U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended September 30, 2007
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ___________ to ___________
Commission file number: 333-76242
Hydrogen Hybrid Technologies, Inc.
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(Name of small business issuer in its charter)
Nevada 45-0487463
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1845 Sandstone Manor Unit #11, Pickering, ON L1W3X9 Canada
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(Address of principal executive offices)
(905) 697-4880
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(Issuer's telephone number)
Securities registered under Section 12(g) of the Securities Exchange Act of
1934: None; report is filed pursuant to Section 15D.
Title of each class Name of each exchange on which
registered
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None None
Common Stock, par value $0.001
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(Title of class)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this Form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this form 10-
KSB or any amendments to this Form 10-KSB. [X]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act) Yes [ ] No [X]
State the issuer's income for its most recent fiscal year (ending September
30, 2007): $ 120,837.
The aggregate market value on January 7, 2008 of voting stock held by
non-affiliates was $39,092,768.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
Number of shares of common stock outstanding as of January 7, 2008:
129,071,362 shares common stock
Number of shares of preferred stock outstanding as of January 7, 2008: None
CONTENTS
PAGE
PART I
Item 1. Description of Business........................................4
Item 2. Description of Property.......................................16
Item 3. Legal Proceedings.............................................16
Item 4. Submission of Matters to a Vote of Security Holders...........16
PART II
Item 5. Market for Common Equity and Related Stockholder Matters......17
Item 6. Management's Discussion and Analysis or Plan of Operation.....18
Item 7. Financial Statements..........................................21
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................22
Item 8a. Controls and Procedures.......................................22
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the
Exchange Act...............................................23
Item 10. Executive Compensation........................................25
Item 11. Security Ownership of Certain Beneficial Owners and
Management.................................................28
Item 12. Certain Relationships and Related Transactions................29
Item 13. Exhibits and Reports on Form 8-K..............................29
Item 14. Principal Accountant Fees and Services........................31
SIGNATURES ..............................................................32
2
Forward-Looking Statements
This report contains forward-looking statements. The forward-looking
statements include all statements that are not statements of historical fact.
The forward-looking statements are often identifiable by their use of words
such as "may," "expect," "believe," "anticipate," "intend," "could,"
"estimate," or "continue," "plans" or the negative or other variations of
those or comparable terms. Our actual results could differ materially from
the anticipated results described in the forward-looking statements. Factors
that could affect our results include, but are not limited to, those
discussed in Item 6, "Management's Discussion and Analysis or Plan of
Operation" and included elsewhere in this report.
3
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) BUSINESS DEVELOPMENT
(i) Business Development, Organization and Acquisition Activities
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Hydrogen Hybrid Technologies, Inc. ("HYHY" or "the Company") was incorporated
under the laws of the State of Nevada on February 2, 2002, under the name
Eaton Laboratories, Inc.
On March 30, 2007, Eaton Laboratories, a Nevada corporation, Eaton
Laboratories Acquisition Corporation, a Nevada corporation ("Merger Sub") and
Hydrogen Hybrid Technologies, Inc., a privately-held Canadian corporation,
entered into a Acquisition Agreement and Plan of Merger pursuant to which the
Registrant, through its wholly-owned subsidiary, Merger Sub, acquired
Hydrogen Hybrid Technologies in exchange for 99,000,000 shares of the
Registrant's common stock which were issued to the holders of Hydrogen Hybrid
Technologies stock. The transaction contemplated by the Agreement was
intended to be a "tax-free" reorganization pursuant to the provisions of
Section 351 and 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended. Following the merger, the Hydrogen Hybrid Technologies shareholders
owned approximately 82% of the Registrant's common stock outstanding as of
March 30, 2007. This figure is based on the issuance of 99,000,000 common
shares.
(b) Business of Issuer
(i) Principal Products, Services and Principal Markets.
Hydrogen Hybrid Technologies' Business
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Hydrogen Hybrid Technologies is engaged in the business of selling and
distributing of on-board hydrogen generating and injections systems for the
Original Equipment Manufacturer ("OEM"), car and light truck markets
globally. HYHY has acquired the exclusive rights to market a proprietary
patented technology from a related company. In addition it holds non-
exclusive rights to distribute the product to other markets including the
heavy goods vehicle market (Commercial Transport Fleets).
The on-board hydrogen generating system strives to improve fuel consumption
and reduce pollution through the enhancement of the internal combustion
process. The technology consists of an on-board system which generates
hydrogen and oxygen by splitting distilled water. Once these gases are
available they are not stored but directly injected through the air intake of
an internal combustion engine. The result of the Hydrogen Fuel Injection
system ("HFI") is a reduction in pollution causing emission and an increase
in fuel efficiency and overall engine performance.
4
Hydrogen Fuel Injection ("HFI") system
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The science behind HFI is well documented. It has been known for some time
(since a 1974 paper by the Jet Propulsion Lab of the California Institute of
Technology) that the addition of hydrogen to fossil fuels, burned in internal
combustion engines, will increase the efficiency of that engine. This premise
has been validated by a number of papers published by the Society of
Automotive Engineers (SAE). The concept is valid with any fossil fuel
(diesel, gasoline, propane, natural gas) or bio-fuel (biodiesel, ethanol)
though it is most effective in diesel engines. Among other, more subtle
effects, the faster flame speed of hydrogen allows for a more complete burn
of the fuel earlier in the power cycle. Of course, electrolysis itself is
well understood.
The HYHY technology differs from its competitors in that it focuses on
delivering an engineering solution using these scientific principles that is
reliable, efficient, and cost-effective. As an integral part of the research
and development cycle, HYHY delivers an HFI solution geared toward a specific
vertical market that has gone through an extensive field trial and testing
verification stage.
Product Highlights
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A number of the product highlights offered by HYHY's on-board hydrogen
generating and injections systems include:
o Reduce fuel consumption 5% to 30% depending on operating environment
o Reduce emissions from 30% to 80% (meets most 2010 emission
requirements)
o Functional with any internal combustion engine and any fossil fuel
o Configurations are available for both 12 & 24 volt, plus 120 amp
services
o Does not require additional power capabilities within current OEM
vehicles
o Simple installation (many trained installers across N.A. - 4 hrs
required)
o Leasing provides immediate positive cash flow for Heavy Vehicle
Operators
o Product that reduces emissions while increasing cash flow
Business Strategy
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While the HFI technology is initially an after-market device, HYHY is
actively seeking Original Equipment Manufacturers (OEM) during the
development and testing phase to license the technology and incorporate it
directly into their engineering cycle. Eventually, with exhaust water re-
capture technology, the HFI system can be built seamlessly into internal
combustion engines.
5
As HFI technology achieves greater acceptance and penetration in various
markets, HYHY will continue to develop hydrogen solutions that meet ongoing
public requirements of emission reductions and energy economies. The HFI
system is positioned as a bridge technology to handle the transition to
products that would, ultimately, allow our society to cease using hydrocarbon
fuels. It is management's belief that the term "hybrid" could soon come to
mean "hydrogen-hydrocarbon" technologies.
HYHY markets on-demand hydrogen-generating technology designed to increase
the efficiency of virtually any combustion process. The technology is based
on a patented Hydrogen Fuel Injection ("HFI") system, in which hydrogen and
oxygen are generated on demand via electrolysis and then introduced into the
combustion process. The HFI system draws power, 12V to 20V, and splits
distilled water to produce hydrogen and oxygen; then both gases are injected
directly into the air intake of the engine. In the engine, the hydrogen acts
as an initiator to promote more complete combustion. By converting more
chemical energy into mechanical energy, the engine operator is able to reduce
fuel consumption, plus the more complete combustion dramatically lowers
exhaust emissions (CO, PM, HC, NOx).
Marketing Strategies
--------------------
Management plans to market their technology initially towards the Heavy Goods
Vehicle (HGV) market. HGVs are Class 7 and Class 8 heavy duty, long-haul
trucks (7.3 to 16 liters) that typically run on diesel. The HFI unit uses
distilled water, runs for 65 hours between fills, and incorporates a number
of safety features the most salient of which is the fact that no hydrogen is
stored on-board since it is generated only on-demand.
An on-board digital controller monitors the device and also allows for two-
way wireless connection, via satellite, along with full GPS capability.
Software updates and monitoring can be performed remotely. Additional
revenue streams might be possible by leveraging this communications ability
as a complementary business, both as a fleet management service and as a
personal communications service.
Competition
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With the primary focus at HYHY being on the Heavy Goods Vehicle and light
truck markets, the principle competition comes from manufacturers of
"passive" emissions control technologies. There are a variety of advanced
exhaust treatment products, including diesel particulate filters and diesel
oxidation catalysts but, while they offer comparable emissions reductions to
HFI, in every case they increase fuel consumption (by increasing back
pressure on the engine) by an average of 3.5%-as contrast to the 10% fuel
savings achieved by HFI. The existing market for these devices is literally
billions of dollars, with companies such as Arvin Meritor, Johnson Matthey,
and Delphi.
6
The credible competitor for HYHY is Hy-Drive. They market a product that is
based on similar technology, but which is less sophisticated than HYHY HFI
models and has only limited application on certain heavy-duty diesel engines.
Their primary market is North America for long-haul trucking and above-ground
mining equipment, they claim to have secured sales agents in the UK and
Australia as well.
There is an extensive list of private companies attempting to develop
technologies involving the addition of fractional amounts of hydrogen to
fossil fuel engines. To date, none has reached the point of having any real
presence in the marketplace.
Hythane Ltd. produces a gas that mixes hydrogen and natural gas before it is
pumped into a vehicle gas tank; in other words, doing off-board what HYHY
does on-board. With their system, there are the obvious issues related to
the storage of large volumes of compressed gas, as well as the sourcing of
large volumes of pure hydrogen.
Finally, there are manufacturers of very large electrolysers, used primarily
to supply hydrogen for cooling turbines in electrical power generating
stations. The two largest North American manufacturers are GE and
Hydrogenics, and it is conceivable that after HYHY demonstrates the potential
for smaller electrolysers, particularly in applications that have never
utilized electrolysis previously, these companies might expand their product
lines to include competition for the various HFI models.
Indirect Competition
--------------------
Indirect competition would include technologies such as fuel cells, battery-
powered vehicles, hybrid vehicles, alternative fuels, and other emission
reduction alternatives, such as diesel oxidation catalysts and diesel
particulate filters. Of these, the only truly price-competitive products are
the diesel particulate filters, but their use on HGVs while accomplishing the
goal of reducing PM comes with the financial penalty of reducing fuel
efficiency by 3.5 - 4% and does nothing to reduce CO2. Diesel oxidation
catalysts, similarly, reduce engine efficiency, and the emissions benefits
come with equipment costs on par with an HFI HT.
Hybrid vehicles are gaining customer acceptance, but are not, in fact, a
competitor to the HFI system since the HFI system can be regarded as a
complementary technology. "Hybrid" may soon refer to the hybrid of hydrogen-
hydrocarbon, not gasoline-electric. Alternative fuels, such as ethanol,
again can be seen as complementary technologies since the HFI device can be
used in conjunction with them. As part of its long-term vision, HYHY plans
to develop partnerships with companies in the bio-fuel industry to develop
hydrogen blends that will make those fuels even cleaner and less expensive.
Battery-powered vehicles-which do not eliminate emissions, but merely
displace them-are not a likely viable alternative, and all but a handful of
niche manufacturers have ceased any development work in this field.
7
Distribution Rights
-------------------
On January 18, 2005, the Company entered into a Distribution Agreement with
Canadian Hydrogen Energy Company, Ltd., a Canadian privately owned related
company. The companies are related due to significant common ownership. The
Distribution Agreement includes the rights to sell and distribute on-board
hydrogen generating and injections systems for the OEM, car and light truck
markets globally. As compensation for the rights granted under this
agreement the Company has agreed to pay a total of $4,783,966 in cash. The
Distribution Agreement provides the Company with the right to sell and
distribute the product for 20 years beginning with receipt of authorization
for full distribution. The Company will amortize the cost of the
distribution rights over the 20 year period once authorization for full
distribution is received. The Company has yet to receive written
authorization to begin full distribution of the Hydrogen Fuel Injection
system, but has received authorization to release units to complete testing.
During the year ended September 30, 2007, six units were sold on a test
basis.
RISK FACTORS
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Risks Relating to our Company
a) Hydrogen Hybrid Technologies, Inc. has a limited operating history in on-
board hydrogen generating and injections systems, and therefore investors may
not be able to evaluate an investment in our common stock.
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Hydrogen Hybrid Technologies has a limited history of operations in on-board
hydrogen generating and injections systems industry. An investment in
Hydrogen Hybrid Technologies should be viewed in light of the risks and
uncertainties inherently faced by a company in the early stages of
development. There can be no assurance that Hydrogen Hybrid Technologies
will achieve or sustain profitability or positive cash flows from operating
activities in the future. Investors may lose their investment or the
opportunity to profit from a developing business or be unable to correctly
assess our ability to operate in our chosen industry.
b) If our business plan is not successful, we may not be able to continue
operations as a going concern and our stockholders may lose their entire
investment in us.
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As discussed in the Notes to Financial Statements included in this
annual report, at September 30, 2007 we had no cash, accounts receivable of
$46,732, current liabilities of accounts payable and accrued expenses of
$1,100,886. In addition, we had revenues of $120,837 and a net loss from
operations of $(1,139,364) for the twelve period ending September 30, 2007.
8
These factors raise substantial doubt that we will be able to continue
operations as a going concern, and our independent auditors included an
explanatory paragraph regarding this uncertainty in their report on our
financial statements. Our ability to continue as a going concern is
dependent upon our generating cash flow sufficient to fund operations and
reducing operating expenses. Our business plan may not be successful in
addressing these issues. If we cannot continue as a going concern, our
stockholders may lose their entire investment in us.
c) We expect losses in the future because we have little revenue.
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We have generated $120,837 in revenues against a loss from operations of
$(1,139,364) for the fiscal year ending September 30, 2007. We are expecting
losses over the next twelve (12) months since we have little revenues to
offset the expenses associated in executing our business plan. We cannot
guarantee that we will ever be successful in generating revenues in the
future. We recognize that if we are unable to generate significant revenues,
we will not be able to earn profits or continue operations as a going
concern. There is no history upon which to base any assumption as to the
likelihood that we will prove successful, and we can provide investors with
no assurance that we will generate any operating revenues or ever achieve
profitable operations.
d) We will require a substantial amount of additional capital to fully
execute our business plan, and we are uncertain about the availability of
such additional funds without which we may not be able to execute our
business plan.
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The business plan calls for the expenditure of substantial capital to finance
development projects, finance a state-of-the-art testing facility, finance a
manufacturing facility, and construct a production facility with capacity for
future large scale on-board hydrogen generating and injections systems that
we plan to sell. Hydrogen Hybrid Technologies will require additional capital
to fund its expenditures, including business development, operating losses,
and other cash needs to implement its market entry and cost reduction phases.
Hydrogen Hybrid Technology has made an initial estimate of its capital needs
for its market entry stage and believes it will need between $15-$45 million
in additional capital. Furthermore, if Hydrogen Hybrid Technology decides to
expand the business beyond what is currently planned; additional capital
beyond what is anticipated in our current business plan will be required.
Hydrogen Hybrid Technology plans in the future to seek portions of the
required funding from commercial sales, existing state incentive programs for
on-board hydrogen generating and injections systems. Although Hydrogen
Hybrid Technology currently plans to obtain some of the required additional
financing through the issuance of debt instruments, conditions and
circumstances may change such that Hydrogen Hybrid Technology may decide to
raise capital through the issuance of equity securities, which would result
in dilution to existing shareholders.
9
Any such financing terms may be adverse to existing security holders of
Hydrogen Hybrid Technology and could impose operational limitations on
Hydrogen Hybrid Technology. There can be no assurance that such additional
financing will be available to Hydrogen Hybrid Technology. Without the
necessary funds, our business plan will have to be modified or may not be
fully executed.
e) Hydrogen Hybrid Technologies relies on trade secret and similar means to
protect much of its intellectual property which may not prove to be
effective, with the effect of an impairment in our rights.
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The Company relies on trade secret law, confidentiality agreements and
physical security such as restricted access to protect much of its
intellectual property. These means of protection may not be effective with
the consequence that others may obtain knowledge of our intellectual
property. To protect its rights that others learn illegally may require
Hydrogen Hybrid Technologies to expend time and financial resources pursuing
court actions. These actions are typically expensive and are not always
conclusive in favor of the claimant. In addition, though we believe doing so
would be difficult, it may be possible for third parties to reverse engineer
its fuel cells through inspection and testing. Finally, although we are not
aware, it is possible that third party patents may exist on which our
technology may infringe. Our financial condition may be impaired in any such
events, and it may lose its competitive position as a result.
f) If we are unable to obtain additional funding, our business operations
will be harmed. Even if we do obtain additional financing our then existing
shareholders may suffer substantial dilution.
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We will require additional funds to market our services and pay the required
fees to keep our company fully reporting and compliant with SEC rules and
regulations. We need to address all necessary infrastructure concerns. We
anticipate that we will require up to approximately $15-$45 million to fund
our continued operations. Such funds may come from the sale of equity and/or
debt securities and/or loans. It is possible that additional capital will be
required to effectively support the operations and to otherwise implement our
overall business strategy. The inability to raise the required capital will
restrict our ability to grow and may reduce our ability to continue to
conduct business operations. If we are unable to obtain necessary financing,
we will likely be required to curtail our development plans which could cause
the company to become dormant. Any additional equity financing may involve
substantial dilution to our then existing shareholders.
10
g) We have no experience manufacturing on-board hydrogen generating and
injections systems, on a commercial basis which may result in delays in sales
and result in additional development costs.
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We have no experience designing and manufacturing on-board hydrogen
generating and injections systems, on a commercial basis. We do not know
whether or when we will be able to develop efficient, low-cost manufacturing
capability and processes that will enable it to meet the production standards
or production volumes necessary to successfully market its products. Even if
we are successful in developing its manufacturing capability and processes,
we do not know whether we will do so in time to meet its product
commercialization schedule. Therefore, investors may lose the opportunity to
profit from the development of our technology and business plan because there
may be delays in sales, additional development costs and loss of market
position.
h) Newer technologies could render our systems obsolete prior to
commercialization, and therefore will cause us to curtail our current
business plan and an impairment in an investment in our Company.
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Our on-board hydrogen generating and injections systems are one of a number
of energy products being developed today as supplements to reciprocating
engines. Technological advances in alternative energy products, improvements
in reciprocating engine/generator sets, and other fuel cell technologies may
render our systems obsolete, therefore causing a diminished value of an
investment in our Company.
i) We are subject to competition with traditional and other alternative
energy systems, any of which could be determined better, more reliable or
more cost efficient and any of which could reduce demand for our products.
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Our success depends on our ability to compete with other energy systems
providers. We are likely to face competition from existing energy systems
providers, including combustion turbine manufacturers and the automobile
industry, who may decide to sell to the same customers and/or to build
expansions of their own power generating systems, and from equipment
manufacturers and local contractors who typically build energy systems upon a
customer's request and may decide to build excess power generating capacity
which would compete with our products. Due to the highly competitive nature
of the American, European and international energy industries, new companies
may emerge in the future offering services and products similar to our
products. Management believes that the liberalization of the energy market is
likely to attract more competitors, such as companies offering traditional
technology products like combustion turbines, internal combustion engines and
others. , This intensifying competition could reduce the demand for our
products.
11
j) We plan to operate and sell our products in various countries, we will
be subject to varying degrees of regulation in each of the jurisdictions in
which we operate.
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There can be no assurance that regulatory, judicial and legislative changes
will not have a material adverse effect on our operations. For example,
regulators may raise material issues with regard to our compliance or non-
compliance with applicable regulations or judicial decisions may impact on
our operations, each of which could have a material adverse effect on our
business, financial condition and results of operations because of added
costs or as an impediment or barrier to marketing and sales.
k) Our success depends on our ability to hire and retain key personnel
without which its ability to implement its business plan will be slowed.
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Our future success depends on the skills, experience and efforts of our
officers and key technical and sales employees. Our success depends on our
ability to attract, train and retain qualified engineering, technical, and
sales personnel. Competition for personnel in these areas is intense and we
may not be able to hire or retain the required personnel. Moreover, we may
not be able to retain these employees. A failure to do so could have a
material adverse effect on our business, financial condition and results of
operations because without the right personnel, we will not be able to
implement our business plan. We do not maintain key man insurance on any of
its management or employees.
l) Our principal stockholders, and officers and directors own a controlling
interest in our voting stock and investors will not have any voice in our
management, which could result in decisions adverse to our general
shareholders.
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Our officers and our principal stockholders, in the aggregate, beneficially
own approximately or have the right to vote approximately 69% of our
outstanding common stock. As a result, these stockholders, acting together,
will have the ability to control substantially all matters submitted to our
stockholders for approval including:
1) election of our board of directors;
2) removal of any of our directors;
3) amendment of our Articles of Incorporation or bylaws; and
4) adoption of measures that could delay or prevent a change in control or
impede a merger, takeover or other business combination involving us.
12
As a result of their ownership and positions, these two individuals have the
ability to influence all matters requiring shareholder approval, including
the election of directors and approval of significant corporate transactions.
In addition, the future prospect of sales of significant amounts of shares
held by our director and executive officer could affect the market price of
our common stock if the marketplace does not orderly adjust to the increase
in shares in the market and the value of your investment in the company may
decrease. Management's stock ownership may discourage a potential acquirer
from making a tender offer or otherwise attempting to obtain control of us,
which in turn could reduce our stock price or prevent our stockholders from
realizing a premium over our stock price.
Risks Relating To Our Common Shares
-----------------------------------
m) We may, in the future, issue additional common shares, which would reduce
investors' percent of ownership and may dilute our share value.
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Our Articles of Incorporation authorize the issuance of 180,000,000 shares of
common stock and 20,000,000 preferred shares. The future issuance of common
stock may result in substantial dilution in the percentage of our common
stock held by our then existing shareholders. We may value any common stock
issued in the future on an arbitrary basis. The issuance of common stock for
future services or acquisitions or other corporate actions may have the
effect of diluting the value of the shares held by our investors, and might
have an adverse effect on any trading market for our common stock.
n) Our common shares are subject to the "Penny Stock" Rules of the SEC and
the trading market in our securities is limited, which makes transactions in
our stock cumbersome and may reduce the value of an investment in our stock.
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The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes the definition of a "penny stock," for the purposes relevant to
us, as any equity security that has a market price of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to
certain exceptions.
For any transaction involving a penny stock, unless exempt, the rules
require: (a) that a broker or dealer approve a person's account for
transactions in penny stocks; and (b) the broker or dealer receive from the
investor a written agreement to the transaction, setting forth the identity
and quantity of the penny stock to be purchased.
13
In order to approve a person's account for transactions in penny stocks, the
broker or dealer must: (a) obtain financial information and investment
experience objectives of the person; and (b) make a reasonable determination
that the transactions in penny stocks are suitable for that person and the
person has sufficient knowledge and experience in financial matters to be
capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prescribed by the Commission relating to the
penny stock market, which, in highlight form: (a) sets forth the basis on
which the broker or dealer made the suitability determination; and (b) that
the broker or dealer received a signed, written agreement from the investor
prior to the transaction. Generally, brokers may be less willing to execute
transactions in securities subject to the "penny stock" rules. This may make
it more difficult for investors to dispose of our Common shares and cause a
decline in the market value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks
in both public offerings and in secondary trading and about the commissions
payable to both the broker-dealer and the registered representative, current
quotations for the securities and the rights and remedies available to an
investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny
stocks.
o) Even though our common stock is now listed on the OTC-Bulletin Board,
the market price of the shares may fluctuate greatly, and investors in our
the Company bear the risk that they will not recover their investment.
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Trading in our common stock has been minimal from time to time and may be
subject to large price fluctuation. Therefore, there is no clearly
established market for our shares at this time. The public market price is
likely to be influenced by the price at which and the amount of shares the
selling stockholders are attempting to sell at any point in time with the
possible effect of limiting the trading price or lowering it to their
offering price. Shares such as those of companies like ours are also subject
to the activities of persons engaged in short selling the securities which
have the effect of driving the price down. Therefore, the price of our
common stock may fluctuate widely. A full and stable trading market for our
common stock may never develop in which event; any holder of our shares may
not be able to sell at the time he elects or at all.
14
p) Because we do not intend to pay any cash dividends on our common stock,
our stockholders will not be able to receive a return on their shares unless
they sell them.
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We intend to retain any future earnings to finance the development and
expansion of our business. We do not anticipate paying any cash dividends on
our common stock in the foreseeable future. Unless we pay dividends, our
stockholders will not be able to receive a return on their shares unless they
sell them. There is no assurance that stockholders will be able to sell
shares when desired.
q) We may issue shares of preferred stock in the future that may adversely
impact your rights as holders of our common stock.
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Our articles of incorporation authorize us to issue up to 20,000,000 shares
of preferred stock. Accordingly, our board of directors will have the
authority to fix and determine the relative rights and preferences of
preferred shares, as well as the authority to issue such shares, without
further stockholder approval. As a result, our board of directors could
authorize the issuance of a series of preferred stock that would grant to
holders preferred rights to our assets upon liquidation, the right to receive
dividends before dividends are declared to holders of our common stock, and
the right to the redemption of such preferred shares, together with a
premium, prior to the redemption of the common stock. To the extent that we
do issue such additional shares of preferred stock, your rights as holders of
common stock could be impaired thereby, including, without limitation,
dilution of your ownership interests in us. In addition, shares of preferred
stock could be issued with terms calculated to delay or prevent a change in
control or make removal of management more difficult, which may not be in
your interest as holders of common stock.
2) Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements, or Labor Contracts
The Company relies on trade secret law, confidentiality agreements and
physical security such as restricted access to protect much of its
intellectual property.
The Company plans to enter into confidentiality agreements with its
future employees, contract suppliers and future consultants and in connection
with its license agreements with third parties and generally seeks to control
access to and distribution of its intellectual property, documentation and
other proprietary information. Despite these precautions, it may be possible
for a third party to copy or otherwise obtain and use the Company's
proprietary information without authorization or to develop similar
technology independently.
15
3) Employees
We have no full time employees at this time. All managerial functions
including development, strategy, negotiations is being provided by our
officers/directors.
(i) The Company's performance is dependent on the performance of its sole
officer. In particular, the Company's success depends on their ability to
develop a business strategy which will be successful for the Company.
(ii) The Company does not carry key person life insurance on any of its
personnel. The loss of the services of any of its executive officers or other
key employees could have a material adverse effect on the business, results
of operations and financial condition of the Company. The Company's future
success also depends on its ability to retain and attract highly qualified
technical and managerial personnel.
(iii) There can be no assurance that the Company will be able to retain its
key managerial and technical personnel or that it will be able to attract and
retain additional highly qualified technical and managerial personnel in the
future. The inability to attract and retain the technical and managerial
personnel necessary to support the growth of the Company's business, due to,
among other things, a large increase in the wages demanded by such personnel,
could have a material adverse effect upon the Company's business, results of
operations and financial condition.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's corporate headquarters are located at: 1845 Sandstone Manor
Unit #11, Pickering, ON L1W3X9 Canada.
ITEM 3. LEGAL PROCEEDINGS.
The Company finalized negotiations with Rosseau Limited Partners, a Warrant
Subscriber of HHT, requesting return of funds invested. The resulting
settlement has the Company converting the subscription of 500,000 warrants
for approximately $1,007,151 to accounts payable. Payment is to be made
through equal monthly installments of approximately $250,000 beginning
October 1, 2007 and concluding January 1, 2008. The transaction reduces the
total warrants sold as of September 30, 2007 to a total of 2,489,450 units at
a weighted average price of $1.77 for an aggregate of approximately
$4,474,844.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On March 30, 2007, the Company submitted to its majority of security
holders to vote on the acquisition of Hydrogen Hybrid Technologies, Inc. The
majority of shareholders approved the acquisition of Hydrogen Hybrid
Technologies, Inc.
16
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(i) Market Information
----------------------
HYHY Common Stock, $0.001 par value, is traded on the OTC-Bulletin Board
under the symbol: HYHY.
During the year ended September 30, 2007, the price of the common stock as
reported and summarized by the OTC-BB was at a high of $7.25, and a low $0.97
bid. Such prices are based on inter-dealer bid and asked prices, without
markup, markdown, commissions, or adjustments and may not represent actual
transactions.
A limited market exists for the trading of the Company's common stock.
During the year ending September 30, 2007, there has been limited trading
activity in the Common Stock, however, there are no assurances this trading
activity will continue in the future for the Common Stock.
(a) There is currently no Common Stock which is subject to outstanding
options or warrants to purchase, or securities convertible into, the
Company's common stock.
(b) The Company did not repurchase any of its shares during the fiscal year
covered by this report.
(ii) Dividends
--------------
Holders of common stock are entitled to receive such dividends as the board
of directors may from time to time declare out of funds legally available
for the payment of dividends.
17
(iii) Recent Sales of Unregistered Securities
---------------------------------------------
As of March 30, 2007, in connection with the Merger Agreement, the Registrant
agreed to issue 99,000,000 shares of its unregistered common stock to HYHY
shareholders.
We relied upon Section 4(2) of the Securities Act for the offer and sale. We
believed that Section 4(2) was available because the offer and sale did not
involve a public offering and there was not general solicitation or general
advertising involved in the offer or sale.
(iv) Stock Splits
------------------
On June 26, 2007, the Company forward split its stock on a 2 for 1 basis.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
(i) General
-----------
Hydrogen Hybrid Technologies is engaged in the business of selling and
distributing of on-board hydrogen generating and injections systems for the
Original Equipment Manufacturer ("OEM"), car and light truck markets
globally. HYHY has acquired the exclusive rights to market a proprietary
patented technology from a related company. In addition it holds non-
exclusive rights to distribute the product to other markets including the
heavy goods vehicle market.
The Company has a limited operating history, upon which an evaluation of the
Company, its current business and its prospects can be based, each of which
must be considered in light of the risks, expenses and problems frequently
encountered by all companies in the early stages of development, and
particularly by such companies entering new areas of business.
The Company's prospects must be considered in light of the risks,
uncertainties, expenses and difficulties frequently encountered by companies
in their early stages of a new business plan, particularly companies involved
in the highly competitive oil and gas industry. Such risks include, without
limitation, the ability of the Company to manage its operations, including
the amount and timing of capital expenditures and other costs relating to the
expansion of the company's operations, direct and indirect competitors of the
Company, including those with greater financial, technical and marketing
resources, the inability of the Company to attract, retain and motivate
qualified personnel and general economic conditions.
18
The Company has generated $120,837 in revenues and a net loss of $(1,139,364)
for the fiscal year ending September 30, 2007. The Company anticipates that
it will continue to incur net losses for the next six to twelve months. The
extent of these losses will depend, in part, on the amount of expenditures
the Company earmarks to execute its business strategy. As of September 30,
2006, the Company had an accumulated deficit of $(1,319,478). The Company
expects that its operating expenses will increase as it moves its business
strategy forward.
(ii) Results of Operations
--------------------------
For its fiscal year ending September 30, 2007, the Company generated $120,837
in revenues. During the year ended September 30, 2007, the Company invoiced
its first sales and is holding trade receivables of $46,732. During fiscal
year ending September 30, 2007, the Company experienced a net loss from
operations of $(1,139,364) or a loss (basic and diluted) per share of $(0.01)
as compared to a net loss of $(180,114) or a loss basic and diluted) per
share of $(0.01) for the same period last year. All of The bulk of the
company's expenses represented management fees and general and administrative
expenses. During the fiscal year ending September 30, 2007, the Company
spent $182,131 on product development expenses, specifically related to the
OEM market. Since inception, the Company has experienced a net loss from
operations of $(1,319,478).
(iii) Liquidity and Capital Resources
-------------------------------------
As of September 30, 2007, the Company's current liabilities exceeded its
current assets by $544,237.
During 2007, the Company completed a reverse merger with Eaton Laboratories
Inc. Eaton Laboratories issued 99,000,000 shares for 100% of Hydrogen Hybrid
Technologies Inc. shares outstanding as at September 30, 2007 and
subsequently transferred the balance of its operations to separate legal
entity. The Company also registered to change the Company's name to Hydrogen
Hybrid Technologies Inc. and to change the Company's fiscal year end to
September 30.
As of September 30, 2007, 100% of the outstanding warrants were exercised for
common stock. The share certificates have been distributed and a formal
registration statement was prepared and submitted to the Securities and
Exchange Commission for all shares issued through this transaction.
Additionally, per the terms and conditions of HHT's Special Warrants, it
completed the conversion of the warrants to common stock. The total number
of warrants converted to common stock was 2,489,450 for an aggregate of
$4,474,844.
Additionally, the Company sold 427,756 common stock subscriptions for a total
aggregate of $620,922. The common stock subscriptions were also converted to
shares during the year.
19
As of January 7, 2008, there are 129,071,362 common shares issued and
outstanding.
There have been no other issuances of preferred or common stock.
The Company has limited financial resources available, which has had an
adverse impact on the Company's liquidity, activities and operations. These
limitations have adversely affected the Company's ability to obtain certain
projects and pursue additional business. There is no assurance that the
proceeds of the Company will be able to raise sufficient funding to enhance
the Company's financial resources sufficiently to generate volume for the
Company.
Since the Company has limited financial resources, the officer/director and
major shareholder has agreed to pay any necessary fees and expenses to keep
the company operational and fully reporting without cost to the Company, he
does not expect any reimbursement for these expenses.
20
ITEM 7. FINANCIAL STATEMENTS.
Hydrogen Hybrid Technologies, Inc.
Financials
September 30, 2007 and September 30, 2006
TABLE OF CONTENTS
-----------------
TABLE OF CONTENTS
PAGE
----
Report of Independent Registered Public Accounting Firm F-1
Balance Sheets F-2
Statements of Operations F-3
Statement of Stockholders' Deficit F-4-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7-14
21
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
------------------------
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
To the Board of Directors
Hydrogen Hybrid Technologies, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of Hydrogen Hybrid
Technologies, Inc. (A Development Stage Company) as of September 30, 2007,
and September 30, 2006, and the related statements of operations,
stockholders' equity and cash flows through September 30, 2007, and Inception
on January 13, 2005 through September 30, 2007. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hydrogen Hybrid
Technologies, Inc. (A Development Stage Company) as of September 30, 2007 and
September 30, 2006, and the results of its operations and its cash flows
through September 30, 2007, and Inception on January 13, 2005 through
September 30, 2007, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, the Company has accumulated a deficit of $1,319,478 as
of September 30, 2007 and has not established a source of revenues sufficient
to cover its operating costs, which raises substantial doubt about its
ability to continue as a going concern. Management's plans concerning these
matters are also described in Note 5. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/ Moore & Associates, Chartered
---------------------------------
Moore & Associates Chartered
Las Vegas, Nevada
January 7, 2008
2675 S. Jones Blvd. Suite 109, Las Vegas, NV 89146
(702) 253-7499 Fax (702) 253-7501
F-1
HYDROGEN HYBRID TECHNOLOGIES, INC.
(A Development Stage Company)
Balance Sheets
Balance Sheets
ASSETS
------
September 30, September 30,
2007 2006
------------- -------------
CURRENT ASSETS
Cash $ - $ 1,026,571
Accounts receivable 46,732 -
Prepaid deposits 509,917 302,672
------------- -------------
Total Current Assets 556,649 1,329,243
------------- -------------
DISTRIBUTION RIGHTS 4,783,966 4,254,100
------------- -------------
TOTAL ASSETS $ 5,340,615 $ 5,583,343
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,100,886 $ 1,496,284
------------- -------------
Total Current Liabilities 1,100,886 1,496,284
------------- -------------
STOCKHOLDERS' EQUITY
Common shares; $0.001 par value,
180,000,000 shares authorized; 129,071,362
and 30,000,000 shares issued and
outstanding, respectively 129,071 30,000
Additional paid-in capital 4,966,777 (29,918)
Special warrants subscribed - 4,267,973
Accumulated deficit (1,319,478) (180,114)
Accumulated other comprehensive income 463,359 (882)
------------- -------------
Total Stockholders' Equity 4,239,729 4,087,059
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 5,340,615 $ 5,583,343
============= =============
The accompanying notes are an integral part of these financial statements.
F-2
HYDROGEN HYBRID TECHNOLOGIES, INC.
(A Development Stage Company)
Statements of Operations
Statements of Operations
From Inception
For the Years Ended on January 13,
September 30, 2005, through
-------------------------- September 30,
2007 2006 2007
------------ ------------ -------------
REVENUES $ 120,837 $ - $ 120,837
COST OF SALES 72,368 - 72,368
------------ ------------ -------------
GROSS PROFIT 48,469 - 48,469
OPERATING EXPENSES
Management expenses 516,553 17,824 534,377
General and administrative 400,736 18,070 418,806
Professional fees 88,413 133,623 222,036
Product development 182,131 10,597 192,728
------------ ------------ -------------
Total Operating Expenses 1,187,833 180,114 1,367,947
LOSS FROM OPERATIONS (1,139,364) (180,114) (1,319,478)
INCOME TAX EXPENSE - - -
------------ ------------ -------------
NET LOSS $(1,139,364) $ (180,114) $ (1,319,478)
============ ============ =============
OTHER COMPREHENSIVE INCOME
Gain (Loss) on foreign
currency translation 464,241 (882) 463,359
------------ ------------ -------------
NET COMPREHENSIVE INCOME (LOSS) $ (675,123) $ (180,996) $ (856,119)
============ ============ =============
BASIC LOSS PER SHARE $ (0.01) $ (0.01)
============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 79,535,681 30,000,000
============ ============
The accompanying notes are an integral part of these financial statements.
F-3
HYDROGEN HYBRID TECHNOLOGIES, INC.
(A Development Stage Company)
Statements of Stockholders' Equity
Statements of Stockholders' Equity
Deficit
Accumulated Accumulated
Common Stock Additional Other During Total
-------------------- Paid-in Comprehensive Development Members'
Shares Amount Capital (Loss) Stage Equity
----------- -------- ----------- -------- ------------ ------------
Balance,
January 13,
2005 - $ - $ - $ - $ - $ -
Common
stock
issued
for cash 30,000,000 30,000 (29,918) 82
Net loss
for the
year ended
September 30,
2005 - - - - - -
----------- -------- ----------- -------- ------------ ------------
Balance,
September 30,
2005 30,000,000 30,000 (29,918) - - 82
Foreign
exchange
translation
adjustments
for rate
changes - - - (882) - (882)
Net loss for
the year
ended
September 30,
2006 - - - - (180,114) (180,114)
----------- -------- ----------- -------- ------------ ------------
Balance,
September 30,
2006 30,000,000 30,000 (29,918) (882) (180,114) (180,914)
F-4
HYDROGEN HYBRID TECHNOLOGIES, INC.
(A Development Stage Company)
Statements of Stockholders' Equity
Deficit
Accumulated Accumulated
Common Stock Additional Other During Total
-------------------- Paid-in Comprehensive Development Members'
Shares Amount Capital (Loss) Stage Equity
----------- -------- ----------- -------- ------------ ------------
Recapital-
ization 90,747,500 90,747 (90,747) - - -
Common stock
issued for
cash 8,323,862 8,324 5,087,442 - - 5,095,766
Foreign
exchange
translation
adjustments
for rate
changes 464,241 - 464,241
Net loss
for the
year ended
September 30,
2007 - - - - (1,139,364) (1,139,364)
----------- -------- ----------- -------- ------------ ------------
Balance,
September 30,
2007 129,071,362 $129,071 $4,966,777 $463,359 $(1,319,478) $ 4,239,729
=========== ======== =========== ======== ============ ============
The accompanying notes are an integral part of these financial statements.
F-5
HYDROGEN HYBRID TECHNOLOGIES, INC.
(A Development Stage Company)
Statements of Cash Flows
Statements of Cash Flows
From Inception
For the Years Ended on January 13,
September 30, 2005, through
-------------------------- September 30,
2007 2006 2007
------------ ------------ -------------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) $(1,139,364) $ (180,114) $ (1,319,478)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Amortization expense - - -
Changes in operating assets
and liabilities:
Changes in receivables
and prepaid deposits (253,977) (302,672) (556,649)
Changes in accounts
payable (1,402,549) 1,496,284 93,735
------------ ------------ -------------
Net Cash Used by
Operating Activities (2,795,890) 1,013,498 (1,782,392)
------------ ------------ -------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Increase in intellectual
property and other assets (529,866) (4,254,100) (4,783,966)
------------ ------------ -------------
Net Cash Used by Investing
Activities (529,866) (4,254,100) (4,783,966)
------------ ------------ -------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from notes payable 1,007,151 - 1,007,151
Effect of foreign exchange
rate changes 464,241 (882) 463,359
Issuance of common stock 827,793 4,268,055 5,095,848
------------ ------------ -------------
Net Cash Provided by
Financing Activities 2,299,185 4,267,173 6,566,358
------------ ------------ -------------
NET DECREASE IN CASH (1,026,571) 1,026,571 -
CASH AT BEGINNING OF PERIOD 1,026,571 - -
------------ ------------ -------------
CASH AT END OF PERIOD $ - $ 1,026,571 $ -
============ ============ =============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
The accompanying notes are an integral part of these financial statements.
F-6
HYDROGEN HYBRID TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2007 and 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
------------------
Hydrogen Hybrid Technologies, Inc. (the Company) was incorporated in the
Province of Ontario, Canada on January 13, 2005. The Company is engaged in
the development, manufacturing, and distribution of technologies aimed at
increasing fuel efficiency and decreasing emissions of internal combustion
engines. In March 2007, the Company entered into a plan of reorganization
with Eaton Laboratories, Inc.,(Eaton) a Nevada corporation, whereby the
Company became a wholly owned subsidiary of Eaton. The shareholders of the
Company became the controlling shareholders of Eaton accordingly the
transaction was accounted for as a recapitalization of the Company. Eaton's
name was changed to Hydrogen Hybrid Technologies, Inc. Eaton is the
surviving entity for legal purposes and the historical financial statements
of the Company are the historical financial statements of the combined
entity.
Use of 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 at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Basic (Loss) per Common Share
-----------------------------
Basic (loss) per share is calculated by dividing the Company's net loss
applicable to common shareholders by the weighted average number of common
shares during the period. Diluted earnings per share is calculated by
dividing the Company's net income available to common shareholders by the
diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted
number of shares adjusted for any potentially dilutive debt or equity. There
are no such common stock equivalents outstanding as of September 30, 2007 and
2006.
F-7
HYDROGEN HYBRID TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2007 and 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basic (Loss) per Common Share (Continued)
-----------------------------------------
Basic (Loss)
(Loss) Shares Per Share
(Numerator) (Denominator) Amount
------------ ------------- ------------
For the year ended
September 30, 2007 $(1,139,364) 79,535,681 $ (0.01)
For the year ended
September 30, 2006 $ (180,996) 30,000,000 $ (0.01)
Revenue Recognition
-------------------
The Company recognizes revenue when products are fully delivered or services
have been provided and collection is reasonably assured.
Advertising Costs
-----------------
The Company's policy regarding advertising is to expense advertising when
incurred. The Company had not incurred any advertising expense as of
September 30, 2007 and 2006.
Cash and Cash Equivalents
-------------------------
For purposes of the Statement of Cash Flows, the Company considers all highly
liquid instruments purchased with a maturity of three months or less to be
cash equivalents to the extent the funds are not being held for investment
purposes.
Income Taxes
------------
The Company provides for income taxes under Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. SFAS No. 109 Requires the use
of an asset and liability approach in accounting for income taxes. Deferred
tax assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the tax rates
in effect when these differences are expected to reverse. The Company's
predecessor operated as entity exempt from Federal and State income taxes.
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely
than not that some or all of the deferred tax assets will not be realized.
F-8
HYDROGEN HYBRID TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2007 and 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes (Continued)
------------------------
The provision for income taxes differs from the amounts which would be
provided by applying the statutory federal income tax rate to net loss before
provision for income taxes for the following reasons:
September 30, 2007
------------------
Income tax expense at statutory rate $ 387,383
Common stock issued for services -0-
Valuation allowance (387,383)
------------------
Income tax expense per books $ -0-
==================
Net deferred tax assets consist of the following components as of:
September 30, 2007
NOL Carryover $ 448,623
Valuation allowance (448,623)
------------------
Net deferred tax asset $ -0-
==================
Income Taxes (Continued)
------------------------
Due to the change in ownership provisions of the Tax Reform Act of 1986, net
operating loss carry forwards for federal income tax reporting purposes are
subject to annual limitations. Should a change in ownership occur net
operating loss carry forwards may be limited as to use in future years.
Impairment of Long-Lived Assets
-------------------------------
The Company continually monitors events and changes in circumstances that
could indicate carrying amounts of long-lived assets may not be recoverable.
When such events or changes in circumstances are present, the Company
assesses the recoverability of long-lived assets by determining whether the
carrying value of such assets will be recovered through undiscounted expected
future cash flows.
F-9
HYDROGEN HYBRID TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2007 and 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impairment of Long-Lived Assets (Continued)
-------------------------------------------
If the total of the future cash flows is less than the carrying amount of
those assets, the Company recognizes an impairment loss based on the excess
of the carrying amount over the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or the fair
value less costs to sell.
Accounting Basis
----------------
The basis is accounting principles generally accepted in the United States of
America. The Company has adopted a September 30 fiscal year end.
Inventory
---------
The Company accounts for inventory of raw materials and finished goods on a
cost basis. The inventory is maintained on a first in- first out (FIFO)
basis.
Stock-based compensation
------------------------
As of September 30, 2007, the Company has not issued any share-based payments
to its employees.
The Company adopted SFAS No. 123-R effective January 1, 2006 using the
modified prospective method. Under this transition method, stock compensation
expense includes compensation expense for all stock-based compensation awards
granted on or after January 1,2006, based on the grant-date fair value
estimated in accordance with the provisions of SFAS No. 123-R.
Recent Accounting Pronouncements
--------------------------------
In September 2006, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 157, "Fair Value Measurements" which
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements.
F-10
HYDROGEN HYBRID TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2007 and 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued)
--------------------------------------------
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 issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years.
Earlier adoption is encouraged. The Company does not expect the adoption of
SFAS No. 157 to have a significant effect on its financial position or
results of operation.
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", 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.
F-11
HYDROGEN HYBRID TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2007 and 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued)
--------------------------------------------
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.
Foreign Currency Translation Adjustment
---------------------------------------
The Company's uses the Canadian Dollar as its functional currency in
recording its assets and liabilities which are translated to U.S. dollars
based on the current exchange rate prevailing at each balance sheet date and
any resulting translation adjustments are included in accumulated other
comprehensive income (loss).
The Company's revenues and expenses are translated into U.S. dollars using
the average exchange rates prevailing for each period presented.
2. ACCOUNTS RECEIVABLE AND PREPAID DEPOSITS
During the year ended September 30, 2007, the Company invoiced its first
sales and is holding trade receivables of $46,732. The accounts receivable
are net of the allowance for doubtful accounts as of September 30, 2007 of $-
0-.
The Company has forwarded approximately $500,000 to Canadian Hydrogen Energy
Company Limited (CHEC), the manufacturer of the Hydrogen Fuel Injection cell
a Canadian privately owned related company, controlled by the same
stockholders of the Company granting the Distribution Agreement. These funds
are to be used to produce additional inventory for distribution by HHT and to
develop specific test units for the OEM market.
F-12
HYDROGEN HYBRID TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2007 and 2006
3. DISTRIBUTION RIGHTS
On January 18, 2005, the Company entered into a Distribution Agreement with
Canadian Hydrogen Energy Company, Ltd., a Canadian privately owned related
company. The companies are related due to significant common ownership. The
Distribution Agreement includes the rights to sell and distribute on-board
hydrogen generating and injections systems for the OEM, car and light truck
markets globally. As compensation for the rights granted under this
agreement the Company has agreed to pay a total of $4,783,966 in cash. The
Company owes approximately $1,000,000 under the terms of the Distribution
Agreement as of September 30, 2007. The Distribution Agreement provides the
Company with the right to sell and distribute the product for 20 years
beginning with receipt of authorization for full distribution. The Company
will amortize the cost of the distribution rights over the 20 year period
once authorization for full distribution is received. The Company has yet to
receive written authorization to begin full distribution of the Hydrogen Fuel
Injection system, but has received authorization to release units to complete
testing. During the year ended September 30, 2007, six units were sold on a
test basis.
4. EQUITY TRANSACTIONS
As of September 30, 2007, 100% of the outstanding warrants were exercised for
common stock. The share certificates have been distributed and a formal
registration statement was prepared and submitted to the Securities and
Exchange Commission for all shares issued through this transaction.
Prior to the exercising of the warrants, the Company finalized negotiations
with Rosseau Limited Partners, a Warrant Subscriber of HHT, requesting return
of funds invested. The resulting settlement has the Company converting the
subscription of 500,000 warrants for approximately $1,007,151 to accounts
payable. Payment is to be made through equal monthly installments of
approximately $250,000 beginning October 1, 2007 and concluding January 1,
2008. The transaction reduces the total warrants sold as of September 30,
2007 to a total of 2,489,450 units at a weighted average price of $1.77 for
an aggregate of approximately $4,474,844.
During 2007, the Company completed a reverse merger with Eaton Laboratories
Inc. Eaton Laboratories issued 99,000,000 shares for 100% of Hydrogen Hybrid
Technologies Inc. shares outstanding as at September 30, 2007 and
subsequently transferred the balance of its operations to separate legal
entity. The Company also registered to change the Company's name to Hydrogen
Hybrid Technologies Inc. and to change the Company's fiscal year end to
September 30.
F-13
HYDROGEN HYBRID TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2007 and 2006
4. EQUITY TRANSACTIONS (Continued)
Additionally, per the terms and conditions of HHT's Special Warrants, it
completed the conversion of the warrants to common stock. The total number
of warrants converted to common stock was 2,489,450 for an aggregate of
$4,474,844.
Additionally, the Company sold 427,756 common stock subscriptions for a total
aggregate of $620,922. The common stock subscriptions were also converted to
shares during the year.
5. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principle, which contemplate continuation of
the Company as a going concern. However, the Company has accumulated deficit
of $1,319,478 as of September 30, 2007. The Company currently has limited
liquidity, and has not completed its efforts to establish a stabilized source
of revenues sufficient to cover operating costs over an extended period of
time.
Management anticipates that the Company will be dependent, for the near
future, on additional investment capital to fund operating expenses The
Company intends to position itself so that it may be able to raise additional
funds through the capital markets. In light of management's efforts, there
are no assurances that the Company will be successful in this or any of its
endeavors or become financially viable and continue as a going concern.
F-14
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no disagreements with accountants on accounting and financial
disclosure.
Prior to the Company's reverse merger with Eaton Laboratories on March 30,
2007, Moore & Associates Chartered were the auditors for the Registrant.
During the interim period March 31, 2007 through June 30, 2007, the
Registrant employed the services of Schwartz Levitsky Feldman LLP, a Canadian
audit firm to perform its reviews. Prior to the September 30, 2007 year end
audit, the Registrant asked Moore & Associates Chartered to audit its
financials since its inception. Therefore, Moore & Associates Chartered
provided year-end audit for the Registrant.
The reports of the Registrant on the financial statements as of and for the
fiscal year ended September 30, 2007, did not contain an adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty,
audit scope, or accounting principles, except that Moore & Associates
Chartered, issued an explanatory paragraph in its fiscal 2007 report as to
the Registrant's ability to continue as a going concern.
ITEM 8a. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the principal
executive officer and principal financial officer, of the Company's
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-
15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). Based
on this evaluation, the principal executive officer and principal financial
officer concluded that the Company's disclosure controls and procedures are
effective to ensure that information required to be disclosed by the Company
in reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. There was no change in
the Company's internal control over financial reporting during the Company's
most recently completed fiscal year that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
22
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
A. The following table sets forth the current officers and directors of
Hydrogen Hybrid Technologies, Inc.
Name Age Position
------------- --- --------------------------------
Ira Lyons 57 President/Director
----------------------------------------------------------------------
Vice President - Market Development November 1999 to Sept 2003
Exxecom Technologies / Xccept Systems
On a contract basis have been providing market development consulting
services to an Internet integrator and e-business solution provider.
Vice President 1997 to November 1999
Northern Communications Group Inc.
An independent telephone directory publisher with complete in-house ad
production and pagination capabilities, producing "the Gold Book" Telephone
Directory
Executive Vice President & Chief Operating Officer, 1995-1997
ES-TX Distribution Inc.
Packard-Edison Computers Inc.
NetGlobe Access Centres
A vertically integrated computer hardware and software assembly, distribution
and retailing group involved in the business
Senior Vice President, 1993-1995
AX.s Communications Group
A telecommunications group involved in the development of custom long-
distance call costing systems
Partner, 1991-1993
The Rally Group
A Retail, Franchise and Marketing consulting group specializing in Franchise
structuring and implementation.
President, 1987-1990
Wickets Tickets Inc.
23
A chain of retail ticketing establishments located in the TTC Subway system.
Executive Vice President, 1990-1991
Treats International Enterprises Inc.
Executive Vice President & General Manager, 1979-1987
Treats Inc.
One of Canada's largest specialty food franchises with 200+ locations across
North America.
Vice President, Administration & Development, 1971-1979
Tiffany's Bakery Inc.
A Canadian owned, Toronto based, U.S. bakery chain that grew from a concept
in 1971 to a 250+ store chain located in 43 states.
Education
---------
University of Toronto, Innis College Main Campus -1968 to 1970
U of T Extension, Business Administration & Accounting - 1974
OMBA, Mortgage Broker's License -1989
Seneca College, OREA Real Estate License -1993
W. Lyon McKenzie Secondary School - Graduated 1967
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers, and persons who beneficially own more than ten
percent of a registered class of our equity securities (referred to as
"reporting persons"), to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of common
stock and other Hydrogen Hybrid Technologies, Inc. equity securities.
Reporting persons are required by Commission regulations to furnish us with
copies of all Section 16(a) forms they file.
24
ITEM 10. EXECUTIVE COMPENSATION.
As a result of our the Company's current limited available cash, no officer
or director received compensation during the fiscal year ended September 30,
2007. HYHY intends to pay salaries when cash flow permits.
SUMMARY COMPENSATION TABLES
----------------------------------------------------
Annual Compensation
----------------------------------------------------
Name and Other Annual
Principal Position Year Salary ($) Bonus ($) Compensation ($)
-----------------------------------------------------------------------------
Ira Lyons
President 2007 -0- -0- -0-
2006 -0- -0- -0-
-----------------------------------------------------------------------------
Long Term Compensation Table
------------------------------------------------------
Long Term Compensation
------------------------------------------------------
Awards Payouts
------------------------------------------------------
Restricted Stock Securities LTIP All Other
Name and Principal Award(s)($) Underlying Options/ Payouts Compensation
Position Year SARs(#) ($) ($)
-----------------------------------------------------------------------------
Ira Lyons
President 2007 -0- -0- -0- -0-
Director 2006 -0- -0- -0- -0-
-----------------------------------------------------------------------------
The Company currently does not have employment agreements with its executive
officers. The executive officer/director of the Company has agreed to take
no salary until the Company can generate enough revenues to support salaries
on a regular basis. The officer will not be compensated for services
previously provided. They will receive no accrued remuneration.
25
Compensation of Directors
-------------------------
No director receives any fee, salary or commission for service as a director.
In addition, no such arrangement is contemplated for the foreseeable future.
Family Relationships
--------------------
None.
Code of Ethics
--------------
The company has not adopted a Code of Ethics for the Board and the salaried
employees.
Audit Committee
---------------
The company does not presently have an Audit Committee. The member of the
Board sits as the Audit Committee. No qualified financial expert has been
hired because the company is to small to afford such expense.
Committees and Procedures
-------------------------
(1) The registrant has no standing audit, nominating and compensation
committees of the Board of Directors, or committees performing
similar functions. The Board acts itself in lieu of committees due
to its small size.
(2) The view of the board of directors is that it is appropriate for the
registrant not to have such a committee because its directors
participate in the consideration of director nominees and the
board and the company are so small.
(3) The members of the Board who acts as nominating committee is
not independent, pursuant to the definition of independence of a
national securities exchange registered pursuant to section 6(a)
of the Act (15 U.S.C. 78f(a).
(4) The nominating committee has no policy with regard to the
consideration of any director candidates recommended by security
holders, but the committee will consider director candidates
recommended by security holders.
26
(5) The basis for the view of the board of directors that it is
appropriate for the registrant not to have such a policy is that
there is no need to adopt a policy for a small company.
(6) The nominating committee will consider candidates recommended by
security holders, and by security holders in submitting such
recommendations.
(7) There are no specific, minimum qualifications that the nominating
committee believes must be met by a nominee recommended by security
holders except to find anyone willing to serve with a clean
background.
(8) The nominating committee's process for identifying and evaluation
of nominees for director, including nominees recommended by security
holders, is to find qualified persons willing to serve with a clean
backgrounds. There are no differences in the manner in which the
nominating committee evaluates nominees for director based on
whether the nominee is recommended by a security holder, or found
by the board.
27
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the beneficial
ownership of our outstanding common stock as of January 7, 2008, by each
person known by Hydrogen Hybrid Technologies, Inc. to own beneficially more
than 5% of the outstanding common stock, by each of our directors and officer
and by all of our directors and officers as a group. Unless otherwise
indicated below, to our knowledge all persons listed below have sole voting
and investment power with respect to their shares of common stock except to
the extent that authority is shared by spouses under applicable law.
Amount
Title Name and Address of shares Percent
of of Beneficial held by of
Class Owner of Shares Position Owner Class(1)
----------------------------------------------------------------------------
Common Ira Lyons(2) President 4,000,000 3.1%
Common Frank Carino(3) Shareholder 82,000,000 63.5%
Common CHEC(4) Shareholder 4,000,000 3.1%
Common HHT ESOP(5) Shareholder 9,000,000 6.9%
-----------------------------------------------------------------------------
All Executive Officers, Directors
as a Group (1 persons) 4,000,000 3.1%
(1) The percentages listed in the percent of class column are based upon
129,071,362 issued and outstanding shares of Common Stock.
(2) Ira Lyons, 1845 Sandstone Manor Unit #11, Pickering, ON L1W3X9 Canada
(3) Frank Carino, 1845 Sandstone Manor Unit #11, Pickering, ON L1W3X9
Canada
(4) Canadian Hydrogen Energy Company Ltd., 182 Wellington St. W,
Bowmanville, Ontario L1C 1W3
(5) HHT ESOP, 1845 Sandstone Manor Unit #11, Pickering, ON L1W3X9 Canada
B. Persons Sharing Ownership of Control of Shares
Frank Carino, individually, own shares the power to vote ten percent (10%) or
more of the Company's securities.
C. Non-voting Securities and Principal Holders Thereof
The Company has not issued any non-voting securities.
D. Preferred Stock
None issued.
E. Parents of Issuer
Under the definition of parent, as including any person or business entity
who controls substantially all (more than 80%) of the issuers of common
stock, the Company has no parents.
28
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Through a Board Resolution and ratification of the shareholders, the Company
hired the professional services of Moore & Associates, Chartered, Certified
Public Accountants, to perform audited financials for the Company. Moore
& Associates, Chartered own no stock in the Company. The company has no
formal contracts with its accountants, they are paid on a fee for service
basis.
The sole officer and director of the Company is involved in other business
activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their
other business interests. The Company has not formulated a policy for the
resolution of such conflicts.
On January 18, 2005, the Company entered into a Distribution Agreement with
Canadian Hydrogen Energy Company, Ltd., a Canadian privately owned related
company. The companies are related due to significant common ownership
between Hydrogen Hybrid Technologies, Inc. and Canadian Hydrogen Energy
Company, Ltd. The Distribution Agreement includes the rights to sell and
distribute on-board hydrogen generating and injections systems for the OEM,
car and light truck markets globally. As compensation for the rights granted
under this agreement the Company has agreed to pay a total of $4,783,966 in
cash. The Distribution Agreement provides the Company with the right to sell
and distribute the product for 20 years beginning with receipt of
authorization for full distribution. The Company has yet to receive written
authorization to begin full distribution of the Hydrogen Fuel Injection
system, but has received authorization to release units to complete testing.
During the year ended September 30, 2007, six units were sold on a test
basis.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
23.1 Consent Letter of Moore & Associates, Chartered
31.1 Certifications of the President/CFO pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certifications of President/CFO pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
29
(b) REPORTS ON FORM 8-K
The Company filed a Current Report on April 4, 2007, pursuant to Item
1.01 ("Termination of a Material Definitive Agreement"); Item 2.01
("Completion of Acquisition or Disposition"); Item 3.02 ("Unregistered Sales
of Equity Securities"); Item 5.01 ("Changes in Control of Registrant"); Item
5.02 ("Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers"); Item 8.01 ("Other Events"); and Item
9.01 ("Financials Statements, Pro Forma Financial Information and Exhibits ")
entitled the acquisition of Hydrogen Hybrid Technologies, Inc.
The Company filed a Current Report on April 17, 2007, pursuant to Item 8.01
("Other Events") entitled stock dividend spin-off.
The Company filed a Current Report on June 28, 2007, pursuant to Item 5.03
("Amendments to Articles of Incorporation or Bylaws"); Item 8.01 ("Other
Events"); and Item 9.01 ("Exhibit") amended Articles for corporate name
change.
The Company filed an amended Current Report on July 26, 2007, pursuant to
Item 7.01 ("Regulation FD Disclosure"); and Item 9.01 ("Exhibit") press
release.
The Company filed a Current Report on August 20, 2007, pursuant to Item 5.03
("Amendments to Articles of Incorporation or Bylaws"), change in fiscal year.
30
Item 14. Principal Accountant Fees and Services
AUDIT FEES
The aggregate fees billed by the Company's auditors for professional services
rendered in connection with the audit of the Company's annual consolidated
financial statements for fiscal 2007 and 2006 included in the Company's Form
10-KSB for fiscal 2007 and 2006 were approximately $15,000 and $3,500
respectfully.
AUDIT-RELATED FEES
The Company's auditors did not bill any additional fees for assurance and
related services that are reasonably related to the performance of the audit
or review of the Company's financial statements and are not reported under
"Audit Fees" above.
TAX FEES
The aggregate fees billed by the Company's auditors for professional services
for tax compliance, tax advice, and tax planning were $0 and $0 for fiscal
2007 and 2006, respectively.
ALL OTHER FEES
The aggregate fees billed by the Company's auditors for all other non-audit
services rendered to the Company, such as attending meetings and other
miscellaneous financial consulting, in fiscal 2007 and 2006 were $0 and $0,
respectively.
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Hydrogen Hybrid Technologies, Inc.
----------------------------------
Registrant
By: /s/ Ira Lyons
------------------------------------
Name: Ira Lyons
Title: President and Director
Dated: January 7, 2008
-----------------------
32