Page
|
|
1
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|
FORWARD
LOOKING STATEMENTS
|
7
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SUMMARY
FINANCIAL INFORMATION
|
8
|
RISK
FACTORS
|
9
|
DETERMINATION
OF OFFERING PRICE
|
20
|
SELLING
STOCKHOLDER
|
20
|
PLAN
OF DISTRIBUTION
|
24
|
USE
OF PROCEEDS
|
26
|
DILUTION
|
27
|
DESCRIPTION
OF SECURITIES
|
28
|
DESCRIPTION
OF THE BUSINESS
|
31
|
DESCRIPTION
OF PROPERTY
|
50
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|
51
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
|
|
AND
RESULTS OF OPERATIONS
|
54
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
|
66
|
EXECUTIVE
COMPENSATION
|
69
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
75
|
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND
|
|
CERTAIN
CONTROL PERSONS AND CORPORATE GOVERNANCE
|
77
|
NOTICE
TO CANADIAN RESIDENTS
|
78
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS
|
|
ON
ACCOUNTING AND FINANCIAL DISCLOSURE
|
78
|
INTERESTS
OF NAMED EXPERTS AND COUNSEL
|
79
|
HOW
TO GET MORE INFORMATION
|
80
|
INDEX
TO FINANCIAL STATEMENTS
|
F-i
|
Assumed Offering
Price
|
75% of Assumed
Offering Price
|
50% of Assumed
Offering Price
|
25% of Assumed
Offering Price
|
||||||||||
Purchase
Price:
|
$
|
0.45
|
$
|
0.34
|
$
|
0.23
|
$
|
0.11
|
|||||
No. of
Shares(1):
|
4,054,541
|
4,054,541
|
4,054,541
|
4,054,541
|
|||||||||
Total
Outstanding(2):
|
33,964,118
|
33,964,118
|
33,964,118
|
33,964,118
|
|||||||||
Percent
Outstanding(3):
|
11.94
|
%
|
11.94
|
%
|
11.94
|
%
|
11.94
|
%
|
|||||
Gross
Cash to the Company:
|
$
|
1,824,543
|
$
|
1,378,544
|
$
|
932,544
|
$
|
446,000
|
|||||
Net
Cash to the Company(4):
|
$
|
1,474,115
|
$
|
1,090,556
|
$
|
706,996
|
$
|
288,568
|
(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 July 15,
2008
after the issuance of the shares to YA Global under the SEDA.
|
(3) |
Represents
the shares of Common Stock to be issued as a percentage of the total
number of shares outstanding on July 15, 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:
|
$
|
0.45
|
$
|
0.34
|
$
|
0.23
|
$
|
0.11
|
|||||
No. of
Shares(1):
|
8,888,889
|
11,764,706
|
17,391,304
|
36,363,636
|
|||||||||
Total
Outstanding(2):
|
38,798,466
|
41,674,283
|
47,300,881
|
66,273,213
|
|||||||||
Percent
Outstanding(3):
|
22.91
|
%
|
28.23
|
%
|
36.77
|
%
|
54.87
|
%
|
|||||
Gross
Cash to Company:
|
$
|
4,000,000
|
$
|
4,000,000
|
$
|
4,000,000
|
$
|
4,000,000
|
|||||
Net
Cash to the Company(4),(5):
|
$
|
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 4,054,541 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 July 15,
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 July 15, 2008.
|
(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 July 15, 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 4,054,541 shares of our Common Stock.
|
|
Offering
Price and Terms:
|
The
Selling Stockholder will sell up to 4,054,541 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 July 15, 2008:
|
29,909,577
|
|
Common
Stock to be outstanding after the Offering 1
|
33,964,118
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 29,909,577 shares issued
and
outstanding as of July 15, 2008 (including 92,000 shares of restricted
stock granted to certain holders that are subject to forfeiture)
but
excludes:
|
·
|
919,916
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 688,250 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
|
·
|
711,084
shares of Common Stock reserved for issuance under our 2005 Incentive
Compensation Plan.
|
Three Months Ended March 31,
|
Year Ended December 31,
|
From Inception
(May 19, 2003) to
|
||||||||||||||
2008
|
2007
|
2007
|
2006
|
March 31, 2008
|
||||||||||||
Statement of Operations:
|
||||||||||||||||
Sales
|
$
|
161,685
|
$
|
238,290
|
$
|
740,799
|
$
|
278,344
|
$
|
1,224,388
|
||||||
Cost
of Sales
|
138,463
|
202,664
|
1,178,393
|
681,870
|
2,022,270
|
|||||||||||
Gross
Profit
|
23,222
|
35,626
|
(437,594
|
)
|
(403,526
|
)
|
(797,882
|
)
|
||||||||
Loss
from Operations
|
(823,013
|
)
|
(1,731,678
|
)
|
(5,265,886
|
)
|
(5,696,892
|
)
|
(13,144,564
|
)
|
||||||
Net
Loss
|
(859,043
|
)
|
(1,761,814
|
)
|
(5,372,721
|
)
|
(5,752,269
|
)
|
(13,364,721
|
)
|
||||||
Series
A Preferred Stock beneficial
conversion feature accreted
as a dividend
|
—
|
(1,899,063
|
)
|
(1,889,063
|
)
|
—
|
(1,889,063
|
)
|
||||||||
Net
loss available to common stockholders
|
$
|
(859,043
|
)
|
$
|
(3,650,877
|
)
|
$
|
(7,261,784
|
)
|
$
|
(5,752,269
|
)
|
$
|
(15,253,784
|
)
|
|
Weighted-average
shares outstanding
|
27,498,164
|
25,472,024
|
26,325,151
|
25,207,950
|
||||||||||||
Basic
& diluted net loss per share
|
$
|
(0.03
|
)
|
$
|
(0.14
|
)
|
$
|
(0.28
|
)
|
$
|
(0.23
|
)
|
||||
Balance
Sheet Data:
|
||||||||||||||||
Total
Assets
|
$
|
5,258,857
|
$
|
5,985,477
|
$
|
7,050,239
|
||||||||||
Current
Liabilities
|
1,213,595
|
1,185,129
|
1,593,455
|
|||||||||||||
Total
Liabilities
|
2,592,981
|
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
|
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
|
27,590
|
26,144
|
|||||||||||||
Total
Stockholders’ Equity
|
$
|
2,665,876
|
$
|
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
4,054,541
Shares Offered
Hereby
|
Percentage of
Outstanding
Shares Beneficially
Owned After
Offering(2)
|
|||||||||
YA Global Investments, L.P.
|
386,567
|
1.3
|
%
|
4,054,541
|
1.1
|
%
|
|||||||
Total:
|
386,567
|
1.3
|
%
|
4,054,541
|
1.1
|
%
|
(1)
|
Applicable
percentage of ownership is based on 29,909,577 shares of our Common
Stock
outstanding as of July 15, 2008, together with securities exercisable
or
convertible into shares of Common Stock within sixty (60) days of
July 15,
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 33,964,118 shares
(which includes the 4,054,541 shares to be sold in the
offering).
|
Assumed Offering
Price
|
75% of Assumed
Offering Price
|
50% of Assumed
Offering Price
|
25% of Assumed
Offering Price
|
||||||||||
Purchase
Price:
|
$
|
0.45
|
$
|
0.34
|
$
|
0.23
|
$
|
0.11
|
|||||
No. of
Shares(1):
|
4,054,541
|
4,054,541
|
4,054,541
|
4,054,541
|
|||||||||
Total
Outstanding(2):
|
33,964,118
|
33,964,118
|
33,964,118
|
33,964,118
|
|||||||||
Percent
Outstanding(3):
|
11.94
|
%
|
11.94
|
%
|
11.94
|
%
|
11.94
|
%
|
|||||
Gross
Cash to the Company:
|
$
|
1,824,543
|
$
|
1,378,544
|
$
|
932,544
|
$
|
446,000
|
|||||
Net
Cash to the Company(4):
|
1,474,115
|
$
|
1,090,556
|
$
|
706,996
|
$
|
288,568
|
(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 July
15, 2008
after the issuance of the shares to YA Global under the SEDA.
|
(3) |
Represents
the shares of Common Stock to be issued as a percentage of the
total
number of shares outstanding on July 15, 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:
|
$
|
0.45
|
$
|
0.34
|
$
|
0.23
|
$
|
0.11
|
|||||
No. of
Shares(1):
|
8,888,889
|
11,764,706
|
17,391,304
|
36,363,636
|
|||||||||
Total
Outstanding(2):
|
38,798,466
|
41,674,283
|
47,300,881
|
66,273,213
|
|||||||||
Percent
Outstanding(3):
|
22.91
|
%
|
28.23
|
%
|
36.77
|
%
|
54.87
|
%
|
|||||
Gross
Cash to the Company:
|
$
|
4,000,000
|
$
|
4,000,000
|
$
|
4,000,000
|
$
|
4,000,000
|
|||||
Net
Cash to the Company(4),(5):
|
$
|
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 4,054,541 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 July
15, 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 July 15,
2008.
|
(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 July 15, 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.
|
$
|
1,824,543
|
$
|
2,500,000
|
(1)
|
$
|
4,000,000
|
(1)
|
|||
Net
proceeds(2)
|
$
|
1,429,115
|
$
|
2,010,008
|
$
|
3,300,008
|
||||
Number
of shares to be issued pursuant to the SEDA(3)
|
4,054,541
|
5,555,556
|
8,888,889
|
USE
OF PROCEEDS: (NET)
|
AMOUNT
|
|
AMOUNT
|
|
AMOUNT
|
|||||
General
Working Capital
|
$
|
1,429,115
|
$
|
2,010,008
|
$
|
3,300,008
|
||||
Total
|
$
|
1,429,115
|
$
|
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 $0.45 per share.
|
$
|
0.45
|
||||||
Net
tangible book value per share before this offering
|
$
|
0.09
|
|||||
Increase
attributable to new investors
|
$
|
0.03
|
|||||
Net
tangible book value per share after this offering
|
$
|
0.12
|
|||||
Dilution
per share to new stockholders
|
$
|
0.33
|
Assumed
Offering Price
|
No.
Of Shares To Be Issued(1)
|
Dilution
Per Share To New
Investors
|
||||||
$
|
0.45
|
4,054,541
|
$
|
0.33
|
||||
$
|
0.34
|
4,054,541
|
$
|
0.23
|
||||
$
|
0.23
|
4,054,541
|
$
|
0.13
|
||||
$
|
0.11
|
4,054,541
|
$
|
0.02
|
(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.
|
· |
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
our 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
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.
|
· |
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 Chief Operating Officer 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 and in May
2008 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.
|
· |
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
|
||
TM:
Opposed Cycle Engine
|
Filed
on 6/17/08
|
77/500,804
|
·
|
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
|
|||||
Second
Quarter ended June 30, 2008
|
0.48
|
0.40
|
·
|
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
|
892,9161
|
$
|
1.16
|
746,0842
|
||||||
Equity
compensation plans not approved by security holders
|
782,8711
|
$
|
2.13
|
—
|
||||||
Total
|
1,675,7871
|
$
|
1.61
|
746,0842
|
(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.
|
2008
|
2007
|
From Inception
(May 19, 2003) to
March 31, 2008
|
||||||||
Revenues
|
$
|
161,685
|
$
|
238,290
|
$
|
1,224,388
|
||||
Cost
of Sales
|
138,463
|
202,664
|
2,022,270
|
|||||||
Gross
Profit (Loss)
|
23,222
|
35,626
|
(797,882
|
)
|
||||||
Operating
Expenses
|
846,235
|
1,767,304
|
12,346,682
|
|||||||
Loss
from Operations
|
(823,013
|
)
|
(1,731,678
|
)
|
(13,144,564
|
)
|
||||
Other
Expense
|
(36,030
|
)
|
(30,136
|
)
|
(220,157
|
)
|
||||
Net
Loss
|
$
|
(859,043
|
)
|
$
|
(1,761,814
|
)
|
$
|
(13,364,721
|
)
|
|
Series
A Preferred Stock Beneficial Conversion Feature Accreted as a
Dividend
|
$
|
-
|
$
|
(1,889,063
|
)
|
$
|
(1,889,063
|
)
|
||
Net
Loss Available to Common Stockholders
|
$
|
(859,043
|
)
|
$
|
(3,650,877
|
)
|
$
|
(15,253,784
|
)
|
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
|
From Inception
|
||||||||||
Three months ended March 31,
|
(May 19, 2003) to
|
|||||||||
2008
|
2007
|
March 31, 2008
|
||||||||
Net
cash used in operating activities
|
$
|
(505,830
|
)
|
$
|
(1,303,078
|
)
|
$
|
(11,674,142
|
)
|
|
Net
cash used in investing activities
|
(1,297
|
)
|
(43,125
|
)
|
(3,092,633
|
)
|
||||
Net
cash provided by (used in) financing activities
|
(40,058
|
)
|
515,244
|
14,936,291
|
· 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)
|
Position
with the
Company
Held Since
|
|||
Theodore
G. Hollinger
|
66
|
Acting
President and Chief Executive Officer, Chairman of the Board of the
Company, HEC Iowa and HEC Canada, President of HEC Canada
|
August
30, 2005
|
|||
Sandra
M. Batt
|
55
|
Chief
Financial Officer and Treasurer of the Company, HEC Iowa and HEC
Canada
|
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
of the Company and HEC Iowa
|
August
30, 2005
|
|||
Philip
G. Ruggieri
|
53
|
Director
of the Company and HEC Iowa
|
May
19, 2006
|
|||
Stephen
T. Parker
|
58
|
Director
of the Company and HEC Iowa
|
February
8, 2008
|
|||
Jan
Rowinski
|
55
|
Director
of the Company, HEC Iowa and HEC Canada
|
July
21, 2008 and director of HEC Canada since April 29,
2008
|
|||
David
F. McManamy
|
62
|
Director
of the Company and HEC Iowa
|
July
21, 2008
|
|||
Matthew
Fairlie
|
53
|
Director
of and Consultant to HEC Canada
|
January
24, 2007
|
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
|
2005
|
35,654
|
11,667
|
3
|
48,000
|
4
|
95,321
|
||||
(deceased) |
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
|
-
|
-
|
-
|
-
|
||||||
(resigned June 26, 2008) |
2006
|
-
|
-
|
-
|
-
|
||||||
2007
|
95,808
|
-
|
110,200
|
5
|
206,008
|
||||||
Sandra
M. Batt, Chief Financial Officer
|
2005
|
6,923
|
-
|
73,649
|
6
|
80,572
|
|||||
and Treasurer |
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, 2006 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 were 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. All unvested options granted to Mr. Vanderbrook were
cancelled on June 26, 2008, the date of his separation from the
Company.
|
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 $1.00 per share, the fair market
value
of the shares on the date of grant, September 1, 2005. Options vested
as
to 18,000 shares on September 1, 2005, as to 19,000 shares on September
1,
2006, and as to 19,000 shares on September 1, 2007. 14,000 of the
shares
are scheduled to vest on September 1, 2008 and September 1,
2009.
|
9
|
The
2005 salary amount for Mr. Hollinger includes amounts paid by HEC
Iowa
prior to the September 1, 2005 merger with Green Mt. Labs,
Inc.
|
Name
(a)
|
Grant Date
(b)
|
All Other Option
Awards: Number of
Securities Underlying
Options (#)
(j)
|
Exercise or Base
Price of Option
Awards ($/Sh)
(k)
|
Grant Date Fair
Value of Stock and
Option Awards
(l)
|
|||||
Donald
C. Vanderbrook
|
1/22/07
|
85,000
|
1
|
2.95
|
192,933
|
||||
President
and CEO
|
3/14/07
|
35,000
|
1
|
3.15
|
84,536
|
||||
(resigned
June 26, 2008)
|
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. All unvested options granted
to
Mr. Vanderbrook were cancelled on June 26, 2008, the date of his
separation from the Company.
|
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 were 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. All unvested options were cancelled
on
June 26, 2008, the date of his separation from the Company.
|
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, Acting President and Chief Executive Officer and
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 and Chief Executive Officer (resigned
06-26-08)
|
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 ($0.66 per share) is based on the closing price
of
the stock on December 31, 2007.
|
3
|
These
options vested as to 36,000 shares on September 1, 2005, 2006 and
2007.
|
4
|
Options
were scheduled to vest as to 36,000 shares on September 1, 2008 and
2009.
Dr. Bose is deceased and all unvested options have been cancelled.
Any
unexercised option will be cancelled one year after the date of his
death,
January 24, 2008.
|
5
|
These
options vested as to 17,000 shares, on January 22, 2007; as to 7,000
shares and on March 14, 2007; as to 17,000 shares, on January 22,
2008;
and as to 7,000 shares on March 14, 2008. The options were scheduled
to
vest as to 17,000 shares on January 22, 2009, 2010 and 2011 and as
to
7,000 shares on March 14, 2009, 2010 and 2011. All unvested options
were
cancelled on June 26, 2008, the date of his separation from the Company.
|
6
|
These
options vested as to 18,000 shares on September 29, 2006 and as to
18,000
shares on September 29, 2007. The options are scheduled to vest as
to
18,000 on September 29 2008, 2009 and
2010.
|
7
|
These
options vested as to 18,000 shares on September 1, 2005; as to 19,000
shares on September 1, 2006 and 2007. The options are scheduled to
vest as
to 14,000 shares on September 1, 2008 and
2009.
|
8
|
These
shares are scheduled to vest as 6,000 shares on September 1, 2008
and
2009.
|
Name (a)
|
Fees Earned or Paid
in Cash
($)
(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
|
|||||||||
Jan
Rowinski5
|
-
|
-
|
-
|
-
|
-
|
|||||||||||
David
F. McManamy5
|
-
|
-
|
-
|
-
|
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.
|
5
|
Mr.
Rowinski and Mr. McManamy were appointed to the Board of Directors
by
action of the Board of Directors effective July 21, 2008. As of July
25,
2008, no compensation has been paid to Mr. Rowinski or Mr. McManamy.
They
will qualify for the $2,500 per quarter compensation currently being
paid
to other non-employee directors. The Board will consider additional
director compensation during 2008.
|
Audit Committee
|
Compensation Committee
|
Philip
G. Ruggieri
|
Thomas
O. Trimble
|
Thomas
O. Trimble
|
Stephen
T. Parker
|
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
|
16,541,8011
|
55.31
|
%
|
||||||
Common
|
Thomas
O. Trimble
2341
Hilton Road
Ferndale,
MI 58220-1593
|
20,0002
|
*
|
|||||||
Common
|
Stephen
T. Parker
2502
East Poplar Street
Algona,
IA 50511
|
10,0003
|
*
|
|||||||
Common
|
Philip
G. Ruggieri
1562
Lake Whitney Drive
Windermere,
FL 34786
|
40,0004
|
*
|
|||||||
Common
|
Sandra
M. Batt
2502
East Poplar Street
Algona,
IA 50511
|
66,7705
|
*
|
|||||||
Common
|
Michael
A. Schiltz
2502
East Poplar Street
Algona,
IA 50511
|
155,5206
|
*
|
|||||||
Common
|
Jan
Rowinski
6300
Chemin Côte-de-Liesse,
Suite
201
Montréal,
Québec,
H4T
1E3
|
0
|
*
|
|||||||
Common
|
David
F. McManamy
13150
Hidden Creek
Plymouth,
MI 48170
|
0
|
*
|
|||||||
Common
|
Matthew
Fairlie
RR4
Shelburne
Ontario,
Canada L0N 1S8
|
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
(8 Persons)6
|
16,834,0918
|
56.04
|
%
|
||||||
Common
|
Gabriel
Elias and
Alma
Elias
509
Spring Ave
Elkins
Park, PA 19027
|
2,311,2507
|
7.73
|
%
|
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 70,000 shares, all for $1.00 per
share
under the Company’s 2005 Incentive Compensation
Plan.
|
7
|
Includes
250,000 shares of Common Stock owned by Wholesale Realtors Supply,
a
partnership controlled by Mr. Elias and 550,000 shares of Common
Stock
owned jointly by Mr. Elias and Alma Elias, his spouse.
|
8
|
This
amount represents shares beneficially owned by Messrs. Hollinger,
Trimble,
Parker, Ruggieri, Fairlie, Rowenski and Schlitz and Ms. Batt, including
the options and restricted shares as described
above.
|
9
|
Applicable
percentage of ownership is based on 29,909,577 shares of Common Stock
outstanding as of July 15, 2008, together with securities exercisable
or convertible into shares of Common Stock within sixty (60) days
of July
15, 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.
|
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
|
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH
31,
2008
|
||
Condensed
Consolidated Balance Sheets as of March 31, 2008 (unaudited) and
December
31, 2007
|
F-1 –
F-2
|
|
Condensed
Consolidated Statements of Operations for the Three Months
Ended
March 31, 2008 and 2007 and the period from inception
(May
19, 2003) through March 31, 2008 (unaudited)
|
F-3
|
|
Condensed
Consolidated Statements of Cash Flows for the Three Months
Ended
March 31, 2008 and 2007 and the period from inception
(May
19, 2003) through March 31, 2008 (unaudited)
|
F-4
– F-5
|
|
Notes
to Consolidated Financial Statements, March 31, 2008
(unaudited)
|
F-6
|
|
CONSOLIDATED
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2007
|
||
Report
of Independent Registered Public Accounting Firm
|
F-20
|
|
Consolidated
Balance Sheets as of December 31, 2007 and 2006
|
F-21
– F-22
|
|
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-23
|
|
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-24
– F-25
|
|
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-26
– F-27
|
|
Notes
to Consolidated Financial Statements, December 31, 2007
|
F-28
|
March
31,
|
December
31,
|
||||||
|
2008
|
2007
|
|||||
(Unaudited)
|
|||||||
(Restated)
|
(Restated)
|
||||||
ASSETS
|
|||||||
Current
Assets
|
|||||||
Cash
and cash equivalents
|
$
|
161,578
|
$
|
713,289
|
|||
Restricted
cash
|
116,454
|
115,157
|
|||||
Accounts
receivable
|
112,135
|
134,237
|
|||||
Inventories
|
1,578,085
|
1,655,359
|
|||||
Prepaid
expenses
|
78,786
|
89,901
|
|||||
Total
current assets
|
2,047,038
|
2,707,943
|
|||||
Property,
Plant and Equipment
|
|||||||
Building
|
2,271,209
|
2,271,209
|
|||||
Equipment
|
899,391
|
908,999
|
|||||
Land
and improvements
|
472,504
|
472,504
|
|||||
3,643,104
|
3,652,712
|
||||||
Less
accumulated depreciation
|
431,285
|
375,178
|
|||||
Net
property and equipment
|
3,211,819
|
3,277,534
|
|||||
Total
Assets
|
$
|
5,258,857
|
$
|
5,985,477
|
|
March
31,
|
December
31,
|
|||||
2008
|
2007
|
||||||
(Unaudited)
|
|||||||
(Restated)
|
(Restated)
|
||||||
LIABILITIES
AND EQUITY
|
|||||||
Current
Liabilities
|
|||||||
Notes
payable, banks
|
$
|
580,046
|
$
|
594,677
|
|||
Current
portion long-term debt
|
43,337
|
30,350
|
|||||
Current
installments of obligation under capital lease
|
46,637
|
45,247
|
|||||
Accounts
payable
|
156,207
|
146,585
|
|||||
Accrued
expenses
|
221,964
|
207,328
|
|||||
Accrued
interest
|
141,220
|
129,965
|
|||||
Unearned
grants
|
24,184
|
30,977
|
|||||
Total
current liabilities
|
1,213,595
|
1,185,129
|
|||||
Long-term
debt, net of current maturities
|
1,310,625
|
1,338,235
|
|||||
Obligation
under capital lease, excluding current
installments
|
68,761
|
80,955
|
|||||
1,379,386
|
1,419,190
|
||||||
Total
liabilities
|
2,592,981
|
2,604,319
|
|||||
Commitments
and Contingencies
|
|||||||
Stockholders'
Equity
|
|||||||
Preferred
stock - Series B, $0.001 par value; 5,000,000 shares authorized,
1,932,846
shares issued and outstanding
|
1,933
|
1,933
|
|||||
Common
stock, $0.001 par value; 100,000,000 shares authorized, 27,590,164
shares
issued and outstanding
|
27,590
|
27,590
|
|||||
Additional
paid-in capital
|
16,009,012
|
15,860,725
|
|||||
Accumulated
other comprehensive loss - foreign currency
|
(7,938
|
)
|
(3,412
|
)
|
|||
Deficit
accumulated during the development stage
|
(13,364,721
|
)
|
(12,505,678
|
)
|
|||
Total
stockholders' equity
|
2,665,876
|
3,381,158
|
|||||
Total
Liabilities and Stockholders’ Equity
|
$
|
5,258,857
|
$
|
5,985,477
|
Three months ended
|
From Inception
|
|||||||||
March 31,
|
(May 19, 2003) to
|
|||||||||
|
2008
|
2007
|
March 31, 2008
|
|||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||
(Restated)
|
(Restated)
|
(Restated)
|
||||||||
Sales
|
$
|
161,685
|
$
|
238,290
|
$
|
1,224,388
|
||||
Cost
of Goods Sold
|
||||||||||
Material,
labor, and overhead
|
150,367
|
202,664
|
1,072,151
|
|||||||
Inventory
markdown (recovery)
|
(11,904
|
)
|
-
|
950,119
|
||||||
138,463
|
202,664
|
2,022,270
|
||||||||
Gross
Profit (Loss)
|
23,222
|
35,626
|
(797,882
|
)
|
||||||
Operating
Expenses
|
||||||||||
Sales
and marketing
|
84,065
|
88,514
|
1,285,101
|
|||||||
General
and administrative
|
570,904
|
823,422
|
7,042,312
|
|||||||
Research
and development
|
191,266
|
407,357
|
3,441,769
|
|||||||
Vendor
settlement
|
-
|
448,011
|
577,500
|
|||||||
846,235
|
1,767,304
|
12,346,682
|
||||||||
Operating
Loss
|
(823,013
|
)
|
(1,731,678
|
)
|
(13,144,564
|
)
|
||||
Other
Income (Expense)
|
||||||||||
Interest
income
|
4,429
|
11,501
|
168,481
|
|||||||
Interest
expense
|
(40,459
|
)
|
(41,637
|
)
|
(381,904
|
)
|
||||
Loss
on sale of asset
|
-
|
-
|
(6,734
|
)
|
||||||
(36,030
|
)
|
(30,136
|
)
|
(220,157
|
)
|
|||||
Net
Loss
|
$
|
(859,043
|
)
|
$
|
(1,761,814
|
)
|
$
|
(13,364,721
|
)
|
|
Series
A Preferred stock beneficial conversion feature accreted as a
dividend
|
$
|
-
|
$
|
(1,889,063
|
)
|
$
|
(1,889,063
|
)
|
||
Net
Loss Attributable To Common Stockholders
|
$
|
(859,043
|
)
|
$
|
(3,650,877
|
)
|
$
|
(15,253,784
|
)
|
|
Weighted
-average shares outstanding
|
27,498,164
|
25,472,024
|
||||||||
Basic
and diuluted net loss per share
|
(0.03
|
)
|
(0.14
|
)
|
Three Months Ended
|
From Inception
|
|||||||||
March 31,
|
(May 19, 2003) to
|
|||||||||
|
2008
|
2007
|
March 31, 2008
|
|||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||
Operating
Activities
|
||||||||||
Net
loss
|
$
|
(859,043
|
)
|
$
|
(1,761,814
|
)
|
$
|
(13,364,721
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operations:
|
||||||||||
Depreciation
|
65,715
|
57,213
|
492,558
|
|||||||
Compensation
to directors and employees of stock options and restricted
stock
|
138,005
|
136,089
|
1,512,424
|
|||||||
Compensation
to consultants of stock options
|
10,282
|
2,462
|
197,092
|
|||||||
Warrants
issued in vendor settlement
|
-
|
-
|
577,500
|
|||||||
Loss
on sale of assets
|
-
|
-
|
6,734
|
|||||||
Change
in assets and liabilities:
|
||||||||||
Accounts
receivable
|
22,102
|
(85,175
|
)
|
(112,135
|
)
|
|||||
Inventories
|
77,274
|
(362,217
|
)
|
(1,557,020
|
)
|
|||||
Prepaid
expenses
|
11,115
|
(97,240
|
)
|
(100,243
|
)
|
|||||
Accounts
payable
|
9,622
|
138,135
|
240,063
|
|||||||
Accrued
expenses
|
14,636
|
677,953
|
268,202
|
|||||||
Accrued
interest
|
11,255
|
-
|
141,220
|
|||||||
Unearned
grants
|
(6,793
|
)
|
(8,484
|
)
|
24,184
|
|||||
Net
cash used in operating activities
|
(505,830
|
)
|
(1,303,078
|
)
|
(11,674,142
|
)
|
||||
Investing
Activities
|
||||||||||
Withdrawal/(Deposit)
of restricted cash
|
(1,297
|
)
|
(3,848
|
)
|
(116,454
|
)
|
||||
Proceeds
from sale of assets
|
-
|
-
|
36,500
|
|||||||
(Purchases)/Impairment
of property, plant, and equipment
|
-
|
(39,277
|
)
|
(3,012,679
|
)
|
|||||
Net
cash used in investing activities
|
(1,297
|
)
|
(43,125
|
)
|
(3,092,633
|
)
|
||||
Financing
Activities
|
||||||||||
Proceeds
from note payable, bank
|
-
|
250,000
|
1,839,420
|
|||||||
Payments
on note payable, bank
|
(14,630
|
)
|
(2,283
|
)
|
(927,774
|
)
|
||||
Proceeds
from long-term debt
|
-
|
-
|
1,172,052
|
|||||||
Payments
on long-term debt
|
(25,428
|
)
|
(11,473
|
)
|
(169,323
|
)
|
||||
Proceeds
from exercise of stock option
|
-
|
-
|
8,000
|
|||||||
Issuance
of preferred stock (Series A) in private placement, net of
expenses
|
-
|
-
|
2,779,813
|
|||||||
Issuance
of preferred stock (Series B) in private placement, net of
expenses
|
-
|
279,000
|
3,595,095
|
|||||||
Issuance
of common stock in private placements, net of expenses
|
-
|
-
|
6,639,008
|
|||||||
Net
cash provided by (used in) financing activities
|
(40,058
|
)
|
515,244
|
14,936,291
|
||||||
Effect
of Exchange Rates on Cash and Cash Equivalents
|
(4,526
|
)
|
(1,184
|
)
|
(7,938
|
)
|
||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(551,711
|
)
|
(832,143
|
)
|
161,578
|
|||||
Cash
and Cash Equivalents - Beginning of Period
|
713,289
|
1,149,207
|
-
|
|||||||
Cash
and Cash Equivalents - End of Period
|
$
|
161,578
|
$
|
317,064
|
$
|
161,578
|
Three
months ended
|
From Inception
|
|||||||||
March
31,
|
(May 19, 2003) to
|
|||||||||
|
2008
|
2007
|
March 31, 2008
|
|||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||
Supplemental
Cash Flow Information
|
||||||||||
Interest
paid
|
$
|
29,111
|
$
|
13,913
|
$
|
240,401
|
||||
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
|
||||
Acquistion
of property, plant, and equipment through financing
|
$
|
-
|
$
|
111,450
|
$
|
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
|
Period from Inception
|
||||
(May 19, 2003) to
|
||||
March 31, 2008
|
||||
Net
loss attributable to common shareholders, as reported
|
$
|
(15,253,784
|
)
|
|
Add:
options and restricted stock-based employee compensation expense
included
in reported net loss attributable to common shareholders
|
1,512,424
|
|||
Deduct:
options and restricted stock-based employee compensation expense
determined under fair value based method
|
(1,698,226
|
)
|
||
Pro
forma net loss attributable to common shareholders
|
$
|
(15,439,586
|
)
|
March 31, 2008
As Previously
Reported
|
Adjustments
|
March 31, 2008
As Restated
|
||||||||
Sales
|
$
|
161,685
|
$
|
-
|
$
|
161,685
|
||||
Cost
of Goods Sold
|
||||||||||
Material,
labor, and overhead
|
150,367
|
-
|
150,367
|
|||||||
Inventory
markdowns (recoveries)
|
-
|
(11,904
|
)
|
(11,904
|
)
|
|||||
|
150,367
|
(11,904
|
)
|
138,463
|
||||||
Gross
Profit (Loss)
|
11,318
|
11,904
|
23,222
|
|||||||
Losses
(recovery) related to inventory
|
(11,904
|
)
|
11,904
|
-
|
||||||
Vendor
settlement
|
-
|
-
|
-
|
|||||||
Total
Operating Expenses
|
834,331
|
11,904
|
846,235
|
|||||||
Operating
Loss
|
(823,013
|
)
|
-
|
(823,013
|
)
|
|||||
Net
Loss
|
$
|
(859,043
|
)
|
$
|
-
|
$
|
(859,043
|
)
|
March 31, 2007
As Previously
Reported
|
Adjustments
|
March 31, 2007
As Restated
|
||||||||
Sales
|
$
|
238,290
|
$
|
-
|
$
|
238,290
|
||||
Cost
of Goods Sold
|
||||||||||
Material,
labor, and overhead
|
202,664
|
-
|
202,664
|
|||||||
Inventory
markdowns (recoveries)
|
-
|
-
|
-
|
|||||||
|
202,664
|
-
|
202,664
|
|||||||
Gross
Profit (Loss)
|
35,626
|
-
|
35,626
|
|||||||
Losses
(recovery) related to inventory
|
448,011
|
(448,011
|
)
|
-
|
||||||
Vendor
settlement
|
-
|
448,011
|
448,011
|
|||||||
Total
Operating Expenses
|
1,767,304
|
-
|
1,767,304
|
|||||||
Operating
Loss
|
(1,731,678
|
)
|
-
|
(1,731,678
|
)
|
|||||
Net
Loss
|
$
|
(1,761,814
|
)
|
$
|
-
|
$
|
(1,761,814
|
)
|
Inception to
March 31, 2008
As Previously
Reported
|
Adjustments
|
Inception to
March 31, 2008
As Restated
|
||||||||
Sales
|
$
|
1,224,388
|
$
|
-
|
$
|
1,224,388
|
||||
Cost
of Goods Sold
|
||||||||||
Material,
labor, and overhead
|
1,072,151
|
-
|
1,072,151
|
|||||||
Inventory
markdowns (recoveries)
|
-
|
950,119
|
950,119
|
|||||||
|
1,072,151
|
950,119
|
2,022,270
|
|||||||
Gross
Profit (Loss)
|
152,237
|
(950,119
|
)
|
(797,882
|
)
|
|||||
Losses
(recovery) related to inventory
|
1,527,619
|
(1,539,523
|
)
|
-
|
||||||
Vendor
settlement
|
-
|
577,500
|
577,500
|
|||||||
Total
Operating Expenses
|
13,296,801
|
(950,119
|
)
|
12,346,682
|
||||||
Operating
Loss
|
(13,144,564
|
)
|
-
|
(13,144,564
|
)
|
|||||
Net
Loss
|
$
|
(13,364,721
|
)
|
$
|
-
|
$
|
(13,364,721
|
)
|
March 31, 2008
As Previously
Reported
|
Adjustments
|
March 31, 2008
As Restated
|
||||||||
Additional
paid-in capital
|
$
|
17,898,075
|
$
|
(1,889,063
|
)
|
$
|
16,009,012
|
|||
Deficit
accumulated during the development stage
|
(15,253,784
|
)
|
1,889,063
|
(13,364,721
|
)
|
|||||
Total
Stockholders’ Equity
|
$
|
2,665,876
|
$
|
-
|
$
|
2,665,876
|
December 31, 2007
As Previously
Reported
|
Adjustments
|
December 31,
2007
As Restated
|
||||||||
Additional
paid-in capital
|
$
|
17,749,788
|
$
|
(1,889,063
|
)
|
$
|
15,860,725
|
|||
Deficit
accumulated during the development stage
|
(14,394,741
|
)
|
1,889,063
|
(12,505,678
|
)
|
|||||
Total
Stockholders’ Equity
|
$
|
3,381,158
|
$
|
-
|
$
|
3,381,158
|
Carrying
Amount
In
Consolidated
Balance Sheet
March 31,
|
Fair Value
March 31,
|
Fair Value Measurement Using
|
||||||||||||||
2008
|
2008
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Money
Market Funds
|
$
|
61,656
|
$
|
61,656
|
$
|
61,656
|
$
|
-
|
$
|
-
|
March 31,
2008
|
December 31,
2007
|
||||||
(unaudited)
|
|||||||
Component
parts
|
$
|
1,216,738
|
$
|
1,266,612
|
|||
Work
in process
|
36,444
|
10,407
|
|||||
Finished
goods
|
324,903
|
378,340
|
|||||
Totals
|
$
|
1,578,085
|
$
|
1,655,359
|
March
31, 2008
|
December
31, 2007
|
||||||
(unaudited)
|
|||||||
Note
payable to City of Algona. See (a)
|
$
|
155,000
|
$
|
160,000
|
|||
Note
payable to Algona Area Economic Development Corporation. See (b)
|
146,124
|
146,124
|
|||||
Note
payable to Algona Area Economic Development Corporation. See
(c)
|
60,881
|
64,827
|
|||||
Notes
payable to Iowa Department of Economic Development. See (d)
|
400,000
|
400,000
|
|||||
Note
payable to finance company. See (e)
|
-
|
6,388
|
|||||
Note
payable to bank. See (f)
|
591,956
|
594,246
|
|||||
1,353,962
|
1,368,585
|
||||||
Less
amounts due within one year
|
43,337
|
30,350
|
|||||
Totals
|
$
|
1,310,625
|
$
|
1,338,235
|
2009
|
$
|
591,011
|
||
2010
|
169,562
|
|||
2011
|
200,330
|
|||
2012
|
148,800
|
|||
Thereafter
|
200,922
|
|||
Total
long-term debt
|
$
|
1,310,625
|
·
|
$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.
|
At
March 31, 2008 we have created 17 jobs to meet the above job creation
requirement.
|
(f)
On March 27, 2008, we renewed a note with a bank for $591,956. The
balance
of this note on December 31, 2007 was $594,246. This note matures
on April
1, 2009, and carries a variable interest rate equal to the Wall Street
Journal U.S. Prime Rate. At March 31, 2008, the interest rate on
the note
was 5.25% and requires monthly interest and principal payments of
$4,340.
The loan is secured by real estate.
|
2008
|
$
|
43,086
|
||
2009
|
57,448
|
|||
2010
|
19,889
|
|||
2011
|
11,586
|
|||
2012
|
635
|
|||
Total
minimum lease payments
|
132,644
|
|||
Less
amount representing interest
|
17,246
|
|||
Present
value of minimum lease payments
|
115,398
|
|||
Less
amounts due within one year
|
46,637
|
|||
Totals
|
$
|
68,761
|
For the three months
ending
|
Period from
Inception
|
|||||||||
March 31,
|
(May 19, 2003)
to
|
|||||||||
2008
|
2007
|
March 31, 2008
|
||||||||
Risk-free
interest rate
|
3.6
|
%
|
4.7
|
%
|
4.2
|
%
|
||||
Expected
volatility
|
81.0
|
%
|
100.8
|
%
|
146.5
|
%
|
||||
Expected
life (in years)
|
4.0
|
5.5
|
7.4
|
|||||||
Dividend
yield
|
-
|
-
|
-
|
|||||||
Weighted-average
estimated fair value of options
|
||||||||||
granted
during the period
|
$
|
0.27
|
$
|
2.38
|
$
|
0.97
|
Options Outstanding
|
|||||||||||||
Number of
Shares
|
Weighted-
Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Term
(in years)
|
Aggregate
Intrinsic
Value
(1)
|
||||||||||
|
|||||||||||||
Balance
at December 31, 2007
|
884,916
|
$
|
1.16
|
||||||||||
Granted
|
50,000
|
$
|
.46
|
||||||||||
Balance
at March 31, 2008
|
934,916
|
$
|
1.12
|
5.02
|
$
|
0
|
|||||||
Vested
and exercisable as of
March 31, 2008
|
629,916
|
$
|
1.05
|
3.38
|
$
|
0
|
|||||||
Vested
and expected to vest as of
March 31, 2008
|
906,869
|
$
|
1.15
|
5.02
|
$
|
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 $0.40 on March 31, 2008, the last day
of
trading in March.
|
Unvested
Restricted Stock
|
|||||||
Number
of
Shares
|
Weighted-
Average
Grant Date
Fair Value
|
||||||
Unvested
at December 31, 2007
|
92,000
|
$
|
1.00
|
||||
Vested
|
-
|
-
|
|||||
Unvested
at March 31, 2008
|
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
|
|||||||||||
$0.40
|
20,000
|
10.00
|
$
|
.40
|
10,000
|
$
|
.40
|
|||||||||
$0.50
|
30,000
|
2.88
|
$
|
.50
|
30,000
|
$
|
.50
|
|||||||||
$1.00
|
481,666
|
2.72
|
$
|
1.00
|
429,666
|
$
|
1.00
|
|||||||||
$1.34
|
393,250
|
7.62
|
$
|
1.34
|
160,250
|
$
|
1.34
|
|||||||||
$1.40
|
10,000
|
9.41
|
$
|
1.40
|
-
|
$
|
-
|
|||||||||
934,916
|
5.01
|
$
|
1.05
|
629,916
|
$
|
1.05
|
West
Des Moines, Iowa
|
December 31,
|
December 31,
|
||||||
ASSETS
|
2007
|
2006
|
|||||
(Restated)
|
|||||||
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,
|
|||||
LIABILITIES AND EQUITY
|
2007
|
2006
|
|||||
(Restated)
|
|||||||
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 - Series A, $0.001 par value; 10,000,000 shares
authorized,
-0-
and 930,000 shares issued and outstanding, respectively
|
-
|
930
|
|||||
Preferred
stock - Series B, $0.001 par value; 5,000,000 shares
authorized,
1,932,846
and -0- shares issued and outstanding
|
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
|
|||||
Additional
paid-in capital
|
15,860,725
|
11,160,272
|
|||||
Accumulated
other comprehensive loss - foreign currency
|
(3,412
|
)
|
(9,219
|
)
|
|||
Deficit
accumulated during the development stage
|
(12,505,678
|
)
|
(7,132,957
|
)
|
|||
Total
stockholders' equity
|
3,381,158
|
4,045,170
|
|||||
Total
Liabilities and Stockholders’ Equity
|
$
|
5,985,477
|
$
|
7,050,239
|
|
|
From Inception
|
||||||||
Year Ended
|
Year Ended
|
(May 19, 2003) to
|
||||||||
|
December 31, 2007
|
December 31, 2006
|
December 31, 2007
|
|||||||
(Restated)
|
(Restated)
|
(Restated)
|
||||||||
Sales
|
$
|
740,799
|
$
|
278,344
|
$
|
1,062,703
|
||||
Cost
of Goods Sold
|
||||||||||
Material,
labor, and overhead
|
644,517
|
253,723
|
921,784
|
|||||||
Inventory
markdowns
|
533,876
|
428,147
|
962,023
|
|||||||
1,178,393
|
681,870
|
1,883,807
|
||||||||
Gross
Profit (Loss)
|
(437,594
|
)
|
(403,526
|
)
|
(821,104
|
)
|
||||
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
|
|||||||
Vendor
settlement
|
448,011
|
129,489
|
577,500
|
|||||||
4,828,292
|
5,293,366
|
11,500,447
|
||||||||
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
|
)
|
Deficit
|
||||||||||||||||||||||||||||||||||
Accumulated
|
Accumulated
|
|||||||||||||||||||||||||||||||||
Preferred
|
Preferred
|
Preferred
|
Preferred
|
Common
|
Common
|
Additional
|
Unearned
|
Other
|
During the
|
|||||||||||||||||||||||||
Stock A
|
Stock A
|
Stock B
|
Stock B
|
Stock
|
Stock
|
Paid - in
|
Stock-Based
|
Comprehensive
|
Development
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Compensation
|
Loss
|
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
|
Deficit
|
||||||||||||||||||||||||||||||||||
Accumulated
|
Accumulated
|
|||||||||||||||||||||||||||||||||
Preferred
|
Preferred
|
Preferred
|
Preferred
|
Common
|
Common
|
Additional
|
Unearned
|
Other
|
During the
|
|||||||||||||||||||||||||
Stock A
|
Stock A
|
Stock B
|
Stock B
|
Stock
|
Stock
|
Paid - in
|
Stock-Based
|
Comprehensive
|
Development
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Compensation
|
Loss
|
Stage
|
Total
|
||||||||||||||||||||||||
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
|
|||||||||||||||||||||||
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
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||
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 (Restated)
|
-
|
$
|
-
|
1,932,846
|
$
|
1,933
|
27,590,164
|
$
|
27,590
|
$
|
15,860,725
|
$
|
-
|
$
|
(3,412
|
)
|
$
|
(12,505,678
|
)
|
$
|
3,381,158
|
Year Ended
|
Year Ended
|
From Inception
|
||||||||
December 31,
|
December 31,
|
(May 19, 2003) to
|
||||||||
|
2007
|
2006
|
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 note payable, bank
|
283,374
|
906,046
|
1,839,420
|
|||||||
Payments
on note 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
|
Year Ended
|
From Inception
|
||||||||
December 31,
|
December 31,
|
(May 19, 2003) to
|
||||||||
|
2007
|
2006
|
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
|
||||
Acquistion
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
As Previously Reported
|
Adjustments
|
December 31, 2007
As Restated
|
||||||||
Sales
|
$
|
740,799
|
$
|
-
|
$
|
740,799
|
||||
Cost
of Goods Sold
|
||||||||||
Material,
labor, and overhead
|
644,517
|
-
|
644,517
|
|||||||
Inventory
markdowns
|
-
|
533,876
|
533,876
|
|||||||
|
644,517
|
533,876
|
1,178,393
|
|||||||
Gross
Profit (Loss)
|
96,282
|
(533,876
|
)
|
(437,594
|
)
|
|||||
Losses
related to inventory
|
981,887
|
(981,887
|
)
|
-
|
||||||
Vendor
settlement
|
-
|
448,011
|
448,011
|
|||||||
Total
Operating Expenses
|
5,362,168
|
(533,876
|
)
|
4,828,292
|
||||||
Operating
Loss
|
(5,265,886
|
)
|
-
|
(5,265,886
|
)
|
|||||
Net
Loss
|
$
|
(5,372,721
|
)
|
$
|
-
|
$
|
(5,372,721
|
)
|
December 31, 2006
As Previously Reported
|
Adjustments
|
December 31, 2006
As Restated
|
||||||||
Sales
|
$
|
278,344
|
$
|
-
|
$
|
278,344
|
||||
Cost
of Goods Sold
|
||||||||||
Material,
labor, and overhead
|
253,723
|
-
|
253,723
|
|||||||
Inventory
markdowns
|
-
|
428,147
|
428,147
|
|||||||
|
253,723
|
428,147
|
681,870
|
|||||||
Gross
Profit (Loss)
|
24,621
|
(428,147
|
)
|
(403,526
|
)
|
|||||
Losses
related to inventory
|
557,636
|
(557,636
|
)
|
-
|
||||||
Vendor
settlement
|
-
|
129,489
|
129,489
|
|||||||
Total
Operating Expenses
|
5,721,513
|
(428,147
|
)
|
5,293,366
|
||||||
Operating
Loss
|
(5,696,892
|
)
|
-
|
(5,696,892
|
)
|
|||||
Net
Loss
|
$
|
(5,752,269
|
)
|
$
|
-
|
$
|
(5,752,269
|
)
|
Inception to
December 31, 2007
As Previously Reported
|
Adjustments
|
Inception to
December 31, 2007
As Restated
|
||||||||
Sales
|
$
|
1,062,703
|
$
|
-
|
$
|
1,062,703
|
||||
Cost
of Goods Sold
|
||||||||||
Material,
labor, and overhead
|
921,784
|
-
|
921,784
|
|||||||
Inventory
markdowns
|
-
|
962,023
|
962,023
|
|||||||
|
921,784
|
962,023
|
1,883,807
|
|||||||
Gross
Profit (Loss)
|
140,919
|
(962,023
|
)
|
(821,104
|
)
|
|||||
Losses
related to inventory
|
1,539,523
|
(1,539,523
|
)
|
-
|
||||||
Vendor
settlement
|
-
|
577,500
|
577,500
|
|||||||
Total
Operating Expenses
|
12,462,470
|
(962,023
|
)
|
11,500,447
|
||||||
Operating
Loss
|
(12,321,551
|
)
|
-
|
(12,321,551
|
)
|
|||||
Net
Loss
|
$
|
(12,505,678
|
)
|
$
|
-
|
$
|
(12,505,678
|
)
|
December 31, 2007
As Previously Reported
|
Adjustments
|
December 31, 2007
As Restated
|
||||||||
Additional
paid-in capital
|
$
|
17,749,788
|
$
|
(1,889,063
|
)
|
$
|
15,860,725
|
|||
Deficit
accumulated during the development stage
|
(14,394,741
|
)
|
1,889,063
|
(12,505,678
|
)
|
|||||
Total
Stockholders’ Equity
|
$
|
3,381,158
|
$
|
-
|
$
|
3,381,158
|
December 31, 2007
As Previously Reported
|
Adjustments
|
December 31, 2007
As Restated
|
||||||||
Additional
paid-in capital
|
$
|
17,749,788
|
$
|
(1,889,063
|
)
|
$
|
15,860,725
|
|||
Deficit
accumulated during the development stage
|
(14,394,741
|
)
|
1,889,063
|
(12,505,678
|
)
|
|||||
Total
Stockholders’ Equity
|
$
|
3,381,158
|
$
|
-
|
$
|
3,381,158
|
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.
|
(f)
On March 27, 2008, we renewed a note with a bank for $591,956. The
balance
of this note on December 31, 2007 was $594,246. This note matures
on April
1, 2009, and carries a variable interest rate equal to the Wall Street
Journal U.S. Prime Rate. At December 31, 2007, the interest rate
on the
note was 7.25% and requires monthly interest and principal payments
of
$4,340. The loan is secured by real
estate.
|
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
|
)
|
Period from Inception
|
||||||||||
Year ended December 31,
|
(May 19, 2003) to
|
|||||||||
2007
|
2006
|
December 31, 2007
|
||||||||
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
|
(2)
|
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;
|
4,054,541
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.
|
August
5, 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.
|
|