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10KSB/A — Amendment to Annual Report — Small Business
Securities
registered under Section 12(b) of the Exchange Act
NONE
Securities
registered under Section 12(g) of the Exchange Act
Common
Stock, $0.001 par value
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. o
Check
whether the issuer (1) 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
x No
o
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not 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. o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes o No x
The
issuer’s revenues for its fiscal year ended December 31, 2006 were$0.
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates, computed by reference to the price at which the common equity
was last sold (on January 23, 2007 at $0.50 per share), as of March 28, 2007
was
$5,938,437.
The
number of shares of Common Stock, par value $0.001, of the issuer outstanding
as
of March 28, 2007, was29,697,276
shares.
Transitional
Small Business Disclosure Format (Check one): Yes o;
No x
EXPLANATORY
NOTE
Energenx,
Inc. is filing this amendment to its Form 10-KSB for the fiscal year ended
December 31, 2006, filed with the Securities and Exchange Commission on March29, 2007 (the “Original Filing”), to add shell company disclosure on the cover
page of this Form 10-KSB/A pursuant to Rule 12b-2 of the Exchange
Act.
As
a
result of this amendment, the certifications pursuant to Section 302 and
Section
906 of the Sarbannes-Oxley Act of 2002, filed as exhibits to the Original
Filing, have been re-executed and re-filed as of the date of this Form
10-KSB/A.
Except
for the amendment described above, this Form 10-KSB/A does not modify or
update
other disclosures in, or exhibits to, the Original Filing.
TABLE
OF CONTENTS
PART
I
Page
Item
1.
Description
of Business
4
Item
2.
Description
of Property
13
Item
3.
Legal
Proceedings
13
Item
4.
Submission
of Matters to a Vote of Security Holders
13
PART
II
Item
5.
Market
for Common Equity and Related
Stockholder
Matters
14
Item
6
Management’s
Discussion and Analysis or Plan of Operation
Compliance
with Section 16 (a) of the Securities Exchange Act
28
Item
10.
Executive
Compensation
32
Item
11.
Security
Ownership of Certain Beneficial Owners
and
Management and Related Stockholder Matters
34
Item
12.
Certain
Relationships and Related Transactions
35
Item
13.
Exhibits
36
Item
14.
Principal
Accountant Fees and Services
36
EXHIBIT
INDEX
36
SIGNATURES
38
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/A. 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
B.
Energenx
Research and Product Development Programs
C.
Licensed
Proprietary Technology
D.
Out-Licensed
Technology
E.
Competition
G.
Strategic
Alliance
H.
Marketing
and
Sales
I.
Patents,
Trademarks, and Copyrights
J.
Employees
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
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
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
We
have
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. The current 36 volt version of the Potential Battery Charger is
designed to be specifically used to charge golf cart batteries. This charger
incorporates the use of our patented solid-state technology. The Potential
Battery Charger draws approximately one third as much power as a conventional
charger, charges the battery in less time, and does not cause the battery to
heat up or off-gas during the charging process. In a direct comparison between
the Potential Charger and a commercially available battery charger, the
Potential Charger draws approximately 425 watts of electrical charge while
the
commercial battery charger draws over 1200 watts. The Potential Charger also
charges the battery in 35% less time. Again, in a direct comparison between
the
Potential Charger and a commercially available model, the Potential Charger
was
able to completely recharge a golf cart battery in 7 hours while the commercial
charger required a full 12 hours to complete the task.
Besides
these obvious economic advantages to the Potential Battery Charger, there are
three other major benefits. The first is that the battery remains at room
temperature during the entire charge cycle. Experts in the battery industry
know
that over-heating of the battery during the charge cycle is the primary reason
for premature failure of the battery. Most of the energy saved by the Potential
Charger is the energy not lost to the production of heat in the battery during
the charge cycle. The second is that when charging a battery with the Potential
Battery Charger the battery off-gases much less than during conventional
charging. This reduces water loss in the battery during the charging process,
and therefore reduces maintenance requirements. The third is that ultimately
the
battery will last at least as long, or longer, than the manufacturer specifies,
based on the lack of heat damage to the battery.
The
electro-deposition process produced by the Potential Battery Charger is
extremely fine. This maintains the battery plates in “like new” condition at the
end of each charge cycle. 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.
6
Energenx
has developed a 36 volt version of the Potential Battery Charger designed for
use in certain golf carts and forklifts. Currently, other versions of the
Potential Battery Charger are being developed to meet the 24 and 48 voltage
ranges for electrically driven vehicles i.e. golf carts and ATVs.
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. Recent research and
development efforts by Energenx on the 36 volt Potential Battery Charger have
apparently resulted in significant improvements in its effectiveness. We intend
to provide a new version of the 36 volt Potential Battery Charger to GTG Corp.
for further testing. If positive results from such testing are obtained, GTG
may
re-submit pre-production models of the newest version of the 36 volt Potential
Battery Charger for further UL assessment and certification. Currently the
parties intend to manufacture the 36 volt Potential Battery Chargers necessary
for UL assessment and certification at Energenx premises. After full UL
certification, GTG Corp. would then manufacture, market and sell Potential
Battery Charger products.
Once
the
development for the North American market for the Potential Battery Chargers
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.
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. 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.
7
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.
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.
8
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.
Under
the
2001 License Agreement Energenx agreed to pay an up front license fee of
$58,000. John Bedini was issued 856,721 shares of common stock of Energenx
in
lieu of payment of the license fee. 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.
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.
9
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 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.
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 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 $50.00 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.
10
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.
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 Potential Battery
Charger products. As part of the Exclusive Technology License Agreement GTG
agreed to purchase all Potential modules on a cost plus basis at a base price
of
$50.00 per module. Each Potential Battery Charger will require installation
of
this Potential module into its electronic circuitry prior to becoming
operational. We intend to develop other versions of the Potential Battery
Charger with varying voltage levels for use in forklifts, ATVs and other battery
powered vehicles. GTG Corp. will have the right to manufacture and sell these
newer versions of the Potential Battery Charger under the same terms and
conditions as the original Potential Battery Charger. Currently the parties
intend to manufacture the 36 volt Potential Battery Chargers for UL assessment
and testing purposes only at Energenx premises.
11
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.
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.
12
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.
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 2006.
13
PART
II
Item
5.Market
for Common Equity and Related Stockholder Matters.
Our
common stock is not traded on any securities exchange and there is currently
no
market for our common stock.
The
transfer agent of Energenx is Nevada Agency and Trust Company, 50 West Liberty
Street, Suite 880, Reno, Nevada89501.
As
of
March 28, 2007 there were approximately 170 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.
14
Recent
Sales of Unregistered Securities; Use of Proceeds From Registered
Securities
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 has agreed to purchase 3,000,000 shares
of common stock of Energenx for a purchase price of $1,500,000. This private
placement is exempt from registration pursuant to Section 4(2) of Securities
Act
of 1933, as amended, and pursuant to Rule 505 of Regulation D. As of December31, 2006, Energenx confirmed receipt of $1,000,000 of the $1,500,000 total
purchase price pursuant to the Subscription Agreement signed September 30,2005.
Energenx has subsequently received the remaining $500,000 of the $1,500,000
total purchase price.
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-19
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 Potential Battery Chargers from GTG Corp., and research and
development activities on energy generation, battery charger and charge control
unit prototypes.
Concerning
the battery chargers, product research will continue on improving the efficiency
of the Potential Battery Charger. We will continue our development of variations
of the Potential Battery Charger for specific markets to accommodate 12-volt,
24-volt, 36-volt and 48-volt applications with a wide range of capacity
requirements. In 2007 we expect to be able to deliver a new version of the
36
volt of our Potential Battery Chargers to GTG Corp. for testing and potentially
for further UL assessment, testing and certification.
15
We
may
generate revenues pursuant to our Exclusive Technology License Agreement with
GTG Corp. if they order Potential Battery Chargers. We cannot assure you that
GTG Corp. will order any Potential Battery Chargers from us in 2007 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.
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
Potential Battery Chargers 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 Potential 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, 2006, we had $499,235 in cash and cash equivalents. In January
2007
we received an additional $500,000 from a private placement (see below). 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, 2006
was
$461,261 resulting in a net loss of $513,305.
Net
cash
from financing activities for the fiscal year ended December 31, 2006 was
$800,000. This does not include the $500,000 due to the Energenx related to
shares remaining to be issued to Marvin Redenius 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. The additional
$500,000 was received on January 23, 2007.
16
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;
·
revenues
from purchase of Potential modules by GTG Corp., 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. We cannot at this
time assure you that those orders will occur or revenues will be generated
in
fiscal year 2007, 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:
17
Revenue
recognition:
Royalties will be recognized as revenue when the amounts are contractually
earned, fixed and determinable, and there is substantial probability of
collection.
Research,
development costs: Research
and development costs are expensed as incurred.
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 not generated any revenue to date other than interest
income. Our only income other than equity financings has been a modest amount
of
interest income. As of December 31, 2006, we had an accumulated deficit of
$2,250,159and
our
operating losses are continuing.
We
have no products available for sale and we may never be successful in developing
products suitable for commercialization.
All
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 no products available for sale and we do not expect to
have
any products commercially available for several years, if at all. There can
be
no assurance that our research will lead to the discovery of any commercially
viable battery chargers or power generation devices. There are many reasons
that
we may fail in our efforts to develop our product candidates, including
that:
18
·
our
product candidates will be ineffective,
·
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..
19
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 2007 from supplying
GTG Corp., we may need additional future financings in order to carry out our
plan of operations beyond the next twelve months.
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 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.
20
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.
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.
21
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.
22
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.
23
Our
controlling stockholders may make decisions that you do not consider to be
in
your best interest.
As
of
March 28, 2007, 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.
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 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.
24
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.
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 in 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
There
is currently no market for our common stock; if listed the price of our stock
may experience considerable volatility.
There
currently is no trading market for our common stock. It is our intention to
undertake an initial public offering or engage in another strategy to have
our
common stock traded on the OTC Bulletin Board under a symbol to be determined.
The OTC Bulletin Board is a limited market and subject to substantial
restrictions and limitations in comparison to the NASDAQ system. There can
be no
assurance that a substantial trading market will ever develop for our common
stock, or be sustained, if developed, or that current or future shareholders
will be able to resell their securities or otherwise liquidate their investment
without considerable delay, if at all.
25
Recent
history relating to the market prices of listed newly public companies indicates
that, from time to time, there may be significant volatility in the market
price
of our securities because of factors unrelated, as well as related, to our
operating performance. Factors that could have a significant impact on the
future market price of our common stock include, but are not limited to,
announcements of technological innovations or new products by Energenx or its
competitors, government regulatory action, patent or proprietary rights
developments and market conditions for companies engaged in the development
of
alternative energy products. There can be no assurance that our common stock
will ever qualify for inclusion within the NASDAQ System, or that more than
a
limited market will ever develop for our common stock.
If
our common stock is traded at a low price in the future, this may affect the
ability of shareholders to sell their shares.
Penny
Stock Regulation Broker-dealer practices in connection with transactions in
"Penny Stocks" are regulated by certain penny stock rules adopted by the
Securities and Exchange Commission. Penny stocks generally are equity securities
with a price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the NASDAQ system). The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document that provides information about penny stocks and the risk associated
with the penny stock market. The broker-dealer must also provide the customer
with current bid and offer quotations for the penny stock, the compensation
of
the broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules generally require that prior to
a
transaction in a penny stock, the broker-dealer must make a written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules. When and if our common stock is listed on the OTC Bulletin Board,
our stock will likely have a trading price of less than $5.00 per share and
will
not be traded on any exchanges, as they are defined. Therefore, our common
stock
is likely to become subject to the penny stock rules and investors may find
it
more difficult to sell their securities, should they desire to do
so.
We
do not pay cash dividends.
We
have
never paid dividends and do not presently intend to pay any dividends in the
foreseeable future.
Item
7.Financial
Statements.
The
Audited Financial Statements for this Form 10-KSB appear on pages F-1
through F-19
following the signature page below.
Item
8.Changes
In and Disagreements With Accountants on Accounting and Financial
Disclosure.
26
On
January 28, 2005, the board of directors of Energenx, Inc. unanimously passed
resolutions dismissing the independent accounting firm Beckstead and Watts,
LLP,
Certified Public Accountants, 3340 Wynn Road, Suite B, Las Vegas, Nevada89102
and appointing the independent accounting firm Williams & Webster, PS.,
Certified Public Accountants, 601 W. Riverside, Suite 1940, Spokane, Washington99201 to audit the financial statements of Energenx for the year ending December31, 2004. The board of directors dismissed the accounting firm Beckstead and
Watts because that firm had performed the audits for Edward II, Inc., the blank
check reporting company that Energenx merged with on December 28, 2004 and
was
not familiar with the business of Energenx, the surviving
corporation.
In
its
audit of Edward II, Beckstead and Watts had expressed substantial doubt about
the ability of Edward II, Inc. the blank check pre-merger corporation, to
continue as a going concern because Edward II, Inc. had had limited operations
at the time of the audit and had not commenced planned principal operations.
Beckstead and Watts’ report on the audited financial statements of Edward II did
not contain an adverse opinion or a disclaimer of opinion nor was it modified
as
to uncertainty, audit scope, or accounting principles, except for the going
concern paragraph. There were no disagreements at the most recent fiscal year
end and any subsequent interim period through the date of dismissal with
Beckstead and Watts concerning any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure by either Edward
II or Energenx. As Energenx was the surviving corporation in the merger
transaction the board of directors decided that the independent auditors of
the
pre-merger corporation Energenx, Williams & Webster, PS., should continue in
that capacity.
On
January 28, 2005, the Board of Directors of Energenx, Inc. unanimously passed
resolutions appointing the independent accounting firm Williams & Webster,
PS., Certified Public Accountants, 601 W. Riverside, Suite 1940, Spokane,
Washington99201 to audit the financial statements of Energenx for the year
ending December 31, 2004.
Appointment
of the new independent accountant was approved by Energenx’s Board of Directors,
which undertook the following actions before the appointment of the
accountant:
1
The
Board verified that the accountant was in good standing within the
jurisdiction of its practice in the state of
Washington.
2
The
Board verified that the accountant was a member in good standing
of the
Public Company Accounting Oversight Board (PCAOB).
3
The
Board verified that the accountant was capable of exercising objective
and
impartial judgment on all issues encompassed within its potential
engagement, and that no member of the firm had any interest or
relationship with any officer, director or principal
shareholder.
27
Item
8A.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 December31,2006. Based on that evaluation, our principal executive officer and our
principal financial officer have concluded that our disclosure controls and
procedures were effective as of December 31, 2006. 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
8B
Other
Information
None.
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
54
President
& Chief Executive
Officer,
Director
Rick
M. Street
49
Chief
Financial Officer, Secretary,
Treasurer,
Director
John
C. Bedini
57
Vice
President of Research and
Development,
Director
Thomas
E. Bearden, Ph.D.
78
Director
Marvin
Redenius
42
Director
Hans
Werner Huss
64
Director
28
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.
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.
29
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 Ph.D. (Trinity University) in
Science, M.S. (Georgia Tech) in Nuclear Engineering, and B.S. (Northeast
Louisiana State) in mathematics. has participated in founding the first
legitimate theory of COP>1.0 EM systems published in leading scientific
journals. Dr. Bearden is Director of the Association of Distinguished American
Scientists (ADAS), a former 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. He has authored or co-authored more than
200
professional papers in the literature and has published several technical books.
In his work with the AIAS, he has participated in authoring and co-authoring
more than 100 scientific papers primarily in the area of advanced
electrodynamics. Approximately one third of the papers have been published
in
leading scientific and research journals. Of the published articles one half
of
them are related to extracting usable electromagnetic energy.
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.
Hans
Werner Huss.
Hans
Werner Huss has served as a director of Energenx since January 2002. Mr. Huss
graduated Diplom Ingenieur Electrical Engineering, with emphasis on 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.
30
Gary
A.
Bedini is the brother of John C. Bedini. There are no other family relationships
between any of the officers and directors.
As
we are
a development stage company with no 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 intend to do so in the
near future. Consequently 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.
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 just recently become a reporting company required to file
periodic reports with the SEC and as our common stock is not currently listed
on
any exchange, we have not yet dealt with this issue, but we intend to do so
in
the near future.
Two
report on Form 4 filed on behalf of Marvin Redenius, Director, were filed late
during January and November 2006 concerning the receipt of subscription
receivables pursuant to a Subscription Agreement between Energenx and Marvin
Redenius dated September 30, 2005.
31
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, 2005 and December 31, 2006
to our Chief Executive Officer and our Vice President (collectively the “Named
Executive Officers”). None of the other executive officers of Energenx had an
annual salary and bonus for fiscal year 2006 that exceeded
$100,000.
Name
and
Principal
Position
(a)
Year
(b)
Salary
($)
(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.
2006
123,214
0
0
0
0
0
0
123,214
2005
104,932
0
0
0
0
0
0
104,932
John
Bedini
Vice
Pres., Dir.
2006
127,282
0
0
0
0
0
0
127,282
2005
122,924
0
0
0
0
0
0
122,924
B.
Narrative
Disclosure to Summary Compensation
Table
Neither
Gary Bedini or John Bedini 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 either Named Executive Officer. 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. John Bedini’s annual salary for 2006 was initially set at $136,853 but
was also revised downward in November 2006 to $77,418, resulting in actual
salary paid of $127,282.
32
C.
Outstanding
Equity Awards at Fiscal Year
End
Option
Awards
Stock
Awards
Name
(a)
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b)
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
Equity
Incentive
Plan
Awards
Number
of
Securities
Underlying
Unexer-
cised
Unearned
Options
(#)
(d)
Option
Exercise
Price
($)
(e)
Option
Expira-
tion
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
J.
Bedini
0
0
0
0
0
0
0
0
0
There
were no option grants to our Named Executive Officers in 2006. 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
Name
(a)
Fees
Earned
or
Paid in
Cash
($)
(b)
Stock
Awards
($)
(c)
Option
Awards
($)
(d)
Non-Equity
incentive
Plan
Com-
pensation
($)
(e)
Change
in
Pension
Vslue
and
Nonqualified
Deferred
Compensation
Earnings
(f)
All
other
Compensa-
tion
($)
(g)
Total
($)
(h)
Bearden
0
0
0
0
0
0
0
Huss
0
0
0
0
0
4500
(1)
4500
Redenius
0
0
0
0
0
0
0
Street
0
0
0
0
0
0
0
(1)
Hans
Werner Huss was paid $4,500 in 2006 as a consultant to Energenx for
services involving drafting an updated business
plan.
33
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 28, 2007 (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 28, 2007 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 28, 2007 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.
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.
34
(4)
Rick
M. Street. Includes 250,000 shares of common stock held by Rick
Street.
(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 31,2006.
(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)
0
$0
300,000
Equity
compensation plans not approved by security holders
0
$0
Total
0
$0
300,000
(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 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.
During
the years ended December 31, 2006 and 2005, Energenx paid expenses on behalf
of
Bedini Electronics, Inc., a company privately owned by two officers of Energenx.
At the same time, Bedini Electronics, Inc. paid some of the expenses of
Energenx. This was done as the two companies shared joint office space and
split
certain expenses. In addition, in April 2005, Energenx loaned Bedini Electronics
$4,000 in cash for operations. This related loan, which bears interest of 6%,
is
payable in monthly installments of $352. At December 31, 2006, the unpaid loan
balance from Bedini Electronics was $2,037. No principal or interest was paid
on
this loan during 2006. The aggregate net amount owing from Bedini Electronics
at
December 31, 2006 and 2005 was $11,229 and $10,176, respectively.
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 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.
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.
35
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 in
connection with its audit of Energenx’s financial statements as of and for the
years ended December 31, 2006, and 2005, its reviews of Energenx’s unaudited
condensed consolidated interim financial statements, and for SEC consultations
and filings were $20,226 and $17,497 , respectively.
Tax
Fees
- We
paid Williams & Webster, P.S. $450 for the fiscal year 2006 for professional
services rendered for tax compliance. We did not incur any fees and expenses
from Williams & Webster, P.S. for the fiscal year 2005 for professional
services rendered for tax compliance, tax advice and tax planning.
All
Other Fees
- We did
not incur any other fees and expensesfrom
Williams & Webster, P.S. for the fiscal years 2005 and 2006 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
______________
37
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/A to be signed on its
behalf
by the undersigned, thereunto duly authorized, in the City of Post Falls,
Idaho
on this 21st day of April, 2007.
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 21th
of
April, 2007.
Signature
Title
/s/
Gary A. Bedini
Director,
President & Chief Executive
Gary
A. Bedini
Officer
(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
38
Energenx,
Inc.
Post
Falls, Idaho
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
have
audited the accompanying balance sheets of Energenx, Inc. (a development
stage
company) as of December 31, 2006 and 2005, and the related statements of
operations, stockholders’ equity (deficit) and cash flows for the years then
ended. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Energenx, Inc. as of December31,2006 and 2005 and the results of its operations, stockholders’ equity (deficit)
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
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 electromagnetic motor, generator and battery charger
system. 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
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” (hereinafter “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)” (hereinafter “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," (hereinafter
"SFAS No. 157") which defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles (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 has not yet determined the financial impact of adopting
SFAS No. 157.
In
June
2006, the Financial Accounting Standards Board issued FASB Interpretation
No.
48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No. 109” (hereinafter “FIN 48”), which 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.
FIN
48 also provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition. FIN
48 is
effective for fiscal years beginning after December 15, 2006. The Company
does
not expect the adoption of FIN 48 to have a material impact on its financial
reporting, and the Company is currently evaluating the impact, if any the
adoption of FIN 48 will have on its disclosure requirements.
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 immediate 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” (hereinafter “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 immediate
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 that
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. If the amount were estimable, it would not be currently
recognized as the amount would be deemed immaterial.
Concentration
of Credit Risk
The
Company maintains its cash in one commercial account at a major financial
institution. Although the financial institution is considered creditworthy
and
has not experienced any losses on its deposits, at December 31, 2006 and
2005the Company’s cash balance exceeded Federal Deposit Insurance Corporation (FDIC)
limits by $399,235 and $69,451, respectively.
Derivative
Instruments
The
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 133, “Accounting for Derivative Instruments and Hedging
Activities” (hereinafter “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, 2006 and 2005, 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 and has not commenced the sale of any
products.
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, 2006 and 2005.
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, 2006 and 2005, the
Company
determined that there were no impairments of long-lived assets.
Intangible
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” (hereinafter “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.
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
periodically 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, 2006 and
2005 were $209,913 and $169,212, respectively. Salaries for those employees
directly involved in research and development are included in research and
development expense.
Revenue
Recognition
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, 2006 and 2005 was $5,252 and $5,488,
respectively.
Costs
relating to the development and approval of patents, other than research
and
development costs which are expensed, are capitalized and amortized using
the
straight-line method over ten years. The Company’s patents relate to the
creation of an EMF permanent electromagnetic motor generator.
The
following is a summary of the costs of patents and patents pending:
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 shareholder and officer of
the
Company. The Company acquired this license for a $50,000 note payable to
Mr.
Bedini, which was initially due on June 30, 2000. This note is unsecured
and
bears interest at the rate of 6% per annum. The payment due date for the
note
was extended until the completion of the Company’s second round of financing.
See Note 6.
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.
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.
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 agreement grants 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 is 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
a
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 years ended December 31, 2006 and 2005, the Company paid expenses on
behalf
of Bedini Electronics, Inc., a company privately owned by two shareholders
and
officers of Energenx. At the same time, 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. In addition, in April 2005, the
Company
loaned Bedini Electronics $4,000 in cash for operations. This unsecured loan,
which bears interest of 6%, is payable in monthly installments of $352. The
aggregate net amount owing from Bedini Electronics at December 31, 2006 and
2005
was $11,229 and $10,176, respectively.
During
the years ended December 31, 2002, the Company loaned to two of its officers
a
total of $4,900. At the time, the Company was not paying salaries. Because
the
transactions occurred while the Company was still private, it was not subject
to
the Sarbanes-Oxley Act of 2002, and therefore, was not prohibited. During
the
year ended December 31, 2005, the officers repaid the amounts through a salary
reduction.
For
additional related party transactions, see Notes 5, 6, 8 and 12.
NOTE
8 - NOTES PAYABLE
During
the year ended December 31, 2002the Company received loans from outside
parties
totaling $44,500. These notes were unsecured and interest was payable at
6% per
annum. During the year ended December 31, 2004the Company converted the
outstanding principal and accrued interest on these loans into 925,375 shares
of
common stock. The note payable of $1,660 at December 31, 2006 represents
the
remaining balance of interest not converted.
NOTE
9 - PROVISION FOR TAXES
At
December 31, 2006, the Company had deferred tax assets calculated at an expected
rate of 34% of approximately $673,000 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 deferred tax asset, a valuation allowance equal to the deferred
tax asset has been established at December 31, 2006. The significant components
of the deferred tax asset at December 31, 2006 and 2005 were as
follows:
At
December 31, 2006, the Company has net operating loss carryforwards of
approximately $1,990,000, which expire in the years 2019 through 2026. 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, 2005 to December 31,2006
was approximately $176,000.
NOTE
10 - COMMON STOCK
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 2,400,000 shares of common stock at
$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 December31,2005, 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.
NOTE
11 - STOCK OPTION PLAN
Statement
of Financial Accounting Standards No. 123, “Accounting for Stock-Based
Compensation” (hereinafter 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 300,000 shares of common stock can be issued under the plan. No options
have been issued under the plan through the date of this report.
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
in 2005 for a cash payment of $500,000. Because the options were granted in
consideration of a capital investment, they were 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 2006
$
—
NOTE
12 - COMMITMENTS AND CONTINGENCIES
Leases
On
March13, 2006, the Company entered into a new two-year lease for office space and
in
lieu of a security deposit, prepaid the entire amount of the lease ($57,600).
The unamortized prepaid balance at December 31, 2006 was $33,600.
Royalty
Agreements
No
royalties have been earned or paid under the Company’s royalty agreements at
December 31, 2006 or 2005.These agreements are described in Notes 5 and
6.
On
January 23, 2007, the Company issued 2,200,000 shares of common stock to satisfy
an outstanding stock subscription agreement. At that time, the Company received
$500,000 in cash related to 1,000,000 of the aforementioned shares. The
remaining 1,200,000 shares were related to the $600,000 deposit on common stock
liability at December 31, 2006, which was converted into equity at the time
the
shares were issued.
F-19
Dates Referenced Herein and Documents Incorporated by Reference
