(Exact
name of small business issuer as specified in its charter)
Nevada
20-1044677
(State
or other jurisdiction
(IRS
Employer
of
incorporation or organization)
Identification
No.)
6200
E. Commerce Loop, Post Falls, Idaho 83854323
(Address
of principal executive offices)
(208)
665-5553
(Issuer’s
telephone number)
N/A
(Former
name, former address and former fiscal year, if changed since last
report)
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.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See
the definitions of “large accelerated filer,”“accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer ¨
Accelerated
filer ¨
Non-accelerated
filer ¨
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).
The
foregoing unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Regulation S-B as
promulgated by the Securities and Exchange Commission (“SEC”).
Accordingly, these financial statements do not include all of the
disclosures required by generally accepted accounting principles in the United
States of America for complete financial statements. These unaudited
interim financial statements should be read in conjunction with the Company’s
audited financial statements for the year ended December 31, 2007. In the
opinion of management, the unaudited interim financial statements furnished
herein includes all adjustments, all of which are of a normal recurring nature,
necessary for a fair statement of the results for the interim period presented.
Operating results for the six month period ended June 30, 2008 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2008.
The
preparation of financial statements in accordance with generally accepted
accounting principles in the United States of America requires the use of
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities known to exist
as
of the date the financial statements are published, and the reported amounts
of
revenues and expenses during the reporting period. Uncertainties with
respect to such estimates and assumptions are inherent in the preparation of
the
Company’s financial statements; accordingly, it is possible that the actual
results could differ from these estimates and assumptions and could have a
material effect on the reported amounts of the Company’s financial position and
results of operations.
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES
This
summary of significant accounting policies of Energenx, Inc. is presented to
assist in understanding the Company’s financial statements. The financial
statements and notes are representations of the Company’s management, which is
responsible for their integrity and objectivity. These accounting policies
conform to accounting principles generally accepted in the United States of
America, and have been consistently applied in the preparation of the financial
statements.
Accounting
Method
The
Company uses the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America.
Accounting
Pronouncements
In
May,
2008, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 163, “Accounting for Financial Guarantee Insurance
Contracts—an interpretation of FASB Statement No. 60” (SFAS 163). This Statement
requires that an insurance enterprise recognize a claim liability prior to
an
event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation. This Statement
also clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement to be used to account
for
premium revenue and claim liabilities. Those clarifications will increase
comparability in financial reporting of financial guarantee insurance contracts
by insurance enterprises. This Statement requires expanded disclosures about
financial guarantee insurance contracts. The accounting and disclosure
requirements of the Statement will improve the quality of information provided
to users of financial statements. This Statement is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and all
interim periods within those fiscal years, except for some disclosures about
the
insurance enterprise’s risk-management activities. This Statement requires that
disclosures about the risk-management activities of the insurance enterprise
be
effective for the first period (including interim periods) beginning after
issuance of this Statement. Except for those disclosures, earlier application
is
not permitted. The adoption of this statement will have no material effect
on
the Company’s financial condition or results of operations.
In
March
2008, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 161, “Disclosures about Derivative Instruments and
Hedging Activities—an amendment of FASB Statement No. 133” (SFAS No. 161). This
statement changes the disclosure requirements for derivative instruments and
hedging activities. Entities are required to provide enhanced disclosures about
(a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under Statement 133
and
its related interpretations, and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance, and
cash flows. This Statement is intended to enhance the current disclosure
framework in Statement 133. The Statement requires that objectives for using
derivative instruments be disclosed in terms of underlying risk and accounting
designation. This disclosure better conveys the purpose of derivative use in
terms of the risks that the entity is intending to manage. Disclosing the fair
values of derivative instruments and their gains and losses in a tabular format
should provide a more complete picture of the location in an entity’s financial
statements of both the derivative positions existing at period end and the
effect of using derivatives during the reporting period. Disclosing information
about credit-risk-related contingent features should provide information on
the
potential effect on an entity’s liquidity from using derivatives. Finally, this
Statement requires cross-referencing within the footnotes, which should help
users of financial statements locate important information about derivative
instruments.
Concentration
of Credit Risk
The
Company maintains its cash in one commercial account at a major financial
institution. Although the financial institution is considered creditworthy
and
has not experienced any losses on its deposits, at June 30, 2008 and 2007 the
Company’s cash balance exceeded Federal Deposit Insurance Corporation (FDIC)
limits by $195,910 and $531,328, respectively.
Cost
of Sales
Cost
of
sales consist of the cost of raw material, direct labor, commissions, inbound
shipping charges, and packaging supplies.
Estimates
The
preparation of financial statements in conformity with accounting principles
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 and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Fair
Value of Financial Instruments
The
Company's financial instruments as defined by Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments,"
include cash, notes receivable, accounts payable, accrued expenses and
short-term borrowings. All instruments are accounted for on a historical cost
basis, which, due to the short maturity of these financial instruments,
approximates fair value at June 30, 2008 and December 31, 2007.
Going
Concern
As
shown
in the accompanying financial statements, the Company has incurred an
accumulated deficit of $3,259,339 through June 30, 2008 and has a history of
recurring losses. The Company is currently putting technology in place which
will, if successful, mitigate these factors which raise substantial doubt about
the Company’s ability to continue as a going concern. The 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. Management
has developed technology that if proven will result in a marketable product.
Management intends to seek additional capital from new equity securities
offerings that will provide funds needed to increase liquidity, fund internal
growth and fully implement its business plan.
Management
believes $500,000 is needed to finance the plan of operation for at least the
next twelve months. The timing and amount of capital requirements will depend
on
a number of factors, including demand for products and services and the
availability of opportunities for international expansion through affiliations
and other business relationships.
Research
and development expenses are charged to operations as incurred. The cost of
intellectual property purchased from others that is immediately marketable
or
that has an alternative future use is capitalized and amortized as intangible
assets. Capitalized costs are amortized using the straight-line method over
the
estimated economic life, typically 10 years, of the related asset. The Company
annually reviews its capitalized patent costs to assess recoverability based
on
the projected undiscounted cash flows from operations. Impairments are
recognized in operating results when a permanent diminution in value occurs.
Research and development expenses for the period ended June 30, 2008 and
2007 were $75,339 and $82,449, respectively. Salaries for those employees
directly involved in research and development are included in research and
development expense.
Revenue
Recognition
Revenue
is recorded when the Company has no significant remaining obligations,
persuasive evidence of an arrangement exists, the price to the buyer is fixed
or
determinable, and collectability is reasonably assured or probable.
Product
sales revenue is recognized when title and risk of loss have passed to the
buyer. According to the Company’s terms of sale, title and risk of loss pass to
the customer upon delivery to the carrier.
Royalties
will be recognized as revenue when the amounts are contractually earned, fixed
and determinable, and there is substantial probability of
collection.
NOTE
3 - PREPAID EXPENSE
Prepaid
expenses at June 30, 2008 includes the prepayment of a commercial lease.
During
the period ended June 30, 2008, the Company renewed its office space lease
for
one year and prepaid the entire amount of the lease, $34,800. During the
six months ended June 30, 2007, the Company expensed $2,900. The unamortized
prepaid balance at June 30, 2007 was $31,900.
Property
and equipment are recorded at cost. Major additions and improvements are
capitalized. Minor replacements, maintenance and repairs that do not increase
the useful lives of the assets are expensed as incurred. Depreciation of
property and equipment is calculated using the straight-line method over the
expected useful lives of the assets of 5 to 7 years. Depreciation expense for
the periods ended June 30, 2008 and December 31, 2007 was $2,528 and $7,501,
respectively.
Following
is a summary of property, equipment, leasehold improvement, and accumulated
depreciation:
Costs
relating to the development and approval of patents, other than research and
development costs which are expensed, are capitalized and amortized using the
straight-line method over ten years. The Company’s patents relate to the
creation of an EMF permanent electromagnetic motor generator.
The
following is a summary of the costs of patents and patents pending, and
amortization expense:
The
amortization expense for the periods ended June 30, 2008 and 2007 were $3,957
and $3,820 respectively.
NOTE
6 -
TECHNOLOGY
LICENSES
The
Company aquired two technology licenses from an officer/director in 1999 and
2001. The Company is amortizing these licenses over fifteen years using the
straight-line method. The technology licenses relate to the design of the back
EMF permanent electromagnetic motor generator. The amortization expense for
the
periods ended March 31, 2008 and 2007 were $3,600 and $3,600
respectively.
NOTE
7 - RELATED PARTY TRANSACTIONS
During
the year ended December 31, 2007, the company purchased a piece of testing
equipment in the amount of approximately $1,509, for which it will be reimbursed
by GTG Corporation. The principal shareholder of GTG is also a director of
the
Company.
NOTE
8 – CAPITAL STOCK
Preferred
Stock
The
Company is authorized to issue 5,000,000 shares of preferred stock with a par
value of $0.001. As of December 31, 2007 and 2006, the Company has not issued
any preferred stock.
Common
Stock
The
Company is authorized to issue 50,000,000 shares of common stock with a par
value of $0.001. All shares have equal voting rights, are non-assessable and
have one vote per share.
During
the initial period ended December 31, 1999, the Company issued 7,836,168 shares
of its common stock at par, for cash.
During
the year ended December 31, 2000, the Company issued 195,060 shares for
convertible debt of $60,010. The Company also issued 9,750 shares for equipment
valued at $3,250 and 330,000 shares for cash of $0.33 per share, or
$110,000.
During
the year ended December 31, 2001, the Company issued 453,000 shares of common
stock for cash of $151,000, or $0.33 per share. The Company also issued 160,886
share of common stock for services totaling $55,366, 1,086 shares of common
stock to purchase equipment totaling $362, and 5,140,326 shares of common stock
in payment of a technology license with a value of $58,000. See Note
6.
On
May 4,2001, the Company executed a 1 for 6 forward split to all shareholders of record
as of May 1, 2001. The financial records have been restated to reflect this
stock split in the accompanying financial statements.
During
the year ended December 31, 2002, the Company issued 24,000 shares of its common
stock for cash of $1.00 per share, or $24,000. The Company also issued 20,000
shares of common stock in payment of debt of $20,000.
During
the year ended December 31, 2003, the Company issued 3,200,000 shares of common
stock to board members and other consultants at $0.05 per share, or $160,000.
Also during the year ended December 31, 2003, the Company issued 2,000,000
shares of common stock to Mr. John Bedini as a supplement to the licensing
agreement. The Company valued these shares at $0.05 per share, or $100,000.
During
the year ended December 31, 2004, the Company issued 2,527,000 shares of common
stock at $0.05 per share in payment of outstanding loans and interest totaling
$126,350. In addition, the Company issued 2,400,000 shares of common stock
and
options to purchase an additional 2,400,000 shares of common stock for $0.21
per
share for cash of $500,000. The stock options were issued with the stock in
consideration of the stock purchase, and were valued at $0.03 per share, or
$72,000 which was treated as a proration of additional paid-in capital upon
the
completion of this transaction. Furthermore, during 2004, this individual then
exercised these options and purchased the 2,400,000 shares of common stock
for
$0.21 per share for an additional $500,000.
During
the year ended December 31, 2005, the Company issued 400,000 shares of common
stock at $0.50 per share for cash of $200,000. These shares were issued under
an
existing subscription agreement as part of a stock subscription plan and
commitment for a total of $1,500,000 for 3,000,000 shares. As of December 31,2005, this commitment had $1,300,000 remaining for a future commitment of
2,600,000 shares of common stock. The Company is issuing the shares as the
money
is received.
During
the year ended December 31, 2006, the Company issued 400,000 shares of common
stock at $0.50 per share for cash of $200,000.
During
the year ended December 31, 2007, the Company issued 2,200,000 shares of common
stock at $0.50 per share for cash of $1,100,000.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
CAUTIONARY
STATEMENT FOR FORWARD-LOOKING STATEMENTS
THIS
QUARTERLY REPORT ON FORM 10-Q CONTAINS “FORWARD-LOOKING STATEMENTS” WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND INVOLVE
A
HIGH DEGREE OF RISK AND UNCERTAINTY. ALL STATEMENTS, OTHER THAN STATEMENTS
OF
HISTORICAL FACTS, INCLUDED IN OR INCORPORATED BY REFERENCE INTO THIS FORM 10-Q
ARE FORWARD-LOOKING STATEMENTS. IN ADDITION, WHEN USED IN THIS DOCUMENT, THE
WORDS “ANTICIPATE,”“ESTIMATE,”“PROJECT,” AND SIMILAR EXPRESSIONS ARE INTENDED
TO IDENTIFY FORWARD-LOOKING STATEMENTS. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY
FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS DUE TO RISKS AND
UNCERTAINTIES THAT EXIST IN OUR OPERATIONS. THESE FORWARD-LOOKING STATEMENTS
ARE
SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS INCLUDING AMONG OTHERS,
THE RISK THAT OUR PRODUCT DEVELOPMENT PROGRAMS WILL NOT PROVE SUCCESSFUL, THAT
WE WILL NOT BE ABLE TO OBTAIN FINANCING TO COMPLETE ANY FUTURE PRODUCT
DEVELOPMENT, THAT OUR PRODUCTS WILL NOT PROVE COMPETITVE IN THEIR MARKETS.
THESE
RISKS AND OTHERS ARE MORE FULLY DESCRIBED IN OUR ANNUAL REPORT ON FORM 10-KSB.
SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD
UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY
FROM
THOSE ANTICIPATED, ESTIMATED OR PROJECTED.
ALTHOUGH
WE BELIEVE THAT THE EXPECTATIONS INCLUDED IN SUCH FORWARD-LOOKING STATEMENTS
ARE
REASONABLE, WE CANNOT GIVE ANY ASSURANCES THAT THESE EXPECTATIONS WILL PROVE
TO
BE CORRECT. WE UNDERTAKE NO OBLIGATION TO PUBLICLY RELEASE THE RESULT OF ANY
REVISIONS TO SUCH FORWARD-LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT EVENTS
OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
The
following discussion and analysis should be read in conjunction with our
financial statements and the notes thereto appearing in Part I, Item
1.
General
Since
commencement of operations in 1999, our efforts have been principally devoted
to
research and development activities, including the development of an efficient
energy generation system and battery chargers, recruiting management personnel
and advisors, and raising capital.
Product
Research and Development Plans
On
May 9,2008, we signed a Test Market Program agreement with Classic Electrics, LLC
under which we, in joint cooperation with Classic Electrics, will produce the
first of a series of electric car batteries which will be manufactured by
Energenx. The parties intend to enter into a finalized OEM agreement after
an
initial market testing period of one year to produce an OEM after-market
electric car battery charger. Classic Electrics will do the initial market
testing through its preexisting network and with additional marketing efforts.
Energenx will design and manufacture the battery chargers, and provide such
chargers to Classic Electrics on an agreed pricing schedule along with a one
year limited manufacturers warranty and technical support.
Our
current plan of operation for the next 12 months primarily involves meeting
any
demand for our battery charger/rejuvenator products from Renaissance Charger,
LLC, GTG Corp., and Classic Electrics, LLC, and research and development
activities on battery charger/rejuvenator and charge control unit
products.
Concerning
the battery charger/rejuvenators, product research will continue on improving
efficiency. We will continue our development of variations of the
charger/rejuvenators for specific markets to accommodate various
voltapplications
with a wide range of capacity requirements. This will include the new battery
chargers for electric cars for the market testing program with Classic
Electrics. We are also currently developing a new charger for electric
motorcycles which will charge batteries in the range from 12 to 72 volts. We
plan to do additional market testing once this electric motorcycle battery
charger product is finalized.
13
In
June
2007 we delivered a new golf cart version of the 36/48 volt of our battery
charger/rejuvenator to GTG Corp. also for in-house testing and potentially
for
further UL assessment, testing and certification. In addition, in May 2007
we
completed development of a 12 volt battery charger. We have not received any
purchase orders from GTG Corp. for battery charger/rejuvenators to
date.
During
2007 we sold 139 of the 12 volt battery chargers to Renaissance Charger LLC
who
is undertaking in-house testing and sample marketing of these battery chargers,
which resulted in the recognition of $17,985 of revenue for the year ending
December 31, 2007. Energenx and Renaissance have been operating under an
informal joint venture relationship involving the sale and market testing of
other charger/rejuvenators and solar/wind charge control units which has
generated revenues for Energenx in 2008. For the first six months of 2008,
Energenx has sold 73 chargers to Renaissance Charge, which resulted in the
recognition of $14,765 of revenue for the six months ending June 30, 2008.
In
addition, sales of chargers for car batteries to individual customers generated
$9,065 in revenue for the first six months of 2008.
We
may
generate revenues pursuant to our Exclusive Technology License Agreement with
GTG Corp. if they order battery charger/rejuvenators, or pursuant to our Test
Market Program with Electric Classics if they order electric car battery
chargers. As mentioned above, we did generate revenues from the sale of 139
of
our 12 volt battery charger units to Renaissance Charger LLC during 2007, and
sales of 73 chargers to Renaissance Charger during the first six months of
2008.
We cannot assure you that GTG Corp. or Classic Electrics will order any
charger/rejuvenators from us in 2008 or ever, that Renaissance Charger LLC
will
order additional charger/rejuvenators, that licensed battery charger products
will ever reach the market giving rise to royalty payments or that additional
revenues from patent licensing will be generated.
Concerning
the further development of our electromagnetic motor/generator battery system,
we intend to improve the current system and design larger scale systems that
may
allow us to generate larger amounts of energy that can be utilized to charge
multiple banks of batteries.
While
we
have no plans to relocate our current research facility within the next twelve
months, equipment purchases will be necessary if we receive a significant volume
of orders for the battery charger/rejuvenators from Renaissance Charger, Classic
Electrics and/or GTG Corp. Such equipment would include test equipment,
oscilloscopes, analyzers, soldiering stations, and packaging equipment. Such
equipment purchases are likely to be in the range of $100,000 for the next
twelve months if the need arises and assuming the availability of capital
resources. We may also need to hire up to three more employees if we receive
a
significant volume of orders from GTG Corp., Renaissance Charger, or Classic
Electrics. We intend to contract out the bulk of the manufacturing of the hybrid
modules for GTG Corp., with final testing, potting and packaging of the hybrid
modules to be done in house.
Our
actual research and development and related activities may vary significantly
from current plans depending on numerous factors, including changes in the
costs
of such activities from current estimates, the results of our research and
development programs, technological advances, determinations as to commercial
viability and the status of competitive products. The focus and direction of
our
operations will also be dependent on the establishment of our collaborative
arrangement with other companies, the availability of financing and other
factors. We expect our development costs to increase asour
battery charger systems development programs enters the later stages of
development.
Liquidity
and Capital Resources
As
of
June 30, 2008, we had $298,262 in cash and cash equivalents as compared to
$532,545 in cash and cash equivalents at December 31, 2007. We do not have
any
available lines of credit. Since inception we have financed our operations
from
private placements of equity securities and loans from
shareholders.
14
Net
cash
used in operating activities during the six months ended June 30, 2008 was
$229,151 resulting in a net loss of $206,684. During the three months and six
months ended June 30, 2008, we had revenues of $16,756 and $23,831 respectively
as compared to revenues of $3,735 for the three and six month period,
respectively, ending June 30, 2007. The revenues in 2008 were derived largely
from sales of our battery charging products to Renaissance Charge,
LLC.
Our
current real estate lease is on a two year renewal basis. Under the terms of
an
addendum to the lease agreement, during the quarter ending June 30, 2008 we
renewed our office space lease at a new monthly rental rate of $2,900 for one
year and prepaid the entire amount of the lease, in the amount of $34,800.
In
addition, during the quarter we also prepaid our commercial general liability
insurance for a one year period ending July 5, 2009 in the amount of
$6,461.
We
plan
to finance our needs principally from the following:
·
our
existing capital resources and interest earned on that
capital;
·
revenues
from purchase of Potential modules by GTG Corp., if
any;
·
revenues
from sale of chargers to Renaissance Charge, LLC or Classic Electrics,
LLC, if any;
·
royalty
income, if any, from product sales by GTG
Corp.;
·
through
future private placement financing.
As
mentioned above, we may generate revenue from GTG Corp. if they order Potential
hybrid modules under our license agreement, from Classic Electrics if they
order
electric car chargers under the Test Market Program or if Renaissance Charge
purchases more of our chargers. We cannot at this time assure you that those
orders will occur or revenues will be generated in the second half of 2008,
if
at all.
We
believe that we have sufficient capital resources to finance our plan of
operation at least through the first quarter of 2009. However, this is a
forward-looking statement, and there may be changes that could consume available
resources before the end of the year. Our long term capital requirements and
the
adequacy of our available funds will depend on many factors, including our
reporting company costs, patent costs for filing, prosecuting, maintaining
and
defending our patent rights, among others.
We
will
need to raise additional capital or generate additional revenue to complete
our
development of product variations on our battery charger/rejuvenators, our
hybrid electromagnetic motor/generator product candidate and our charge control
unit. We cannot assure you that we will generate sufficient additional capital
or revenues, if any, to fund our operations beyond the first quarter of 2009,
that any future equity financings will be successful, or that other potential
financings through bank borrowings, debt or equity offerings, or otherwise,
will
be available on acceptable terms or at all. If we are unable to raise additional
capital when necessary we will have to curtail or cease operations.
Critical
Accounting Policies and Estimates
This
discussion and analysis of our financial condition and results of operations
are
based on our financial statements that have been prepared under accounting
principles generally accepted in the United States of America. The preparation
of financial statements in conformity with accounting principles generally
accepted in the United States of America requires our management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could materially differ from those
estimates. We have disclosed all significant accounting policies in Note 2
to
the financial statements included in our Form 10-KSB. Our critical accounting
policies are:
15
Revenue
recognition:
Revenue
is recorded when products are shipped and we have no significant remaining
obligations, persuasive evidence of an arrangement exits, the price to the
buyer
is fixed or determinable, and collectability is reasonably assured or probable.
Product sales revenue is recognized when title and risk of loss have passed
to
the buyer. According to our terms of sale, title and risk of loss pass to the
customer upon delivery to the carrier. Royalties will be recognized as revenue
when the amounts are contractually earned, fixed and determinable, and there
is
substantial probability of collection.
Research,
development costs: Research
and development costs are expensed as incurred. Beginning with the financial
statements for the quarter ending June 30, 2005 we have included certain salary
and benefit expenses in the research and development line item.
Estimates.
The
preparation of financial statements in conformity with accounting principles
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 and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Intangible
Assets.
Energenx’ intangible assets are composed of a patent and license. They are
amortized on a straight-line basis over ten and fifteen year lives,
respectively.
Item
3.
Quantitative
and Qualitative Disclosures About Market
Risk
In
connection with the preparation of this Quarterly Report on Form 10-QSB, an
evaluation was carried out by our management, with the participation of our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of
our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of
June 30, 2008. Disclosure controls and procedures are designed to ensure that
information required to be disclosed in reports filed or submitted under the
Exchange Act is recorded, summarized, and reported within the time periods
specified in SEC rules and forms and that such information is accumulated and
communicated to management, including the Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, and in light of the previously identified material
weakness in internal control over financial reporting, as of December 31, 2007,
relating to fundamental elements of an effective control environment described
in the 2007 Annual Report on Form 10-KSB, our principal executive officer and
our principal financial officer have concluded that our disclosure controls
and
procedures were not effective as of June 30, 2008.
During
the quarter ended June 30, 2008, our board of directors formed an audit
committee initially made up of the two directors who are not members of our
management and such audit committee was involved in the review of this quarterly
report and the financial statements. Our board of directors also adopted a
Code
of Ethics applicable to all officers, directors and employees.
Part
II.OTHER
INFORMATION
Item
1.
Legal
Proceedings
There
have been no material changes from the disclosure provided in Part 1, Item
3 of
our Annual Report on Form 10-KSB for the year ended December 31,2007.
Item
1A.
Risk
Factors
There
have been no material changes from the disclosure provided in Part 1, Item
1 of
our Annual Report on Form 10-KSB for the year ended December 31,2007.
Submission
of Matters to a Vote of Security
Holders
None.
Item
5.
Other
Information
None.
Item
6.
Exhibits
(a)
Exhibits
Exhibit
Number
Description
of Exhibit
10.1
Addendum
to Lease Agreement between Powderhorn Properties, LLC and Energenx,
Inc.
dated June 1, 2008
10.2
Test
Market Program agreement between Classic Electrics, LLC and Energenx,
Inc.
dated May 9, 2008
31.1
Certification
of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
promulgated under the Securities and Exchange Act of 1934, as
amended.
31.2
Certification
of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d
14(a),
promulgated under the Securities and Exchange Act of 1934, as
amended.
32.1
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002 (Chief Executive
Officer).
32.2
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002 (Chief Financial
Officer).
17
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
