Attached files
file | filename |
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EX-23 - Li-ion Motors Corp. | v165432_ex23.htm |
EX-31 - Li-ion Motors Corp. | v165432_ex31.htm |
EX-32 - Li-ion Motors Corp. | v165432_ex32.htm |
EX-10.29 - Li-ion Motors Corp. | v165432_ex10-29.htm |
U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x | Annual Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934 |
For the fiscal year ended July 31, 2009 | |
o | Transition Report Under Section 13 Or 15(d) Of The Securities Exchange Act Of 1934 |
For the transition period from |
COMMISSION
FILE NUMBER: 000-33391
EV
INNOVATIONS, INC.
(Exact
Name of Registrant as Specified in Its Charter)
NEVADA
|
88-0490890
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
4894
Lone Mountain #168, Las Vegas NV
|
89130
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(702)
425-7376
|
Issuer's
telephone number
|
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities
registered under Section 12(g) of the Exchange Act: COMMON STOCK, PAR VALUE
$0.001 PER SHARE
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o
No x
Indicate
by checkmark if the registrant is not required to file reports to Section 13 or
15(d)Of the Act. o
Yes x No
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. x
Yes o No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. x
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o
No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a smaller reporting company. (Check
One):
Large accelerated filer | o | Accelerated filer | o | |
Non-accelerated filer | o | Smaller reporting company | x |
(Do not
check if a smaller reporting company)
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). o
Yes x No
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates as of the last business day of the registrant’s most recently
completed second fiscal quarter was $1,930,750.
Number of
shares of Common Stock outstanding as of November 2, 2009:
21,284,101.
PART
I
NOTE
REGARDING FORWARD LOOKING STATEMENTS
CAUTIONARY
STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Annual Report contains historical information as well as forward-looking
statements. Statements looking forward in time are included in this
Annual Report pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Such statements involve known
and unknown
risks and uncertainties that may cause our actual results in future periods
to be materially different from any future performance suggested herein.
We wish
to caution readers that in addition to the important factors described
elsewhere
in this Form 10-K, the following forward looking statements, among others,
sometimes have affected, and in the future could affect, our actual results
and could cause our actual consolidated results during 2009, and beyond,
to differ
materially from those expressed in any forward-looking statements made
by or on
our behalf.
Item
1. Business.
Our
Business
Background
EV
Innovations, Inc. ("we", “us", the "Company" or "EV Innovations") was
incorporated under the laws of the State of Nevada in April 2000. We are engaged
in the development and marketing of electric powered vehicles and
products.
We
changed our name from Whistler Investments, Inc. to Hybrid Technologies, Inc. on
March 9, 2005 to reflect our corporate focus on electric products. Effective
January 22, 2009, we changed our name to EV Innovations, Inc. to clarify our
vehicles are fully electric not hybrids. Since our incorporation, we evaluated
various business opportunities including a mineral property in British Columbia;
the Azra Shopping Center in Las Vegas, which we acquired on April 10, 2002, and
disposed of on January 1, 2003; a Vancouver based coffee franchise; oil and gas
properties in California; and a medical software product company. We did not
pursue several of these opportunities, and none of these business opportunities
produced meaningful revenue. Following the sale of the Azra shopping center and
our determination not to pursue acquisition of a medical software company, we
began to focus our efforts on the development and marketing of electric powered
vehicles and products.
Recent
Developments
Effective
April 15, 2008, we entered into two material agreements with respect to our
subsidiary Zingo, Inc., the name of which was subsequently changed to
Superlattice Power, Inc. (“Superlattice”). On April 18, 2008, we sold the
80,000,000 shares of common stock of Superlattice held by us to Blue Diamond
Investments, Inc. for $215,000, and we assigned to the Purchaser all receivables
or debt obligations of Superlattice owing to or held by us at March 31, 2008.
Effective April 15, 2008, we entered into a License Agreement with Superlattice
providing for our license to Superlattice of our patent applications and
technologies
for rechargeable lithium ion batteries for hybrid vehicles and other
applications.
1
Liquidity
and Capital Resources
As of
July 31, 2009, we had cash on hand of $5,182. At that same date our liabilities
totaled $5,307,066. For the year ended July 31, 2009, we incurred a net loss
from continuing operations of $6,240,712. On July 31, 2009, we had a working
capital deficit of $1,266,351 and a stockholders' deficit of $3,026,780. In
fiscal 2009, we defaulted on our outstanding loan with Wyndom Capital
Investments, Inc., and this lender, as its sole recourse under the loan
agreement, took possession of the 10,000,000 shares of our common stock pledged
as collateral for loan. In fiscal 2009, we also defaulted under our loan
agreement with Crystal Capital Ventures, Inc., pursuant to which we have pledged
7,500,000 shares of our common stock as collateral and which is the lender’s
sole recourse in the event of a default. This lender has waived all defaults
through November 9, 2009 under this loan agreement.
We had
21,284,101 shares of common stock issued and outstanding as of November 2, 2009.
Our common stock is traded on the OTC Bulletin Board.
General
We are an
early stage technology company. We are developing and marketing electric powered
vehicles and products.
Our
Electric Battery Pack and Vehicle Technology
After the
termination of all licensing relationships with RV Systems and Lithium House,
our initial licensor of battery technology, we began developing portable battery
power pack technology and effecting vehicle conversions from conventional power
systems to electric power systems in our own facility which we have purchased in
Mooresville, North Carolina. We commenced marketing conversions of four-wheel
vehicles in 2007 and 2008.
In our
Mooresville, North Carolina, facility we have converted and tested vehicles
based on Chrysler PT Cruiser, Mini Cooper, Pontiac Vibe, Toyota Yaris and
Mercedes’ Smart car. We replaced the gasoline power systems with all electric
power systems and battery management systems. In the past, we have also
converted some large and small ATV's, including vehicles for handicapped
persons, electric bicycles and electric scooters. We have developed a rapid
charge system that reduces charge time by approximately 65%; it is being used
and tested.
Our
Mooresville facility consists of about 40,000 square feet of space. We have also
set up a battery lab that Superlattice is using of approximately 5,000 square
feet.
The
Battery Technology We Would Use
The
electric vehicles’ battery pack performs the same function as the gas tank in a
conventional vehicle: it stores the energy needed to operate the vehicle. We use
battery packs created in-house from Kokam cells in our converted vehicles. We
anticipate using cells created by Superlattice in the near future.
2
Effective
April 15, 2008, we entered into a License Agreement (the “License Agreement”)
with Superlattice providing for our license to Superlattice of our patent
applications and technologies for rechargeable lithium ion batteries for hybrid
vehicles and other applications (“Licensed Products”). Under the License
Agreement, we have the right to purchase our requirements of lithium ion
batteries from Superlattice, and our requirements of lithium ion batteries shall
be supplied by Superlattice in preference to, and on a priority basis as
compared with, supply and delivery arrangements in effect for other customers of
Superlattice. Our cost for lithium ion batteries purchased from Superlattice
shall be Superlattice’s actual manufacturing costs for such batteries for the
fiscal quarter of Superlattice in which our purchase takes place.
Superlattice
agreed to invest a minimum of $1,500,000 in each of the next two years in
development of the technology for the Licensed Products. In the initial year
under the License Agreement, Superlattice invested approximately $264,043 in the
development of technology, and therefore is not in compliance with its
obligations under this covenant of the License Agreement. We have advised
Superlattice in a letter dated October 1, 2009, that we will not give notice of
default against Superlattice for its failure to comply with this covenant in the
first year of the term of the License Agreement.
Electric
Motors
We are
using a variety of electric motors in our converted vehicles. We are not reliant
on any single manufacturer of electric motors. There are a large number of
domestic and foreign manufacturers of electric motors, and we anticipate the
motors with the specifications we require will be available at reasonable
commercial prices from a number of these sources.
We
believe that an important characteristic of our technology is the lithium
battery power source, which is more efficient and powerful than other battery
power sources. Vehicles utilizing this technology have the ability to travel far
greater distances, can recharge in less time and also benefit from weight
reduction, as compared with vehicles using other battery powered systems. One of
the major historic hurdles facing electric vehicle manufacturers is that most
power sources would not allow the vehicle to travel over 100 miles before
needing to be recharged. We believe that we can produce electric powered
vehicles with a travel range equal to or greater than 200 miles.
A
significant difference between electric vehicles and gasoline-powered vehicles
is the number of moving parts. The electric vehicle motor has one moving part,
the shaft, which is very reliable and requires little or no maintenance,
reducing repair costs. Whereas the gasoline-powered vehicle’s motor has numerous
moving parts, requiring a wide range of maintenance. The controller and charger
are electronic devices with no moving parts, and they require little or no
maintenance. Electric vehicle batteries are sealed and maintenance free,
However, the life of these batteries is limited, and batteries will require
periodic replacement. New batteries are being developed that will not only
extend the range of electric vehicles, but will also extend the life of the
battery pack which may eliminate the need to replace the battery pack during the
life of the vehicle.
Products
Under Development
We have
products under development in the following categories.
3
We have
converted golf carts, a type of neighborhood electric vehicle (NEV). A NEV is a
4-wheeled vehicle, larger than a go cart but smaller than most light-duty
passenger vehicles. NEV's are usually configured to carry two or four passengers
with a pickup bed. NEV's are defined by the United States National Highway
Traffic Safety Administration as subject to Federal Motor Vehicle Safety
Standard (FMVSS} No. 500. Per FMVSS 500, NEV's have top speeds between 20 and 25
miles per hour and are defined as "Low Speed Vehicles". FMVSS 500 requires that
NEV's be equipped with headlamps, stop lamps, turn signal lamps, tail lamps,
reflex reflectors, parking brakes, rear view mirrors, windshields, seat belts,
and vehicle identification numbers. Many states have passed legislation or
regulations allowing NEV's to be licensed and driven on roads that are generally
posted at 35 miles per hour or less. While NEV’s were initially used in gated
communities, they have been increasingly used by the general public for school
transportation, shopping and general neighborhood trips. In addition, they are
used at military bases, national parks, commercial airports and for local
government activities.
Commercial
Initiatives
On March
9, 2009 the State of North Carolina issued a manufacturing license to the
Company, and we now are manufacturing our own original design vehicles with
VIN’s, while we continue to convert other vehicles.
Since
February 2004, the LiVTM series
electric vehicle has been tested and is under review by a number of government
agencies. The testing of the LiVTM series
vehicles by NASA, Arcadis, a contractor to the U.S. Environmental Protection
Administration, NYC Taxi Commission, and US Paratransit is completed. The
LiVTM WISE is
listed in the catalogue of the Unites States General Services Administration,
and these vehicles are available for purchase by multiple government agencies.
The target market for the LiVTM WISE is
federal government offices, utility companies, defense organizations and fleet
operators. EV Innovations is working with Zero Truck- USA for commercialization
of lithium ion powered heavy duty truck. EV Innovations now offers its own,
“WAVE” three and four wheel electric vehicles and the “INIZIO” super cars to the
US market. The WAVE electric vehicle is targeted at the commuter environment, as
the “INIZIO” super sport car targets the high performance car market. The INIZIO
is also featured in the market through Sam’s Club “Once in a Lifetime” offer.
The advanced lithium ion battery powered INIZIO received an outstanding response
from Sam’s Club members. We anticipate that the INIZIO and WAVE will be the
front line vehicles for us. A manufacturing and assembly plant has been proposed
to the DOE under the Advanced Technology Vehicle Manufacturing loan program in
order to achieve scaled up production. This particular plant design is
estimated to produce around 100,000 cars in the first five years, once it is
operational.
Current
Joint Venture Activities or Negotiations in Progress
U.S.
Navy
On
February 5, 2004 we announced the initiation of a lithium-ion conversion project
with the United States Navy. We have funded the initial 3kw prototype for this
project, and the prototype has been completed and delivered to the
Navy.
4
Paratransit
Paratransit,
Sacramento, California, a company providing community transportation services,
purchased two converted PT Cruisers. The two vehicles were delivered in
November 2006.
NASA
We have
signed a Space Act agreement with NASA and several vehicles are being tested by
NASA at the Kennedy Space Center in Florida.
Holiday
2007 and 2008
We were
featured as Sam’s Club’s “Once in a Lifetime” package in 2007 and 2008 and a
Smart Car with a trip to NASA was sold to a Sam’s Club member. Other members
were allowed to purchase similar Smart Car conversions at reduced pricing, with
one other Smart Car sold at that price.
Competition
The
discussion below identifies some of our principal competitors in the electric
vehicle area.
General
Motors’ Chevrolet division is developing its model named “Volt”, an electric
car, with a scheduled launch in the 2011 model year.
The
Lightning GT is a battery powered sports car manufactured by the UK company
British Lightning Car Company that is scheduled to go on sale in 2009. The
expected price is about $200,000.
The Buddy
is a Norwegian electric car manufactured by Elbil Norge AS. The car is capable
of 40-80 km range per charge.
The Joule
is a South African 6-seater electric car produced by Optimal Energy that is
scheduled to go on sale in 2010.
The
Phoenix SUV and SUT are produced by Phoenix Motorcars in Ontario, California.
Both models use lithium titanate batteries and have a range of approximately 130
miles.
The Smart
EV is modified by Zytek Electric Vehicles with a range of about 62
miles.
The Tesla
Roadster is the first production car by Tesla Motors. It is capable of a range
of 200 miles with a top speed of 135 mph. The first were scheduled to be
delivered in 2008, but as of yet deliveries have not commenced.
The Th!nk
City is the only crash tested and highway certified electric car in the world.
The vehicles are manufactured in Aurskog, Norway and are capable of a 190 mile
range.
The
Venturi Fétish is a two-seater electric sports car produced by Venturi in
Monaco.
The
Commuter Car T600 is a three-wheeled $108,000 car with a range of 80 miles
manufactured by Commuter Car Corporation.
5
Employees
As of the
date of this report, we have 42 employees, including our President and CEO,
Stacey Fling, and her assistants at the corporate office in Las Vegas,
Nevada.
Research
and Development Expenditures
We
incurred research and development expenditures of approximately $1,402,077 in
our fiscal year ended July 31, 2008, and of approximately $1,296,281 in our
fiscal year ended July 31, 2009.
Patents
and Trademarks
The
Company has filed provisional patent applications with the U.S. Patent and
Trademark Office (“USPTO”) for three of our inventions relating to our battery
management system, cathode material and an ultracapacitor.
Item
1A. Risk Factors.
You
should be particularly aware of the inherent risks associated with our
business plan. These risks include but are not limited to:
General
WE
DEFAULTED ON LONG TERM DEBT IN 2009
In the
year ended July 31, 2009, we defaulted under our loan agreement with Wyndom
Capital Investments, Inc. and the lender, as its sole recourse under this loan
agreement, took possession of the 10,000,000 shares of our common stock pledged
as collateral for the loan. We are also in default under our loan agreement with
Crystal Capital Ventures, Inc., but all defaults through November 9, 2009 under
that loan agreement have been waived. The sole recourse of the lender under that
loan agreement is the 7,500,000 shares of our common stock held as collateral
for the loan. See discussion under the caption “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and in Footnote 6 of
the Footnotes to our Consolidated Financial Statements included in this
report.
WE ARE
CONTINUING TO INCUR SUBSTANTIAL LOSSES FROM OUR OPERATIONS
We have
had minimal revenues from joint ventures and sales of our products. We have
not signed any definitive joint venture agreements to commercialize any of our
products. As of July 31, 2009, we had cash on hand of $5,182. At that same date
our liabilities totaled $5,307,066. For the year ended July 31, 2009, we
incurred a net loss from continuing operations of $6,240,712. On July 31, 2009,
we had a working capital deficit of $1,266,351 and a stockholders' deficit of
$3,026,780.
We expect
that we will continue to incur operating losses in the future. Failure to
achieve or maintain profitability may materially and adversely affect the future
value of our common stock.
6
IF WE DO
NOT OBTAIN ADDITIONAL FINANCING, OUR BUSINESS WILL FAIL
Our
current operating funds and revenues from converted vehicle sales are less than
necessary for commercialization of our products, and therefore we will need to
obtain additional financing to complete our business plan. We do not currently
have arrangements for financing and we may not find such financing if required.
Market factors may make the timing, amount, terms or conditions of additional
financing unavailable to us.
WE HAVE
BEEN AND CONTINUE TO BE THE SUBJECT OF A GOING CONCERN OPINION FROM OUR
INDEPENDENT AUDITORS, WHICH MEANS THAT WE MAY NOT BE ABLE TO CONTINUE OPERATIONS
UNLESS WE OBTAIN ADDITIONAL FUNDING
Our
independent auditors have added an explanatory paragraph to their audit
opinions, issued in connection with our financial statements, which states our
ability to continue as a going concern is uncertain.
WE ARE
SUBJECT TO ALL OF THE RISKS OF A NEW BUSINESS
Our
business operations are relatively recent; therefore we face a potentially
higher risk of business failure. Our sales revenues are still not significant as
of the date of this report. Potential investors should be aware of the
difficulties normally encountered by newer companies and the high rate of
failure of such enterprises. The likelihood of success must be considered in
light of the many problems including expenses, difficulties, complications,
delays encountered in connection with the commercialization of our products,
unanticipated problems relating to product development, arranging and
negotiating with joint venture partners, additional costs and expenses that may
exceed current estimates. We have limited history upon which to base any
assumption as to the likelihood that our business will prove successful, and
investors should be aware that there is a substantial risk that we may not
generate any significant operating revenues or ever achieve profitable
operations. If we are unsuccessful in addressing these risks, our business will
most likely fail.
Because
we have only recently commenced business operations, we expect to incur
operating losses for the foreseeable future
OUR
MANAGEMENT HAS LIMITED EXPERIENCE IN PRODUCTS UTILIZING ELECTRIC BATTERY POWER
AND WITH NEGOTIATING COMMERCIAL ARRANGEMENTS FOR SUCH PRODUCTS
Our
management has limited experience in negotiating licenses and joint
ventures to commercialize the types of products we are developing. As a result
of this inexperience, there is a high risk we may be unable to complete our
business plan and negotiate profitable licenses or joint ventures for our
lithium ion battery powered products. Because of the intense competition for our
planned products, there is substantial risk that we will not successfully
commercialize these products.
OUR
PRODUCTS WILL BE HIGHLY REGULATED
Our
products are highly regulated. There are special safety standards in effect for
vehicles with a top speed of up to 25 miles per hour. Marketing vehicles that
compete with passenger cars, requires compliance with the full federal safety
standards. Regulatory reviews and compliance has already consumed significant
time and resources and will continue to do so as we work towards obtaining a
dealership license. This may adversely affect the timing of bringing products to
market, as well as the profitability of such products once regulatory approvals
are obtained.
7
OUR
ELECTRIC POWERED VEHICLE BUSINESS IS SUBJECT TO SUBSTANTIAL RISKS
The
electric battery powered product market is competitive and risky. We are
competing against numerous competitors with greater financial resources than us,
and due to the difficulties of entry into these markets, we may be unsuccessful
and not be able to complete our business plan.
WE INTEND
TO RELY ON LITHIUM ION BATTERIES WHICH, IF NOT PROPERLY MANAGED, MAY POSE A FIRE
HAZARD.
Another
manufacturer of electric motor vehicles has received five reports of the
batteries overheating, three of which caught fire, though no injuries have been
reported. Our battery management systems will need to lessen or eliminate the
risk of fire from the use of lithium ion batteries as a power source. If we are
not able to develop such systems our business will not develop as planned. If
our battery management systems fail, we could be liable to those who are harmed
as a result of such failure.
Item
1B. Unresolved Staff Comments.
Not
applicable.
Item
2. Properties.
We rent
office space of approximately 1,500 square feet in Las Vegas, for which we pay
$1,500 monthly, pursuant to a one-year lease expiring March 2009. Our mailing
address is 4894 Lone Mountain #168, Las Vegas, Nevada 89130, for which we
pay $25 per month, on a month to month basis.
We
purchased, in May 2006, a 40,000 square foot facility at 158 Rolling
Hill in Mooresville, North Carolina.
Item
3. Legal Proceedings.
Other
than as described below, we are not a party to any material legal proceedings
and to our knowledge, no such proceedings are threatened or
contemplated.
Hybrid
Technologies, Inc. v. Keith Boucher
An
arbitration award in the amount of $70,803.00 was awarded to Keith Boucher
against the Company for attorneys fees and costs incurred in arbitration. The
Company has filed a motion to vacate the award, which motion is scheduled for
hearing in December, 2009 in the District Court of Nevada in Clark
County.
Barrett
Lyon v. EV Innovations, Inc.
Barrett
Lyon, an individual, has filed suit against the Company in the Superior Court of
California, San Mateo County, for alleged breach of warranty for a vehicle he
purchased from the Company, seeking $68,220.00 in damages, plus attorneys fees
estimated in the range of $10,000 to $30,000. The Company disputes his claims.
Trial is set for December, 2009.
8
F&C
Promptly, Inc. v. EV Innovations, Inc.
F&C
Promptly, Inc., a collection agency, filed in February 2009 a lawsuit against us
in the District Court, Clark County, Nevada, for approximately $32,000 for
collection of the account of the Law Offices of Richard McKnight assigned to
F&C Promptly, Inc. for collection. The Company is separately suing Richard
McKnight and brought a third party complaint against McKnight and his law
office, alleging negligence and professional malpractice.
Caudle
& Spears v. EV Innovations, Inc.
Caudle
& Spears has obtained in Meckenberg County, North Carolina, General Court, a
default judgment against us in the amount of $17,686. This law firm represented
the Company in our litigation against Martin Koebler, a former employee, whom we
successfully sued for return of Company property and other damages. We are in
settlement negotiations with Caudle & Spears, since our judgment against
Martin Koebler is still in the collection process.
Item
4. Submission of Matters to a Vote of Security Holders.
Not
applicable.
9
PART
II
Item
5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer
Purchases of Equity Securities.
Our
shares of common stock trade and have traded on
the NASD OTC Bulletin Board since March 4, 2002. The OTC
Bulletin Board is a network of security dealers who buy and sell
stock. A computer network
that provides information on current "bids" and
"asks", as well as volume information, connects
the dealers. The following table sets forth for
our last two fiscal years by quarter the high and low closing prices of our
common shares traded on the OTC Bulletin Board:
Period
|
High
|
Low
|
||||||
August
1 to October 31, 2006
|
$ | 7.41 | $ | 3.30 | ||||
November
1, 2006 to January 31, 2007 (1)
|
$ | 5.42 | $ | 3.52 | ||||
February
1 to April 30, 2007 (2)(3)
|
$ | 4.77 | $ | 4.11 | ||||
May
1 to July 31, 2007 (4)
|
$ | 4.35 | $ | 2.50 | ||||
August
1 October 31, 2007
|
$ | 2.78 | $ | 1.85 | ||||
November
1, 2007 to January 16, 2008
|
$ | 2.49 | $ | .55 | ||||
January
17 to April 30, 2008 (5)
|
$ | 5.15 | $ | 2.05 | ||||
May
1 to July 31, 2008
|
$ | 6.30 | $ | 3.35 | ||||
August
1 to October 31, 2008
|
$ | 3.35 | $ | .72 | ||||
November
1, 2008 to February 18, 2009
|
$ | .89 | $ | .30 | ||||
February
19 to April 30, 2009 (6)
|
$ | 2.00 | $ | 1.02 | ||||
May
1 to July 31, 2009
|
$ | 2.10 | $ | 1.30 | ||||
August
1 to October 30, 2009
|
$ | 1.83 | $ | 1.37 |
(1)
|
A
one-for-ten stock dividend was effective November 30,
2006.
|
(2)
|
Following
the one-for-twenty stock dividend effective January 31,
2007.
|
(3)
|
A
one-for-twenty stock dividend was effective March 30,
2007.
|
(4)
|
A
one-for-ten stock dividend was effective May 31,
2007.
|
(5)
|
A
one-for-seven reverse split was effective January 17,
2008.
|
(6)
|
A
one-for-three reverse split was effective February 19,
2009.
|
The
above quotations are taken from information provided by
Yahoo and reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
Holders
of Common Stock
As of
November 2, 2009, we had 112 holders of record of our common stock.
Dividends
Our
current policy is to retain earnings in order to finance our
operations. Our board of directors will determine future declaration
and payment of dividends, if any, in light of the then-current
conditions they deem relevant and in accordance with the Nevada Revised
Statutes.
10
Securities
Authorized for Issuance under Equity Compensation Plans
The
following table sets forth as of July 31, 2009 information with
respect to our common stock issued and available to be issued under outstanding
options, warrants and rights.
Plan
category
|
(a)
Number
of securities to be
issued
upon exercise of
outstanding
options,
warrants
and rights
|
(b)
Weighted-average
exercise
price
of outstanding
options,
warrants and
rights
|
(c)
Number
of securities
remaining
available for
future
issuance under
equity
compensation
plans
(excluding
securities
reflected
in
column
(a))
|
|||||||||
Equity
compensation Plans approved by security holders
|
||||||||||||
Equity
compensation plans not approved by security holders
|
1,585,090 | $ | .90 | 242,857 | ||||||||
Total
|
1,585,090 | 242,857 |
2006 and
2009 Restricted Stock Plans
The 2006
Restricted Stock Plan was adopted by the board with 5,000,000 shares
reserved. The Plan is administered by the Board of Directors of the
Company. Subject to the express limitations of
the Plan, the Board has authority in its discretion to
determine the eligible persons to
whom, and the time or times at which, restricted stock awards may be
granted, the number of shares subject to each
award, the time or times at which an award will become
vested, the performance criteria, business or performance goals or
other conditions of an award, and all other terms of
the award. The Board also has discretionary authority to
interpret the Plan, to make all
factual determinations under the Plan, and to
make all other determinations necessary or advisable for
Plan administration. The Board may prescribe, amend, and rescind
rules and regulations relating to the Plan. All interpretations,
determinations, and actions by the Board are final, conclusive, and
binding upon all parties.
The 2009
Restricted Stock Plan was adopted by the board with 5,000,000 shares
reserved. The Plan is administered by the Board of Directors of the
Company. Subject to the express limitations of
the Plan, the Board has authority in its discretion to
determine the eligible persons to
whom, and the time or times at which, restricted stock awards may be
granted, the number of shares subject to each
award, the time or times at which an award will become
vested, the performance criteria, business or performance goals or
other conditions of an award, and all other terms of
the award. The Board also has discretionary authority to
interpret the Plan, to make all
factual determinations under the Plan, and to
make all other determinations necessary or advisable for
Plan administration. The Board may prescribe, amend, and rescind
rules and regulations relating to the Plan. All interpretations,
determinations, and actions by the Board are final, conclusive, and
binding upon all parties.
11
Sales of
Unregistered Securities
The
following table sets forth the sales of unregistered securities since the
Company’s last report filed under this item.
Date
|
Title
and Amount (1)
|
Purchaser
|
Principal
Underwriter
|
Total
Offering Price/ Underwriting Discounts
|
||||
January
18, 2008
|
8,571,427
shares of common stock issued as collateral security pursuant to Loan
Agreement, dated October 29, 2007, between the Company and Wyndom Capital
Investments Inc. Shares were issued pursuant to anti-dilution provisions
in Loan Agreement.
|
Wyndom
Capital Investments Inc.
|
NA
|
NA/NA
|
||||
May
27, 2008
|
7,500,000
shares of common stock issued as collateral security pursuant to Loan
Agreement, dated May 5, 2008, between the Company and Crystal Capital
Investments Inc.
|
Crystal
Capital Investments Inc.
|
NA
|
NA/NA
|
||||
January
22, 2009
|
3,500
shares of common stock.
|
Consultant
|
NA
|
$3,675/NA
|
||||
February
20, 2009
|
6,666,665
shares of common stock issued as collateral security pursuant to Loan
Agreement, dated October 29, 2007, between the Company and Wyndom Capital
Investments Inc. Shares were issued pursuant to anti-dilution provisions
in Loan Agreement.
|
Wyndom
Capital Investments Inc.
|
NA
|
NA/NA
|
||||
February
20, 2009
|
4,999,999
shares of common stock issued as collateral security pursuant to Loan
Agreement, dated May 5, 2008, between the Company and Crystal Capital
Investments Inc. Shares issued pursuant to anti-dilution provisions in
Loan Agreement.
|
Crystal
Capital Investments, Inc.
|
NA
|
NA/NA
|
Item
6. Selected Financial Data.
Not
applicable.
12
Item
7. Management's Discussion and Analysis or Plan of Operations.
FORWARD
LOOKING STATEMENTS
This
annual report contains forward-looking statements that involve risks
and uncertainties. We use words such as anticipate, believe, plan,
expect, future, intend and similar expressions to identify such
forward-looking statements. You should not place too
much reliance on
these forward-looking statements. Our actual
results are likely to differ materially from
those anticipated in these
forward-looking statements for
many reasons, including the risks faced by us described in
this section.
Results
Of Operations for the Year Ended July 31, 2009
We incurred a
net loss from continuing operations of $6,240,712 for the year
ended July 31, 2009, and of approximately
$5,868,272 for the year ended July 31, 2008, and in the year ended July 31,
2009, general and administrative costs of $4,794,393
and interest expense of $745,118.
We had
sales from continuing operations of $475,828 in the year ended July 31,
2009. Revenues increased from $191,801 in the year ended July 31,
2008 to $475,828 in 2009, due to increased vehicle sales at a higher average
price, and cost of sales increased to $625,866 in 2009 from $384,267 in 2008.
Our net loss from continuing operations for 2009 increased from
fiscal 2008 (from $5,868,272 in 2008 to approximately $6,240,712 in
2009), due primarily to increased general and administrative costs from
$4,794,393 in fiscal 2008, as compared with approximately $4,794,393 in 2009.
General and administrative costs also reflected the hiring of additional
employees in 2009 and an increased stock compensation expense of $2,630,000 in
2009, as compared with $804,652 in 2008. Professional fees decreased from
$1,004,617 in 2008 to $470,246 in 2009, and travel expense decreased from
$358,350 in 2008 to $91,182 in 2009. Advertising and promotion decreased from
$627,643 in 2008 to $443,288 in 2009. We paid a higher level of
finders’ fees of $518,565 in 2008, as compared with $164,294 in 2009. We also
increased interest expense in the twelve months ended July 31, 2009 of $745,118,
as compared with approximately $231,114 in the comparable period in 2008, and
stock based compensation of $804,652 in 2008 as compared with -0- in
2009.
PLAN OF
OPERATION
On July
31, 2009, we had a
working capital deficit of $1,266,351
and a stockholders' deficit of $3,026,780. In fiscal 2009, we also
defaulted under our loan agreement with Wyndom Capital Investments, Inc. which,
as its sole recourse under the loan agreement, took possession of 10,000,000
shares of our common stock held as collateral, and are in default under our loan
agreement with Crystal Capital Ventures, Inc., pursuant to which we have pledged
7,500,000 shares of our Common Stock as collateral and which is the lender’s
sole recourse in the event of a default. This lender has waived all defaults
through November 9, 2009 under this loan agreement.
The
continuation of the Company as a going concern is dependent upon the continued
financial support from
our shareholders, our ability to obtain
necessary
equity financing to continue operations, and
the attainment of profitable operations. Our
auditors have expressed substantial doubt concerning our ability to continue as
a going concern.
As of
July 31, 2009, we had cash on hand of $5,182. At that same
date our liabilities totaled $5,307,066.
We do not have sufficient cash on hand to complete commercialization of our
current and planned products.
13
Electric
Vehicle Operations
We
convert vehicles in our developmental facility in Mooresville, North Carolina.
Our team of highly qualified engineers oversee groups of electrical and
mechanical staff. This 40,000 square foot facility has room for both conversions
and storage with the potential for future growth, enabling us to work on many
projects and vehicles concurrently.
With the
license of our lithium battery technology described below, we are concentrating
on sales of our vehicles. We have initiated several nationwide
newspaper advertising campaigns which have generated orders for our vehicles,
and we are also seeing as a result a significant increase in inquiries about our
electric vehicle products.
Effective
April 15, 2008, we entered into a License Agreement (the “License Agreement”)
with Superlattice providing for our license to Superlattice of our patent
applications and technologies for rechargeable lithium ion batteries for hybrid
vehicles and other applications (“Licensed Products”). Under the
License Agreement, we have the right to purchase our requirements of lithium ion
batteries from Superlattice, and our requirements of lithium ion batteries shall
be supplied by Superlattice in preference to, and on a priority basis as
compared with, supply and delivery arrangements in effect for other customers of
Superlattice. Our cost for lithium ion batteries purchased from Superlattice
shall be Superlattice’s actual manufacturing costs for such batteries for the
fiscal quarter of Superlattice in which our purchase takes place.
Superlattice
agreed to invest a minimum of $1,500,000 in each of the next two years in
development of the technology for the Licensed Products. In the initial year
under the License Agreement, Superlattice invested approximately $264,043 in the
development of technology, and therefore is not in compliance with its
obligations under this covenant of the license agreement. We have advised
Superlattice in a letter dated October 1, 2009, that we will not give notice of
default against Superlattice for its failure to comply with this covenant in the
first year of the term of the License Agreement.
Effective
April 16, 2008, Superlattice agreed to lease approximately 5,000 square feet of
space (“Leased Space”) in our North Carolina facility, such Leased Space to be
suitable for, and utilized by Superlattice for, Superlattice’s developmental and
manufacturing operations for Licensed Products pursuant to the License
Agreement. The Leased Space is leased on a month-to-month basis at a
monthly rental of $2,500, the monthly rental to be escalated five (5%) percent
annually. Effective April 16, 2008, we also sold to Superlattice for the
purchase price of $29,005, specified equipment and supplies related to the
Licensed Field.
5.2 Liquidity
and Capital Resources
Since our
incorporation, we have financed our operations almost exclusively through the
sale of our common shares to investors and
borrowings. We expect to finance
operations through the sale of equity in
the foreseeable future as we receive minimal revenue from
our current business operations. There is no guarantee that we will be
successful in arranging financing on acceptable terms.
During
the year ended July 31, 2009, we received net proceeds of $1,108,221
from the issuance of promissory notes for debt.
14
Wyndom
Capital Loan Agreement
In
October 2007, the Company entered into a loan agreement with Wyndom Capital
Investments, Inc. (“Wyndom”). During the year ended July 31, 2008 the Company
issued 3,333,335 shares of outstanding stock as collateral for the notes under
the loan agreement. In February 2009 the Company had a 1:3 reverse stock split
and issued 6,666,665 shares of common stock to Wyndom to make their shares held
as collateral total 10,000,000. The agreement provided for loans of
up to $4,000,000 with interest payable monthly at a rate of 10% per annum and
due in full in October of 2010. Loans under the agreement were secured by the
Company’s shares of common stock at a rate of two and one half shares to each
dollar of principal. The Company paid interest to Wyndom of approximately
$342,000 for the year ended July 31, 2009 and $154,000 for the year ended July
31, 2008, respectively. The Company defaulted on the loan in February 2008, but
Wyndom had waived the default until June 2009 when they took possession of the
10,000,000 shares they held as collateral. As a result, our liability of
$4,000,000 for principal and accrued unpaid interest was extinguished as of June
16, 2009, the date on which Wyndom took possession of the final portion of the
share collateral.
Crystal
Capital Ventures Loan Agreement
On May 5,
2008, the Company entered into a loan agreement with Crystal Capital Ventures
Inc. (“Crystal”). The loan agreement provides for loans to the Company of up to
$3,000,000, with a minimum initial loan of $500,000 on May 19, 2008. The notes
bear interest payable monthly in arrears at the rate of 10% per annum and mature
and are due and payable May 4, 2011. The loans under the loan agreement are
secured by shares of the Company’s common stock held by Crystal. The Company is
required to issue shares as collateral at the rate of two and one half shares of
the Company’s common stock for each dollar principal amount of the loan advanced
to the Company. Following disbursement of the first $1,000,000 of
funds pursuant to the loan agreement, on May 27, 2008, the Company issued
2,500,000 shares of common stock as collateral to Crystal. After the 1:3 reverse
stock split in February 2009 the Company issued Crystal an additional 5,000,000
shares to make their shares held as collateral total 7,500,000.
As of
July 31, 2009, the Company had borrowed $2,853,859 under the loan agreement, and
as of August 12, 2009 had borrowed the full $3,000,000 from
Crystal. The Company paid interest to Crystal of approximately
$173,000 for the year ended July 31, 2009 and $11,000 for the year ended July
31, 2008. The Company went into default on the loan agreement in August 2008 for
failure to make required interest payments, but Crystal has waived default on
all interest payments that have not been made as of November 9,
2009.
Related
Parties Advances
We
received net advances of $1,346,790 from related parties in the year ended July
31, 2009.
Our
current operating funds are less than necessary for commercialization of our
planned products, and therefore we will need to obtain additional financing in
order to complete our business
plan. We anticipate that up to $2,000,000 of
additional working capital will be required over the next
12 months for market introduction of
these products through joint venture partners or otherwise. We do not
have sufficient cash on hand to meet these anticipated obligations.
We do not
currently have any arrangements for financing, and we may not be able to find
such financing if required. Obtaining additional financing would be subject to a
number of factors, including investor sentiment. Market factors may
make the timing, amount, terms
or conditions of additional financing
unavailable to us.
Our
auditors are of
the opinion that our continuation as
a going concern is in doubt. Our continuation as a
going concern is dependent upon continued
financial support from our shareholders and other related parties.
15
CRITICAL
ACCOUNTING ISSUES
The
Company's discussion and analysis of its financial condition and results
of operations are based upon the Company's financial statements,
which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation
of the financial statements requires the Company to make estimates
and judgments that affect the reported amount of assets, liabilities,
and expenses, and related disclosures of contingent assets and
liabilities. On an on-going basis, the Company evaluates its
estimates, including those related to intangible assets, income taxes
and contingencies and litigation. The Company bases its estimates on
historical experience and on various assumptions that are believed to
be reasonable under the circumstances, the results of which form the
basis for making judgments about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions
or
conditions.
Other
Matters
New
Financial Accounting Standards
In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - Including and Amendment of FASB
Statement No. 115." SFAS No. 159 provides entities with an
irrevocable option to report selected financial assets and financial liabilities
at fair value. It also establishes presentation and disclosure
requirements that are designed to facilitate comparisons between entities that
choose different measurement attributes for similar types of assets and
liabilities. The Company adopted SFAS No. 159 on August 1, 2008 and
chose not to elect the fair value option for its financial assets and
liabilities that had not been previously carried at fair
value. Therefore, material financial assets and liabilities not
carried at fair value, such as other assets, accounts payable and other
liabilities are reported at their carrying values.
In
December 2007, the FASB issued SFAS No. 141(R), “Business
Combinations.” This standard establishes principles and requirements for how an
acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any non-controlling interest in the
acquired and the goodwill acquired. This statement also establishes disclosure
requirements which will enable users to evaluate the nature and financial
effects of the business combination. SFAS No. 141(R) is
effective for which the acquisition date is or after an entities fiscal year end
that begins after December 15, 2008. The provisions of SFAS 141(R)
are effective for the Company for the fiscal year ending July 31, 2010. We are
evaluating the impact of this standard and do not expect the adoption of
SFAS 141(R) to have a material impact on its financial
statements.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS No.
160”). SFAS No. 160 amends Accounting Research Bulletin (“ARB”) No.
51 to establish accounting and reporting standards for the noncontrolling
(minority) interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the Consolidated Financial Statements. SFAS No.
160 also requires consolidated net income to be reported at amounts that include
the amounts attributable to both the parent and the noncontrolling interest on
the face of the consolidated statement of income. Under SFAS No. 160,
the accounting for changes in a parent’s ownership interest in a subsidiary that
do not result in deconsolidation must be accounted for as equity transactions
for the difference between the parent’s carrying value and the cash exchanged in
the transaction. In addition, SFAS No. 160 also requires that a
parent recognize a gain or loss in net income when a subsidiary is
deconsolidated (except in the case of a spin-off), and requires expanded
disclosure in the Consolidated Financial Statements that clearly identify and
distinguish between the interests of the parent’s ownership interest and the
interests of the noncontrolling owners of a subsidiary. This
Statement is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008. The Company will
adopt SFAS No. 160 on August 1, 2009, as required, and does not believe they
will have a significant impact on its financial statements.
16
In
February 2008, the FASB issued FASB Staff Position SFAS 157-1, “Application
of SFAS No. 157 to SFAS No. 13 and Its Related Interpretative Accounting
Pronouncements that Address Leasing Transactions” (“FSP SFAS 157-1”) and FASB
Staff Position SFAS 157-2, “Effective Date of SFAS No. 157” (“FSP SFAS
157-2”). FSP SFAS 157-1 excludes SFAS No. 13 and its related interpretive
accounting pronouncements that address leasing transactions from the
requirements of SFAS No. 157, with the exception of fair value measurements of
assets and liabilities recorded as a result of a lease transaction but measured
pursuant to other pronouncements within the scope of SFAS No. 157. FSP SFAS
157-2 delays the effective date of SFAS No. 157 for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually). FSP
SFAS 157-1 and FSP SFAS 157-2 became effective for the Company upon adoption of
SFAS No. 157 on August 1, 2008. The Company will provide the additional
disclosures required relating to the fair value measurement of nonfinancial
assets and nonfinancial liabilities. The Company completed its implementation of
SFAS No. 157 effective August 1, 2008 and it did not have a material impact on
its financial statements.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities,” an amendment of FASB Statement No. 133 (“SFAS No.
161”). The new standard is intended to improve financial reporting
about derivative instruments and hedging activities by requiring enhanced
disclosures to enable investors to better understand their effects on an
entity’s financial position, financial performance and cash flows. It
is effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008. The Company does not
believe that SFAS No. 161 will have a material impact on its financial
statements.
In April
2009, the FASB issued FASB Staff Positions ("FSP") FAS 115-2 and FAS 124-2,
"Recognition and Presentation of Other-Than-Temporary
Impairments". These FSPs amend rules for other-than-temporary
impairments, provide for guidance on calculating fair values in inactive and
distressed markets and require quarterly fair value
disclosures. These FSPs are effective for interim and annual
reporting periods ending after June 15, 2009, with early adoptions permitted for
periods ending after March 15, 2009. The adoption of these FSPs did
not have a material impact on the Company's financial statements.
In May
2009, the FASB issued SFAS No. 165, "Subsequent Events." SFAS No. 165
defines subsequent events as events or transactions that occur after the balance
sheet date, but before the financial statements are issued. It
defines two types of subsequent events: recognized subsequent events, which
provide additional evidence about conditions that existed at the balance sheet
date, and non-recognized subsequent events, which provide evidence about
conditions that did not exist at the balance sheet date, but arose before the
financial statements were issued. Recognized subsequent events are
required to be recognized in the financial statements, and non-recognized
subsequent events are required to be disclosed. SFAS No. 165 requires
entities to disclose the date through which subsequent events have been
evaluated, and the basis for that date. SFAS 165 is consistent with
current practice and did not have any impact on the Company's consolidated
financial statements. Subsequent events were evaluated through
October 13, 2009.
17
In June
2009, the FASB issued SFAS No. 168, the "FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles". SFAS
No. 168 replaces SFAS No. 162, "The Hierarchy of Generally Accepted Accounting
Principles" (SFAS No. 168), and establishes the FASB Accounting Standards
Codification (Codification) as the source of authoritative GAAP in the U.S.
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements. SFAS No. 168 is effective for
financial statements issued for interim periods and annual periods ending after
September 15, 2009.
Item
7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk - Interest rate
risk refers to fluctuations in the value of a security resulting from changes in
the general level of interest rates. Investments that are classified as cash and
cash equivalents have original maturities of three months or less. Our interest
income is sensitive to changes in the general level of U.S. interest
rates. We do not have significant short-term investments, and due to
the short-term nature of our investments, we believe that there is not a
material risk exposure. Our debt is at fixed interest
rates.
Credit
Risk - Our accounts receivables are subject, in the normal course of business,
to collection risks. We regularly assess these risks and have established
policies and business practices to protect against the adverse effects of
collection risks. As a result we do not anticipate any material losses in this
area.
18
Item
8. Financial Statements and Supplementary Data.
EV
INNOVATIONS, INC.
CONSOLIDATED
FINANCIAL STATEMENTS
July
31, 2009 and 2008
TABLE
OF CONTENTS
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
20
|
Consolidated
balance sheet
|
21
|
Consolidated
statements of operations
|
22
|
Consolidated
statements of stockholders’ equity
|
23
|
Consolidated
statements of cash flows
|
24
|
Notes
to consolidated financial statements
|
25
|
19
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors
EV
Innovations, Inc.
Las
Vegas, NV
We have
audited the accompanying balance sheets of EV Innovations, Inc. (collectively,
the “Company”) as of July 31, 2009 and 2008, and the related statements of
operations, stockholders’ deficiency, and cash flows for each of two years in
the period ended July 31, 2009. These financial statements are the
responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company's
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, such financial statements present fairly, in all material respects, the
financial position of the Company as of July 31, 2009 and 2008, and the results
of its operations and its cash flows for each of the two years in the period
ended July 31, 2009, in conformity with accounting principles generally accepted
in the United States of America.
The
accompanying consolidated financial statements have been prepared assuming the
company will continue as a going concern. As shown in the
consolidated financial statements, the Company incurred a net loss of $6.8
million for the year ending July 31, 2009. As of July 31, 2009,
current liabilities exceeded current assets by $1.3 million and the Company has
a deficit of $3.0 million. During the year ended July 31, 2009, the
Company defaulted on two loans and the shares used as collateral to secure one
of the loans was used to extinguish the loan and all unpaid
interest. These factors, and others discussed in Notes 1 and 12,
raise substantial doubt about the Company’s ability to continue as a going
concern.
These
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
/s/
Wiener, Goodman & Company, P.C.
Eatontown,
New Jersey
November
4, 2009
20
Consolidated
Balance Sheets
|
July
31,
|
||||||||
|
2009
|
2008
|
||||||
ASSETS | ||||||||
Current
assets:
|
||||||||
Cash
|
$ | 5,182 | $ | 101,095 | ||||
Accounts
receivable, net of allowance for doubtful accounts of $0
|
13,522 | 13,601 | ||||||
Inventories
|
227,826 | 287,310 | ||||||
Employee
advances
|
1,508 | - | ||||||
Other
current assets
|
18,009 | 69,119 | ||||||
Total
current assets
|
266,047 | 471,125 | ||||||
Property
and equipment, net
|
1,989,981 | 2,014,580 | ||||||
Other
long term assets:
|
||||||||
Other
assets
|
- | 51,600 | ||||||
Deferred
patent costs
|
24,258 | 19,903 | ||||||
Total
other long term assets
|
24,258 | 71,503 | ||||||
Total
Assets
|
$ | 2,280,286 | $ | 2,557,208 | ||||
LIABILITIES
AND DEFICIENCY
|
||||||||
Current
liabilities:
|
||||||||
Current
portion of long-term debt
|
$ | 39,702 | $ | 32,422 | ||||
Accounts
payable and accrued expenses
|
999,749 | 330,183 | ||||||
Customer
deposits
|
391,199 | 149,160 | ||||||
Deferred
revenue
|
3,808 | - | ||||||
Advances
from related parties
|
97,940 | 38,000 | ||||||
Total
current liabilities
|
1,532,398 | 549,765 | ||||||
Long-term
debt - less current portion above
|
3,774,668 | 6,135,408 | ||||||
Commitments
and contingencies
|
- | - | ||||||
Deficiency:
|
||||||||
EV
Innovations, Inc. deficiency:
|
||||||||
Preferred
stock, $.001 par value, 5,000,000 shares authorized, no shares
issued
|
- | - | ||||||
Common
stock, $.001 par value, 50,000,000 authorized; outstanding 20,884,101 at
July 31, 2009 and 23,347,257 at July 31, 2008,
respectively
|
20,884 | 23,347 | ||||||
Additional
paid-in-capital
|
55,731,174 | 47,790,509 | ||||||
Deficit
|
(58,765,425 | ) | (51,947,451 | ) | ||||
Cumulative
other comprehensive income (loss)
|
(13,413 | ) | 5,630 | |||||
Total
EV Innovations, Inc. deficiency
|
(3,026,780 | ) | (4,127,965 | ) | ||||
Noncontrolling
interest
|
- | - | ||||||
Total
deficiency
|
(3,026,780 | ) | (4,127,965 | ) | ||||
Total
liabilities and deficiency
|
$ | 2,280,286 | $ | 2,557,208 |
SEE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21
EV
INNOVATIONS, INC.
|
Consolidated
Statements of Operations
|
YEARS
ENDED
|
||||||||
July
31,
|
||||||||
2009
|
2008
|
|||||||
Sales
|
$ | 475,828 | $ | 199,801 | ||||
Costs
and expenses:
|
||||||||
Cost
of sales
|
625,866 | 384,267 | ||||||
General
and administrative
|
4,794,393 | 3,477,077 | ||||||
Research
and development
|
1,296,281 | 1,402,077 | ||||||
Loss
from sale of other assets
|
- | 804,652 | ||||||
6,716,540 | 6,068,073 | |||||||
Loss
from continuing operations
|
(6,240,712 | ) | (5,868,272 | ) | ||||
Other
income (expense):
|
||||||||
Interest
expense
|
(745,118 | ) | (231,114 | ) | ||||
Interest
income
|
2,293 | - | ||||||
Other
income
|
77,791 | 34,546 | ||||||
Forgiveness
of debt
|
87,772 | - | ||||||
Net
loss before provision for (benefit-from) income taxes
|
(6,817,974 | ) | (6,064,840 | ) | ||||
Provision
for (benefit from) income tax
|
- | - | ||||||
Net
loss
|
(6,817,974 | ) | (6,064,840 | ) | ||||
Discontinued
operations:
|
||||||||
Loss
from discontinued operations
|
- | (563,289 | ) | |||||
Gain
on disposal of discontinued operations
|
- | 90,069 | ||||||
Net
loss on discontinued operations
|
- | (473,220 | ) | |||||
Loss
from continued and discontinued operations
|
(6,817,974 | ) | (6,538,060 | ) | ||||
Less:
Net loss attributable to noncontrolling interest
|
- | 2,377 | ||||||
Net
loss attributable to EV Innovations, Inc.
|
$ | (6,817,974 | ) | $ | (6,535,683 | ) | ||
Loss
per share - basic and diluted - continuing operations:
|
||||||||
Loss
per common share attributable to EV Innovations, Inc.
|
||||||||
common
shareholders
|
$ | (0.33 | ) | $ | (1.06 | ) | ||
Weighted
shares outstanding - basic and diluted - continuing
operations
|
20,558,046 | 5,733,513 | ||||||
Loss
per share - basic and diluted - discontinued operations:
|
||||||||
Loss
per common share attributable to EV Innovations, Inc.
|
||||||||
common
shareholders
|
$ | - | $ | (0.08 | ) | |||
Weighted
shares outstanding - basic and diluted - discontinued
operations
|
20,558,046 | 5,733,513 | ||||||
Amounts
attributable to EV Innovations, Inc. common shareholders:
|
||||||||
Net
loss
|
$ | (6,864,894 | ) | $ | (6,535,683 | ) |
SEE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22
Consolidated
Statement of Stockholders' Equity
(Deficiency)
|
Cumulative
|
||||||||||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||||||||||
Common
stock
|
Paid-in
|
Comprehensive
|
Noncontrolling
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Income
(loss)
|
Interest
|
Total
|
||||||||||||||||||||||
Balance
August 1, 2007
|
39,500,511 | $ | 39,501 | $ | 46,569,703 | $ | (45,414,145 | ) | $ | (7,860 | ) | $ | 2,377 | $ | 1,189,576 | |||||||||||||
Stock
issuances
|
||||||||||||||||||||||||||||
Value
of stock options issued (valued at $1.8933 per share)
|
- | - | 804,652 | - | - | - | 804,652 | |||||||||||||||||||||
Common
stock issued as collateral on loan
|
10,000,000 | 10,000 | (10,000 | ) | - | - | - | - | ||||||||||||||||||||
1:7
Reverse stock split
|
(42,428,598 | ) | (42,429 | ) | 42,429 | - | - | - | - | |||||||||||||||||||
Common
stock issued as collateral on loan
|
16,071,427 | 16,071 | (16,071 | ) | - | - | - | - | ||||||||||||||||||||
Exercise
of options (valued at $1.96 per share)
|
203,917 | 204 | 399,796 | - | - | - | 400,000 | |||||||||||||||||||||
Net
loss for the year
|
- | - | - | (6,533,306 | ) | - | (2,377 | ) | (6,535,683 | ) | ||||||||||||||||||
Foreign
currency transactions
|
- | - | - | - | 13,490 | - | 13,490 | |||||||||||||||||||||
Balance
July 31, 2008
|
23,347,257 | 23,347 | 47,790,509 | (51,947,451 | ) | 5,630 | - | (4,127,965 | ) | |||||||||||||||||||
Stock
issuances
|
||||||||||||||||||||||||||||
Exercise
of options (valued at $0.90 per share)
|
3,500 | 4 | (4 | ) | - | - | - | - | ||||||||||||||||||||
1:3
Reverse stock split adjustment
|
(15,566,844 | ) | (15,567 | ) | 15,567 | - | - | - | - | |||||||||||||||||||
Value
of stock options issued (valued at $0.90 per share)
|
- | - | 2,630,000 | - | - | - | 2,630,000 | |||||||||||||||||||||
Common
stock issued as collateral on loan
|
11,666,664 | 11,667 | (11,667 | ) | - | - | - | - | ||||||||||||||||||||
Exercise
of options (valued at $0.90 per share)
|
1,433,524 | 1,433 | 1,285,417 | - | - | - | 1,286,850 | |||||||||||||||||||||
Conversion
of loan to equity
|
- | - | 4,000,000 | - | - | - | 4,000,000 | |||||||||||||||||||||
Conversion
of accrued interest to equity
|
- | - | 21,352 | - | - | - | 21,352 | |||||||||||||||||||||
Net
loss for the period
|
- | - | - | (6,817,974 | ) | - | - | (6,817,974 | ) | |||||||||||||||||||
Foreign
currency transactions
|
- | - | - | - | (19,043 | ) | - | (19,043 | ) | |||||||||||||||||||
Balance
July 31, 2009
|
20,884,101 | $ | 20,884 | $ | 55,731,174 | $ | (58,765,425 | ) | $ | (13,413 | ) | $ | - | $ | (3,026,780 | ) |
SEE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23
EV
INNOVATIONS, INC.
|
Consolidated
Statements of Cash Flows
|
YEARS
ENDED
|
||||||||
July
31,
|
||||||||
2009
|
2008
|
|||||||
Cash
provided by (used in) Operating Activities:
|
||||||||
Net
(loss)
|
$ | (6,817,974 | ) | $ | (6,538,060 | ) | ||
Items
not affecting cash flows
|
||||||||
Depreciation
and amortization
|
82,350 | 103,407 | ||||||
Bad
debt expense
|
- | 9,678 | ||||||
Non
cash stock-based compensation
|
2,630,000 | 804,652 | ||||||
Gain
on sale of subsidiary
|
- | (90,069 | ) | |||||
Loss
from discontinued operations
|
- | 563,289 | ||||||
Gain/loss
of sale of other assets
|
- | 788 | ||||||
Changes
in operating assets and liabilities
|
||||||||
(Increase)
decrease in accounts receivable
|
79 | (21,285 | ) | |||||
Decrease
in inventories
|
59,484 | 138,465 | ||||||
(Increase)
in employee advances
|
(1,508 | ) | - | |||||
(Increase)
decrease in prepaid expenses and other assets
|
51,110 | (8,886 | ) | |||||
Decrease
in other assets
|
51,600 | - | ||||||
Increase
(decrease) in accounts payable and accrued expenses
|
1,229,237 | (159,605 | ) | |||||
Increase
in customer deposits
|
242,039 | 149,160 | ||||||
(Increase)
decrease in deferred revenue
|
3,808 | (2,990 | ) | |||||
Cash
used in operating activities
|
(2,469,775 | ) | (5,051,456 | ) | ||||
Cash
provided by (used in) Investing Activities:
|
||||||||
Proceeds
from sale of subsidiary
|
- | 215,000 | ||||||
Decrease
in marketable securities - restricted
|
- | 41,224 | ||||||
Purchase
of property and equipment
|
(57,751 | ) | (106,750 | ) | ||||
Proceeds
from sale of property and equipment
|
- | 108,318 | ||||||
Investment
in subsidiaries
|
- | (688,220 | ) | |||||
Increase
in deferred patent costs
|
(4,355 | ) | (19,903 | ) | ||||
Cash
used in investing activities
|
(62,106 | ) | (450,331 | ) | ||||
Cash
provided by (used in) Financing Activities:
|
||||||||
Proceeds
from the issuance of debt
|
1,146,481 | 6,194,713 | ||||||
Advances
from related parties
|
2,174,399 | 3,867,791 | ||||||
Payments
of related party advances
|
(827,609 | ) | (3,405,286 | ) | ||||
Payments
of debt
|
(38,260 | ) | (1,071,601 | ) | ||||
Cash
provided by financing activities
|
2,455,011 | 5,585,617 | ||||||
Effect
of exchange rate changes on cash and cash equivalents
|
(19,043 | ) | 13,490 | |||||
Net
increase (decrease) in cash
|
(95,913 | ) | 97,320 | |||||
Cash
at beginning of period
|
101,095 | 3,775 | ||||||
Cash
at end of period
|
$ | 5,182 | $ | 101,095 | ||||
Supplemental
information:
|
||||||||
Cash
paid during the year for:
|
||||||||
Interest
paid
|
$ | 119,032 | $ | 231,114 | ||||
Income
taxes paid
|
$ | - | $ | - | ||||
Non
- cash financing activities:
|
||||||||
Shares
issued for related party advances
|
$ | 1,286,850 | $ | 400,000 | ||||
Accrued
expenses transferred to long term debt
|
$ | 538,319 | $ | - | ||||
Conversion
of accrued interest to equity
|
$ | 21,352 | $ | - | ||||
Conversion
of loan to equity
|
$ | 4,000,000 | $ | - |
SEE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
24
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
The
summary of significant accounting policies is presented to assist in the
understanding of the financial statements. The financial statements and notes
are the representations of management. These accounting policies conform to
accounting policies generally accepted in the United States of America and have
been consistently applied in the preparation of the financial
statements.
History
and Nature of Business
EV
Innovations, Inc. (formerly Hybrid Technologies, Inc.) was incorporated under
the laws of the State of Nevada on April 12, 2000. EV Innovations, Inc.'s (the
“Company”) original business was the exploration and development of mineral
interests. The Company abandoned these interests in 2003.
The
Company is currently pursuing the development and marketing of electric powered
vehicles and products based on the advanced lithium battery technology it has
developed. As of July 31, 2009 the Company no longer considers itself a
development stage company as planned principal operations have began in its
primary line of business. The Company is organized by line of business and
geographic area. The Company had two businesses, telecommunication services and
the development and sale of electric powered vehicles.
On April
16, 2008, the Company sold their controlling interest of approximately 69% of
the outstanding common stock in Zingo, Inc. (now Superlattice Power, Inc.,
“SPI”). Prior to April 16, 2008, SPI was a related party who provided
telecommunication services to business and residential customers utilizing VOIP
technology and currently is researching and developing rechargeable lithium ion
batteries.
Effective
April 15, 2008, the Company entered into a license agreement with SPI providing
for their license to SPI of their patent applications and technologies for
rechargeable lithium ion batteries for electric vehicles and other applications
(“licensed products”). Under the license agreement, the Company has the right to
purchase their requirements of lithium ion batteries from SPI, and their
requirements of lithium ion batteries shall be supplied by SPI in preference to,
and on a priority basis as compared with, supply and delivery arrangements in
effect for other customers of SPI. The Company’s cost for lithium ion batteries
purchased from SPI shall be SPI’s actual manufacturing costs for such batteries
for the fiscal quarter of SPI in which the Company’s purchase takes
place.
Under the
terms of the license agreement, SPI has agreed to invest a minimum of $1,500,000
in each of the next two years in development of the technology for the Licensed
Products. To date, investments have been made in the amount of $264,043 in the
development of technology, and therefore, is not in compliance with its
obligations under this covenant of the license agreement. The Company has
advised SPI in a letter dated October 1, 2009, that it will not give notice of
default against SPI for their failure to comply with this covenant in the first
year of the term of the license agreement.
Basis
of presentation
The
Company’s financial statements for the year ended July 31, 2009 have been
prepared on a going concern basis which contemplates the realization of assets
and settlement of liabilities and commitments in the normal course of business.
As of July 31, 2009, the Company had a working capital deficiency of
approximately $1.3 million and a deficiency of approximately $3.0 million. In
addition, during the year ended July 31, 2009, the Company defaulted on interest
payments on two loans and the shares used as collateral to secure the loan to
Wyndom Capital Investments, Inc. (“Wyndom”) was used to extinguish the loan and
all unpaid interest. The 10,000,000 shares to Wyndom to extinguish the debt
represents 47.9% of the Company’s outstanding shares, sufficient to make Wyndom
the controlling shareholder. The Company currently is still in default on the
interest payments for the second loan. See Note 6 for further information.
Management recognized that the Company’s continued existence is dependent upon
its ability to obtain needed working capital through additional equity and/or
debt financing and revenue to cover expenses as the Company continues to incur
losses.
The
Company’s business is subject to most of the risks inherent in the establishment
of a new business enterprise. The likelihood of success of the Company must be
considered in light of the expenses, difficulties, delays and unanticipated
challenges encountered in connection with the formation of a new business,
rising operating and development capital, and the marketing of a new
product. There is no assurance the Company will ultimately achieve a
profitable level of operations.
25
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
On
December 24, 2007, the Company shareholders approved the increase of the
authorized shares of the Company from 50,000,000 to 250,000,000. In January
2008, the Company’s shareholders approved a one-for-seven reverse stock split.
The number authorized shares were reduced from 250,000,000 to 35,714,285
shares.
In
January 2009, the Company’s shareholders approved a one-for-three reverse stock
split of its outstanding common shares which became effective on February 19,
2009. Also on February 19, 2009 the authorized shares of the Company was
increased from 35,714,285 to 50,000,000 shares.
Net loss
per common share for the year ended July 31, 2008 has been
revised. See Note 8, "Net loss per common share", for other
information.
SIGNIFICANT
ACCOUNTING POLICIES
Basis
of consolidation
The
consolidated financial statements included the accounts and records of the
Company and its wholly-owned and majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. The Company does
not have any special purpose entities. For those consolidated
subsidiaries in which the company's ownership is less than 100 percent (100%),
the outside stockholders' interests are shown as noncontrolling
interest. The noncontrolling interest of the company's earnings or
loss is classified as net income (loss) attributable to noncontrolling interest
in the consolidated statement of operations.
The
following is a listing of the Company's subsidiaries and its ownership
interests:
Global
Electric, Corp.
|
67.57 | % | ||
R
Electric Car, Co.
|
67.57 | % | ||
Solium
Power, Corp.
|
67.57 | % | ||
Hybrid
Technologies USA Distributing Inc.
|
100.00 | % | ||
Hybrid
Electric Vehicles India Pvt. Ltd.
|
100.00 | % |
Estimates
The
preparation of financial statements prepared in accordance with the accounting
standards generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. Actual results could differ from those
estimates.
Fair
value of financial instruments
The fair
value of accounts receivables, accounts payable and accrued expenses, long term
debt, customer advances, and advances from related parties approximates fair
value based on their short maturities.
In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS
No. 157"), which defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. SFAS No.
157 is effective as of the beginning of the Company's 2009 fiscal
year. In February 2008, the FASB deferred the effective date of SFAS
No. 157 for non-financial assets and liabilities that are recognized or
disclosed at fair value on a nonrecurring basis until the beginning of fiscal
year 2010. The Company adopted SFAS No. 157 with respect to financial
assets and liabilities on August 1, 2008. There was no material
effect on the financial statements upon adoption of this new accounting
pronouncement. The impact on the financial statements from adoption
of SFAS No. 157 as it pertains to non-financial assets and liabilities has not
yet been determined.
26
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
Level 1:
Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities.
Level 2:
Inputs, other than quoted prices that are observable for the asset or liability,
either directly or indirectly. These include quoted prices for
similar assets or liabilities in active markets and quoted prices for identical
or similar assets or liabilities in markets that are not active.
Level 3:
Unobservable inputs that reflect the reporting entity's own
assumptions.
The
assets measured at fair value on a recurring basis as of July 31, 2009 are as
follows:
Assets:
|
Level
1
|
Level
2
|
Level
3
|
July
31, 2009
|
||||||||||||
Cash
and cash equivalents
|
$ | 5,182 | $ | - | $ | - | $ | 5,182 |
Accounts
receivables
The
Company provides credit to customers in the normal course of business. An
allowance for doubtful accounts is estimated by management based in part on the
aging of receivables and historical transactions. Periodically management
reviews accounts receivable for accounts that appear to be uncollectible and
writes off these uncollectible balances against the allowance
accordingly.
Inventories
Inventories
are stated at the lower of cost or market. Cost is based on the specific
identification method.
Property
and equipment
Property
and equipment are recorded at cost less accumulated depreciation. Depreciation
of property and equipment are accounted for by accelerated methods over the
following estimated useful lives:
Lives
|
Methods
|
|||
Building
improvements
|
39
years
|
Straight
line
|
||
Furniture
and fixtures
|
10
years
|
Accelerated
|
||
Software
|
3-5
years
|
Straight
line
|
||
Computers
|
5
years
|
Straight
line
|
Deferred
patent costs
The
Company capitalizes costs directly incurred in pursuing patent applications as
deferred patent costs. When such applications result in an issued patent, the
related costs are amortized over the remaining legal life of the patents, which
is assumed to be three to five years, using the straight-line method. On a
quarterly basis, the Company reviews the issued patents and pending patent
applications and if the Company determines to abandon a patent application, or
an issued patent no longer has economic value, the unamortized balance in
deferred patent costs relating to that patent is immediately expensed. As of
July 31, 2009 there were only pending patent applications.
27
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
The
Company issues stock options to employees and other certain service providers
under stockholder approved stock option programs that provide the right to
purchase the Company’s stock pursuant to stock purchase programs. The Company
also issued common stock for services performed. The fair value of
the stock options issued is estimated on the date of grant using the Black
Scholes Option Pricing Model. The fair value of common stock issued
for services is estimated on the date of issuance based on the value of the
stock issued or the consideration received. See Note 9 of Notes to
Consolidated Financial Statements for further disclosures and
discussions.
Revenue
recognition
The
Company recognizes revenue in accordance with the guidance contained in SEC
Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements"
and other relevant accounting literature. Revenue is recognized when
the product has been delivered and title and risk of loss have passed to the
customer, collection of the resulting receivable is deemed reasonably assured by
management, persuasive evidence of an arrangement exists and the sale price is
fixed and determinable.
Shipping
and handling
Shipping
and handling costs related to services and product sales are expensed as
incurred.
Advertising
Advertising
costs are expensed as incurred and are included in general and administrative
expenses. Total advertising expenditures for the years ended July 31, 2009 and
2008 amounted to approximately $527,000 and $755,000, respectively.
Research
and development
Research
and development (“R&D”) expenses are expensed as incurred. All
projects and purchases must be approved before being started or
purchased. For the years ending July 31, 2009 and 2008, R&D
amounted to approximately $1,296,000 and $1,402,000, respectively. Included in
R&D are salaries and wages, parts and supplies, shipping charges, battery
management systems and other R&D expenses. Internally generated R&D
expenses are included in the total.
Concentration
of risk
The
Company maintains cash deposit accounts and certificates of deposits which at
times may exceed federally insured limits. These accounts have not experienced
any losses and the Company believes it is not exposed to any significant credit
risk related to cash.
Income
taxes
The
Company accounts for income taxes using an asset and liability approach under
which deferred income taxes are recognized by applying enacted tax rates
applicable to future years to the differences between the financial statement
carrying amounts and the tax bases of reported assets and
liabilities.
The
principal item giving rise to deferred taxes is the net operating loss carry
forward.
Effective
August 1, 2007, uncertain tax positions are accounted for in accordance with
FASB Interpretation No. 48 "Accounting for Uncertainty in Income
Taxes." See Note 11 for further discussion.
Long-lived
assets
The
Company accounts for long-lived assets in accordance with Statement of Financial
Accounting Standard No. 144 (SFAS 144) "Accounting for Long-Lived Assets". The
carrying value of long-lived assets is reviewed on a regular basis for the
existence of facts and circumstances that may suggest impairment. The Company
recognizes impairment when the sum of undiscounted future cash flows is less
than the carrying amount of the asset. The write down of the asset is charged to
the period in which the impairment occurs.
28
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
Foreign
currency translation
The
functional currency for some foreign operations is the local currency. Assets
and liabilities of foreign operations are translated at balance sheet date rates
of exchange and income, expense and cash flow items are translated at the
average exchange rate for the period. Translation adjustments in future periods
will be recorded in Cumulative Other Comprehensive Income (Loss). The
translation gains or losses for the years ended July 31, 2009 and 2008 were
approximately $19,000 loss and $13,000 gain, respectively.
Comprehensive
loss
The
Company reports comprehensive loss in accordance with the requirements of SFAS
No. 130. For the years ended July 31, 2009 and 2008, the difference between net
loss and comprehensive loss is foreign currency translation.
Loss
per Share
Basic
loss per common share is computed by dividing net loss by the weighted average
number of common shares outstanding during the specified
period. Diluted loss per common share is computed by dividing net
loss by the weighted average number of common shares and potential common shares
during the specified period. All potentially dilutive securities, which include
options and warrants convertible into 1,585,000 and 31,857common shares at July
31, 2009 and 2008, respectively, have been excluded from the computations, as
their effect is anti-dilutive.
Discontinued
Operations
In April
2008, the Company completed the sale of SPI. The operations of SPI were
accounted for as discontinued operations in the consolidated financial
statements for the years presented herein. The divestiture resulted
in a loss of $0 and $473,220, respectively, for the year ended July 31, 2009,
and 2008.
Summarized
combined statement of loss for discontinued operations is as
follows:
YEARS
ENDED
|
||||||||
July
31,
|
||||||||
2009
|
2008
|
|||||||
Net
sales
|
$ | - | $ | 600,303 | ||||
Loss
before income tax
|
- | (1,163,592 | ) | |||||
Provision
for income taxes
|
- | - | ||||||
Loss
from operations - net tax
|
- | (563,289 | ) | |||||
Gain
on sale of discontinued operations
|
- | 90,069 | ||||||
Provision
for income taxes
|
- | - | ||||||
Loss
from discontinued operations - net of tax
|
$ | - | $ | (473,220 | ) |
Reclassification
Certain
reclassifications have been made to the prior year’s financial statements to
conform to the current year presentation. These reclassifications have had no
impact on the net loss. The reclassification consisted of other assets being
reclassified as marketable securities. Effective January 1, 2009, the Company
completed its implementation of SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements - An Amendment of ARB No. 51". As a
result of adopting SFAS No. 160, prior year’s balances were reclassified to
conform to correct presentation.
Recently
issued accounting pronouncements
In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - Including an Amendment of FASB
Statement No. 115." SFAS No. 159 provides entities with an
irrevocable option to report selected financial assets and financial liabilities
at fair value. It also establishes presentation and disclosure
requirements that are designed to facilitate comparisons between entities that
choose different measurement attributes for similar types of assets and
liabilities. The Company adopted SFAS No. 159 on August 1, 2008 and
chose not to elect the fair value option for its financial assets and
liabilities that had not been previously carried at fair
value. Therefore, material financial assets and liabilities not
carried at fair value, such as other assets, accounts payable and other
liabilities are reported at their carrying values.
29
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
In
December 2007, the FASB issued SFAS No. 141(R), “Business
Combinations.” This standard establishes principles and requirements for how an
acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any non-controlling interest in the
acquired and the goodwill acquired. This statement also establishes disclosure
requirements which will enable users to evaluate the nature and financial
effects of the business combination. SFAS No. 141(R) is
effective for which the acquisition date is or after an entities fiscal year end
that begins after December 15, 2008. The provisions of SFAS 141(R)
are effective for the Company for the fiscal year ending July 31, 2010. We are
evaluating the impact of this standard and do not expect the adoption of
SFAS 141(R) to have a material impact on its financial
statements.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS No.
160”). SFAS No. 160 amends Accounting Research Bulletin (“ARB”) No.
51 to establish accounting and reporting standards for the noncontrolling
(minority) interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the Consolidated Financial Statements. SFAS No.
160 also requires consolidated net income to be reported at amounts that include
the amounts attributable to both the parent and the noncontrolling interest on
the face of the consolidated statement of income. Under SFAS No. 160,
the accounting for changes in a parent’s ownership interest in a subsidiary that
do not result in deconsolidation must be accounted for as equity transactions
for the difference between the parent’s carrying value and the cash exchanged in
the transaction. In addition, SFAS No. 160 also requires that a
parent recognize a gain or loss in net income when a subsidiary is
deconsolidated (except in the case of a spin-off), and requires expanded
disclosure in the Consolidated Financial Statements that clearly identify and
distinguish between the interests of the parent’s ownership interest and the
interests of the noncontrolling owners of a subsidiary. This
Statement is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008. The Company will
adopt SFAS No. 160 on August 1, 2009, as required, and does not believe they
will have a significant impact on its financial statements.
In
February 2008, the FASB issued FASB Staff Position SFAS 157-1, “Application
of SFAS No. 157 to SFAS No. 13 and Its Related Interpretative Accounting
Pronouncements that Address Leasing Transactions” (“FSP SFAS 157-1”) and FASB
Staff Position SFAS 157-2, “Effective Date of SFAS No. 157” (“FSP SFAS
157-2”). FSP SFAS 157-1 excludes SFAS No. 13 and its related interpretive
accounting pronouncements that address leasing transactions from the
requirements of SFAS No. 157, with the exception of fair value measurements of
assets and liabilities recorded as a result of a lease transaction but measured
pursuant to other pronouncements within the scope of SFAS No. 157. FSP SFAS
157-2 delays the effective date of SFAS No. 157 for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually). FSP
SFAS 157-1 and FSP SFAS 157-2 became effective for the Company upon adoption of
SFAS No. 157 on August 1, 2008. The Company will provide the additional
disclosures required relating to the fair value measurement of nonfinancial
assets and nonfinancial liabilities. The Company completed its implementation of
SFAS No. 157 effective August 1, 2008 and it did not have a material impact on
its financial statements.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities,” an amendment of FASB Statement No. 133 (“SFAS No.
161”). The new standard is intended to improve financial reporting
about derivative instruments and hedging activities by requiring enhanced
disclosures to enable investors to better understand their effects on an
entity’s financial position, financial performance and cash flows. It
is effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008. The Company does not
believe that SFAS No. 161 will have a material impact on its financial
statements.
30
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
In April
2009, the FASB issued FASB Staff Positions ("FSP") FAS 115-2 and FAS 124-2,
"Recognition and Presentation of Other-Than-Temporary
Impairments". These FSPs amend rules for other-than-temporary
impairments, provide for guidance on calculating fair values in inactive and
distressed markets and require quarterly fair value
disclosures. These FSPs are effective for interim and annual
reporting periods ending after June 15, 2009, with early adoptions permitted for
periods ending after March 15, 2009. The adoption of these FSPs did
not have a material impact on the Company's financial statements.
In May
2009, the FASB issued SFAS No. 165, "Subsequent Events." SFAS No. 165
defines subsequent events as events or transactions that occur after the balance
sheet date, but before the financial statements are issued. It
defines two types of subsequent events: recognized subsequent events, which
provide additional evidence about conditions that existed at the balance sheet
date, and non-recognized subsequent events, which provide evidence about
conditions that did not exist at the balance sheet date, but arose before the
financial statements were issued. Recognized subsequent events are
required to be recognized in the financial statements, and non-recognized
subsequent events are required to be disclosed. SFAS No. 165 requires
entities to disclose the date through which subsequent events have been
evaluated, and the basis for that date. SFAS 165 is consistent with
current practice and did not have any impact on the Company's consolidated
financial statements. Subsequent events were evaluated through
November 4, 2009.
In June
2009, the FASB issued SFAS No. 168, the "FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles". SFAS
No. 168 replaces SFAS No. 162, "The Hierarchy of Generally Accepted Accounting
Principles" (SFAS No. 168), and establishes the FASB Accounting Standards
Codification (Codification) as the source of authoritative GAAP in the U.S.
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements. SFAS No. 168 is effective for
financial statements issued for interim periods and annual periods ending after
September 15, 2009.
Note
2. Inventories
Inventories
consist of the following:
July
31,
|
||||||||
2009
|
2008
|
|||||||
Raw
materials
|
$ | 119,153 | $ | 134,456 | ||||
Work
in progress
|
108,673 | 117,124 | ||||||
Finished
goods
|
- | 35,730 | ||||||
$ | 227,826 | $ | 287,310 |
Raw
materials, work in progress and finished goods for the year ended July 31, 2009,
is related to the Company’s planned sales of electric powered
vehicles.
31
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
Note
3. Property and equipment
Property
and equipment consists of:
July
31,
|
||||||||
2009
|
2008
|
|||||||
Building
and improvements
|
$ | 1,274,636 | $ | 1,272,352 | ||||
Furniture
and fixtures
|
29,023 | 19,548 | ||||||
Office
equipment
|
143,965 | 137,030 | ||||||
Machinery
and equipment
|
36,971 | 19,026 | ||||||
Vehicles
|
60,979 | 60,979 | ||||||
Software
costs
|
32,924 | 11,874 | ||||||
Land
|
700,000 | 700,000 | ||||||
2,278,498 | 2,220,809 | |||||||
Less
accumulated depreciation
|
(288,517 | ) | (206,229 | ) | ||||
$ | 1,989,981 | $ | 2,014,580 |
For the
years ended July 31, 2009, and 2008, depreciation amounted to $82,350 and
$103,407, respectively.
Note
4. Other assets
On June
28, 2006, the Company executed two $50,000 notes, one bearing interest at 6% and
the other non-interest bearing note, to a contractor, as compensation for monies
paid by the Company to the contractor for the contractor to file for a patent,
and $50,000 for inventory that was either missing or damaged. The patent that
the contractor received with the money of EVI was assigned to EVI as collateral
until both notes and interest were paid in full. On August 19, 2008, the
non-interest bearing note in the amount of $50,000 was repaid. On February 19,
2009, the interest bearing note in the amount of $50,000, plus interest of
$8,319, was repaid and the patent that was being held as collateral was
returned. The interest bearing note is included in other current assets on the
Company's balance sheet at July 31, 2008.
Note
5. Advances from related parties and related party transactions
During
the years ended July 31, 2009 and 2008, the Company received and repaid
additional advances from Del Mar Ventures Corp, a company owned by Aarif Jamani
(a Company stockholder) of $0 and $0 in 2009, and $9,940 and $10,000,
respectively in 2008. As of July 31, 2009 and 2008, the balance was
$0.
The
Company received and repaid additional advances from SSRI (owned by a Company
stockholder) for the years ended July 31, 2009 and 2008 in amounts of
approximately $2,174,400 and $827,600, respectively for 2009 and $3,732,000 and
$3,592,000, respectively for 2008. The Company also issued shares of stock for
payment of debt for the years ended July 31, 2009 and 2008 in mounts of
approximately $1,286,900 and $400,000, respectively. As of July 31, 2009 and
2008, the amount due to SSRI was $97,940 and $38,000, respectively.
The
Company received and repaid additional advances from A & S Holding (owned by
a previous Company president) for the years ended July 31, 2009 and 2008 in the
amount of $0 and $0 for 2009 and $11,000 and $0, respectively for 2008. As of
July 31, 2009 and 2008, the amount due to the Company was $0.
The
Company received and repaid additional advances from Greg Navone (Director of
the Company prior to July 10, 2009) for the years ended July 31, 2009 and 2008
in amount of $51,000 and $51,000, respectively for 2009 and $115,000 and $0,
respectively for 2008. As of July 31, 2009 and 2008, the amount due to the
Company was $0. Greg Navone resigned as a Director of the Company on
July 10, 2009.
32
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
Due from
related parties and advances from related parties are reported as current assets
or liabilities. These advances are not subject to written agreements and have no
specific repayment terms but are deemed due on demand and are not interest
bearing notes except for the Greg Navone note.
Note
6. Long-term debt
Long-term
debt consists of:
July
31,
|
July
31,
|
|||||||
2009
|
2008
|
|||||||
10.875%
note payable to Bayview Loan
|
||||||||
Servicing,
LLC, payable in monthly
|
||||||||
installments
of approximately $11,388 including
|
||||||||
interest,
collateralized by real property
|
||||||||
due
in full on or before December 2022 (1)
|
$ | 954,631 | $ | 984,204 | ||||
10%
note payable to Wyndom Capital
|
||||||||
Investments,
Inc., payable in October 2010
|
||||||||
collateralized
by 10,000,000 shares of
|
||||||||
the
Company's common stock that was
|
||||||||
collected
by Wyndom Capital on June 16,
|
||||||||
2009
for default on the loan (2)
|
— | 3,971,150 | ||||||
10%
note payable to Crystal Capital
|
||||||||
Ventures,
payable in May 2011
|
||||||||
collateralized
by 7,500,000 shares of
|
||||||||
the
Company's common stock (3)
|
2,853,859 | 1,211,000 | ||||||
15.8%
note payable to Allegiance
|
||||||||
Direct
Bank, payable in monthly
|
||||||||
installments
of approximately $525,
|
||||||||
due
in full on October 2008 (4)
|
5,880 | 1,476 | ||||||
3,814,370 | 6,167,830 | |||||||
Less
current portion
|
(39,702 | ) | (32,422 | ) | ||||
$ | 3,774,668 | $ | 6,135,408 |
Principal maturities on continuing operations are as follows as of July 31, 2009:
2010
|
$ | 39,702 | ||
2011
|
2,892,666 | |||
2012
|
43,245 | |||
2013
|
48,189 | |||
2014
|
53,699 | |||
Thereafter
|
736,869 | |||
$ | 3,814,370 |
(1) In
November 2007, the Company refinanced a loan on a building. The Company paid the
remainder of the loan to Richard Howard, with $50,000 in cash and $1,000,000
from the new loan proceeds. The new loan with Bayview Loan Servicing, LLC is
$1,000,000. The loan has an initial interest rate at 10.875% per annum with a
monthly payment of $11,388, including interest. The loan is due on December 1,
2022. After the first 24 months, the interest rate adjusts to Prime plus 4.875%.
Interest rate changes are limited to 2% increase or decrease in any annual
adjustments. Interest expense for the years ended July 31, 2009 and 2008 for
Bayview Loan Servicing, LLC is approximately $107,000 and $63,900,
respectively.
33
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
(2) In
October 2007, the Company entered into a loan agreement with Wyndom Capital
Investments, Inc. (“Wyndom”). During the year ended July 31, 2008 the Company
issued 3,333,335 shares of outstanding stock as collateral for the above note.
In February 2009 the Company had a 1:3 reverse stock split and issued 6,666,665
to Wyndom Capital to make their shares held as collateral total
10,000,000. The agreement provides loans of up to $4,000,000 with
interest payable monthly at a rate of 10% per annum and due in full in October
of 2010. Loans under the agreement are secured by the Company’s shares of common
stock at a rate of two and one half shares to each dollar of principal. The
Company paid interest to Wyndom of approximately $342,000 for the year ended
July 31, 2009 and $154,000 for the year ended July 31, 2008, respectively. The
Company defaulted on the loan in February 2008 but Wyndom had waived the default
until June 2009 when they took possession of the 10,000,000 shares they held as
collateral. As a result, our liability of $4,000,000 for principal and accrued
unpaid interest was extinguished as of June 16, 2009, the date on which the
Lender took possession of the final portion of the share
collateral.
(3) On
May 5, 2008, the Company entered into a loan agreement with Crystal Capital
Ventures Inc. (“Crystal Capital”). The loan agreement provides for loans to the
Company of up to $3,000,000, with a minimum initial loan of $500,000 on May 19,
2008. The notes bear interest payable monthly in arrears at the rate of 10% per
annum; and mature and are due and payable May 4, 2011. The loans under the loan
agreement are secured by shares of the Company’s common stock held by Crystal
Capital. The Company is required to issue shares as collateral at the rate of
two and one half shares of the Company’s common stock for each dollar principal
amount of the loan advanced to the Company. Following disbursement of
the first $1,000,000 of funds pursuant to the loan agreement, on May 27, 2008,
the Company issued 2,500,000 shares of common stock as collateral to Crystal
Capital. After the 1:3 reverse stock split in February 2009 the Company issued
Crystal an additional 5,000,000 shares to make their shares held as collateral
total 7,500,000.
As of
July 31, 2009, the Company has borrowed $2,853,859 under the loan agreement. As
of August 12, 2009 the Company has borrowed the full $3,000,000 from Crystal
Capital. The Company paid interest to Crystal Capital of
approximately $173,000 for the year ended July 31, 2009 and $11,000 for the year
ended July 31, 2008, respectively. The Company went into default on the loan
agreement in August 2008 but Crystal Capital has waived default on all interest
payments that have not been made as of November 9, 2009.
(4) On
February 28, 2009 the Company financed a workman’s compensation policy with
Allegiance Direct Bank for the period February 28, 2009 to February 28, 2010 for
$13,091. The Company was required to make a down payment of
approximately $3,291 in February 2009 and monthly payments including interest of
5%. The interest expense for the year ended July 31, 2009 was
$202.
Note
7. Stockholders' equity (deficit)
On
December 24, 2007, the Company shareholders approved the increase of the
authorized shares of the Company from 50,000,000 to 250,000,000. In January
2008, the Company’s shareholders approved a one-for-seven reverse stock split.
The number authorized shares were reduced from 250,000,000 to 35,714,285
shares.
In
January 2009, the Company’s shareholders approved a one-for-three reverse stock
split of its outstanding common shares which became effective on February 19,
2009. Also on February 19, 2009 the authorized shares of the Company was
increased from 35,714,285 to 50,000,000 shares.
Except
for the presentation of common shares authorized and issued on the consolidated
balance sheet and share presented in the consolidated statement of stockholders’
equity (deficiency), all shares and per share information have been revised to
give retroactive effect to both reverse stock splits.
34
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
See Note
8 “Net loss per common share” for the impact on the Company’s earnings per share
amounts on a result of the reverse stock splits. The stock split in 2008
resulted in the decrease of approximately 42.4 million shares of common stock
and was accounted for by the transfer at approximately $42,000 from additional
paid in capital to common stock. The stock split in 2009 resulted in the
decrease of approximately 15.6 million shares of common stock and was accounted
for by the transfer of approximately $15,000 from paid-in-capital to common
stock. Both transfers are an amount equal to the par value of the shares reduced
to effect the stock split.
On
February 24, 2009, under the 2006 stock option plan the remainder of the shares
were granted and exercised. The 2006 stock option plan was then terminated. The
Company has registered the 2009 stock option plan with the SEC for 3,000,000
shares, and of those 2,042,857 shares have been granted at par value $0.001 per
share and a purchase share price of $0.90 per share.
During
the year ended July 31, 2008:
The
Company issued stock options valued in the amount of $804,652.
476,191
shares of common stock were issued in escrow as collateral.
5,357,140
shares of common stock were issued in escrow as collateral. As of July 31, 2008,
the total amount of shares held as collateral totaled 5,833,331
shares.
The
Company issued 67,972 shares of stock upon the exercise of stock
options.
During
the year ended July 31, 2009:
The
Company issued stock options valued in the amount of $2,630,000.
11,666,669
shares of common stock were issued in escrow as collateral. As of July 31, 2009,
the total amount of shares held as collateral totaled 17,500,000
shares.
The
Company issued 1,433,524 shares of stock upon the exercise of stock
options.
Note
8. Net loss per common share
The
following table sets forth the reconciliation of the basic and diluted net loss
per common share computations for the years ended July 31, 2009 and
2008.
YEARS
ENDED
|
||||||||
July
31,
|
||||||||
2009
|
2008
|
|||||||
Continuing
operations:
|
||||||||
Basic
and diluted EPS:
|
||||||||
Net
loss ascribed to common shareholders - basic and diluted
|
$ | (6,817,974 | ) | $ | (6,064,840 | ) | ||
Weighted
shares outstanding - basic and diluted
|
20,558,046 | 5,733,513 | ||||||
Basic
and diluted net loss per common share
|
$ | (0.33 | ) | $ | (1.06 | ) | ||
Discontinued
operations:
|
||||||||
Basic
and diluted EPS - discontinued operations:
|
||||||||
Net
loss ascribed to common shareholders - basic and diluted
|
$ | - | $ | (473,220 | ) | |||
Weighted
shares outstanding - basic and diluted
|
20,558,046 | 5,733,513 | ||||||
Basic
and diluted net loss per common share
|
$ | 0.00 | $ | (0.08 | ) |
Net loss
per common share for the year ended July 31, 2008 has been
revised. This revision was immaterial to the Company’s consolidated
results of operations and financial position. See below for further discussion.
All share and per share amounts have been restated to reflect the one-for-seven
and one-for-three reverse stock split as discussed in Note 7.
35
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
The
amounts previously reported, in 2008, were as follows:
YEAR
ENDED
|
||||
July
31,
|
||||
2008
|
||||
Continuing
operations:
|
||||
Basic
and diluted loss per common share
|
$ | (0.35 | ) | |
Discontinued
operations:
|
||||
Basic
and diluted loss per common share
|
$ | (0.03 | ) |
Note
9. Share-based compensation
Prior to
August 1, 2006, the Company accounted for its share-based compensation plans
using the intrinsic value method in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations, as permitted by Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." Effective August 1, 2006, we adopted the provisions of SFAS No.
123(R), "Share-Based Payment." The adoption of SFAS No. 123(R) resulted in the
recording of compensation expense for employee stock options and employee stock
purchase rights in our financial statements. Such compensation expense is
recognized over the requisite service period based on the fair value of the
options or rights on the date of grant.
Using the
modified-prospective transition method, the compensation cost recognized during
the year ended July 31, 2009, included (i) compensation cost for all share-based
payments granted prior to, but not yet vested as of January 1, 2006, based on
the grant date fair value estimated in accordance with the original provisions
of SFAS No. 123, and (ii) compensation cost for all share-based payments granted
subsequent to January 1, 2006, based on the grant date fair value estimated in
accordance with the provisions of SFAS No. 123(R). Results for prior periods
have not been restated.
On
November 10, 2005, the FASB issued FASB Staff Position No. FAS 123R-3,
"Transition Election Related to Accounting for Tax Effects of Share-Based
Payment Awards." The Company has elected to adopt the alternative transition
method provided in the FASB Staff Position for calculating the tax effects of
share-based compensation pursuant to SFAS No. 123(R).
The
following table reflects the assumptions utilized to value the 2006 stock option
plan for the years ended July 31, 2009 and 2008 under SFAS 123R and using
the Black-Scholes valuation model. Among other factors, the Black Scholes model
considers the expected life of the option and the expected volatility of the
Company's stock price in arriving at an option valuation. The risk-free interest
rate is based upon U.S. Treasury Rates for instruments with similar terms. The
expected term of the grants were estimated based upon the Company’s prior
average experience. The Company has not paid cash dividends to date and does not
plan to pay cash dividends in the near future. The volatility assumptions were
derived from historical volatilities of competitors whose shares are traded in
the public markets and are adjusted to reflect anticipated behavior specific to
the Company.
Expected
dividend yield
|
0 | % | ||
Risk-free
interest rate
|
1 - 5 | % | ||
Expected
volatility
|
100 | % | ||
Expected
life from the vesting date
|
0.4
- 1 year
|
|||
The
Company established the 2003 Restricted Stock Plan ("the Plan") during the year
ended January 31, 2004 as well as the 2006 Restricted Stock Plan established
during the year ended July 31, 2006, and filed an S-8 Registration Statement
with the Securities and Exchange Commission that was declared effective. The
Plan allows the Company's Board of Directors to issue up to 1,800,000 common
shares and options for common shares for the 2003 Restricted Stock Plan and
5,000,000 common shares and options for common shares for the 2006 Restricted
Stock Plan pursuant to the Plan as compensation for services to the Company. The
Company's Board of Directors has the discretion to set the price, term vesting
schedules and other terms and conditions for options granted under the plan. All
2003 Restricted Stock Plan commons shares have been issued.
36
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
The
Company established the 2005 Restricted Stock Plan ("the 2005 Plan") in April,
2005 and filed an S-8 Registration Statement with the Securities and Exchange
Commission that was declared effective. The 2005 Plan allows the Company's Board
of Directors to issue up to 2,000,000 common shares pursuant to the 2005 Plan as
compensation for services to the Company. The Company's Board of Directors has
the discretion to set the price, vesting schedules and other terms and
conditions for options granted under the 2005 Plan. All 2005 Restricted Stock
Plan common shares have been used.
The
Company established the 2009 Restricted Stock Plan ("the 2009 Plan") in
February, 2009 and filed an S-8 Registration Statement with the Securities and
Exchange Commission that was declared effective. The 2009 Plan allows the
Company's Board of Directors to issue up to 3,000,000 common shares pursuant to
the 2009 Plan as compensation for services to the Company. The Company's Board
of Directors has the discretion to set the price, vesting schedules and other
terms and conditions for options granted under the 2009 Plan.
During
the years ended July 31, 2009 and 2008, the Company granted 3,042,857 and 60,714
options, respectively with an option price of $0.90 and $2.00 per share for July
31, 2009 and 2008, respectively, to various consultants. During the years ended
July 31, 2009 and 2008, 3,042,857 and 60,714 options, respectively, were vested
at the fair market value of which was determined under the Black-Scholes formula
to be approximately $2,630,000 and $804,000 in July 31, 2009 and 2008 and is
included in general and administrative expenses. During the years ended July 31,
2009 and 2008, 1,429,833 and 66,667 options were exercised, respectively valued
at $0.90 and $2.88 per share.
37
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
A summary
of the Company’s Restricted Stock Plans follows:
Number
of
|
||||
Authorized
options and ungranted:
|
Shares
|
|||
Balance
July 31, 2007
|
82,143 | |||
Options
authorized (2006 Plan)
|
- | |||
Options
granted (2006 Plan)
|
60,714 | |||
Options
cancelled/expired (2006 Plan)
|
- | |||
Balance
July 31, 2008 (2006 Plan)
|
142,857 | |||
Options
authorized (2006 Plan)
|
- | |||
Options
granted (2006 Plan)
|
(142,857 | ) | ||
Options
cancelled/expired (2006 Plan)
|
- | |||
Options
authorized (2009 Plan)
|
3,000,000 | |||
Options
granted (2009 Plan)
|
(2,900,000 | ) | ||
Options
cancelled/expired (2009 Plan)
|
- | |||
Balance
July 31, 2009 (2009 Plan)
|
100,000 |
Weighted
average
|
||||||||
Number
of
|
exercise
|
|||||||
Options
granted and unexercised:
|
shares
|
price/share
|
||||||
Balance
July 31, 2007
|
37,810 | $ | 3.55 | |||||
Options
cancelled during the year
|
||||||||
ended
July 31, 2008 (2006 Plan)
|
- | |||||||
Options
granted during the year
|
||||||||
ended
July 31, 2008 (2006 Plan)
|
60,714 | $ | 2.00 | |||||
Options
exercised during the year
|
||||||||
ended
July 31, 2008 (2006 Plan)
|
(66,667 | ) | $ | 2.88 | ||||
Balance
July 31, 2008
|
31,857 | $ | 2.00 | |||||
Options
cancelled during the year
|
||||||||
ended
July 31, 2009 (2006 Plan)
|
(59,881 | ) | $ | 1.49 | ||||
Options
granted during the year
|
||||||||
ended
July 31, 2009 (2006 Plan)
|
142,857 | $ | 0.90 | |||||
Options
exercised during the year
|
||||||||
ended
July 31, 2009 (2006 Plan)
|
(114,833 | ) | $ | 0.90 | ||||
Options
cancelled during the year
|
||||||||
ended
July 31, 2009 (2009 Plan)
|
- | |||||||
Options
granted during the year
|
||||||||
ended
July 31, 2009 (2009 Plan)
|
2,900,000 | $ | 0.90 | |||||
Options
exercised during the year
|
||||||||
ended
July 31, 2009 (2009 Plan)
|
(1,315,000 | ) | $ | 0.90 | ||||
Unexercised
options at July 31, 2009
|
1,585,000 | $ | 0.90 |
During
the years ended July 31, 2009 and 2008, total related advances converted in
return for the exercise of options under the plan amounted to approximately
$1,287,000 and $400,000, respectively.
Range
of
|
Options
Outstanding
|
Weighted
|
Options
Exercisable
|
Weighted
|
||||||||||
Exercisable
|
Outstanding
at
|
Average
|
Exercisable
at
|
Average
|
||||||||||
Prices
|
July
31, 2009
|
Exercise
Price
|
July
31, 2009
|
Exercise
Price
|
||||||||||
$ | 0.90 | 1,585,000 | $ | 0.90 | 1,585,000 | $ | 0.90 |
The
weighted average remaining contractual life of options outstanding at July 31,
2009 was approximately five years.
38
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
The
aggregated intrinsic value of options outstanding and exercisable at July 31,
2009, was de minimus. The aggregate intrinsic value represents the total pre-tax
value (the difference between the Company’s closing stock price on the last
trading day of July 31, 2009 and the exercise price, multiplied by the number of
in-the money options) that would have been received by the option holders had
all option holders exercised their options on July 31, 2009. The
amount of aggregate intrinsic value will change based on the fair-market value
of the Company’s common stock.
Note
10. Segment information
FASB
Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information,
establishes standards for reporting information about operating segments.
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by
management. The Company is organized by line of business and geographical area.
The Company has two businesses, telecommunication services and the development
and sale of electric powered vehicles.
The
following is financial information relating to the Company’s business
segments:
YEARS
ENDED
|
||||||||
July
31,
|
||||||||
2009
|
2008
|
|||||||
Revenues
from external customers:
|
||||||||
Telecommunication
services
|
||||||||
United
States
|
$ | - | $ | - | ||||
India
|
- | - - | ||||||
Canada
|
- | - - | ||||||
Electric
powered vehicle sales
|
||||||||
United
States
|
475,828 | 199,801 | ||||||
Hong
Kong
|
- | - | ||||||
India
|
- | - | ||||||
Total
revenues from continuing operations
|
$ | 475,828 | $ | 199,801 |
YEARS
ENDED
|
||||||||
Loss
from continuing operations:
|
July
31,
|
|||||||
Telecommunication
services
|
2009
|
2008
|
||||||
United
States
|
$ | - | $ | - | ||||
India
|
- | - | ||||||
Canada
|
- | - | ||||||
Electric
powered vehicle sales
|
||||||||
United
States
|
(6,155,677 | ) | (5,787,742 | ) | ||||
Hong
Kong
|
(1 | ) | (2,119 | ) | ||||
India
|
(85,034 | ) | (78,411 | ) | ||||
Total
loss from continuing operations
|
$ | (6,240,712 | ) | $ | (5,868,272 | ) |
39
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
Long-lived
assets:
|
||||||||
Telecommunication
services
|
||||||||
United
States
|
$ | - | $ | - | ||||
India
|
- | - | ||||||
Canada
|
- | - | ||||||
Electric
powered vehicle sales
|
||||||||
United
States
|
24,258 | 71,503 | ||||||
Hong
Kong
|
- | - | ||||||
India
|
- | - | ||||||
Total
long-lived assets
|
$ | 24,258 | $ | 71,503 | ||||
Capital
expenditures:
|
||||||||
Telecommunication
services
|
||||||||
United
States
|
$ | - | $ | - | ||||
India
|
- | 7,985 | ||||||
Canada
|
- | - | ||||||
Electric
powered vehicle sales
|
||||||||
United
States
|
42,253 | 93,970 | ||||||
Hong
Kong
|
- | - | ||||||
India
|
15,498 | 4,795 | ||||||
Total
capital expenditures
|
$ | 57,751 | $ | 106,750 | ||||
Depreciation
and amortization:
|
||||||||
Telecommunication
services
|
||||||||
United
States
|
$ | - | $ | 16,532 | ||||
India
|
- | 10,276 | ||||||
Canada
|
- | - | ||||||
Electric
powered vehicle sales
|
||||||||
United
States
|
77,848 | 76,013 | ||||||
Hong
Kong
|
- | - | ||||||
India
|
4,502 | 586 | ||||||
Total
depreciation
|
||||||||
and
amortization
|
$ | 82,350 | $ | 103,407 |
Note 11. Income taxes
The
Company adapted the provisions of FASB Interpretation No 48, Accounting for
Uncertainty in Income Taxes (“FIN 48”), on August 1, 2007. The implementation of
FIN 48 did not impact the total amount of the Company’s liabilities for
uncertain tax position.
The
Company recorded no provisions for income taxes for the years ended July 31,
2009 and 2008.
40
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
A
reconciliation of taxes on income computed at federal statuary rate to the
amount provided is as follows:
July
31,
|
|||||||||
2009
|
2008
|
||||||||
Tax
provision computed at
|
|||||||||
federal
statuary rate of 35%
|
|||||||||
continuing
operations
|
$ | (2,378,818 | ) | $ | (2,122,694 | ) | |||
Increase
(decrease) in taxes
|
|||||||||
resulting
from:
|
|||||||||
unused
operating losses
|
2,378,818 | 2,122,694 | |||||||
$ | - | $ | - |
Components
of deferred income tax assets are as follows:
July
31,
|
|||||||||
2009
|
2008
|
||||||||
Tax
effect
|
Tax
effect
|
||||||||
Deferred
tax assets - current:
|
|||||||||
United
States net operating loss
|
$ | 20,560,818 | $ | 18,182,000 | |||||
Valuation
allowances
|
(20,560,818 | ) | (18,182,000 | ) | |||||
$ | - | $ | - |
The net
operating loss carry forward as of July 31, 2009 is approximately $58.7 million
and will expire in years through 2024.
Note
12. Going concern
The
Company's financial statements are prepared based on the going concern
principle. That principle anticipates the realization of assets and payments of
liabilities through the ordinary course of business. No adjustments
have been made to reduce the value of any assets or record additional
liabilities, if any, if the Company were to cease to exist. The Company has
incurred significant operating losses since inception. These operating losses
have been funded by the issuance of capital, loans and advances. There are no
guarantees that the Company will continue to be able to raise the funds
necessary. Additionally, the lack of capital may limit the Company's ability to
establish a viable business.
Note
13. Contingencies
Hybrid
Electric Vehicles India Pvt. Ltd. entered into an 11 month lease agreement
ending in August 2009. It is expected that in the normal course of business the
lease will be continued or replaced by a similar arrangement or on a month to
month basis.
Future
minimum payments under this lease are approximately $414 per month or $3,312
through August 2009. Total rent expense for the year ended July 31,
2009 and 2008, amounted to approximately $4,900 and $3,500,
respectively.
Effective
April 16, 2008, SPI agreed to lease approximately 5,000 square feet of space in
the Company’s North Carolina facility. The leased space will be suitable for,
and utilized by SPI for, SPI’s developmental and manufacturing operations for
licensed products pursuant to the license agreement. The leased space is leased
on a month-to-month basis at a monthly rental of $2,625, the monthly rental to
be escalated five (5%) percent annually. Although the lease was signed, the
space is only 80% completed as of October 20, 2009. Also, effective April 16,
2008, the Company sold specified equipment and supplies related to the licensed
agreement to SPI for the purchase price of $29,005. The Company also entered
into a month to month lease agreement for $750 with SPI for renting offices in
the Companies Las Vegas corporate office.
41
HYBRID
TECHNOLOGIES, INC.
Notes
to Consolidated Financial Statements
July
31, 2009
|
Total
rent income for the year ended July 31, 2009 and 2008 amounted to approximately
$39,000 and $6,500, respectively.
Surety
bond
EVI
applied to North Carolina Department of Motor Vehicles for a manufacturing
license. This application required a surety bond of $50,000 for three years
which the Company acquired from Kaercher Campbell & Associates. EVI was
licensed as a motor vehicle dealer to engage in the business of selling motor
vehicles on March 9, 2009, until March 31, 2010, by the State of North Carolina
DMV.
Legal
proceedings
The
Company is currently involved in various claims and legal proceedings.
Quarterly, the Company reviews the status of each significant matter and
assesses its potential financial exposure and if the potential loss from any
claim or legal proceeding is considered probable and the amount can be
reasonably estimated, the Company accrues a liability for the estimated
loss.
An
arbitration award in the amount of $70,803 was awarded to Keith Boucher against
the Company for attorney’s fees and costs incurred in arbitration. EV
Innovations, Inc. has filed a motion to vacate the award, which motion is
scheduled for hearing in December 2009, in the District Court of Nevada in Clark
County.
Barret
Lyon, an individual, has filed suit against the Company in the Superior Court of
California, San Mateo County, for alleged breach of warranty for a vehicle he
purchased from the Company seeking $68,222 in damages, plus attorney’s fees
estimated in the range of $10,000 to $30,000. The Company disputes his claims.
Trial is set for December 2009.
F&C
Promptly, Inc., a collection agency, filed in February 2009 a lawsuit
against the Company in the District Court, Clark County, Nevada, for
approximately $32,000 for collection of the account of the Law Offices of
Richard McKnight assigned to F&C Promptly, Inc. for
collection. The Company is separately suing Richard McKnight and
brought a third party complaint against McKnight and his law office, alleging
negligence and professional malpractice.
Caudle
& Spears has obtained a default judgment against the Company in Meckenberg
County, North Carolina, General Court, in the amount of $17,686. This law firm
represented us in our litigation against Martin Koebler, a former employee, whom
we successfully sued for return of Company property and other damages. The
Company is in settlement negotiations with Caudle & Spears, since its
judgment against Martin Koebler is still in the collection process.
42
Item
9. Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure.
None.
Evaluation
of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Securities Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to our management, including our chief executive and financial
officer, to allow timely decisions regarding required disclosure. In designing
and evaluating the disclosure controls and procedures, management recognized
that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
as ours are designed to do, and management necessarily was required to apply its
judgment in evaluating the cost- benefit relationship of possible controls and
procedures.
As of
July 31, 2009, an evaluation was performed under the supervision and with the
participation of our management, including our chief executive and principal
financial officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based upon that evaluation, our chief
executive and principal financial officer concluded that our disclosure controls
and procedures were ineffective as a result of a significant deficiencies and
material weaknesses as discussed in the following paragraph.
The
reportable conditions identified relate to failure to require documentation
substantiating the timing and terms of exercises of options and the failure
properly to track compliance with two loan agreements to which we were party in
the years ended July 31, 2009 and 2008. We have implemented certain procedures
ensure that option exercises are properly recorded and financial transactions
relating to payments on outstanding debt are properly recorded, documented and
reviewed as to compliance with the particular loan agreement, for purposes of
disclosure in our financial statements.
Management's
Annual Report on Internal Control over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange
Act. Internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles.
Management
assessed the effectiveness of internal control over financial reporting as of
July 31, 2009. We carried out this assessment using the criteria of the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control—Integrated Framework.
This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.
Management's
report was not subject to attestation by our registered public accounting firm,
pursuant to temporary rules of the Securities and Exchange
Commission
that permit us to provide only management's report in this annual report.
Management concluded in this assessment that, as of July 31, 2009, given the
above reportable conditions, our internal control over financial reporting was
not effective.
There
have been no significant changes in our internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act)
during
the fourth quarter of our 2009 fiscal year that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
43
Limitations
on the Effectiveness of Controls
A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within a company have been
detected. The Company's disclosure controls and procedures are designed to
provide reasonable assurance of achieving its objectives. The Company's chief
executive officer and principal financial officer concluded that the Company's
disclosure controls and procedures are effective at that reasonable assurance
level.
Item
9B. Other Information.
Default
Under Wyndom Capital Loan Agreement
In
October 2007, the Company entered into a loan agreement with Wyndom Capital
Investments, Inc. (“Wyndom”). During the year ended July 31, 2008 the Company
issued 3,333,335 shares of common stock as collateral for the note issued under
the loan agreement. In February 2009 the Company had a 1:3 reverse stock split
and issued 6,666,665 to Wyndom to make their shares held as collateral total
10,000,000. The agreement provided for loans of up to $4,000,000 with
interest payable monthly at a rate of 10% per annum and due in full in October
of 2010. Loans under the agreement were secured by the Company’s shares of
common stock at a rate of two and one half shares to each dollar of principal.
The Company paid interest to Wyndom of approximately $342,000 for the year ended
July 31, 2009 and $154,000 for the year ended July 31, 2008, respectively. The
Company defaulted on the loan in February 2008 but Wyndom had waived the default
until June 2009 when they took possession of the 10,000,000 shares they held as
collateral. As a result, our liability of $4,000,000 for principal and accrued
unpaid interest was extinguished as of June 16, 2009, the date on which Wyndom
took possession of the final portion of the share collateral.
Our
Default and Waiver Thereof Under Crystal Capital Ventures Loan
Agreement
On May 5,
2008, the Company entered into a loan agreement with Crystal Capital Ventures
Inc. (“Crystal”). The loan agreement provides for loans to the Company of up to
$3,000,000, with a minimum initial loan of $500,000 on May 19, 2008. The notes
under the loan agreement bear interest payable monthly in arrears at the rate of
10% per annum and mature and are due and payable May 4, 2011 and are secured by
shares of the Company’s common stock held by Crystal. The Company is required to
issue shares as collateral at the rate of two and one half shares of the
Company’s common stock for each dollar principal amount of the loan advanced to
the Company. Following disbursement of the first $1,000,000 of funds
pursuant to the loan agreement, on May 27, 2008, the Company issued 2,500,000
shares of common stock as collateral to Crystal. After the 1:3 reverse stock
split in February 2009 the Company issued Crystal an additional 5,000,000 shares
to make their shares held as collateral total 7,500,000.
As of
July 31, 2009, the Company had borrowed $2,853,859 under the loan agreement, and
as of August 12, 2009 had borrowed the full $3,000,000 from
Crystal. The Company paid interest to Crystal of approximately
$173,000 for the year ended July 31, 2009 and $11,000 for the year ended July
31, 2008. The Company went into default on the loan agreement in August 2008 for
failure to make required interest payments, but Crystal has waived default on
all interest payments that have not been made as of November 9,
2009.
44
PART III
Item
10. Directors, Executive Officers, and Corporate Governance.
Our
executive officers and directors and their respective ages as of October 30,
2009 are as follows:
Age
|
Position
|
||||
Stacey
Fling
|
50
|
Chief
Executive Officer, President and Director
|
|||
|
|||||
Holly
A. Roseberry
|
56
|
Director
|
Our Board of Directors now consists of
two directors. The following information with respect to the principal
occupation or employment of each officer and director, the principal business of
the corporation or other organization in which such occupation or employment is
carried on, and such person's business experience during the past five years,
has been furnished to the Company by the respective officers and
director:
STACEY
FLING graduated from South San Francisco High School in South San
Francisco, California, in 1977. Since June 2003, Ms. Fling has been
the President of A & S Holdings, Inc., a real estate investment and
development company located in Las Vegas, NV. Prior to 2003, Ms.
Fling managed the administrative offices of an environmental remediation and
monitoring company with offices in San Diego, California, as well as in Las
Vegas, Nevada.
HOLLY A.
ROSEBERRY was appointed as
our secretary, treasurer and chief
financial officer on February 20, 2002. On November 15, 2002, she
resigned from these positions and was appointed as our
president, chief executive officer and as
a director. On May 1, 2009, she resigned from all
offices held with the Company and later agreed to continue as a director. From
2001 to 2003, she acted as manager for the Azra
Shopping Center. She obtained a Bachelor of Arts degree from Sacred Heart
University in Bridgeport, Connecticut in 1973. Ms. Roseberry was employed from
1993 to 1996 as human resources manager, and
from 1997 to 1999
as business office manager, of the
Las Vegas location of Wards Department Store. Ms.
Roseberry has held the positions of President, Chief Executive Officer and a
Director of our former majority-owned subsidiary, Zingo, Inc. August 30, 2005 to
June 4, 2008.
Term of
Office
Our
directors are appointed for a one-year term to hold office until the next
annual
general meeting of our shareholders or until removed from office
in accordance
with our bylaws. Our officers are appointed by our board of directors and hold
office until removed by the board.
Committees
We do not
have any committees of the Board of Directors. We intend to have an audit
committee; the sole member of our audit committee, Brian Newman, resigned on May
1, 2009.
Corporate
Code of Conduct
We are
reviewing a proposed corporate code of conduct, which would provide for internal
procedures concerning the reporting and disclosure of corporate matters that are
material to our business and to our stockholders. The corporate code of conduct
would include a code of ethics for
our officers and employees as to
workplace conduct, dealings
with customers, compliance with
laws, improper
payments, conflicts of interest, insider trading, company confidential
information, and behavior with honesty and integrity.
Significant
Employees
We have
no significant employees other than the officers described above.
45
Section
16(A) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires the Company’s executive officers and
directors, and persons who beneficially own
more than ten percent of the
Company's equity securities, to
file reports of ownership and changes
in ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten
percent shareholders are required by SEC regulation to furnish
the Company with copies of
all Section 16(a) forms they
file. Based on its review of the copies of such
forms received by it, the
Company believes that during the fiscal year
ended July 31, 2009 all
such filing requirements applicable to its officers
and directors were complied with.
Item
11. Executive Compensation.
The
following table sets forth certain information as to the
Company's highest
paid executive officers and directors for
the Company's fiscal years ended
July 31, 2009, 2008 and 2007. No other
compensation was paid to any such officer or director other than the
cash compensation set forth below.
SUMMARY
COMPENSATION TABLE
Name
and Principal Position**
(a)
|
Year
*
(b)
|
Salary
($)
(c)
|
Bonus
($)
(d)
|
Stock
Awards
($)
(e)
|
Option
Awards
($)
(f)
|
Non-Equity
Incentive
Plan
Compensation
($)
(g)
|
Change
in Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(h)
|
All
Other
Compensation
(i)
|
Total
($)
(j)
|
||||||||||||||
Holly
|
|||||||||||||||||||||||
Roseberry
|
|||||||||||||||||||||||
President
|
2007
|
$ | 60,500 | $ | 60,500 | ||||||||||||||||||
2008
|
$ | 64,720 | $ | 64,720 | |||||||||||||||||||
2009
|
$ | 52,040 | $ | 1,154 | $ | 53,194 | |||||||||||||||||
Stacey
Fling, President
|
2009
|
$ | 16,923 | $ | 16,923 | ||||||||||||||||||
Mehboob
|
|||||||||||||||||||||||
Charania,
|
|||||||||||||||||||||||
Director
|
2007
|
$ | 1,827 | $ | 1,827 |
** Holly Roseberry
has held the office of President from November 15, 2002 to May 1, 2009. Ms.
Roseberry, as President and Chief Executive Officer, received management fees of
$1,100 per week through December 31, 2006 and $1,210 per week thereafter in our
2007 fiscal year. Her compensation for 2007 included $12,000 of directors fees
paid by one of our subsidiaries.
Option/SAR
Grants in Last Fiscal Year
There were no grant of options to
purchase our common stock to our officers or directors in fiscal 2009, and there
were no exercises of such options during or options held at the end of such
fiscal year by officers or directors.
Directors’
Compensation
The
following table shows compensation paid to our directors in the fiscal year
ended July 31, 2009.
DIRECTOR
COMPENSATION
Name
(a)
|
Fees
Earned or Paid in Cash
($)
(b)
|
Stock
Awards
($)
(c)
|
Option
Awards
($)
(d)
|
Non-Equity
Incentive Plan Compensation
($)
(e)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
($)
(f)
|
All
Other Compensation
($)
(g)
|
Total
($)
(h)
|
||||||||||
Stacey
Fling
|
$ | 3,000 | $ | 3,000 | |||||||||||||
Mehboob
Charania
|
$ | 6,000 | $ | 6,000 | |||||||||||||
Brian
Newman
|
$ | 9,000 | $ | 9,000 | |||||||||||||
Gregory
Navone
|
$ | 11,322 | $ | 11,322 | |||||||||||||
Holly
Roseberry
|
$ | 2,000 | $ | 2,000 |
* Stacey Fling has acted as a director since May 1, 2009;
Mehboob Charania resigned as a director on November 28, 2008; Brian Newman
resigned as a director on May 1, 2009; Gregory Navone resigned as a director on
July 10, 2009; and Holly Roseberry commenced service as a Director on June 1,
2009.
46
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The
following table sets forth certain information concerning the number of
shares of
our common stock owned beneficially as of November 2, 2009 by: (i)
each person (including any group) known to us to own more
than five percent (5%) of any class of
our voting securities, (ii) each of
our directors, and (iii)officers and directors as a group.
Unless otherwise indicated, the shareholders
listed possess sole voting
and investment power with respect to the shares
shown.
Percentage
of
|
||||||||||
Name
and address
|
Number
of Shares
|
Outstanding
|
||||||||
Title
of class
|
of
beneficial owner
|
of
Common Stock
|
Common
Stock(1)
|
|||||||
Common
Stock
|
Holly
Roseberry
|
7 | * | |||||||
Director
|
||||||||||
4894
Lone Mountain Rd. #168
|
||||||||||
Las
Vegas, Nevada 89130
|
||||||||||
Stacey
A. Fling
|
||||||||||
President
and Chief Executive Officer
|
177 | * | ||||||||
4894
Lone Mountain Rd. #168
|
||||||||||
Las
Vegas, Nevada 89130
|
||||||||||
All
Officers and Directors
|
184 | * | ||||||||
Directors
as a Group (2 persons)
|
||||||||||
Crystal
Capital Ventures Inc.
|
7,500,000 | (2) | 35.24 | % | ||||||
1274
Sundial Ave. Coral Grove
|
||||||||||
PO
Box 2135
|
||||||||||
Belize
City, Belize
|
||||||||||
Liberty
Financial Group Ltd.
|
8,000,000 | 37.58 | % | |||||||
76
Dean Street
|
||||||||||
P.O.
Box 644
|
||||||||||
Belize
City, Belize
|
* Less
than 1%
(1)
|
As
of November 2, 2009, there were 21,284,101 shares of
our common stock issued and
outstanding.
|
(2)
|
Held
as collateral pursuant to Loan Agreement with the Company dated May 5,
2008.
|
CHANGE IN
CONTROL
We are
not aware of any arrangement that might result in a change in control in the
future.
47
Item
13. Certain Relationships and Related Transactions, and Director
Independence.
In our
fiscal year ended July 31, 2007, Ms. Roseberry received $12,000 in directors
fees from Zingo, Inc., our former majority-owned telecommunications subsidiary.
In fiscal year ended July 31, 2008, Ms. Roseberry received $11,000 in consulting
fees from Zingo, Inc. (now Superlattice Power, Inc.) as she worked with their
new officers throughout the changeover period following the sale of the
Company’s controlling stock interest in Zingo, Inc. She is no longer receiving
any compensation from Superlattice.
The
Company received and repaid additional advances from SSRI (owned by a Company
stockholder) for the years ended July 31, 2009 and 2008 in amounts of
approximately $2,174,399 and $2,114,459, respectively for 2009 and $3,732,000
and $3,592,000, respectively for 2008. As of July 31, 2009 and 2008, the amount
due to SSRI was $97,940 and $38,000, respectively.
The
Company received and repaid additional advances from A & S Holding (owned by
a previous Company president) for the years ended July 31, 2009 and 2008 in the
amount of $0 for 2009 and $11,000 and $0, respectively for 2008. As of July 31,
2009 and 2008, the amount due to the Company was $0.
The
Company received and repaid additional advances from Greg Navone (a director of
the Company prior to July 10, 2009) for the years ended July 31, 2009 and 2008
in amount of $51,000 and $51,000, respectively for 2009 and $115,000 and $0,
respectively for 2008. As of July 31, 2009 and 2008, the amount due to the
Company was $0. Mr. Navone resigned as a director of the Company on
July 10, 2009.
Effective
April 15, 2008, we entered into a License Agreement (the “License Agreement”)
with Superlattice providing for our license to Superlattice of our patent
applications and technologies for rechargeable lithium ion batteries for hybrid
vehicles and other applications (“Licensed Products”). Under the
License Agreement, we have the right to purchase our requirements of lithium ion
batteries from Superlattice, and our requirements of lithium ion batteries shall
be supplied by Superlattice in preference to, and on a priority basis as
compared with, supply and delivery arrangements in effect for other customers of
Superlattice. Our cost for lithium ion batteries purchased from Superlattice
shall be Superlattice’s actual manufacturing costs for such batteries for the
fiscal quarter of Superlattice in which our purchase takes place.
Superlattice
agreed to invest a minimum of $1,500,000 in each of the next two years in
development of the technology for the Licensed Products. In the initial year
under the License Agreement, Superlattice invested approximately $264,043 in the
development of technology, and therefore is not in compliance with its
obligations under this covenant of the license agreement. We have advised
Superlattice in a letter dated October 1, 2009, that we will not give notice of
default against Superlattice for its failure to comply with this covenant in the
first year of the term of the License Agreement.
Effective
April 16, 2008, Superlattice agreed to lease approximately 5,000 square feet of
space (“Leased Space”) in our North Carolina facility, such Leased Space to be
suitable for, and utilized by Superlattice for, Superlattice’s developmental and
manufacturing operations for Licensed Products pursuant to the License
Agreement. The Leased Space is leased on a month-to-month basis at a
monthly rental of $2,500, the monthly rental to be escalated five (5%) percent
annually. Effective April 16, 2008, we also sold to Superlattice for the
purchase price of $29,005, specified equipment and supplies related to the
Licensed Field.
48
Item
14. Principal Accountant Fees and Services.
(1)
|
Aggregate
fees for the last two years:
|
2009-$29,000
|
2008-$30,000
|
(2)
|
Audit
related fees:
|
2009-
NA
|
2008-
NA
|
(3)
|
Tax
fees:
|
2009-
NA
|
2008-
NA
|
(4)
|
All
other fees.
|
NA
|
|
(5) |
Audit committee pre-approval processes, percentages of services
approved by audit committee,
percentage of hours spent on audit engagement by persons
other than principal accountant's full time
employees.
|
NA
|
Item
15. Exhibits and Financial Statement Schedules.
Exhibit
No.
|
Description
|
|
3.1
|
Articles
of Incorporation of the Company.(Incorporated herein
by reference to Exhibit 3.1 to the Company's Registration
Statement on Form SB-2, filed with the
Commission on May 29, 2001.)
|
|
3.1a
|
Certificate
of Amendment to Articles of Incorporation filed October
27, 2004. (Incorporated by reference to Exhibit 3.1a
to the Company’s Current Report on Form 8-K, filed with
the Commission on November 2, 2004.)
|
|
3.1b
|
Form
of Restatement of Articles of Incorporation of the Company.
(Incorporated by reference to Exhibit 3.1a to the Company’s
Quarterly Report on Form 10-QSB, filed with the Commission
on December 15, 2004.)
|
|
3.1c
|
Certificate
of Amendment to Articles of Incorporation, filed
effective March 9, 2005. (Incorporated by reference to
Exhibit 3.1c to the Company’s Annual Report on Form 10-KSB,
filed with the Commission on May 23, 2005.)
|
|
3.1d
|
Certificate
of Change, filed effective January 17, 2008. (Incorporated
by reference to Exhibit 3.1d to the Company’s Current
Report on Form 8-K, filed with the Commission on January
16, 2008.)
|
|
3.1e
|
Certificate
of Amendment to Articles of Incorporation, filed
effective December 24, 2007, filed herewith.
|
|
3.1
|
Articles
of Incorporation of the Company.(Incorporated herein
by reference to Exhibit 3.1 to the Company's Registration
Statement on Form SB-2, filed with the
Commission on May 29, 2001.)
|
|
3.1a
|
Certificate
of Amendment to Articles of Incorporation filed October
27, 2004. (Incorporated by reference to Exhibit 3.1a
to the Company’s Current Report on Form 8-K, filed with
the Commission on November 2,
2004.)
|
49
3.1b
|
Form
of Restatement of Articles of Incorporation of the Company.
(Incorporated by reference to Exhibit 3.1a to the Company’s
Quarterly Report on Form 10-QSB, filed with the Commission
on December 15, 2004.)
|
|
3.1c
|
Certificate
of Amendment to Articles of Incorporation, filed
effective March 9, 2005. (Incorporated by reference to
Exhibit 3.1c to the Company’s Annual Report on Form 10-KSB,
filed with the Commission on May 23, 2005.)
|
|
3.1d
|
Certificate
of Change, filed effective January 17, 2008. (Incorporated
by reference to Exhibit 3.1d to the Company’s Current
Report on Form 8-K, filed with the Commission on January
16, 2008.)
|
|
3.1e
|
Certificate
of Amendment to Articles of Incorporation, filed
effective December 24, 2007. (Incorporated
by reference to Exhibit 3.1e to the Company’s
Annual Report on Form 10-K, filed with the
Commission
on November 12, 2008.)
|
|
3.1f
|
Certificate
of Amendment to Articles of Incorporation, filed
effective February 19, 2009.(Incorporated by reference
to Exhibit 3.1f to the Company’s Current Report
on Form 8-K, filed with the Commission on February
27, 2009.)
|
|
3.2
|
By-Laws
of the Company. (Incorporated herein by reference to
Exhibit 3.2 to the Company's Registration Statement on Form
SB-2 filed with the Commission on May 29, 2001.)
|
|
4.1
|
Specimen
Common Stock Certificate. (Incorporated herein by reference
to Exhibit 4.1 to the Company’s Annual Report on Form
10-KSB, filed with the Commission on November 8, 2006.)
|
|
4.2
|
Whistler
Investments, Inc. 2003 Restricted Stock Plan. (Incorporated
herein by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-8 filed with the
Commission on July 18, 2003.)
|
|
4.3
|
EV
Innovations, Inc. 2005 Restricted Stock Plan. (Incorporated
herein by reference to Exhibit 4. to the Company's
Registration Statement on Form S-8 filed with the
Commission on April 22, 2005.)
|
|
4.4
|
Promissory
Note, dated December 3, 2004, payable to Trade Winds
Telecom, LLC. (Incorporated by reference to Exhibit 4.4
to the Company’s Annual Report on Form 10-KSB, filed with
the Commission on May 23, 2005.)
|
|
10.1
|
Mineral
Claim dated October 2, 2000.(Incorporated herein by reference
to Exhibit 10.1 to the Company's Registration Statement
on Form SB-2 filed with the Commission on May 29, 2001.)
|
|
10.2
|
Mineral
Property Staking and Sales agreement, dated 20
September
19, 2000, between Mr. Edward McCrossan and the Company.
(Incorporated herein by reference to Exhibit 10.2 to
the Company's Registration Statement on Form SB-2 filed with
the Commission on May 29,
2001.)
|
50
10.3
|
Office
Services Agreement, dated May 1, 2000, between the Company
and Dewey Jones. (Incorporated herein by reference to
Exhibit 10.3 to the Company's Registration Statement on Form
SB-2 filed with the Commission on May 29, 2001.)
|
|
10.4
|
Asset
Purchase Agreement dated April 10, 2002 between Salim
S. Rana Investments Corp. and Whistler Investments, Inc.
(Incorporated by reference to Exhibit No. 10.1 to the
Company's
Annual Report on Form 10-KSB, filed with the Commission
on May 6, 2002.)
|
|
10.5
|
Agreement
dated January 1, 2003 between Whistler Investments,
Inc. and Kim Larsen respecting the disposition of
Azra Shopping Center. (Incorporated by reference to
Exhibit
10.1 to the Company's Amendment No. 1 to its Annual Report
on Form 10-KSB filed May 8, 2003.)
|
|
10.6
|
Amendment
to Licensing Agreement, dated October 21, 2003, between
Nu Age Electric Inc. and Whistler Investments, Inc. (Incorporated
by reference to Exhibit 10.3 to the Company's Current
Report on Form 8-K, filed with the Commission on November
21, 2003.)
|
|
10.7
|
Agreement,dated
October 21,2003, by and between RV Systems, Inc.
and Whistler Investments, Inc. (Incorporated by reference
to Exhibit 10.4 to the Company's Current Report
on
Form 8-K, filed with the Commission on November 21, 2003.)
|
|
10.8
|
Investment
Agreement, dated as of January 19, 2004, by and between
Whistler Investments, Inc. and Dutchess Private Equities
Fund, L.P. (Incorporated by reference to Exhibit
10.5
to the Company's Current Report on Form 8-K, filed with
the Commission on January 23, 2004.)
|
|
10.9
|
Registration
Rights Agreement,dated as of January 19, 2004, by
and between Whistler Investments, Inc. and Dutchess Private
Equities Fund, L.P. (Incorporated by reference to
Exhibit
10.6 to the Company's Current Report on Form 8-K, filed
with the Commission on January 23, 2004.)
|
|
10.10
|
Stock
Redemption and Reissuance Agreement, dated as of February
10, 2004, Between Whistler Investments, Inc. and Salim
S. Rana Investments, Inc. (Incorporated by reference to
Exhibit 10.10 to Amendment No. 1 to the Company’s Annual Report
on Form 10-KSB, filed with the Commission on October 4,
2004.)
|
|
10.11
|
Letter
from City of Austin, Texas, dated February 27, 2004. (Incorporated
by reference to Exhibit 10.11 to Amendment No.
1 to the Company’s Annual Report on Form 10-KSB, filed with
the Commission on October 4, 2004.)
|
|
10.12
|
Memorandum
of Understanding, dated March 15, 2004, between Shanghai
Geely Metop International and the Global Electric 21
subsidiary
of Whistler Investments, Inc. (Incorporated by reference
to Exhibit 10.12 to Amendment No. 1 to the Company’s
Annual Report on Form 10-KSB, filed with the Commission
on October 4, 2004.)
|
51
10.13
|
Loan
Agreement, made as of the 20th day of February, 2004, among
Sterling Capital Inc. and Whistler Investments, Inc. (Incorporated
by reference to Exhibit 10.13 to Amendment
No.
1 to the Company’s Annual Report on Form 10-KSB, filed with
the Commission on October 4, 2004.)
|
|
10.14
|
Letter
Agreement, dated February 3, 2004, between Whistler Investments,
Inc. and RV Systems, Inc. (Incorporated by reference
to Exhibit 10.14 to Amendment No. 1 to the
Company’s
Annual Report on Form 10-KSB, filed with the Commission
on October 4, 2004.)
|
|
10.15
|
Purchase
and Sale Agreement, made effective as of the 3rd
day of December, 2004, between WhistlerTel, Inc. and Trade
Winds Telecom, LLC. (Incorporated by reference to
Exhibit
10.15 to the Company’s Current Report on Form 8-K, filed
with the Commission on December 8, 2004.)
|
|
10.16
|
Bill
of Sale and Assignment, dated as of December 3,
2004, between Trade Winds Telecom LLC and Whistlertel, Inc.
(Incorporated by reference to Exhibit 10.16 to the
Company’s
Current Report on Form 8-K, filed with the Commission
on December 8, 2004.)
|
|
10.17
|
Agreement
and Plan of Reorganization, dated as of August 18,
2005, among the Company, Whistlertel, Inc. and Javakingcoffee,
Inc. (Incorporated by reference to Exhibit
10.17
to the Company’s Current Report on Form 8-K, filed with
the Commission on August 24, 2005.)
|
|
10.18
|
Notice,
dated July 2, 2005, from EV Innovations, Inc. To
RV Systems, Inc. (Incorporated by reference to Exhibit 10.18
to the Company’s Annual Report on Form 10-KSB, filed
with
the Commission on October 26, 2005.)
|
|
10.19
|
Nonreimbursable
Space Act Agreement between National Aeronautics
and Space Administration, John F. Kennedy Space Center
and EV Innovations, Inc. (Incorporated
by
reference to Exhibit 10.19 to the Company’s Quarterly Report
on Form 10-QSB, filed with the Commission on March 17,
2006.
|
|
10.20
|
Agreement
dated March 30, 2006 between Paratransit, Inc. and
the Company. (Incorporated herein by reference
to Exhibit 10.20 to the Company’s Annual Report
on
Form 10-KSB, filed with the Commission on November 8, 2006.)
|
|
10.21
|
Request
for Pilot Approval, submitted May 31, 2006, to New York City
Taxi and Limousine Commission by the Company. (Incorporated
herein by reference to Exhibit 4.1 to the
Company’s
Annual Report on Form 10-KSB, filed with the Commission
on November 8, 2006.)
|
|
10.22
|
Consulting
Agreement, dated March 26, 2007, between Hybrid Technologies,
Inc. and Griffen Trading Company. (Incorporated
by reference to Exhibit 10.22 to the Company’s Quarterly
Report on Form 10-QSB, filed with the Commission on
June 19, 2007.)
|
52
10.23
|
Loan
Agreement, dated as of October 29, 2007, between Wyndom
Capital Investments, Inc. and the Company. (Incorporated
by reference to Exhibit 10.23 to the Company’s
Annual Report on Form 10-KSB, filed with the Commission
on November 13, 2007.)
|
|
10.24
|
Form
of Note issuable pursuant to the Loan Agreement, dated October
29, 2007, between Wyndom Capital Investments, Inc. and
the Company, filed herewith. (Incorporated by reference to
Exhibit 10.24 to the Company’s Annual Report on Form 10-KSB,
filed with the Commission on November 13, 2007.)
|
|
10.25
|
Stock
Purchase Agreement, dated as of April 15, 2008, between
the Company and Blue Diamond Investments, Inc. (Incorporated
by reference to Exhibit 10.25 to the Company’s
Current Report on Form 8-K, filed with the Commission
on April 21, 2008.)
|
|
10.26
|
License
Agreement, dated April 15, 2008, between the Company
and Zingo, Inc. (now Superlattice Power, Inc.). (Incorporated
by reference to Exhibit 10.25 to the Company’s
Current Report on Form 8-K, filed with the Commission
on April 21, 2008.)
|
|
10.27
|
Loan
Agreement, dated as of May 5, 2008, between Crystal Capital
Ventures Inc. and the Company. (Incorporated by reference
to Exhibit 10.27 to the Company’s Current Report on
Form 8-K, filed with the Commission on June 6, 2008.)
|
|
10.28
|
Form
of Note issuable pursuant to the Loan Agreement, dated May
5, 2008, between Crystal Capital Ventures Inc. and the Company.
(Incorporated by reference to Exhibit 10.28 to the Company’s
Current Report on Form 8-K, filed with the Commission
on June 6, 2008.)
|
|
10.29
|
Letter
to the Superlattice Power, Inc., dated October 1, 2009,
waiving default under April 14, 2008 License Agreement,
filed herewith.
|
|
21
|
Subsidiaries
of Registrant, filed herewith.
|
|
23
|
Consent
of Independent Registered Public Accounting Firm, filed
herewith.
|
|
31
|
Certification
of Chief Executive Officer and Principal Financial
Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, filed herewith.
|
|
32
|
Certification
of Chief Executive Officer and Principal Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, filed herewith.
|
53
SIGNATURES
In accordance with Section
13 or 15(d) of the Exchange Act, the registrant
caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EV
INNOVATIONS, INC.
|
|||
Date:
November 10, 2009
|
By:
|
/s/ Stacey Fling | |
Stacey Fling | |||
Chief Executive Officer and Principal Financial Officer |
In accordance with the Securities Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: |
/s/
Stacey Fling
|
||||
Stacey
Fling
|
|||||
President
and C.E.O.
|
|
||||
(President, Chief Executive Officer | |||||
Principal Financial Officer and Director) | |||||
Date: November 10, 2009 | |||||
By: | /s/ Holly Roseberry | ||||
Holly Roseberry | |||||
(Director) | |||||
Date: November 10, 2009 |
EXHIBIT
INDEX
10.29
|
Letter
to the Superlattice Power, Inc., dated October 1, 2009, waiving default
under April 14, 2008 License Agreement.
|
|
23
|
Consent
of Independent Registered Public Accounting Firm.
|
|
31
|
Certification of Chief
Executive Officer and Principal Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
|
|
32
|
Certification
of Chief Executive Officer and Principal Financial Officer Pursuant to 18
U.S.C.
Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of
2002.
|
54