NEVADA
|
3599-15
|
82-0497807
|
||||||
(State
or other jurisdiction
|
(Primary Standard Industrial
|
(IRS
Employer Number)
|
||||||
of
incorporation)
|
Classification
Code)
|
|||||||
(515)
295-3178
|
||||||||
(Address
and Telephone Number of Registrant’s Principal Executive
Offices)
|
||||||||
Theodore
G. Hollinger, Chairman of the Board
|
||||||||
2502
East Poplar Street, Algona, Iowa 50511
|
||||||||
Beverly
Evans
Davis,
Brown, Koehn, Shors & Roberts, P.C.
2500
Financial Center,
Des
Moines, Iowa 50309
(515)
288 2500
|
and
|
Clayton
E. Parker, Esq.
Matthew
Ogurick, Esq.
Kirkpatrick
& Lockhart Preston Gates Ellis LLP
200
South Biscayne Blvd. - Suite 3900,
Miami,
Florida 33131-2399
(305)
539-3306
|
Title of each class of securities
to be registered
|
Amount to be
registered1
|
Proposed maximum
offering price per unit2 |
Proposed maximum
aggregate offering price |
Amount of registration
fee |
|||||||||
Common Stock,
par value $0.001 per share
|
3,289,135
|
$
|
0.44
|
$
|
1,447,219
|
$
|
56.88
|
1. |
In
the event of a stock split, stock dividend or similar transaction
involving Common Stock of the registrant, in order to prevent dilution,
the number of shares registered shall be automatically increased
to cover
the additional shares in accordance with Rule 416(a) under the Securities
Act.
|
2. |
Estimated
solely for the purpose of calculating the registration fee pursuant
to
Rule 457(c) under the Securities Act of 1933. For the purposes of
this
table, we have used the average of the bid and asked prices as
of May 19, 2008.
|
|
Page
|
PROSPECTUS
SUMMARY
|
1
|
FORWARD
LOOKING STATEMENTS
|
7
|
SUMMARY
FINANCIAL INFORMATION
|
8
|
RISK
FACTORS
|
9
|
DETERMINATION
OF OFFERING PRICE
|
20
|
SELLING
STOCKHOLDER
|
21
|
PLAN
OF DISTRIBUTION
|
24
|
USE
OF PROCEEDS
|
26
|
DILUTION
|
27
|
DESCRIPTION
OF SECURITIES
|
28
|
DESCRIPTION
OF THE BUSINESS
|
32
|
DESCRIPTION
OF PROPERTY
|
51
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|
52
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
55
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
|
66
|
EXECUTIVE
COMPENSATION
|
69
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
76
|
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS AND
CORPORATE GOVERNANCE
|
79
|
NOTICE
TO CANADIAN RESIDENTS
|
80
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
81
|
HOW
TO GET MORE INFORMATION
|
83
|
INDEX
TO FINANCIAL STATEMENTS
|
F-i
|
PART
II
|
II-1
|
SIGNATURES
|
II-6
|
Assumed
Offering Price |
75% of
Assumed Offering Price |
50% of
Assumed Offering Price |
25% of
Assumed Offering Price |
||||||||||
Purchase
Price:
|
$
|
0.48
|
$
|
0.36
|
$
|
0.24
|
$
|
0.12
|
|||||
No. of
Shares(1):
|
3,289,135
|
3,289,135
|
3,289,135
|
3,289,135
|
|||||||||
Total
Outstanding(2):
|
30,879,299
|
30,879,299
|
30,879,299
|
30,879,299
|
|||||||||
Percent
Outstanding(3):
|
10.65
|
%
|
10.65
|
%
|
10.65
|
%
|
10.65
|
%
|
|||||
Gross
Cash to the Company:
|
$
|
1,578,785
|
$
|
1,184,089
|
$
|
789,393
|
$
|
394,716
|
|||||
Net
Cash to the Company(4):
|
$
|
1,262,763
|
$
|
923,324
|
$
|
583,885
|
$
|
244,463
|
(1) |
Represents
the number of shares of Common Stock registered in the registration
statement to which this Prospectus is made a part, which may be issued
to
YA Global under the SEDA at the prices set forth in the
table.
|
(2) |
Represents
the total number of shares of Common Stock outstanding at May 8,
2008
after the issuance of the shares to YA Global under the SEDA. Does
not
include 1,932,846 shares of Series B Preferred Stock currently convertible
into 1,932,846 shares of Common
Stock.
|
(3) |
Represents
the shares of Common Stock to be issued as a percentage of the total
number of shares outstanding on May 8, 2008 as set forth in footnote
(2)
above.
|
(4) |
Net
cash equals the gross proceeds minus the seven percent (7%)
underwriting discount payable to YA Global, minus the seven percent
(7%)
placement fee payable to GenCap and minus $94,992 in SEDA expenses,
which
such figure includes an aggregate maximum of $79,992 in
monitoring fees payable by the Company to YA Global during the term
of the
SEDA ($3,333 per month for two (2) years) and $15,000 in due diligence
and
commitment fees.
|
Assumed
Offering Price |
75% of
Assumed Offering Price |
50% of
Assumed Offering Price |
25% of
Assumed Offering Price |
||||||||||
Purchase
Price:
|
$
|
0.48
|
$
|
0.36
|
$
|
0.24
|
$
|
0.12
|
|||||
No. of
Shares(1):
|
8,333,334
|
11,111,112
|
16,666,667
|
33,333,334
|
|||||||||
Total
Outstanding(2):
|
35,923,334
|
38,701,276
|
44,256,831
|
60,923,498
|
|||||||||
Percent
Outstanding(3):
|
23.20
|
%
|
28.71
|
%
|
37.66
|
%
|
54.71
|
%
|
|||||
Gross
Cash to the Company:
|
$
|
4,000,000
|
$
|
4,000,000
|
$
|
4,000,000
|
$
|
4,000,000
|
|||||
Net
Cash to the Company(4):
|
$
|
3,345,008
|
$
|
3,345,008
|
$
|
3,345,008
|
$
|
3,345,008
|
|||||
(1) |
Represents
that total number of shares of Common Stock which would need to be
issued
at the stated purchase price to receive gross proceeds of $4 million.
We
are only registering 3,289,135 shares of Common Stock under this
Prospectus pursuant to the SEDA. We would need to register additional
shares of Common Stock to obtain the entire Four Million Dollars
($4,000,000) available under the SEDA at these stated purchase
prices.
|
(2) |
Represents
the total number of shares of Common stock outstanding at May 8,
2008 (as
set forth in footnote (3) below) after the issuance of the shares
to YA
Global under the SEDA. The Company’s Articles of Incorporation (as
amended) authorizes the issuance of 100,000,000 shares of Common
Stock.
|
(3) |
Represents
the shares of Common Stock to be issued as a percentage of the total
number shares outstanding at May 8, 2008. Does not include 1,932,846
shares of Series B Preferred Stock currently convertible into 1,932,846
shares of Common Stock.
|
(4) |
If
the Company drew down on the entire Four Million Dollars ($4,000,000)
available under the SEDA, YA Global would receive an aggregate
underwriting discount equal to $280,000 and GenCap would receive
an
aggregate placement fee equal to $280,000. As of May 8, 2008, the
balance
on the Four Million Dollars ($4,000,000) available under the SEDA
is $4
million, which is used in the calculations in the chart
above.
|
(5) |
Net
cash equals the gross proceeds minus the seven percent (7%)
underwriting discount payable to YA Global, minus the seven percent
(7%)
placement fee payable to GenCap and minus $94,992 in SEDA expenses,
which
such figure includes an aggregate maximum of $79,992 in
monitoring fees payable by the Company to YA Global during the term
of the
SEDA ($3,333 per month for two (2) years) and $15,000 in due diligence
and
commitment fees.
|
Common
Stock being offered by the Selling Stockholder:
|
Up
to 3,289,135 shares of our Common Stock.
|
Offering
Price and Terms:
|
The
Selling Stockholder will sell up to 3,289,135 shares of Common Stock
at
the then current market price and will determine the terms of the
sale.
|
Termination
of the Offering:
|
The
offering will conclude when all of the offering shares have been
sold or
at a time when the Company, in its sole discretion, decides to terminate
the registration.
|
Common
Stock issued and outstanding on May 8, 2008:
|
27,590,164
|
Common
Stock to be outstanding after the Offering 1
|
32,812,145
shares1
|
Use
of Proceeds:
|
We
will receive no proceeds from the sale of the shares.
See “Use of Proceeds” herein.
|
Risk
Factors:
|
The
securities offered hereby involve a high degree of risk. See “Risk
Factors” and “Dilution” herein.
|
Over-The-Counter
Bulletin Board symbol:
|
HYEG.OB
|
1. |
The
number of shares of our Common Stock which shall be outstanding
immediately after this offering is based on 29,523,010 shares issued
and
outstanding as of May 8, 2008 (including 92,000 shares of restricted
stock
granted to certain holders that are subject to forfeiture and 1,932,846
shares of Common Stock issuable upon conversion of 1,932,846 shares
of our
Series B Preferred Stock) but
excludes:
|
·
|
942,916
shares of Common Stock issuable upon exercise of outstanding options
granted under our 2005 Incentive Compensation Plan, with exercise
prices
ranging from $0.40 to $1.40 per share (of the options granted, 231,666
were granted as non-employee stock options, and 711,250 were granted
as
employee and director stock
options);
|
·
|
69,640
shares of Common Stock issuable upon exercise of warrants issued
in the
First Private Placement (as defined herein) with an exercise price
of
$1.00 per share;
|
·
|
134,346
shares of Common Stock issuable upon exercise of warrants issued
in the
Second Private Placement (as defined herein) with an exercise price
of
$3.25 per share;
|
·
|
120,900
shares of Common Stock issuable upon exercise of warrants issued
in the
Series A Preferred Offering (as defined herein) and 57,985 shares
of
Common Stock issuable upon exercise of warrants issued in the Series
B
Preferred Offering (as defined herein), all with an exercise price
of
$2.00 per share;
|
·
|
375,000
shares of Common Stock issuable upon exercise of warrants issued
to settle
a vendor dispute and 25,000 shares of Common Stock issued for the
purchase
of inventory, all with an exercise price of $2.00 per share;
and
|
·
|
696,084
shares of Common Stock reserved for issuance under our 2005 Incentive
Compensation Plan.
|
Year Ended December 31,
|
From Inception
(May 19, 2003) to
|
|||||||||
2007
|
2006
|
December 31, 2007
|
||||||||
STATEMENT
OF OPERATIONS:
|
||||||||||
Sales
|
$
|
740,799
|
$
|
278,344
|
$
|
1,062,703
|
||||
Cost
of Sales
|
644,517
|
253,723
|
921,784
|
|||||||
Gross
Profit
|
96,282
|
24,621
|
140,919
|
|||||||
Loss
from Operations
|
(5,265,886
|
)
|
(5,696,892
|
)
|
(12,321,551
|
)
|
||||
Net
Loss
|
(5,372,721
|
)
|
(5,752,269
|
)
|
(12,505,678
|
)
|
||||
Series
A Preferred Stock beneficial conversion feature accreted as a
dividend
|
(1,889,063
|
)
|
-
|
(1,889,063
|
)
|
|||||
Net
loss available to common stockholders
|
$
|
(7,261,784
|
)
|
$
|
(5,752,269
|
)
|
$
|
(14,394,741
|
)
|
|
Weighted-average
shares outstanding
|
26,325,151
|
25,207,950
|
||||||||
Basic
and diluted net loss per share
|
$
|
(0.28
|
)
|
$
|
(0.23
|
)
|
||||
BALANCE
SHEET DATA:
|
||||||||||
Total
Assets
|
$
|
5,985,477
|
$
|
7,050,239
|
||||||
Current
Liabilities
|
1,185,129
|
1,593,455
|
||||||||
Total
Liabilities
|
2,604,319
|
3,005,069
|
||||||||
Stockholders’
Equity
|
||||||||||
Preferred
stock - $0.001 par value; 10,000,000 shares authorized Series
A, $0.001 par value; 1,000,000 shares designated, -0- and 930,000
shares
issued and outstanding, respectively
|
-
|
930
|
||||||||
Series
B, $0.001 par value; 5,000,000 shares designated, -1,932,846 and
0 shares
issued and outstanding, respectively
|
1,933
|
-
|
||||||||
Common
stock, $0.001 par value; 100,000,000 shares authorized, 27,590,164
and
26,143,914 shares issued and outstanding
|
27,590
|
26,144
|
||||||||
Total
Stockholders’
Equity
|
$
|
3,381,158
|
$
|
4,045,170
|
·
|
timely
receipt of required financing which has to date been delayed beyond
our
initial expectations;
|
·
|
successful
pursuit of our research and development
efforts;
|
·
|
development
and protection of our intellectual property;
|
·
|
quality
and reliability of our products;
|
·
|
ability
to attract and retain a qualified work force in a small
town;
|
·
|
size
and timing of future customer orders, milestone achievement, product
delivery and customer acceptance;
|
·
|
success
in maintaining and enhancing existing strategic relationships and
developing new strategic relationships with potential customers;
|
·
|
actions
taken by competitors, including suppliers of traditional engines,
hydrogen
fuel cells and new product introductions and pricing changes;
|
·
|
reliability
of our suppliers, which to date have been less reliable than we had
expected; and
|
·
|
reasonable
costs of maintaining our facilities and our
operations.
|
·
|
consumer
perception of the safety of hydrogen and ammonia and willingness
to use
engines powered by hydrogen or ammonia;
|
·
|
the
cost competitiveness of hydrogen or ammonia as a fuel relative to
other
fuels;
|
·
|
the
future availability of hydrogen or ammonia as a fuel;
|
·
|
adverse
regulatory developments, including the adoption of onerous regulations
regarding hydrogen, or ammonia, use or storage;
|
·
|
barriers
to entry created by existing energy providers; and
|
·
|
the
emergence of new competitive technologies and products.
|
·
|
we
may be unsuccessful in entering into or maintaining collaborative
agreements for the co-development of our technologies or the
commercialization of products incorporating our
technology;
|
·
|
we
may not be successful in applying our technology to or otherwise
satisfying the needs of our collaborative
partners;
|
·
|
our
collaborators may not be successful in, or may not remain committed
to,
co-developing our technologies or commercializing products incorporating
our technology;
|
·
|
our
collaborators may seek to develop other proprietary
alternatives;
|
·
|
our
collaborators may not commit sufficient resources to incorporating
our
technology into their business;
|
·
|
our
collaborators are not obligated to market or commercialize our
technologies or products incorporating our technology, and they are
not
required to achieve any specific commercialization schedule;
and
|
·
|
our
collaborative agreements may be terminated by our partners on short
notice.
|
·
|
Without
prior stockholder approval, our Board of Directors has the authority
to
issue one or more classes of preferred stock with rights senior to
those
of holders of Common Stock and to determine the rights, privileges,
and
preferences of that preferred stock;
|
·
|
There
is no cumulative voting in the election of directors;
and
|
·
|
Stockholders
cannot call a special meeting of the
stockholders.
|
·
|
Deliver
to the customer, and obtain a written receipt for, a disclosure
document;
|
·
|
Disclose
certain price information about the
stock;
|
·
|
Disclose
the amount of compensation received by the broker-dealer or any associated
person of the broker-dealer;
|
·
|
Send
monthly statements to customers with market and price information
about
the penny stock; and
|
·
|
In
some circumstances, approve the purchaser’s account under certain
standards and deliver written statements to the customer with information
specified in the rules.
|
Selling Stockholder
|
Shares
Beneficially Owned Before Offering |
Percentage of
Outstanding Shares Beneficially Owned Before Offering (1) |
Shares to be Sold in
the Offering Assuming The
Company Issues All 3,289,135 Shares Offered Hereby |
Percentage of
Outstanding Shares Beneficially Owned After Offering(2) |
|||||||||
YA Global Investments,
L.P.
|
0
|
0
|
%
|
3,289,135
|
0
|
%
|
|||||||
Total:
|
0
|
0
|
%
|
3,289,135
|
0
|
%
|
(1)
|
Applicable
percentage of ownership is based on 27,590,164 shares of our Common
Stock
outstanding as of May 8, 2008, together with securities exercisable
or
convertible into shares of Common Stock within sixty (60) days of
May 8,
2008 for the Selling Stockholder. Beneficial ownership is determined
in
accordance with the rules of the SEC and generally includes voting
or
investment power with respect to securities. Shares of Common Stock
are
deemed to be beneficially owned by the person holding such securities
for
the purpose of computing the percentage of ownership of such person,
but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person. Note that affiliates are subject to
Rule
144 and insider trading regulations, percentage computation is for
form
purposes only.
|
(2)
|
Outstanding
shares beneficially owned after offering is based on 30,879,299 shares
(which includes the 3,289,135 shares to be sold in the offering and
excludes the 1,932,846 shares of Series B Preferred Stock currently
convertible into 1,932,846 shares of Common
Stock).
|
Assumed
Offering Price |
75% of
Assumed Offering Price |
50% of
Assumed Offering Price |
25% of
Assumed Offering Price |
||||||||||
Purchase
Price:
|
$
|
0.48
|
$
|
0.36
|
$
|
0.24
|
$
|
0.12
|
|||||
No. of
Shares(1):
|
3,289,135
|
3,289,135
|
3,289,135
|
3,289,135
|
|||||||||
Total
Outstanding(2):
|
30,879,299
|
30,879,299
|
30,879,299
|
30,879,299
|
|||||||||
Percent
Outstanding(3):
|
10.65
|
%
|
10.65
|
%
|
10.65
|
%
|
10.65
|
%
|
|||||
Gross
Cash to the Company:
|
$
|
1,578,785
|
$
|
1,184,089
|
$
|
789,393
|
$
|
394,716
|
|||||
Net
Cash to the Company(4):
|
$
|
1,262,763
|
$
|
923,324
|
$
|
583,885
|
$
|
244,463
|
(1) |
Represents
the number of shares of Common Stock registered in the registration
statement to which this Prospectus is made a part, which may be issued
to
YA Global under the SEDA at the prices set forth in the
table.
|
(2) |
Represents
the total number of shares of Common Stock outstanding at May 8,
2008
after the issuance of the shares to YA Global under the SEDA. Does
not
include 1,932,846 shares of Series B Preferred Stock currently convertible
into 1,932,846 shares of Common
Stock.
|
(3) |
Represents
the shares of Common Stock to be issued as a percentage of the total
number of shares outstanding on May 8, 2008 as set forth in footnote
(2)
above.
|
(4) |
Net
cash equals the gross proceeds minus the seven percent (7%)
underwriting discount payable to YA Global, minus the seven percent
(7%)
placement fee payable to GenCap and minus $94,992 in SEDA expenses,
which
such figure includes an aggregate maximum of $79,992 in
monitoring fees payable by the Company to YA Global during the
term of the
SEDA ($3,333 per month for two (2) years) and $15,000 in due diligence
and
commitment fees.
|
Assumed
Offering Price |
75% of
Assumed Offering Price |
50% of
Assumed Offering Price |
25% of
Assumed Offering Price |
||||||||||
Purchase
Price:
|
$
|
0.48
|
$
|
0.36
|
$
|
0.24
|
$
|
0.12
|
|||||
No. of
Shares(1):
|
8,333,334
|
11,111,112
|
16,666,667
|
33,333,334
|
|||||||||
Total
Outstanding(2):
|
35,923,498
|
38,701,276
|
44,256,831
|
60,923,498
|
|||||||||
Percent
Outstanding(3):
|
23.20
|
%
|
28.71
|
%
|
37.66
|
%
|
54.71
|
%
|
|||||
Gross
Cash to the Company:
|
$
|
4,000,000
|
$
|
4,000,000
|
$
|
4,000,000
|
$
|
4,000,000
|
|||||
Net
Cash to the Company(4):
|
$
|
3,345,008
|
$
|
3,345,008
|
$
|
3,345,008
|
$
|
3,345,008
|
(1) |
Represents
that total number of shares of Common Stock which would need to be
issued
at the stated purchase price to receive gross proceeds of $4 million.
We
are only registering 3,289,135 shares of Common Stock under this
Prospectus pursuant to the SEDA. We would need to register additional
shares of Common Stock to obtain the entire Four Million Dollars
($4,000,000) available under the SEDA at these stated purchase
prices.
|
(2) |
Represents
the total number of shares of Common stock outstanding at May 8,
2008 (as
set forth in footnote (3) below) after the issuance of the shares
to YA
Global under the SEDA. The Company’s Articles of Incorporation (as
amended) authorizes the issuance of 100,000,000 shares of Common
Stock.
|
(3) |
Represents
the shares of Common Stock to be issued as a percentage of the total
number shares outstanding at May 8, 2008. Does not include 1,932,846
shares of Series B Preferred Stock currently convertible into 1,932,846
shares of Common Stock.
|
(4) |
If
the Company drew down on the entire Four Million Dollars ($4,000,000)
available under the SEDA, YA Global would receive an aggregate
underwriting discount equal to $280,000 and GenCap would receive
an
aggregate placement fee equal to $280,000 plus warrants to purchase
Common
Stock. As of May 8, 2008, the balance on the Four Million Dollars
($4,000,000) available under the SEDA is $4 million, which is used
in the
calculations in the chart above.
|
(5) |
Net
cash equals the gross proceeds minus the seven percent (7%)
underwriting discount payable to YA Global, minus the seven percent
(7%)
placement fee payable to GenCap and minus $94,992 in SEDA expenses,
which
such figure includes an aggregate maximum of $79,992 in
monitoring fees payable by the Company to YA Global during the term
of the
SEDA ($3,333 per month for two (2) years) and $15,000 in due diligence
and
commitment fees.
|
$
|
1,578,785
|
$
|
2,500,000
|
(1)
|
$
|
4,000,000
|
(1)
|
|||
Net
proceeds(2)
|
$
|
1,252,763
|
$
|
2,010,008
|
$
|
3,300,008
|
||||
Number
of shares to be issued pursuant to the SEDA(3)
|
3,289,135
|
5,208,333
|
8,333,334
|
USE
OF PROCEEDS: (NET)
|
AMOUNT
|
AMOUNT
|
AMOUNT
|
|||||||
General
Working Capital
|
$
|
1,252,763
|
$
|
2,010,008
|
$
|
3,300,008
|
||||
Total
|
$
|
1,252,763
|
$
|
2,010,008
|
$
|
3,300,008
|
(1)
|
The
Company would need to register additional shares in order to obtain
the
gross proceeds set forth in this table at the assumed
price.
|
(2)
|
Net
cash equals the gross proceeds minus $45,000 in offering expenses,
minus a
seven percent (7%) underwriting discount payable to YA Global, minus
a seven percent (7%) placement fee payable to GenCap and minus $94,992
in
additional SEDA expenses, which such figure includes an aggregate
of
$79,992 in
monitoring fees payable by the Company to YA Global during the term
of the
SEDA ($3,333 per month for two (2) years) and $15,000 in due diligence
and
commitment fees.
|
(3)
|
Assuming
a recent price of $0.48 per share.
|
$
|
0.48
|
||||||
Net
tangible book value per share before this offering
|
$
|
0.12
|
|||||
Increase
attributable to new investors
|
$
|
0.03
|
|||||
Net
tangible book value per share after this offering
|
$
|
0.15
|
|||||
Dilution
per share to new stockholders
|
$
|
0.33
|
Assumed Offering Price
|
No. Of Shares To Be Issued(1)
|
Dilution Per Share To New
Investors
|
||||||
$
|
0.48
|
3,289,135
|
$
|
0.33
|
||||
$
|
0.36
|
3,289,135
|
$
|
0.13
|
||||
$
|
0.24
|
3,289,135
|
$
|
0.01
|
||||
$
|
0.12
|
3,289,135
|
$
|
(0.11
|
)
|
(1)
|
This
represents the maximum number of shares of Common Stock that are
being
registered pursuant to the SEDA at this time.
|
·
|
one
(1) non-cumulative vote for each share held of record on all matters
submitted to a vote of the
stockholders;
|
·
|
to
participate equally and to receive any and all such dividends as
may be
declared by the board of directors; and
|
·
|
to
participate pro rata in any distribution of assets available for
distribution upon our liquidation.
|
·
|
Dividends:
Holders of Series B Preferred Stock shall be entitled to dividends
at the
same rate as holders of Common Stock when and as declared on the
Common
Stock, on an as-converted basis.
|
·
|
Conversion:
Each holder of Series B Preferred Stock has the right to convert
such
shares, at any time, into shares of Common Stock for no additional
consideration. The total number of shares of Common Stock into which
Series B Preferred Stock may be converted will be determined by dividing
the original purchase price by the applicable conversion price. The
initial conversion price for the Series B Preferred Stock is $2.00
per
share.
|
·
|
Automatic
Conversion:
Shares of Series B Preferred Stock will be automatically converted
into
shares of Common Stock, at the then applicable conversion price,
on May
31, 2008, the date that is twelve (12) months from the date of
issue.
|
·
|
Anti-dilution
Provisions:
The Series B Preferred Stock has proportional anti-dilution protection
for
stock splits, stock dividends or similar transactions. The conversion
price of the Series B Preferred Stock is subject to adjustment to
prevent
dilution in the event we issue, or are deemed to issue, additional
shares
of Common Stock or preferred stock at a purchase price less than
the
then-effective conversion price. We will not be required to make
any
adjustment of the conversion price in the case of the grant of options
to
purchase or the issuance by the Company of Common Stock to employees,
directors and consultants of the Company, or any subsidiary, pursuant
to
any stock option or stock purchase plan adopted by the Board of Directors
for the benefit of our employees, consultants and
directors.
|
·
|
Voting
Rights:
Holders of Series B Preferred Stock are entitled to that number of
votes
on all matters presented to stockholders equal to the number of shares
of
Common Stock then issuable upon conversion of the Series B Preferred
Stock. Holders of shares of Series B Preferred Stock have the right
to
vote together with Common Stock and not as a separate class except
as
specifically provided herein or as otherwise required by
law.
|
·
|
Protective
Provisions:
So
long as shares of Series B Preferred Stock are outstanding, we may
not,
without first obtaining the approval (by vote or written consent,
as
provided by law) of the holders of at least fifty percent (50%) of
the
then outstanding shares of Series B Preferred Stock (as applicable),
voting as a single class, modify adversely or waive any of the rights,
preferences or privileges of the shares of Series B Preferred Stock
described in the applicable Certificate of
Designation.
|
·
|
is
or was a director, officer, employee or agent of the corporation;
or
|
·
|
is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
|
·
|
cost
effective
|
·
|
sustainable
and therefore capable of ushering in the carbonless fuel
era
|
·
|
competitive
with fossil fuel alternative
|
·
|
reliable
|
·
|
capable
of exceeding customer expectations
|
·
|
market
driven
|
·
|
Distributed
power generation via renewable power
support
|
·
|
Power
generation using clean-burning by-product gases such as
hydrogen
|
·
|
Industrial
applications for our engine controls and fuel distribution
system
|
·
|
Launch
the Oxx Power®
4.9L engine line
|
·
|
Establish
US and India based distribution
|
·
|
Establish
a core line of power generation
products
|
·
|
Hire
the core staff of the organization
|
·
|
Create
a brand presence
|
·
|
Establish
the basis of our IP portfolio
|
·
|
Establish
proof of concept projects throughout the
world
|
·
|
4.9L,
6-cylinder Oxx Power®
Engine
|
·
|
4.9L,
6 cylinder Oxx Power®
Hydrogen
engine
|
·
|
Oxx
Power®
Power
Units
|
·
|
50kW
Oxx Power®
Hydrogen
Genset
|
·
|
250kW
4 + 1™ Hydrogen Genset
|
·
|
Oxx
Boxx™ Engine Controller
|
·
|
We
entered into a strategic alliance with Startech Environmental Corporation,
a Connecticut based firm, on February 19, 2008. Startech designs
and
manufactures plasma conversion waste processing equipment. Startech
believes that it can produce gas from its waste mitigation process
that
can be used to create power from both traditional and non-traditional
power generation systems. We will supply Startech a single genset
to
integrate with its system in order to prove the concept. Assuming
we have
successful trials, we intend to work together to package and market
a
complete system.
|
·
|
In
September 2007, we entered into a memorandum of understanding with
New
Delhi-based Belliss India Limited to sell, deploy, and service its
engines
and distributed generation equipment in India. We believe our new
relationship with Belliss offers us the opportunity to establish
broader
sales penetration of carbonless energy products in India while allowing
Belliss to expand its product and service scope.
|
·
|
In
September 2007, we shipped our first ammonia-fueled power unit for
testing
purposes. The power unit, equipped with an Oxx Power®
4.9L
engine outfitted with our proprietary controls and fuel delivery
system,
was shipped to TGP West in California. The engine is being tested
to run
primarily on anhydrous ammonia, with liquefied petroleum gas (LPG)
as a
catalyst fuel for this test. The clean power supplied by this unit
is used
to irrigate a walnut grove and provide water for a cattle ranch in
the San
Luis Obispo area. We
believe ammonia could be the enabler to the hydrogen economy. There
is an
established manufacturing and distribution infrastructure in place
around
the world for anhydrous ammonia, which is the greatest carrier of
hydrogen, at 17.6% hydrogen by weight. We are developing the means
to
operate engines effectively on this fuel, and intend to continue
to
further optimize the platform.
|
·
|
In
August 2007 we received an order for two hydrogen-fueled, V-8 Oxx
Power®
engines
in support of the International Centre for Hydrogen Energy
Technology/UNIDO (United Nations Industrial Development Organization)
hydrogen development program in Istanbul, Turkey which are expected
to be
integrated into the water taxi fleet in Istanbul, bringing emission-free
fuel for taxis operating in that busy port. The engines to be delivered
under this purchase order will be specially outfitted for marine
use.
|
·
|
In
January 2007, we shipped one of our 4+1™
250
kW Oxx Power®
generator
systems to a demonstration site in Toronto as part of our contract
to
deliver the generator system to Natural Resources
Canada (“NRCan”). The HEC Oxx Power®
generator
system was successfully tested in Canada for several months, generating
power by burning non-polluting hydrogen fuel. The generator system
is
controlled by our Oxx Boxx™
technology developed by HEC Canada, whereby four engines run in parallel
while one is always in reserve. This design maximizes both output
and
reliability, to become a key part of extending the use of both wind
power
and the power grid.
|
·
|
The
unit has been returned to Iowa for additional work to allow it to
be
connected to the grid. We believe that this Oxx Power®
4+1™ system is highly scalable and can be an integral part of large-scale
power generation systems. NRCan is seeking power generation solutions
that
are environmentally clean and economically viable. By integrating
wind-based energy with our Oxx Power®
generator
system, NRCan, its project partners, and HEC plan to bring on-line
a
sustainable solution that extends the reach of wind energy, and reduces
customers’ dependence on petroleum and gas burning technology. During
slack wind conditions, hydrogen, which is produced by water electrolysis
when the wind is blowing, will be used to fuel the 4+1™
power generation system, thereby extending the use of wind energy
sources.
|
·
|
On
November 6, 2006, we entered into a Memorandum of Understanding with
ITM
Power
plc (“ITM”),
one of the UK’s leading innovators within the alternative energy industry.
The parties plan to jointly develop products for a non-polluting,
grid-independent energy system which can undergo early field trial
testing. We anticipate that ITM can offer an assured supply of hydrogen
using ITM’s low cost electrolyzer technology. ITM anticipates that HEC
will provide an early route to the provision of a complete system
package
using our proven engine technology. The combination of a hydrogen-fueled
internal combustion engine and a low cost electrolyzer could provide
the
essential technology to convert low-value, intermittent, renewable
energy
(wind, solar) into a reliable, non-fossil energy supply. Subject
to the
production of satisfactory results from the field trials, the
Company
and ITM intend to progress into detailed discussions with the intention
of
entering into a more formal commercial exploitation arrangement.
In
November 2007, our then COO, Donald C. Vanderbrook traveled to Sheffield,
UK, to meet with ITM and discuss program status. We believe that
when ITM
commences production there could be considerable market potential
for
their hydrogen production technology and our small hydrogen powered
generator set in off-grid applications such as telecom and remote
location
applications.
|
·
|
In
August 2006, we received an order from Grasim Industries Limited
for one
50 kW hydrogen engine together with a generator and control system.
We
shipped that system on March 30, 2007. We shipped that system on
March 30,
2007. The unit has been operating as a field test since May 2007.
A visit
was made to Grasim in Nagdah, India in October 2007 to review progress.
We
plan to add more power to this application in 2008. Grasim Industries,
a
member of the Aditya Birla Group of Indian companies, owns and operates
a
number of chlor-alkali manufacturing factories. Our hydrogen engines
and
gensets are of particular interest to Grasim Industries because hydrogen
is a waste product of the chlor-alkali manufacturing process. The
Company
and Grasim have entered into a Memorandum of Understanding as a first
step
toward the goal of working together to develop and market a complete
electrical generation system for the chlor-alkali manufacturing
industry.
|
·
|
On
May 15, 2006, we executed a statement of intent acknowledging our
commitment to provide funding over a three-year period to support
research
by Propulsion Sciences Co. at the United States Merchant Marine Academy,
relating to the use of ammonia emulsions in diesel fuels. To date,
operation on an ammonia emulsification system on a 400 hp diesel
engine
has been conducted in several phases. The objective of this contract
is to
develop a scalable, commercially viable ammonia/diesel-fueled system
for
both new and retrofit applications in order to reduce carbon emissions
footprint, reduce operating costs, and add greater operational flexibility
to fleet diesel power application. Our goal is to operate at levels
of 70%
to 90% ammonia (NH3)
to
diesel fuel. The work to date is expected to be used with a smaller,
high
production diesel engine to verify
scalability.
|
·
|
In
April 2006, we received a purchase order from National
Renewable Energy Lab
and Xcel Energy Services Inc. for the purchase of one 50kW hydrogen
fueled
genset. This genset was delivered in December 2006 and is being tested
in
a wind farm setting in Colorado. The following internet link provides
an
animation where the overall process can be reviewed:
http://www.nrel.gov/hydrogen/proj_wind_hydrogen_animation.html. The
unit
has been operational since late 2007 and has been exporting power
onto the
grid. A preventative maintenance trip was conducted in April 2008
to check
on the unit and make upgrades. The unit continues to function. This
is a
two-year, proof-of-concept program.
|
·
|
Precision
Hi-speed Generator Alignment Fixture
-
A patent has been filed and is pending covering a method and apparatus
allowing for precise alignment between engines and hi-speed alternators.
The device solves the issue of misalignment, the cause of most failures
associated with using high-speed engines with 2-pole 3000 or 3600
rpm
alternators. The device’s precise alignment of +/-.004 between engine
crankshaft and alternator rotor shaft greatly reduces vibration and
significantly increases the system’s life span. The device also acts as a
safety hub preventing the destruction of the alternator, should there
be a
catastrophic failure of the coupler. We were informed in May 2008
that
this patent application has been
allowed.
|
·
|
Material
Neutral Process –
A
patent has been filed and is pending covering a method and apparatuses
for
the development of a self-sustaining and carbon-free power system.
The
system would utilize renewable electrical power created from wind,
hydro
or solar to power an electrolyzer creating hydrogen “H2”.
The H2
would then be synthesized into anhydrous ammonia “NH3”
by adding nitrogen from the air. The NH3
would then be stored in tanks and later used as fuel in Oxx
Power®
generators.
|
·
|
A
byproduct of burning NH3
in
the engine is the creation of water “H2O”
which can be returned to the electrolyzer to be re used. Nitrogen
from the
engine exhaust is also fed into the H2
synthesizer to create NH3.
Please refer to the diagram below regarding the
process:
|
·
|
Permanent
Magnet Generator Cooling
-
A patent has been filed and is pending covering the method and apparatus
for the more efficient transfer of heat away from the permanent magnet
generator. Permanent magnet generators represent a major step forward
in
the evolution of power generation. A stumbling block to the future
widespread implementation of this technology is the increased heat
associated with the design. We believe that our method of reducing
this
heat represents a significant breakthrough in this area. These heat
deflection capabilities will allow us to produce prime power alternators
with one-third of the footprint of their air-cooled
counterparts.
|
·
|
Dual
Connecting Rod Piston
-
A patent has been filed and is pending covering a large displacement
piston and connecting rod. The piston comprises a large bore piston
and a
plurality of connecting rods. A very large displacement engine is
built
using one piston with the plurality of connecting rods, wherein the
one
piston has the combined diameter of two pistons in a smaller bore
engine.
The connecting rods are spaced to operatively connect with a standard
crankshaft style, where each connecting rod of the two smaller, standard
pistons would connect to the crankshaft.
|
·
|
Indexed
Segmented Crankshaft
-
A patent has been filed and is pending relating to the manufacture
and
assembly of a crankshaft for an internal combustion or diesel engine.
The
invention is comprised of a crankshaft that is made up of pieces
or
segments that are assembled together with the proper segment indexing
to
achieve a design that could not be achieved by casing or machining
as a
single component. Crankshafts are generally made by molding and designing
to fit a specific engine and specific stroke. This design allows
for
changing the crankshaft design without having to make a new mold
or
undertake other associated steps.
|
·
|
Large
Displacement Engine
-
A patent has been filed and is pending covering an engine block with
a
plurality of relatively large piston bores. The engine block is adapted
for use of relatively large bore pistons, and preferably dual connecting
rod pistons. Configured in this manner, the engine block has a relatively
large displacement and is especially suited for use of low-btu fuels,
more
particularly hydrogen.
|
·
|
Laminated
Internal Combustion Engine Design and Fabrication
Technique
-
A patent has been filed and is pending covering an engine block for
an
internal combustion engine that is fabricated from laminated pieces
of
material instead of cast iron or cast aluminum. The advantages of
this
design are several. There is the flexibility of the design. Each
lamination piece can be designed to complex three dimensional structures
and/or passages. The lamination material itself can be changed to
improve
strength, thermal conductivity, reduce cost, or any other parameter
that
one might like to adjust. We believe this engine will have a manufacturing
cost of half, or less, than the cost of a traditional cost engine.
The
laminated engine is illustrated in Figure
2.
|
·
|
Carbon
Free Hydrogen and Ammonia Fueled Internal Combustion
Engine
-
A patent has been filed and is pending covering a spark ignited internal
combustion engine with a dual-fuel system and a special engine control
system, including special software. The engine control system starts
the
engine on either H2
or
on a combination of H2
and NH3
where in the latter case the percentage of H2
is
adjusted to ensure proper starting. Once the engine is running, the
engine
control system adjusts the percentage of hydrogen needed for proper
operation. The percentage of hydrogen can be from about 5% to 100%,
while
the percentage of ammonia can be from 0% to about 95%. NH3
provides greater power and requires less storage space and is therefore
the preferred fuel. The preferred way to operate the engine is to
start
with a hydrogen rich mixture and slowly decrease the percentage of
H2
until
the minimum amount required for proper engine operation is achieved.
This
minimum will be determined by several factors. The most notable is
the
flame velocity. At higher engine speeds (rpms) greater amounts of
hydrogen
will be required.
|
·
|
Gaseous/Liquid
and Ammonia Fueled Internal Combustion Engine
-
A patent has been filed and is pending covering a spark ignited internal
combustion engine with a dual-fuel system and a special engine control
system, including special software. The engine control system starts
the
engine with either 100% of a gaseous or liquid fuel (such as natural
gas,
gasoline or ethanol and referred to as “standard fuel”) or a combination
of standard fuel and NH3.
In the latter case, the percentage of standard fuel is adjusted to
ensure
proper starting. Once the engine is running, the engine control system
adjusts the percentage of standard fuel needed for proper operation.
The
percentage of standard fuel can be from approximately 5% to 100%,
while
the percentage of ammonia can be from 0% to approximately 95%.
NH3
produces no CO2
emissions and is therefore the preferred fuel. The preferred way
to
operate the engine is to start with a gaseous fuel rich mixture and
slowly
decrease the percentage of standard fuel until the minimum amount
required
for proper engine operation is achieved. This minimum will be determined
by several factors. The most notable is the flame velocity. At higher
engine speeds (rpms) greater amounts of standard fuel will be
required.
|
Mark
|
Status
|
Reg./Serial
No.
|
||
TM:
Energy In A Bottle
|
Allowed
|
77/015,544
|
||
TM:
4 + 1
|
Pending
Filed
on 2/6/2006
|
78/807,600
|
||
TM:
HEC
|
Pending
Filed
on 4/5/2007
|
77/149,385
|
||
TM:
Baby Oxx
|
Allowed
|
77/015,515
|
||
TM:
No Carbon Design
|
Allowed
|
78/942,318
|
||
TM:
OXX & Design
|
Registered
|
78/841,069
|
||
TM:
OXX BOXX
|
Pending
Filed
on 3/27/2006
|
78/846,909
|
||
TM:
OXX CART
|
Allowed
|
78/812,253
|
||
TM:
OXX POWER
|
Registered:
|
78/537,731
|
||
TM:
OXX WORKS
|
Allowed
|
78/807,587
|
||
TM:
Part of the Solution
|
Allowed
|
77/036,246
|
||
TM:
Tangible Technology
|
Pending
Filed
on 6/8/2007
|
77/201,544
|
·
|
Test
data and results;
|
·
|
OEM
part numbers;
|
·
|
Recommended
maintenance;
|
·
|
Service
or repair manuals;
|
·
|
Parts
manuals;
|
·
|
End-user
warranty statement;
|
·
|
Recall
and campaign processes;
|
·
|
Warranty
reporting process;
|
·
|
Record
retention process.
|
High Bid ($)
|
Low Bid ($)
|
||||||
First
Quarter ended March 31, 2006
|
8.20
|
5.00
|
|||||
Second
Quarter ended June 30, 2006
|
23.25
|
6.50
|
|||||
Third
Quarter ended September 30, 2006
|
14.10
|
3.10
|
|||||
Fourth
Quarter ended December 31, 2006
|
3.60
|
2.30
|
|||||
First
Quarter ended March 31, 2007
|
3.55
|
2.50
|
|||||
Second
Quarter ended June 30, 2007
|
3.08
|
1.35
|
|||||
Third
Quarter ended September 30, 2007
|
1.75
|
0.95
|
|||||
Fourth
Quarter ended December 31, 2007
|
1.85
|
0.65
|
|||||
First
Quarter ended March 31, 2008
|
0.80
|
0.30
|
·
|
The
number of securities to be resold must fall within specified volume
limitations;
|
·
|
The
resale must comply with the revised “manner of sale” conditions; and
|
·
|
The
seller may be required to file a Form 144 reporting the sale (or
proposed
sale), subject to the new reporting threshold.
|
Plan
Category
|
Number of Securities
to be issued upon exercise of outstanding options, warrants and rights (a)
|
Weighted-average
exercise price of outstanding options, warrants and rights (b)
|
Number of securities
remaining available for future issuance under
equity compensation plans (excluding securities
reflected in column (a)
(c)
|
|||||||
Equity
compensation plans approved by security holders
|
892,916
|
1 |
$
|
1.16
|
746,084
|
2 | ||||
Equity
compensation plans not approved by security holders
|
782,871
|
1 |
$
|
2.13
|
—
|
|||||
Total
|
1,675,787
|
1 |
$
|
1.61
|
746,084
|
2 |
(1) |
Includes (a)
options issued under the Company’s 2005 Incentive Compensation Plan to
purchase 892,916 shares, including employee/director options for
691,250
shares and consultant options for 201,666 shares, less options to
purchase
8,000 shares that have been exercised, (b) 782,871 shares of Common
Stock
underlying warrants, 69,640 of which were issued in the First Private
Offering, 134,346 of which were issued in the Second Private Offering,
120,900 of which were issued in the Series A Preferred Offering,
57,985 of
which were issued in the Series B Preferred Offering, 375,000 of
which
were issued to settle a vendor dispute and 25,000 of which were issued
for
the purchase of inventory. This figure does not include 361,000 shares
of
restricted stock issued under the Company’s 2005 Incentive Compensation
Plan, 92,000 of which remain subject to forfeiture as of December
31,
2007.
|
(2) |
This
amount equals the number of shares remaining to be issued under the
Company’s 2005 Incentive Compensation
Plan.
|
2007
|
2006
|
From Inception
(May 19, 2003) to
December 31, 2007 |
||||||||
Revenues
|
$
|
740,799
|
$
|
278,344
|
$
|
1,062,703
|
||||
Cost
of Sales
|
644,517
|
253,723
|
921,784
|
|||||||
Gross
Profit
|
96,282
|
24,621
|
140,919
|
|||||||
Operating
Expenses
|
5,362,168
|
5,721,513
|
12,462,470
|
|||||||
(Loss)
from Operations
|
(5,265,886
|
)
|
(5,696,892
|
)
|
(12,321,551
|
)
|
||||
Other
Income (Expense)
|
(106,835
|
)
|
(55,377
|
)
|
(184,127
|
)
|
||||
Net
Loss
|
$
|
(5,372,721
|
)
|
$
|
(5,752,269
|
)
|
$
|
(12,505,678
|
)
|
|
Series
A Preferred Stock Beneficial Conversion Feature Accreted as a
Dividend
|
(1,889,063
|
)
|
-
|
$
|
(1,889,063
|
)
|
||||
Net
Loss Available to Common Stockholders
|
$
|
(7,261,784
|
)
|
$
|
(5,752,269
|
)
|
$
|
(14,394,741
|
)
|
From Inception
|
||||||||||
Year ended December 31,
|
(May 19, 2003) to
|
|||||||||
2007
|
2006
|
December 31, 2007
|
||||||||
Net
cash used in operating activities
|
$
|
(4,067,546
|
)
|
$
|
(6,136,676
|
)
|
$
|
(11,168,312
|
)
|
|
Net
cash provided by (used in) investing activities
|
89,393
|
(1,841,333
|
)
|
(3,091,336
|
)
|
|||||
Net
cash provided by financing activities
|
3,536,428
|
6,787,980
|
14,976,349
|
· Community
Economic Betterment Account Forgivable Loan (“CEBA”)
|
$
|
250,000
|
||
· Physical
Infrastructure Assistance Program Forgivable Loan (“PIAP”)
|
$
|
150,000
|
||
· Enterprise
Zone (estimated value)
|
$
|
142,715
|
·
|
Funding
for training new employees through a supplemental new jobs withholding
credit equal to 3% of gross wages of the new jobs created;
|
·
|
A
refund of 100% of the sales, service and use taxes paid to contractors
and
subcontractors during the construction phase of the plant (excluding
local
option taxes);
|
·
|
A
6.5% research activities tax credit based on increasing research
activities within the State of Iowa;
|
·
|
An
investment tax credit equal to 10% of our capital investment. This
Iowa
tax credit may be carried forward for up to seven
years.
|
·
|
A
value-added property tax exemption. Our community has approved an
exemption from taxation on a portion of the property in which our
business
is located.
|
Name
|
Age
|
Position(s)
|
Held
Since
|
|||
Theodore
G. Hollinger
|
66
|
Chairman
of the Board of the Company, HEC Iowa and HEC Canada, President of
HEC
Canada
|
August
30, 2005
|
|||
Donald
C. Vanderbrook
|
49
|
President
and Chief Executive Officer of the Company, Chief Operating Officer
of HEC
Iowa
|
November
26, 2007
|
|||
Sandra
M. Batt
|
55
|
Chief
Financial Officer and Treasurer
|
December
5, 2005
|
|||
Michael
A. Schiltz
|
47
|
Secretary
of the Company, Vice President of Engine Development of HEC Iowa
|
August
30, 2005
|
|||
Thomas
O. Trimble
|
66
|
Director
|
August
30, 2005
|
|||
Philip
G. Ruggieri
|
53
|
Director
|
May
19, 2006
|
|||
Stephen
T. Parker
|
58
|
Director
|
February
8, 2008
|
|||
Matthew
Fairlie
|
53
|
Director
of and Consultant to HEC Canada
|
January
24, 2007
|
|||
Jan
Rowinski
|
55
|
Director
of HEC Canada
|
April
29, 2008
|
Name
and principal position (a)
|
Year
(b)
|
Salary
($)
(c)9
|
Stock
Awards1 ($) (e)
|
Option
Awards1 ($) (f)
|
Total
($)
(j)
|
|||||||||||
Theodore
G. Hollinger, Chairman of the Board
|
2005
|
81,667
|
68,000
|
2 |
-
|
149,667
|
||||||||||
2006
|
123,704
|
44,325
|
2 |
-
|
168,029
|
|||||||||||
2007
|
123,924
|
42,033
|
2 |
-
|
165,957
|
|||||||||||
Tapan
K. Bose, President of HEC Canada (deceased)
|
2005
|
35,654
|
11,667
|
3 |
48,000
|
4 |
95,321
|
|||||||||
2006
|
110,257
|
4,925
|
3 |
35,460
|
4 |
150,642
|
||||||||||
2007
|
|
116,194
|
3,233
|
3 |
23,280
|
4 |
142,707
|
|||||||||
Donald
C. Vanderbrook, President and CEO
|
2005
|
-
|
-
|
-
|
-
|
|||||||||||
2006
|
-
|
-
|
-
|
-
|
||||||||||||
2007
|
95,808
|
-
|
110,200
|
5 |
206,008
|
|||||||||||
Sandra
M. Batt, Chief Financial Officer and Treasurer
|
2005
|
6,923
|
-
|
73,649
|
6 |
80,572
|
||||||||||
2006
|
88,269
|
-
|
96,575
|
6 |
184,844
|
|||||||||||
2007
|
87,923
|
-
|
86,189
|
6 |
174,112
|
|||||||||||
Michael
A. Schiltz, Secretary
|
2005
|
18,115
|
14,000
|
7 |
24,333
|
8 |
56,448
|
|||||||||
2006
|
88,269
|
5,910
|
7 |
18,715
|
8 |
112,894
|
||||||||||
2007
|
88,420
|
5,820
|
7 |
16,813
|
8 |
111,053
|
1.
|
Amounts
shown represent the amount recognized for financial statement reporting
purposes with respect to the fiscal year in accordance with FAS 123R
as
disclosed in the Company’s Annual Report on Form 10-KSB for the year ended
December 31, 2007.
|
2
|
On
September 1, 2005, 220,000 shares of restricted stock were issued
to
Theodore G. Hollinger, valued at $1.00 per share, based on the stock
price
in the First Private Placement. There was no reported closing price
for
the date of grant, September 1, 2005. 20,000 of these shares were
granted
as compensation for serving as a director of the company. The total
also
includes 3,000 shares initially granted to Dana Hollinger, who is
now
deceased and who was the wife of Mr. Hollinger. 53,000 of these shares
of
restricted stock vested on September 1, 2005, 10,000 of which were
granted
as director compensation. 45,000 of these shares of restricted stock
vested on September 1, 2006, 5,000 of which were granted as director
compensation. 45,000 of these shares of restricted stock vested on
September 1, 2007, 5,000 of which were granted as director compensation.
The remaining shares will vest as to 40,000 shares on September 1,
2008;
and 40,000 shares on September 1, 2009.
|
3
|
On
September 1, 2005, 20,000 shares of restricted stock were issued
to Tapan
K. Bose, valued at $1.00 per share, based on the stock price in the
First
Private Placement. There was no reported closing price for the date
of
grant, September 1, 2005. These shares were granted as compensation
for
serving as a director of HEC Canada. 10,000 of these shares of restricted
stock vested on September 1, 2005. 5,000 of these shares of restricted
stock vested on September 1, 2007 and 5,000 vested on September 1,
2007.
|
4
|
These
options carry an exercise price of $1.00 per share, the fair market
value
of the shares on the date of grant, September 1, 2005. Options vested
as
to 36,000 shares on September 1, 2005, as to 36,000 shares on September
1,
2006, and as to 36,000 shares on September 1,
2007.
|
5
|
These
options carry an exercise price of $1.34, the fair market value of
the
shares on the date of grant, August 14, 2007. Options vested immediately
as to 24,000 shares; on January 22, 2008 as to 17,000 shares; and
on March
14, 2008 as to 7,000 shares. The options are scheduled to vest as
to
17,000 shares on January 22, 2009, 2010 and 2011; and as to 7,000
shares
on March 14, 2009, 2010 and 2011. Options granted to Mr. Vanderbrook
in
January and March 2007 were cancelled and new options were issued
in
August 2007.
|
6
|
These
options carry an exercise price of $1.34, the fair market value of
the
shares on the date of grant, August 14, 2007. Options vested as to
18,000
shares on September 29, 2006 and 2007. Options will vest as to 18,000
shares on September 1, 2008; as to 18,000 shares on September 1,
2009; and
as to 18,000 shares on September 1, 2010. Options granted to Ms.
Batt
during 2005 were cancelled and new options were issued in September
2006.
Those options were cancelled and new options were issued in August
2007.
|
7
|
On
September 1, 2005, 36,000 shares of restricted stock were issued
to
Michael A. Schiltz, valued at $1.00 per share, based on the stock
price in
the First Private Placement. There was no reported closing price
for the
date of grant, September 1, 2005. 30,000 of these shares were granted
as
compensation for serving as a director of the company. 12,000 of
these
shares of restricted stock vested on September 1, 2005. 6,000 of
these
shares of restricted stock vested on September 1, 2006 and September
1,
2007. 6,000 of the shares are scheduled to vest on September 1, 2008
and
September 1, 2009.
|
8
|
These
options carry an exercise price of $1.00 per share, the fair market
value
of the shares on the date of grant, September 1, 2005. Options vested
as
to 18,000 shares on September 1, 2005, as to 19,000 shares on September
1,
2006, and as to 19,000 shares on September 1, 2007. 14,000 of the
shares
are scheduled to vest on September 1, 2008 and September 1,
2009.
|
9
|
The
2005 salary amount for Mr. Hollinger includes amounts paid by HEC
Iowa
prior to the September 1, 2005 merger with Green Mt. Labs,
Inc.
|
GRANTS
OF PLAN-BASED AWARDS
|
Name
(a)
|
Grant Date
(b)
|
All Other Option
Awards: Number of Securities Underlying Options (#) (j)
|
Exercise or Base
Price of Option Awards ($/Sh) (k)
|
Grant Date Fair
Value of Stock and Option Awards (l)
|
|||||||||
Donald
C. Vanderbrook
|
1/22/2007
|
85,000
|
1 |
2.95
|
192,933
|
||||||||
President
and CEO
|
3/14/07
|
35,000
|
1 |
3.15
|
84,536
|
||||||||
|
8/14/07
|
120,000
|
2 |
1.34
|
18,964
|
||||||||
Sandra
M. Batt, Chief Financial Officer and Treasurer
|
8/14/07
|
90,000
|
3 |
1.34
|
17,460
|
1
|
Options
granted to Mr. Vanderbrook in January and March 2007 were cancelled
and
new options were issued in August
2007.
|
2
|
These
options carry an exercise price of $1.34, the fair market value of
the
shares on the date of grant, August 14, 2007. Options vested immediately
as to 24,000 shares; on January 22, 2008 as to 17,000 shares; and
on March
14, 2008 as to 7,000 shares. The options are scheduled to vest as
to
17,000 shares on January 22, 2009, 2010 and 2011; and as to 7,000
shares
on March 14, 2009, 2010 and 2011.
|
3
|
These
options carry an exercise price of $1.34, the fair market value of
the
shares on the date of grant, August 14, 2007. Options vested as to
18,000
shares on September 29, 2006 and 2007. Options will vest as to 18,000
shares on September 1, 2008; as to 18,000 shares on September 1,
2009; and
as to 18,000 shares on September 1, 2010. Options granted to Ms.
Batt
during 2005 were cancelled and new options were issued in September
2006.
Those options were cancelled and new options were issued in August
2007.
|
OPTION
AWARDS
|
STOCK
AWARDS
|
||||||||||||||||||
Name
(a)
|
Number of
Securities Underlying Unexercised Options (#)
Exercisable
(b)
|
Number of
Securities Underlying Unexercised Options (#)
Unexercisable
(c)
|
Option
Exercise Price ($)
(e)
|
Option
Expiration Date (f)
|
Number of
Shares or Units of Stock That Have Not Vested (#)
(g)
|
Market
Value of Shares or Units of Stock That Have Not Vested ($)
(h)
|
|||||||||||||
Theodore
G. Hollinger,
Chairman of the Board |
-
|
-
|
-
|
-
|
80,000
|
1 |
52,800
|
2 | |||||||||||
Tapan
K. Bose, President of HEC Canada (deceased)
|
108,000
|
3 |
-
|
4 |
1.00
|
1-24-2009
|
-
|
-
|
|||||||||||
Donald
C. Vanderbrook,
President |
24,000
|
5 |
96,000
|
5 |
1.34
|
8-14-2017
|
-
|
-
|
|||||||||||
Sandra
M. Batt, Chief Financial Officer and Treasurer
|
36,000
|
6 |
54,000
|
6 |
1.34
|
8-14-2017
|
-
|
-
|
|||||||||||
Michael
A. Schiltz, Secretary
|
56,000
|
7 |
28,000
|
7 |
1.00
|
8-14-2017
|
12,000
|
8 |
7,920
|
2 |
1
|
These
shares are scheduled to vest as to 40,000 on September 1, 2008 and
2009.
|
2
|
Market
value of these shares ($0.66 per share) is based on the closing price
of
the stock on December 31, 2007.
|
3
|
These
options vested as to 36,000 shares on September 1, 2005, 2006 and
2007.
|
4
|
Options
were scheduled to vest as to 36,000 shares on September 1, 2008 and
2009.
Dr. Bose is deceased and all unvested options have been cancelled.
Any
unexercised option will be cancelled one year after the date of his
death,
January 24, 2008.
|
5
|
These
options vested as to 17,000 shares, on January 22, 2007; as to 7,000
shares and on March 14, 2007; as to 17,000 shares, on January 22,
2008;
and as to 7,000 shares on March 14, 2008. The options are scheduled
to
vest as to 17,000 shares on January 22, 2009, 2010 and 2011 and as
to
7,000 shares on March 14, 2009, 2010 and 2011.
|
6
|
These
options vested as to 18,000 shares on September 29, 2006 and as to
18,000
shares on September 29, 2007. The options are scheduled to vest as
to on
September 29 2008, 2009 and 2010.
|
7
|
These
options vested as to 18,000 shares on September 1, 2005; as to 19,000
shares on September 1, 2006 and 2007. The options are scheduled to
vest as
to 14,000 shares on September 1, 2008 and
2009.
|
8
|
These
shares are scheduled to vest as 6,000 shares on September 1, 2008
and
2009.
|
·
|
an
annualized base salary of
$105,000.00;
|
·
|
a
bonus payment equal to $5,000 upon the later of (i) the date when
the
Company shall have sold and shipped a total of 100 open power units
or the
date when the Company shall have sold and shipped a total of 50 gensets
(ii) the date when the Mr. Vanderbrook has finalized his move to
Algona,
Iowa;
|
·
|
any
bonus due under the terms of a Company bonus plan to be subsequently
adopted; and
|
·
|
medical,
dental, pension, life, disability and any other employee benefits
offered
by Company.
|
DIRECTOR
COMPENSATION
|
Name
(a)
|
Fees Earned or Paid
in Cash ($)
(b)
|
Stock
Awards ($)
(c)
|
Option
Awards ($)
(d)1
|
All
Other Compensation
($)
(g)
|
Total
($)
(j)
|
|||||||||||
Theodore
G. Hollinger2
|
-
|
-
|
-
|
-
|
2 |
-
|
||||||||||
Thomas
O. Trimble
|
9,625
|
3 |
-
|
13,386
|
4 |
-
|
23,011
|
|||||||||
Edward
T. Berg
|
9,625
|
3 |
-
|
13,386
|
4 |
-
|
23,011
|
|||||||||
Philip
G. Ruggieri
|
9,625
|
3 |
-
|
13,386
|
4 |
-
|
23,011
|
|||||||||
1
|
Amounts
shown represent the amount recognized for financial statement reporting
purposes with respect to the fiscal year in accordance with FAS 123R
as
disclosed in the Form 10-KSB for the year ended December 31, 2007.
|
2
|
Does
not include executive compensation disclosed above in the Summary
Compensation Table.
|
3
|
Commencing
May 19, 2007, non-employee directors (Mr. Trimble, Mr. Berg and Mr.
Ruggieri) are compensated $2,500 per quarter, subject to attendance
at
Board meetings. Mr. Berg resigned from the Board on February 15,
2008 and
has been replaced on the Board by Stephen T. Parker. Directors are
entitled to be reimbursed for expenses incurred in attendance at
meetings.
Except as described above, none of the directors of the company has
received any other compensation for his services as a
director.
|
4
|
On
May 30, 2007, Mr. Trimble, Mr. Berg and Mr. Ruggieri were granted
options
to purchase 10,000 shares of restricted stock of the company. The
amount
shown above represents the amount recognized for financial statement
reporting purposes with respect to the fiscal year 2007 in accordance
with
FAS 123R. Those options were cancelled and new options were issued
in
August 2007, all of which are scheduled to vest on May 30, 2008.
These
options are exercisable at $1.34 per share.
|
Audit
Committee
|
Compensation
Committee
|
|
Philip
G. Ruggieri
|
Thomas
O. Trimble
|
|
Stephen
T. Parker
|
||
Phillip
G. Ruggieri
|
·
|
The
integrity of the company’s financial statements and financial reporting
process;
|
·
|
The
company’s compliance with legal and regulatory requirements;
|
·
|
The
independent auditors’ qualifications, independence and performance; and
|
·
|
Communication
among the independent auditors, management and the Board of Directors.
|
Title of Class
|
Name and Address of
Beneficial Owner |
Amount and Nature of
Beneficial Ownership |
Percent
of Class9
|
Common
|
Theodore
G. Hollinger
2502
East Poplar Street
Algona,
IA 50511
|
16,541,801
|
1
|
56.03
|
%
|
|||||
Common
|
Thomas
O. Trimble
2341
Hilton Road
Ferndale,
MI 58220-1593
|
20,000
|
2
|
*
|
||||||
Common
|
|
Stephen
T. Parker
2502
East Poplar Street
Algona,
IA 50511
|
10,000
|
3
|
*
|
|||||
Common
|
Philip
G. Ruggieri
8742
Wittenwood Cove, Orlando, FL 32836
|
40,000
|
4 |
*
|
||||||
Common
|
Sandra
M. Batt
2502
East Poplar Street
Algona,
IA 50511
|
66,770
|
5 |
*
|
||||||
Common
|
Michael
A. Schiltz
2502
East Poplar Street
Algona,
IA 50511
|
141,520
|
6 |
*
|
||||||
Common
|
Donald
C. Vanderbrook
2502
East Poplar Street
Algona,
IA 50511
|
48,000
|
10 |
*
|
||||||
Common
|
Matthew
Fairlie
RR4
Shelburne
Ontario,
Canada L0N 1S8
|
0
|
*
|
|||||||
Common
|
Jan
Rowinski
6300
Chemin Côte-de-Liesse, Suite 201
Montréal,
Québec,
H4T
1E3
|
0
|
*
|
|||||||
Title of Class
|
Name and Address of
Beneficial Owner |
Amount and Nature of
Beneficial Ownership |
Percent
of Class9
|
Common
|
Officers
and directors as a Group (9
Persons)6
|
16,868,091
|
8 |
56.82
|
%
|
|||||
Series
B Preferred
|
Gabriel
Elias and
Alma
Elias
509
Spring Ave
Elkins
Park, PA 19027
|
2,311,250
|
7 |
7.83
|
%
|
1.
|
Mr.
Hollinger received 16,297,200 shares of Common Stock as a result
of its
acquisition on August 30, 2005 of Hydrogen Engine Center, Inc., an
Iowa
corporation. Immediately prior to the acquisition, Mr. Hollinger
was the
sole stockholder of HEC Iowa and these shares were issued in exchange
for
his shares in HEC Iowa.
|
Mr.
Hollinger received 20,000 shares of restricted stock on September
1, 2005
under the Company’s 2005 Incentive Compensation Plan for his services as a
director, all of which are fully
vested.
|
Mr.
Hollinger received 200,000 shares of restricted stock on September
1, 2005
under the Company’s 2005 Incentive Compensation Plan for services as an
employee, of which 60% (120,000 shares) have fully vested (20% vested
on
September 1, 2005 and 20% have and shall continue to vest each year
thereafter until fully vested).
|
Mr.
Hollinger received 3,000 shares of stock which were reserved by the
Board
of Directors to be granted to his wife, Dana Hollinger, under the
Company’s 2005 Incentive Compensation Plan for services as an employee.
Mrs. Hollinger is now deceased and these shares have been issued
directly
to Mr. Hollinger as her heir.
|
Mr.
Hollinger received 21,601 shares of stock on September 1, 2005 upon
conversion of a promissory note dated September 15, 2003 and issued
to Mr.
Hollinger in exchange for a loan of $17,280 to the Company. Under
the
terms of the promissory note, these shares were issued at a conversion
price of $0.80 per share.
|
2.
|
Includes
20,000 shares of restricted stock granted under the Company’s 2005
Incentive Compensation Plan, all of which are fully
vested.
|
3.
|
Includes
currently excisable options to purchase 10,000 shares for $0.40 per
share.
|
4.
|
Includes
currently exercisable options to purchase 15,000 shares for $1.34
per
share under the Company’s 2005 Incentive Compensation Plan.
|
5
|
Includes
currently exercisable options to purchase 36,000 shares for $1.34
per
share under the Company’s 2005 Incentive Compensation
Plan.
|
6.
|
Includes
12,000 shares of restricted stock that are subject to forfeiture
under the
Company’s 2005 Incentive Compensation Plan. Also includes currently
exercisable options to purchase 56,000 shares, all for $1.00 per
share
under the Company’s 2005 Incentive Compensation
Plan.
|
7.
|
Includes
250,000 shares of Series B Preferred Stock convertible into 250,000
shares
of Common Stock owned by Wholesale Realtors Supply, a partnership
controlled by Mr. Elias and 550,000 shares of Series B Preferred
Stock
convertible into 550,000 shares of Common Stock owned jointly by
Mr. Elias
and Alma Elias, his spouse. The shares of the Series B Preferred
Stock are
voted by the holder on an “as-converted”
basis.
|
8.
|
This
amount represents shares beneficially owned by Messrs. Hollinger,
Trimble,
Parker, Ruggieri, Vanderbrook, Fairlie, Rowenski and Schlitz and
Ms. Batt,
including the options and restricted shares as described
above.
|
9.
|
Applicable
percentage of ownership is based on 27,590,164 shares of Common Stock
and
1,932,846 shares of Series B Preferred Stock outstanding as of April
28, 2008, together with securities exercisable or convertible into
shares
of Common Stock within sixty (60) days of April 28, 2008 for each
stockholder. Beneficial ownership is determined in accordance with
the rules of the SEC and generally includes voting or investment
power
with respect to securities. Shares of Common Stock are deemed to be
beneficially owned by the person holding such securities for the
purpose
of computing the percentage of ownership of such person, but are
not
treated as outstanding for the purpose of computing the percentage
ownership of any other person. Note that affiliates are subject to
Rule 144 and Insider trading regulations - percentage computation
is for
form purposes only.
|
10.
|
Includes
currently exercisable options to purchase 48,000 shares for $1.34
per
share under the Company’s 2005 Incentive Compensation
Plan.
|
Name
|
Amount of
Loan |
Date of Loan
|
Conversion
price/share |
Number
of Shares |
|||||||||
Theodore
G. Hollinger
|
$
|
17,280.06
|
September
2003
|
$
|
0.80
|
21,601
|
|||||||
Michael
A. Schiltz
|
$
|
15,000.00
|
September
2003
|
$
|
0.80
|
18,750
|
|||||||
Tapan
K. Bose (Deceased)
|
$
|
19,751.76
|
September
2003
|
$
|
0.80
|
24,465
|
Report
of Independent Registered Public Accounting Firm
|
F-ii
|
Consolidated
Balance Sheets as of December 31, 2007 and 2006
|
F-1 –
F-2
|
Consolidated
Statements of Operations for the Years Ended
December
31, 2007 and 2006 and the period from inception
(May
19, 2003) through December 31, 2007
|
F-3
|
Consolidated
Statement of Changes in Stockholders’ Equity for the Years
Ended
December
31, 2007 and 2006 and the period from inception
(May
19, 2003) through December 31, 2007
|
F-4
–F-5
|
Consolidated
Statements of Cash Flows for the Years Ended
December
31, 2007 and 2006 and the period from inception
(May
19, 2003) through December 31, 2007
|
F-6 –
F-7
|
Notes
to Consolidated Financial Statements
|
F-8
|
/s/
LWBJ, LLP
|
LWBJ,
LLP
|
West
Des Moines, Iowa
|
April
15, 2008
|
December 31,
|
December 31,
|
||||||
2007
|
2006
|
||||||
ASSETS
|
|||||||
Current
Assets
|
|||||||
Cash
and cash equivalents
|
$
|
713,289
|
$
|
1,149,207
|
|||
Restricted
cash
|
115,157
|
352,584
|
|||||
Accounts
receivable
|
134,237
|
203,375
|
|||||
Inventories
|
1,655,359
|
2,001,004
|
|||||
Prepaid
expenses
|
89,901
|
69,882
|
|||||
Total
current assets
|
2,707,943
|
3,776,052
|
|||||
Property,
Plant and Equipment
|
|||||||
Leasehold
improvements
|
-
|
17,156
|
|||||
Building
|
2,271,209
|
2,150,322
|
|||||
Equipment
|
908,999
|
757,217
|
|||||
Land
and improvements
|
472,504
|
467,188
|
|||||
Construction
in progress
|
-
|
64,744
|
|||||
3,652,712
|
3,456,627
|
||||||
Less
accumulated depreciation
|
375,178
|
182,440
|
|||||
Net
property and equipment
|
3,277,534
|
3,274,187
|
|||||
Total
Assets
|
$
|
5,985,477
|
$
|
7,050,239
|
December 31,
|
December 31,
|
||||||
2007
|
2006
|
||||||
LIABILITIES
AND EQUITY
|
|||||||
Current
Liabilities
|
|||||||
Notes
payable, banks
|
$
|
594,677
|
$
|
568,693
|
|||
Current
portion long-term debt
|
30,350
|
48,289
|
|||||
Current
installments of obligation under capital lease
|
45,247
|
8,084
|
|||||
Accounts
payable
|
146,585
|
498,316
|
|||||
Accrued
expenses
|
207,328
|
175,935
|
|||||
Accrued
interest
|
129,965
|
98,045
|
|||||
Unearned
project reimbursements
|
-
|
102,972
|
|||||
Unearned
grants
|
30,977
|
66,663
|
|||||
Accrued
purchase commitment losses
|
-
|
26,458
|
|||||
Total
current liabilities
|
1,185,129
|
1,593,455
|
|||||
Long-term
debt, net of current maturities
|
1,338,235
|
1,369,339
|
|||||
Obligation
under capital lease, excluding current
installments
|
80,955
|
42,275
|
|||||
1,419,190
|
1,411,614
|
||||||
Total
liabilities
|
2,604,319
|
3,005,069
|
|||||
Commitments
and Contingencies
|
|||||||
Stockholders’
Equity
|
|||||||
Preferred
stock - $0.001 par value; 10,000,000 shares authorized,
|
|||||||
Series
A, $0.001 par value; 1,000,000 shares designated, -0- and 930,000
shares
issued and outstanding, respectively
|
-
|
930
|
|||||
Series
B, $0.001 par value; 5,000,000 shares designated, 1,932,846 and -0-
shares
issued and outstanding, respectively
|
1,933
|
-
|
|||||
Common
stock, $0.001 par value; 100,000,000 shares authorized, 27,590,164
and
26,143,914 shares issued and outstanding, respectively
|
27,590
|
26,144
|
|||||
Additional
paid-in capital
|
17,749,788
|
11,160,272
|
|||||
Accumulated
other comprehensive loss - foreign currency
|
(3,412
|
)
|
(9,219
|
)
|
|||
Deficit
accumulated during the development stage
|
(14,394,741
|
)
|
(7,132,957
|
)
|
|||
Total
stockholders’ equity
|
3,381,158
|
4,045,170
|
|||||
Total
Liabilities and Stockholders’ Equity
|
$
|
5,985,477
|
$
|
7,050,239
|
Year
Ended
December
31,
2007
|
Year
Ended
December
31,
2006
|
From
Inception
(May
19,
2003)
to
December
31,
2007
|
||||||||
Sales
|
$
|
740,799
|
$
|
278,344
|
$
|
1,062,703
|
||||
Cost
of Sales
|
644,517
|
253,723
|
921,784
|
|||||||
Gross
Profit
|
96,282
|
24,621
|
140,919
|
|||||||
Operating
Expenses
|
||||||||||
Sales
and marketing
|
219,875
|
859,587
|
1,201,036
|
|||||||
General
and administrative
|
2,790,255
|
3,007,139
|
6,471,408
|
|||||||
Research
and development
|
1,370,151
|
1,297,151
|
3,250,503
|
|||||||
Losses
related to inventory
|
981,887
|
557,636
|
1,539,523
|
|||||||
5,362,168
|
5,721,513
|
12,462,470
|
||||||||
Operating
Loss
|
(5,265,886
|
)
|
(5,696,892
|
)
|
(12,321,551
|
)
|
||||
Other
Income (Expense)
|
||||||||||
Interest
income
|
73,057
|
58,972
|
164,052
|
|||||||
Interest
expense
|
(173,158
|
)
|
(114,349
|
)
|
(341,445
|
)
|
||||
Loss
on sale of asset
|
(6,734
|
)
|
-
|
(6,734
|
)
|
|||||
(106,835
|
)
|
(55,377
|
)
|
(184,127
|
)
|
|||||
Net
Loss
|
$
|
(5,372,721
|
)
|
$
|
(5,752,269
|
)
|
$
|
(12,505,678
|
)
|
|
Series
A Preferred stock beneficial conversion feature accreted as a
dividend
|
(1,889,063
|
)
|
-
|
(1,889,063
|
)
|
|||||
Net
Loss Attributable To Common Stockholders
|
$
|
(7,261,784
|
)
|
$
|
(5,752,269
|
)
|
$
|
(14,394,741
|
)
|
|
Weighted-average
shares outstanding
|
26,325,151
|
25,207,950
|
||||||||
Basic
and diluted net loss per share
|
$
|
(0.28
|
)
|
$
|
(0.23
|
)
|
Preferred
Stock A
Shares
|
Preferred
Stock A
Amount
|
Preferred
Stock B
Shares
|
Preferred
Stock B
Amount
|
Common
Stock
Shares
|
Common
Stock
Amount
|
Additional
Paid – in
Capital
|
Unearned
Stock-Based
Compensation
|
Accumulated
Other
Comprehensive
Loss
|
Deficit
Accumulated
During the
Development
Stage
|
Total
|
||||||||||||||||||||||||
Issuance
of common stock to founder in exchange for equipment and expenses
incurred
by founder
|
-
|
$
|
-
|
-
|
-
|
$
|
2,000,000
|
$
|
2,000
|
$
|
98,165
|
$
|
-
|
$
|
-
|
$
|
100,165
|
|||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(65,642
|
)
|
(65,642
|
)
|
|||||||||||||||||||||
Balance
at December 31, 2003
|
-
|
-
|
-
|
-
|
2,000,000
|
2,000
|
98,165
|
-
|
-
|
(65,642
|
)
|
34,523
|
||||||||||||||||||||||
Company
- related expenses paid by founder
|
-
|
-
|
-
|
-
|
-
|
-
|
39,187
|
-
|
-
|
-
|
39,187
|
|||||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(192,476
|
)
|
(192,476
|
)
|
|||||||||||||||||||||
Balance
at December 31, 2004
|
-
|
-
|
-
|
-
|
2,000,000
|
2,000
|
137,352
|
-
|
-
|
(258,118
|
)
|
(118,766
|
)
|
|||||||||||||||||||||
Company
- related expenses paid by founder
|
-
|
-
|
-
|
-
|
-
|
-
|
12,135
|
-
|
-
|
-
|
12,135
|
|||||||||||||||||||||||
Exchange
of previous shares by sole shareholder of HEC Iowa
|
-
|
-
|
-
|
-
|
(2,000,000
|
)
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||
Shares
in Green Mt. Labs acquired in reverse merger
|
-
|
-
|
-
|
-
|
1,006,000
|
1,006
|
(1,006
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||
Stock
split of 3.8 to 1 prior to the merger
|
-
|
-
|
-
|
-
|
2,816,804
|
2,817
|
(2,817
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||
Issuance
of common stock to the sole shareholder of HEC Iowa
|
-
|
-
|
-
|
-
|
16,297,200
|
14,297
|
(14,297
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||
Issuance
of restricted common stock to employees and directors
|
-
|
-
|
-
|
-
|
426,000
|
426
|
425,574
|
(275,332
|
)
|
-
|
-
|
150,668
|
||||||||||||||||||||||
Issuance
of common stock in connection with private placement, net of
expenses
|
-
|
-
|
-
|
-
|
3,948,500
|
3,949
|
3,590,940
|
-
|
-
|
-
|
3,594,889
|
|||||||||||||||||||||||
Issuance
of common stock in connection with conversion of debt
|
-
|
-
|
-
|
-
|
663,401
|
663
|
556,388
|
-
|
-
|
-
|
557,051
|
|||||||||||||||||||||||
Consultant
compensation associated with stock options
|
-
|
-
|
-
|
-
|
-
|
-
|
133,333
|
-
|
-
|
-
|
133,333
|
|||||||||||||||||||||||
4,329,310
|
||||||||||||||||||||||||||||||||||
Comprehensive
Loss
|
||||||||||||||||||||||||||||||||||
Foreign
currency translation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(2,207
|
)
|
-
|
(2,207
|
)
|
|||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,122,570
|
)
|
(1,122,570
|
)
|
|||||||||||||||||||||
Total
comprehensive loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,124,777
|
)
|
||||||||||||||||||||||
Balance
at December 31, 2005
|
-
|
$
|
-
|
-
|
$
|
-
|
25,157,905
|
$
|
25,158
|
$
|
4,837,602
|
$
|
(275,332
|
)
|
$
|
(2,207
|
)
|
$
|
(1,380,688
|
)
|
$
|
3,204,533
|
||||||||||||
Reclassification
due to implementation of SFAS 123R
|
-
|
$
|
-
|
-
|
$
|
-
|
-
|
$
|
-
|
$
|
(275,332
|
)
|
$
|
275,332
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||||
Employee/Director
compensation associated with stock options and restricted
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
724,209
|
-
|
-
|
-
|
724,209
|
|||||||||||||||||||||||
Consultant
compensation associated with stock options
|
-
|
-
|
-
|
-
|
-
|
-
|
43,777
|
-
|
-
|
-
|
43,777
|
Preferred
Stock A
Shares
|
Preferred
Stock A
Amount
|
Preferred
Stock B
Shares
|
Preferred
Stock B
Amount
|
Common
Stock
Shares
|
Common
Stock
Amount
|
Additional
Paid – in
Capital
|
Unearned
Stock-Based
Compensation
|
Accumulated
Other
Comprehensive
Loss
|
Deficit
Accumulated
During the
Development
Stage
|
Total
|
||||||||||||||||||||||||
Issuance
of preferred stock in connection with private placement, net of
expenses
|
930,000
|
930
|
-
|
-
|
-
|
-
|
2,778,883
|
-
|
-
|
-
|
2,779,813
|
|||||||||||||||||||||||
Issuance
of common stock in connection with private placements, net of
expenses
|
-
|
-
|
-
|
-
|
978,009
|
978
|
3,043,141
|
-
|
-
|
-
|
3,044,119
|
|||||||||||||||||||||||
Issuance
of stock related to option exercises
|
-
|
-
|
-
|
-
|
8,000
|
8
|
7,992
|
-
|
-
|
-
|
8,000
|
|||||||||||||||||||||||
9,804,451
|
||||||||||||||||||||||||||||||||||
Comprehensive
Loss
|
||||||||||||||||||||||||||||||||||
Foreign
currency translation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(7,012
|
)
|
-
|
(7,012
|
)
|
|||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,752,269
|
)
|
(5,752,269
|
)
|
|||||||||||||||||||||
Total
comprehensive loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,759,281
|
)
|
||||||||||||||||||||||
Balance
at December 31, 2006
|
930,000
|
$
|
930
|
-
|
$
|
-
|
26,143,914
|
$
|
26,144
|
$
|
11,160,272
|
$
|
-
|
$
|
(9,219
|
)
|
$
|
(7,132,957
|
)
|
$
|
4,045,170
|
|||||||||||||
Employee/Director
compensation associated with stock options and restricted
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
499,542
|
-
|
-
|
-
|
499,542
|
|||||||||||||||||||||||
Forfeiture
of restricted stock
|
-
|
-
|
-
|
-
|
(65,000
|
)
|
(65
|
)
|
65
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Consultant
compensation associated with stock options
|
-
|
-
|
-
|
-
|
-
|
-
|
9,700
|
-
|
9,700
|
|||||||||||||||||||||||||
Issuance
of preferred stock in connection with private placement Series B,
net of
expenses
|
-
|
-
|
1,932,846
|
1,933
|
-
|
-
|
3,593,162
|
-
|
-
|
-
|
3,595,095
|
|||||||||||||||||||||||
Issuance
of warrants in vendor dispute
|
-
|
-
|
-
|
-
|
-
|
-
|
577,500
|
-
|
-
|
-
|
577,500
|
|||||||||||||||||||||||
Issuance
of warrants for inventory
|
-
|
-
|
-
|
-
|
-
|
-
|
21,065
|
-
|
-
|
-
|
21,065
|
|||||||||||||||||||||||
Conversion
of Series A Preferred Stock to Common Stock
|
(930,000
|
)
|
(930
|
)
|
-
|
-
|
1,511,250
|
1,511
|
(581
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||
Beneficial
conversion feature accreted as a dividend to Series A convertible
preferred stock
|
-
|
-
|
-
|
-
|
-
|
-
|
1,889,063
|
-
|
-
|
(1,889,063
|
)
|
8,748,072
|
||||||||||||||||||||||
Comprehensive
Loss
Foreign
currency translation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
5,807
|
-
|
5,807
|
|||||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,372,721
|
)
|
(5,372,721
|
)
|
|||||||||||||||||||||
Total
comprehensive loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,366,914
|
)
|
||||||||||||||||||||||
Balance
at December 31, 2007
|
-
|
$
|
-
|
1,932,846
|
$
|
1,933
|
27,590,164
|
$
|
27,590
|
$
|
17,749,788
|
$
|
-
|
$
|
(3,412
|
)
|
$
|
(14,394,741
|
)
|
$
|
3,381,158
|
Year Ended
December 31,
2007
|
Year Ended
December 31,
2006
|
From Inception
(May 19, 2003) to
December 31,
2007
|
||||||||
Operating
Activities
|
||||||||||
Net
loss
|
$
|
(5,372,721
|
)
|
$
|
(5,752,269
|
)
|
$
|
(12,505,678
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operations:
|
||||||||||
Depreciation
|
244,403
|
142,622
|
426,843
|
|||||||
Compensation
to directors and employees of stock options and restricted
stock
|
499,542
|
724,209
|
1,374,419
|
|||||||
Compensation
to consultants of stock options
|
9,700
|
43,777
|
186,810
|
|||||||
Warrants
issued in vendor dispute
|
448,011
|
129,489
|
577,500
|
|||||||
Loss
on sale of assets
|
6,734
|
-
|
6,734
|
|||||||
Change
in assets and liabilities:
|
||||||||||
Accounts
receivable
|
69,138
|
(170,223
|
)
|
(134,237
|
)
|
|||||
Inventories
|
366,710
|
(1,794,913
|
)
|
(1,634,294
|
)
|
|||||
Prepaid
expenses
|
(41,476
|
)
|
7,841
|
(111,358
|
)
|
|||||
Accounts
payable
|
(242,022
|
)
|
132,486
|
230,441
|
||||||
Accrued
expenses
|
51,173
|
148,583
|
253,566
|
|||||||
Accrued
interest
|
31,920
|
82,087
|
129,965
|
|||||||
Unearned
project reimbursements
|
(102,972
|
)
|
102,972
|
-
|
||||||
Unearned
grants
|
(35,686
|
)
|
66,663
|
30,977
|
||||||
Net
cash used in operating activities
|
(4,067,546
|
)
|
(6,136,676
|
)
|
(11,168,312
|
)
|
||||
Investing
Activities
|
||||||||||
Withdrawal/(deposit)
of restricted cash
|
237,427
|
(352,584
|
)
|
(115,157
|
)
|
|||||
Proceeds
from sale of assets
|
36,500
|
-
|
36,500
|
|||||||
Purchases
of property, plant, and equipment
|
(184,534
|
)
|
(1,488,749
|
)
|
(3,012,679
|
)
|
||||
Net
cash provided by (used in) investing activities
|
89,393
|
(1,841,333
|
)
|
(3,091,336
|
)
|
|||||
Financing
Activities
|
||||||||||
Proceeds
from notes payable, bank
|
283,374
|
906,046
|
1,839,420
|
|||||||
Payments
on notes payable, bank
|
(263,144
|
)
|
-
|
(913,144
|
)
|
|||||
Proceeds
from long-term debt
|
-
|
100,000
|
1,172,052
|
|||||||
Payments
on long-term debt
|
(78,897
|
)
|
(49,998
|
)
|
(143,895
|
)
|
||||
Proceeds
from exercise of stock option
|
-
|
8,000
|
8,000
|
|||||||
Issuance
of preferred stock (Series A) in private placement, net of
expenses
|
-
|
2,779,813
|
2,779,813
|
|||||||
Issuance
of preferred stock (Series B) in private placement, net of
expenses
|
3,595,095
|
-
|
3,595,095
|
|||||||
Issuance
of common stock in private placements, net of expenses
|
-
|
3,044,119
|
6,639,008
|
|||||||
Net
cash provided by financing activities
|
3,536,428
|
6,787,980
|
14,976,349
|
|||||||
Effect
of Exchange Rates on Cash and Cash Equivalents
|
5,807
|
(7,012
|
)
|
(3,412
|
)
|
|||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(435,918
|
)
|
(1,197,041
|
)
|
713,289
|
|||||
Cash
and Cash Equivalents – Beginning of Period
|
1,149,207
|
2,346,248
|
-
|
|||||||
Cash
and Cash Equivalents – End of Period
|
$
|
713,289
|
$
|
1,149,207
|
$
|
713,289
|
Year
Ended
December
31,
2007
|
Year
Ended
December
31,
2006
|
From
Inception
(May
19, 2003) to
December
31,
2007
|
||||||||
Supplemental
Cash Flow Information
|
||||||||||
Interest
paid
|
$
|
141,081
|
$
|
32,262
|
$
|
211,290
|
||||
Supplemental
Disclosures of Noncash
|
||||||||||
Investing
and Financing Activities
|
||||||||||
Additional
paid-in capital contribution
|
||||||||||
for
expenses paid by founder
|
$
|
-
|
$
|
-
|
$
|
103,636
|
||||
Issuance
of common stock for equipment
|
$
|
-
|
$
|
-
|
$
|
47,851
|
||||
Issuance
of common stock for conversion of debt
|
$
|
-
|
$
|
-
|
$
|
557,051
|
||||
Acquisition
of property, plant, equipment, and prepaid expenses through
financing
|
$
|
111,450
|
$
|
101,460
|
$
|
692,081
|
||||
Payables
for construction in progress
|
$
|
-
|
$
|
-
|
$
|
232,208
|
||||
Receivable
for state loan
|
$
|
-
|
$
|
-
|
$
|
100,000
|
||||
Series
A Preferred stock beneficial conversion feature accreted as a
dividend
|
$
|
1,889,063
|
$
|
-
|
$
|
1,889,063
|
Year Ended December 31,
|
|||||||
2007
|
2006
|
||||||
Basic
and diluted net loss per share:
|
|||||||
Numerator:
|
|||||||
Net
loss attributable to common shareholders
|
$
|
(7,261,784
|
)
|
$
|
(5,725,269
|
)
|
|
Denominator:
|
|||||||
Average
common shares outstanding
|
26,417,151
|
25,483,440
|
|||||
Unvested
restricted common shares
|
(92,000
|
)
|
(275,490
|
)
|
|||
Weighted-average
common shares outstanding
|
26,325,151
|
25,207,950
|
|||||
Basic
and diluted net loss per share
|
$
|
(.28
|
)
|
$
|
(.23
|
)
|
a. |
565,916
shares related to exercisable employee and non-employee incentive
stock
options.
|
b. |
92,000
unvested restricted shares.
|
c. |
782,871
warrants.
|
d. |
1,932,846
shares of preferred stock.
|
Period from Inception
(May 19, 2003) to
December 31, 2007
|
||||
Net
loss attributable to common shareholders, as reported
|
$
|
(14,394,741
|
)
|
|
Add:
options and restricted stock-based employee compensation expense
included
in reported net loss
|
1,374,419
|
|||
Deduct:
options and restricted stock-based employee compensation expense
determined under fair value based method
|
(1,560,221
|
)
|
||
Pro
forma net loss attributable to common shareholders
|
$
|
(14,580,543
|
)
|
December 31,
|
|||||||
2007
|
2006
|
||||||
Component
parts
|
$
|
1,266,612
|
$
|
1,490,676
|
|||
Work
in process
|
10,407
|
119,416
|
|||||
Finished
goods
|
378,340
|
390,912
|
|||||
Total
|
$
|
1,655,359
|
$
|
2,001,004
|
December 31,
|
|||||||
2007
|
2006
|
||||||
Note
payable to City of Algona. See (a)
|
$
|
160,000
|
$
|
175,000
|
|||
Note
payable to Algona Area Economic Development Corporation. See
(b)
|
146,124
|
146,124
|
|||||
Note
payable to Algona Area Economic Development Corporation. See
(c)
|
61,827
|
64,566
|
|||||
Notes
payable to Iowa Department of Economic Development. See
(d)
|
400,000
|
400,000
|
|||||
Note
payable to finance company. See (e)
|
6,388
|
31,938
|
|||||
Note
payable to bank. See (f)
|
594,246
|
600,000
|
|||||
1,368,585
|
1,417,628
|
||||||
Less
amounts due within one year
|
30,350
|
48,289
|
|||||
Totals
|
$
|
1,338,235
|
$
|
1,369,339
|
2009
|
$
|
618,621
|
||
2010
|
169,562
|
|||
2011
|
200,330
|
|||
2012
|
148,800
|
|||
Thereafter
|
200,922
|
|||
Total
long-term debt
|
$
|
1,338,235
|
·
|
$67,650
of principal and interest will be forgiven if we certify that we
have
created 50 new full-time equivalent jobs by June 1, 2010, and continuously
retained those jobs in Algona, Iowa until June 1, 2015.
|
·
|
$67,650
of principal and interest will be forgiven if we certify that we
have
created and continuously retained 50 additional new full-time equivalent
jobs by June 1, 2015.
|
·
|
Balance
of $10,824 due on June 1, 2015, without interest if paid by that
date.
|
·
|
Payment
of a wage for the retained jobs that is equal to or greater than
the
average hourly wage for workers in Kossuth County, Iowa, as determined
annually by Iowa Workforce Development.
|
2008
|
$
|
57,448
|
||
2009
|
57,448
|
|||
2010
|
19,889
|
|||
2011
|
11,586
|
|||
2012
|
635
|
|||
Total
minimum lease payments
|
147,006
|
|||
Less
amount representing interest
|
20,804
|
|||
Present
value of minimum lease payments
|
126,202
|
|||
Less
amounts due within one year
|
45,247
|
|||
Totals
|
$
|
80,955
|
·
|
Funding
for training new employees is allowed through the new jobs and
supplemental new jobs withholding credit equal to 3.0% of gross wages
of
the new jobs created;
|
·
|
A
refund of 100% of the sales, service and use taxes paid to contractors
and
subcontractors during the construction phase of the plant (excluding
local
option taxes);
|
·
|
A
6.5% research activities tax credit based on increasing research
activities within the State of Iowa;
|
·
|
An
investment tax credit equal to 10% of the capital investment. This
Iowa
tax credit may be carried forward for up to seven years;
|
·
|
A
value-added property tax exemption. Our community has approved an
exemption from taxation on a portion of the property in which our
business
has located.
|
December
31,
|
|||||||
2007
|
2006
|
||||||
Deferred
tax assets:
|
|||||||
Federal
|
$
|
3,840,000
|
$
|
2,250,000
|
|||
State
|
530,000
|
310,000
|
|||||
Foreign
|
450,000
|
240,000
|
|||||
Total
|
4,820,000
|
2,800,000
|
|||||
Valuation
allowance
|
(4,820,000
|
)
|
(2,800,000
|
)
|
|||
Provision
for income taxes, less valuation
|
$
|
-
|
$
|
-
|
December
31,
|
|||||||
2007
|
2006
|
||||||
Rate
Reconciliation:
|
|||||||
Expected
expense/(benefit) at federal statutory rate
|
(35
|
)%
|
(35
|
)%
|
|||
State
tax benefit, net of federal benefit
|
(5
|
)
|
(5
|
)
|
|||
Stock
based compensation
|
7
|
2
|
|||||
Foreign
tax benefit
|
(8
|
)
|
(4
|
)
|
|||
Other
|
1
|
2
|
|||||
Valuation
allowance
|
40
|
40
|
|||||
Expected
tax rate
|
-
|
%
|
-
|
%
|
December
31,
|
|||||||
2007
|
2006
|
||||||
Deferred
tax assets:
|
|||||||
Net
operating loss carryforward
|
$
|
3,840,000
|
$
|
2,290,000
|
|||
Foreign
tax benefit
|
450,000
|
240,000
|
|||||
Unrealized
inventory impairment loss
|
380,000
|
170,000
|
|||||
Warranty
accrual
|
10,000
|
-
|
|||||
Vacation
accrual
|
20,000
|
20,000
|
|||||
Stock
based compensation
|
10,000
|
10,000
|
|||||
Research
and development credit
|
120,000
|
80,000
|
|||||
Total
deferred tax assets
|
4,830,000
|
2,810,000
|
|||||
Deferred
tax liabilities:
|
|||||||
Depreciation
|
(10,000
|
)
|
(10,000
|
)
|
|||
Total
deferred tax liabilities
|
(10,000
|
)
|
(10,000
|
)
|
|||
Gross
deferred tax asset
|
4,820,000
|
2,800,000
|
|||||
Valuation
allowance
|
$
|
(4,820,000
|
)
|
$
|
(2,800,000
|
)
|
Year ended December 31,
|
Period from Inception
(May 19, 2003) to
December 31, 2007
|
|||||||||
2007
|
2006
|
|||||||||
Risk-free
interest rate
|
4.72
|
%
|
4.6
|
%
|
4.21
|
%
|
||||
Expected
volatility
|
96.4
|
%
|
113.5
|
%
|
148.8
|
%
|
||||
Expected
life (in years)
|
4.7
|
5.5
|
7.5
|
|||||||
Dividend
yield
|
-
|
-
|
-
|
|||||||
Weighted-average
estimated fair value of options
granted during the period |
$
|
.99
|
$
|
2.94
|
$
|
.99
|
Options
Outstanding
|
|||||||||||||
Number of
Shares
|
Weighted-
Average
Exercise Price
|
Weighted-
Average
Remaining
Contractual
Term (in years)
|
Aggregate
Intrinsic
Value
(1)
|
||||||||||
Balance
at December 31, 2006
|
838,666
|
$
|
1.85
|
||||||||||
Granted
|
195,000
|
$
|
1.34
|
||||||||||
Forfeited
|
(148,750
|
)
|
$
|
1.18
|
|||||||||
Balance
at December 31, 2007
|
884,916
|
$
|
1.16
|
5.22
|
$
|
0
|
|||||||
Vested
and exercisable as of
December 31, 2007 |
565,916
|
$
|
1.08
|
3.31
|
$
|
0
|
|||||||
Vested
and expected to vest as of
December 31, 2007 |
858,369
|
$
|
1.19
|
5.22
|
$
|
0
|
(1)
|
The
aggregate intrinsic value is calculated as approximately the difference
between the weighted-average exercise price of the underlying awards
and
our closing stock price of $.66 on December 31, 2007, the last day
of
trading in December.
|
Unvested Restricted Stock
|
|||||||
Number of Shares
|
Weighted-
Average Grant
Date Fair Value
|
||||||
Unvested
at December 31, 2006
|
218,000
|
$
|
1.00
|
||||
Vested
|
(61,000
|
)
|
$
|
1.00
|
|||
Forfeited
|
(65,000
|
)
|
$
|
1.00
|
|||
Unvested
at December 31, 2007
|
92,000
|
$
|
1.00
|
Options
Outstanding
|
Options
Exercisable
|
||||||||||||||||
Exercise
Price
|
Options
Outstanding
|
Weighted-
Average
Remaining
Contractual
Life
|
Weighted-
Average
Exercise
Price
|
Shares
Exercisable
|
Weighted-
Average
Exercise
Price
|
||||||||||||
$ |
1.00
|
481,666
|
2.97
|
$
|
1.00
|
429,666
|
$
|
1.00
|
|||||||||
$ |
1.34
|
393,250
|
7.87
|
$
|
1.34
|
136,250
|
$
|
1.34
|
|||||||||
$ |
1.40
|
10,000
|
9.66
|
$
|
1.40
|
0
|
$
|
-
|
|||||||||
884,916
|
5.22
|
$
|
1.16
|
565,916
|
$
|
1.08
|
We
have not authorized any dealer, salesperson or other person to
provide any
information or make any representations about Hydrogen Engine,
Inc.,
except the information or representations contained in this Prospectus.
You should not rely on any additional information or representations
if
made.
|
|
|
|
|
|
§
|
This
Prospectus does not constitute an offer to sell, or a solicitation
of an
offer to buy any securities:
|
|
|
||
§
|
except
the Common Stock offered by this Prospectus;
|
|
|
||
§
|
in
any jurisdiction in which the offer or solicitation is not
authorized;
|
PROSPECTUS
|
§
|
in
any jurisdiction where the dealer or other salesperson is not qualified
to
make the offer or solicitation;
|
3,289,135
shares of Common Stock
|
§
|
to
any person to whom it is unlawful to make the offer or solicitation;
or
|
HYDROGEN
ENGINE, INC.
|
§
|
to
any person who is not a United States resident or who is outside
the
jurisdiction of the United States.
|
May
20, 2008
|
|
||
§
|
The
delivery of this Prospectus or any accompanying sale does not imply
that:
|
|
|
|
|
§
|
there
have been no changes in the affairs of Hydrogen Engine, Inc. after
the
date of this Prospectus; or
|
|
|
|
|
§
|
the
information contained in this Prospectus is correct after the date
of this
Prospectus.
|
|
|
||
All
dealers effecting transactions in the registered securities, whether
or
not participating in this distribution, may be required to deliver
a
Prospectus. This is in addition to the obligation of dealers to
deliver a
Prospectus when acting as underwriters.
|
|
SEC
Registration Fee
|
$
|
62
|
||
Accounting
Fees and Expenses
|
$
|
15,000
|
||
Legal
Fees and Expenses
|
$
|
20,000
|
||
Printing
and Engraving Costs
|
$
|
5,000
|
||
Miscellaneous
|
$
|
4,938
|
||
Total:
|
$
|
45,000
|
·
|
On
October 11, 2005, we closed the First Private Offering of our Common
Stock. We sold 3,948,500 shares of our Common Stock, par value $0.001
per
share, at $1.00 per share, for a total of $3,948,500 to 93 investors,
which represents 13.37% of the 29,523,010 issued and outstanding
shares of
Common Stock (including 930,000 shares of Series A Preferred Stock
which
converted into 1,511,250 shares of Common Stock and 1,932,846 shares
of
Series B Preferred Stock which are convertible into 1,932,846 shares
of
Common Stock). We sold the shares in a private transaction and we
relied
on an exemption from registration pursuant to Regulation D, Rules
Governing the Limited Offer and Sale of Securities without Registration
under the Securities Act.
|
·
|
On
October 2, 2006, we closed the private placement of our Series A
Preferred
Stock (the “Series
A Preferred Offering”)
having sold a total of 930,000 shares (convertible into 1,511,250
shares
of Common Stock) at $3.25 per share for a total of $3,022,500, which
number represents on an “as-converted” basis, 5.12% of the 29,523,010
issued and outstanding shares of Common Stock (including 930,000
shares of
Series A Preferred Stock which converted into 1,511,250 shares of
Common
Stock and 1,932,846 shares of Series B Preferred Stock which are
convertible into 1,932,846 shares of Common Stock).
|
·
|
On
October 15, 2006 we closed the Second Private Offering of our Common
Stock. We sold 978,009 shares of our Common Stock, par value $0.001
per
share, at $3.25 per share, for a total of $3,178,464 to 41 investors,
which represents 3.31% of the 29,523,010 issued and outstanding shares
of
Common Stock (including 930,000 shares of Series A Preferred Stock
which
converted into 1,511,250 shares of Common Stock and 1,932,846 shares
of
Series B Preferred Stock which are convertible into 1,932,846 shares
of
Common Stock).
|
·
|
On
May 31, 2007, we closed the private placement of our Series B Preferred
Stock (the “Series
B Preferred Offering”).
We sold 1,932,846 shares (convertible into 1,932,846 shares of Common
Stock) of our Series B Preferred Stock at $2.00 per share, which
represents, on an “as-converted” basis, 6.55% of the 29,523,010 issued and
outstanding shares of Common Stock (including 930,000 shares of Series
A
preferred which converted into 1,511,250 shares of Common Stock and
1,932,846 shares of Series B Preferred Stock which are convertible
into
1,932,846 shares of Common Stock).
|
Exhibit
No.
|
Description
|
Location
|
||
2.2
|
Revised
and Amended Agreement and Plan of Merger with Hydrogen Engine Center,
Inc.
and Green Mt. Acquisitions, Inc.
|
Incorporated
by reference to the Preliminary Information Statement on Schedule
14C as
filed with the SEC on July 12, 2005.
|
||
3.1
|
Articles
of Incorporation of the Company
|
Incorporated
by reference to the Company’s Form 10−SB as filed with the SEC on January
8, 2004
|
||
3.2
|
Bylaws
of the Company
|
Incorporated
by reference to the Company’s Form 10−SB as filed with the SEC on January
8, 2004
|
||
3.3
|
Certificate
of Amendment to Articles of Incorporation of the Company
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-QSB as filed
with the SEC on November 21, 2005
|
||
3.4
|
Amendment
to Bylaws of the Company
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-QSB as filed
with the SEC on November 21, 2005
|
||
3.5
|
Certificate
of Designation for the Series A Preferred Stock
|
Incorporated
by reference to the Company’s Annual Report on Form 10-KSB as filed with
the SEC on April 17, 2007
|
||
3.6
|
Certificate
of Designation for the Series B Preferred Stock
|
Incorporated
by reference to the Company’s Annual Report on Form 10-KSB as filed with
the SEC on April 17, 2007
|
Exhibit
No.
|
Description
|
Location
|
||
4.1
|
Instrument
Defining Rights of Stockholders
|
See
Exhibits No. 3.1 through 3.6 herein above.
|
||
5.1
|
Opinion
re Legality
|
To
be filed by amendment.
|
||
10.1
|
Iowa
State Bank Note dated March 24, 2008
|
Incorporated
by reference to the Company’s Annual Report on Form 10-KSB as filed with
the SEC on April 15, 2008
|
||
10.2
|
Farmers
State Bank Note dated March 27, 2008
|
Incorporated
by reference to the Company’s Annual Report on Form 10-KSB as filed with
the SEC on April 15, 2008
|
||
10.3
|
Standby
Equity Distribution Agreement, dated April 11, 2008, by and between
the
Company and YA Global Investments, L.P.
|
Incorporated
by reference to the Company’s Annual Report on Form 10-KSB as filed with
the SEC on April 15, 2008
|
||
10.4
|
Registration
Rights Agreement, dated April 11, 2008, by and between the Company
and YA
Global Investments, L.P.
|
Incorporated
by reference to the Company’s Annual Report on Form 10-KSB as filed with
the SEC on April 15, 2008
|
||
10.5
|
Form
of Engine Distribution Agreement
|
Provided
herewith
|
||
10.6
|
Form
of Genset Distribution Agreement
|
Provided
herewith
|
||
10.7
|
Open-End
Mortgage, dated December 16, 2005, by and between the Company and
Iowa
State Bank
|
Incorporated
by reference to the Company’s Annual Report on Form 10-KSB as filed with
the SEC on March 31, 2006
|
||
10.8
|
Statement
of Work for the Supply of a 250 kW Hydrogen-Fuelled Genset to Natural
Resources Canada
|
Incorporated
by reference to the Company’s Annual Report on Form 10-KSB as filed with
the SEC on March 31, 2006
|
||
10.9
|
Mortgage,
dated December 16, 2005, by and between the Company and Algona
Area
Economic Development Corporation
|
Incorporated
by reference to the Company’s Annual Report on Form 10-KSB as filed with
the SEC on March 31, 2006
|
||
10.10
|
Enterprise
Loan Agreement, dated June 28, 2005, by and among the Company,
the Iowa
Department of Economic Development and Kossuth County
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-QSB as filed
with the SEC on November 21, 2005
|
||
10.11
|
Physical
Infrastructure Assistance Program Agreement, dated June 28, 2005,
by and
between the Company and the Iowa Department of Economic
Development
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-QSB as filed
with the SEC on November 21, 2005
|
||
10.12
|
Community
Economic Betterment Account Agreement, dated June 28, 2005, by
and among
the Company, the Iowa Department of Economic Development and the
City of
Algona
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-QSB as filed
with the SEC on November 21, 2005
|
||
10.13
|
Executive
Employment Agreement
|
Provided
herewith
|
||
10.14
|
Letter
Agreement with GenCap
Solutions, LP
|
Provided
herewith
|
||
10.15
|
Loan
Agreement, dated August 5, 2005, by and between the Company and
the City
of Algona
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-QSB as filed
with the SEC on November 21, 2005
|
Exhibit
No.
|
Description
|
Location
|
||
10.16
|
Loan
Agreement, dated June 27, 2005, by and between the Company and
Algona Area
Economic Development Corporation
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-QSB as filed
with the SEC on November 21, 2005
|
||
10.17
|
Industrial
New Jobs Training Agreement, dated August 23, 2005, by and between
the
Company and Iowa Lakes Community College
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-QSB as filed
with the SEC on November 21, 2005
|
||
10.18
|
Consortium
Agreement, dated May 1, 2005, by and between the Company and Atlantic
Hydrogen Inc.
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-QSB as filed
with the SEC on November 21, 2005
|
||
10.19
|
Research
Agreement, dated February 1, 2005, by and between the Company and
Universite du Quebec a Trois-Rivieres
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-QSB as filed
with the SEC on November 21, 2005
|
||
21.1
|
Subsidiaries
of the Company
|
Incorporated
by reference to the Company’s Annual Report on Form 10-KSB as filed with
the SEC on April 15, 2008
|
||
23.1
|
Consent
of LWBJ, LLP
|
Provided
herewith
|
||
23.2
|
Consent
of Lionel Sawyer & Collins
|
Provided
herewith (Included in Exhibit 5.1)
|
||
24.1
|
Power
of Attorney
|
Provided
herewith (included on signature page
hereto)
|
Date:
May 20, 2008
|
HYDROGEN
ENGINE, INC.
|
|
By:
|
/s/ Donald
C. Vanderbrook
|
|
Name:
|
Donald
C. Vanderbrook
|
|
Titles:
|
President,
Chief Executive Officer and Principal Executive
Officer
|
By:
|
/s/
Donald
C. Vanderbrook
|
Date:
May 20, 2008
|
|
Name:
|
Donald
C. Vanderbrook
|
||
Titles:
|
President,
Chief Executive Officer and Principal Executive Officer
|
||
By:
|
/s/
Sandra
M. Batt
|
Date:
May 20, 2008
|
|
Name:
|
Sandra
M. Batt
|
||
Titles:
|
Chief
Financial Officer, Treasurer and Principal Financial and Accounting
Officer
|
||
By:
|
/s/
Theodore
G. Hollinger
|
Date:
May 20, 2008
|
|
Name:
|
Theodore
G. Hollinger
|
||
Title:
|
Chairman
of the Board
|
By:
|
/s/
Thomas
O. Trimble
|
Date:
May 20, 2008
|
|
Name:
|
Thomas
O. Trimble
|
||
Titles:
|
Director
|
||
By:
|
/s/
Philip
G. Ruggieri
|
Date:
May 20, 2008
|
|
Name:
|
Philip
G. Ruggieri
|
||
Titles:
|
Director
|
||
By:
|
/s/
Stephen
T. Parker
|
Date:
May 20, 2008
|
|
Name:
|
Stephen
T. Parker
|
||
Titles:
|
Director
|