(Address
of principal executive offices and zip code)
(208)
665-5553
(Registrant’s
telephone number, including area
code)
Securities
registered pursuant to Section 12(b) of the Act: NONE
Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock, $.001 par value
Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act. ¨
Check
mark whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2)
has been subject to such filing requirements for the past 90 days. YES
þ
NO
¨
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB
or any
amendment to this Form
10-KSB. þ
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
YES
¨
NO
þ
The
issuer’s revenues for its fiscal year ended December 31, 2007 were
$17,985
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the issuer, as of March 27, 2008 was $7,120,151.
Number
of
shares outstanding of the issuer’s common stock as of March 27, 2008:
29,697,276
shares.
Transitional
Small Business Disclosure Format (Check one): Yes o; No x
TABLE
OF CONTENTS
Page
PART
I
Item
1.
Description
of Business
4
Item
2.
Description
of Property
14
Item
3.
Legal
Proceedings
14
Item
4.
Submission
of Matters to a Vote of Security Holders
14
PART
II
Item
5.
Market
for Common Equity and Related Stockholder
Matters
15
Item
6
Management’s
Discussion and Analysis or Plan of Operation
16
Item
7.
Financial
Statements
28
Item
8.
Changes
in and Disagreements with Accountants on
Accounting and Financial Disclosure
28
Item
8A(T).
Controls
and Procedures
28
Item
8B.
Other
Information
30
PART
III
Item
9.
Directors,
Executive Officers of the Registrant; Compliance
with Section 16 (a) of the Securities Exchange Act
31
Item
10.
Executive
Compensation
34
Item
11.
Security
Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
36
Item
12.
Certain
Relationships and Related Transactions
37
Item
13.
Exhibits
38
Item
14.
Principal
Accountant Fees and Services
38
EXHIBIT
INDEX
39
SIGNATURES
41
FORWARD
LOOKING STATEMENTS
This
Report on Form 10-KSB and the documents incorporated by reference include
“forward-looking statements”. To the extent that the information presented in
this Report on Form 10-KSB discusses financial projections, information or
expectations about our business plans, results of operations, products or
markets, or otherwise makes statements about future events, such statements
are
forward-looking. Such forward-looking statements can be identified by the use
of
words such as “intends”, “anticipates”, “believes”, “estimates”, “projects”,
“forecasts”, “expects”, “plans” and “proposes”. Although we believe that the
expectations reflected in these forward-looking statements are based on
reasonable assumptions, there are a number of risks and uncertainties that
could
cause actual results to differ materially from such forward-looking statements.
These include, among others, the cautionary statements in the “Risk Factors” and
“Management’s Discussion and Analysis or Plan of Operation” sections of this
Report on Form 10-KSB. These cautionary statements identify important factors
that could cause actual results to differ materially from those described in
the
forward-looking statements. When considering forward-looking statements in
this
prospectus, you should keep in mind the cautionary statements in the “Risk
Factors” section above and “Management’s Discussion and Analysis or Plan of
Operation” section below, and other sections of this Report on Form
10-KSB.
The
statements contained in this Report on Form 10-KSB that are not purely
historical are forward-looking statements within the meaning of Section 27A
of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including, without limitation, statements regarding our expectations,
objectives, anticipations, plans, hopes, beliefs, intentions or strategies
regarding the future. All forward-looking statements included in this document
are based on information available to us on the date hereof, and we assume
no
obligation to update any such forward-looking statements. It is important to
note that our actual results could differ materially from those included in
such
forward-looking statements. There are many factors that could cause actual
results to differ materially from the forward looking statements. For a detailed
explanation of such risks, please see the section entitled “Risk Factors”
beginning on page 18 of this Report on Form 10-KSB. Such risks, as well as
such
other risks and uncertainties as are detailed in our SEC reports and filings
for
a discussion of the factors that could cause actual results to differ materially
from the forward- looking statements. Given these uncertainties, readers are
cautioned not to place undue reliance on the forward-looking
statements.
The
following discussion should be read in conjunction with the audited consolidated
financial statements and the notes included in this Report on Form 10-KSB and
the section entitled “Management’s Discussion and Analysis or Plan of Operation”
included in this Report on Form 10-KSB.
3
PART
I
Item
1.Description
of Business.
TABLE
OF CONTENTS
A.Energenx
- Introduction, Business Strategy
4
B.Energenx
Research and Product Development Programs
6
C.Licensed
Proprietary Technology
9
D.Out-Licensed
Technology
10
E.Competition
11
G.Strategic
Alliance
12
H.Marketing
and Sales
12
I.Patents,
Trademarks, and Copyrights
13
J.Employees
14
A.Energenx
Inc. - Introduction, Business Strategy
Energenx,
Inc. (“Energenx”), is a technology based company engaged in the discovery,
research and development of novel electromagnetic motor/generator and battery
rejuvenator/battery charger systems. Energenx, formerly Bedini Technology,
Inc.,
was incorporated in Nevada on September 29, 1999.
Our
proprietary technology is based on a hybrid electromagnetic motor/generator
and
on a two phase solid state battery charger that uses an innovative method for
pulse charging batteries, both invented by John C. Bedini, a co-founder of
Energenx, who is currently the Vice President for Research and Development
of
Energenx and a member of the board of directors.
The
hybrid electromagnetic motor/generator is a low friction motor that utilizes
a
flywheel design configured with opposing magnets to charge dead batteries in
a
highly efficient manner, needing only a small trigger pulse of electricity
from
a primary battery or from the electrical power grid. We have built and tested
several hybrid motor/generator prototypes based on the hybrid electromagnetic
motor/generator. We intend to develop and test energy generation system
prototypes that can be utilized to efficiently charge batteries for many home
and industrial applications.
Our
patented battery charger system is based on a solid state battery charger that
uses a two phase method to charge batteries with pulsating current rather than
with a constant charge current as is used with conventional battery chargers.
This technology can be used to increase and preserve for a longer period of
time
the energy stored in the charged battery as compared to constant current battery
chargers. We have utilized this solid state pulse battery charger technology
in
our lead product candidate, the Potential Battery Charger. We have also built
and began field testing a prototype of a Battery Charge Control Unit for use
with residential solar and wind powered electric systems. The Charge Control
System is a 12 and 24 volt variation of the Potential Battery Charger that
uses
digital circuitry to monitor and switch between two banks of
batteries.
4
Energenx
acquired the exclusive worldwide patent rights to the platform technology
underlying the hybrid electromagnetic motor/generator from John Bedini pursuant
to an Exclusive License Agreement and Right to Purchase Patents dated October8,1999. Energenx also acquired worldwide patent rights to proprietary battery
charging technology from John Bedini pursuant to a second Exclusive License
Agreement and Right to Purchase Patents dated May 1, 2001.
Our
business strategy is to segregate the market pertaining to various energy
generation and battery charging products and technical applications, then enter
into sub-licensing agreements with third party companies. We plan to derive
our
revenues from licensing fees, royalties from product sales, profits from the
manufacture and sale of key proprietary components and from research and
development contracts.
On
December 1, 2004, Energenx entered into an Exclusive Technology License
Agreement with GTG Corp. pursuant to which Energenx granted an exclusive
sub-license to sell and manufacture the Potential Battery Charger to GTG Corp.
GTG Corp. is largely owned and controlled by Marvin Redenius, a member of our
board of directors. The exclusive license is limited to North America and covers
the electric vehicle market, excluding automobiles. Under the terms of the
sub-license agreement, Energenx will receive a 5% royalty based on the gross
sales price of the units by GTG Corp. In addition, the agreement contemplates
that Energenx will supply proprietary electronic components of the Potential
Battery Charger, known as Potential hybrid modules, to the licensee on a cost
plus basis. The grant of the exclusive sub-license was part of an integrated
transaction whereby Mr. Redenius purchased an aggregate of 4,800,000 shares
of
common stock of Energenx in return for an aggregate investment of $1 million
between March and August 2004. Mr. Redenius also became a member of our board
of
directors as part of these transactions in March 2004.
On
December 27, 2004 Energenx and Edward II, Inc. (“Edward II”), a Nevada
corporation and a reporting company under Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), entered into
an Acquisition Agreement and Plan of Merger (the “Acquisition Agreement”)
whereby Energenx acquired all of the outstanding shares of common stock of
Edward II from its sole shareholder in exchange for payment of cash at a per
share price equal to the par value of $0.001. Energenx was the surviving
corporation in the transaction and its officers and directors became those
of
the surviving corporation. The sole director and officer of Edward II resigned
on the effective date of the merger. Edward II was a blank check company
incorporated in March 2004, and had no business activities prior to the date
of
the Acquisition Agreement. Edward II was incorporated for the purpose of
becoming a fully reporting company and subsequently finding a merger candidate.
Pursuant to Rule 12g-3 of the Exchange Act Energenx is the successor issuer
to
Edward II for reporting purposes under the Exchange Act.
Our
executive offices are located at 6200 E. Commerce Loop, Post Falls, Idaho83854,
telephone number (208) 665-5553.
5
Energenx’s
fiscal year end is December 31.
B.Energenx
Research and Product Development Programs.
We
spent
$215,469 and $209,913 respectively, in our fiscal years ending December 31,2007
and 2006 on the development of the products described below.
Solid
State Pulse Battery Chargers
Our
pulse
charging solid state battery charger system uses a two phase method to charge
batteries with pulsating current rather than with a constant charge current
as
is used with conventional battery chargers. This type of device uses a timed
electrical pulse to create a waveform in a direct current electrical pulse
to be
discharged into the battery receiving the charge. Our research indicates that
this technology can be used to increase and preserve for a longer period of
time
the energy stored in the charged battery as compared to constant current battery
chargers. Through our research and development efforts, we have refined our
pulse charging technology through several product prototypes.
Battery
Charger Products
During
2006 and early 2007 we completed development of a solid state pulse current
battery charging system called the Potential Battery Charger, specifically
designed to charge electric powered vehicles such as golf carts, ATVs, forklifts
and back-up battery systems. This type of charger incorporated the use of our
patented solid-state technology. Originally Energenx developed a 36 volt version
of the Potential Battery Charger designed for use in certain golf carts and
forklifts. The 36 volt Potential Battery Charger was submitted for the UL
(Underwriter’s Laboratories) assessment and testing process by GTG Corp. in 2006
and received a class A rating by UL for the US market in late 2006. In April
2007 wedelivered
a forklift version of a 36/48 volt of our Potential Battery Charger to GTG
Corp.
for testing and potentially for further UL assessment, testing and
certification. In mid 2007, we decided to discontinue the Potential Battery
Chargers and replace them with a new set of battery charger products which
are
also battery rejuvenators, as described below.
Battery
Charger/Rejuvenators
In
the
second quarter of 2007 we decided to shift our product development utilizing
our
pulse charging solid state battery charger system towards combination battery
chargers and rejuvenators based on a new proprietary process using
unidirectional wave impulses that could also rejuvenate batteries. The
rejuvenation process systematically breaks through the sulfation associated
with
older batteries and return them to active material within the electro-chemical
process. Once the sulfation becomes active material it then can be re-plated
to
the plates of the battery, which occurs through the charging process. This
results in a denser charge capacity and improved battery performance. The net
result of this is that the batteries become capable of delivering many more
charge/discharge cycles than batteries charged conventionally. This extends
the
life of the batteries and reduces the cost of battery replacement. This can
be
the largest economic benefit because battery replacement is the most expensive
unnecessary cost associated with running electric vehicles. The rejuvenation
process requires more energy than conventional battery chargers in the
rejuvenation process, but significantly increaces the amount of usable power
over multiple charge and discharge cycles. With conventional battery charging,
battery capacity degrades with each consecutive charge and discharge cycle.
For
this reason, the common practice is to place the battery on the charger more
frequently and/or for longer periods of time. Less energy is required to just
charge a battery, but the charging process alone will not break up the build
up
of sulfation that occurs during the charging/discharging cycles. On June 2,2007
we delivered a new 36/48 volt golf cart charger/rejuvenator to GTG Corp. also
for in-house testing and potentially for further UL assessment, testing and
certification. If positive results from such testing are obtained, GTG may
re-submit pre-production models of the newest charger/rejuvenator version of
the
36/48 volt battery charger for further UL assessment and certification.
Currently the parties intend to manufacture the 36/48 volt charger/rejuvenator
necessary for UL assessment and certification at Energenx premises. After full
UL certification, GTG Corp. would then manufacture, market and sell the
charger/rejuvenator products.
6
In
addition, in May 2007 we completed development of a 12/24 volt battery
charger/rejuvenator for retail sales for charging and rejuvenation of lead
acid
batteries. During 2007 we sold 139 of the 12 volt battery charger/rejuvenator
units to Renaissance Charger LLC who are undertaking in-house testing and sample
marketing of these battery charger/rejuvenator units, which resulted in the
recognition of $17,985 of revenue for the fiscal year ending December 31, 2007.
Renaissance has sold these battery charger/rejuvenator units to customers,
many
of whom have provided valuable feedback about their performance. Depending
on
the results of the in-house testing being undertaken by Renaissance Charger
LLC,
Energenx and Renaissance may enter into a joint venture
relationship.
We
are
also developing the following charger/rejuvenator products which we will sell
to
Renaissance Charger for in-house testing and sample marketing:
·
12
volt charger/rejuvenator for lead-acid, gel-cell and AGM (Absorbed
Glass
Mat) batteries used in trucks, autos, motorcycles, marine craft and
recreational vehicles to be marketed to repair shops and
dealerships.
·
universal
battery charger/rejuvenator for nickel-cadmium and nickel-metial
hydride ,
lead acid primary cells, and tool batteries between 1.5 and 24 volts
used
in cordless power tools, phones, toys and back up UPS (uninterruptible
power supply)supplies
·
72-144
volt battery charger/rejuvenator for electric vehicles and
hybrids
·
12/24
volt Solar/Wind Charge Controller for use with lead-acid, gel-cell,
nickel-metail hydride and AGM battery banks utilized in conjunction
with
solar and/or wind power
Of
these
products, the first two are covered by the GTG license agreement.
7
Once
the
development for the North American market for the battery charger/rejuvenators
is sufficiently advanced, Energenx intends to seek licensees in other countries
in order to cover other geographical regions.
Battery
Charge Control Unit for Renewable Energy System Storage
Batteries.
Using
the
same battery charging technology base as utilized in our battery chargers,
in
late 2006, we built and began field testing a prototype of a battery charge
control unit for use with residential solar and wind powered electric systems,
called the Solar Kick Radiant Charge Controller. This Solar Kick charge
controller is a 12 and 24 volt variation of the proprietary Energenx battery
chargers that uses digital circuitry to monitor and switch the charge between
two banks of batteries. The system, in addition to all of the advantages
associated with our battery charge systems described above, is able to deliver
more of the available energy from the source (the solar panels or wind turbine
generator) to the batteries than conventional chargers. Based on preliminary
testing, this appears to result in an increase of performance in such systems
when solar or wind conditions are less then optimal.
Energenx
plans to build and test further prototypes for application with solar and wind
systems, initially for small power supply units for individual buildings. Since
the same principles are applicable for larger systems, the product spectrum
could subsequently be extended into those areas. The intent is to provide the
market with systems with higher efficiency than existing on the market today,
resulting in a higher energy output from the same primary energy
source.
Upon
the
successful conclusion of a testing period of the charge control system, Energenx
intends to seek to license out this technology for the manufacturing and sales
of the Charge Control units in the United States, Canada, and Mexico. We plan
to
work with such future licensee to finalize the development of a Charge Control
System, assist in industrializing the product line, and obtaining UL
certification.
Electromagnetic
Motor/Generator Battery Energy System
The
hybrid electromagnetic motor generator can produce mechanical energy using
electrical energy pulses from a primary bank of batteries (or another source
of
electricity) and efficiently recharges a second bank of batteries
simultaneously. The charging and discharge of the banks of batteries are cycled
so that at any given point in time, one bank of batteries is charging the other
bank of batteries while it also utilizes excess energy to provide electrical
current, via a direct current/alternating current inverter, to be consumed
for
other purposes. The two phase pulse system for charging the second bank of
batteries is based on the same proprietary technology as that used in the
Potential Battery Charger. Prototype models have demonstrated remarkable
efficiencies, with seventy percent battery recharge as well as thirty percent
mechanical energy production.
We
have
the longer term intention to develop and test energy generation systems that
can
be utilized to efficiently charge batteries for many home and industrial
applications. It is contemplated that our electromagnetic motor generator
battery systems could be used to efficiently store energy from various sources,
for example, from the electrical grid, from alternating current generators,
from
solar cells, wind or hydropower turbines, and be available for long term back
up
power.
8
C.Licensed
Proprietary Technology
Bedini
Exclusive Technology License Agreements
On
October 8, 1999, pursuant to an Exclusive Technology License Agreement and
Right
to Purchase Patents, we obtained an exclusive license from John Bedini to a
patent application and any proprietary technology developed by John Bedini
involving a back electromagnetic force permanent electromagnetic motor
generator. A patent application covered by the license agreement relating to
this technology was subsequently filed on January 13, 2000 and issued as a
patent on May 21, 2002 concerning a “Device and method of a back EMF permanent
electromagnetic motor generator”. John Bedini also agreed, in the event that he
was granted domestic or foreign patents relating to the back electromagnetic
force permanent electromagnetic motor generator in the future, that John Bedini
would, within 60 days, assign all right, title and interest in such patents
to
Energenx. After the patent application covered by the license agreement was
issued, John Bedini assigned the patent to Energenx, with Energenx retaining
its
obligations under the license agreement.
Under
the
1999 License Agreement Energenx agreed to pay an up front license fee of
$50,000. The license fee was paid over a several year period ending in
2004.
In
addition Energenx must pay a royalty of five percent on of the net selling
price
per unit of any licensed product sold by Energenx. Energenx was granted the
right to enter into exclusive sublicenses concerning the licensed technology
upon written authorization from John Bedini.Energenx
must pay to John Bedini a three percent royalty on all product royalty income
per unit received by Energenx from a sub-licensee. In addition, Energenx
undertakes to pay to John Bedini fifty percent of any license fee paid as part
of a sub-license agreement.
On
May 1,2001, we entered into an Exclusive Technology License Agreement with John
Bedini, our Vice President for Research and Development, a director, and a
co-founder of our company. Pursuant to the License Agreement John Bedini granted
Energenx an exclusive worldwide license to proprietary technology involving
a
monopole energy delivery system utilized in charging batteries. The license
covers any patents, any filed patent applications or patent applications to
be
filed in the future, and improvements, proprietary information including trade
secrets, technical and scientific information and know how for the purpose
of
using the proprietary battery charging technology. At the time of the Licensing
Agreement one patent application concerning the proprietary battery charging
technology had been filed and was subsequently issued as a patent. In addition,
another patent concerning the proprietary battery charging technology and
covered by the Licensing Agreement was filed on December 21, 2001 and was issued
as a patent on January 13, 2004. John Bedini also agreed, in the event that
he
was granted domestic or foreign patents relating to proprietary technology
involving a monopole energy delivery system utilized in charging batteries
in
the future, that John Bedini would, within 60 days, assign all right, title
and
interest in such patents to Energenx. After the patent applications covered
by
the license agreement were issued, John Bedini assigned each of the patents
to
Energenx, with Energenx retaining its obligations under the license
agreement.
9
Under
the
2001 License Agreement Energenx agreed to pay an up front license fee of
$58,000. John Bedini was issued 5,140,326 shares of common stock of Energenx
in
lieu of payment of the license fee. In addition Energenx must pay a royalty
of
five percent of the net selling price per unit of any licensed product sold
by
Energenx. Energenx was granted the right to enter into exclusive sublicenses
concerning the licensed technology upon written authorization from John
Bedini.Energenx
must pay to John Bedini a three percent royalty on all product royalty income
per unit received by Energenx from a sub-licensee. In addition, Energenx
undertakes to pay to John Bedini fifty percent of any license fee paid as
part
of a sub-license agreement.
Under
both the 1999 and 2001 License Agreements, we are obligated to pay all patent
filing, prosecution and maintenance costs. John Bedini, the licensor, has the
first right to bring suit against any third party infringers and is responsible
for all of our costs and expenses incurred in conjunction with such suit. If
John Bedini chooses not to bring such a suit, we have the right to do so, and
will pay the costs and expenses of such a suit against a third party infringer.
Either party shall be entitled to recovery of damages in a suit against a third
party infringer brought by that party.
Under
the
1999 License Agreement, the license terminates upon expiration of the last
to
expire of the licensed patents or patents to be filed in the future concerning
the proprietary Energenx technology. Energenx can terminate the License
Agreements upon sixty day notice.
Under
the
2001 License Agreement, the license terminates upon expiration of the last
to
expire of the licensed patents or patents to be filed in the future concerning
the proprietary Energenx technology, unless John Bedini is no longer a
shareholder of Energenx. While he continues to be a shareholder of Energenx,
royalties will continue to be payable under the License Agreements. Energenx
can
terminate the License Agreements upon sixty day notice, but only with the
permission and agreement of John Bedini.
Under
both the 1999 and 2001 License Agreements, either party can terminate the
Exclusive Technology License Agreement if the other party defaults in the
performance of any obligation under the agreement, is adjudged bankrupt, becomes
insolvent, makes an assignment for the benefit of creditors or is placed in
the
hands of a receiver or trustee in bankruptcy, and such default or circumstance
is not cured within 30 days after receiving notice by the other party specifying
such default or circumstance. Termination of the agreement would not relieve
either party of any obligation to the other party incurred prior to such
termination.
D.Out-Licensed
Technology
On
December 1, 2004, we entered into an Exclusive Technology License Agreement
with
GTG Corp., an Iowa based corporation largely owned and controlled by Marvin
Redenius, a member of our board of directors. Pursuant to that agreement, we
granted GTG Corp. an exclusive license in the area of North America (the United
States, Canada and Mexico) to proprietary Energenx technology relating to a
battery charging system, known as the Potential/Radiant Battery Charger, for
charging battery operated vehicles, excluding automobiles. The license granted
to GTG Corp. includes a license under existing patents rights owned by Energenx
and to any patent applications to be filed to the extent that it relates to
the
proprietary Energenx technology involving a battery charging system utilized
for
charging battery operated vehicles other than automobiles. The license shall
remain exclusive for a period of ten years, with an option to extend the
exclusivity for an additional ten years. GTG Corp. was not granted the right
to
sublicense under the agreement.
10
GTG
Corp.
agreed to pay royalties equal to five percent of the gross sales price of all
products sold which utilize the licensed proprietary technology. A de minimus
up
front license fee of $1 was paid by GTG Corp. for the license.
As
condition to entering into the Exclusive Technology License Agreement, GTG
Corp.
agreed to purchase all of our proprietary hybrid module components to be
installed in all of the battery charger/rejuvenators, named “Radiant modules” in
the agreement, but now referred to as hybrid modules between the parties, on
a
cost plus basis at a base price of $50.00 per module.
Under
the
Exclusive Technology License Agreement, we are obligated to pay all patent
filing, prosecution and maintenance costs. We have the first right to bring
suit
against any third party infringers and are responsible for all of our costs
and
expenses incurred in conjunction with such suit. If we choose not to bring
such
a suit, GTG Corp. has the right to do so, and will pay the costs and expenses
of
such a suit against a third party infringer. Either party shall be entitled
to
recovery of damages in a suit against a third party infringer brought by that
party.
The
license terminates upon expiration of the last to expire of the licensed patents
or patents to be filed in the future concerning the proprietary Energenx
technology. Either party can terminate the Exclusive Technology License
Agreement if the other party defaults in the performance of any obligation
under
the agreement, is adjudged bankrupt, becomes insolvent, makes an assignment
for
the benefit of creditors or is placed in the hands of a receiver or trustee
in
bankruptcy, and such default or circumstance is not cured within 30 days after
receiving notice by the other party specifying such default or circumstance.
Termination of the agreement would not relieve either party of any obligation
to
the other party incurred prior to such termination.
E.Competition
We
compete with many small and large energy generation and battery charger
companies that are developing and marketing battery charger and energy
generation systems similar to those being developed by us, especially in the
area of battery chargers. There are many companies, both public and private,
including well-known battery manufacturing companies, engaged in developing
new
types of battery chargers. Our major competitors are currently large companies
such as Exide International, Coleman, LVS Sales, Diversified Power
International, LLC, EZ-GO, Inc., Lester and Associated. Companies including
Powerwise (a division of EZGO Textron), Lester and VDC Electronics, among
others, have been engaged in developing and marketing charge control units.
These are large and diversified companies with far ranging capabilities to
market their products and to develop follow on products. Many of these large
battery manufacturing companies that also make battery chargers and smaller
battery charger companies have well funded research departments concentrating
on
improving the efficiency and effectiveness of their battery chargers. We expect
substantial competition from these companies as they develop different and/or
novel approaches to charging batteries and battery storage of energy. Some
of
these approaches may directly compete with the battery chargers or hybrid
motor/generators that we are currently or are considering
developing.
11
Certain
smaller battery charger companies may also be competitors, such as Posicharge
(a
subsidiary of AreoVironment), Japlar Schauer, VDC Electronics, Inc., Deltran,
Iota Engineering, Stontronics and Xantrex. Many of these companies have
substantially greater capital, research and development and human resources
and
experience than us and represent significant long-term competition for us.
In
addition, many of these competitors have significantly greater experience than
us in undertaking testing of new products and obtaining regulatory approvals.
It
will be difficult to distinguish our battery charger products from the currently
battery chargers and gain market share.
F.Strategic
Alliance - GTG Corp.
Pursuant
to the Exclusive Technology License Agreement entered into in December 2004,
the
licensee GTG Corp. intends to test the sublicensed prototype battery charger
known as the Potential Battery Charger. If positive results from such testing
are obtained, GTG intends to manufacture, market and sell charger/rejuvenator
products. As part of the Exclusive Technology License Agreement GTG agreed
to
purchase all proprietary hybrid modules on a cost plus basis at a base price
of
$50.00 per module. Each charger/rejuvenators will require installation of this
hybrid module into its electronic circuitry prior to becoming operational.
We
intend to develop other versions of the charger/rejuvenators with varying
voltage levels. GTG Corp. will have the right to manufacture and sell these
newer versions of the charger/rejuvenators under the same terms and conditions
as the original Potential Battery Charger. Currently the parties intend to
manufacture the 36 volt charger/rejuvenators for UL assessment and testing
purposes only at Energenx premises.
G.Marketing
and Sales
We
do not
intend to manufacture the products we may develop. We intend to contract out
the
bulk of the manufacturing of the Potential hybrid modules pursuant to the
license agreement with GTG Corp., or, in the future, other proprietary modules
to be designed for each product, with final testing, potting and packaging
of
the hybrid modules to be done in house. We intend to license to, or enter into
strategic alliances with companies like GTG Corp., and larger companies in
the
battery charger business which are equipped to manufacture and/or market our
products, if any, through their well developed distribution networks. A similar
approach is planned for the energy supply systems. We intend to license some
or
all of our worldwide patent rights to more than one company to achieve the
fullest development, marketing and distribution of our products, if any. We
may,
however, do the initial marketing for the different products, before deciding
on
the cooperation partners, and may undertake such activities as sales through
a
franchising network for specific products, in which case we would subcontract
the manufacturing of the product(s), and outsource the distribution. The best
suited business form will be decided an a case-to-case basis.
12
H.Patents,
Trademarks, and Copyrights
We
are
substantially dependent on our ability to obtain and maintain patents and
proprietary rights for our product candidates, particularly those relating
to
the technology underlying our Potential Battery Charger, our lead product,
and
to avoid infringing the proprietary rights of others. We have interests in
three
patents issued by the United States Patent and Trademark Office. We obtained
exclusive worldwide licenses to three patent applications, all of which
subsequently became issued patents. We have sublicensed to GTG Corp. our rights
to two of the three patents listed below to the extent that they relate to
a
battery charging system for charging electric vehicles, excluding automobiles.
Additional patent applications may be forthcoming from our ongoing research
and
development.
On
October 8, 1999, we obtained an exclusive worldwide license from John Bedini
to
any proprietary technology being developed by John Bedini involving a back
electromagnetic force permanent electromagnetic motor generator. A patent
application covered by the license agreement relating to this technology was
subsequently filed on January 13, 2000 and issued as a patent on May 21, 2002
concerning a “Device and method of a back EMF permanent electromagnetic motor
generator”.
On
May 1,2001, we obtained an exclusive worldwide license from John Bedini to any
proprietary technology being developed by John Bedini involving a monopole
energy delivery system involved in charging batteries, including a patent
application filed on March 13, 2001 entitled “Device and method for utilizing a
monopole motor to create back EMF to charge batteries,” that was later issued as
a patent on April 8, 2003. An additional patent application covered by the
license agreement relating to this technology was subsequently filed on December21, 2001 and issued as a patent on January 13, 2004 concerning a “Device and
method for pulse charging a battery and for driving other devices with a pulse.”
After the patent applications covered by each of the license agreements were
issued, John Bedini assigned each of the patents to Energenx, with Energenx
retaining its obligations under the license agreements.
Patent
Application
U.S.
Patent Application No. 11/592,633 filed November 3, 2006 entitled Circuits
and
Related Methods for Charging Battery.
Issued
Patents
U.S.
Patent 6,392,370 issued May 21, 2002 for a “Device and method of a back EMF
permanent electromagnetic motor generator”. Expires January 12,2020.
U.S.
Patent 6,545,444 issued April 8, 2003 for a “Device and method for utilizing a
monopole motor to create back EMF to charge batteries”. Expires March 13,2021.
13
U.S.
Patent 6,677,730 issued January 13, 2004 for a “Device and method for pulse
charging a battery and for driving other devices with a pulse”. Expires December21, 2021.
These
patents can expire earlier if they are allowed to abandon or are not adequately
maintained. We do not have any patents pending.
We
have
not filed for any copyright or trademark protection to date.
J.Employees
We
currently have three full time employees one of whom is involved in both
management and research and development, and two of whom are in
administration/management. We have one part-time employee.
Item
2.Description
of Property.
Our
operations are conducted from our offices in Post Falls, Idaho. On March 31,2006 we renewed our lease on approximately 5,000 square feet of office and
research and development space in Post Falls on a two year renewable basis
at a
rental rate of $2,400 per month. We have prepaid for the full two year period
of
the lease, in the amount of $57,600.
Item
3.Legal
Proceedings.
We
are
not involved in any legal proceedings, and there are no material pending legal
proceedings of which we are aware.
Item
4.Submission
of Matters to a Vote of Security Holders
Energenx
did not submit any matters to a vote of its stockholders in the fourth quarter
of 2007.
14
PART
II
Item
5.Market
for Common Equity and Related Stockholder Matters.
Our
common stock began to be traded in the Over-The-Counter Bulletin Board (“OTCBB”)
on June 21, 2007 under the stock symbol EENX.OB.
The
market represented by the OTCBB is limited and the price for our common stock
quoted on the OTCBB is not necessarily a reliable indication of the value of
our
common stock. The following table sets forth the high and low closing prices
for
shares of our common stock for the periods noted, as reported on the OTCBB.
Quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
YEAR
PERIOD
HIGH
LOW
Fiscal
Year 2007
Second
Quarter
$
0.70
$
0.65
Third
Quarter
$
0.75
$
0.54
Fourth
Quarter
$
0.90
$
0.75
The
transfer agent of Energenx is Nevada Agency and Trust Company, 50 West Liberty
Street, Suite 880, Reno, Nevada89501.
As
of
March 25, 2008 there were approximately 177 holders of record of Energenx’s
common stock, of which 29,697,276 were issued and outstanding.
We
have
never paid cash dividends on our common stock. We presently intend to retain
future earnings, if any, to finance the expansion of our business and we do
not
anticipate that any cash dividends will be paid in the foreseeable future.
Our
future dividend policy will depend on our earnings, capital requirements,
expansion plans, financial condition and other relevant
factors.
15
Item
6.Management’s
Discussion and Analysis or Plan of Operation.
THE
FOLLOWING PLAN OF OPERATIONS SECTION SHOULD BE READ IN CONJUNCTION WITH OUR
FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED ON PAGES F-1 THROUGH F-18
FOLLOWING THE SIGNATURE PAGES OF THIS ANNUAL REPORT. ALL STATEMENTS IN THIS
ANNUAL REPORT RELATED TO ENERGENX’S CHANGING FINANCIAL OPERATIONS AND EXPECTED
FUTURE OPERATIONAL PLANS CONSTITUTE FORWARD-LOOKING STATEMENTS. THE ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED OR EXPRESSED IN SUCH
STATEMENTS.
A.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.
Our
current business strategy is to concentrate our financial resources primarily
on
the further development of our battery charger technology. In addition to the
battery charger program, we plan to continue to undertake research and
development on our electromagnetic motor/generator battery system.
B.Product
Research and Development Plans
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 and GTG Corp., 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. On June 2, 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. During 2007 we sold 139 of the 12 volt battery
charger units to Renaissance Charger LLC who are undertaking in-house testing
and sample marketing of these battery charger units, which resulted in the
recognition of $17,985 of revenue for the year ending December 31, 2007.
Depending on the results of the in-house testing being undertaken by Renaissance
Charger LLC, Energenx and Renaissance may enter into a joint venture
relationship involving the sale and market testing of other charger/rejuvenators
and solar/wind charge control units.
We
may
generate revenues pursuant to our Exclusive Technology License Agreement with
GTG Corp. if they order battery charger/rejuvenators. As mentioned above, we
did
generate revenues from the sale of 25 of our 12 volt battery charger units
to
Renaissance Charger LLC during the second quarter of 2007, but this was a one
time purchase. We cannot assure you that GTG Corp. will order any
charger/rejuvenators from us in 2008 or ever, 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.
16
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 orders for the
battery charger/rejuvenators from 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. We may also need to hire up to three more employees
if we receive orders from GTG Corp. We intend to contract out the bulk of the
manufacturing of the hybrid modules, 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.
C.Liquidity
and Capital Resources.
As
of
December 31, 2007, we had $532,545 in cash and cash equivalents. 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.
Net
cash used in operating activities during the fiscal year ended December 31,2007
was $449,446 resulting in a net loss of $802,417.
Net
cash
from financing activities for the fiscal year ended December 31, 2007 was
$498,340, with proceeds of $500,000 from sale of common stock offset by $1,660
for payment of notes payable in 2007. This funding came entirely from $500,000
received on January 23, 2007 from Marvin Redenius, one of our directors,
representing the final tranche of a private placement pursuant to a Subscription
Agreement signed on September 30, 2005, in which Mr. Redenius subscribed for
3,000,000 shares of common stock of Energenx for $1,500,000.
Our
current real estate lease is on a two year renewal basis. We plan to finance
our
needs principally from the following:
·
our
existing capital resources and interest earned on that
capital;
17
·
revenues
from purchase of Potential modules by GTG Corp., if
any;
·
revenues
from sale of chargers to Renaissance Charge, LLC, if
any;
·
royalty
income, if any, from product sales by GTG Corp.;
and
·
through
future private placement financing.
As
mentioned above, we may generate additional revenues from GTG Corp. if they
order Potential hybrid modules under our license agreement, 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 fiscal year 2008,
if at
all.
We
believe that we have sufficient capital resources to finance our plan of
operation for at least the next twelve months. However, this is a
forward-looking statement, and there may be changes that could consume available
resources before such time. Our long term capital requirements and the adequacy
of our available funds will depend on many factors, including the eventual
reporting company costs, public relations fees, patent costs for filing,
prosecuting, maintaining and defending our patent rights, among
others.
We
are
pursuing potential equity financing, sub-licensing and other collaborative
arrangements that may generate additional capital for us. We may need to raise
additional capital or generate additional revenue to complete our development
of
product variations on our Potential Battery Charger and our hybrid
electromagnetic motor/generator product candidate. We cannot assure you that
we
will generate sufficient additional capital or revenues, if any, to fund our
operations beyond the twelve month period ending March 31, 2008, 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.
D.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 this Form 10-KSB. Our critical accounting
policies are:
Revenue
recognition:
Royalties will be recognized as revenue when the amounts are contractually
earned, fixed and determinable, and there is substantial probability of
collection.
18
Research,
development costs: Research
and development costs are expensed as incurred.
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.
E.Risks
and Uncertainties
RISKS
AND UNCERTAINTIES
You
should carefully consider the risks described below in evaluating Energenx
and
our business. If any of the following risks actually occur, our business could
be harmed. This could cause the price of our stock to decline. This report
on
Form 10-KSB contains, in addition to historical information, forward-looking
statements, including statements about future plans, objectives, and intentions,
that involve risks and uncertainties. Our actual results may differ materially
from the results discussed in the forward-looking statements. Factors that
might
cause or contribute to these differences include those discussed below and
elsewhere in this report.
Risks
Related to Our Business
We
have a limited operating history. We have a large accumulated deficit and may
never become profitable.
We
have a
limited operating history upon which investors may base an evaluation of
our
likely future performance. Since we began operations in 1999 we have been
engaged in developing our research programs, recruiting outside directors
and
key consultants. We have generated only nominal revenue to date other than
interest income. Our only income other than equity financings has been
revenue
in the amount of $17,985 in 2007 from sales of products to Rennaisance
Charge,
and a modest amount of interest income. As of December 31, 2007, we had
an
accumulated deficit of $3,052,576 and our operating losses are
continuing.
We
have only limited products currently available for sale and we may never
be
successful in developing products suitable for
commercialization.
Some
of
our product candidates are at an early stage of development and all of our
product candidates will require expensive and lengthy testing and regulatory
clearances. None of our product candidates have been approved by regulatory
authorities. We have only a few products available for sale online via
Renaissance Charge, LLC for sample marketing purposes only. There can be
no
assurance that our research and these limited marketing trials will lead
to
commercially viable battery chargers or power generation devices. There are
many
reasons that we may fail in our efforts to develop commercially viable product
candidates, including that:
·
our
product candidates will be
ineffective,
19
·
our
product candidates will not be validated by independent
testing,
·
our
product candidates will be too expensive to manufacture or market
or will
not achieve broad market acceptance,
·
third
parties will hold proprietary rights that may preclude us from developing
or marketing our product candidates, or
·
third
parties will market equivalent or superior
products.
We
cannot assure you that we will have future revenue or operating profits and
you
could lose your entire investment.
We
expect
to incur substantial operating losses for at least the next several years.
We
currently have sufficient capital resources to fund our operations, with
necessary adjustments to our general and administrative budget, at least through
March 2008. We currently have no sources of revenue and we cannot assure you
that we will be able to develop other revenue sources or that our operations
will become profitable, even if we are able to commercialize any products.
If we
do not generate significant increases in revenue, at some point in the future
we
may not be in a position to continue operations and investors could lose their
entire investment.
We
may need additional funds, and if we are unable to raise them, we may have
to
curtail or cease operations.
Our
product development programs and the potential commercialization of our product
candidates require substantial working capital, including expenses for in house
and third party testing, manufacture of hybrid modules for use by GTG Corp.
in
its production of Potential Chargers pursuant to our License Agreement. Our
future working capital needs will depend on many factors,
including:
·
the
progress and magnitude of our product development
programs,
·
the
scope and results of product development
testing,
·
the
costs under current and future license agreements for our product
candidates, including the costs of obtaining and maintaining patent
protection for our product candidates,
·
the
costs of acquiring any technologies or additional product
candidates,
·
the
rate of technological advances,
·
the
commercial potential of our product
candidates,
·
the
magnitude of our administrative and legal expenses, including office
and
research development facilities rent, and
·
the
costs of establishing third party arrangements for
manufacturing.
·
the
amount of revenues we may generate from supplying hybrid modules
to GTG
Corp..
We
have
incurred negative cash flow from operations since we incorporated and we may
not
generate positive cash flow from our operations within the next several years.
Therefore, depending the amount of revenues we generate in 2008 from supplying
GTG Corp., we may need additional future financings in order to carry out our
plan of operations beyond the next twelve months.
20
We
may
not be able to obtain adequate financing to fund our operations and any
additional financing we obtain may be on terms that are not favorable to us.
In
addition, any future financings could substantially dilute our stockholders.
If
adequate funds are not available we will be required to delay, reduce or
eliminate one or more of our product development programs, to enter into new
collaborative arrangements on terms that are not favorable to us (i.e., the
collaborative arrangements could result in the transfer to third parties of
rights that we consider valuable), or to cease operations
altogether.
We
do not currently have the capability to undertake manufacturing, marketing,
or
sales of any potential products.
We
have
not invested in full scale manufacturing, marketing or product sales resources.
We cannot assure you that we will be able to acquire such resources. It is
likely that we will also need to hire additional personnel skilled in
engineering, product development and manufacturing of components if we develop
additional product candidates with commercial potential. We have no history
of
manufacturing or marketing. We cannot assure you that we will successfully
manufacture or market any product we may develop, either independently or under
manufacturing or marketing arrangements, if any, with other companies. We
currently do not have any arrangements with other companies, and we cannot
assure you that any arrangements with other companies can be successfully
negotiated or that such arrangements will be on commercially reasonable terms.
To the extent that we arrange with other companies to manufacture or market
our
products, if any, the success of such products may depend on the efforts of
those other companies.
There
is considerable technological change and uncertainty in our
industry.
We
are
engaged in the battery charger, charge control and energy generation field,
which is characterized by extensive research efforts and rapid technological
progress. New developments in energy generation devices are expected to continue
at a rapid pace in both industry and academia. There can be no assurance that
research and discoveries by others will not render some or all of our programs
or products noncompetitive or obsolete.
Our
business strategy is based in large part upon a core technology related to
pulse
charging of batteries and of capturing back electromagnetic energy and
converting this energy into electricity. There is no assurance that the
application of these new and unproven technologies will result in the
development of commercially viable products for the generation of energy or
competitive battery chargers. No assurance can be given that unforeseen problems
will not develop with these technologies or applications or we will ultimately
develop those commercially feasible products.
We
are dependent on executive officers most of whom do not have employment
contracts.
Because
of the specialized scientific nature of our business, we are highly dependent
upon our ability to attract and retain qualified scientific and management
personnel. The loss of John Bedini, our Vice President for Research and
Development, as well as the licensor of our patent rights would be particularly
detrimental to us. Also the loss of any of our other executive officers would
be
detrimental to us. We do not currently have employment agreements with any
of
our executive officers. We do not carry key man insurance on any of our
personnel.
21
There
is
intense competition for qualified personnel in the areas of our activities,
and
there can be no assurance that we will be able to continue to attract and retain
qualified personnel necessary for the development of our business. Loss of
the
services of or failure to recruit additional key scientific, technical and
management personnel would be detrimental to our research and development
programs and business.
Our
business could be harmed if we fail to protect our intellectual
property.
We
have
licensed rights to certain patented technology from John Bedini, an officer
and
director of Energenx, to whom we are obligated to pay royalties if we or our
sublicensees develop products based upon the licensed technology. Because of
the
substantial length of time and expense associated with bringing new products
through development and regulatory approval to the marketplace, the battery
charger and energy generation industry places considerable importance on patent
and trade secret protection for new technologies, products and processes. We
have interests in three patents issued in the United States pursuant to our
license agreements with John Bedini. We have sublicensed, within North America,
certain proprietary technology including our patent rights to two patents to
GTG
Corp. We are obligated to pay the filing, prosecution and maintenance expenses
with regard to all of these patents. We and our licensor plan to file patent
applications in other countries, and we may seek additional patents in the
future. Our patent position, like that of many technology development companies,
is uncertain and involves complex legal and factual questions for which
important legal principles are unresolved. We may not develop or obtain rights
to products or processes that are patentable. Even if we do obtain additional
patents, they may not adequately protect the technology we own or have
in-licensed. In addition, others may challenge, seek to invalidate, infringe
or
circumvent any patents we own or in-license, and rights we receive under those
patents may not provide competitive advantages to us. Further, the manufacture,
use or sale of our products or processes, if any, may infringe the patent rights
of others.
We
cannot
assure you as to the breadth or the degree of protection that any such patents,
if issued, will afford us or that any patents based on the patent applications
will be issued at all. In addition, we cannot assure you that others will not
independently develop substantially equivalent proprietary information or
otherwise obtain access to our know-how or that others may not be issued patents
that may require licensing and the payment of significant fees or royalties
by
us for the pursuit of our business.
Other
companies may have filed patent applications or received patents that cover
technologies similar to ours. Our ability to make, use or sell any of our
product candidates may be blocked by patents that have been or will be issued
to
third parties that we may not be aware of. The United States patent applications
are confidential while pending in the Patent and Trademark Office, and patent
applications filed in foreign countries are often first published six months
or
more after filing. Therefore, until a patent is issued, we have no way of
knowing if a third party has a patent that could preclude us from
commercializing our product candidates. Third party patent applications and
patents could significantly reduce the coverage of our patents and limit our
ability to obtain meaningful patent protection. If other companies obtain
patents with conflicting claims, we may be required to obtain licenses to these
patents or to develop or obtain alternative technology. We may not be able
to
obtain any such license on acceptable terms or at all. Any failure to obtain
such licenses could delay or prevent us from pursuing the development or
commercialization of our product candidates, which would adversely affect our
business.
22
Potential
litigation concerning patent rights could involve significant expenses and
damage our business.
In
the
United States, the first to invent a technology is entitled to patent protection
on that technology. For patent applications filed prior to January 1, 1996,
United States patent law provides that a party who invented a technology outside
the United States is deemed to have invented the technology on the earlier
of
the date it introduced the invention in the United States or the date it filed
its patent application. In foreign countries, the first party to file a patent
application on a technology, not the first to invent the technology, is entitled
to patent protection on that technology. Under the patent laws of most
countries, a product can be found to infringe a third party patent if the third
party patent expressly covers the product or method of treatment using the
product, or if the third party patent covers subject matter that is
substantially equivalent in nature to the product or method, even if the patent
does not expressly cover the product or method.
While
we
have not received notification of potential infringement of patents held by
third parties, with respect to any of our product candidates, litigation, patent
opposition and adversarial proceedings could result in substantial costs to
us.
Litigation and/or proceedings could be necessary or may be initiated to enforce
any patents we own or in-license, or to determine the scope, validity and
enforceability of other parties’ proprietary rights and the priority of an
invention. The outcome of any of these types of proceedings could significantly
affect our product candidates and technology. United States patents carry a
presumption of validity and generally can be invalidated only through clear
and
convincing evidence.
Under
our
license agreements with John Bedini and with GTG Corp., we have the right to
pursue any actions against third parties for infringement of the patent rights
covered by those agreements. Under those arrangements we are not obligated
to
share any recovery from infringement suits brought by us. If we do not bring
an
infringement action, our licensor or licensee may bring such action and will
be
entitled to any recovery.
An
adverse outcome of these proceedings could subject us to significant liabilities
to third parties, require disputed rights to be licensed from third parties
or
require us to cease using such technology, any of which could adversely affect
our business. Moreover, the mere uncertainty resulting from the initiation
and
continuation of any technology related litigation or adversarial proceeding
could adversely affect our business pending resolution of the disputed
matters.
23
If
we do
not exercise our right to prosecute and our licensors institute and prosecute
patent proceedings, our rights will depend in part upon the manner in which
these licensors conduct the proceedings. In any proceedings they elect to
initiate and maintain, these licensors may not vigorously pursue or defend
or
may decide to settle such proceedings on terms that are unfavorable to
us.
Despite
the use of confidentiality agreements, which themselves may be of limited
effectiveness, it may be difficult for us to protect our trade
secrets.
We
rely
on trade secrets to protect technology in cases when we believe patent
protection is not appropriate or obtainable. However, trade secrets are
difficult to protect. While we require certain of our corporate collaborators,
contractors and consultants to enter into confidentiality agreements, we may
not
be able to adequately protect our trade secrets or other proprietary
information.
We
might face intellectual property claims that may be costly to resolve and could
divert management attention.
We
may
from time to time be subject to claims of infringement of other parties’
proprietary rights. We could incur substantial costs in defending ourselves
in
any suits brought against us claiming infringement of the patent rights of
others or in asserting our patent rights in a suit against another company.
Adverse determinations in any litigation could subject us to significant
liabilities to third parties, require us to seek costly licenses from third
parties and prevent us or our sublicensees from manufacturing and selling our
potential products.
We
cannot assure you that our products will be awarded necessary certifications
after independent testing.
Our
battery charger products will need to be tested independently before they are
marketed and sold in the United States by Underwriters Laboratory and other
similar organizations in other countries in order to obtain the UL or similar
foreign certification product label. There can be no assurance that any future
products we or our licensees submit for testing of effectiveness and safety
by
Underwriters Laboratory or similar foreign organization will result in
certification of that product. Without such certification sale of the products
would be difficult if not impossible.
If
our product candidates do not achieve market acceptance, our business may never
achieve profitability.
Our
success will depend on the market acceptance of any products we may develop.
The
degree of market acceptance will depend upon a number of factors, including
the
receipt and scope of regulatory approvals, the establishment and demonstration
in the business community of the safety and effectiveness of our products and
their potential advantages over existing technologies. Consumers may not accept
or utilize any product that we may develop.
Our
controlling stockholders may make decisions that you do not consider to be
in
your best interest.
As
of
March 27, 2008, our directors and executive officers beneficially owned
approximately 60%of
our
outstanding common stock. As a result, our controlling stockholders are able
to
control all matters requiring stockholder approval, including the election
of
directors and the approval of significant corporate transactions. This
concentration of ownership could also delay or prevent a change in control
of
Energenx that may be favored by other stockholders.
24
We
are significantly controlled by our management.
Our
executive officers comprise three of the six members of the Board of Directors.
As a result, our management has the ability to exercise influence over our
significant matters. This high level of influence may have a significant effect
in delaying, deferring or preventing a change of control of our
company.
Risks
Related to Our Industry
Potential
technological changes in our field of business create considerable
uncertainty.
We
are
engaged in the battery charger, charge control and energy generation field,
which is characterized by extensive research efforts and rapid technological
progress. New developments in research concerning battery charging and energy
generation may occur at a rapid pace in both industry and academia. We cannot
assure you that research and discoveries by others will not render some or
all
of our programs or product candidates noncompetitive or obsolete. We cannot
assure you that unforeseen problems will not develop with our technologies
or
applications or that commercially feasible battery charger or energy generation
products will ultimately be developed by us.
The
markets in which we seek to participate are intensely competitive and many
of
our competitors are better capitalized and have more experience than we
do.
There
are
many companies, both public and private, including well-known battery
manufacturing companies, engaged in developing new types of battery chargers.
Our major competitors are currently large companies such as Exide International,
Coleman, LVS Sales, Diversified Power International, LLC, EZ-GO, Inc., Lester
and Associated. These are large and diversified companies with far ranging
capabilities to market their products and to develop follow on products. We
are
years away from having an energy generation system product ready for the market
and we do not currently have the resources to fund the development of such
a
product through the product development process. In addition we do not have
the
capability of marketing a battery charger product and will have to enter into
a
collaborative relationship with a larger company in order to market our battery
chargers. It will be difficult to distinguish our battery charger products
from
the currently battery chargers and gain market share.
Certain
smaller battery charger companies may also be competitors, such as Posicharge
(a
subsidiary of AreoVironment), Japlar Schauer, VDC Electronics, Inc., Deltran,
Iota Engineering, Stontronics and Xantrex. Many of these companies have
substantially greater capital, research and development and human resources
and
experience than us and represent significant long-term competition for us.
In
addition, many of these competitors have significantly greater experience than
us in undertaking testing of new products and obtaining regulatory approvals.
Furthermore, if we or our current or any future licensee is permitted to
commence commercial sales of any product, we or our licensee will also be
competing with companies that have greater resources and experience in
manufacturing, marketing and sales. We have no experience in these areas. These
other companies may succeed in developing products that are more effective
or
less costly than any that may be developed by us or our future licensee and
may
also prove to be more successful than us or our future licensee in production
and marketing.
25
If
we
successfully develop and obtain approval for our product candidates, we will
face competition based on the safety and effectiveness of our products,
marketing and sales capability, patent position and other factors. Our
competitors may develop or commercialize more effective or more affordable
products, or obtain more effective patent protection, than we do. Accordingly,
our competitors may commercialize products more rapidly or effectively than
we
do, which could hurt our competitive position.
If
product liability lawsuits are successfully brought against us, we may incur
substantial liabilities and may be required to limit commercialization of our
products.
Our
business and products will, in the future, expose us to potential product
liability risks that are inherent in the testing, manufacturing and marketing
of
battery chargers and electrical generation products. If we cannot successfully
defend ourselves against liability claims, we may incur substantial liabilities
or be required to limit commercialization of our products. Our inability
to
obtain sufficient product liability insurance at an acceptable cost to protect
against potential product liability claims could prevent or inhibit the
commercialization of products we develop, alone or with corporate collaborators.
We do not carry product liability insurance. We may not be able to obtain
insurance at a reasonable cost, if at all.
Other
Risks
Our
common stock is traded on the OTCBB, our stock price is highly volatile, and
you
may not be able to sell your shares of our common stock at a price greater
than
or equal to the price you paid for such shares.
In
May
2007 our shares of common stock began trading on the Over the Counter Bulletin
Board, or OTCBB. Stocks traded on the OTCBB generally have limited trading
volume and exhibit a wide spread between bid and ask quotations. The market
price of our common stock is volatile. The trading volume in our shares since
initiation of trading in May 2007 is very small, with average daily of
approximately 3,000 shares. Moreover, during that period, our common stock
traded as low as $0.54 per share and as high as $0.90 per share. This may impact
an investor’s decision to buy or sell our common stock. Factors affecting our
stock price include:
·
our
financial results;
·
fluctuations
in our operating results;
26
·
announcements
of technological innovations or new commercial battery charger, charge
control or energy generation products by us or our
competitors;
·
government
regulation;
·
developments
in patents or other intellectual property rights;
·
developments
in our relationships with customers and potential customers;
and
·
general
market conditions.
Furthermore,
volatility in the stock price of other companies has often led to securities
class action litigation against those companies. Any such securities litigation
against us could result in substantial costs and divert management’s attention
and resources, which could seriously harm our business and financial
condition.
Our
common stock may be subject to “penny stock” rules which may be detrimental to
investors.
Our
common stock may be, or may become, subject to the regulations promulgated
by
the SEC for “penny stock.” SEC regulation relating to penny stock is presently
evolving, and the OTCBB may react to such evolving regulation in a way that
adversely affects the market liquidity of our common stock. Penny stock
currently includes any non-NASDAQ equity security that has a market price of
less than $5.00 per share, subject to certain exceptions. The regulations
require that prior to any non-exempt buy/sell transaction in a penny stock,
a
disclosure schedule set forth by the SEC relating to the penny stock market
must
be delivered to the purchaser of such penny stock. This disclosure must include
the amount of commissions payable to both the broker-dealer and the registered
representative and current price quotations for the common stock. The
regulations also require that monthly statements be sent to holders of penny
stock that disclose recent price information for the penny stock and information
of the limited market for penny stocks. These requirements may adversely affect
the market liquidity of our common stock.
Sales
of our common stock may require broker-dealers to make special suitability
determinations regarding prospective purchasers.
Our
common stock may be, or may become, subject to Rule 15g-1 through 15g-9 under
the Exchange Act, which imposes certain sales practice requirements on
broker-dealers which sell our common stock to persons other than established
customers and “accredited investors” (generally, individuals with a net worth in
excess of $1,000,000 or an annual income exceeding $200,000 (or $300,000
together with their spouses)). For transactions covered by this rule, a
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser’s written consent to the transaction prior to
the sale. Applicability of this rule would adversely affect the ability of
broker-dealers to sell our common stock and purchasers of our common stock
to
sell their shares of such common stock. Accordingly, the market for our common
stock may be limited and the value negatively impacted.
We
do not pay cash dividends.
We
have never paid dividends and do not presently
intend to pay any dividends in the foreseeable future.
27
Item
7.Financial
Statements.
The
Audited Financial Statements for this Form 10-KSB appear on pages F-1 through
F-18 following the signature page below.
Item
8.Changes
In and Disagreements With Accountants on Accounting and Financial
Disclosure.
None.
ITEM
8A(T).CONTROLS
AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures.
Our
management, including our principal executive officer and our principal
financial officer, has evaluated the effectiveness of our “disclosure controls
and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the
United States Securities Exchange Act of 1934, as amended), as of December31,2007. As described below in the Management’s Report on Internal Control over
Financial Reporting, management has reported material weaknesses in the internal
control over financial reporting as of December 31, 2007. Based on that
evaluation, our principal executive officer and our principal financial officer
have concluded that our disclosure controls and procedures were not effective
as
of December 31, 2007 due to the reported material weakness.
Management’s
Report on Internal Control over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting. Internal control over financial reporting is defined in
Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of
1934, as amended, as a process designed by, or under the supervision of, a
company’s principal executive and principal financial officers and effected by a
company’s board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:
·
Pertain
to the maintenance of records that in reasonable detail accurately
and
fairly reflect the transactions and dispositions of the assets of
the
company;
·
Provide
reasonable assurance that transactions are recorded as necessary
to permit
preparation of financial statements in accordance with generally
accepted
accounting principles, and that receipts and expenditures of the
company
are being made only in accordance with authorizations of management
and
directors of the company; and
28
·
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the company’s assets that
could have a material effect on the financial
statements.
All
internal control systems, no matter how well designed, have inherent limitations
and can provide only reasonable, not absolute, assurance that the objectives
of
the control system are met. Further, the design of a control system must reflect
the fact that there are resource constraints, and the benefits of controls
must
be considered relative to their costs. 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 our company
have
been detected. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation.
Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, assessed the effectiveness of our internal control over
financial reporting as of December 31, 2007. In making this assessment, our
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal
Control - Integrated Framework and
Internal
Control over Financial Reporting-Guidance for Smaller Public
Companies.
A
material
weakness
is a deficiency, or a combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will not be prevented
or detected on a timely basis.
Based
on
this assessment and the material weakness described above, management has
concluded that internal control over financial reporting was not effective
as of
December 31, 2007.
·
This
annual report does not include an attestation report of the company’s
registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by
the company’s registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit the
company to
provide only management’s report in this annual
report.
29
We
intend
to take the following steps as soon as practicable to remediate the material
weakness we identified as follows:
·
We
will segregate incompatible functions using existing personnel where
possible or, given sufficient capital resources, we will hire additional
personnel to perform those functions.
·
We
will increase the oversight and review procedures of the board of
directors with regard to financial reporting, financial reporting
processes and procedures and internal control
procedures.
·
To
the extent we can attract outside directors, we will nominate an
audit
committee to review and assist the Board with its oversight
responsibilities.
·
We
will adopt a code of conduct and
ethics
Changes
in Internal Control Over Financial Reporting
There
has
been no change in our internal control over financial reporting that occurred
during our most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
Item
8BOther
Information
None.
30
PART
III
Item
9.Directors
and Executive Officers of the Registrant
A.
Directors,
Executive Officers, Promoters and Control
Persons
The
current executive officers, directors and significant employees of Energenx
are
as follows:
Name
Age
Position
Gary
A. Bedini
55
President
& Chief Executive Officer,
Director
Rick
M. Street
50
Chief
Financial Officer, Secretary,
Treasurer,
Director
John
C. Bedini
58
Vice
President of Research and
Development,
Director
Thomas
E. Bearden, Ph.D.
79
Director
Marvin
Redenius
43
Director
Hans
Werner Huss
65
Director
Each
director is elected to hold office for a one year term or until the next annual
meeting of stockholders and until his successor is elected and qualified. The
officers of Energenx serve at the pleasure of Energenx’s Board of
Directors.
The
following sets forth certain biographical information with respect to the
directors and executive officers of Energenx.
Gary
A. Bedini.
Gary
Bedini and his brother John Bedini were co-founders of Energenx, previously
named Bedini Technology, Inc. Gary Bedini has served as a director and President
& CEO of Energenx since September 1999. Mr. Gary Bedini has over 25 years
experience in consumer electronics industry. Gary Bedini was a co-founder of
Bedini Electronics, Inc. with his brother John Bedini. Mr. Bedini possesses
a
broad knowledge of procurement, manufacturing, distribution, advertising and
sales. Mr. Bedini was instrumental in securing numerous state of the art trade
reviews and the 1996 Golden Note Award, given to the most innovative audio
products.
As a
member of H.E.A.A. (Hi End Audio Association) he has participated in numerous
efforts to promote and enhance the industries availability into export
markets.
31
Rick
M. Street.Rick
Street has served as a director of Energenx since November 2001. Mr. Street
has
served as Chief Financial Officer, Treasurer and Secretary of Energenx since
June 2002. Rick Street, CPA, CIA has 21 years of management experience in
accounting, auditing, development of management information systems, maintaining
fully integrated computerized accounting programs designed for small businesses
and experienced in all aspects of small business management. From 2002 until
present he has been teaching accounting at North Idaho College, Gonzaga
University and Spokane Community College. He currently holds a fulltime tenure
track position at Spokane Community College and is a principal of an accounting
practice in Spokane Washington. From 1996 to 2001 he was the Director of
Internal Auditing for the Coeur d’Alene Casino & Resort in Worley, Idaho.
From 1991 to 1996, Mr. Street was the controller of the Athletic Round Table,
Inc., a non-profit charitable organization. Mr. Street received a Bachelor
of
Arts in Business Administration (accounting) in 1991 from Eastern Washington
University and a Masters in Accountancy from Gonzaga University in 2003. He
is a
Member of the Washington State Society of Certified Public Accountants and
a
Member of the Institute of Internal Auditors and Chapter Secretary of the
Spokane IIA Chapter.
John
C. Bedini.
John
Bedini and his brother Gary Bedini were co-founders of Energenx, previously
named Bedini Technology, Inc. John Bedini has been a director and Vice President
of Energenx since September 1999. Mr. John Bedini is a scientist and well-known
inventor. His work has produced many innovative audio products that have been
marketed over a 25-year period to the audio electronics industry. Mr. Bedini
has
also developed a variety of products and technically innovative products for
several different industries. His inventions include the BEDINI line of audio
amplifiers, Bedini Audio Spacial Environment (B.A.S.E.), the Bedini Clarifier
products, the Binaural Audio and several instruments for the medical industry.
He has been awarded many patents related to his various inventions. Mr. Bedini
has received broad industry recognition including designation as Distinguished
Scientist of the year by the Association of Distinguished American Scientists.
He is a graduate of Bell and Howell Institute of Technology.
Thomas
E. Bearden, Ph.D.
Thomas
Bearden has served as a director of Energenx since June 2001. Thomas Bearden
is
a member of the Scientific Advisory Board of Energenx. Tom Bearden is a research
scientist, inventor, consultant, and holds a Ph.D. (Trinity University) in
Science, a M.S. (Georgia Tech) in Nuclear Engineering, and a B.S. (Northeast
Louisiana State) in mathematics. Dr. Bearden is a Director of the Association
of
Distinguished American Scientists (ADAS), a Fellow Emeritus of the Alpha
Foundation's Institute for Advanced Study (AIAS), CEO of CTEC, Inc., a private
research and development company based in Huntsville, Alabama and serves as
a
member on the board of directors of two private companies.
Marvin
Redenius.
Marvin
Redenius has served as a director of Energenx since his appointment to the
board
in March 2004.Since
1990, Mr. Redenius has been the owner of Farm Advantage, Inc., an agriculture
supply company operating in the mid-western U.S. Farm Advantage supplies
innovative agricultural products and services. The company warehouses and
distributes products from North Central Iowa and has annual sales in excess
of
40 million dollars. Mr. Redenius also owns and operates Northern National
Trucking, Inc., which consists of a fleet of 30 tractor trailers. Mr. Redenius
and his family also own and operate Cristina Corp, a farm corporation. Mr.
Redenius also owns GTG Corporation, which invests in early stage technology
based companies.
32
Hans
Werner Huss.
Hans
Werner Huss has served as a director of Energenx since January 2002. Mr. Huss
graduated Diplom Ingenieur Electrical Engineering, with an emphasis in
Electronics, from the Technical University in Munich/Germany. He currently
serves as President and Chairman of a new technology company Integrated
Micrometallurgical Systems, Inc. based in Spokane, Washington. He is also
involved in Consulting for several other start-up companies with promising
new
technologies, advising them in business and marketing matters. Previously,
he
has served in many functions in different companies in the U.S. and in Europe,
most notably in executive positions of several high tech companies in different
industries, such as: President, Euromissile G.I.E. in Paris, France (a
management and sales company for missile systems in the EADS Group - European
Aeronautics Defense and Space Company); President, MEADS International, Inc.
in
Orlando/Florida (tri-national management company for the Medium Extended Air
Defense System, under contract from NAMEADSMA, the NATO agency in Huntsville,
AL, managing this tri-national system under joint development in the U.S.,
Germany, and Italy); President, Magnetic Transit of America, Inc., in Los
Angeles, CA (engineering and marketing company for a Mag-Lev Transportation
system for inner urban use; a subsidiary of AEG/Daimler-Benz); General Manager
of IBCOL Technical Services GmbH, in Munich, Germany (internationally operating
marketing and sales company mainly in the fields of aircraft, aircraft parts,
transportation systems, security and surveillance systems, medical systems);
and, Program Manager for a mobile air defense system at Euromissile, Paris,
France and at MBB, Munich, Germany.
Gary
A.
Bedini is the brother of John C. Bedini. There are no other family relationships
between any of the officers and directors.
B.
Section
16(a) Beneficial Ownership Reporting
Compliance.
A
report
on Form 4 filed on behalf of Marvin Redenius, Director, was filed late during
January 2007 concerning the receipt of a subscription receivable pursuant to
a
Subscription Agreement between Energenx and Marvin Redenius dated September30,2005. A report on Form 4 filed on behalf of Rick Street, Chief Financial Officer
and director, was filed one day late concerning the granting of stock options
in
November 2007.
Code
of Ethics
We
have
not adopted a code of ethics that applies to our President and CEO (principal
executive officer), or our Chief Financial Officer (principal accounting
officer). As we have recently become a reporting company required to file
periodic reports with the SEC and as we are not a “listed company” under SEC
rules, we have not yet dealt with this issue, but we intend to do so in the
future.
33
Audit
Committee and Audit Committee Financial Expert
We
are
not a “listed company” under SEC rules and are therefore not required to have an
audit committee comprised of independent directors. As we are a development
stage company with minimal revenues from operations, few employees, and
relatively simple financial statements, we have not, at this stage, constituted
any board committees, including an audit committee. We do intend to constitute
an audit committee in the near future. We do not have an audit committee
financial expert who is an outside director. As our business grows and our
financial statements become more complicated, we intend to seek an outside
director who can qualify as an audit committee financial expert.
Item
10.Executive
Compensation.
A.Summary
Compensation Table
The
table
below sets forth the aggregate annual and long-term compensation paid by us
during our last two fiscal years ended December 31, 2006 and December 31, 2007
to our Chief Executive Officer, and our Chief Financial Officer (collectively
the “Named Executive Officers”). Other
than as set forth below, no executive officer’s salary and bonus exceeded
$100,000 for the fiscal year 2007.
Name
and
Principal
Position
(a)
Year
(b)
Salary
($)
(c)
Bonus
($)
(d)
Stock
Awards
($)
(e)
Option
Awards
($)
(f)
Non-Equity
Incentive Plan Compensation ($)
(g)
Non-Qualified
Deferred Compen-sation Earnings ($)
(h)
All
other Compen-sation
($)
(i)
Total
($)
(j)
Gary
A. Bedini
Pres.
& CEO, Dir.
2007
83,784
0
0
0
0
0
0
83,784
2006
123,214
0
0
0
0
0
0
123,214
Rick
Street
CFO,
Dir.
2007
0
0
0
263,440
0
0
0
263,440
2006
0
0
0
0
0
0
0
0
B.
Narrative
Disclosure to Summary Compensation Table
Neither
Gary Bedini, or Rick Street have entered into formal written employment
agreements with Energenx. Each is employed on an at will basis with a base
salary but with any bonus or option compensation at the discretion of the
uninterested members of the board of directors. To date no bonus or option
compensation has been granted to our Named Executive Officers with the exception
of the grant of an option to purchase 400,000 shares of common stock to Rick
Street on November 8, 2007. In 2006 Gary Bedini’s annual salary was set at
$132,306, but was revised downward to $81,602 in November 2006, resulting in
actual salary compensation received in 2006 of $123,214. In 2007, Gary Bedini’s
annual salary was adjusted to $80,000. He received one payroll payment of $3,378
for services rendered in 2006 in 2007.
34
C.
Outstanding
Equity Awards at Fiscal Year End
Option
Awards
Stock
Awards
Name
(a)
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b)
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
Equity
Incentive
Plan
Awards
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(d)
Option
Exercise
Price
($)
(e)
Option
Expiration
Date
(f)
Number
of
Shares
or
Units of
Stock
That
Have
Not
Vested
(#)
(g)
Market
Value
of
Shares
of
Units
of
Stock
That
Have
Not
Vested
($)
(h)
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
(i)
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares
Units
or
Other
Rights
That
Have
Not
Vested
($)
(j)
G.
Bedini
0
0
0
0
0
0
0
0
0
R.
Street
200,000
200,000
200,000
$
0.75
11/8/2017
200,000
160,000
0
0
On
November 8, 2007 Rick Street was granted an option to purchase 400,000 shares
of
common stock at $0.75, with 200,000 shares vesting immediately and 25,000
vesting every three months between 2/9/08 and 11/9/09. There were no other
option grants to our Named Executive Officers in 2007. Other than the 2007
grant
to Rick Street, no option grants have been made to any of our named executive
officers under the Energenx 1999 Stock Option Plan, or outside of that Plan,
to
date.
D.
Compensation
of Directors
No
compensation was paid to directors for their director services in
2007.
35
Item
11.Security
Ownership of Certain Beneficial Owners and Management.
The
following table sets forth certain information regarding beneficial ownership
of
our common stock as of March 27, 2008 (a) by each person known by us to own
beneficially 5% or more of any class of our common stock, (b) by each of our
executive officers and directors and (c) by all executive officers and directors
of Energenx as a group. As of March 27, 2008 there were 29,697,276 shares of
our
common stock issued and outstanding. The numbers of shares beneficially owned
include shares of common stock which the listed beneficial owners have the
right
to acquire within 60 days of March 27, 2008 upon the exercise of all options
and
other rights beneficially owned on that date. Unless otherwise noted, we believe
that all persons named in the table have sole voting and investment power with
respect to all the shares beneficially owned by them.
Name
and, as Appropriate,
Address
of Beneficial
Owner (1)
Amount
and
Nature
of
Beneficial
Owner
Percent
of
Common
Stock
Gary
A. Bedini (2)
3,592,000
12.10
%
John
C. Bedini (3)
5,658,000
19.05
%
Rick
M. Street (4)
475,000
1.60
%
Marvin
Redenius (5)
7,800,000
26.27
%
Thomas
E. Bearden (6)
320,402
1.08
%
Hans
Werner Huss (7)
200,000
*
All
directors and executive officers (six persons) as a group
Unless
otherwise indicated, the address of each of the listed beneficial
owners
identified above is c/o 6200 E. Commerce Loop, Post Falls, Idaho83854.
(2)
Gary
A. Bedini. Includes 3,592,000 shares of common stock held by Gary
Bedini.
(3)
John
C. Bedini. Includes 5,658,000 shares of common stock held by John
Bedini.
36
(4)
Rick
M. Street. Includes 250,000 shares of common stock held by Rick Street
and
vested options to purchase 225,000 shares at $0.75 per
share.
(5)
Marvin
Redenius. Includes 7,800,000 shares of common stock held by Marvin
Redenius.
(6)
Thomas
E. Bearden. Includes 320,402 shares of common stock held by Thomas
Bearden.
(7)
Hans
Werner Huss. Includes 200,000 shares of common stock held by Hans
Werner
Huss.
(8)
Thomas
G. Walsh. Includes 1,867,638 shares of common stock held by Thomas
G.
Walsh.
(9)
Frank
and Judith Ten Thy. Includes 1,632,588 shares of common stock held
in the
name of the Frank Ten Thy and Judith Ten Thy Family Trust.
Equity
Compensation Plan Information
The
following table sets forth information about the common stock available for
issuance under compensatory plans and arrangements as of December 31,2007.
(a)
(b)
(c)
Plan
Category
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights.
Weighted-average
exercise price of outstanding options, warrants, and
rights
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
Equity
compensation plan approved by security holders (1)
460,000
$
0.75
1,340,000
Equity
compensation plans not approved by security holders
0
$
0
Total
0
$
0.75
1,340,000
(1)
On
October 7, 1999 the shareholders of Energenx adopted the 1999 Stock
Option
Plan with 300,000 shares of common stock reserved for issuance under
the
Plan (increased to 1,800,000 shares pursuant to the 6:1 forward stock
split on April 20, 2001) under which the board of directors may grant
incentive or non-statutory stock options to officers, directors,
employees, consultants and advisors of
Energenx.
Item
12.Certain
Relationships and Related Transactions.
On
September 30, 2005, Energenx entered into a Subscription Agreement with Marvin
Redenius., a member of the Board of Directors of Energenx. Pursuant to the
Subscription Agreement Marvin Redenius agreed to purchase 3,000,000 shares
of
common stock of Energenx for a purchase price of $1,500,000. The purchase of
the
3,000,000 shares was completed on January 23, 2007 with the receipt of the
final
$500,000 of the purchase price from Marvin Redenius. The purchase price of
the
shares was set by the board of directors, excluding Marvin Redenius, pursuant
to
the recommendation of management. The purchase price of the shares is higher
than that obtained by Energenx in its most recent private placements. Marvin
Redenius largely owns and controls GTG Corp., an Iowa based corporation that
signed an Exclusive Technology License Agreement on December 1, 2004 with
Energenx, pursuant to which Energenx granted GTG Corp. an exclusive license
in
the area of North America (the United States, Canada and Mexico) to proprietary
Energenx technology relating to a battery charging system, known as the
Potential Battery Charger, for charging battery operated vehicles, excluding
automobiles.
37
Director
Independence
The
Board
of Directors has determined thatthree
of
its members are currently “independent directors” as that term is defined in
Rule 4200(a)(15)
of
the
Marketplace Rules of the National Association of Securities Dealers. Our
independent directors include: Thomas Bearden, Marvin Redenius and Hans Werner
Huss.
Item
13.Exhibits
(a) Exhibits
specified by item 601 of Regulation S-B.
Audit
Fees. Aggregate
fees billed for professional services rendered by Williams & Webster, P.S.
in connection with its audit of Energenx’s financial statements as of and for
the years ended December 31, 2006, and 2007, its reviews of Energenx’s unaudited
condensed consolidated interim financial statements, and for SEC consultations
and filings were $20,226 and $25,025, respectively.
Tax
Fees
- We
paid Williams & Webster, P.S. $450 and $0 for the fiscal years 2006 and 2007
respectively for professional services rendered for tax compliance.
All
Other Fees
- We did
not incur any other fees and expensesfrom
Williams & Webster, P.S. for the fiscal years 2006 and 2007 annual
audits.
Exclusive
Technology License Agreement and Right to Purchase Patents between
Bedini
Technology, Inc. and John C. Bedini, dated October 8, 1999. (Incorporated
by reference to exhibit 10.3 to the Form 10-KSB previously filed
by
Energenx on April 15, 2005 (File No. 000-50739))
10.3
Exclusive
Technology License Agreement and Right to Purchase Patents between
Bedini
Technology, Inc. and John C. Bedini, dated May 1, 2001 (Incorporated
by
reference to exhibit 10.4 to the Form 10-KSB previously filed by
Energenx
on April 15, 2005 (File No. 000-50739))
Rule
13a-14(a)/15d-14(a) Certification of Chief Executive
Officer
31.2
Rule
13a-14(a)/15d-14(a) Certification of Chief Financial
Officer
32
Section
1350 Certifications
40
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act of 1934, as amended,
the
registrant caused this Annual Report on Form 10-KSB to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Post Falls, Idaho
on this 31th day of March, 2008.
ENERGENX, INC.
By:
/s/
Gary
A. Bedini
Gary
A. Bedini
President
& Chief Executive Officer
In
accordance with Section 13 or 15(d) of the Exchange Act of 1934, as amended,
this Annual Report on Form 10-KSB has been signed below by the following persons
on behalf of the registrant in the capacities indicated below on this 31th
of
March, 2008.
Signature
Title
/s/
Gary A. Bedini
Director,
President & Chief Executive Officer
Gary
A. Bedini
(Principal
Executive Officer)
/s/
Rick M. Street
Director,
Chief Financial Officer,
Rick
M. Street
Secretary,
Treasurer
(Principal
Financial and Accounting Officer)
/s/
John C. Bedini
Director,
Vice President for Research and
John
C. Bedini
Development
/s/
Thomas E. Bearden
Director
Thomas
E. Bearden
/s/
Hans Werner Huss
Director
Hans
Werner
Huss
/s/
Marvin Redenius
Director
Marvin
Redenius
41
F-1
ENERGENX,
INC.
(A
Development Stage Company)
BALANCE
SHEET
December
31
2007
2006
ASSETS
CURRENT
ASSETS
Cash
$532,545
$499,235
Notes
receivable
1,509
11,229
Prepaid
expense
7,614
38,401
Total
Current Assets
541,668
548,865
PROPERTY
AND EQUIPMENT, NET
18,130
20,470
OTHER
ASSETS
License,
net of accumulated amortization
54,400
61,600
Patents,
net of accumulated amortization
38,404
37,117
Total
Other Assets
92,804
98,717
TOTAL
ASSETS
$
652,602
$
668,052
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT
LIABILITIES
Accounts
payable
$
8,101
$
8,890
Accounts
payable - related party
1,040
—
Interest
payable
—
2,674
Interest
payable-related party
—
2,607
Deposit
on license
5,000
5,000
Deposit
on common stock
—
600,000
Payroll
taxes payable
4,024
37,216
Notes
payable
—
1,660
Accrued
payroll
—
56,950
Unclaimed
property
6,599
—
Total
Current Liabilities
24,764
714,997
COMMITMENTS
AND CONTINGENCIES
—
—
STOCKHOLDERS'
EQUITY (DEFICIT)
Preferred
stock, $.001 par value; 5,000,000 shares authorized,
no
shares issued or outstanding
—
—
Common
stock, $.001 par value; 50,000,000 shares authorized,
29,697,276
and 27,497,276 shares issued and oustanding,
respectively
29,697
27,497
Additional
paid-in capital
3,650,717
2,175,717
Deficit
accumulated during development stage
(3,052,576
)
(2,250,159
)
Total
Stockholders' Equity (Deficit)
627,838
(46,945
)
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
$
652,602
$
668,052
The
accompanying notes are an integral part of these financial
statements.
The
Company was incorporated on September 29, 1999 under the laws of the State
of
Nevada. The primary business purpose of the Company is to undertake research
and
development relating to an electromagnetic motor. The Company is in the
development stage. The fiscal year end of the corporation is December
31.
On
June1, 2001, the Company’s board of directors executed a unanimous written consent
to amend its articles of incorporation to provide that the name of the Company
be changed from Bedini Technology, Inc. to Energenx, Inc. (hereinafter
“Energenx” or the “Company”).
On
December 23, 2004, the Company acquired all of the outstanding common stock
of
Edward II, Inc., a fully reporting public company. For accounting purposes,
the
acquisition has been treated as a recapitalization of Energenx with Energenx
as
the acquirer in a reverse acquisition. The historical financial statements
prior
to December 23, 2004 are those of Energenx, the operating company, while the
Company maintains the legal structure of the acquired Edward II, Inc.
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
December 2007, the FASB issued Statement of Financial Accounting Standards
No.
160 ("SFAS 160"), “Noncontrolling Interests in Consolidated Financial
Statements”, this statement requires that the ownership interests in
subsidiaries held by parties other than the parent be clearly identified,
labeled, and presented in the consolidated statement of financial position
within equity, but separate from the parent’s equity. The amount of consolidated
net income attributable to the parent and to the noncontrolling interest be
clearly identified and presented on the face of the consolidated statement
of
income. Changes in a parent’s ownership interest while the parent retains its
controlling financial interest in its subsidiary be accounted for consistently.
A parent’s ownership interest in a subsidiary changes if the parent purchases
additional ownership interests in its subsidiary or if the parent sells some
of
its ownership interests in its subsidiary. It also changes if the
subsidiary
reacquires some of its ownership interests or the subsidiary issues additional
ownership interests. All of those transactions are economically similar, and
this Statement requires that they be accounted for similarly, as equity
transactions. When a subsidiary is deconsolidated, any retained noncontrolling
equity investment in the former subsidiary be initially measured at fair value.
The gain or loss on the deconsolidation of the subsidiary is measured using
the
fair value of any noncontrolling equity investment rather than the carrying
amount of that retained investment. Entities provide sufficient disclosures
that
clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners.
This
Statement is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008 (that is, January 1, 2009, for
entities with calendar year-ends). Earlier adoption is prohibited. The effective
date of this Statement is the same as that of the related Statement
141(R)
In
December 2007, the FASB issued Statement of Financial Accounting Standards
No.
141R, “Business Combinations”, (SFAS No. 141R”). This statement changes the
accounting for business combinations. Under this statement, an acquiring entity
is required to recognize all the assets acquired and liabilities assumed in
a
transaction at the acquisition-date fair value with limited exceptions. This
statement changes the accounting treatment and disclosure for certain specific
items in a business combination. This statement applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December15, 2008. Accordingly, any business combinations we engage in will be recorded
and disclosed following existing generally accepted accounting principles (GAAP)
until January 1, 2009. We expect SFAS No. 141R will have an impact on accounting
for business combinations once adopted but the effect is dependent upon
acquisitions at that time.
In
February 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities - Including an amendment of FASB Statement
No.
115” SFAS No. 159). This statement permits entities to choose to measure many
financial instruments and certain other items at fair value. The objective
is to
improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets
and
liabilities differently without having to apply complex hedge accounting
provisions. This statement is expected to expand the use of fair value
measurement, which is consistent with the Board’s long-term measurement
objectives for accounting for financial instruments. This statement is effective
as of the beginning of an entity’s first fiscal year that begins after November15, 2007, although earlier adoption is permitted. Management has not determined
the effect that adopting this statement would have on the Company’s financial
condition or results of operations.
In
September 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
No. 87, 88,
106,
and
132(R)” (SFAS No. 158). This statement requires an employer to recognize the
overfunded or underfunded statues of a defined benefit postretirement plan
(other than a multiemployer plan) as an asset or liability in its statement
of
financial position and to recognize changes in that funded status in the year
in
which the changes occur through comprehensive income of a business entity or
changes in unrestricted net assets of a not for profit organization. This
statement also requires an employer to measure the funded status of a plan
as of
the date of its year end statement of financial position, with limited
exceptions. The adoption of this statement had no immediate material effect
on
the Company’s financial condition or results of operations.
In
September 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 157, "Fair Value Measurements," (SFAS No.
157) which defines fair value, establishes a framework for measuring fair value
in GAAP, and expands disclosures about fair value measurements. Where
applicable, SFAS No. 157 simplifies and codifies related guidance within GAAP
and does not require any new fair value measurements. SFAS
No.
157 is effective for financial
statements issuedfor
fiscal years beginning after November15, 2007, and interim periods within those fiscal years. Earlier adoption is
encouraged. The Company does not expect the adoption of SFAS No. 157 to have
a
significant immediate effect on its financial position or results of
operation.
In
March
2006, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 156, “Accounting for Servicing of Financial Assets—an
amendment of FASB Statement No. 140.” This statement requires an entity to
recognize a servicing asset or servicing liability each time it undertakes
an
obligation to service a financial asset by entering into a servicing contract
in
any of the following situations: a transfer of the servicer’s financial assets
that meets the requirements for sale accounting; a transfer of the servicer’s
financial assets to a qualifying special-purpose entity in a guaranteed mortgage
securitization in which the transferor retains all of the resulting securities
and classifies them as either available-for-sale securities or trading
securities; or an acquisition or assumption of an obligation to service a
financial asset that does not relate to financial assets of the servicer or
its
consolidated affiliates. The statement also requires all separately recognized
servicing assets and servicing liabilities to be initially measured at fair
value, if practicable and permits an entity to choose either the amortization
or
fair value method for subsequent measurement of each class of servicing assets
and liabilities. The statement further permits, at its initial adoption, a
one-time reclassification of available for sale securities to trading securities
by entities with recognized servicing rights, without calling into question
the
treatment of other available for sale securities under Statement 115, provided
that the available for sale securities are identified in some manner as
offsetting the entity’s exposure to changes in fair value of servicing assets or
servicing liabilities that a servicer elects to subsequently measure at fair
value and requires separate presentation of servicing assets and servicing
liabilities subsequently measured at fair value in the statement of financial
position and additional disclosures for all separately recognized servicing
assets and servicing liabilities. This
statement
is effective for fiscal years beginning after September 15, 2006, with early
adoption permitted as of the beginning of an entity’s fiscal year. Management
believes the adoption of this statement will have no impact on the Company’s
financial condition or results of operations.
In
February 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Financial
Instruments, an Amendment of FASB Standards No. 133 and 140” (SFAS No. 155).
This statement established the accounting for certain derivatives embedded
in
other instruments. It simplifies accounting for certain hybrid financial
instruments by permitting fair value remeasurement for any hybrid instrument
that contains an embedded derivative that otherwise would require bifurcation
under SFAS No. 133 as well as eliminating a restriction on the passive
derivative instruments that a qualifying special-purpose entity (“SPE”) may hold
under SFAS No. 140. This statement allows a public entity to irrevocably elect
to initially and subsequently measure a hybrid instrument that would be required
to be separated into a host contract and derivative in its entirety at fair
value (with changes in fair value recognized in earnings) so long as that
instrument is not designated as a hedging instrument pursuant to the statement.
SFAS No. 140 previously prohibited a qualifying special-purpose entity from
holding a derivative financial instrument that pertains to a beneficial interest
other than another derivative financial instrument. This statement is effective
for fiscal years beginning after September 15, 2006, with early adoption
permitted as of the beginning of an entity’s fiscal year. Management believes
the adoption of this statement will have no impact on the Company’s financial
condition or results of operations.
Accounting
for Stock Options and Warrants Granted to Employees and
Nonemployees
Statement
of Financial Accounting Standards No. 123, “Accounting for Stock-Based
Compensation”,
defines
a
fair value-based method of accounting for stock options and other equity
instruments. The Company has adopted this method, which measures compensation
costs based on the estimated fair value of the award and recognizes the cost
over the service period. In 2004, the Company adopted the changes to SFAS No.
123 as prescribed by SFAS No. 123(R). See Note 13.
Cash
Equivalents
The
Company considers all highly liquid investments with a maturity of three months
or less when purchased to be cash equivalents.
Compensated
Absences
Employees
of the Company are entitled to paid vacation, paid sick days and personal days
off depending on job classification, length of service, and other factors.
The
Company’s policy is to recognize the cost of compensated absences when actually
paid to employees. The amount is not currently recognized as it is deemed
immaterial.
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 December 31, 2007 and 2006the Company’s cash balance exceeded Federal Deposit Insurance Corporation (FDIC)
limits by $433,281 and $399,235, respectively.
Derivative
Instruments
The
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 133, “Accounting for Derivative Instruments and Hedging
Activities” ( SFAS No. 133), as amended by SFAS No. 137, “Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB No. 133”, and SFAS No. 138, “Accounting for Certain Derivative
Instruments and Certain Hedging Activities”, SFAS No. 149, “Amendment of
Statement 133 on Derivative Instruments and Hedging Activities”, SFAS No. 150,
“Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity”, and SFAS No. 155, “Accounting for Certain Hybrid
Financial Instruments, an Amendment of FASB Standards No. 133 and 140”. These
standards establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. They require that an entity recognize
all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value.
If
certain conditions are met, a derivative may be specifically designated as
a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging derivative with the recognition of (i) the changes in the fair
value of the hedged asset or liability that are attributable to the hedged
risk
or (ii) the earnings effect of the hedged forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change.
Historically,
the Company has not entered into derivatives contracts to hedge existing risks
or for speculative purposes.
At
December 31, 2007 and 2006, the Company has not engaged in any transactions
that
would be considered derivative instruments or hedging activities.
Development
Stage
The
Company is in the development stage however, the Company has had limited sales
in 2007.
Earnings
Per Share
On
January 1, 1998, the Company adopted Statement of Financial Accounting Standards
No. 128, which provides for calculation of "basic" and "diluted" earnings per
share. Basic earnings per share includes no dilution and is computed by dividing
net income available to common shareholders by the weighted average common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution of securities that could
share
in
the earnings of an entity. Diluted net income (loss) per share is the same
as
basic net income (loss) per share as there are no common stock equivalents
outstanding.
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 December 31, 2007 and 2006.
Going
Concern
As
shown
in the accompanying financial statements, the Company has incurred an
accumulated deficit of $3,052,576 through December 31, 2007 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.
Impaired
Asset Policy
The
Company reviews its long-lived assets quarterly to determine if any events
or
changes in circumstances have transpired which indicate that the carrying value
of its assets may not be recoverable. At December 31, 2007 and 2006, the Company
determined that there were no impairments of long-lived assets.
The
Company’s intangible assets are composed of a patent and license. They are
amortized on a straight-line basis over ten and fifteen year lives,
respectively.
Provision
for Taxes
Income
taxes are provided based upon the liability method of accounting pursuant to
Statement of Financial Accounting Standards No. 109, “Accounting for Income
Taxes” (SFAS No. 109). Under this approach, deferred income taxes are recorded
to reflect the tax consequences in future years of differences between the
tax
basis of assets and liabilities and their financial reporting amounts at each
year-end. A valuation allowance is recorded against deferred tax assets if
management does not believe the Company has met the “more likely than not”
standard imposed by SFAS No. 109 to allow recognition of such an asset. See
Note
10.
Effective
November 1, 2007, the Company adopted the Financial Accounting Standards
Board (“FASB”) Interpretation No. 48, Accounting
for Uncertainty in Income Taxes—an interpretation of FASB Statement
No. 109
(“FIN
48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in an enterprise’s financial statements in accordance with FASB Statement
No. 109, Accounting
for Income Taxes.
FIN 48
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to
be
taken in a tax return. Additionally, FIN 48 provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. The adoption of FIN 48 did not have a material
impact on the Company’s financial position, results of operation or liquidity.
The current Company policy classifies any interest recognized on an underpayment
of income taxes as interest expense and classifies any statutory penalties
recognized on a tax position taken as selling, general and administrative
expense.
The
Company has not taken a tax position that, if challenged, would have a material
effect on the financial statements for the twelve-months ended December 31,2007, or during the prior three years applicable under FIN 48.
As
a
result of the adoption of FIN 48, we did not recognize any adjustment to
the liability for uncertain tax position and therefore did not record any
adjustment to the beginning balance of accumulated deficit on the consolidated
balance sheet.
Research
and Development
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 year ended December 31, 2007 and
2006 were $215,469 and $209,913, respectively. Salaries for those employees
directly involved in research and development are included in research and
development expense.
Revenue
Recognition
Revenue
is recorded when products are shipped and 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 - PROPERTY AND EQUIPMENT
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 years ended December 31, 2007 and 2006 was $7,501 and $5,852,
respectively.
Following
is a summary of property, equipment, leasehold improvement, and ccumulated
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
On
October 8, 1999, the Company acquired a technology license, which included
all
rights, title and interest in certain patent applications, improvements,
proprietary information, trade secrets, technical and scientific information
pertaining to several designs of the back EMF permanent electromagnetic motor
generator from Mr. John C. Bedini, currently a director and officer of the
Company.
On
May 1,2001, the Company acquired a second license, accompanied by similar rights
as
the aforementioned license, from Mr. Bedini in exchange for 5,140,326 shares
of
the Company’s common stock. The second license was recorded at $58,000 and is
for certain technology referred to as Monopole Energy Delivery System (“MEDS”).
MEDS is an energy producing system designed to use a magnetic monopole motor
configuration and produce electrical energy.
NOTE
6 - LICENSE AGREEMENT WITH AFFILIATED COMPANY
On
December 1, 2004, the Company entered into an exclusive technology license
agreement with a corporation that is mainly controlled by a member of the board
of directors. Pursuant to that agreement, the Company granted an exclusive
license in North America to proprietary Energenx technology relating to a
battery charging system, known as the Potential Battery Charger, for charging
battery operated vehicles, excluding automobiles. The license granted includes
a
license under existing patents rights owned by Energenx and to any
patentapplications
to be filed to the extent that it relates to the proprietary Energenx technology
involving a battery charging system utilized for charging battery operated
vehicles other than automobiles. The license shall exclusive for a period of
ten
years, with an option to extend the exclusivity for an additional ten years.
There was no right to sublicense granted in the agreement.
The
licensee agrees to pay royalties equal to five percent of the gross sales price
of all products sold which utilize the licensed proprietary technology to
Energenx. A de minimus up front license fee of $1 was paid for the
license.
As
condition to entering into the exclusive technology license agreement, the
licensee agreed to purchase all of Energenx’s proprietary hybrid module
components to be installed in the Potential Battery Chargers, named “Radiant
modules” in the agreement, but now referred to as “Potential modules” between
the parties, on a cost plus basis at a base price of $50 per module. Under
the
agreement, the Company is obligated to pay all patent filing, prosecution and
maintenance costs.
While
either party can terminate the exclusive technology license agreement if the
other party defaults in the performance of any obligation under the agreement
or
is adjudged bankrupt, the license formally terminates upon expiration of the
last to expire of the licensed patents or patents to be filed in the future
concerning the proprietary Energenx technology.
NOTE
7 - RELATED PARTY TRANSACTIONS
During
the year ended 2006, the Company paid expenses on behalf of Bedini Electronics,
Inc., a company privately owned by two officers of Energenx. During the years
ended December 31, 2007 and 2006, Bedini Electronics, Inc. paid some of the
expenses of the Company. This was done as the two companies shared joint office
space and split certain expenses. Bedini Electronics Inc paid all outstanding
monies owed at December 20, 2007. The net amount owing from Bedini Electronics
at December 31, 2007 and 2006 is $0 and $11,229, respectively. In April 2005,
the Company loaned Bedini Electronics $4,000 in cash for operations. This
related loan, which bears interest of 6%, is payable in monthly installments
of
$352. As of December 31, 2007 the loan has been paid in full.
During
the year ended December 31, 2007, the company purchased a piece of testing
equipment in the amount of approximately $1,500, for which it will be reimbursed
by GTG Corporation. The principal shareholder of GTG is also a director of
the
Company.
For
additional related party transactions, see Notes 5 and 6.
NOTE
8 - PROVISION FOR TAXES
At
December 31, 2007the Company had net deferred tax assets calculated at an
expected rate of 34% of approximately $949,000 principally arising from net
operating loss carryforwards for income tax purposes. As management of the
Company cannot determine that it is more likely than not that the Company will
realize the benefit of the net deferred tax asset, a valuation allowance equal
to the net deferred tax asset has been
At
December 31, 2007, the Company has net operating loss carryforwards of
approximately $2,793,000, which expire in the years 2019 through 2027. In 2003
the Company recognized approximately $260,000 of losses from the issuance of
common stock for services and license fees which were not deductible for tax
purposes and are not included in the above calculation of deferred tax assets.
The change in the allowance account from December 31, 2006 to December 31,2007
was $272,000.
NOTE
9 - 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. See Note 13.
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.
NOTE
10 - STOCK OPTION PLAN
Statement
of Financial Accounting Standards No. 123, “Accounting for Stock-Based
Compensation” (SFAS No. 123), defines a fair value-based method of accounting
for stock options and other equity instruments. The Company has adopted this
method,
which
measures compensation costs based on the estimated fair value of the award
and
recognizes that cost over the service period. In 2004, the Company adopted
the
changes to SFAS No. 123 as prescribed by SFAS No. 123(R).
The
Company’s board of directors approved the adoption of the “1999 Non-Qualified
Stock Option and Stock Appreciation Rights Plan” by unanimous consent on October7, 1999. The plan was initiated to encourage and enable officers, directors,
consultants, advisors and other key employees of the Company to acquire and
retain a proprietary interest in the Company by ownership of its common stock.
Up to 1,800,000 shares of common stock can be issued under the plan. During
the
year ended December 31, 2007, the Company granted 460,000 non-qualified options
to an officer and director and employees. The options were valued using the
Black-Scholes option pricing model using the following assumptions as required
under SFAS No. 123: risk-free interest rate of 4.28%; volatility of 127.32%;
no
dividends; an expected life of 10 years; and an expected exercise price of
$0.85. The Black-Scholes value was $0.82.
During
the year ended December 31, 2004, the Company granted 2,400,000 non-qualified
options to an individual in consideration of purchasing an initial 2,400,000
shares of common stock at a total unit price of $0.21 per unit. The purchase
price of these units was allocated $0.18 per share and $0.03 per stock option.
The options were valued using the Black-Scholes option pricing model using
the
following assumptions as required under SFAS No. 123: risk-free interest rate
of
4%; volatility of 50%; no dividends; an expected life of no more than 1 year;
and an expected exercise price of $0.21 for six months changing to $0.40 for
a
further six months. The 2,400,000 options were exercised within the first six
months of the grant for a cash payment of $500,000. Because the options were
granted in consideration of a capital investment, they are treated for
accounting purposes as warrants attached to the stock.
The
following is a summary of stock option activity:
Fair
Market Value Per Share of Options Granted in 2007
$
377,200
NOTE
11 - COMMITMENTS AND CONTINGENCIES
Leases
On
March13, 2006, the Company entered into a new two-year lease for office space. In
lieu of a security deposit, the Company in 2006 prepaid the entire amount of
the
lease, $57,600, which was then included in prepaid expenses in the financial
statements. The unamortized prepaid balance at December 31, 2007 was
$7,200.
Royalty
Agreements
The
Company has a royalty agreement with Mr. John Bedini as part of its EMF license.
Mr. Bedini is entitled to royalties of 3% of the net selling price of all
products covered by the EMF license and 3% of any gross rent or lease income
associated with the license.
The
Company also has a royalty agreement with Mr. Bedini regarding the MEDS license
for Mr. Bedini to receive 5% of the net selling price of all products covered
by
the MEDS license and 5% of any gross rent or lease income associated with the
license. The agreement also provides that a 3% royalty shall be paid on any
sub-licensee income derived from the MEDS license.
No
royalties have been earned or paid under either agreement at December 31, 2007
or 2006.
F-19
Dates Referenced Herein and Documents Incorporated by Reference