufacturing facility in Birmingham, Alabama under a lease
ending 12/31/2008. Our Birmingham facility consists of about 8,000 rentable
square feet. We do not own any real estate. We believe that our leased
facilities are adequate to meet our current needs and that additional facilities
will be available for lease to meet our future needs.
 
 Employees
 
 At
December 31, 2008, we had a total of 13 employees. None of our employees
are represented by a labor union or covered by a collective bargaining
agreement. We believe that we have a good relationship with our
employees.
   -7-
 
 ITEM
1A. RISK FACTORS
 
 Not applicable to smaller reporting
companies.
 
 ITEM
2.    PROPERTIES
 
 We are located at 2222 5th Avenue
South, Birmingham, Alabama 35233.
 
 ITEM
3.    LEGAL PROCEEDINGS
  There are no pending legal proceedings
to which the Company is a party or in which any director, officer or affiliate
of the Company, any owner of record or beneficially of more than 5% of any class
of voting securities of the Company, or security holder is a party adverse to
the Company or has a material interest adverse to the Company. The Company’s
property is not the subject of any pending legal proceedings.
  ITEM
4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
 
 None.
  PART
II
 
 ITEM
5.   MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
 Public Market for Common
Stock
 
 Our
common stock has been quoted on the OTC Bulletin Board under the symbol
CFED.OB.  In December 2008, the symbol changed from FPKR to CFED
pursuant to a name change and reverse split.  The stock does not trade
but is listed on the bulletin board.  Our Common Stock may remain at
or near its ask price and at any given time the trading volume may be relatively
small or non-existent. There can be no assurance that a broader or more active
public trading market for our Common Stock will develop or be sustained, or that
current trading levels will be sustained. If such a market is developed, we
cannot assure you what the market price of our Common Stock will be in the
future. You are encouraged to obtain current market quotations for our Common
Stock and to review carefully the other information contained in this Report or
incorporated by reference into this Report. We have never declared or paid cash
dividends on our capital stock, and do not anticipate paying cash dividends on
our Common Stock in the foreseeable future.
 
 The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the
definition of a “penny stock,” for purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require: (i)
that a broker or dealer approve a person’s account for transactions in penny
stocks and (ii) the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person’s account for
transactions in penny stocks, the broker or dealer must (i) obtain financial
information and investment experience  and objectives of the person;
and (ii) make a reasonable determination that the transactions in penny stocks
are suitable for that person and that person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks. The broker or dealer must also deliver, prior to
any transaction in a penny stock, a disclosure schedule prepared by the
Commission relating to the penny stock market, which, in highlight form, (i)
sets forth the basis on which the broker or dealer made the suitability
determination and (ii) that the broker or dealer received a signed, written
agreement from the investor prior to the transaction. Disclosure also has to be
made about the risks of investing in penny stocks in both public offerings and
in secondary trading, and about commissions payable to both the broker-dealer
and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks.
 
 Holders
 
 As of May
15, 2009, 11,050,000 shares of common stock are issued and
outstanding.  There are approximately 40 shareholders of our common
stock and each shareholder of our common stock is entitled to one vote for each
share on all matters submitted to a stockholder vote.
 
 Holders
of common stock do not have cumulative voting rights.
 
 Therefore,
holders of a majority of the shares of common stock voting for the election of
directors can elect all of the directors. Holders of our common stock
representing a majority of the voting power of our capital stock issued and
outstanding and entitled to vote, represented in person or by proxy, are
necessary to constitute a quorum at any meeting of our stockholders. A vote by
the holders of a majority of our outstanding shares is required to effectuate
certain fundamental corporate changes such as liquidation, merger or an
amendment to our Articles of Incorporation.
  -8-
  Although
there are no provisions in our charter or by-laws that may delay, defer or
prevent a change in control, we are authorized, without shareholder approval, to
issue shares of preferred stock that may contain rights or restrictions that
could have this effect.
 
 Holders
of common stock are entitled to share in all dividends that the board of
directors, in its discretion, declares from legally available funds. In the
event of liquidation, dissolution or winding up, each outstanding share entitles
its holder to participate pro rata in all assets that remain after payment of
liabilities and after providing for each class of stock, if any, having
preference over the common stock. Holders of our common stock have no
pre-emptive rights, no conversion rights and there are no redemption provisions
applicable to our common stock.
  Dividends
 
 Since
inception we have not paid any dividends on our common stock. We currently do
not anticipate paying any cash dividends in the foreseeable future on our common
stock, when issued pursuant to this offering. Although we intend to retain our
earnings, if any, to finance the exploration and growth of our business, our
Board of Directors will have the discretion to declare and pay dividends in the
future.
 
 Payment
of dividends in the future will depend upon our earnings, capital requirements,
and other factors, which our Board of Directors may deem relevant.
 
 Recent Sales of Unregistered
Securities
 
 Since the
closing of the reverse merger, there have been no sales of unregistered
securities.  For a description of the sales of unregistered securities
in connection with the reverse merger, please refer to the Super 8-k filed with
the Securities and Exchange Commission on February 12, 2009.
  Equity Compensation Plan
Information
  The
following table sets forth certain information as of May 15, 2009, with respect
to compensation plans under which our equity securities are authorized for
issuance:
  (a)
              (b)
              (c)_________________
              _________________
              _________________Number
      of securities to be issued
                upon
      exercise of outstanding options,
                warrants
      and rights
              Weighted-average
      exercise price of
                outstanding
      options, warrants and
                rights
              Number
      of securities remaining available for
                future
      issuance under equity compensation
                plans
      (excluding securities reflected
                in
      column (a))Equity
      compensation
              NonePlans
      approved bySecurity
      holdersEquity
      compensation
              NonePlans
      not approvedBy
      security holdersTotal
   -9-
 
 ITEM
6.    SELECTED FIANANCIAL DATA
  Not
applicable because we are a smaller reporting company.
 
 ITEM
7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS.
 
 Forward-Looking
Statements
 
 This
Report contains forward-looking statements. The forward-looking statements are
contained principally in, but not limited to, the sections entitled “Risk
Factors,” “Management’s Discussion and Analysis or Plan of Operation” and
“Business.” Forward-looking statements provide our current expectations or
forecasts of future events. Forward-looking statements include statements about
our expectations, beliefs, plans, objectives, intentions, assumptions and other
statements that are not historical facts. Words or phrases such as “anticipate,”
“believe,” “continue,” “ongoing,” “estimate,” “expect,” “intend,” “may,” “plan,”
“potential,” “predict,” “project” or similar words or phrases, or the negatives
of those words or phrases, may identify forward-looking statements, but the
absence of these words does not necessarily mean that a statement is not
forward-looking.
 
 Forward-looking
statements are subject to known and unknown risks and uncertainties and are
based on potentially inaccurate assumptions that could cause actual results to
differ materially from those expected or implied by the forward-looking
statements. Our actual results could differ materially from those anticipated in
forward-looking statements for many reasons, including the factors described in
the section entitled “Risk Factors” in this Report. Accordingly, you should not
unduly rely on these forward-looking statements, which speak only as of the date
of this Report.
  Unless
required by law, we undertake no obligation to publicly revise any
forward-looking statement to reflect circumstances or events after the date of
this Report or to reflect the occurrence of unanticipated events. You should,
however, review the factors and risks we describe in the reports we will file
from time to time with the SEC after the date of this Report.
 
 Management
cautions that these statements are qualified by their terms and/or important
factors, many of which are outside of our control, and involve a number of
risks, uncertainties and other factors that could cause actual results and
events to differ materially from the statements made, including, but not limited
to, the following:
 
 ●        actual
or anticipated fluctuations in our quarterly and annual operating
results;
 ●       actual
or anticipated product constraints;
 ●       decreased
demand for our products resulting from changes in consumer
preferences;
 ●       product
and services announcements by us or our competitors;
 ●       loss of
any of our key executives;
 ●      regulatory
announcements, proceedings or changes;
 ●       announcements
in the motorcycle community;
 ●       competitive
product developments;
 ●        intellectual
property and legal developments;
 ●       mergers
or strategic alliances in the motorcycle industry;
 ●       any
business combination we may propose or complete;
 ●       any
financing transactions we may propose or complete; or
 ●       broader
industry and market trends unrelated to its performance.
 
 Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance,
or achievements.
 
 Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
 
 Confederate
Motors, Inc. (“Confederate” or “CM) produces premium, heavyweight (651+cc)
motorcycles. CM manufactures three models of motorcycles: Hellcat, Wraith and
Fighter.
 
 Overview
and Outlook
 
 The Company’s
2008 year to date (YTD) net revenue was $ 2,055,500 compared to $1,771,665 for
the year end 2007. The Company’s year end financial performance reflected an
increase in shipments of Confederate motorcycles.  Net loss for the
year ended December 31, 2008 was $317,952 compared to a loss of $631,513 for the
year ended December 31, 2007.
  The
Company believes that the near-term global economic environment will be
challenging for the business and it will continue to make prudent decisions to
manage through this difficult environment. At the same time, the Company is
optimistic about its long-term business prospects and plans to continue to
expand production and global distribution.
   -10-
 
 Cost
of Goods Sold
 
 Cost
of
goods sold was $1,272,358 for the year ended December 31, 2008, compared to
$1,391,452 for the corresponding period last year. Cost of goods sold was lower
due to favorable price reductions from machine parts
suppliers.
  Gross
Profit
 
 Gross
profit was $783,142 for the year of 2008, compared to $380,213 for the same
period last year. The improvement in gross profit for the year of 2008 was a
result of higher average price per unit and lower cost of goods sold per
unit.
 
 Results of Operations for the Year Ended December
31, 2008 Compared to the Year
Ended December 31, 2007
  Year
      endedDecember 31,
                        2008
                      
                      
                      December 31,
                        2007Revenue
      from motorcycles & related products
                      
                      $
                      2,055,500
                      
                      
                      $
                      1,771,665Gross
      Profit
                      
                      $
                      783,142
                      
                      
                      $
                      380,213Operating
      Expense
                      
                      $
                      998,979
                      
                      
                      $
                      998,049Interest
      Income (Expense),
      net
                      
                      $
                      (200,479
                      )
                      
                      $
                      (24,677
                      )Net
      Income (Loss)
                      
                      $
                      (317,952
                      )
                      
                      $
                      (631,513
                      )Earnings
      (Loss) per Share
                      
                      
                      (2,336
                      )
                      
                      
                      (5,306
                      )
  Cautionary
Statements
  The
Company’s ability to meet the targets and expectations noted depends upon, among
other factors, the Company’s ability to (i) continue to realize production
efficiencies and manage operating costs including materials, labor and overhead;
(ii) manage production capacity and production changes; (iii) manage
supply chain issues; (iv) provide products, services and experiences that
are successful in the marketplace; (v) develop and implement sales and
marketing plans that retain existing retail customers and attract new retail
customers in an increasingly competitive marketplace; (vi) continue to
develop the capabilities of its distributor network; (vii) manage changes
and prepare for requirements in legislative and regulatory environments for its
products, services and operations; (viii) manage access to reliable sources
of capital and adjust to fluctuations in the cost of capital;
(ix) anticipate consumer confidence in the economy; (x) retain and
attract talented employees; (xi) detect any issues with our motorcycles or
manufacturing processes to avoid delays in new model launches, increased
warranty costs or litigation;
 
 The
Company’s ability to sell its motorcycles and related products and services and
to meet its financial expectations also depends on the ability of the Company’s
independent distributors to sell its motorcycles and related products and
services to retail customers. The Company depends on the capability and
financial capacity of its independent distributors to develop and implement
effective retail sales plans to create demand for the motorcycles and related
products and services they purchase from the Company.
 
 In
addition, the Company’s independent distributors may experience difficulties in
operating their businesses and selling.
 
 Liquidity
and Capital Resources
 
 The
Company currently generates its cash flow through operations which it believes
will be sufficient to sustain current level operations for at least the next
twelve months.  In addition, in February 2009, in connection with the
reverse merger, we completed a $1.5 million financing and we intend to use the
proceeds to expand our operations and design and develop a new motorcycle for
our line of products.
 
 -11-
  To the
extent we are successful in rolling out our product line and increasing demand
for our motorcycles, we plan to use our working capital and the proceeds of any
financing to finance such expansion.  Our opinion concerning our
liquidity is based on current information. If this information proves to be
inaccurate, or if circumstances change, we may not be able to meet our liquidity
needs.
  Recent
Accounting Pronouncements
  In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements", which
clarifies the principle that fair value should be based on the assumptions that
market participants would use when pricing an asset or liability. It also
defines fair value and established a hierarchy that prioritizes the information
used to develop assumptions. SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007. SFAS No. 157 did not
have a material impact on the Company’s financial position, resultsof operations
or cash flows.
 
 In
February 2007, the FASB issued SFAS 159, "The Fair Value Option for Financial
Assets and Financial Liabilities", which permits entities to choose to measure
many financial instruments and certain other items at fair value. The unrealized
gains and losses on items for which the fair value option has been elected
should be reported in earnings. The decision to elect the fair value option is
determined on an instrument-by-instrument basis, should be applied to an entire
instrument and is irrevocable. Assets and liabilities measured at fair values
pursuant to the fair value option should be reported separately in the balance
sheet from those instruments measured using other measurement attributes. SFAS
No. 159 is effective as of the beginning of the Company's 2008 fiscal year. The
adoption of SFAS No. 159 did not have a material effect on the Company’s
financial position, results of operations or cash flows.
 
 In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements, an amendment of Accounting Research Bulletin
No 51" (SFAS 160). SFAS 160 establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent,
changes in a parent's ownership of a noncontrolling interest, calculation and
disclosure of the consolidated net income attributable to the parent and the
noncontrolling interest, changes in a parent's ownership interest while the
parent retains its controlling financial interest and fair value measurement of
any retained noncontrolling equity investment. SFAS 160 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. Early adoption is prohibited. The
adoption of SFAS No. 160 is not expected to have a material effect on its
financial position, results of operations or cash flows.
 
 In
December 2007, the FASB issued SFAS 141R, "Business Combinations" ("SFAS 141R"),
which replaces FASB SFAS 141, "Business Combinations". This Statement retains
the fundamental requirements in SFAS 141 that the acquisition method of
accounting be used for all business combinations and for an acquirer to be
identified for each business combination. SFAS 141R defines the acquirer as the
entity that obtains control of one or more businesses in the business
combination and establishes the acquisition date as the date that the acquirer
achieves control. SFAS 141R will require an entity to record separately from the
business combination the direct costs, where previously these costs were
included in the total allocated cost of the acquisition. SFAS 141R will require
an entity to recognize the assets acquired, liabilities assumed, and any
non-controlling interest in the acquired at the acquisition date, at their fair
values as of that date. This compares to the cost allocation method previously
required by SFAS No. 141. SFAS 141R will require an entity to recognize as an
asset or liability at fair value for certain contingencies, either contractual
or non-contractual, if certain criteria are met. Finally, SFAS 141R will require
an entity to recognize contingent consideration at the date of acquisition,
based on the fair value at that date. This Statement will be effective for
business combinations completed on or after the first annual reporting period
beginning on or after December 15, 2008. Early adoption of this standard is not
permitted and the standards are to be applied prospectively only. Upon adoption
of this standard, there would be no impact to the Company's results of
operations and financial condition for acquisitions previously completed. The
adoption of SFAS No. 141R is not expected to have a material effect on its
financial position, results of operations or cash flows.
 
 In
January 2008, the SEC released SAB No. 110, which amends SAB No. 107 which
provided a simplified approach for estimating the expected term of a "plain
vanilla" option, which is required for application of the Black-Scholes option
pricing model (and other models) for valuing share options. At the time, the
Staff acknowledged that, for companies choosing not to rely on their own
historical option exercise data (i.e. because such data did not provide a
reasonable basis for estimating the term), information about exercise patterns
with respect to plain vanilla options granted by other companies might not be
available in the near term; accordingly, in SAB No. 107, the Staff permitted use
of a simplified approach for estimating the term of plain vanilla options
granted on or before December 31, 2007. The information concerning exercise
behavior that the Staff contemplated would be available by such date has not
materialized for many companies. Thus, in SAB No. 110, the Staff continues to
allow use of the simplified rule for estimating the expected term of plain
vanilla options until such time as the relevant data becomes widely available.
The Company does not expect its adoption of SAB No. 110 to have a material
impact on its financial position, results of operations or cash
flows.
  In March
2008, the FASB issued SFAS No. 161 "Disclosures about Derivative Instruments and
Hedging Activities-An Amendment of FASB Statement No. 133." ("SFAS 161"). SFAS
161 establishes the disclosure requirements for derivative instruments and for
hedging activities with the intent to provide financial statement users with an
enhanced understanding of the entity's use of derivative instruments, the
accounting of derivative instruments and related hedged items under Statement
133 and its related interpretations, and the effects of these instruments on the
entity's financial position, financial performance, and cash flows. This
statement is effective for financial statements issued for fiscal years
beginning after November 15, 2008. The Company does not expect its adoption of
SFAS 161 to have a material impact on its financial position, results of
operations or cash flows.
  -12-
  SFAS No.
162, The Hierarchy of Generally Accepted Accounting Principles – identifies the
sources of accounting principles and the framework for selecting the principles
to be used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with generally accepted accounting
principles (GAAP) in the United States (the GAAP hierarchy).  This
Statement is effective 60 days following the SEC’s approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Accepted Accounting Principles.  The adoption
of this standard is not expected to have a material impact on the Company’s
financial statements.
  Critical
Accounting Policies
  Our
financial statements and related public financial information are based on the
application of accounting principles generally accepted in the United States
(“GAAP”). GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenues and expense amounts reported. These estimates can
also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition. We
believe our use of estimates and underlying accounting assumptions adhere to
GAAP and are consistently and conservatively applied. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates under different assumptions or conditions. We continue to
monitor significant estimates made during the preparation of our financial
statements.
 
 Our
significant accounting policies are summarized in Note 1 of our financial
statements. While all these significant accounting policies impact our financial
condition and results of operations, we view certain of these policies as
critical. Policies determined to be critical are those policies that have the
most significant impact on our financial statements and require management to
use a greater degree of judgment and estimates. Actual results may differ from
those estimates. Our management believes that given current facts and
circumstances, it is unlikely that applying any other reasonable judgments or
estimate methodologies would cause effect on our consolidated results of
operations, financial position or liquidity for the periods presented in this
report.
  Off-Balance Sheet
Arrangements
 
 We do not have any off-balance sheet
arrangements, financings, or other relationships with unconsolidated entities or
other persons, also known as “special purpose entities” (SPEs).
  ITEM
7A. QUANTITIATIVE AND QUALITATIVE DISCLOUSURES ABOUT MARKET
RISK
 
 Not
applicable because we are a smaller reporting company.
  -13-
  ITEM
8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.
  INDEPENDENT AUDITOR’S
REPORT
 
 To the
Board of Directors and
 Stockholders
of Confederate Motors Company, Inc.
 
 We have
audited the accompanying balance sheet of Confederate Motors Company, Inc. (the
“Company”) as of December 31, 2008, and the related statements of operations,
stockholders’ equity (deficit), and cash flows for the year then ended.
Confederate Motors, Inc.’s management is responsible for these financial
statements. Our responsibility is to express an opinion on these financial
statements based on our audits.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Confederate Motors, Inc. as of
December 31, 2008, and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States of America.
 
 The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As shown in the accompanying financial statements,
the Company has a working capital deficiency of approximately $357,000 as of
December 31, 2008, has had net losses of approximately $318,000 and $631,513 for
the years ended December 31, 2008 and 2007, respectively, and has an accumulated
deficit of approximately $2,773,000 as of December 31, 2008. These factors raise
substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans regarding these matters are described in Note 8. The
financial statements do not include adjustments that might result from the
outcome of this uncertainty.
 
 
 Bartolomei
Pucciarelli, LLC
 Lawrenceville,
NJ
 May 20,
2009
   -14-
  CONFEDERATE
MOTORS COMPANY, INC.
 Balance
Sheets
 December
31, 2008 and 2007
  2008
                            
                            
                            2007AssetsCurrent
      assetsCash
      and cash equivalents
                            
                            $
                            34,963
                            
                            
                            $
                            10,899Inventory
                            
                            
                            398,283
                            
                            
                            
                            260,654Due
      from related party
                            
                            
                            21,100
                            
                            
                            
                            -454,346
                            
                            
                            
                            271,553Property
      and equipment, net
                            
                            
                            97,438
                            
                            
                            
                            150,910Other
      assets
                            
                            
                            -
                            
                            
                            
                            21,000Total
      Assets
                            
                            $
                            551,784
                            
                            
                            $
                            443,463Liabilities
      and Stockholders' DeficitCurrent
      liabilitiesAccounts
      payable
                            
                            $
                            156,397
                            
                            
                            $
                            170,290Accrued
      salaries
                            
                            
                            8,835
                            
                            
                            
                            23,650Deferred
      revenue
                            
                            
                            278,183
                            
                            
                            
                            492,504Warranty
      reserve
                            
                            
                            8,600
                            
                            
                            
                            8,000Other
      accrued expenses
                            
                            
                            5,700
                            
                            
                            
                            67,540Convertible
      Note, net of debt discount of $16,347
                            
                            
                            208,653
                            
                            
                            
                            -Derivative
      Liability
                            
                            
                            76,801
                            
                            
                            
                            -Current
      portion of notes payable
                            
                            
                            45,410
                            
                            
                            
                            45,580Current
      portion of capital leases
                            
                            
                            22,641
                            
                            
                            
                            21,400Total
      Current Liabilities
                            
                            
                            811,220
                            
                            
                            
                            828,964Notes
      payable, less current portion
                            
                            
                            162,788
                            
                            
                            
                            211,131Capital
      leases, less current portion
                            
                            
                            47,474
                            
                            
                            
                            70,114Deferred
      exclusive agency fee
                            
                            
                            240,000
                            
                            
                            
                            -Stockholders'
      deficitClass
      C preferred stock, no par value, $17,500 liquidation
      value,50,000
      shares authorized, 57.1430 shares issued and outstanding
      at
                            
                            
                            -
                            
                            
                            
                            -December
      31, 2008 and 2007, respectivelyClass
      B common stock, no par value, 50,000 shares
    authorized,42.6670
      and 0 shares issued and oustanding at December 31,
    2008and
      2007, respectively
                            
                            
                            -
                            
                            
                            
                            -Class
      A common stock, no par value, 50,000 shares
    authorized,95.7011
      and 132.6736 shares issued and oustanding atDecember
      31, 2008 and 2007, respectively
                            
                            
                            -
                            
                            
                            
                            -Additional
      paid-in capital
                            
                            
                            2,063,000
                            
                            
                            
                            1,838,000Stock
      subscriptions
                            
                            
                            -
                            
                            
                            
                            (50,000
                            )Accumulated
      deficit
                            
                            
                            (2,772,698
                            )
                            
                            
                            (2,454,746
                            )Total
      Stockholders’ Deficit
                            
                            
                            (709,698
                            )
                            
                            
                            (666,746
                            )Total
      Liabilities and Stockholders’ Deficit
                            
                            $
                            551,784
                            
                            
                            $
                            443,463
   -15-
  CONFEDERATE
MOTORS COMPANY, INC.
 Statement
of Operations
 Years
ended December 31, 2008 and 2007
 
 2008
                      
                      
                      2007Sales
                      
                      $
                      2,055,500
                      
                      
                      $
                      1,771,665Cost
      of goods sold
                      
                      
                      (1,272,358
                      )
                      
                      
                      (1,391,452
                      )Gross
      profit
                      
                      
                      783,142
                      
                      
                      
                      380,213Selling,
      general and administrative expenses
                      
                      
                      998,979
                      
                      
                      
                      998,049Loss
      from operations
                      
                      
                      (215,837
                      )
                      
                      
                      (617,836
                      )Other
      income (expense)Gain
      on derivative liability
                      
                      
                      13,219
                      
                      
                      
                      -Other
      income
                      
                      
                      85,145
                      
                      
                      
                      11,000Interest income (expense),
      net
                      
                      
                      (200,479
                      )
                      
                      
                      (24,677
                      )(102,115
                      )
                      
                      
                      (13,677
                      )Net
      loss
                      
                      $
                      (317,952
                      )
                      
                      $
                      (631,513
                      )Net
      loss per common share – basic and diluted
                      
                      $
                      (2,336
                      )
                      
                      $
                      (5,306
                      )Weighted
      average shares outstanding
                      
                      
                      136.0903
                      
                      
                      
                      119.0192
   -16-
  CONFEDERATE
MOTORS COMPANY, INC.
 Statement
of Stockholders’ Deficit
 Years
ended December 31, 2008 and 2007
 
 Preferred
      Stock Shares
                        
                        
                        Common
      Stock Shares
                        
                        
                        Additional
      Paid-In Capital
                        
                        
                        Stock
      Subscriptions
                        
                        
                        Accumulated
      Deficit
                        
                        
                        Total
      Stockholders' DeficitBalance
      at December 31, 2005
                        
                        
                        57.1430
                        
                        
                        
                        133.3330
                        
                        
                        $
                        1,396,000
                        
                        
                        $
                        -
                        
                        
                        $
                        (1,109,661
                        )
                        
                        $
                        286,339Net
      loss
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (713,572
                        )
                        
                        
                        (713,572
                        )Balance
      at December 31, 2006
                        
                        
                        57.1430
                        
                        
                        
                        133.3330
                        
                        
                        
                        1,396,000
                        
                        
                        
                        -
                        
                        
                        
                        (1,823,233
                        )
                        
                        
                        (427,233
                        )Issuance
      of common stock
                        
                        
                        
                        
                        
                        
                        34.4656
                        
                        
                        
                        560,000
                        
                        
                        
                        (50,000
                        )
                        
                        
                        
                        
                        
                        
                        510,000Redemption
      of common stock
                        
                        
                        
                        
                        
                        
                        (35.1250
                        )
                        
                        
                        (118,000
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (118,000
                        )-Net
      loss
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (631,513
                        )
                        
                        
                        (631,513
                        )Balance
      at December 31, 2007
                        
                        
                        57.1430
                        
                        
                        
                        132.6736
                        
                        
                        
                        1,838,000
                        
                        
                        
                        (50,000
                        )
                        
                        
                        (2,454,746
                        )
                        
                        
                        (666,746
                        )Issuance
      of common stock
                        
                        
                        
                        
                        
                        
                        5.6945
                        
                        
                        
                        150,000
                        
                        
                        
                        50,000
                        
                        
                        
                        
                        
                        
                        
                        200,000Convertible
      Debt - Beneficial Conversion
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        75,000
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        75,000Net
      loss
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (317,952
                        )
                        
                        
                        (317,952
                        )Balance
      at December 31, 2008
                        
                        
                        57,1430
                        
                        
                        
                        138,3681
                        
                        
                        $
                        2,063,000
                        
                        
                        $
                        -
                        
                        
                        $
                        (2,772,698
                        )
                        
                        $
                        (709,698
                        )
   -17-
   CONFEDERATE
MOTORS COMPANY, INC.
 Statement
of Cash Flows
 Years
ended December 31, 2008 and 2007
 
  2008
                          
                          
                          2007Operating
      activitiesNet
      Loss
                          
                          $
                          (317,952
                          )
                          
                          $
                          (631,513
                          )Adjustments
      to reconcile net loss to netcash
      used by operating activitiesDepreciation
                          
                          
                          53,472
                          
                          
                          
                          39,033Accretion
      of debt discount
                          
                          
                          173,673
                          
                          
                          
                          -Gain
      on derivative liability
                          
                          
                          (13,219
                          )Change
      in operating assets and liabilitiesInventory
                          
                          
                          (137,629
                          )
                          
                          
                          (151,592
                          )Due
      from related parties
                          
                          
                          (21,100
                          )
                          
                          
                          -Other
      assets
                          
                          
                          21,000
                          
                          
                          
                          -Accounts
      payable
                          
                          
                          (13,893
                          )
                          
                          
                          109,743Accrued
      salaries
                          
                          
                          (14,815
                          )
                          
                          
                          23,650Other
      accrued expenses
                          
                          
                          (61,840
                          )
                          
                          
                          51,861Deferred
      revenue
                          
                          
                          (214,321
                          )
                          
                          
                          168,135Deferred
      exclusive agency fee
                          
                          
                          240,000
                          
                          
                          
                          -Warranty
      reserve
                          
                          
                          600
                          
                          
                          
                          (1,350
                          )Net
      cash used by operating activities
                          
                          
                          (306,024
                          )
                          
                          
                          (392,033
                          )Investing
      activitiesPurchases
      of property and equipment
                          
                          
                          -
                          
                          
                          
                          (5,604
                          )Net
      cash used by investing activities
                          
                          
                          -
                          
                          
                          
                          (5,604
                          )Financing
      activitiesRepayment
      of notes payable
                          
                          
                          (48,513
                          )
                          
                          
                          (27,127
                          )Repayment
      of capital leases
                          
                          
                          (21,399
                          )
                          
                          
                          (17,290
                          )Net
      proceeds from convertible debt
                          
                          
                          200,000
                          
                          
                          
                          -Proceeds
      from issuance of stock
                          
                          
                          200,000
                          
                          
                          
                          510,000Redemptions
      of stock
                          
                          
                          -
                          
                          
                          
                          (118,000
                          )-Net
      cash provided by financing activities
                          
                          
                          330,088
                          
                          
                          
                          347,583Net
      increase (decrease) in cash and cash equivalents
                          
                          
                          24,064
                          
                          
                          
                          (50,054
                          )Cash
      and cash equivalents at the beginning of year
                          
                          
                          10,899
                          
                          
                          
                          60,953Cash
      and cash equivalents at end of year
                          
                          $
                          34,963
                          
                          
                          $
                          10,899Supplemental  disclosures
      of cash flow information:Cash
      paid during the year for:Interest
      expense
                          
                          $
                          26,806
                          
                          
                          $
                          23,665Income
      tax
                          
                          $
                          -
                          
                          
                          $
                          -
   -18-
  Confederate
Motors Company, Inc.
 Notes to
Financial Statements
 December
31, 2008 and 2007
 
 Note
1 – Summary of Significant Accounting Policies
 
 Nature
of Business
 
 Confederate
Motors Company, Inc. (the “Company”) is one of the world’s leading manufacturers
of handcrafted street motorcycles of superior design, structure, performance and
quality. The Company currently offers three models of motorcycles: the F131
Hellcat Combat, B120 Wraith and C120 Fighter. The Brand was founded in 1991. The
Company has been operational since 2003 and was formerly located in New Orleans,
Louisiana. The Company moved in December 2005 and is now headquartered in
Birmingham, Alabama.
 
 Use
of Estimates
 
 The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States 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 reported amounts of revenues and expenses during the reporting
period. Management believes that the estimates utilized in preparing the
Company’s financial statement are reasonable and prudent; however, actual
results could differ from those estimates.
 
 Cash
and Cash Equivalents
 
 The
Company considers all liquid investments with an original maturity of three
months or less to be cash equivalents. The Company maintains cash depository
accounts which at times, may exceed federally insured limits. The risk is
managed by maintaining all deposits in high quality financial institutions.
These amounts represent actual account balances held by the financial
institution at the end of the period, and unlike the balance reported in the
financial statements, the account balances do not reflect timing delays inherent
in reconciling items such as outstanding checks and deposits in
transit.
 
 Inventory
 
 Inventory
is valued at the lower of cost or market using the first-in, first-out (FIFO)
method
 
 Inventory
is comprised of the following at December 31:
  2008
                                  
                                  
                                  2007Parts
                                  
                                  $
                                  315,083
                                  
                                  
                                  $
                                  176,454Work
      in process
                                  
                                  
                                  13,200
                                  
                                  
                                  
                                  13,200Motorcycle
      finished goods
                                  
                                  
                                  70,000
                                  
                                  
                                  
                                  71,000Total
      Inventory
                                  
                                  $
                                  398,283
                                  
                                  
                                  $
                                  260,654
 
 Property
and Equipment
 
 Property
and equipment are carried at cost less accumulated depreciation and includes
expenditures that substantially increase the useful lives of existing property
and equipment. Maintenance, repairs, and minor renovations are charged to
expense as incurred. Upon sale or retirement of property and equipment, the cost
and related accumulated depreciation are eliminated from the respective account
and the resulting gain or loss is included in the results of operations. The
Company provides for depreciation of property and equipment using the
straight-line method over the estimated useful lives or the term of the lease,
as appropriate. The estimated useful lives are as follows: vehicles, 5 years;
furniture and fixtures, 3 to 5 years; equipment, 3 to 5 years.
 -19-
  Revenue
Recognition
 
 Revenues
from the sale of motorcycles and equipment are recognized when products are
delivered or shipped. Advance payments from customers are typically required to
secure the order and are shown as deferred revenue in the accompanying balance
sheets. The Company recognizes revenue from repair services in the same month
the service is provided.
 
 Income
Taxes
 
 The
Company provides for income taxes currently due and for the expected future tax
effects of temporary differences between book and tax bases of assets and
liabilities. Deferred income taxes are recognized for the tax consequences in
future years of differences between the tax bases of assets and liabilities and
their financial reporting amounts at each year-end, based on enacted tax laws
and statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce net deferred tax assets to the amount expected to be
realized.
 
 Advertising
Costs
 
 Advertising
costs are expensed as incurred and are included in selling, general and
administrative expenses in the accompanying statements of operations.
Advertising costs totaled $3,525 and $76,871 for the years ended December 31,
2008 and 2007, respectively.
 
 Research
and Development Costs
 
 Research
and development costs are expensed as incurred and are included in selling,
general and administrative expenses in the accompanying statements of
operations. Research and development costs totaled $139,924 and $161,052 for the
years ended December 31, 2008 and December 31, 2007,
respectively.
 Shipping
and Handling Costs
 
 The
Company records shipping and handling costs billed to the customer and shipping
and handling expenses in cost of sales.
 
 Fair
Value Measurements
 
 Effective
January 1, 2008, we adopted SFAS 157, Fair Value Measurements (SFAS 157). SFAS
157 clarifies the definition of fair value, prescribes methods for measuring
fair value, and establishes a fair value hierarchy to classify the inputs used
in measuring fair value as follows:
 
 -20-
  Level 1 -
Inputs are unadjusted quoted prices in active markets for identical assets or
liabilities available at the measurement date.
 
 Level 2 -
Inputs are unadjusted quoted prices for similar assets and liabilities in active
markets, quoted prices for identical or similar assets and liabilities in
markets that are not active, inputs other then quoted prices that are
observable, and inputs derived from or corroborated by observable market
data.
 
 Level 3 -
Inputs are unobservable inputs which reflect the reporting entity’s own
assumptions on what assumptions the market participants would use in pricing the
asset or liability based on the best available information.
 
 The
adoption of SFAS No. 157 did not have a material impact on our fair value
measurements.
 
 The
following tables present our assets and liabilities that are measured at fair
value on a recurring basis and are categorized using the fair value hierarchy.
The fair value hierarchy has three levels based on the reliability of the inputs
used to determine fair value.
  Fair
      Value Measurements at Reporting Date UsingDescription
                                                          
                                                          December
      31, 2008
                                                          
                                                          Quoted
      Prices in Active Markets for Identical Assets (Level 1)
                                                          
                                                          Significant
      Other Observable Inputs (Level 2)
                                                          
                                                          Significant
      Unobservable Inputs (Level 3)Liabilities
      - Conversion Options
                                                          
                                                          $
                                                          76,801
                                                          
                                                          $
                                                          —
                                                          
                                                          $
                                                          —
                                                          
                                                          $
                                                          76,801Total
      Liabilities
                                                          
                                                          $
                                                          76,801
                                                          
                                                          $
                                                          —
                                                          
                                                          $
                                                          —
                                                          
                                                          $
                                                          76,801
 
 Liabilities
measured at fair value on a recurring basis using significant unobservable Level
3 inputs consist of conversion options embedded within convertible debt. The
Level 3 inputs for the Company's disclosure of the fair value of it’s conversion
options are disclosed in Note 4 “Embedded Derivatives.”
 
 Convertible
Instruments
 
 The
Company evaluates and accounts for conversion options embedded in its
convertible instruments in accordance with SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities” (“SFAS 133”) and EITF 00-19,
“Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company’s Own Stock” (“EITF 00-19”).
 
 -21-
  SFAS 133
generally provides three criteria that, if met, require companies to bifurcate
conversion options from their host instruments and account for them as free
standing derivative financial instruments in accordance with EITF 00-19. These
three criteria include circumstances in which (a) the economic characteristics
and risks of the embedded derivative instrument are not clearly and closely
related to the economic characteristics and risks of the host contract, (b) the
hybrid instrument that embodies both the embedded derivative instrument and the
host contract is not remeasured at fair value under otherwise applicable
generally accepted accounting principles with changes in fair value reported in
earnings as they occur and (c) a separate instrument with the same terms as the
embedded derivative instrument would be considered a derivative instrument
subject to the requirements of SFAS 133. SFAS 133 and EITF 00-19 also provide an
exception to this rule when the host instrument is deemed to be conventional (as
that term is described in the implementation guidance to SFAS 133 and further
clarified in EITF 05-2, “The Meaning of “Conventional Convertible Debt
Instrument” in Issue No. 00-19”).
 
 In
addition to considerations under SFAS 133, the Company accounts for conversion
preferences embedded within convertible instruments in accordance with the
provisions of EITF 98-5, “Accounting for Convertible Securities with Beneficial
Conversion Features” (“EITF 98-5”) and EITF 00-27, “Application of EITF 98-5 to
Certain Convertible Instruments” (“EITF 00-27”). Accordingly, when necessary,
the Company records discounts to convertible notes for the intrinsic value of
conversion options embedded in debt instruments based upon the differences
between the fair value of the underlying common stock at the commitment date of
the note transaction and the effective conversion price embedded in the
note.  Debt discounts under these arrangements are amortized over the
term of the related debt.
 
 The
Company evaluated the conversion options embedded in its convertible instruments
during each of the reporting periods presented.
 
 NOTE
2 – PROPERTY AND EQUIPMENT
 
 At
December 31, property and equipment consisted of the following:
  2008
                                        
                                        
                                        2007Vehicles
                                        
                                        $
                                        36,628
                                        
                                        
                                        $
                                        36,628Furniture
      and fixtures
                                        
                                        
                                        11,734
                                        
                                        
                                        
                                        11,734Equipment
                                        
                                        
                                        119,068
                                        
                                        
                                        
                                        119,068Leasehold
      improvements
                                        
                                        
                                        39,886
                                        
                                        
                                        
                                        39,886207,316
                                        
                                        
                                        
                                        207,316Less
      accumulated depreciation
                                        
                                        
                                        109,878
                                        
                                        
                                        
                                        56,406$
                                        97,438
                                        
                                        
                                        $
                                        150,910
  Depreciation
expense charged to income for the years ended December 31, 2008 and 2007
amounted to $53,472 and $39,033,
respectively.
  NOTE
3 – NOTES PAYABLE
 
 At
December 31, notes payable consisted of the following:
 
 2008
                      
                      
                      2007Government
      agency note payable due August 12, 2013,prime
      plus 2.75 % rate of interest (7.75% and 10.50% atDecember
      31, 2008 and 2007, respectively), principaland
      interest payable monthly, unsecured
                      
                      $
                      94,370
                      
                      
                      $
                      112,208Bank
      note payable due August 18, 2009, prime rate of interestwith
      an 8.25% minimum rate (8.25% at December 31, 2008and
      2007), principal and interest payable monthly, secured byall
      assets of the Company
                      
                      
                      4,465
                      
                      
                      
                      14,656Bank
      note payable due July 18, 2012, 7.95% fixed rate ofinterest,
      principal and interest payable monthly, securedby
      Company vehicle
                      
                      
                      27,675
                      
                      
                      
                      34,097Note
      payable due October 15, 2008, 7.00% fixedrate
      of interest, principal and interest payable monthly,Unsecured
                      
                      
                      81,688
                      
                      
                      
                      95,750208,198
                      
                      
                      
                      256,711Less
      current portion
                      
                      
                      45,410
                      
                      
                      
                      45,580$
                      162,788
                      
                      
                      $
                      211,131
  -22-
  At
December 31, 2008, principal maturities of notes payable are as
follows:
 
 2009
                        
                        $
                        45,4102010
                        
                        
                        42,5832011
                        
                        
                        46,1452012
                        
                        
                        46,2492013
                        
                        
                        27,811$
                        208,198
 
 5% Senior Secured
Convertible Debenture
 
 On July
15, 2008, the Company issued an unsecured convertible debenture (the
“Debenture”) in the aggregate principal amount of $225,000 to an accredited
investor (the “Note Holder”).  The Debenture is due and payable on the
earlier to occur of (i) six months after the date of issuance, and (ii) when
declared due and payable by the Note Holder upon the occurrence of an Event of
Default (as defined in the Debentures). Interest on the Debenture is computed on
a 360 day calendar year at 5% per annum and is payable upon
maturity.  Upon default, the interest rate on the Debenture would
increase to 18% per annum.  The Company does not have the option to
prepay the Debenture. The terms of the Debenture also include a conversion
option such that provided that the principle, interest and any penalties payable
under the terms of the Debenture could be converted into the Company's common
stock at conversion rate equal to 75% of the purchase price of a PIPE financing
to be negotiated and then completed upon the closing of a transaction in which
the Company merges with another company which is listed and trades on the FINRA
OTCBB stock exchange in the United States.
 
 At the
time the Debenture was issued, the Company did not have the authorized share
capital available to satisfy the optional conversion rights described above.
Accordingly, the Company determined, in accordance with EITF 00-19, paragraphs
19 through 23, that it would be appropriate to assume that cash settlement of
the conversion option was in the control of the note holders and bifurcate the
conversion option from the notes to account for them as a free standing
derivative. The fair value of the conversion option was calculated using the
Black-Scholes option pricing model with the assumptions as outlined in Footnote
4. The aggregate commitment date fair value of the conversion option amounted to
$90,020.
 
 -23-
  Interest
expense related to the Debenture amounted to $7,688 for the year ended December
31, 2008.
 
 NOTE
4 – EMBEDDED DERIVATIVES
 
 The fair
market value of embedded derivative liabilities consisted of the
following:
  December
      31, 2008
                                
                                
                                December 31,2007Derivatives
      embedded within convertible debenture dated July 15, 008, initial
      value
                                
                                $
                                90,020
                                
                                
                                $
                                —Cumulative
      adjustments to record fair market value of embedded
    derivative
                                
                                
                                (13,219
                                )
                                
                                
                                —Total
                                
                                $
                                76,801
                                
                                
                                $
                                —
 
 The
Company recorded a gain on the change in the fair market value of this
derivative liability in the amount of $13,219 for the year ended December 31,
2008. Attributes used to determine the fair value of the embedded derivatives as
of December 31, 2008 and as of July 15, 2008 (the initial value) are provided
below.
  December
      31,
                          
                          
                          July
      15,2008
                          
                          
                          2008Valuation AssumptionsStock
      price
                          
                          $
                          1.50
                          
                          
                          $
                          1.50Conversion
      price
                          
                          $
                          1.125
                          
                          
                          $
                          1.125Number
      of underlying shares to be issued upon conversion
                          
                          
                          204,694
                          
                          
                          
                          200,000Expected
      term (in years)
                          
                          
                          .04
                          
                          
                          
                          0.5Expected
      volatility
                          
                          
                          54.71
                          %
                          
                          
                          54.71
                          %Risk-free
      interest rate
                          
                          
                          0.11
                          %
                          
                          
                          2.30
                          %
 
 NOTE
5 – CAPITAL LEASES
 
 The
capitalized cost and accumulated depreciation of the computers and equipment
totaled $108,804 and $42,072, respectively at December 31, 2008
 
 At
December 31, 2008, future minimum payments due under the capital lease
agreements are as follows:
 
 2009
                    
                    $
                    29,1932010
                    
                    
                    29,1932011
                    
                    
                    19,4492012
                    
                    
                    3,971Future
      minimum lease payments
                    
                    
                    81,806Less
      amount representing interest
                    
                    
                    11,691Present
      value of minimum lease payments
                    
                    
                    70,115Less
      current portion
                    
                    
                    22,641Long-term
      capital leases
                    
                    $
                    47,474
  
 -24-
 
 NOTE
6 – INCOME TAXES
 
 The
Company’s deferred tax assets are primarily related to net operating loss (NOL)
carryforwards.  Realization of deferred tax assets associated with NOL
carryforwards and reversal of other temporary differences is dependent upon
generating sufficient taxable income prior to expiration of the NOL
carryforwards. The Company’s net operating loss carryforwards totaled
approximately $2.5 million and $2.3 million at December 31, 2008 and 2007,
respectively and will expire on various dates between 2024 and 2028. As of
December 31, 2008 and 2007, the Company had recorded 100% valuation allowance
against the deferred tax assets. This represents an increase of approximately
$68,400 in the valuation allowance from December 31, 2007 to December 31,
2008.  Management believes that a valuation allowance is appropriate
due to the Company’s history of operating losses and the uncertainty of long
term estimates of future taxable income. As such, the Company has recorded no
income tax benefit in the accompanying financial statements.
 
 NOTE
7 – RELATED PARTY TRANSACTIONS
 
 During
2008, the Company paid advances to Matthew Chambers in the amount of
$21,100.  Mr. Chambers serves as the Chief Executive Officer of the
Company.
  NOTE
8 – COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES:
 
 Going
Concern
  The
Company’s financial statements have been prepared on a going concern basis,
which contemplates continuity of operations, realization of assets and
liquidation of liabilities in the normal course of business. The Company had
cumulative losses of $(2,772,698) as of December 31, 2008 and negative cash
flows from operations during the year ended December 31, 2008 of $(306,024). The
ability of the Company to operate as a going concern depends upon its ability to
obtain outside sources of working capital. The Company has negative working
capital in that it’s Current Liabilities are in excess of it’s Current Assets by
$356,874. Management is aware of these requirements and is undertaking specific
measures to address these liquidity concerns. Notwithstanding the foregoing,
there can be no assurance that the Company will be successful in obtaining
financing, that it will have sufficient funds to execute its business plan or
that it will generate positive operating results. The financial statements do
not include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going
concern
 
 Operating
Lease
 
 The
Company leases facility space under a non-cancelable operating lease
obligation.
 
 Rent
expense paid under the operating lease obligation totaled $53,354 and $53,515
for the years ended December 31, 2008 and 2007, respectively
 
 At
December 31, 2008, future minimum payments due under the operating lease
agreement is as follows:
 
 For
      the year ended December 31, 2009
                    $45,521For
      the year ended December 31, 2010
                    $55,131For
      the year ended December 31, 2011
                    $56,631
 NOTE
9 – STOCKHOLDERS’
EQUITY
  During
2008, the Company issued 5.6945 shares of the Company’s common stock for
$150,000. Additionally, the Company received $50,000 for shares that were issued
during 2007.
 The
Company’s stock is divided into three classes. Class A stock has full voting
rights together with all other rights held by shareholders pursuant to Louisiana
Business Corporation Law. Class B and Class C stock have the same rights as
Class A stock, except that holders of Class B and Class C stock are not entitled
to vote.
 
 -25-
  Holders
of Class C stock are entitled to receive dividends when and as declared by the
Board of Directors of the Company and to share ratably in the assets of the
Company available for distribution in the event of a liquidation, dissolution,
or winding up of the Company prior to any holders of Class A and Class B stock
of the Company, until the holders of Class C stock have received a return of the
total of the original purchase price paid to the Company. The original purchase
price paid to the Company for Class C stock totaled $1,000,000 at December 31,
2007 and 2008.
 
 The
issuance of authorized but unissued shares of any class by the Company that
result in a dilution of more than 33.333% to the holders of Class A stock will
include an issuance to the holders of Class C stock in an amount so as not to
cause a dilution of the equity ownership by more than 10%.
 
 NOTE
10 – SUPPLEMENTAL CASH FLOW DISCLOSURES
 
 Non-cash
investing and financing transactions for the year ended December 31, 2008
included the following:
  Additional
Paid In Capital increased $75,000 due to the beneficial conversion feature
identified with the issuance of a convertible debenture (See Notes 1 &
5)
 
 NOTE
11 – RECENT ACCOUNTING PRONOUNCEMENTS
 
 In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which
clarifies the principle that fair value should be based on the assumptions that
market participants would use when pricing an asset or liability.  It
also defines fair value and established a hierarchy that prioritizes the
information used to develop assumptions.  SFAS No. 157 is effective
for financial statements issued for fiscal years beginning after November 15,
2007.  The adoption of SFAS No. 157 did not have a material effect on
its financial position, results of operations or cash flows.
 
 On
February 15, 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities — Including an Amendment of FASB
Statement No. 115” (“SFAS 159”). This standard permits an entity to measure
financial instruments and certain other items at estimated fair value. Most of
the provisions of SFAS No. 159 are elective; however, the amendment to FASB No.
115, “Accounting for Certain Investments in Debt and Equity Securities,” applies
to all entities that own trading and available-for-sale securities. The fair
value option created by SFAS 159 permits an entity to measure eligible items at
fair value as of specified election dates. The fair value option (a) may
generally be applied instrument by instrument, (b) is irrevocable unless a new
election date occurs, and (c) must be applied to the entire instrument and not
to only a portion of the instrument. SFAS 159 is effective as of the beginning
of the first fiscal year that begins after November 15, 2007. Early adoption is
permitted as of the beginning of the previous fiscal year provided that the
entity (i) makes that choice in the first 120 days of that year, (ii) has not
yet issued financial statements for any interim period of such year, and (iii)
elects to apply the provisions of FASB 157. Management is currently evaluating
the impact of SFAS 159, if any, on the Company’s financial statements. The
adoption of SFAS No. 159 did not have a material effect on its financial
position, results of operations or cash flows.
 
 -26-
  In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of Accounting Research Bulletin
No 51” (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent,
changes in a parent’s ownership of a noncontrolling interest, calculation and
disclosure of the consolidated net income attributable to the parent and the
noncontrolling interest, changes in a parent’s ownership interest while the
parent retains its controlling financial interest and fair value measurement of
any retained noncontrolling equity investment. SFAS 160 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. Early adoption is prohibited. The
adoption of SFAS No. 160 is not expected to have a material effect on the
Company’s financial position, results of operations or cash flows.
 
 In
December 2007, the FASB issued SFAS 141R, “Business Combinations” (“SFAS 141R”),
which replaces FASB SFAS 141, “Business Combinations”.  This Statement
retains the fundamental requirements in SFAS 141 that the acquisition method of
accounting be used for all business combinations and for an acquirer to be
identified for each business combination. SFAS 141R defines the acquirer as the
entity that obtains control of one or more businesses in the business
combination and establishes the acquisition date as the date that the acquirer
achieves control.  SFAS 141R will require an entity to record
separately from the business combination the direct costs, where previously
these costs were included in the total allocated cost of the
acquisition.  SFAS 141R will require an entity to recognize the assets
acquired, liabilities assumed, and any non-controlling interest in the acquired
at the acquisition date, at their fair values as of that date.  This
compares to the cost allocation method previously required by SFAS No.
141.  SFAS 141R will require an entity to recognize as an asset or
liability at fair value for certain contingencies, either contractual or
non-contractual, if certain criteria are met.  Finally, SFAS 141R will
require an entity to recognize contingent consideration at the date of
acquisition, based on the fair value at that date.  This Statement
will be effective for business combinations completed on or after the first
annual reporting period beginning on or after December 15,
2008.  Early adoption of this standard is not permitted and the
standards are to be applied prospectively only.  Upon adoption of this
standard, there would be no impact to the Company’s results of operations and
financial condition for acquisitions previously completed.  The
adoption of SFAS No. 141R is not expected to have a material effect on the
Company’s financial position, results of operations or cash flows.
 
 In
January 2008, the SEC released SAB No. 110, which amends SAB No. 107 which
provided a simplified approach for estimating the expected term of a “plain
vanilla” option, which is required for application of the Black-Scholes option
pricing model (and other models) for valuing share options. At the time, the
Staff acknowledged that, for companies choosing not to rely on their own
historical option exercise data (i.e., because such data did not provide a
reasonable basis for estimating the term), information about exercise patterns
with respect to plain vanilla options granted by other companies might not be
available in the near term; accordingly, in SAB No. 107, the Staff permitted use
of a simplified approach for estimating the term of plain vanilla options
granted on or before December 31, 2007. The information concerning exercise
behavior that the Staff contemplated would be available by such date has not
materialized for many companies. Thus, in SAB No. 110, the Staff continues to
allow use of the simplified rule for estimating the expected term of plain
vanilla options until such time as the relevant data becomes widely available.
The Company does not expect its adoption of SAB No. 110 to have a material
impact on its financial position, results of operations or cash
flows.
   -27-
 
 In March
2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and
Hedging Activities—An Amendment of FASB Statement No. 133.” (“SFAS 161”). SFAS
161 establishes the disclosure requirements for derivative instruments and for
hedging activities with the intent to provide financial statement users with an
enhanced understanding of the entity’s use of derivative instruments, the
accounting of derivative instruments and related hedged items under Statement
133 and its related interpretations, and the effects of these instruments on the
entity’s financial position, financial performance, and cash flows. This
statement is effective for financial statements issued for fiscal years
beginning after November 15, 2008. The Company does not expect its adoption of
SFAS 161 to have a material impact on its financial position, results of
operations or cash flows.
 
 In April
2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 142-3, “Determination
of the Useful Life of Intangible Assets”. This FSP amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement
No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). The intent of this
FSP is to improve the consistency between the useful life of a recognized
intangible asset under SFAS 142 and the period of expected cash flows used to
measure the fair value of the asset under SFAS 141R, and other GAAP. This FSP is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early adoption
is prohibited. The Company is currently evaluating the impact of SFAS FSP 142-3,
but does not expect the adoption of this pronouncement will have a material
impact on its financial position, results of operations or cash
flows.
  In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS 162”).  SFAS 162 identifies the sources
of accounting principles and the framework for selecting principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States.  This statement is effective 60 days following the
SEC’s approval of the Public Company Accounting Oversight Board’s amendments to
AU section 411, The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles.  The Company is currently evaluating
the impact of SFAS 162, but does not expect the adoption of this pronouncement
will have a material impact on its financial position, results of operations or
cash flows.
 
 In
October 2008, the FASB issued FSP FAS 157-3, “Determining the Fair Value of a
Financial Asset When the Market For That Asset Is Not Active” (“FSP FAS 157-3”),
with an immediate effective date, including prior periods for which financial
statements have not been issued.  FSP FAS 157-3 amends FAS 157 to
clarify the application of fair value in inactive markets and allows for the use
of management’s internal assumptions about future cash flows with appropriately
risk-adjusted discount rates when relevant observable market data does not
exist.  The objective of FAS 157 has not changed and continues to be
the determination of the price that would be received in an orderly transaction
that is not a forced liquidation or distressed sale at the measurement
date.  The adoption of FSP FAS 157-3 is not expected to have a
material effect on the Company’s financial position, results of operations or
cash flows.
 
 -28-
   Other
accounting standards have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date and
are not expected to have a material impact on the financial statements upon
adoption.
  NOTE
12 – EARNINGS (LOSS) PER SHARE
 
 Basic
earnings (loss) per share is computed by dividing net income (loss) by the
weighted-average number of common shares outstanding for the period. Diluted
earnings (loss) per share is computed giving effect to all potential dilutive
common stock, including convertible debentures. For all periods presented,
convertible debentures were not included in the computation of diluted loss per
share because the effect would be antidilutive. These items could be dilutive in
the future.
  NOTE
13 – DEFERRED EXCLUSIVE AGENCY FEE
 
 A
distribution agreement, starting on January 01, 2008, was signed in 2007 with a
group based in Dubai to distribute Confederate branded motorcycles in the Middle
East region.  During 2008, a $300,000 fee was received for the exclusive
selling rights within the Middle East region.  The contract is for 5 years
ending on 12/31/2012.  The fee is being amortized over the life of the
agreement
 
 NOTE
14 – SUBSEQUENT EVENTS
 
 On
February 12, 2009, the Company completed a stock-for-stock merger with
Confederate Motor, Inc. The combined company will operate under the name
Confederate Motors, Inc. and will assume and execute Confederate’s hand-crafted
motorcycle business as its sole business.
 
 The
Company also closed on a private placement financing to accredited investors
which closed concurrently with the merger on February 12, 2009.  The
Company completed a 3.167420814-for-1 reverse stock split effective January 20,
2009.
 
 On March
11, 2009 the Board unanimously approved stock awards of 400,000 shares to Joseph
Gamberale and 400,000 shares to Oldenway.  These shares were awarded
from the Employee Stock Purchase Plan.
 
 On April
15, 2009 the Board unanimously appointed Bartolomei and Pucciarelli as the new
external audit firm replacing Barfield, Murphy, Shank and Smith.
  Effective
April 17, 2009, Francois-Xavier Terny was appointed as a member of the Board of
Directors of Confederate Motors, Inc.
  During
2009, the Company extended the note payable to March 15, 2011.
  -29-
  ITEM
9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
 
 On April
15, 2009, Barfield, Murphy, Shank & Smith, P.C. (“BMSS”) resigned as our
independent registered public accounting firm. The reports of BMSS on our
financial statements for each of the two fiscal years ended December 31, 2006
and 2007 contained no adverse opinion or a disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
The decision to change independent accountants was approved by our Board of
Directors on April 15, 2009.
 
 During
our two most recent fiscal years and through April 15, 2009, the date of filing
our Current Report on Form 8-K announcing the resignation of BMSS, we
have had no disagreements with BMSS on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of BMSS, would have caused it
to make reference to the subject matter of such disagreements in its report on
our financial statements for such periods.
 
 During
our two most recent fiscal years there have been no reportable events as defined
under Item 304(a)(1)(v) of Regulation S-K adopted by the SEC.
 
 BMSS
provide us with a letter addressed to the SEC stating that it agreed with the
above statements. This letter was filed as an exhibit to the current report on
Form 8-K filed on April 15, 2009.
 
 On April
15, 2009, the Board appointed Bartolomei Pucciarelli, LLC (“BP”) as the
Company’s new independent registered public accounting firm. The decision to
engage BP was approved by the Company’s Board of Directors on April 15,
2009.  Prior to April 15, 2009, the Company did not consult with BP
regarding (1) the application of accounting principles to a specified
transactions, (2) the type of audit opinion that might be rendered on the
Company’s financial statements, (3) written or oral advice was provided that
would be an important factor considered by the Company in reaching a decision as
to an accounting, auditing or financial reporting issues, or (4) any matter that
was the subject of a disagreement between the Company and its predecessor
auditor as described in Item 304(a)(1)(iv) or a reportable event as described in
Item 304(a)(1)(v) of Regulation S-K.
 
 ITEM
9A(T).  CONTROLS AND PROCEDURES
 
 Evaluation
of disclosure controls and procedures
  Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities
Exchange Act of 1934, as amended (Exchange Act), as of December 31, 2008. Based
on this evaluation, our principal executive officer and principal financial
officers have concluded that our disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in the
reports we file or submit under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in the Securities and
Exchange Commission’s rules.
 
 MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 
 Management
of the Company is responsible for establishing and maintaining effective
internal control over financial reporting as defined in Rule
13a-15(f) under the Exchange Act over the registrant. The Company’s
internal control over financial reporting is designed to provide reasonable
assurance to the Company’s management and Board of Directors regarding the
preparation and fair presentation of published financial statements in
accordance with United State’s generally accepted accounting
principles (US GAAP), including those policies and procedures that: (i) pertain
to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the
company, (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with US
GAAP and that receipts and expenditures are being made only in accordance with
authorizations of management and directors of the company, and (iii)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.  Management
conducted an evaluation of the effectiveness of internal control over financial
reporting based on the framework in Internal Control— Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Management’s assessment included an evaluation of the design of our
internal control over financial reporting and testing of the operational
effectiveness of our internal control over financial reporting. Based on this
assessment, Management concluded the Company maintained effective internal
control over financial reporting as of December 31, 2008.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Therefore, even those
systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and
presentation.  This annual report does not include an attestation
report of the Company’s registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to
attestation by our registered public accounting firm pursuant to temporary rules
of the Securities and Exchange Commission that permit the Company to
provide only management’s report in this Annual Report.
  ITEM 9.  OTHER
INFORMATION
 
 None
   -30-
 
 PART
III
 
 ITEM
10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
 Executive
Officers and Directors
  The
following table sets forth the names, ages, and positions of our executive
officers and directors as of the May 15, 2009. Executive officers are elected
annually by our Board of Directors.  Each executive officer holds his
office until he resigns, is removed by the Board, or his successor is elected
and qualified.  Directors are elected annually by our stockholders at
the annual meeting.  Each director holds his office until his
successor is elected and qualified or his earlier resignation or
removal.
  NAME
                    AGE
                    POSITIONH.
      Matthew Chambers
                    54
                    Chairman
      and Chief Executive Officer and FounderPaolo
      Chiaia
                    50
                    DirectorFrancois-Xavier
      Terny
                    39
                    DirectorJoseph
      Mitchell
                    40
                    Executive
      Vice President and Chief Financial
Officer
  H. Matthew
Chambers has been our Chief Executive Officer and one of our directors
from our inception in March 2003. Chambers earned a bachelor of arts in business
administration from Louisiana State University in 1975, and went on to receive a
juris doctorate degree from LSU in 1978. On January 1, 1979, Chambers began a 13
year career as a solo practitioner of law in Baton Rouge. In 1990, Chambers won
the largest verdict of his career in a police brutality case. The verdict
represented the largest ever granted in the state of Louisiana against a
sheriff's parish agency.
 
 Next,
idle meditation yielded an idea propelled by a lust for American hot rods which
began in the 1950's. An avant-garde American industrial and mechanical design
initiative was envisioned. The roots of rugged principled individuality would
again form an idealogical foundation for pure, strong, tough
motorcycles.
  The
Confederate dream was embraced April 2, 1991. The cornerstone which formalized
the effort is described by just three letters - fun. A true to concept creative
body of work was mandated. Honest American motorcycles are the
result.
 
 Chambers
currently has dual-residences in Birmingham, Ala. and hometown New Orleans,
where his family still resides.
 
 Paolo
Chiaia is a member of the board of directors of Finanzattiva Sim
(securities broker), BPUPRAMERICA SGR (Asset Management Company joint venture
between BPU with Prudential), IWBank (major player in online trading), and
Centrobanca (in charge for Investment Banking activities).
 
 Paolo
served as a senior executive from 1999 to 2004 at Gruppo Banca Popolare di
Bergamo (10th largest Italian Banking Group) where he was in charge of the
capital markets activities of the Group. The department deals with securities
and derivatives trading, both listed and over the counter, debt capital market,
equity capital market, M&A. In 1998 he was head of the sales team covering
Italian clients with reference to all financial products: fixed income, foreign
exchange, emerging markets and corporate bonds.
 
 From 1993
to 1999 Paolo served as a broker at JP Morgan in charge of both Italian and
foreign institutional clients. From 1987
to 1993 he worked for Montedison (Italian Chemical Group) in the Treasury
department in charge of FX and Interest Rate risk management, both for the
Holding Company and for the Italian and foreign subsidiaries. Paolo
graduated with top marks from Bocconi University in 1986.
  There are no relationships between Mr. Chiaia and any of the officers or
directors of the Company. And there is no employment agreement between Mr.
Chiaia and the Company.
 
 Francois-Xavier
Terny is a private investor and operational consultant to 7 companies and
start ups since 2008.  He was the founder of Masaï, a consultancy
specializing in cost optimization established in 1996. Under the management of
Mr. Terny, Masaï had 8 consulting offices in Europe, US and Japan, and 7 LCC
offices, with a total of over 120 professionals. It was acquired by Lowendal
group in October 2006.
 
 Following
his studies at HEC, from 1991 to 1996, Mr. Terny served as a strategic
consultant in Bain & Company, with one year spent between the Moscow and
Warsaw offices (1993) and creation of the South African office (1995). It was
during the numerous purchasing assignments (sheer luck in strategic
consultancy!) that the idea for Masaï was born. Discussions with his friend
Thierry Fournier, a Manager within Bain & Co., gave life to the project in
March 1996.
 
 -31-
  Mr. Terny
has always been keen on multi-cultural, multi time zone projects - often
combining the complexity of worldwide team management with a taste for creating
new methodologies, new approaches to the ever-evolving issues clients are facing
in cost management. He is passionate about cars and race car driving, a wine
enthusiast with a particular taste for Languedoc wines, and a seasoned
traveler.
 
 There are
no relationships between Mr. Terny and any of the officers or directors of the
Company. And there is no employment agreement between Mr. Terny and the
Company.
 
 Joseph
Mitchell has served as our Chief Financial Officer from November
2006.  He has over 17 years of experience in financial operations and
management in the financial services, technology, healthcare and manufacturing
sectors, including 3 years at HealthSouth. During his time at HealthSouth, he
held various senior management positions, including Director of Business
Development, Audit Director and Assistant Controller, and was instrumental in
the company being re-listed on the NYSE. Prior to HealthSouth, Joseph spent 4
years at Dell Financial Services and served as the Financial Reporting Manager
and Corporate Governance Manager, where he led a team in implementing financial
and internal controls for SEC compliance. Prior to Dell, he spent 4 years at
AmSouth as the Finance Manager where he directed the integration of the
financial operations for a $500 million acquisition.
 
 Joseph
earned a bachelor's degree in accounting from the University of Alabama. He
holds an MBA from the University of Alabama Birmingham. He is a licensed
CPA.
 
 Family
Relationships
 
 There are
no relationships between any of the officers or directors of the
Company.
 
 Conflicts
of Interest
 
 Certain
potential conflicts of interest are inherent in the relationships between our
officers and directors, and us.
 
 From time
to time, one or more of our affiliates may form or hold an ownership interest in
and/or manage other businesses both related and unrelated to the type of
business that we own and operate. These persons expect to continue to form, hold
an ownership interest in and/or manage additional other businesses which may
compete with ours with respect to operations, including financing and marketing,
management time and services and potential customers. These activities may give
rise to conflicts between or among the interests of us and other businesses with
which our affiliates are associated. Our affiliates are in no way prohibited
from undertaking such activities, and neither we nor our shareholders will have
any right to require participation in such other activities.
 
 Further,
because we intend to transact business with some of our officers, directors and
affiliates, as well as with firms in which some of our officers, directors or
affiliates have a material interest, potential conflicts may arise between the
respective interests of us and these related persons or entities. We believe
that such transactions will be effected on terms at least as favorable to us as
those available from unrelated third parties.
 
 With
respect to transactions involving real or apparent conflicts of interest, we
have adopted policies and procedures which require that: (i) the fact of the
relationship or interest giving rise to the potential conflict be disclosed or
known to the directors who authorize or approve the transaction prior to such
authorization or approval, (ii) the transaction be approved by a majority of our
disinterested outside directors, and (iii) the transaction be fair and
reasonable to us at the time it is authorized or approved by our
directors.
  Our
policies and procedures regarding transactions involving potential conflicts of
interest are not in writing.  We understand that it will be difficult
to enforce our policies and procedures and will rely and trust our officers and
directors to follow our policies and procedures.  We will implement
our policies and procedures by requiring the officer or director who is not in
compliance with our policies and procedures to remove himself and the other
officers and directors will decide how to implement the policies and procedures,
accordingly.
 
 Involvement in Certain Legal
Proceedings
 
 To our
knowledge, during the past five (5) years, none of our directors, executive
officers, promoters, control persons, or nominees has been:
  є
              the
      subject of any bankruptcy petition filed by or against any business of
      which such person was a general partner or executive officer either at the
      time of the bankruptcy or within two years prior to that time except for
      our Chief Executive Officer, Matt Chambers who filed a Chapter 7
      bankruptcy petition in December 2004 and was discharged in May
      2005;
  є
              convicted
      in a criminal proceeding or is subject to a pending criminal proceeding
      (excluding traffic violations and other minor
  offenses);
   -32-
  є
              subject
      to any order, judgment, or decree, not subsequently reversed, suspended or
      vacated, of any court of competent jurisdiction, permanently or
      temporarily enjoining, barring, suspending or otherwise limiting his
      involvement in any type of business, securities or banking activities;
      or
  є
              found
      by a court of competent jurisdiction (in a civil action), the Commission
      or the Commodity Futures Trading Commission to have violated a federal or
      state securities or commodities
law.
 
 Compliance With Section
16(A) Of The Exchange Act.
  Section
16(a) of the Exchange Act requires the Company’s officers and directors, and
persons who beneficially own more than 10% of a registered class of the
Company’s equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and are required to
furnish copies to the Company. To the best of the Company’s knowledge, any
reports required to be filed were timely filed in fiscal year ended December 31,
2008.
  Auditors; Code of Ethics;
Financial Expert
 
 We do not
have an audit committee financial expert.  We do not have an audit
committee financial expert because we believe the cost related to retaining a
financial expert at this time is prohibitive.  Furthermore, because we
are only beginning our commercial operations, at the present time, we believe
the services of a financial expert are not warranted.
  Potential Conflicts of
Interest
 
 We are
not aware of any current or potential conflicts of interest with any of our
executives or directors.
 
 ITEM
11.  EXECUTIVE COMPENSATION
 
 EXECUTIVE COMPENSATION
 
 Summary
Compensation Table
 
 The
following summary compensation table sets forth all compensation awarded to,
earned by, or paid to the named executive officers paid by us during the
calendar years ended December 31, 2008 and 2007 in all capacities for the
accounts of our executives, including the Chief Executive Officer (CEO) and
Chief Financial Officer (CFO):
 
 SUMMARY
COMPENSATION TABLE
  Name
      and Principal Position
                Year
                Salary
                  ($)
                Bonus
                  ($)
                Stock
                  Awards
                  ($)
                Option
                  Awards
                  ($)
                Non-Equity
      Incentive Plan Compensation ($)
                Non-Qualified
      Deferred Compensation Earnings
                  ($)
                All
      Other Compensation
                  ($)
                Totals
                  ($)H.
      Matthew Chambers,
                  President
      and Chief
                2008
                115,450
                0
                0
                
                0
                0
                0
                0
                115,450Executive
      Officer
                2007
                98,000
                0
                0
                
                0
                0
                0
                0
                98,000Joseph
      Mitchell,
                  Executive
      VP, Chief Financial
                2008
                110,000
                0
                0
                
                0
                0
                0
                0
                110,000Officer,
      Secretary
                2007
                92,000
                0
                0
                
                0
                0
                0
                0
                92,000Ed
      Jacobs,
                  Director
      of Design
                2008
                67,125
                0
                0
                
                0
                0
                0
                0
                67,1252007
                60,000
                0
                0
                
                0
                0
                0
                0
                60,000
  Corporate
Governance
 
 We are
committed to having sound corporate governance principles. We believe that such
principles are essential to running our business efficiently and to maintaining
our integrity in the marketplace. Our Board of Directors has five directors, but
does not have any standing committees.
  -33-
  Director
Qualifications
 
 We
believe that our directors should have the highest professional and personal
ethics and values, consistent with our longstanding values and standards. They
should have broad experience at the policy-making level in business or banking.
They should be committed to enhancing stockholder value and should have
sufficient time to carry out their duties and to provide insight and practical
wisdom based on experience. Their service on other boards of public companies
should be limited to a number that permits them, given their individual
circumstances, to perform responsibly all director duties for us. Each director
must represent the interests of all stockholders. When considering potential
director candidates, the Board of Directors also considers the candidate’s
character, judgment, diversity, age and skills, including financial literacy and
experience in the context of our needs and the needs of the Board of
Directors.
 
 Director
Compensation
 
 Our
directors will not receive a fee for attending each board of directors meeting
or meeting of a committee of the board of directors. All directors will be
reimbursed for their reasonable out-of-pocket expenses incurred in connection
with attending board of director and committee
meetings.
 
 Option/SAR
Grants to Executive Officers
 
 No Named
Executive Officers received or exercised any stock awards, stock options or SARs
during the year ended December 31, 2008, or otherwise were the beneficial owners
of any stock awards, stock options or SARs at December 31, 2008.
 
 Employment
Agreements
  We will
enter into employment agreements with H. Matthew Chambers, Joseph Mitchell and
Ed Jacobs.  It is anticipated that each of the employment agreements
will be entered into and will have a three-year term and will automatically
extend in one-year increments unless we notify the executive in that year that
his employment agreement will not be extended.
 
 Before
entering
into these employment agreements, the 2008 target base salary was $120,000 for
H. Matthew Chambers, $120,000 for Joseph Mitchell and $72,000 for Ed Jacobs. The
employment agreements provide for annual base salaries at the following initial
rates: $180,000 for H. Matthew Chambers and $144,000 for Joseph Mitchell and
$96,000 for Ed Jacobs. The annual base salaries will be reviewed each year by
our board of directors (or compensation committee, if we then have one), but
cannot be decreased from the amount in effect in the previous year. The
employment agreements also make each executive eligible for annual bonuses
determined by our board of directors (or compensation committee, if any). The
employment agreements also provide that these officers are eligible to
participate in our equity incentive plans and other employee benefit
programs.
  The
employment agreements impose on each employee post-termination non-competition,
non-solicitation and confidentiality obligations. Under the agreements, each
officer will agree not to compete with our business in the United States,
subject to certain limited exceptions, for a period of two years after
termination of his employment (provided that the agreements are terminated other
than for good reason by the officers or without cause by us). Each officer will
further agree, for a period of three years after termination of his employment,
to refrain from inducing, or attempting to induce, any of our customers or
employees to curtail or terminate their relationship or employment with us, as
applicable. Each officer will also agree to maintain the confidentiality of all
confidential or proprietary information of our company, and assign any
inventions to us that he acquired or developed during his relationship with
us.
  The
employment agreements provide for payments and benefits upon termination of
employment in addition to those previously accrued. If the executive is
terminated due to death or disability, the executive will receive (in addition
to items previously accrued):
 
 ●            instead
of a bonus (other than accrued and unpaid guaranteed bonus) for that year, a
lump sum cash payment equal to the average annual bonus in recent years
(calculated as described below), prorated to reflect the part of the year
completed before termination; and
 ●            in
case of disability, continued health, medical and life insurance coverage until
age 65.
 
 If we
terminate the executive’s employment without cause, including after a change in
control, or if the executive terminates employment for good reason, the
executive will receive (in addition to items previously accrued):
 
 ●            a
lump sum cash payment equal to (1) the sum of his then-current annual base
salary, plus his then-current guaranteed cash bonus, plus the average annual
bonus in recent years (calculated as described below), multiplied by 3, in
the case of H. Matthew Chambers and 2 in the case of each of Joseph Mitchell and
Ed Jacobs;
 ●            instead
of a bonus (other than accrued and unpaid guaranteed bonus) for that year, a
lump sum cash payment equal to his average annual bonus in recent years
(calculated as described below), which, unless the termination occurs within the
period beginning on the date of a change in control and ending two years after a
change in control, will be prorated to reflect the part of the year completed
before termination; and
 ●            continued
health, medical and life insurance coverage for one year.
  -34-
  In each
case, the average annual bonus in recent years is calculated by using the most
recent (up to three) calendar years in which the executive worked for us for the
entire year. If the executive was not eligible for, or did not receive, a bonus
during any of those years, then we deem the average annual bonus to be equal to
the target annual bonus for the year of termination. When calculating the
average annual bonus, any guaranteed cash bonus is disregarded.
 
 If
payments under the employment agreement are subject to the golden parachute
excise tax, we must pay an additional gross-up amount so that his after-tax
benefits are the same as if no excise tax had applied.
  ITEM
12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
 
 The
number of shares beneficially owned by each stockholder is determined under
rules promulgated by the SEC. The information is not necessarily indicative of
beneficial ownership for any other purpose. Under these rules, beneficial
ownership includes any shares as to which the individual or entity has sole or
shared voting or investment power and any shares as to which the individual or
entity has the right to acquire beneficial ownership within 60 days after
February 12, 2009 through the exercise of any stock option, warrant or other
right. The inclusion in the following table of those shares, however, does not
constitute an admission that the named stockholder is a direct or indirect
beneficial owner.
  Percentage
      of shares outstandingBeneficial
      owner
                      Number of shares
      beneficially owned(1)
                      Pre-Offering(2)
                      Post-Offering Minimum
      Amount(3)RSC
      Affiliated Businesses, LLC (4)
                      2,633,220
                      23.5%
                      21.5%Joseph
      Mitchell, Chief Financial Officer
                      316,985
                      2.8%
                      2.6%Paolo
      Chiaia, Director
                      207,262
                      1.8%
                      1.7%Ed
      Jacobs, Director of Design
                      74,000
                      *
                      *All
      directors and executive officers as a group
                      3,231,467
                      28.1%
                      25.8%Joseph
      Gamberale
                      1,258,612
                      11.2%
                      10.3%Oldenway
      1 (5)
                      1,039,914
                      9.3%
                      8.5%Oldenway
      2 (6)
                      1,039,914
                      9.3%
                      8.5%
  Unless
otherwise indicated below, to our knowledge, all persons listed below have sole
voting and investment power with respect to their shares of Common Stock, except
to the extent authority is shared by spouses under applicable law. Unless
otherwise indicated below, each entity or person listed below maintains an
address of 2222 5th Avenue South, Birmingham, Alabama 35233.
 
 *      Less
than 1%
  (1)     Unless
otherwise indicated, each person or entity named in the table has sole voting
power and investment power (or shares that power with that person’s spouse) with
respect to all shares of common stock listed as owned by that person or
entity.
 (2)     A
total of 11,210,000 shares of the Company’s common stock are considered to be
outstanding pursuant to Rule 13d-3(d)(1) under the Securities Exchange Act of
1934.
 (3)     A
total of 12,260,000 shares of the Company’s common stock are considered to be
outstanding pursuant to Rule 13d-3(d)(1) under the Securities Exchange Act of
1934.
 (4)     H.
Matthew Chambers, the principal of RSC Affiliated Businesses, L.L.C., is deemed
to be the beneficial owner of the shares of common stock owned by RSC Affiliated
Businesses, L.L.C.  Mr. Chambers has voting and disposition power over
the shares beneficially owned by RSC Affiliated Businesses, L.L.C.
 (5)     Nazir
Mohammed Parker, the principal of Oldenway 1, is deemed to be beneficial owners
of all of the shares of common stock owned by Oldenway 1. Mr. Parker has voting
and disposition power over the shares beneficially owned by
Oldenway1.
 (6)     Nazir
Mohammed Parker, the principal of Oldenway 2, is deemed to be beneficial owners
of all of the shares of common stock owned by Oldenway 2. Mr. Parker has voting
and disposition power over the shares beneficially owned by
Oldenway2.
 
 ITEM
13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
  Board
of Directors and Officers
 
 Other
than the transactions described under the heading “Executive Compensation” (or
with respect to which such information is omitted in accordance with SEC
regulations), since December 31, 2006 there have not been, and there is not
currently proposed, any transaction or series of similar transactions to which
we were or will be a participant in which the amount involved exceeded or will
exceed the lesser of $120,000 or one percent of the average of our total assets
at year-end for the last two completed fiscal years, and in which any director,
executive officer, holder of 5% or more of any class of our capital stock or any
member of the immediate family of any of the foregoing persons had or will have
a direct or indirect material interest.
  -35-
  Other
Stockholders
  There are
currently no capital loans payable to existing stock holders.
 
 Pursuant
to the Merger Agreement, on February 12, 2009, we issued 8,895,000 shares of our
common stock to the shareholders of Confederate Motor Company, Inc. pursuant to
the merger between us and Confederate Motor Company, Inc.  Such securities were not registered
under the Securities Act of 1933. The issuance of these shares was exempted from
registration pursuant to Section 4(2) of the Securities Act of
1933.
 
 On
February 12, 2009, we closed a private placement offering whereby we sold
1,050,000 shares of our common stock to certain investors for a total aggregate
purchase price of $1,275,000.  The issuance of these securities
were exempt from registration pursuant to Section 4(2) of the Securities Act of
1933, as amended, and Regulation D promulgated under the Securities Act of 1933,
as amended.
 
 ITEM
14.  PRINCIPAL ACCOUNTING FEES AND SERVICES
 
 (1)
Audit Fees
  Audit
Fees
  For the
Company’s fiscal year ended December 31, 2008, we were billed approximately
$15,000 for professional services rendered for the audit and review of our
financial statements. That total amount consisted of $15,000 for the auditing
and review of the financial statements for the fiscal year 2008.
  Legal
Fees
  For the
Company’s fiscal year ended December 31, 2008, we were billed approximately
$10,000 for professional services rendered for legal compliance related to
federal securities laws.
 
 All Other
Fees
  The
Company did not incur any other fees related to services rendered by our
principal accountant for the fiscal year ended December 31, 2008.
  Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
  PART
IV
 
  ITEM
15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
  Exhibit
      No.
                                      
                                      Description31.1
                                      
                                      Certification
      of Chief Executive Officer, Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
                                      
                                      Certification
      of Chief Financial Officer, Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1
                                      
                                      Certification
      of Chief Executive Officer, Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 200232.2
                                      
                                      Certification
      of Chief Financial Officer, Pursuant to Section 906 of the Sarbanes-Oxley
      Act of
2002
 -36-
 
 
   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.
  Date:  May
      18, 2009
                Confederate
      Motors, Inc.By:
                /s/
      H. Matthew ChambersH.
      Matthew Chambers
                  Chief
      Executive Officer
   Principal
      Executive Officers of
                    Confederate
      Motors, Inc.By:
                  /s/
      H. Matthew
      ChambersH.
      Matthew Chambers
                    Chief
      Executive OfficerBy:
                  /s/
      Joseph MitchellJoseph
      Mitchell
                    Chief
      Financial Officer and Principal Accounting Officer