GEORGIA
|
3714
|
58-2267238
|
(State
or other jurisdiction Of
incorporation or Industrial Classification Employer organization)
|
(Primary
Standard Code
Number)
|
(I.R.S.Identification
No.)
|
|
Title of Each Class of
Securities to be Registered
|
Amount
to be Registered
|
Proposed
Maximum Offering Price
Per
Share(1)
|
Proposed
Maximum Aggregate
Offering
Price
|
Amount
of Registration
Fee
|
Common Stock, par value $.001(2) |
30,000,000
|
$0.07
|
$2,100,000.00
|
$64.47
|
(1) |
Estimated
solely for purposes of calculating the registration fee to Rule 457(c)
under the Securities Act of
1933, as amended. The average of the high and low price per share
of the
Registrant's Common Stock on the Over
the Counter Bulletin Board as of June 4, 2007 was $0.09 per
share.
|
(2) |
Represents
shares issuable upon sales under the Investment
Agreement.
|
Page
|
|
Prospectus
Summary
|
5
|
Risk
Factors
|
7
|
Forward
Looking Statements
|
9
|
Use
of Proceeds
|
9
|
The
Investment Agreement
|
9
|
Management's
Discussion and Analysis of Financial
Condition or Plan of Operation
|
10
|
|
|
Description
of Business
|
13
|
Description
of Property
|
16
|
Legal
Proceedings
|
16
|
Directors
and Executive Officers
|
17
|
Executive
Compensation
|
18
|
Security
Ownership of Certain Beneficial Owners and
Management
|
19
|
|
|
Selling
Shareholders
|
20
|
Certain
Relationships and Related Transactions
|
21
|
Description
of Securities
|
22
|
Plan
of Distribution
|
23
|
Legal
Matters
|
25
|
Experts
|
25
|
Where
You Can Find More Information
|
25
|
Disclosure
of Commission Position on Indemnification for
Securities Act Liabilities
|
26
|
|
|
Consolidated
Financial Statements
|
26
|
Summary
Historical
|
|||||||
Financial Data |
2006
|
2005
|
|||||
Statement of Operations | |||||||
Revenue | $ | 1,375,418 | $ | 652,400 | |||
Net Loss Per Share | $ | (0.09 | ) | $ | (0.09 | ) | |
Weighted Average Basic and | |||||||
Diluted Shares | 121,737,383 | 88,909,988 | |||||
Balance Sheet | |||||||
Cash
and equivalents
|
$ | 3,937 | $ | 818, 557 | |||
Total
Assets
|
$ | 3,394,291 | $ | 3,858,816 | |||
Total
Liabilities
|
$ | 4,180,444 | $ | 4,130,393 | |||
Shareholders'
Equity
|
$ | 786,153 | $ | 271,577 |
Shares offered by Selling | |
Stockholders | Up to 30,000,000 shares |
Common Stock to be outstanding after the offering | 222,169,308 |
Use of Proceeds | We will not receive any proceeds from the sale of the common stock hereunder. We will, however, receive proceeds from the sale of our common stock pursuant to the Investment Agreement |
Risk Factors | The purchase of our common stock involves a high degree of risk. You should carefully review and consider "Risk Factors" beginning on page 7. |
OTC Bulletin Board Trading Symbol | USEI |
10%
|
25%
|
50%
|
100%
|
||||||||||
Gross Proceeds | $ | 500,000 | $ | 1,250,000 | $ | 2,500,000 | $ | 5,000,000 | |||||
Net Proceeds after offering
expenses and fees
|
$ | 444,311.62 | $ | 1,194,311.62 | $ | 2,444,311.62 | $ | 4,944,311.62 | |||||
Use of proceeds: | |||||||||||||
General Working Capital | $ | 444,311.62 | $ | 1,194,311.62 | $ | 2,444,311.62 | $ | 4,944,311.62 |
LATE PAYMENT FOR EACH
NO. OF DAYS LATE
|
$10,000 OF COMMON STOCK |
1 | $100 |
2 | $200 |
3 | $300 |
4 | $400 |
5 | $500 |
6 | $600 |
7 | $700 |
8 | $800 |
9 | $900 |
10 | $1,000 |
Over 10 | $1,000 + $200 for each Business Day late beyond 10 days |
Date
|
Open
|
High
|
Low
|
Close
|
Volume
|
04-Apr-07
|
0.068
|
0.069
|
0.065
|
0.069
|
468,500
|
05-Apr-07
|
0.069
|
0.069
|
0.064
|
0.069
|
755,600
|
08-Apr-07
|
0.068
|
0.069
|
0.065
|
0.069
|
468,500
|
09-Apr-07
|
0.069
|
0.069
|
0.065
|
0.069
|
92,900
|
10-Apr-07
|
0.069
|
0.074
|
0.065
|
0.074
|
365,000
|
11-Apr-07
|
0.0735
|
0.0735
|
0.07
|
0.071
|
189,200
|
12-Apr-07
|
0.072
|
0.072
|
0.067
|
0.067
|
112,200
|
13-Apr-07
|
0.07
|
0.0721
|
0.067
|
0.072
|
146,700
|
16-Apr-07
|
0.0721
|
0.0721
|
0.07
|
0.072
|
208,300
|
17-Apr-07
|
0.07
|
0.072
|
0.07
|
0.07
|
74,400
|
Clean
Cities Program. Created by the Department of Energy, the Clean Cities
Program coordinates voluntary efforts between locally based government
and
industry to accelerate the use of alternative fuels and expand the
alternative fuel vehicle refueling infrastructure. Grants are available
for natural gas fueling stations and vehicle conversions to natural
gas.
Alternative
Fuel Vehicle Credits Program. Congress created this credits program
to
encourage fleets to increase the number of alternative fuel vehicles
in
their fleets early and aggressively. Credits are allocated to state
fleet
operators and cover alternative fuel provider fleet operators when
alternative fuel vehicles are acquired over and above the amount
required,
or earlier than expected. Since credits can be traded and sold, fleets
have the flexibility to acquire alternative fuel vehicles on the
most
cost-effective schedule.
State
Energy Program. States will promote the conservation of energy, reduce
the
rate of growth of energy consumption, and reduce dependence on imported
oil through the development and implementation of a comprehensive
State
Energy Program. The State Energy Program is the result of the
consolidation of two Federal formula-based grant programs - the State
Energy Conservation Program and the Institutional Conservation Program.
The State Energy Program includes provisions for financial assistance
for
a number of state-oriented special project activities. These activities
specifically include programs to accelerate the use of alternative
transportation fuels for government vehicles, fleet vehicles, taxis,
mass
transit, and individuals' privately owned vehicles.
EPA's
Clean School Bus USA, a program designed to reduce both children's
exposure to diesel exhaust and the amount of air pollution created
by
diesel school buses.
|
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
John
Stanton
|
|
58
|
|
Chairman
of the Board
|
Philip
Rappa
|
|
59
|
|
Chief
Executive Officer
|
Mark
Clancy
|
|
51
|
|
Director
|
Michele
Hamilton
|
38
|
Chief
Financial Officer
|
Name
(a)
|
|
Fees
Earned
or Paid
in Cash
($)
(b)
|
|
Stock
Awards
($)
(c)
|
|
Option
Awards
($)
(d)
|
|
Non-Equity
Incentive Plan
Compensation
($)
(e)
|
|
Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
(f)
|
|
All Other
Compensation
($)
(g) (4)
|
|
Total
($)
(h)
|
|
John
Stanton
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Michele
Hamilton
|
|
79,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Mark
Clancy
|
|
240,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Name & Principal Position
|
|
Year
|
|
Salary ($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Option
Awards ($) *
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
Change in Pension
Value and Non-
Qualified Deferred
Compensation
Earnings ($)
|
|
All
Other
Compensation
($)
|
|
Total ($)
|
|
Mark
Clancy
|
|
2006
|
|
240,000
|
|
—
|
|
_
|
|
—
|
|
—
|
|
—
|
|
—
|
|
240,000
|
|
Option Awards
|
|
Stock Awards
|
|
||||||||||||||||
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number
of Shares
or Units
of Stock
That
Have
Not
Vested
(#)
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
(#)
|
|
Equity
Incentive
Plan Awards:
Market or
Payout
Value
of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
($)
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
None
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
NAME
OF BENEFICIAL OWNER
|
NUMBER
SHARES
|
OF
% CLASS
|
|||||
John
Stanton
|
87,835,758
|
41.70%
|
|
||||
Chairman
of the Board
|
|||||||
Mark
Clancy
|
26,101,035
|
12.39%
|
|
||||
Chief
Executive Officer
|
|||||||
Director
|
|||||||
Michele
Hamilton
|
1,000,000
|
0.47%
|
|
||||
Chief
Financial Officer
|
|||||||
Frank
Davis
|
1,708,000
|
0.81%
|
|
||||
Chief
Technical Consultant
|
|||||||
Sheri
Vanhooser
|
11,612,903
|
5.51%
|
|
||||
Vice
President Business Development
|
|||||||
Officers
and Directors as a group (3 persons)
|
28,809,035
|
13.67%
|
|
Beneficial Ownership
Name of Selling Shareholder in after this
Offering(2)
|
Common Shares Beneficially
Owned by Selling
Shareholder Before Offering (1)
|
Percentage Outstanding Shares
Beneficially owned Before Offering
|
Common Shares ofIssuable upon Exercise of Securities forming part of this Offering |
Shares
Registered
this
Offering
|
Number
of Percent(3)
Shares
|
||||
Dutchess Private Equities |
5,040,247
|
4.99%
|
30,000,000 (5)
|
30,000,000
|
None |
0.0%
|
|||
Fund II, LLP (4) | ||||
312 Stuart Street | ||||
Boston, MA 02116 |
1.
|
U.S.
Patent Serial No. 5,083,547, dated January 28, 1992 for a natural
gas and
air mixing device, as assigned to Licensor; any divisions or continuations
in whole or in part thereof; any U.S. patents or applications that
are
later added to this license; any patents issuing on any of such
applications; any reissues or extensions or reexaminations of any
such
patents; and
|
|
2.
|
U.S.
Patent Serial No. 5,408,978, dated April 25, 1995, for a natural
gas and
air mixing device, as assigned to Licensor; any divisions or continuations
in whole or in part thereof; any U.S. patent or applications that
are
later added to this license; any patents issuing on any of such
applications; any reissues or extensions or reexaminations 'of any
such
patents; and
|
|
3.
|
U.S.
Patent Serial No. 5,370,097, dated December 6, 1994, for a dual fuel
control system which controls the flow of liquid fuel alone or in
combination with a gaseous fuel, as assigned to Licensor; any divisions
or
continuations in whole or in part thereof; any U.S. patent or applications
that are later added to this license; any patents issuing on any
of such
applications; any reissues or extensions or reexaminations of any
such
patents; and
|
|
4.
|
U.S.
Patent Serial No. 5,103,795, dated April 14, 1992 for a natural gas
and
air mixing device, as assigned to Licensor; any divisions or continuations
in whole or in part thereof; any U.S. patent or applications that
are
later added to this license; any patents issuing on any of such
applications; any reissues or extensions or reexaminations of any
such
patents; and
|
|
5.
|
U.S.
Patent Serial No. 4,479,466, dated October 30, 1984 for a natural
gas and
air mixing device, as signed to Licensor; any divisions or continuations
in whole or in part thereof.; any U.S. patent or applications that
are
later added to this license; any patents issuing on any of such
applications; any reissues or extensions or reexaminations. of any
such
patents;
|
|
6.
|
U.S.
Non-Provisional Application No. 10/668,589, METHODS AND APPARATUS
FOR
OPERATION OF MULTIPLE FUEL ENGINES, Filed September 23, 2003, Priority
based on U.S. Provisional Application No. 60/413,269, ELECTRONIC
FUEL
CONTROL SYSTEMS, Filed September 24, 2002 PCT Application No.
PCT/US03/29914, METHODS AND APPARATUS FOR OPERATION OF MULTIPLE FUEL
ENGINES, Filed September 23, 2003, Priority based on U.S. Provisional
Application No. 60/413,269, ELECTRONIC FUEL CONTROL SYSTEMS, Filed
September 24, 2002.
|
1.
|
provide
general advice, guidance and counsel to, and consult with, senior
management of Hybrid with respect to all aspects of Hybrid's business;
and
|
2.
|
shall
explain to senior management of Hybrid, in such detail as may be
reasonably requested by Hybrid, the current condition, history and
prospects of Hybrid and its predecessors, including with respect
to
operating, financial and organizational matters; manufacturing, marketing,
planning and other activities; inventions, patents, patent applications,
and other intellectual property rights and interests; relationships
with
stockholders, subsidiaries, affiliates, employees, suppliers, customers,
advisers, consultants and others; transactions; and other matters
as may
be reasonably requested by Hybrid; and
|
3.
|
deliver
to Hybrid, in good condition, all Confidential Information and all
files,
documents and other books and records, in whatever form or media,
relating
to Hybrid's business or its history, prospects, financial condition
or
results of operations; and
|
4.
|
shall
maintain a regular, ongoing and routine physical presence at the
Atlanta
area research, development, and distribution center of
Hybrid.
|
ASSETS
|
March
31, 2007
(unaudited)
|
December
31, 2006
(audited)
|
|||||
Current
Assets
|
|||||||
Cash
|
$
|
3,940
|
$
|
3,937
|
|||
Accounts
Receivable, net of $72,800 allowance in 2007 and 2006
respectively.
|
256,230
|
300,163
|
|||||
Other
assets
|
2,510
|
||||||
Prepaid
expenses and deposits
|
61,339
|
46,060
|
|||||
Inventories
|
616,382
|
634,315
|
|||||
Deferred
consulting
|
94.538
|
147,000
|
|||||
Deferred
debt costs
|
520,858
|
1,021,707
|
|||||
Total
current assets
|
$
|
1,553,287
|
$
|
2,155,692
|
|||
|
|||||||
Property,
plant & equipment, net
|
577,139
|
554,722
|
|||||
Goodwill
Purchase
price subject to allocation
|
683,877
|
683,877
|
|||||
|
|||||||
|
|||||||
Total
Assets
|
$
|
2,814,303
|
$
|
3,394,291
|
|||
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
Current
Liabilities
|
|||||||
Accounts
payable
|
$
|
978,290
|
972,016
|
||||
Accounts
payable in settlement
|
259,440
|
259,440
|
|||||
Due
to related parties
|
224,929
|
214,849
|
|||||
Due
to related parties,convertible debt
|
423,656
|
11,424
|
|||||
Notes
payable
|
1,966,124
|
2,079,869
|
|||||
Discount
on debt
|
(5,133
|
)
|
(82,231
|
)
|
|||
Derivative
liability
|
96,579
|
77,046
|
|||||
Other
current liabilities
|
691,317
|
648,031
|
|||||
Total
Liabilities
|
$
|
4,635,202
|
4,180,444
|
||||
|
|||||||
Shareholders'
Deficit
|
|||||||
Preferred
Stock (.01 par value, 5,000,000 authorized)
|
|||||||
Preferred
A stock (.01 par value, 42,215 shares issued and
outstanding
|
422
|
422
|
|||||
Preferred
B stock (.01 par value, 23,431 shares issued and
outstanding)
|
234
|
234
|
|||||
Common
stock (.001 par value, 295,000,000 shares authorized; 210,698,734
and
198,146,858 shares issued and outstanding, respectively
|
210,698
|
198,146
|
|||||
Additional paid-in capital |
28,422,922
|
27,221,863
|
|||||
Accumulated
deficit
|
(30,455,175
|
(28,206,818
|
)
|
||||
Total
shareholders' deficit
|
(1,820,899
|
)
|
(786,153
|
)
|
|||
|
|||||||
Total
Liabilities and Shareholders' Deficit
|
$
|
2,814,303
|
$
|
3,394,291
|
|
Three
Months
Ended
March
31, 2007
|
Three
Months
Ended
March
31, 2006
|
|||||
(restated)
|
|||||||
|
|||||||
Revenue
|
$
|
385,874
|
$
|
168,100
|
|||
Cost
of sales
|
329,557
|
159,091
|
|||||
Gross
Profit
|
56,317
|
9,009
|
|||||
|
|||||||
|
|||||||
Operating
Expenses
|
|||||||
Consulting
and professional
|
148,679
|
360,397
|
|||||
Research
& Development
|
12,286
|
9,469
|
|||||
Compensation
|
750,742
|
414,213
|
|||||
Depreciation
and Amortization
|
25,788
|
44,918
|
|||||
Loss
on sale of fixed asset
|
1,310
|
0
|
|||||
Rent
|
52,601
|
28,380
|
|||||
Insurance
|
64,713
|
65,278
|
|||||
Other
operating expenses
|
74,813
|
88,520
|
|||||
|
1,130,932
|
1,011,175
|
|||||
|
|||||||
Loss
from operations
|
(1,074,615
|
)
|
(1,002,166
|
)
|
|||
|
|||||||
Other
Expense (Income)
|
|||||||
Derivative
loss (gain)
|
213,259
|
699,430
|
|||||
Interest
expense
|
960,486
|
705,051
|
|||||
Other
income
|
(3
|
)
|
(529
|
)
|
|||
|
|||||||
(Income)
loss from other expenses
|
1,173,742
|
1,403,952
|
|||||
|
|||||||
Net
Loss
|
(2,248,357
|
)
|
(2,406,118
|
)
|
|||
|
|||||||
Basic
and diluted weighted average common shares outstanding
|
210,698,734
|
106,709,351
|
|||||
|
|||||||
Basic
and diluted loss per share
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
|
Three
Months
Ended
March
31, 2007
|
Three
Months
Ended
March
31, 2006
(restated)
|
|||||
Cash
flows from operating activities
|
|
|
|||||
Net
Loss
|
(2,248,357
|
)
|
(2,406,118
|
)
|
|||
Adjustments
to reconcile net income to net cash provided (used) by operating
activities
|
|||||||
Common
stock issued for services
|
375,000
|
52,813
|
|||||
Depreciation
|
25,788
|
21,935
|
|||||
Amortization
of deferred compensation
|
75,000
|
||||||
Amortization
of deferred debt cost and debt discount
|
293,067
|
342,131
|
|||||
Amortization
of deferred interest costs
|
370,879
|
||||||
Amortization
of deferred consulting
|
87,462
|
153,999
|
|||||
Amortization
of intangibles
|
22,983
|
||||||
Loss
on sale of equipment
|
1,310
|
||||||
Conversion
benefit on related party advance
|
288,675
|
68,000
|
|||||
Derivative
(income) expense
|
213,259
|
914,509
|
|||||
|
|||||||
Change
in operating assets and liabilities
|
|||||||
Accounts
Receivable
|
43,934
|
66,494
|
|||||
Inventory
|
17,933
|
26,310
|
|||||
Prepaid
& deposits
|
(50,277
|
)
|
(57,385
|
)
|
|||
Other
assets
|
200
|
||||||
Accounts
payable
|
12,237
|
(57,450
|
)
|
||||
Related
Party payable
|
3,250
|
(150,000
|
)
|
||||
Accrued
liabilities
|
(63,845
|
)
|
(4,122
|
)
|
|||
Other
current liabilities
|
92,087
|
49,808
|
|||||
|
|||||||
Net
Cash Provided (used) by operating activities
|
(537,398
|
)
|
(881,093
|
)
|
|||
|
|||||||
Cash
flows from Investing Activities
|
|||||||
Purchase
of property and equipment
|
(5,599
|
)
|
(20,771
|
)
|
|||
Proceeds
from sale of equipment
|
1,000
|
||||||
|
|
|
|||||
|
|||||||
Net
cash provided (used) by investing activities
|
(4,599
|
)
|
(20,771
|
)
|
|||
|
|||||||
Cash
flows from Financing Activities
|
|||||||
Loans
to employees
|
(2,200
|
)
|
|||||
Loans
from related parties
|
397,000
|
68,000
|
|||||
Payment
on notes payable
|
(852,537
|
)
|
|||||
Proceeds
from convertible debt - Dutchess
|
145,000
|
1,040,000
|
|||||
Proceeds
from sale of common stock
|
223,847
|
||||||
|
|||||||
Net
cash provided (used) by financing activities
|
542,000
|
447,110
|
|||||
|
|||||||
Net
increase (decrease) in cash and cash equivalents
|
3
|
(424,754
|
)
|
||||
Beginning
cash and cash equivalents
|
3,937
|
818,557
|
|||||
|
|||||||
Ending
cash and cash equivalents
|
$
|
3,940
|
$
|
393,803
|
|||
|
|||||||
Supplement
disclosure of cash flow information
|
|||||||
Cash
paid during the year for interest
|
$$
|
30,900
|
|||||
Common
stock issued for services
|
$
|
386,464
|
|||||
Common
stock issued for conversion of convertible note
|
$
|
474,470
|
$
|
341,765
|
|||
Amortization
of common stock issued for deferred compensation
|
$
|
200,000
|
$
|
75,000
|
|||
Amortization
of debt discount
|
$$
|
78,296
|
|||||
Common
stock issued for discount on debt
|
$
|
64,000
|
$
|
366,026
|
|
March
31, 2007
|
March
31, 2006
|
|||||
Goodwill
|
$
|
61,820
|
|||||
Less accumulated amortization
|
|||||||
Less Impairment
|
$ | $ | |||||
Total
|
0.00
|
$
|
61,820
|
|
March
31, 2007
|
March
31, 2006
|
|||||
Intellectual Property
|
$
|
1,146,925
|
|||||
Less accumulated amortization
|
(296,565
|
)
|
|||||
Less Impairment
|
$ |
$
|
|||||
Total
|
0.00
|
$
|
850,360
|
|
|
March
31, 2007
|
|
March
31, 2006
|
|
||
Payroll
and sales taxes
|
|
$
|
274,247
|
|
$
|
51,410
|
|
Accrued penalties and interest
|
|
|
21,800
|
|
|
8,388
|
|
|
|
$
|
296,047
|
|
$
|
59,798
|
|
Issue
Date
|
Expiration
Date
|
Instrument
|
Exercise
Price Per Share
|
Value
at Issue Date
|
Value
at 3/31/07
|
3/05/05
|
3/05/10
|
1,600,000
warrants issued to Alpha Capital
|
$0.19
|
$928,000
|
$68,640
|
11/4/05
|
11/4/10
|
314,815
warrants issued to Dutchess Private Equity
|
$0.27
|
$85,000
|
$13,411
|
Fair
value of freestanding derivative instrument liabilities for options
and
warrants
|
82,051
|
Issue
Date
|
Expiration
Date
|
Instrument
|
Exercise
Price Per Share
|
Value
at Issue Date
|
Value
at 3/31/07
|
12/20/05
|
12/21/06
|
Dutchess
$1,362,500 term note
|
$0.27
|
$302,778
|
$1,175
|
3/23/06
|
3/23/07
|
Dutchess
$1,412,500 term note
|
$0.27
|
$470,833
|
$11,028
|
7/13/06
|
10/13/07
|
Dutchess
$845,000 term note
|
$0.27
|
$338,169
|
$2,325
|
Fair
value of embedded conversion features for term notes
|
14,528
|
||||
Total
fair value of freestanding derivative instrument
liabilities
|
96,579
|
Expected
term ranging from
|
.22
to 3.5 years
|
Stock
Price at March 31, 2007
|
$0.086
|
Expected
dividend yield
|
$0.00
|
Expected
stock price volatility
|
103%
|
Risk-free
interest rate ranging from
|
4.54%
to 5.06%
|
Purchase
Price
|
$
|
490,250
|
||
|
||||
Less:
values currently assigned to assets
|
||||
Cash
|
(63,049
|
)
|
||
Accounts
Receivable net
|
(133,357
|
)
|
||
Inventory
|
(153,003
|
)
|
||
Fixed
Assets net
|
(60,285
|
)
|
||
Other
assets
|
(2,310
|
)
|
||
|
||||
Plus:
values currently assigned to liabilities
|
||||
|
||||
Accounts
Payable and accrued expense
|
205,501
|
|||
Credit
Line Payable
|
400,130
|
|||
Purchase
price subject to allocation
|
$
|
683,877
|
|
|
|
|
|||||||
|
Hybrid
Fuels
|
Manufacturing
|
Total
|
|||||||
Revenue
|
18,226
|
367,648
|
385,874
|
|||||||
Cost
of sales
|
8,174
|
321,383
|
329,557
|
|||||||
Gross
Profit
|
10,052
|
46,265
|
56,317
|
|||||||
|
||||||||||
Operating
Expenses
|
||||||||||
Consulting
and professional
|
144,292
|
4,387
|
148,679
|
|||||||
Research
& development
|
12,286
|
12,286
|
||||||||
Compensation
|
670,428
|
80,314
|
750,
742
|
|||||||
Depreciation
and amotization
|
20,662
|
5,126
|
25,788
|
|||||||
Impairment
loss
|
1,310
|
1,310
|
||||||||
Rent
|
32,180
|
20,421
|
52,601
|
|||||||
Insurance
|
47,409
|
17,304
|
64,713
|
|||||||
Other
operating expenses
|
50,289
|
24,524
|
74,813
|
|||||||
|
977,546
|
153,386
|
1,130,932
|
|||||||
Loss
from operations
|
(967,494
|
)
|
(107,121
|
)
|
(1,074,615
|
)
|
||||
|
||||||||||
Other
income (expense)
|
||||||||||
Derivative (loss)
|
213,259
|
213,259
|
||||||||
Interest expense
|
957,951
|
2,535
|
960,486
|
|||||||
Miscellaneous
|
(3
|
)
|
(3
|
)
|
||||||
|
1,171,207
|
2,535
|
1,173,742
|
|||||||
Loss
from continuing operations
|
(2,138,701
|
)
|
(109,656
|
)
|
(2,248,357
|
)
|
||||
Net
loss for reportable segments
|
(2,138,701
|
)
|
(109,656
|
)
|
(2,248,357
|
)
|
||||
Total
Assets
|
1,706,659
|
1,107,644
|
2,814,303
|
|||||||
|
||||||||||
Reconciliation
of Segment Amounts Reported to Condensed
|
||||||||||
Consolidated
Amounts
|
||||||||||
Revenue
|
||||||||||
Total
revenues for reportable segments
|
385,874
|
|||||||||
Total consolidated revenue
|
385,874
|
|||||||||
|
||||||||||
Net
loss
|
||||||||||
Net
loss for reportable segments
|
2,248,357
|
|||||||||
Net loss consolidated
|
2,248,357
|
|||||||||
|
March
31, 2006
As
Previously
As
|
|||||||
|
Reported
|
||||||
Assets
|
|||||||
Current
assets
|
|||||||
Cash
|
$
|
393,803
|
$
|
393,803
|
|||
Accounts
receivable
|
304,257
|
304,257
|
|||||
Inventory
|
136,381
|
136,381
|
|||||
Prepaid
and other current assets
|
86,951
|
86,951
|
|||||
Deferred
consulting
|
422,259
|
422,259
|
|||||
Deferred
debt costs
|
659,006
|
659,006
|
|||||
Total
current assets
|
2,002,657
|
2,002,657
|
|||||
Property
and equipment, net
|
564,250
|
564,250
|
|||||
Goodwill
|
61,820
|
61,820
|
|||||
Intellectual
property certifications, net
|
850,360
|
850,360
|
|||||
-
|
-
|
||||||
Total
assets
|
$
|
3,479,087
|
$
|
3,479,087
|
|||
|
|||||||
Liabilities
and Stockholders' Equity
|
|||||||
Current
liabilities
|
|||||||
Accounts
payable
|
457,688
|
457,688
|
|||||
Accounts
payable in settlement
|
109,868
|
109,868
|
|||||
Due
to related parties
|
26,540
|
26,540
|
|||||
Due
to related parties, convertible debt
|
1,148,752
|
1,148,752
|
|||||
Notes
payable
|
2,196,639
|
2,196,639
|
|||||
Discount
on debt
|
(563,360
|
)
|
(563,360
|
)
|
|||
Derivative
Liability
|
1,464,335
|
1,464,335
|
|||||
Other
current liabilities
|
412,715
|
412,715
|
|||||
-
|
-
|
||||||
Total
current liabilities
|
5,253,177
|
5,253,177
|
|||||
Long-term
debt, less current portion
|
-
|
-
|
|||||
Total
liabilities
|
5,253,177
|
5,253,177
|
|||||
|
|||||||
Stockholders'
Equity
|
|||||||
Preferred
A stock; $.01 par value; 42,215 shares
|
|||||||
authorized
and outstanding
|
422
|
422
|
|||||
Preferred
B stock; $.01 par value; 954,563 shares
|
|||||||
authorized
and outstanding
|
1,952
|
1,952
|
|||||
Common
stock; $.001 par value; 150,000,000 shares
|
|||||||
authorized;
109,854,116 shares issued and
|
|||||||
oustanding
|
109,854
|
109,854
|
|||||
Paid-in
capital
|
17,447,663
|
17,822,663
|
|||||
Deferred
compensation
|
(125,000
|
)
|
(125,000
|
)
|
|||
Accumulated
deficit
|
(19,208,981
|
)
|
(19,583,981
|
)
|
|||
Total
stockholders' equity
|
(1,774,090
|
)
|
(1,774,090
|
)
|
|||
|
|||||||
Total
Liabilities and Stockholders' Equity
|
$
|
3,479,087
|
$
|
3,479,087
|
|||
|
|||||||
|
|||||||
|
|||||||
March
3,
2006
|
|||||||
Net
loss, as previously reported
|
$
|
(2,031,118
|
)
|
||||
Interest
expense
|
(375,000
|
)
|
|||||
Net
loss, as restated
|
$
|
(2,406,118
|
)
|
||||
Basic
earnings per common share:
|
|||||||
As
previously reported
|
$
|
(0.02
|
)
|
||||
As
restated
|
$
|
(0.02
|
)
|
||||
|
|
2006
|
2005
|
|||||
ASSETS
|
|
|
|||||
Current
Assets
|
|
|
|||||
Cash
|
$
|
3,937
|
$
|
818,557
|
|||
Accounts
Receivable, net of $72,800 and $12,000
|
|||||||
allowance
in 2006 and 2005, respectively.
|
$
|
300,163
|
$
|
370,777
|
|||
|
|||||||
Other
assets
|
$
|
2,510
|
$
|
||||
Prepaid
expenses and deposits
|
$
|
46,060
|
$
|
32,286
|
|||
Inventories
|
$
|
634,315
|
$
|
162,690
|
|||
Deferred
consulting
|
$
|
147,000
|
$
|
576,258
|
|||
Deferred
debt costs
|
$
|
1,021,707
|
$
|
397,671
|
|||
Total
current assets
|
$
|
2,155,692
|
$
|
2,358,239
|
|||
Property
Plant & Equipment, net
|
$
|
554,722
|
$
|
565,415
|
|||
Goodwill
|
$
|
-
|
$
|
61,820
|
|||
Purchase
Price subject to allocation
|
$
|
683,877
|
$
|
-
|
|||
Intellectual
property certifications, net of $365,514 and
|
|||||||
273,583
amortization, respectively
|
$
|
-
|
$
|
873,342
|
|||
|
|||||||
Total
Assets
|
$
|
3,394,291
|
$
|
3,858,816
|
|||
|
|||||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|||||||
Current
Assets
|
|||||||
Accounts
Payable
|
$
|
972,016
|
$
|
526,001
|
|||
Accounts
Payable in settlement
|
$
|
259,440
|
$
|
109,868
|
|||
Due
to related parties
|
$
|
214,849
|
$
|
176,540
|
|||
Due
to related parties, convertible debt
|
$
|
11,424
|
$
|
1,080,752
|
|||
Notes
payable
|
$
|
2,079,869
|
$
|
1,630,293
|
|||
Discount
on Debt
|
$
|
(82,231
|
)
|
$
|
(650,630
|
)
|
|
Derivative
liability
|
$
|
77,046
|
$
|
841,010
|
|||
Other
Current Liabilities
|
$
|
648,031
|
$
|
416,559
|
|||
Total
liabilities
|
$
|
4,180,444
|
$
|
4,130,393
|
|||
|
|||||||
SHAREHOLDERS'
DEFICIT
|
|||||||
Preferred
Stock (.01 par value, 5,000,000 and 996,778
|
|||||||
authorized,
respectively)
|
|||||||
Preferred
A stock ( 42,215 shares issued and outstanding)
|
$
|
422
|
$
|
422
|
|||
|
|||||||
Preferred
B stock (23,431 and 195,209 shares issued
|
|||||||
and
outstanding, respectively)
|
$
|
234
|
$
|
1,952
|
|||
|
|||||||
|
|||||||
Common
stock (.001 par value; 295,000,000 shares
|
|||||||
authorized
198,146,858 and 105,905,433 shares
|
|||||||
issued
and outstanding, respectively)
|
$
|
198,146
|
$
|
105,905
|
|||
|
|||||||
|
|||||||
Additional
paid-in capital
|
$
|
27,221,863
|
$
|
16,997,922
|
|||
Deferred
compensation
|
$
|
-
|
$
|
(200,000
|
)
|
||
Accumulated
deficit
|
$
|
(28,206,818
|
)
|
$
|
(17,177,778
|
)
|
|
Total
shareholders' deficit
|
$
|
(786,153
|
)
|
$
|
(271,577
|
)
|
|
Total
liabilities and shareholders' deficit
|
$
|
3,394,291
|
$
|
3,858,816
|
|
|
|
|||||
|
2006
|
2005
|
|||||
Revenues
|
|
|
|||||
Revenues
from product sales and related income
|
$
|
1,375,418
|
$
|
652,400
|
|||
Cost
of product sales
|
$
|
960,961
|
$
|
641,926
|
|||
Gross
Profit
|
$
|
414,457
|
$
|
10,474
|
|||
|
|||||||
Expenses
|
|||||||
Operating
expenses
|
|||||||
Consulting
and professional fees
|
$
|
1,885,184
|
$
|
952,464
|
|||
Research
& development
|
$
|
93,313
|
$
|
113,658
|
|||
Compensation
|
$
|
3,990,828
|
$
|
1,333,515
|
|||
Amortization
& Depreciation
|
$
|
182,642
|
$
|
319,119
|
|||
Loss
on impairment of goodwill
|
$
|
61,820
|
$ | ||||
Loss
on impairment of intangibles
|
$
|
781,412
|
$
|
2,724,738
|
|||
Rent
|
$
|
193,965
|
$
|
77,481
|
|||
Insurance
|
$
|
259,406
|
$
|
69,992
|
|||
Licenses
|
$
|
2,341
|
$
|
257,312
|
|||
Other
operating expenses
|
$
|
465,009
|
$
|
271,245
|
|||
Total
expenses
|
$
|
7,915,920
|
$
|
6,119,524
|
|||
|
|||||||
Loss
from operations
|
$
|
(7,501,463
|
)
|
$
|
(6,109,050
|
)
|
|
|
|||||||
Other
Expenses (income)
|
|||||||
Settlements
|
$
|
149,572
|
$
|
-
|
|||
Interest
expense
|
$
|
3,909,658
|
$
|
2,607,526
|
|||
Gain
on extinguishment of debt
|
$
|
(162,557
|
)
|
$
|
-
|
||
Other
income
|
$
|
1,175
|
$
|
-
|
|||
Derivative
Gain
|
$
|
(370,271
|
)
|
$
|
(455,205
|
)
|
|
|
|||||||
(Income)
loss from other expenses
|
$
|
3,527,577
|
$
|
2,152,321
|
|||
|
|||||||
Net
loss
|
$
|
(11,029,040
|
)
|
$
|
(8,261,371
|
)
|
|
|
|||||||
Basic
and diluted loss per share
|
$
|
(0.09
|
)
|
$
|
(0.09
|
)
|
|
|
|||||||
Basic
and diluted weighted average number of
|
|||||||
common
shares outstanding
|
121,737,383
|
88,909,988
|
|
Preferred
Stock Series
|
Common
Stock
|
|||||||||||||||||
|
Share
|
Amount
|
Share
|
Amount
|
|
|
|||||||||||||
|
A
|
A
|
B
|
B
|
Shares
|
Amount
|
|||||||||||||
Balance
12/31/04
|
42,215
|
$
|
422
|
195,209
|
$
|
1,952
|
65,509,843
|
$
|
65,510
|
||||||||||
Common
Stock Issued
|
|||||||||||||||||||
Bonus
|
400,000
|
$
|
400
|
||||||||||||||||
Professional
Services
|
3,778,000
|
$
|
3,777
|
||||||||||||||||
Conversion
of Notes
|
22,808,506
|
$
|
22,808
|
||||||||||||||||
Warrants
|
15,000
|
$
|
15
|
||||||||||||||||
Conversion
on
|
|||||||||||||||||||
Related
Party Advance
|
|||||||||||||||||||
Discounts
of Debt
|
|||||||||||||||||||
Stock
for acquisition
|
11,752,903
|
$
|
11,752
|
||||||||||||||||
Amortization
of deferred
|
|||||||||||||||||||
compensation
|
|||||||||||||||||||
Stock
for conversions
|
45,000
|
$
|
45
|
||||||||||||||||
Shares
issued with finance
|
1,598,181
|
$
|
1,598
|
||||||||||||||||
Net
Loss
|
|||||||||||||||||||
Balance
12/31/05
|
42,215
|
$
|
422
|
195,209
|
$
|
1,952
|
105,905,433
|
$
|
105,905
|
||||||||||
Stock
Issued For
|
|||||||||||||||||||
Bonus
|
1,600,000
|
$
|
1,600
|
||||||||||||||||
Professional
Services
|
3,874,313
|
$
|
3,874
|
||||||||||||||||
Conversion
of Notes
|
11,155,312
|
$
|
11,155
|
||||||||||||||||
Conversion
on
|
|||||||||||||||||||
related
party advance
|
|||||||||||||||||||
Stock
for acquisition
|
5,510,000
|
$
|
5,510
|
||||||||||||||||
Amortization
of deferred
compensation
|
|||||||||||||||||||
|
|||||||||||||||||||
Convertible
debt
|
60,243,800
|
$
|
60,244
|
||||||||||||||||
Shares
issued with finance
|
7,858,000
|
$
|
7,858
|
||||||||||||||||
Conversion
of series B
|
(171,778
|
)
|
(1,718
|
)
|
2,000,000
|
$
|
2,000
|
||||||||||||
Preferred
Stock
|
|||||||||||||||||||
Net
Loss
|
|||||||||||||||||||
Balance
12/31/06
|
42,215
|
422
|
23,431
|
234
|
198,146,858
|
$
|
198,146
|
|
Paid-In
|
Accum
|
Deferred
|
Shareholders'
|
|||||||||
|
Capital
|
Deficit
|
Comp
|
Deficit
|
|||||||||
Balance
12/31/04
|
$
|
8,677,270
|
$
|
(8,916,407
|
)
|
$
|
(500,000
|
)
|
$
|
(671,253
|
)
|
||
Common
Stock Issued
|
|||||||||||||
Bonus
|
$
|
168,685
|
$
|
169,085
|
|||||||||
Professional
Services
|
$
|
802,054
|
$
|
805,830
|
|||||||||
Conversion
of Notes
|
$
|
928,712
|
$
|
951,520
|
|||||||||
Warrants
|
$
|
135
|
$
|
150
|
|||||||||
Conversion
on
|
|||||||||||||
Related
Party Advance
|
$
|
1,967,092
|
$
|
1,967,092
|
|||||||||
Discounts
of Debt
|
$
|
937,401
|
$
|
937,401
|
|||||||||
Stock
for acquisition
|
$
|
3,514,118
|
$
|
3,525,871
|
|||||||||
Amortization
of deferred
|
|||||||||||||
compensation
|
$
|
300,000
|
$
|
300,000
|
|||||||||
Stock
for conversions
|
$
|
2,455
|
$
|
2,500
|
|||||||||
Shares
issued with finance
|
$
|
1,598
|
|||||||||||
Net
Loss
|
$
|
(8,261,371
|
)
|
$
|
(8,261,371
|
)
|
|||||||
Balance
12/31/05
|
$
|
16,997,922
|
$
|
(17,177,778
|
)
|
$
|
(200,000
|
)
|
$
|
(271,577
|
)
|
||
Stock
Issued For
|
|||||||||||||
Bonus
|
$
|
346,400
|
$
|
348,000
|
|||||||||
Professional
Services
|
$
|
774,504
|
$
|
778,378
|
|||||||||
Conversion
of Notes
|
$
|
2,107,782
|
$
|
2,118,937
|
|||||||||
Conversion
on
|
|||||||||||||
related
party advance
|
$
|
1,276,339
|
$
|
1,276,339
|
|||||||||
Stock
for acquisition
|
$
|
1,509,740
|
$
|
1,515,250
|
|||||||||
Amortization
of deferred
compensation
|
|||||||||||||
|
$
|
200,000
|
$
|
200,000
|
|||||||||
Convertible
debt
|
$
|
2,351,008
|
$
|
2,411,252
|
|||||||||
Shares
issued with finance
|
$
|
1,858,168
|
$
|
1,866,026
|
|||||||||
Conversion
of series B
|
$
|
282
|
|||||||||||
Preferred
Stock
|
|||||||||||||
Net
Loss
|
$
|
(11,029,040
|
)
|
$
|
(11,029,040
|
)
|
|||||||
Balance
12/31/06
|
$
|
27,221,863
|
$
|
(28,206,818
|
)
|
$$
|
(786,153
|
)
|
|
2006
|
2005
|
|||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|||||
Net
loss
|
$
|
(11,029,040
|
)
|
$
|
(8,261,371
|
)
|
|
|
|||||||
Common
stock issued for services and compensation
|
$
|
2,501,379
|
$
|
324,799
|
|||
Depreciation
|
$
|
90,711
|
$
|
45,536
|
|||
Amortization
of deferred compensation
|
$
|
200,000
|
$
|
300,000
|
|||
Amortization
of debt discount and
|
$
|
2,477,889
|
|||||
deferred
debt cost
|
$
|
297,096
|
|||||
Amortization
of deferred consulting
|
$
|
681,258
|
$
|
39,742
|
|||
Impairment
of intangibles
|
$
|
843,232
|
$
|
2,724,738
|
|||
Amortization
of intangibles
|
$
|
91,931
|
$
|
273,583
|
|||
Conversion
benefit on related party advance
|
$
|
1,276,339
|
$
|
1,967,092
|
|||
Gain
on extinguishment of debt
|
$
|
(162,557
|
)
|
||||
Derivative
Income or expense
|
$
|
(370,271
|
)
|
$
|
(220,827
|
)
|
|
Change
in operating assets and liabilities
|
|||||||
Accounts
receivable
|
$
|
203,970
|
$
|
(218,447
|
)
|
||
Inventory
|
$
|
(319,549
|
)
|
$
|
(78,635
|
)
|
|
Prepaid
and deposits
|
$
|
(20,489
|
)
|
$
|
(24,440
|
)
|
|
Other
assets
|
$
|
(200
|
)
|
||||
Accounts
payable
|
$
|
286,517
|
$
|
356,921
|
|||
Related
party payable
|
$
|
169,343
|
|||||
Accrued
liabilities & other current liabilities
|
$
|
352,370
|
$
|
165,534
|
|||
|
|||||||
Net
cash provided (used) by operating activities
|
$
|
(2,896,510
|
)
|
$
|
(2,139,336
|
)
|
|
Cash
flows from Investing Activities
|
|||||||
Purchase
of property and equipment
|
$
|
(48,582
|
)
|
$
|
(541,504
|
)
|
|
Business
acquisition
|
$
|
(292,635
|
)
|
$
|
(200,000
|
)
|
|
Cash
acquired in business acquisition
|
$
|
63,049
|
-
|
||||
Net
cash provided (used) by investing activities
|
$
|
(278,168
|
)
|
$
|
(741,504
|
)
|
|
Cash
flows from Financing Activities
|
|||||||
Loans
from related party
|
$
|
1,334,424
|
$
|
1,967,092
|
|||
Payment
to related parties
|
$
|
(166,040
|
)
|
$
|
-
|
||
Payments
on notes payable
|
$
|
(1,257,372
|
)
|
$
|
(61,184
|
)
|
|
Payments
on accounts payable in settlement
|
-
|
$
|
(40,000
|
)
|
|||
Payments
on tax settlements
|
$
|
-
|
$
|
(58,536
|
)
|
||
Procededs
from convertible debt
|
$
|
-
|
$
|
1,889,850
|
|||
Proceeds
from notes payable
|
$
|
2,449,046
|
$
|
-
|
|||
Proceeds
from sale of common stock
|
$
|
-
|
$
|
150
|
|||
Net
cash provided (used) by financing activities
|
$
|
2,360,058
|
$
|
3,697,372
|
|||
Net
decrease in cash and cash equivalents
|
$
|
(814,619
|
)
|
$
|
816,532
|
||
Beginning
cash and cash equivalents
|
$
|
818,557
|
$
|
2,025
|
|||
Ending
cash and cash equivalents
|
$
|
3,937
|
$
|
818,557
|
Supplemental
Disclosure of Cash Flow Information
|
|
|
|
|
|
|
|
Cash
Paid during the year for interest
|
|
$
|
50,256
|
|
$
|
37,614
|
|
Cash
Paid during the year for income taxes
|
|
$
|
-
|
|
$
|
-
|
|
Common
stock issued for services
|
|
$
|
2,501,379
|
|
$
|
616,000
|
|
Common
stock issued for reduction in debt
|
|
$
|
2,118,937
|
|
$
|
89,030
|
|
Common
stock issued for conversion of convertible note
|
|
$
|
2,411,252
|
|
$
|
954,074
|
|
Common
stock issued as debt discount
|
|
$
|
366,026
|
|
$
|
285,000
|
|
Common
stock issued as debt costs
|
|
$
|
1,500,000
|
|
$
|
-
|
|
Amortization
of Common stock issued for deferred compensation
|
|
$
|
200,000
|
|
$
|
-
|
|
Common
stock issued for acquisition
|
|
$
|
140,250
|
|
$
|
3,525,871
|
|
·
|
Cash,
Accounts Receivable, Accounts Payable and Accrued Expenses: The carrying
amounts reported in the balance sheet for cash, accounts receivable,
accounts payable and accrued expenses approximate their fair value
due to
their relatively short maturity.
|
·
|
Long-Term
Obligations: The fair value of the Company's fixed-rate long-term
obligations is estimated using discounted cash flow analyses, based
on the
Company's current incremental borrowing rates for similar types of
borrowing arrangements. At December 31, 2006 and 2005, the Company
did not
have any long-term obligations.
|
December
31,
|
|
|||
2007
|
$
|
158,997
|
||
2008
|
$
|
167,095
|
||
2009
|
$
|
170,980
|
||
2010
|
$
|
175,021
|
||
2010
and there after
|
$
|
519,106
|
||
Total
minimum lease payments
|
$
|
1,191,199
|
|
2006
|
2005
|
|||||
Machinery
and Equipment
|
$
|
461,564
|
$
|
401,187
|
|||
Furniture,
Fixtures and Equipment
|
$
|
63,407
|
$
|
44,562
|
|||
Vehicles
|
$
|
41,335
|
$
|
41,335
|
|||
Leasehold
Improvements
|
222,588
|
231,009
|
|||||
Less
accumulated depreciation and amortization
|
$
|
(234,172
|
)
|
$
|
(152,678
|
)
|
|
Total
|
$
|
554,722
|
$
|
565,415
|
|
2006
|
2005
|
|||||
Goodwill
|
$
|
61,820
|
$
|
61,820
|
|||
Less
accumulated amortization
|
$
|
0
|
$
|
0
|
|||
Less
Impairment
|
$
|
(61,820
|
)
|
$
|
0
|
||
Total
|
$
|
0
|
$
|
61,820
|
|
2006
|
2005
|
|||||
Intellectual
Property - Certifications
|
$
|
873,342
|
$
|
1,146,925
|
|||
Less
accumulated amortization
|
$
|
(91,931
|
)
|
$
|
(273,583
|
)
|
|
Less
Impairment
|
$
|
(781,411
|
)
|
$
|
0
|
||
Total
|
$
|
0
|
$
|
873,342
|
|
2006
|
2005
|
|||||
Current
income tax expense (benefit)
|
$0
|
$0
|
|||||
Deferred
income tax expense (benefit) net operating loss carry
forward
|
$(3,556,578)
|
$(1,847,465)
|
|||||
Change
in valuation allowance
|
$
|
3,556,578
|
$
|
1,847,465
|
|||
Income
tax expense (benefit)
|
$
|
0
|
$
|
0
|
|
2006
|
2005
|
|||||
Computed
tax expense at the statutory rate increase
(decrease)
in taxes resulting from:
|
|||||||
Net
Loss
|
$
|
(3,749,875
|
)
|
$
|
(2,808,855
|
)
|
|
Permanent
differences
|
|||||||
Derivative
income
|
(407,338
|
)
|
(482,916
|
)
|
|||
Derivative
expense
|
328,146
|
||||||
Derivative
interest expense
|
281,446
|
95,923
|
|||||
Amortization
of certification
|
31,256
|
93,018
|
|||||
Goodwill
impairment
|
286,698
|
926,411
|
|||||
Non
deductible meals and entertainment (50%)
|
1,235
|
808
|
|||||
|
193,297
|
961,390
|
|||||
Current
income tax expense (benefit)
|
(3,556,578
|
)
|
(1,847,465
|
)
|
|||
|
|
2006
|
2005
|
|||||
Net
operating loss carry forwards
|
$
|
8,209,727
|
$
|
4,653,308
|
|||
Valuation
allowance
|
$
|
8,209,727
|
$
|
4,653,308
|
|
2006
|
2005
|
|||||
Payroll
and sales taxes
|
$
|
182,500
|
$
|
61,561
|
|||
Estimated
and accrued
|
|||||||
Penalties
and interest
|
21,800
|
13,238
|
|||||
|
$
|
204,300
|
$
|
74,799
|
|
Number
of Warrants
|
Weighted
Average Exercise Price
|
|||||
Balance
as of December 31, 2004
|
862,500
|
$
|
0.57
|
||||
Additions
|
3,114,814
|
||||||
Exercised
|
|||||||
Expirations
|
(62,500
|
)
|
|||||
Balance
as of December 31, 2005
|
3,914,814
|
$
|
1.00
|
||||
Additions
|
|||||||
Exercised
|
|||||||
Forfeited
|
1,200,000
|
||||||
Expirations
800,000
|
|||||||
Balance
as of December 31, 2006
|
1,914,814
|
$
|
0.21
|
|
Outstanding
|
Exercisable
|
||||||||||||||
Range
of
Exercise
Prices
|
Weighted
Average
Warrants
Numbers
Outstanding
|
Weighted
Average
Remaining
Contractual
Life
|
Warrants
Exercisable
at
Exercise
Price
|
Exercise
Price
|
Weighted
Average
|
|||||||||||
|
||||||||||||||||
$0.19
- $0.27
|
1,914,814
|
3.55
|
$
|
0.21
|
1,914,814
|
$
|
0.21
|
|
2006
|
2005
|
|||||
|
|
|
|||||
Convertible
Note payable, collateralized by all assets, interest due in monthly
|
|||||||
Payments
at Wall Street Journal prime plus 3.00% and principal payments
|
|||||||
commencing
on August 1, 2005. (face value $600,000)
|
$
|
209,378
|
|||||
|
|||||||
Convertible
Note Payable, collateralized by all assets, Interest due in monthly
|
|||||||
payments
of $3,369.46 at 12% annum, starting in the fourth month monthly
|
|||||||
payments
of $40,498.44 per month including principle. (face value) $340,000
|
$
|
101,267
|
|||||
|
|||||||
Convertible
Note Payable, collateralized by all assets, due in monthly
|
|||||||
payments
$113,541.64. (face value $1,362,500)
|
$
|
793,334
|
$
|
1,059,722
|
|||
|
|||||||
Note
Payable, unsecured, due in monthly payments of $3,800, including
|
|||||||
interest
at 6.28%, through September 2006
|
$
|
190,320
|
|||||
|
|||||||
Note
Payable, unsecured due in monthly payments of $6,627.31
|
|||||||
including
interest at 9.25% through November 2006
|
$
|
69,606
|
|||||
|
|||||||
Note
Payable collateralized by all assets, due in the amount equal to
the
greater
|
|||||||
of
100% of each put to the investor from our credit line or $117,708
per
month.
|
$
|
858,729
|
|||||
|
|||||||
Note
Payable collateralized by all assets, due in the amount equl to 100%
of
Put
|
|||||||
to
the investor from our line of credit until the note is paid in full,
Commencing on
|
|||||||
December
20, 2006, including interest at 12% per month
|
$
|
160,173
|
|||||
|
|||||||
Note
Payable collateralized by all assets, Interest due in monthly payments
|
$
|
109,706
|
|||||
Note
Payable collateralized by (40) signed put notices for the equity
line of
Credit,
|
|||||||
due
in the amount of the greater of 100% of each put until the face amount
is
paid in full.
|
$
|
157,927
|
|||||
|
|||||||
|
$
|
2,079,869
|
$
|
1,630,293
|
|||
Debt
Discount
|
$
|
(82,231
|
)
|
$
|
(650,630
|
)
|
|
Total
|
$
|
1,997,638
|
$
|
979,663
|
|
2006
|
2005
|
|||||
Numerator:
|
|||||||
|
|||||||
Net
loss
|
$
|
(11,029,040
|
)
|
$
|
(8,261,371
|
)
|
|
Less
preferred stock dividends
|
--
|
--
|
|||||
|
|||||||
Net
loss available to common shareholders
|
$
|
(11,029,040
|
)
|
$
|
(8,261,371
|
)
|
|
|
|||||||
Denominator:
|
|||||||
|
|||||||
Weighted
average shares outstanding
|
121,737,383
|
88,909,988
|
|||||
|
|||||||
Effect
of dilutive securities:
|
|||||||
|
|||||||
Stock
Options
|
--
|
||||||
Convertible
debt
|
--
|
||||||
Stock
Warrants
|
--
|
||||||
|
|||||||
Weighted
average fully diluted shares outstanding
|
121,737,383
|
88,909,988
|
|||||
|
|||||||
Net
earnings (loss) per common share
|
|||||||
|
|||||||
Basic
|
(0.09
|
)
|
(0.09
|
)
|
|||
Diluted
|
(0.09
|
)
|
(0.09
|
)
|
Issue
Date
|
Expiration
Date
|
Instrument
|
Exercise
Price Per Share
|
Value
at Issue Date
|
Value
at 12/31/06
|
3/5/2005
|
3/5/2010
|
1,600,000
warrants issued to Alpha Capital
|
$0.55
|
$
928,000
|
$
57,600
|
|
|
|
|
|
|
11/4/2005
|
11/4/2010
|
314,815
warrants issued to Dutchess Priveate Equities
|
$0.27
|
$
85,000
|
$
9,130
|
Issue
Date
|
Expiration
Date
|
Instrument
|
Exercise
Price
Per
Share
|
Value
at Issue
Date
|
Value
At
12/31/06
|
12/20/2005
|
12/21/2006
|
Dutchess
$1,362,500 term note
|
$0.27
|
$
302,778
|
$
4,110
|
3/23/2006
|
3/23/2007
|
Dutchess
$ 1,412,500 term note
|
$0.27
|
$
470,833
|
$
394
|
7/13/2006
|
10/13/2007
|
Dutchess
$845,000 term note
|
$0.27
|
$338,169
|
$5,811
|
Fair
value of derivative instrument liabilities for term
notes
|
$
|
10,315
|
||
|
||||
Total
fair value of derivative instrument liabilities
|
$
|
77,045
|
Expected
term ranging from.25 to 3.75 years
|
Stock
Price at December 31, 2006 $0.072
|
Expected
dividend yield
|
Expected
stock price volatility 103%
|
Risk-free
interest rate ranging from 4.74% to
5.09%
|
Purchase
Price
|
$
|
350,000
|
||
|
||||
Less:
values currently assigned to assets
|
||||
|
||||
Cash
|
(63,049
|
)
|
||
Accounts
Receivable net
|
(133,357
|
)
|
||
Inventory
|
(153,003
|
)
|
||
Fixed
Assets net
|
(60,285
|
)
|
||
Other
assets
|
(2,310
|
)
|
||
|
||||
Plus:
values currently assigned to liabilities
|
||||
|
||||
Accounts
Payable and accrued expense
|
205,501
|
|||
Credit
Line Payable
|
400,130
|
|||
Purchase
price subject to allocation
|
$
|
543,627
|
|
|
For
the year
ended
Dicember
31,
2006
|
|
For
the year
Ended
December
31,
2005
|
|
||
|
|
(unaudited)
|
|
(unaudited)
|
|
||
Revenue
|
|
|
1,720,431
|
|
|
2,511,233
|
|
Gross
Profit
|
|
|
834,294
|
|
|
1,109,295
|
|
Net
Loss
|
|
|
(10,706,004
|
)
|
|
(8,253,932
|
)
|
|
|
|
|
|
|
|
|
Assumption
of liabilities
|
$
|
652,956
|
||
Cash
paid
|
200,000
|
|||
Common
stock issued
|
3,525,871
|
|||
|
$
|
4,378,827
|
||
The
aggregate purchase price was allocated as follows:
|
||||
|
||||
Accounts
Receivable
|
$
|
134,895
|
||
Inventory
|
47,432
|
|||
Property
and equipment
|
60,941
|
|||
Other
assets
|
2,075
|
|||
Goodwill
& Intangible Assets
|
4,133,484
|
|||
|
$
|
4,378,827
|
|
Hybrid
Fuels
|
Manufacturing
|
Total
|
|||||||
Revenues
|
544,640
|
830,778
|
1,375,418
|
|||||||
Cost
of Sales
|
302,059
|
658,902
|
960,961
|
|||||||
Gross
Profit
|
242,581
|
171,876
|
414,457
|
|||||||
|
||||||||||
Operating
expenses
|
||||||||||
Consulting
and Professional
|
1,852,972
|
32,212
|
1,885,184
|
|||||||
Research
& Develop
|
92,062
|
1,251
|
93,313
|
|||||||
Compensation
|
2,365,293
|
1,625,535
|
3,990,828
|
|||||||
Depreciation
& Amortization
|
174,772
|
7,870
|
182,642
|
|||||||
Rent
|
163,182
|
30,783
|
193,965
|
|||||||
Insurance
|
233,018
|
26,388
|
259,406
|
|||||||
Other
operating expenses
|
1,276,661
|
33,921
|
1,310,582
|
|||||||
|
6,157,960
|
1,757,960
|
7,915,920
|
|||||||
|
||||||||||
Loss
from operations
|
(5,915,379
|
)
|
(1,586,084
|
)
|
(7,501,463
|
)
|
||||
|
||||||||||
Other
expense (income)
|
||||||||||
Derivative
gain
|
(370,271
|
)
|
(370,271
|
)
|
||||||
Interest
expense
|
3,895,063
|
14,595
|
3,909,658
|
|||||||
Extinguishment
of debt
|
(162,557
|
)
|
(162,557
|
)
|
||||||
Settlements
|
149,572
|
149,572
|
||||||||
Misc
|
1,175
|
1,175
|
||||||||
|
3,512,982
|
14,595
|
3,527,577
|
|||||||
Loss
from continuing operations
|
(9,428,361
|
)
|
(1,600,679
|
)
|
(11,029,040
|
)
|
||||
Net
loss for reportable segments
|
(9,428,361
|
)
|
(1,600,679
|
)
|
(11,029,040
|
)
|
||||
Total
Assets
|
2,310,395
|
1,083,896
|
3,394,291
|
|||||||
|
Revenue
|
|
|||
Total
revenues for reportable segments
|
1,375,418
|
|||
Total
consolidated revenue
|
1,375,418
|
|||
|
||||
Net
loss
|
||||
|
||||
Net
loss for reportable segments
|
11,029,040
|
|||
Net
loss consolidated
|
11,029,040
|
Securities and Exchange Commission Registration Fee | $ | 64.47 | ||
Accounting Fees and Expenses | $ | 5,000 | ||
Legal Fees and Expenses | $ | 25,000 | ||
Miscellaneous | $ | 300.00 | ||
Total | $ | 30,365 |
Exhibit |
Description
|
|
2.1 | Asset Purchase Agreement between the Company and New York State Electric & Gas Corporation, dated as of October 29, 2001, incorporated by reference to Exhibit 2.1 of the 8-K filed on December 26, 2001. | |
2.2 | Secured Promissory Note in favor of New York State Electric & Gas Corporation, dated as of December 11, 2001, incorporated by reference to Exhibit 2.2 of the 8-K filed on December 26, 2001. | |
2.3 | Security Agreement between the Company and New York State Electric & Gas Corporation, dated as of December 11, 2001, incorporated by reference to Exhibit 2.3 of the 8-K filed on December 26, 2001. | |
2.4 | Guaranty from the Company in favor of New York State Electric & Gas Corporation, dated as of December 11, 2001, incorporated by reference to Exhibit 2.4 of the 8-K filed on December 26, 2001. | |
3.1 | Articles of Incorporation of Save On Energy , Inc., incorporated by reference to Exhibit 3.1 to the SB-2 filed on March 23, 2000. | |
3.2 | Amendment to Articles of Incorporation of Save On Energy, Inc., incorporated by reference to Exhibit 3.2 to the SB-2 filed on March23, 2000. | |
3.3 | By-laws of Save On Energy, Inc., incorporated by reference to Exhibit 3.3 to the SB-2 filed on March 23, 2000. | |
3.4 | Certificate of Amendment to the Certificate of Incorporation of Hybrid Fuel Systems, Inc. dated as of March 1, 2006 * | |
4.1 | Certificate of Designation of Series A Preferred Stock filed with | |
4.2 | Certificate of Designation of Series B Preferred Stock filed with the Secretary of State on May 7th, 2002 [incorporated by reference to Exhibit 4.2 to the 10-KSB filed on May 30, 2002.* | |
4.3 | Subscription Agreement, dated March 31, 2005, by and among Hybrid Fuel Systems, Inc. and the investors named on the signature pages thereto, incorporated by reference to Exhibit 4.1 to the 8-K filed on April 5, 2005. | |
4.4 | Form of Convertible Note of Hybrid Fuel Systems, Inc. issued to the investors named on the signature pages thereto incorporated by reference to Exhibit 4.2 to the 8-K filed on April 5, 2005. | |
4.5 | Form of Class A Common Stock Purchase Warrant of Hybrid Fuel Systems, Inc. issued to the investors named on the signature pages thereto incorporated by reference to Exhibit 4.3 to the 8-K filed on April 5, 2005. | |
4.6 | Form of Security Agreement by and between Hybrid Fuel Systems, Inc. and Barbara Mittman as collateral agent incorporated by reference to Exhibit 4.4 to the 8-K filed on April 5, 2005. | |
4.7 | Form of Collateral Agent Agreement among Barbara R. Mittman, as collateral agent, and the Lenders as defined therein incorporated by reference to Exhibit 4.5 to the 8-K filed on April 5, 2005. | |
5.1 | Opinion of Sichenzia Ross Friedman Ference LLP* | |
10.1 | License Agreement by and between the Davis Family Trust and Electronic Fuel Control, Inc. dated May 13, 1996, incorporated by reference to Exhibit 10.1 to the SB-2 filed on March 23, 2000. | |
10.2 | Amendment to License Agreement by and between the Davis Family Trust and Electronic Fuel Control, Inc, dated June 18, 1998, incorporated by reference to Exhibit 10.2 to the SB-2 filed on March 23, 2000. | |
10.3 | Amendment to License Agreement by and between the Davis Family Trustand Electronic Fuel Control, Inc. dated January 3, 2000,incorporated by reference to Exhibit 10.3 to the SB-2 filed on March 23, 2000. | |
10.4 | Consulting Agreement between Save on Energy, Inc. and MBO, Inc.dated November 23, 1999, Trust and Electronic Fuel Control, Inc, incorporated by reference to Exhibit 10.4 to the SB-2 filed on March 23, 2000. | |
10.5 | Exclusive Supply Agreement between Ambac International Corporation and Electronic Fuel Control, Inc. dated April 29, 1996, incorporated by reference to Exhibit 10.5 to the SB-2 filed on March 23, 2000. | |
10.6 | Agreement re: International Fuel Systems, Inc. and Davenport, dated January 7, 2000, incorporated by reference to Exhibit 10.6 to the SB-2 filed on March 23, 2000. | |
10.7 | Employment Agreement with Robert Stiles, dated July 17, 2001, incorporated by reference to Exhibit 10.1 of the 10-QSB filed on November 19, 2001. | |
10.8 | 2001 Stock Option Plan - Incorporated by reference to the 2001 Annual Proxy Statement filed October 1, 2001. | |
10.9 | Stock Purchase Agreement between the Company and SWI Holdings,,Limited, dated as of December 10, 2001 (Composite Version), incorporated by reference to Exhibit 10.1 of the 8-K filed on December 26, 2001. |
10.10 | Security Agreement between the Company and SWI Holdings, Limited, dated as of December 10, 2001, incorporated by reference to Exhibit | |
10.11 | Convertible Secured Promissory Note issued to SWI Holdings, Limited, dated April 23, 2002 incorporated by reference to Exhibit 10.11 to the 10-KSB filed on May 30, 2002. | |
10.12 | Security Agreement between the Company and SWI Holdings, Limited, dated as of April 23, 2002 incorporated by reference to Exhibit 10.10 to the 10-KSB filed on May 30, 2002. | |
10.13 | Agreement re: White Knight SST, Inc. and Hybrid Fuel Systems, Inc. (formerly Save On Energy, Inc.) dated December 22, 2003 incorporated by reference to Exhibit 10.13 to the 10-KSB filed on August 16, 2004. | |
10.14 |
Debenture
Agreement dated as of November 4, 2005 by and between Hybrid
Fuel Systems, Inc. and Dutchess Private Equities Fund, Ltd., incorporated
by reference to Exhibit 10.1 to the Form 8-K filed
on November 9, 2005.
|
|
10.15 | Debenture Registration Rights Agreement dated as of November 4, 2005 by and between Hybrid Fuel Systems, Inc. and Dutchess Private Equities Fund, Ltd., incorporated by reference to Exhibit 10.2 To the Form 8-K filed on November 9, 2005. | |
10.16 | Warrant Agreement dated as of November 4, 2005 by and between Hybrid Fuel Systems, Inc. and Dutchess Private Equities Fund, Ltd., incorporated by reference to Exhibit 10.2 to the Form 8-K filed on November 9, 2005. | |
10.17 | Equity Line of Credit Registration Rights Agreement dated as of November 4, 2005 by and between Hybrid Fuel Systems, Inc. and Dutchess Private Equities Fund, Ltd., incorporated by reference to Exhibit 10.2 to the Form 8-K filed on November 9, 2005. | |
10.18 | Investment Agreement dated as of November 4, 2005 by and between Hybrid Fuel Systems, Inc. and Dutchess Private Equities Fund, Ltd, incorporated by reference to Exhibit 10.2 to the Form 8-K filed on November 9, 2005. | |
10.19 | Security Agreement dated as of November 4,2005 by and between Hybrid Fuel Systems, Inc. and Dutchess Private Equities Fund, Ltd., incorporated by reference to Exhibit 10.2 to the Form 8-K filed on November 9, 2005. | |
10.20 | Subscription Agreement dated as of November 4, 2005 by and between Hybrid Fuel Systems, Inc. and Dutchess Private Equities Fund, Ltd., incorporated by reference to Exhibit 10.2 to the Form 8-K filed on November 9, 2005. | |
10.21 | Promissory Note of US Energy Initiatives Corporation dated as of March 23, 2006.* | |
10.22 | Promissory Note of US Energy Initiatives Corporation dated as of March 23, 2006.* | |
10.23 | Security Agreement dated as of March 23, 2006 by and between US Energy Initiatives Corporation and Dutchess Private Equities Fund, Ltd.* | |
10.24 | Settlement Agreement and Release dated as of March 24, 2006 by and between US Energy Initiatives Corporation and the investors named on the signature pages thereto.* | |
10.25 | Promissory Note of Hybrid Fuel Systems, Inc. dated as of December 20, 2005.* | |
23.1 | Consent of Sichenzia Ross Friedman Ference LLP (included as part of Exhibit 5.1) | |
23.2 | Consent of Brimmer, Burek & Keelan, LLP.* |
US Energy Initiatives Corporation | ||
|
|
|
Date: June 27, 2007 | By: | /s/ Phillip Rappa |
Phillip Rappa |
||
Chief Executive Officer |
|
|
|
Date: June 27, 2007 | By: | /s/ Michele Hamilton |
Michele Hamilton |
||
Chief Financial Officer |
/s/ John Stanton
|
Chairman of the Board of Directors | June 27, 2007 |
/s/ Phillip Rappa
Phillip Rappa |
Chief Executive Officer | June 27, 2007 |
/s/ Mark Clancy
Mark Clancy |
Director | June 27, 2007 |
/s/ Michele Hamilton
Michele Hamilton |
Chief Financial Officer | June 27, 2007 |