Attached files
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EX-5.1 - NUGEN HOLDINGS, INC. | v178215_ex5-1.htm |
EX-4.1 - NUGEN HOLDINGS, INC. | v178215_ex4-1.htm |
EX-23.1 - NUGEN HOLDINGS, INC. | v178215_ex23-1.htm |
As
filed with the Securities and Exchange Commission March 25,
2010
REGISTRATION
NO. [ ]
SECURITIES AND EXCHANGE COMMISSIONWashington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES
ACT OF 1933
NUGEN
HOLDINGS, INC.
(Name of
Small Business Issuer in its Charter)
Delaware
|
3621
|
29-1946130
|
(State
or other jurisdiction of
incorporation
or organization)
|
(Primary
Standard Industrial
Classification
Code)
|
(IRS
Employer
Identification
No.)
|
NuGen
Holdings, Inc
44645
Guilford Drive, Suite 201
Ashburn,
VA 20147
(703)
858-0036
(Address
and telephone number of
principal
executive offices and principal
place
of business)
Eric
Takamura
Chief
Executive Officer
NuGen
Holdings, Inc
44645
Guilford Drive, Suite 201
Ashburn,
VA 20147
(703)
858-0036
(Name,
address and telephone
Number
of agent for service)
Copies
of all Communications to:
David
Lubin & Associates, PLLC
David
Lubin, Esq.
5 North
Village Avenue
Rockville
Centre, NY 11570
Telephone
No.: (516) 887-8200
Facsimile:
(516) 887-8250
Approximate
date of proposed sale to the public: From time to time after the effectiveness
of the registration statement.
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act of 1933, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company. See
the definition of “large accelerated filer,” “accelerated filer,” and “small
reporting company”:
Large
accelerated filer
|
¨
|
Accelerated
filer
|
¨
|
Non-accelerated
filer
|
¨
|
Smaller
reporting company
|
x
|
(Do not
check if a smaller reporting company)
CALCULATION
OF REGISTRATION FEE
Title of each class of securities to
be registered
|
Amount to be
registered (1)
|
Proposed
maximum
offering price per
share
|
Proposed
maximum
aggregate
offering price
|
Amount of
registration fee
|
||||||||||||
Common
Stock, par value $.001
|
24,991,513 | $ | 1.00 | (2) | $ | 24,991,513 | $ | 1,781.89 | ||||||||
Common
Stock, par value $.001
|
360,000 | (3) | $ | .001 | (4) | $ | 360.00 | $ | .03 | |||||||
Total
|
25,351,513 | $ | 1.00 | $ | 24,991,513 | $ | 1,781.92 |
1)
|
In
the event of a stock split, stock dividend or similar transaction
involving our shares of common stock, the number of shares registered
shall automatically be increased to cover the additional shares of common
stock issuable pursuant to Rule 416 under the Securities Act of 1933, as
amended.
|
2)
|
The offering price has been
estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457(o). Our common stock is not
traded and any national exchange and in accordance with Rule 457, the
offering price was determined by us arbitrarily based on the price shares
were sold to the selling security holders in private placement
transactions plus an increase due to the fact that the shares are being
registered and will be liquid. The selling shareholders may sell shares of
our common stock at a fixed price of $1.00 per share until our shares are
quoted on the OTC Bulletin Board and thereafter at prevailing market
prices or privately negotiated prices. There can be no assurance that a
market maker will agree to file the necessary documents with the Financial
Industry Regulatory Authority (“FINRA”), which operates the OTC Electronic
Bulletin Board, nor can there be any assurance that such an application
for quotation will be approved. We have agreed to bear the expenses
relating to the registration of the shares for the selling security
holders. We will not receive proceeds from the sale of shares from the
selling shareholders.
|
3)
|
Represents
shares of common stock issuable upon the exercise of outstanding
warrants.
|
4)
|
Pursuant to Rule 457(g),
calculated based upon the exercise price of the warrants held by the
selling security holder.
|
THE REGISTRANT HEREBY AMENDS THIS
REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL
THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
PRELIMINARY
PROSPECTUS SUBJECT TO COMPLETION DATED ,
2010
NUGEN
HOLDINGS, INC.
24,991,513
shares of common stock and
360,000
shares of common stock issuable upon the exercise of warrants
The
prospectus relates to the resale by certain selling security holders of NuGen
Holdings, Inc. of up to 25,351,513 shares of our common stock in connection with
the resale of:
up to
24,991,513 shares of common stock issued and outstanding; and
up to
360,000 shares of our common stock which may be issued upon exercise of a
warrant issued to one individual in connection with the private placement that
closed in February 2010.
Upon
the effectiveness of this prospectus, the selling security holders will sell at
a price per share of $1.00 per share until our shares are quoted on the OTC
Bulletin Board and thereafter at prevailing market prices or privately
negotiated prices. Each of the selling stockholders may be deemed to be an
"underwriter", as such term is defined in the Securities Act of 1933. The
selling stockholders may sell the shares from time to time at the prevailing
market price or in negotiated transactions.
There has
been no market for our securities and a public market may not develop, or, if
any market does develop, it may not be sustained. As of March 22, 2010, we had
50,381,564 shares of common stock issued and outstanding. Our common stock is
not traded on any exchange or in the over-the-counter market. After the date of
this prospectus, we expect to have an application filed with the Financial
Industry Regulatory Authority for our common stock to eligible for trading on
the OTC Bulletin Board. Until our common stock becomes eligible for trading on
the OTC Bulletin Board, the selling security holders will be offering our shares
of common stock at a fixed price of $1.00 per common share.
OUR
BUSINESS IS SUBJECT TO MANY RISKS AND AN INVESTMENT IN OUR SHARES OF COMMON
STOCK WILL ALSO INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE
FACTORS DESCRIBED UNDER THE HEADING “RISK FACTORS” BEGINNING ON PAGE 3 BEFORE
INVESTING IN OUR SHARES OF COMMON STOCK.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The
information in this prospectus is not complete and may be changed. This
prospectus is included in the registration statement that was filed by us with
the Securities and Exchange Commission. The selling stockholders may not sell
these securities until the registration statement becomes effective. This
prospectus is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
The date
of this prospectus is , 2010
The
following table of contents has been designed to help you find information
contained in this prospectus. We encourage you to read the entire
prospectus.
TABLE OF
CONTENTS
Page
|
|
|
|
Prospectus
Summary
|
3
|
Risk
Factors
|
4
|
Use
of Proceeds
|
11
|
Determination
of Offering Price
|
11
|
Dilution
|
11
|
Market
Information
|
12
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
12
|
Management
|
18
|
Executive
Compensation
|
26
|
Certain
Relationships and Related Transactions
|
30
|
Security
Ownership of Certain Beneficial Owners and Management
|
30
|
Description
of Securities
|
32
|
Selling
Security Holders
|
32
|
Plan
of Distribution
|
34
|
Legal
Matters
|
37
|
Interest
of Named Experts and Counsel
|
37
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
37
|
Indemnification
for Securities Act Liabilities
|
38
|
Where
You Can Find More Information
|
38
|
Financial
Statements
|
39
|
Information
not Required in Prospectus
|
40
|
2
PROSPECTUS
SUMMARY
The following summary highlights
selected information contained in this prospectus. This summary does not contain
all the information you should consider before investing in the securities.
Before making an investment decision, you should read the entire prospectus
carefully, including the "Risk Factors" section, the Financial Statements and
the Notes to the Financial Statements.
Our
Company
As a
result of our merger with NuGen Mobility, Inc in January 2010, we are, through
our NuGen subsidiary, engaged in the design, manufacture and market systems and
components for the alternative energy sector. We offer high-efficiency,
reliable, compact permanent magnet electrical motor systems, controllers,
vehicle interface modules (including energy storage, management, and monitoring
systems) and related software that have applications in markets ranging from
electric/hybrid electric vehicles to materials handling equipment, distributive
power, ground support equipment, motion control, and military applications. Our
revenue is derived primarily from product sales to customers in the automotive
and industrial markets, and from contract research and development engineering
services.
Our offices are located at 44645Guilford Drive, Suite 201, Ashburn, Virginia and our telephone
number is : (703)
858-0036.
Corporate
Information
InovaChem
was incorporated as a Delaware corporation on September 27, 2007 under the name
“Expedite 1, Inc.” and on February 11, 2008, pursuant to a change of control,
changed its name to InovaChem, Inc. Prior to InovaChem’s acquisition of NuGen
Mobility, Inc., InovaChem was an early development stage company with no
revenues and no business operations. The Company was formed with the intention
of developing a strategic plan to reduce certain food, pharmaceutical and other
products’ costs by utilizing new technologies. Due to the uncertainty of the
state of the economy, InovaChem was unable to pursue this opportunity and had
conducted virtually no business other than organizational matters, and filings
of periodic reports with the SEC. InovaChem abandoned this strategic plan and
sought to acquire an operating company.
NuGen
Mobility, Inc was organized as a Delaware corporation on September 8, 2006 for
the purpose of engaging in research, development and manufacture of permanent
magnet electrical motor systems and related electric controls.
On
January 29, 2010, InovaChem completed the acquisition of NuGen Mobility, Inc
(“NuGen”), through a reverse subsidiary merger (the “Merger”) pursuant to which
NuGen became InovaChem’s wholly-owned subsidiary. As a result of the Merger,
InovaChem intends to carry on NuGen’s business as its sole line of business and
will no longer be in its previous business of attempting to utilize new
technologies to reduce certain food, pharmaceutical and other products’ costs.
On February 26, 2010, the board of directors and stockholders approved an
amendment to the Company’s Certificate of Incorporation changing the Company’s
name from InovaChem, Inc. to NuGen Holdings, Inc. The Certificate of Amendment
to the Certificate of Incorporation became effective on March 4,
2010.
The
Merger resulted in a change in control of our company and also a change in some
of the members of our management team. Our fiscal year remained September
30.
3
The
Merger is being accounted for as a reverse acquisition and recapitalization.
NuGen is the acquirer for accounting purposes and NuGen Holdings, formerly known
as InovaChem, is the acquiree. Accordingly, NuGen’s historical financial
statements for periods prior to the acquisition become those of the acquirer
retroactively restated for the equivalent number of shares received in the
Merger. The accumulated deficit of NuGen is carried forward after the
acquisition. Operations prior to the Merger are those of NuGen. Earnings per
share for the period prior to the Merger are restated to reflect the equivalent
number of shares outstanding.
The
Offering
Shares
of common stock being registered
|
24,991,513
|
|
Total
shares of common stock outstanding as of the date of this
prospectus
|
50,381,564
|
|
Number
of shares of common stock issuable upon the exercise of
warrants.
|
360,000
|
|
Total
number of shares of common stock issued and outstanding if the warrants
are exercised
|
50,741,564
|
|
Total
proceeds raised by us from the disposition of the common stock by the
selling security holders or their transferees
|
We
will receive no proceeds from the disposition of already outstanding
shares of common stock by the selling security holders or their
transferees.
|
|
We
may receive proceeds of up to $360 from the exercise of the warrants
covered by this prospectus.
|
||
Market for our common
stock
|
There
has been no market for our securities. Our common stock is not traded on
any exchange or on the over-the-counter market. After the effective date
of the registration statement relating to this prospectus, we hope to have
a market maker file an application with the FINRA for our common stock to
eligible for trading on the Over The Counter Bulletin Board. We do not yet
have a market maker who has agreed to file such application.
There
is no assurance that a trading market will develop, or, if developed, that
it will be sustained. Consequently, a purchaser of our common stock may
find it difficult to resell the securities offered herein should the
purchaser desire to do so when eligible for public
resale.
|
Risk
Factors
We urge
you to read the "Risk Factors" section beginning on page 4 of this
Prospectus so that you understand the risks associated with an investment in our
common stock.
Summary
Historical Financial Information
The
following tables set forth our summary historical financial information. You
should read this information together with the financial statements and the
notes thereto appearing elsewhere in this Prospectus and the information under
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations”
NuGen
Holdings, Inc.
Summary
Historical Financial Information
For the
years ended September 30, 2009, 2008 and 2007, and
For the
three months ended December 31, 2009 and 2008
For Years Ended
|
For the Three Months ended
|
|||||||||||||||||||
September 30,
|
December 31,
|
|||||||||||||||||||
2009
|
2008
|
2007
|
2009
|
2008
|
||||||||||||||||
Statement of Operations Data:
|
(UNAUDITED)
|
(UNAUDITED)
|
(UNAUDITED)
|
|||||||||||||||||
Revenues
|
$ | 796,847 | $ | 624,695 | $ | 308,696 | $ | 150,141 | $ | 130,000 | ||||||||||
Total
cost of goods sold
|
584,987 | 582,700 | 459,566 | 150,733 | 140,868 | |||||||||||||||
Gross
profit
|
211,860 | 41,995 | (150,870 | ) | (592 | ) | (10,868 | ) | ||||||||||||
Total
operating expenses
|
376,854 | 382,339 | 1,884,795 | 117,696 | 61,324 | |||||||||||||||
Net
loss from operations
|
(164,994 | ) | (340,344 | ) | (2,035,665 | ) | (118,288 | ) | (72,192 | ) | ||||||||||
Total
other income and (expense)
|
(157,515 | ) | (149,239 | ) | (42,089 | ) | (26,727 | ) | (39,037 | ) | ||||||||||
Net
loss
|
$ | (322,509 | ) | $ | (489,583 | ) | $ | (2,077,754 | ) | $ | (145,015 | ) | $ | (111,229 | ) | |||||
Net
loss per share - basic and diluted
|
$ | (0.01 | ) | $ | (0.02 | ) | $ | (0.08 | ) | $ | (0.01 | ) | $ | (0.00 | ) | |||||
Weighted
average number of shares outstanding during the period - basic and
diluted
|
27,133,384 | 27,133,384 | 27,133,384 | 27,133,384 | 27,133,384 | |||||||||||||||
As
of
|
||||||||||||||||||||
September
30,
|
December
31,
|
|||||||||||||||||||
2009
|
2008
|
2007
|
2009
|
|||||||||||||||||
Balance
Sheet Data:
|
(UNAUDITED)
|
(UNAUDITED)
|
||||||||||||||||||
Cash
and Equivalents
|
$ | 58,929 | $ | 72,060 | $ | 2,348 | $ | 70,878 | ||||||||||||
Total
Assets:
|
$ | 291,387 | $ | 219,080 | $ | 51,689 | $ | 257,698 | ||||||||||||
Total
Liabilities:
|
$ | 1,679,357 | $ | 2,631,234 | $ | 1,974,260 | $ | 1,753,183 | ||||||||||||
Shareholders'
Equity (Deficiency):
|
$ | (1,387,970 | ) | $ | (2,412,154 | ) | $ | (1,927,353 | ) | $ | (1,495,485 | ) |
RISK
FACTORS
There
are numerous and varied risks, known and unknown, that may prevent us from
achieving our goals. If any of these risks actually occur, our business,
financial condition or results of operation may be materially adversely
affected. In such case, the trading price of our Common Stock could decline and
investors could lose all or part of their investment.
Risks
Related to the Company’s Business and Industry
We
have a limited operating history and net losses which make it difficult to
evaluate our operations.
We are
still an early stage company. We have had limited assets and operations since
our organization. We have generated revenues of $624,695 and $796,847, for the
fiscal years ending September 30, 2008 and 2009 respectively. For the three
months ending December 31, 2008 and 2009, we generated revenues of $130,000 and
$150,141, respectively. We had net losses of $489,583 and $322,509, for the
fiscal years ending September 30, 2008 and 2009 respectively, and net losses for
the three months ending December 31 2008 and 2009 of $111,229 and $145,015,
respectively. We face all of the risks, uncertainties, expenses, delays,
problems and difficulties typically encountered in developing and
commercializing products. It is possible that we will have unanticipated
expenses, problems or technical difficulties that could cause material delays in
the development, regulatory approval or market acceptance of our
products.
4
We
will need additional capital to continue its business.
We
continue to require additional financing through public or private debt or
equity financings to fund the commercialization of our technology and effectuate
our business plan. As we are generating negative cash flow from our operations,
we will be totally dependent on external sources of financing for the
foreseeable future, for which we have no commitments. We may not be able to
raise additional capital when needed or, if we are able to raise additional
capital, it may not be on favorable terms. Any such additional capital would be
likely to dilute our then-existing stockholders and may have rights, preferences
and privileges that are senior to the shares held by existing stockholders. Our
failure to raise additional funds in the future will adversely affect our
business operations, and may require us to suspend our operations, which in turn
may result in a loss to the purchasers of our Common Stock.
We
have a going concern opinion from our auditors, indicating the possibility that
we may not be able to continue to operate.
As
reflected in our financial statements for the three months ended December 31,
2009 and 2008, we have a working capital deficiency of $909,330, a stockholders’
deficit of $1,495,485 an accumulated deficit of $3,035,218 and negative cash
flows from operations of $37,362 during the three months ending December 31,
2009. We have not yet established an ongoing source of revenues sufficient to
cover our operating costs to allow us to continue as a going concern.
Furthermore, we anticipate generating losses for the next 12 months. These
factors raise substantial doubt that we will be able to continue operations as a
going concern. Our independent auditors included an explanatory paragraph in
their report for the fiscal years ended September 30, 2009 and 2008 on the
accompanying financial statements regarding concerns about our ability to
continue as a going concern. Our financial statements contain additional note
disclosures describing the circumstances that lead to this disclosure by our
independent auditors.
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
strategy 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.
Historically,
we have derived a majority of our revenues from one customer. The loss of this
customer will have a significant impact on our operations.
Revenue
from one customer totaled $671,649 and $525,000 for the years ended September
30, 2009 and September 30, 2008, respectively, or 84% of total revenues for both
years. Accounts receivable from this customer accounted for 96% and 97% of total
accounts receivable as of September 30, 2009 and September 30, 2008,
respectively. The failure to diversify our customers so that we are not
dependent on one customer could result in a significant decrease in our
earnings.
As
we have a limited history, it may be unable to accurately predict our future
operating expenses, which could cause us to experience cash shortfalls in future
periods.
We have a
limited history with regard to expenses and may be unable to accurately forecast
our cash needs for the pre-operating months. There can be no assurance we will
raise sufficient capital to carry out our business plan.
If
we are unable to adequately protect our intellectual property, our business
prospects may be harmed.
Our
long-term success largely depends on our ability to market technologically
competitive products. In order to legally protect our technology we
must:
|
§
|
obtain
and protect its patents, if issued, or the rights to its patents both
domestically and abroad;
|
|
§
|
operate
without infringing upon the proprietary rights of others;
and
|
|
§
|
prevent
others from successfully challenging or infringing its proprietary
rights.
|
5
If we
fail to obtain or maintain patent protections, we may not be able to prevent
third parties from using our proprietary rights. We will be able to protect our
proprietary rights from unauthorized use only to the extent that these rights
are covered by valid and enforceable patents or are effectively maintained as
trade secrets. Until a patent is issued, the claims covered by the patent may be
narrowed or removed entirely, and therefore we may not obtain adequate patent
protection. As a result, we may face unanticipated competition, or conclude that
without patent rights the risk of bringing a new product to the market is too
great, thus adversely affecting operating results. Assuming we are able to
achieve patent protection, the patent position of technology companies involves
complex legal and factual questions, and, therefore, we cannot predict with
certainty whether we will be able to ultimately enforce any issued patents or
proprietary rights. Any patents that we acquire in the future or licenses may be
challenged invalidated or circumvented and may not provide us with adequate
protection against competitors. The laws of certain foreign countries do not
protect our intellectual property rights to the same extent as the laws of the
United States. Accordingly, we may be forced to engage in costly and time
consuming litigation in order to protect its intellectual property
rights.
We also
rely on trade secrets to protect our technology, especially where we do not
believe patent protection is appropriate or obtainable. However, trade secrets
are difficult to protect. While we believe we use reasonable efforts to protect
trade secrets, our employees, consultants, contractors, and other advisors may
unintentionally or willfully disclose proprietary information to competitors.
Enforcing a claim that a third party illegally obtained and is using trade
secrets is expensive and time consuming, and the outcome is unpredictable.
Moreover, our competitors may independently develop equivalent knowledge,
methods and know-how.
We
are doing business in foreign jurisdictions, but have only one issued patent in
a foreign jurisdiction. Our other patents have not been issued in any foreign
jurisdictions. The failure to obtain patent protections in foreign jurisdictions
could adversely affect our future operations.
We have
one filed patent application in a foreign jurisdiction. We believe that there is
a market for our products in a variety of foreign countries. Our ability to
successfully expand our operations may require us to be able to protect our
intellectual property in foreign jurisdictions, which will require us to attempt
to seek patent protection in such jurisdictions in the future, which is timely,
expensive, and may not result in issued patents. The failure to obtain patents
in foreign jurisdictions may adversely affect our future operations in that our
technology may be utilized by competitors.
If
a third party claims we are infringing on our intellectual property rights, we
may incur significant litigation or licensing expenses, or be prevented from
further developing or commercializing our products.
Our
commercial success depends in part on our ability to operate without infringing
the patents and other proprietary rights of third parties. A third party may
assert that we have infringed his, her or its patents and proprietary rights or
challenge the validity of any patents we may receive in the future or our
proprietary rights. Likewise, we may need to resort to litigation to enforce any
patent rights we receive in the future or to determine the scope and validity of
a third party's proprietary rights, which litigation, even if successful, is
expensive and time consuming.
The
outcome of these proceedings is uncertain and could significantly harm our
business. If we do not prevail in this type of litigation, we may be required
to:
|
§
|
pay
monetary damages;
|
|
§
|
expend
time and funding to redesign ours products so that they do not infringe
others' patents while still allowing us to compete in the market with a
substantially similar product;
|
6
|
§
|
obtain
a license in order to continue manufacturing or marketing the affected
product, and pay license fees and royalties;
or
|
|
§
|
stop
research and commercial activities relating to the affected product or
service if a license is not available on acceptable terms, if at
all.
|
In
addition, the defense and prosecution of intellectual property suits,
interferences, oppositions and related legal and administrative proceedings in
the United States and elsewhere, even if resolved in our favor, could be
expensive and time consuming and could divert financial and managerial
resources. Some of our competitors may be able to sustain the costs of complex
patent litigation more effectively than we can because they have substantially
greater financial resources.
Technological
advances, the introduction of new products, and new design and manufacturing
techniques could adversely affect our operations unless we are able to adapt to
the resulting change in conditions.
Our
future success and competitive position depend to a significant extent upon our
proprietary technology. We must make significant investments to continue to
develop and refine our technologies. We will be required to expend substantial
funds for and commit significant resources to the conduct of continuing research
and development activities, the engagement of additional engineering and other
technical personnel, and the enhancement of design and manufacturing processes
and techniques. Our future operating results will depend to a significant extent
on our ability to design and manufacture new products. There can be no assurance
that any new products will receive or maintain customer or market acceptance.
Our inability to design and manufacture new products on a timely and
cost-effective basis could have a material adverse effect on our business,
financial condition, results of operations and liquidity.
We
have international operations and, therefore, are subject to additional
financial and regulatory risks.
We sell
products in foreign countries and currently intend to increase our level of
international business activity. Our overseas operations are subject to various
risks, including:
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U.S.-imposed
embargoes of sales to specific countries (which could prohibit sales of
products there);
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foreign
import controls (which may be arbitrarily imposed and enforced and which
could interrupt our supplies or prohibit customers from purchasing our
products);
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exchange
rate fluctuations;
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expropriation
of assets;
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war,
civil uprisings and riots;
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government
instability;
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the
necessity of obtaining government approvals for both new and continuing
operations; and
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legal
systems of decrees, laws, taxes, regulations, interpretations and court
decisions that are not always fully developed and that may be
retroactively or arbitrarily
applied.
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We
currently intend to expand our operations into selected international markets.
However, we may be unable to execute our business model in these markets or new
markets. Further, foreign providers of competing products and services may have
a substantial advantage over us in attracting consumers and businesses in their
country due to earlier established businesses in that country, greater knowledge
with respect to the cultural differences of consumers and businesses residing in
that country and/or their focus on a single market.
7
In
pursuing an international expansion strategy, we face additional risks,
including:
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foreign
laws and regulations, which may vary country by country, that may impact
how we conduct our business;
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higher
costs of doing business in foreign
countries;
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potential
adverse tax consequences;
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longer
payment cycles and foreign currency fluctuations;
and
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economic
downturns.
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We will
be subject to federal licensing requirements with respect to the sale in foreign
countries of certain products. In addition, we are obligated to comply with a
variety of federal, state and local regulations, both domestically and abroad,
governing certain aspects of our operations. The failure to obtain applicable
governmental approval and clearances could adversely our business.
Like
other companies which operate internationally, we are subject to the Foreign
Corrupt Practices Act and other laws which prohibit improper payments to foreign
governments and their officials. Violations of the Foreign Corrupt Practices Act
may result in severe criminal penalties, which could have a material adverse
effect on our business, financial condition, results of operations and
liquidity.
We
may encounter intense competition from competitors many of which are more
established than us and have greater resources than us.
We face
competition from established and emerging manufacturers, which could divert
prospective customers to our competitors. We currently compete in the industrial
and automotive markets. Some companies not traditionally serving our market
could enter our market, causing reduced revenue and sales opportunities. We
expect existing competitors and new entrants to these industries to increase and
to constantly revise and improve their business models. Many of these entities
have significantly greater research and development capabilities and budgets
than we do, as well as substantially more marketing, manufacturing, financial
and managerial resources. These entities represent significant competition for
us. Acquisitions of, or investments in, competing companies by large
corporations could increase potential competitors’ resources. Since our
resources are limited, we may not be able to compete with these larger
competitors.
We
are dependent upon our management team, and the loss of any of these individuals
would harm our business.
We rely
heavily on the expertise, experience and continued service of our senior
management. The loss of such key personnel could materially adversely affect us.
If such management was to leave we could face substantial difficulty in hiring
qualified successors and could experience loss in productivity while any
successor obtains necessary training and experience. We have entered into
employment agreements with senior management but there can be no assurance that
the terms of any such agreement will be sufficient to retain such
executives.
Our
ability to implement our business plan depends on our ability to attract and
retain key personnel.
Our
future success depends on our ability to attract and retain highly qualified
research and development, technical, and managerial personnel. Competition for
such personnel is intense, and we cannot guarantee that we will be able to
attract or retain a sufficient number of highly qualified employees in the
future. If we are unable to hire and retain personnel in key positions, our
business, financial condition and operating results could be materially
adversely affected.
8
Difficulties
managing growth could adversely affect our business, operating results and
financial condition.
The
growth of our business may require increased demands on our management,
workforce and facilities. If we achieve growth in our operations in the next few
years, such growth could place a strain on our management, and our
administrative, operational and financial infrastructure. Our ability to manage
our operations and growth requires the continued improvement of operational,
financial and management controls, reporting systems and procedures. In
addition, we will need to attract, train, manage and retain qualified management
and other personnel to manage our future operations. If we are unable to manage
our growth effectively or if we are unable to attract additional highly
qualified personnel, our business, operating results and financial condition may
be materially adversely affected.
We
may be subject to liability claims resulting from our products.
There can
be no assurance that product liability issues will not arise that would
adversely impact our business. Although we have product liability insurance,
there is no assurance that such policy will be adequate to cover any potential
claims or that we will maintain such policy coverage in the future.
Our
ability to implement our business plan depends on the viability of our strategic
partners and key customers.
There can
be no assurance that the stability of our strategic partners and key customers
remain in good financial health. This could adversely affect sales, time to
collection of revenues.
Our
ability to implement our business plan depends on the existing government policy
and the price of fuel relating to forms of transportation.
There can
be no assurance that the government’s policy or price of fuel does not adversely
affect the marketability of our products. Our business plan assumes existing
terms and status with an increase of favorability pushing for alternative modes
of transportation
Risks
Relating to the Market for Our Common Stock
We
incur increased costs as a result of being a public company.
As a
result of the Merger, NuGen became a public reporting company. As a public
reporting company, we expect to incur significant additional legal, accounting
and other expenses that we would not otherwise incur as a private company. In
addition, the Sarbanes-Oxley Act of 2002, as well as related rules subsequently
implemented by the Securities and Exchange Commission has required changes in
corporate governance practices of public companies. We expect these rules and
regulations to make some activities more time-consuming and costly. We cannot
predict or estimate the amount of additional costs we will incur or the timing
of such costs.
Insiders
have substantial control over and could delay or prevent a change in corporate
control, which may negatively affect your investment.
Our
executive officers, directors and affiliates, in the aggregate, beneficially own
approximately 48.4% of our outstanding Common Stock. The interests of such
persons may differ from the interests of other stockholders. These stockholders,
if acting together, would be able to significantly influence all matters
requiring approval by our stockholders, including the election of directors and
the approval of mergers or other business combination transactions. In addition,
such persons’ 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.
9
There
is no market for our Common Stock and there can be no assurance that one will
ever develop or be sustained.
There is
currently no trading market for our Common Stock and there can be no assurance
that a market will ever develop. We anticipate our Common Stock will be quoted
on the automated quotation service, known as the OTC Bulletin Board but no
market makers have committed to becoming market makers for our common stock and
none may do so.
“Penny
Stock” rules may make buying or selling our common stock difficult.
Trading
in our common stock is subject to the “penny stock” rules. The Securities and
Exchange Commission (“SEC”) has adopted regulations that generally define a
penny stock to be any equity security that has a market price of less than $5.00
per share, subject to certain exceptions. These rules require that any
broker-dealer that recommends our common stock to persons other than prior
customers and accredited investors, must, prior to the sale, make a special
written suitability determination for the purchaser and receive the purchaser’s
written agreement to execute the transaction. Unless an exception is available,
the regulations require the delivery, prior to any transaction involving a penny
stock, of a disclosure schedule explaining the penny stock market and the risks
associated with trading in the penny stock market. In addition, broker-dealers
must disclose commissions payable to both the broker-dealer and the registered
representative and current quotations for the securities they offer. The
additional burdens imposed upon broker-dealers by such requirements may
discourage broker-dealers from effecting transactions in our common stock, which
could severely limit the market price and liquidity of our common
stock.
We
may, in the future, issue additional common shares, which would reduce
investors’ percent of ownership and may dilute our share value.
Our
Certificate of Incorporation authorizes the issuance of 200 million shares of
common stock and 50 million shares of preferred stock. As of the date of this
Prospectus, there are outstanding 50,381,564 shares of common stock and options
to acquire 2,400,000 shares of common stock. Although there are currently no
shares of preferred stock issued, we have an agreement to create a series of up
to 4,666,667 shares of preferred stock, which, subject to adjustment, may be
convertible into an equivalent number of shares of common stock. The future
issuance of common stock or convertible securities 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, if one
is established, for the common stock.
10
The
risk of our revenues and profitability fluctuating from period to
period.
Our
results of operations for any quarter, half year or year are not necessarily
indicative of results to be expected in future periods. Our operating results
have historically been, and we expect they will continue to be, subject to
quarterly, half yearly and yearly fluctuations as a result of a number of
factors, including:
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changes
in prevailing economic and other conditions relating to our
businesses;
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variations
in costs, sales prices and volume of our products and services, and the
mix of products and services we
offer;
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changes
in customer demand and/or our supply chains, which in turn will often
depend upon market conditions for the relevant products, the success of
our customers' or suppliers' businesses, industry trends, and other
factors;
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changes
in the level of performance of our strategic investments, which in turn
will affect our gains and losses on sales of such investments or may
result in the write-off or impairment of such
investments;
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changes
in our asset prices, including equity, real estate and other assets, which
in turn will affect our gains and losses on sales of such assets or may
result in the write-off or impairment of such
assets;
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changes
in the financial and commodity markets;
and
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changes
in the credit quality of our
customers
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USE
OF PROCEEDS
The
shares of common stock covered by this prospectus are issued and outstanding and
owned by the selling stockholders. Each of the selling stockholders will receive
all of the net proceeds from the sale of shares by that stockholder. We will not
receive any of the proceeds from the sale or other disposition of the shares
common stock covered by this prospectus. We are responsible for the fees, costs
and expenses of this offering.
This
prospectus also covers 360,000 shares of common stock which would be issued if
the warrant holder exercises his warrant. In such instance, we would receive
$360 if the warrant is exercised in its entirety.
DETERMINATION
OF OFFERING PRICE
The $1.00
per share offering price of our common stock was determined arbitrarily by us.
There is no relationship whatsoever between this price and our assets, earnings,
book value or any other objective criteria of value. We intend to apply to the
Over-the-Counter Bulletin Board electronic quotation service for the trading of
our common stock. If our common stock becomes quoted and a market for the
stock develops, the actual price of stock will be determined by prevailing
market prices at the time of sale or by private transactions negotiated by the
selling shareholders named in this prospectus. The offering price would thus be
determined by market factors and the independent decisions of the selling
shareholders named in this prospectus.
DILUTION
The
shares to be sold by the selling shareholders are shares of common
stock that are currently issued and outstanding. Accordingly, there will be
no dilution to our existing shareholders.
11
MARKET
INFORMATION
There is
no trading market for our Common Stock. To be quoted on the OTCBB, a market
maker must file an application on our behalf in order to make a market for our
common stock. We have engaged in preliminary discussions with an FINRA Market
Maker to file our application on Form 211 with the FINRA, but as of the date of
this prospectus, no filing has been made. We are not obligated to register any
shares under the Securities Act for sale by security holders, although we are
hereby filing this registration statement for the registration
of 25,351,513 shares of Common Stock on behalf of the selling
stockholders.
As of the
date of this Prospectus, there were approximately 106 holders of record of our
common stock.
We have
not declared or paid any cash dividends on our common stock nor do we anticipate
paying any in the foreseeable future. Furthermore, we expect to retain any
future earnings to finance its operations and expansion. The payment of cash
dividends in the future will be at the discretion of our Board of Directors and
will depend upon our earnings levels, capital requirements, any restrictive loan
covenants and other factors the Board considers relevant.
Securities
Authorized For Issuance Under Equity Compensation Plan
As of
September 30, 2009, we had no shares of common stock subject to any outstanding
awards or available for future awards under equity compensation plans. Our 2008
Stock Option Plan, which was adopted by the Board on June 30, 2008, specifically
provided for its effectiveness within 12 months of its adoption by vote of the
shareholders; as of September 30, 2009 the shareholders did not vote to adopt or
reject the option plan. Accordingly, the 2008 Stock Option Plan is no longer
effective and any previous options granted thereunder are null and
void.
In
February 2010, our board of directors adopted the 2010 Stock Option Plan. The
total number of shares of common stock available under this Plan equals the sum
of (i) 5,000,000, plus (ii) the number of shares with respect to awards that
terminate without being exercised, are exchanged for awards that do not involve
shares of common stock, or are settled in cash in lieu of shares of common
stock. Currently there are 2,400,000 options granted under this
Plan.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-Looking
Statements
We
caution readers that this Prospectus includes “forward-looking statements” as
that term is used in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on current expectations rather than
historical facts and they are indicated by words or phrases such as
“anticipate,” “could,” “may,” “might,” “potential,” “predict,” “should,”
“estimate,” “expect,” “project,” “believe,” “intend,” “plan,” “envision,”
“continue,” target,” “contemplate,” or “will” and similar words or phrases or
corporate terminology. We have based such forward-looking statements on our
current expectations, assumptions, estimates and projections. While we believe
these expectations, assumptions, estimates and projections are reasonable, such
forward-looking statements are only predictions and involve known and unknown
risks and uncertainties and other factors that may cause actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements, many of which are beyond our control.
Some of
the factors that could affect our financial performance, cause actual results to
differ from our estimates or underlie such forward-looking statements are set
forth in various places in this Prospectus. These factors include, but are not
limited to:
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general
economic conditions,
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12
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•
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our
ability to evaluate and predict our future operations and expenses, being
an early stage development company with limited assets and no current
operations,
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the
possibility of future product-related liability
claims,
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our
future capital needs and our ability to obtain
financing,
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our
ability to protect our intellectual property and trade secrets, both
domestically and abroad,
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expenses
involved in protecting our intellectual property and trade
secrets,
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our
ability to attract and retain key management, technical, and research and
development personnel,
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our
ability to research and develop new technology, products and design and
manufacturing techniques,
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technological
advances, the introduction of new and competing products, and new design
and manufacturing techniques developed by our
competitors,
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anticipated
and unanticipated trends and conditions in our
industry,
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our
ability to predict consumer
preferences,
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changes
in the costs of operation,
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our
ability to compete,
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our
ability to manage growth and carry out growth strategies, including
international expansion,
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possible
necessity of obtaining government approvals for both new and continuing
operations,
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risks,
expenses and requirements involved in operating in various foreign
markets, including India and China,
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exposure
to foreign currency risk and interest rate
risk,
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possible
foreign import controls and United States-imposed
embargoes,
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possible
disruption in commercial activities due to terrorist activity, armed
conflict and government instability,
and
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other
factors set forth in this report and in our other Securities and Exchange
Commission (“SEC”) filings.
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You are
cautioned not to place undue reliance on these forward-looking statements, which
are valid only as of the date they were made. We undertake no obligation to
update or revise any forward-looking statements to reflect new information or
the occurrence of unanticipated events or otherwise.
13
Recent
Developments
On
January 29, 2010, we completed the acquisition of NuGen. As a result of this
merger, we are now engaged in the business of designing, manufacturing, and
marketing systems and components for the alternative energy sector. We offer
high-efficiency, reliable compact permanent magnet electrical motors, systems,
controllers, vehicle interface modules (including energy storage, management,
and monitoring systems) and related software that have applications in markets
ranging from electric/hybrid electric vehicles to materials handling equipment,
distributive power, ground support equipment, motion control, and military
applications.
The
Merger is being accounted for as a reverse acquisition and recapitalization. As
a result, the historical financial statements of NuGen Mobility, Inc. will be
the historical financial statements. Accordingly, our consolidated financial
statements subsequent to the merger consist of the balance sheets of InovaChem,
Inc. and NuGen Mobility, Inc., the historical operations of NuGen Mobility, Inc.
and the operations of both InovaChem, Inc. and NuGen Mobility, Inc. from January
29, 2010 (date of merger) forward. As a result of the merger, the historical
financial statements of InovaChem, Inc. for the period prior to January 29,
2010, are not presented herein. We are maintaining our fiscal year end of
September 30, which was the historical fiscal year end of InovaChem, Inc. and
NuGen Mobility, Inc.
In
January and February 2010, we issued securities for aggregate gross proceeds of
$1,550,000 and converted $845,475 of our indebtedness for our common stock. See
“-Liquidity and Capital Resources”
Results
of Operations
We
generated revenues of $624,695 and $796,847, for the fiscal years ending
September 30, 2008 and 2009 respectively, and $130,000 and $150,141 in revenues
for the three months ending December 31, 2008 and 2009, respectively. We had net
losses of $489,583 and $322,509, for the fiscal years ending September 30, 2008
and 2009 respectively, and net losses of $111,229 and $145,105 for the three
months ending December 31, 2008 and 2009, respectively.
In fiscal
2010 we expect to expend cash for operations and technology investments in order
to implement our business plan and we do not expect immediate revenues to offset
such expenditures.
Results
of Operations— Comparison of Quarters Ending December 31, 2009 and
2008
Revenues.
Our sales increased by $20,141 to $150,141 for the quarter ended December 31,
2009 from $130,000 for the quarter ended December 31, 2008. For the quarter
ended December 31, 2009 the Company had income from two customers, Mahindra and
BSA, versus sales for the quarter ended December 31, 2008 to Mahindra
alone.
Gross
Profit (Loss). Our gross (loss) increased by $7,237 to $(18,107) for the
quarter ended December 31, 2009 from $(10,868) for the quarter ended December
31, 2008, primarily due to increases in compensation expenses in 2009 versus
2008 as staffing levels were increased.
Operating
Expenses . Our operating expenses increased by $38,857 for the quarter
ended December 31, 2009 from $61,324 for the quarter ended December 31, 2008,
primarily due to increased personnel and consulting services in 2009 over 2008.
Operating expenses consist primarily of compensation, rent and office,
professional fees and travel expenses.
Results
of Operations— Comparison of Fiscal Years Ending September 30, 2009 and
2008
Revenues. Our sales increased
by $172,152 to $796,847 for the year ended September 30, 2009 from $624,695 for
the year ended September 30, 2008. The increase in revenues was primarily due to
increases in sales to Mahindra.
14
Gross Profit. Our gross
profit increased by $169,865 to $211,860 for the year ended September 30, 2009
from $41,995 for the year ended September 30, 2008. The increase in gross profit
was primarily due to increases in sales to Mahindra.
Operating Expenses. Our
operating expenses decreased by $5,485 for the year ended September 30, 2009
from $382,339 for the year ended September 30, 2008. Operating expenses consist
primarily of compensation, rent and office, professional fees and travel
expenses.
Results
of Operations— Comparison of Fiscal Years Ending September 30, 2008 and
2007
Revenues. Our sales increased
by $315,999 to $624,695 for the year ended September 30, 2008 from $308,696 for
the year ended September 30, 2007. The increase in revenues was primarily due to
increases in sales to Mahindra.
Gross Profit. Our gross
profit increased by $108,875 to $41,995 for the year ended September 30, 2008
from ($150,870) for the year ended September 30, 2007. The increase in gross
profit was primarily due increases in sales to Mahindra which started in fiscal
2008.
Operating Expenses. Our
operating expenses decreased by $382,339 for the year ended September 30, 2008
from $1,884,795 for the year ended September 30, 2007. We recognized $1,512,448
in Impairment expenses related to the asset purchase from NGM in fiscal 2007.
The other operating expenses consist primarily of compensation, rent and office,
professional fees and travel expenses.
Liquidity
and Capital Resources
Our
principal source of funds has been sales to our customers, equity provided by
our stockholders and various loans. Our principal use of funds has been for cost
of goods sold, operating expenses, general and administrative expenses and
interest expense. Although we currently believe that we have sufficient cash for
the next 12 months, we are unable at present to estimate the funds we will
require to execute our business plan to develop manufacture and market our
products and technology and management expects that we will need to raise
additional capital, which we may do through equity financings. There can be no
assurance that we will be able to raise such funds if and when we wish to do
so.
The
Company’s working capital deficiency was $909,330, at December 31, 2009 versus
$801,592 at September 30, 2009. Cash flows from operations used $154,326 and
$235,111 for the years ended September 30, 2009 and 2008 respectively. Cash
flows from operations used $37,362 for the quarter ended December 31, 2009 and
provided $81,335 during the quarter ending December 31, 2008. Cash flows from
financing activities provided $141,195 and $304,823 for the years ended
September 30, 2009 and 2008 respectively and provided $49,311 for the quarter
ended December 31, 2009 primarily due to the proceeds from issuances of notes
payable to various lenders.
At
December 31, 2009, we had $70,878 of cash on hand; at March 11, 2010, we had
$$1,365,000 of cash on hand.
In connection with the
closing of the Merger, on or about January 29, 2010, (i) we issued an aggregate
of 6,733,336 shares of Common Stock at a purchase price of $0.15 per share for
aggregate gross proceeds of $1,010,000 and (ii) holders of $845,475 of
outstanding indebtedness of NuGen converted their promissory notes (based on a
$0.15 per share conversion price) into an aggregate of 5,636,499 shares of
Common Stock. On
February 11, 2010, we issued an aggregate of 3,599,999 shares of Common Stock at
a purchase price of $0.15 per share for aggregate gross proceeds of
approximately $540,000.
15
Critical
Accounting Policies
We have
identified the accounting policies outlined below as critical to our business
operations and an understanding of our results of operations. Additionally, we
intend to develop and adopt policies, once we commence operations, which are
appropriate to our operations. The list is not intended to be a comprehensive
list of all of our accounting policies. In many cases, the accounting treatment
of a particular transaction is specifically dictated by accounting principles
generally accepted in the United States, with no need for management's judgment
in their application. In particular, given our early stage of business, our
primary critical accounting policy and area in which we use judgment is in the
area of the recoverability of deferred tax assets.
Revenue
and Cost Recognition - We manufacture proprietary products and other
products. Revenue from sales of products are generally recognized at the time
title to the goods and the benefits and risks of ownership passes to the
customer which is typically when products are shipped based on the terms of the
customer purchase agreement.
Revenue
relating to long-term fixed price contracts is recognized using the percentage
of completion method. Under the percentage of completion method, contract
revenues and related costs are recognized based on the percentage that costs
incurred to date bear to total estimated costs.
Changes
in job performance, estimated profitability and final contract settlements may
result in revisions to cost and revenue, and are recognized in the period in
which the revisions are determined.
Contract
costs include all direct materials, subcontract and labor costs and other
indirect costs. Selling, general and administrative costs are charged to expense
as incurred. At the time a loss on a contract becomes known, the entire amount
of the estimated loss is accrued.
In
accordance with ASC 360, "Accounting for the Impairment or Disposal of
Long-Lived Assets", the Company reviews the carrying value of intangibles and
other long-lived assets for impairment at least annually or whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of long-lived assets is measured by comparison of
its carrying amount to the undiscounted cash flows that the asset or asset group
is expected to generate. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the property, if any, exceeds its fair market value.
At
inception, the Company implemented ASC 718, “Share-Based Payment” which requires
the fair value of all stock-based employee compensation awarded to employees to
be recorded as an expense over the related requisite service period. The
statement also requires the recognition of compensation expense for the fair
value of any unvested stock option awards outstanding at the date of adoption.
The Company values any employee or non-employee stock based compensation at fair
value using the Black-Scholes Option Pricing Model.
New
Accounting Pronouncements
In May
2009, the FASB issued ASC 805 “Subsequent Events”. ASC 805 establishes general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued. ASC 805 sets forth (1) the period after the balance sheet date
during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the
financial statements, (2) the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements and (3) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. ASC 805 is
effective for interim or annual financial periods ending after June 15, 2009.
The adoption of this statement did not have a material effect on our financial
statements.
16
In June
2009, the FASB issued Financial Accounting Standards Codification No. 860 . ASC
860 improves the relevance, representational faithfulness, and comparability of
the information that a reporting entity provides in its financial statements
about a transfer of financial assets; the effects of a transfer on its financial
position, financial performance, and cash flows; and a transferor’s continuing
involvement, if any, in transferred financial assets. ASC 860 is effective as of
the beginning of each reporting entity’s first annual reporting period that
begins after November 15, 2009, for interim periods within that first annual
reporting period and for interim and annual reporting periods thereafter. We are
evaluating the impact the adoption of ASC 860 will have on our financial
statements.
In June
2009, the FASB issued ASC 105 Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles. The FASB Accounting
Standards Codification TM (the “Codification”) has become the source of
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
accordance with Generally Accepted Accounting Principles (“GAAP”). All existing
accounting standard documents are superseded by the Codification and any
accounting literature not included in the Codification will not be
authoritative. Rules and interpretive releases of the SEC issued under the
authority of federal securities laws, however, will continue to be the source of
authoritative generally accepted accounting principles for SEC registrants.
Effective September 30, 2009, all references made to GAAP in our consolidated
financial statements will include references to the new Codification. The
Codification does not change or alter existing GAAP and, therefore, will not
have an impact on our financial position, results of operations or cash
flows.
In June
2009, the FASB issued changes to the consolidation guidance applicable to a
variable interest entity (VIE). FASB ASC Topic 810, "Consolidation," amends the
guidance governing the determination of whether an enterprise is the primary
beneficiary of a VIE, and is, therefore, required to consolidate an entity, by
requiring a qualitative analysis rather than a quantitative analysis. The
qualitative analysis will include, among other things, consideration of who has
the power to direct the activities of the entity that most significantly impact
the entity's economic performance and who has the obligation to absorb losses or
the right to receive benefits of the VIE that could potentially be significant
to the VIE. This standard also requires continuous reassessments of whether an
enterprise is the primary beneficiary of a VIE. FASB ASC 810 also requires
enhanced disclosures about an enterprise's involvement with a VIE. Topic 810 is
effective as of the beginning of interim and annual reporting periods that begin
after November 15, 2009. This will not have an impact on our financial position,
results of operations or cash flows.
Off Balance Sheet
Arrangements
In August
2007, NuGen entered into an asset purchase agreement (“Asset Purchase
Agreement”) pursuant to which it acquired substantially all of the assets, and
certain liabilities of New Generation Motors Corporation, a Delaware corporation
(“NGM”), related to NGM’s business of designing, manufacturing, marketing and
licensing axial flux and other electric motors. Pursuant to the Asset Purchase
Agreement with New Generation Motors Corporation(“NGM”), NuGenis required to pay
NGM from Gross Revenues, (i) $596,108 plus accrued interest at the rate of 6%
per annum plus (B) if prior to July 13, 2014, we paid the amount described in
(i) in full, then we are required to pay each year, on a quarterly basis, 2.5%
multiplied by the amount of Gross Revenues accrued in each quarter until July
13, 2014. Gross Revenues is defined in the Asset Purchase Agreement as (i) all
fees and other revenue that we receive from any source, (ii) the then-current
fair market value of (x) the assets purchased from NGM, or (y) the business (as
a going concern) or portion thereof sold or otherwise transferred to our
affiliate, and (iii) the proceeds from the sale or other disposition by us to
any other third party of all or any portion of (x) the assets and/or (y) the
business as a going concern.,
As part
of our purchase of NGM’s assets in July 2007, we acquired a license from Bajaj
Auto Ltd (“Bajaj”) and agreed to assume NGM’s commitment of a conditional grant
of $700,000 from The ICICI Limited, an Indian public banking company (“ICICI”),
which will be paid back through a 2% royalty on the license agreement until
$1,400,000 is repaid. Additionally, ICICI also provided a loan of $500,000 to
NGM that was converted to a conditional grant and assumed by us in 2007. As of
December 31, 2009, no payments are owed to ICICI, as Bajaj is not actively
marketing its product at present, however, with the recent emphasis on electric
vehicles, we expect that marketing of this product will begin in the next two
years.
17
Accounting
Treatment
The
Merger is being accounted for as a reverse acquisition and recapitalization.
NuGen is the acquirer for accounting purposes and NuGen Holdings, formerly
InovaChem, is the acquiree. Accordingly, NuGen’s historical financial statements
for periods prior to the acquisition become those of the acquirer retroactively
restated for the equivalent number of shares received in the Merger. The
accumulated deficit of NuGen is carried forward after the acquisition.
Operations prior to the Merger are those of NuGen. Earnings per share for the
period prior to the Merger are restated to reflect the equivalent number of
shares outstanding.
BUSINESS
Corporate
Background
InovaChem
was incorporated as a Delaware corporation on September 27, 2007 under the name
“Expedite 1, Inc.” and on February 11, 2008, pursuant to a change of control of
the Company, changed its name to InovaChem, Inc. Prior to the Merger, InovaChem
was an early development stage company with a strategic plan to reduce certain
food, pharmaceutical and other products’ costs by utilizing new technologies and
no revenues or business operations. Due to the state of the economy, InovaChem
had conducted virtually no business other than organizational matters, and
filings of periodic reports with the SEC. The Company has abandoned its business
plan and sought an operating company with which to merge or to
acquire.
NuGen was
organized as a Delaware corporation on September 8, 2006 under the name “NuGen
Mobility, Inc.” for the purpose of engaging in research, development and
manufacture of permanent magnet electric motors and related electric
controls.
In August
2007, NuGen entered into an asset purchase agreement (“Asset Purchase
Agreement”) pursuant to which we acquired substantially all of the assets, and
certain liabilities of New Generation Motors Corporation, a Delaware corporation
(“NGM”), related to NGM’s business of designing, manufacturing, marketing and
licensing axial flux and other electric motors, for a purchase price of $1
million and the assumption of certain liabilities (less certain credits as
described in the Asset Purchase Agreement), as evidenced by a 6 % promissory
note. Pursuant to the Asset Purchase Agreement and the note, we are required to
pay NGM from Gross Revenues (as such term is defined in the note), (i) $596,108,
plus accrued interest at the rate of 6% per annum plus (ii) if prior to July 13,
2014, we paid the amount described in clause (i) in full, then we are required
to pay each year, on a quarterly basis, 2.5% multiplied by the amount of Gross
Revenues accrued in each quarter until July 13, 2014. NGM, and its affiliates,
were also subject to two-year non-competition and non-solicitation
provisions.
Recent
Developments and Change in Control
Merger
and Changes in Control
On
January 29, 2010, pursuant to the Merger Agreement dated January 29, 2010 by and
among NuGen Holdings, formerly known as InovaChem, NuGen and InovaChem Mergerco
II, Inc., a wholly-owned subsidiary of NuGen Holdings, and the other parties
identified therein, InovaChem Mergerco II merged with and into NuGen, and NuGen,
as the surviving corporation, became a wholly-owned subsidiary of NuGen
Holdings.
Upon the
closing of this merger (the Merger”), each issued and outstanding share of
NuGen’s common stock was converted into one share of NuGen Holding’s common
stock. As a result, an aggregate of 27,133,384 shares of our common stock, par
value $0.001 per share were issued to the two shareholders of NuGen, Eric
Takamura, our Chairman, Chief Executive Officer and President, and Ron
Takamura.
18
Effective
upon the closing of the Merger, William Zuo, Shao Jun Xu and Xiaojing Li
resigned from all of their respective positions as officers and directors of
Inovachem. On the same date, the board of directors appointed Eric Takamura as
Chairman, Chief Executive Officer, President and a director and John Salatino as
Vice President of Engineering and Programs. Henry Toh retained his position as
Vice Chairman of our board of directors and Executive Vice President of
Corporate Development, Alan Pritzker retained his position as Chief Financial
Officer and Michael Kleinman remained on the board of directors of our
company.
Debt
Conversion and Redemption
In
connection with the Merger, holders of an aggregate of $846,475 of outstanding
indebtedness of NuGen converted their promissory notes (based on a $0.15 per
share conversion price) into an aggregate of 5,636,499 shares of Common Stock
(“Debt Conversion”). Simultaneous with the closing of the Merger, 15,165,000
shares of Common Stock were redeemed by NuGen Holdings for a cash payment of
$152.
Private
Placement
On
February 11, 2010, we closed on the private placement and we issued an aggregate
of 10,333,335 shares of Common Stock in a private placement (the “Private
Placement”) at a purchase price of $0.15 per share for aggregate gross proceeds
of approximately $1,550,000. Each investor in such private placement had the
right to purchase an option from Eric Takamura, our Chairman, Chief Executive
Officer, President and a director, to purchase 50,000 shares of his common stock
for an exercise price of $0.50 per share. The purchase price of this option was
$250, and an aggregate of 33 investors purchased this option from Mr. Takamura
for an aggregate of 2,595,000 shares.
In
connection with this private placement, we issued Martinez-Ayme Securities
(“Martinez”), the placement agent, 1,000,000 shares of common stock and a cash
commission of $52,725 as a result of the consummation of the Private
Placement.
In
connection therewith, Mr. Takamura, our chief executive officer, pledged
1,000,000 shares of common stock he owns to a representative of eleven of the
investors to secure his obligation to transfer to such investors his shares if
we issue prior to August 11, 2011, with certain exceptions shares of common
stock or securities convertible into common stock at a price below $0.15 per
share. We also entered into an agreement with a representative of these eleven
accredited investors confirming that such investors have the right, but not the
obligation, to purchase a minimum of $500,000 and a maximum of $700,000 of our
Class A Preferred Stock (the “Preferred Stock”) at a price of $0.15 per share.
This right is exercisable beginning on the effective date of our registration
statement until August 10, 2010, subject to a 60 day extension if the
registration statement is not effective by August 10, 2010.The investors may
exercise this right on August 10, 2010 even if the registration statement is not
effective by such date. We have not yet filed a certificate of designation
designating this Preferred Stock. When authorized, we expect that the preferred
stock will be convertible into one share of common stock and be subject to
adjustment for issuances of securities to third parties at a price less than
$0.15 per share on a “full-ratchet basis” during the 18 months following a
closing with respect to such issuance. We also expect to provide the holders
pre-emptive rights and the right to designate one person to serve as a member of
our board of directors. Upon exercise of the right to purchase the Preferred
Stock, the investors will also receive options, warrants or other similar rights
to acquire our common stock equal to the total value of the investors’
investment in the Preferred Stock, based on a share value of $0.15 per
share.
19
Business
We
design, manufacture and market systems and components for the alternative energy
sector. We offer high-efficiency, compact motors, controllers, vehicle interface
modules (including energy storage, management, and monitoring systems) and
related software that have applications in markets ranging from electric/hybrid
electric vehicles to materials handling equipment, distributive power, ground
support equipment, motion control, and military applications.
Our
proprietary, variable gap, axial flux technology combines:
•
|
very
high efficiency and torque density
capability;
|
•
|
low
or zero emissions and
|
•
|
compelling
value proposition due to its low-cost
design.
|
Our
current business plan is to expand on our established technology and market
presence in the sale of proprietary and highly efficient, variable gap, axial
flux, permanent magnet electric motors ranging from 1kW to 120 kW, for a broad
range of commercial markets.
We are in
the process of applying for several U.S. government grants under the American
Recovery Act to facilitate domestic manufacturing and/or sales. If and when
federal grant money becomes available to us, we hope to move quickly to
commercial agreements for the US domestic market.
Our
current primary market focus is the electric vehicle market in China and India
where urban air and noise pollution and high fuel costs make these products very
attractive. China and India are currently the two largest markets in the world
for electric vehicles and these markets have been instrumental in our strategy
to become the lowest cost provider of light electric vehicles with the best
performance in terms of efficiency and torque, and speed.
In the
past, we have also identified and penetrated US markets in materials handling
equipment and defense applications through projects, programs and relationships
with such entities such as Harlan Global, DRS Technologies Test & Energy
Management (“DRS Technologies”) and through various Small Business Innovation
Research (“SBIR”) programs with agencies such as the National Renewable Energy
Lab, the Office of the Secretary of Defense and Defense Advanced Research
Projects Agency.
Strategic
Relationships and Customers
Mahindra
Group
In June
2009, we entered into a 30-month technical assistance agreement for light
transport vehicle drive systems with Mahindra Group, a leading manufacturer in
India of utility vehicles, parts and accessories (“Mahindra”), to effectuate the
next phases of integration of drive systems into 4 wheel transport vehicles.
Under the agreement we will provide technical services including engineering,
for electric drive and drive system components. The total amount payable under
this agreement is approximately $726,000, of which we have billed Mahindra
approximately $558,000 and have been paid approximately $447,000 to date. The
agreement may be terminated by Mahindra at any time upon 30 days prior
notice.
Bajaj Auto Ltd
As a
result of our acquisition of certain assets of NGM in July 2007, we are a party
to a master license agreement with Bajaj Auto Ltd. (“Bajaj”), pursuant to which,
among other things, we have granted Bajaj exclusive manufacturing and
distribution licenses to use one of our proprietary engineering designs,
manufacturing specifications and technologies for use on 3-wheeled vehicles that
consist of an integrated electric motor and controller in India. We also granted
Bajaj certain non-exclusive licenses outside of India. In consideration of the
grant of such licenses, in addition to a $650,000 preproduction fee of which
$250,000 was paid to NGM, Bajaj is obligated to pay us an aggregate commercial
production fee of $150,000, a set license fee of $32 for each 3-wheeler product
and a percentage of total sales revenues license fee for other than 3-wheeler
products. Such fees are not due until Bajaj begins production of these products.
We have exclusive rights for the manufacture and sale of any improvements,
modifications or developments in the technology in the US and Bajaj will have
such exclusive rights in India. Technical support supplied by us under the
agreement is at the rate of $500 per day. Under the agreement, Bajaj is
obligated to supply us with the first 300 units at cost and thereafter at 10%
above cost. The term of the agreement is until the earlier of December 7, 2015
or 7 years from payment of 1,200 initial units and payments of a pre-production
technology fee, and may be terminated by Bajaj upon 90 days notice. Bajaj is not
actively marketing its product at present, however, with the recent emphasis on
electric vehicles, we currently believe that Bajaj will begin marketing its
products within the next two years.
20
BSA
Motors of India
We are a
party to a 12-month technical support agreement with BSA Motors of India, a
subsidiary of the Murugappa Group (“BSA”). BSA is in the business of designing,
manufacturing and marketing electric, hybrid electric and standard internal
combustion engine two-wheelers (2w) currently primarily in India. Pursuant to
the agreement, which was entered into in September 2009, we will provide
technical support, including prototype development and demonstration, concept
design and development and improvements for motor and controller systems for BSA
electric scooters with the long-term goal of becoming BSA’s power train systems
supplier. The agreement provides that we will not provide technical support
regarding the development, manufacture or marketing of axial flux powertrain or
new powertrain systems for 2-wheeler platforms to other OEMs during the term of
the agreement in India and that BSA will not develop new axial flux powertrain
with any party other than us. BSA also has a right of first refusal for the
commercial application in India of motors and controllers for electric
2-wheelers developed by us. The total value of the agreement is approximately
$132,000, of which we have billed and have been paid $39,000 to date. The
agreement may be terminated by BSA upon 30 days' notice to us.
US
Department of Defense
We have a
two-year agreement, effective September 2009, with the United States Department
of Defense (“DOD”) for a SBIR Phase II with the US Army to demonstrate our
variable gap control technology for electric generators and motors for the
purpose of validating applicability, performance and reliability on future
platforms and to produce prototypes. We currently anticipate that this project
will move into Phase III in 2012, which may lead to a full production supply
contract. We have a consultant specializing in this area to facilitate our
efforts. We also plan to coordinate the SBIR efforts to our ‘Micro-Truck’ drive
system to increase the marketability and performance of that
system.
We also
have had a market in motors and controllers for solar racing teams worldwide,
where our variable gap, in-wheel motors continue to produce winners in solar
racing competition. Solar car competition participants may include future
automotive and other EV industry engineers from top universities. We believe
that we are the electric drive system of choice by these research
teams.
The
Market
Primary
markets for our core technology of variable gap, axial flux, permanent magnet
motors include:
• Low
and Zero Emission Vehicles in Developing Countries: Worldwide requirements to
reduce hydrocarbon fuel consumption and air pollution have created a large and
emerging market for efficient, inexpensive and reliable, low and zero emission
electric drive vehicles using batteries, fuel cells or hybrid configurations.
Electric drive systems can be employed in the entire spectrum of small passenger
vehicles including scooters, motorcycles, three-wheelers, neighborhood electric
vehicles, compact cars, micro pickups and micro busses. We are targeting the
entire segment of the small vehicle traction market and propose to supply
electric drive systems technology with all prime movers.
21
• Three-wheelers
In India: Bajaj currently builds approximately 300,000 three-wheel and 2,000,000
two-wheel vehicles per year. After five years of developmental and functional
testing, ECO-Ricks began limited commercial production in December 2006 for
additional public testing. This project has slowed down, but with recent EV
activity in India, we currently believe that Bajaj may want to take this project
to full production.
• Four-wheelers:
(Light Commercial Vehicles) under our agreement with Mahindra, we currently
anticipate that Mahindra will produce a minimum of 1,200 vehicles for initial
market-seeding purposes, subject to market demands.
• Two-wheelers:
20 two-wheel scooters for Bajaj were built, tested and certified by the
government of India. Four additional platforms with intended deployments in late
2010 early 2011 are being considered with BSA.
• Further
extension of this vertical market includes applications such as electric
all-terrain vehicles (where volumes could exceed 10,000 vehicles per year), golf
carts (with about 250,000 vehicle sales per year in the US), neighborhood
electric vehicles, quadracycles, citicars and electric motor applications for
15’ to 45’ sailboats.
• Materials
Handling Equipment and Defense Applications: Airport ground support equipment,
including baggage tractors and belt loaders are often powered by electric drive
systems. We have supplied our technologies and products to Harlan Corporation
for use in integrated starter generator units in their ground support
vehicles.
Competition
All of
the markets in which we operate are highly competitive. The markets served by
the technology segment are additionally characterized by rapid changes due to
technological advances that can render existing technologies and products
obsolete.
We hope
to market our advanced electric propulsion systems and components to vehicle
original equipment manufacturers and their suppliers throughout the world for
use in electric, hybrid electric, plug-in hybrid electric and fuel cell electric
vehicles. In recent years, the market for hybrid electric automobiles has begun
to emerge, led by the introduction and market success of hybrid electric
vehicles manufactured by Toyota, Lexus, Honda, Ford and General Motors.
Recently, International Truck and Engine Corporation, Freightliner Trucks and
Peterbilt Motors Company announced plans to begin production of hybrid electric
medium-duty trucks and Caterpillar, Inc. introduced a belt-less engine/electric
tracked bulldozer. As a result, we expect additional vehicle makers in both
on-road and off-road markets to develop and introduce a variety of hybrid
electric vehicles as the market acceptance of these vehicles continues to grow.
We cannot assure that we will be able to compete successfully in this market or
any other market that now exists or may develop in the future. There are
numerous companies developing products that do or soon will compete with our
systems. Some of these companies possess significantly greater financial,
personnel and other resources than we do, including established supply
arrangements and volume manufacturing operations. In addition, the U.S.
government's Stimulus Bill is expected to award substantial financial grants and
loans to companies engaged in the development and manufacture of energy
efficient, low emission vehicles and the components that enable their operation.
Companies that receive awards under the Stimulus Bill may have substantially
greater financial resources available to them which could improve their ability
to compete with us. We believe our principal competitors include Honda, Toyota,
General Motors, Daimler, Hitachi, Toshiba, Siemens, Delphi, Danaher, Enova and
United Technologies Corp., UQM Technologies, Inc. and Azure
Dynamics.
22
Our power
products compete primarily in the automotive, heavy equipment, military,
aerospace and medical products industries. Each of these industries is extremely
competitive. We face substantial competition on a continuing basis from numerous
companies, many of whom possess longer operating histories, significantly
greater financial resources and marketing, distribution and manufacturing
capability. We believe our principal competitors include Advanced Motors and
Drives, Allied Motion, Emerson Electric, General Electric, Moog, Rockwell
International, Baldor, Hitachi, Hyundai, Toshiba, Siemens, Delphi, Danaher,
United Technologies, UQM Technologies, Inc., L-3 Communications and
Enova.
Technology,
Competitive Advantage, Value Proposition
Our high
efficiency variable gap, axial flux, permanent magnet (“PM”) motors are
different from conventional electric motors due to the different path of their
magnetic flux.
Axial Flux Technology: In
conventional motors the flux flows radially through the air gap between the
rotor and the stator. However, in axial flux motors, the flux flows parallel to
the axis of the motor. The motor, often referred to as a “pancake” rotor, can be
made much thinner and lighter, with the same performance.
Our key
competitive advantage is that our motors offer high torque density and
installation in tight spaces, like inside wheel housings. This has been very
compelling to companies like Bajaj that seek low-cost, high efficiency motors
for conversion from internal combustion to electric propulsion in small
vehicles.
An
additional competitive advantage of axial flux motors over conventional series
wound or induction motors is their efficiency. Our motors can achieve total
system efficiencies in the range of 95%.
Variable Gap Technology: In
our permanent magnet(“PM”) motors, the magnets create the working flux. This is
different than an AC induction motor which is current-driven. This fact is
central to why a PM motor can be more efficient than other motors.
Unfortunately, this is the same property that causes the most significant
limitation of a PM motor; the permanent field causes a fixed relationship
between winding current and motor torque. This relationship or “torque constant”
(kT), also defines a fixed top speed of a PM motor. The higher the kT, the lower
the top motor speed.
An axial
flux PM motor is different than a radial flux PM motor, because the kT can be
varied, without causing power loss by simply altering a critical geometry of the
motor. Although there are many different contributors to the torque constant,
the one of interest to us is the distance between the magnet rotor and the
stator. In axial flux motors, the rotor and stator are adjacent discs and the
“gap” is the space between the disks. By moving one of these discs axially
relative to the other, the torque constant can be adjusted. This geometry can be
varied statically (in the factory, simply with different spacers) or dynamically
(by the vehicle controller). The result is optimal performance for various uses
or drive conditions from the same electric motor. The variable gap allows for
application-specific optimization of power, torque, and speed, while maximizing
efficiency across the operating range. Application of this technology makes
electric motors very efficient and can result in enormous energy
savings.
New Applications, In-Wheel
Motors: We believe that there are other applications for this technology
in low tech products ranging from ceiling fans to floor buffers; and to high
tech products ranging from flywheels and military actuators. However, our
primary focus is in-and near-wheel motors, that we have been selling for solar
racing. Application of in-wheel technology plays to the strength of axial flux
motors and our variable gap technology, and we believe is a compelling motive
traction solution for electric, hybrid and fuel cell powered
vehicles.
Manufacturing
We are
currently outsourcing our manufacturing, assembly and testing of our propulsion
system components to Bajaj in India. Bajaj has a long-standing reputation for
high volume, high quality, high standards and excellent customer service. We are
in the process of locating manufacturing outsourcing in China but currently do
not have an outsourcing agreement in China.
23
Product
Warranties
Our
product warranties are generally from three months to three years depending on
the product
Intellectual
Property
We
currently have three US patents and one foreign patent as follows:
U.S.
Patent #6,348,751 B1-“Electric Motor with active hysteresis-based control of
winding currents and/or having an efficient stator winding arrangement and/or
adjustable air gap"
U.S.
Patent #6,137,203-“Electric Motor with active hysteresis-based control of
winding currents and/or having an efficient stator winding arrangement and/or
adjustable air gap”
U.S.
Patent #6,975,082 B2- (co-owned)-Variable Speed Drive with a synchronous
motor
India PCT
# 822/MUM/2003- (co-owned with Bajaj) -Compact Drive system for Electrically
operated road vehicle
Property
We lease
approximately 6,500 square feet of space for our executive offices, located at
44645 Gilford Drive, Suite 201, Ashburn, Virginia, under a month-to-month lease
for a monthly rental of $6,589.
Employees
We
currently have 6 full-time employees and one part-time employee.
Legal
Proceedings
There are
no pending legal proceedings to which we are a party is or in which to our
knowledge any director, officer or affiliate of the Company, any owner of record
or beneficially of more than 5% of any class of voting securities of the
Company, or security holder is a party adverse to the Company or has a material
interest adverse to the Company. The Company's property is not the subject of
any pending legal proceedings.
MANAGEMENT
Directors
and Executive Officers
The
following table sets forth certain information regarding the members of our
board of directors and our executive officers as of the date of this
Prospectus:
24
Name
|
Age
|
Title
|
||
Eric
Takamura
|
40
|
Chairman,
Chief Executive Officer, President and Director
|
||
John
Salatino
|
54
|
Vice
President of Engineering and Programs
|
||
Henry
Toh
|
52
|
Vice
Chairman, Executive Vice President of Corporate Development and
Director
|
||
Alan
Pritzker
|
55
|
Chief
Financial Officer and Secretary
|
||
Michael
Kleinman, M.D.
|
|
53
|
|
Director
|
Our
directors hold office for one-year terms and until their successors have been
elected and qualified. Our officers are elected annually by the board of
directors and serve at the discretion of the board.
There are
no familial relationships among any of our directors or officers. None of our
directors or officers is a director in any other U.S. reporting companies,
except Mr. Toh who serves on the board of directors of four-public companies as
described in his biography below and Dr. Kleinman who is a director of American
Surgical Holdings, Inc We are not aware of any proceedings to which any of our
officers or directors, or any associate of any such officer or director, is a
party adverse to us or any of our subsidiaries or has a material interest
adverse to us or any of our subsidiaries.
Biographies
Eric
Takamura, Chairman, Chief Executive Officer and President
Mr.
Takamura became our Chairman, Chief Executive Officer and President on January
29, 2010. Mr. Takamura served as President and Chief Executive Officer and
director of NuGen since its inception in 2006. Mr. Takamura has 16 years
experience in PM motors, having previously served as Chief Operating Officer of
NGM from May 2004 to January 2007, and Director of Engineering and Marketing,
from May 2002 to May 2004 . Prior to joining NGM, from 1994 to1996, Mr. Takamura
was a lab researcher and engineer at the Naval Research Laboratory in
Washington, D.C. where he worked on tribology assignments. Mr. Takamura has a BS
degree in Mechanical Engineering and a Masters in Transportation & Safety
from The George Washington University.
John
Salatino, Vice President of Engineering and Programs
Mr.
Salatino has served as Vice President of Engineering and Programs since the
Merger on January 29, 2010. Mr. Salatino has 25 years of experience in
developing control and monitoring systems for vehicles ranging from military
ground and air transport and fighting vehicles to commercial electric bicycles,
scooters, assisted mobility and mining equipment. Mr. Salatino has 20 years
experience at GE Aerospace, a defense and aerospace company, where he held
positions in engineering development and management for military and commercial
control systems and electronics packaging for turrets, propulsion systems and
vehicle systems, and for advanced development of core technologies. From July
2007 to February 2010, Mr. Salatino was an engineering manager at Texas
Instruments, a a semiconductor company focusing on battery management integrated
circuits for hybrid and battery electric vehicles. From March 2006 to June 2007,
Mr. Salatino was VP Engineering and Programs at NuGen. From November 2002 to
February 2006, Mr. Salatino was the Engineering Director for EV motor and
controls at WaveCrest Laboratories, an automotive company. Additionally, Mr.
Salatino has a BS degree in Electrical Engineering from Northeastern University
and a MS degree in Computers and Systems from Rensselaer Polytechnic
Institute.
25
Henry
Toh, Vice Chairman and Executive Vice President of Corporate
Development
Mr. Toh
has served as Vice Chairman of our board of directors and Executive Vice
President of Corporate Development since February 2008. Mr. Toh is currently
serving as a director of four other publicly traded companies. Since April 2007,
Mr. Toh has served as a director of American Surgical Holdings Inc, a
company specializing in staffing of surgical assistants. From January 2004 until
June 2009, Mr. Toh has served as a director of Isolagen, Inc., a company which
specialized in cellular therapy. Since 2001, Mr. Toh has served as a director of
Teletouch Communications Inc., a wireless communications company. Since 1992,
Mr. Toh has served as an officer and director of C2 Global
Technologies Inc., a publicly held voice-over-IP company. Since
December 1998, Mr. Toh has served as a director of IDNA, Inc., a
specialized finance and entertainment company. From September 2004 until
August 2005, Mr. Toh served as a director of Vaso Active
Pharmaceuticals Inc., a healthcare products manufacturer. From 1992 to August
2008, Mr. Toh served as an officer and director of Four M
International, Inc., a privately held offshore investment entity.
Mr. Toh began his career with KPMG Peat, Marwick from 1980 to 1992, where
he specialized in international taxation and mergers and acquisitions.
Mr. Toh is a graduate of Rice University
Alan
Pritzker, Chief Financial Officer
Mr.
Pritzker has served as Chief Financial Officer and Secretary of InovaChem since
February 2008. Mr. Pritzker’s corporate experience includes supervision of
finance, accounting, information technology, office services, human resources
and risk management. Additionally, Mr. Pritzker has expertise in SEC reporting
having been the chief financial officer of publicly traded entities for over 16
years. Mr. Pritzker is employed by North Point Consultants, Inc. (“North
Point”), a consulting firm that he founded in 2001. North Point provides
accounting and administrative services to various companies. Mr. Pritzker was
the Chief Financial Officer of Labock Technologies, Inc., an armored vehicle and
armoring products manufacturer, from March 2005 until December 2006 and was
Chief Financial Officer of Commodore Cruise Lines, a publicly traded cruise line
company from July 1995 until May 2002. Mr. Pritzker was the principal accounting
officer of Regency Cruises from 1985 to 1995. Prior thereto, Mr. Pritzker was
employed by Holland America Line and Vacation Travel Concepts in various
accounting and finance positions. Mr. Pritzker is a graduate of Brooklyn
College.
Michael
Kleinman, Director
Dr.
Kleinman, M.D. has served as a director of InovaChem since June 2008. Dr.
Kleinman has served as a director of American Surgical Holdings Inc. since April
2007. Dr. Kleinman graduated from Rice University and attained his medical
degree at the University of Texas, Albert Einstein College of Medicine in
Dallas, Texas in 1983. He is a Board certified surgeon with a private practice
in Houston, Texas, Clinical Assistant Professor of Surgery at Baylor University
and at the University of Texas, Physician Liaison for Memorial Care System,
Fellow of the American College of Surgeons, Member of the American Society of
General Surgeons, the Society of American Gastrointestinal Laparoscopic Surgery,
Houston Surgical Society, Harris County Medical Society, the American Medical
Association and past member of the Texas Medical Association, International
College of Surgeons, American College of Physician Executives, and the American
Board of Utilization Review Physicians. He also received the Physicians’
Recognition Award in 2003 and 2006, and 10 citations for top
doctors.
EXECUTIVE
COMPENSATION
The table
below sets forth information concerning compensation paid, earned or accrued by
our chief executive officer (“Named Executive Officer”) for the last two fiscal
years. No other executive officer earned compensation in excess of $100,000
during our 2009 fiscal year.
26
SUMMARY
COMPENSATION TABLE
Name and
principal
position
|
Year
|
Salary ($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan
Compensation ($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All Other
Compensation
($)
|
Total ($)
|
|||||||||||||||||||||||||
William
Zuo,
|
2009
|
75,000 | 0 | 0 | 0 | 0 | 0 | 0 | 75,000 | |||||||||||||||||||||||||
Chairman
and CEO(3)
|
2008
|
75,000 | (1) | 0 | 90,000 | (2) | 0 | 0 | 0 | 0 | 165,000 | |||||||||||||||||||||||
Eric
Takamura
|
2009
|
150,000 | 0 | 0 | 0 | 0 | 0 | 0 | 150,000 | |||||||||||||||||||||||||
Chairman
and CEO (4)
|
2008
|
150,000 | 0 | 0 | 0 | 0 | 0 | 0 | 150,000 |
1.
|
Represents
accrual of salary for the period February 14, 2008, our inception, through
September 30, 2008. Pursuant to the terms of the employment agreement, Mr.
Zuo was entitled to receive a base salary of $300,000, subject to review
and increase at our board of directors' discretion. We elected to defer
payment of some or all of the compensation to our Chairman and our other
executives until such time as our financial situation permits payment of
such compensation. The total cash amount paid to our Chairman and CEO in
each of fiscal 2009 and fiscal 2008 was $11,250. Beginning January 1,
2009, we stopped paying and accruing salaries to all of its
officers.
|
2.
|
Pursuant
to the employment agreements entered into with Mr. Zuo, we issued 300,000
shares of common stock which were valued by us at $0.30 per
share.
|
3.
|
Mr.
Zuo resigned from our company upon the closing of the Merger on January
29, 2010.
|
4.
|
The
base salary represents accrual of salary for each of the years ending
September 30, 2009 and 2008. Mr. Takamura was never paid his compensation
for the two years listed above and forgave the debt owed him by the
Company for unpaid salary, as well as other debts owed him, as of
September 30, 2009.
|
Mr. Zuo
was entitled to 300,000 options to purchase shares of our common stock pursuant
to the 2008 Stock Option Plan, but no options ever vested and any issued options
terminated as a result of not receiving shareholder approval for the adoption of
such plan.
Employment
Agreements
As a
result of the Merger, employment agreements with all of our executive officers
at such time were terminated and such individuals released us from any liability
under such agreements.
Employment
Agreements with Messrs. Takamura and Pritzker
On
February 9, 2010, we Inc. entered into agreements pursuant to which we employed
Eric Takamura
as our Executive Chairman and Chief Executive Officer and Alan Pritzker as our
Chief Financial Officer. Mr. Takamura’s annual base salary is $180,000 and he is
entitled to a signing bonus of $30,000 and Mr. Pritzker’s annual base salary is
$120,000 and he is entitled to a signing bonus of $10,000. The signing bonuses
were paid. We granted Messrs. Takamura and Pritzker, pursuant to our 2010 Stock
Option Plan, options to acquire 900,000 shares and 150,000 shares of our common
stock, respectively. The employment agreements also provide that they are
entitled to receive such other benefits as may be made available by us to our
employees and key executive officers (and with respect life, medical, health and
death plans, such coverage is, with specified exceptions and limitations, to be
provided to the employee and his family at our expense until the expiration of
the applicable employee’s non-compete period) and, in the discretion of our
board of directors, annual bonuses. Mr. Takamura’s employment agreement provides
that it is anticipated that he will receive an annual bonus of 100% of his base
salary and Mr. Pritzker’s employment agreement provides that it is anticipated
that he will receive an annual bonus of 25% of his base salary.
The term
of employment is, in the case of Mr. Takamura for three years, and in the case
of Mr. Pritzker, one year, in each case commencing January 1, 2010 (the
effective date of these agreements), and the term of employment is renewed
automatically for successive one year periods unless we or the employee gives
notice of non-renewal at least 90 days prior to the expiration of the applicable
term. We may terminate the employment of an employee before the stated
expiration date for “Cause” (as defined in the applicable employment agreement)
in which case we are only obligated to pay the employee his unpaid base salary
through the termination date; provided, however, if the
reason for terminating him for “Cause” is due to his material uncured breach of
his employment agreement, we must pay him his base salary (as in effect at the
time of termination) for, in the case of Mr. Takamura, nine months, and, in the
case of Mr. Pritzker, three months, following termination of
employment.
27
We may
also terminate either of these employees without “Cause” or either employee may,
if he determines in good faith that he has “Good Reason” (as defined below), to
terminate his employment. In either of such events, we are obligated to (A)
continue to pay the employee his base salary (as in effect at the time of such
termination) for the longer of (i) the balance of his employment term or (ii) in
the case of Mr. Takamura twelve (12) months, and in the case of Mr. Pritzker,
four months, from the date of termination , (B) pay the employee his pro rata share of his annual
bonus, if any, is awarded and (C) provide such employee with outplacement
services. The term “Good Reason” means (w) our failure to appoint or reappoint
the employee to his position or his removal from his office or position, (x) the
employee is assigned duties materially inconsistent with his position or his
position, authority, duties, or responsibilities are materially diminished, (y)
our uncured breach of any material provision of the employee’s employment
agreement, or (z) within twelve months following a “Change in Control” (as
defined Rule 405 promulgated under the Securities Act of 1933, as amended), a
sale of substantially all of our assets or we are merged out of existence
(collectively, a “Change of Control Event”).
Letter
with John Salatino
Effective
February 11, 2010, InovaChem, Inc. signed a letter with John Salatino pursuant
to which he is to serve as our VP of Engineering and Programs. The letter
contemplates that, among other things, the terms of his employment will be
formalized in an employment agreement to be entered into by April 12, 2010, he
will serve in such capacity for two years, his annual base salary will be
$160,000 and $180,000 in the first and second year of his employment,
respectively, he will receive a $20,000 signing bonus within ten days of
entering into an agreement, he will be eligible for a variable performance based
bonus plan with the envisioned annual bonus, if all our goals are met, of 25% of
his base salary, he will be entitled to other benefits provided to management
employees, in the event he is terminated, he will be entitled to severance equal
to the greater of the remaining term of his contract or six months of his annual
salary, and he will be granted an option to acquire an aggregate of 400,000
shares of our common stock at an exercise price of $0.15 per share, which option
may be exercised on a cashless basis and may be exercised until February 29,
2012. Generally, options to acquire 100,000 shares may be exercised on a
cumulative basis during the two weeks preceding August 31, 2010, February 28,
2011, August 31, 20111, and February 29, 2012 subject to accelerated exercise
upon a change in control as provided therein and the right to exercise his
remaining option in the event of the termination of his employment.
Compensation
of Mr. Toh
Henry
Toh, our Vice Chairman and Executive Vice President of Corporate Development, is
an employee at will and receives a base salary of $90,000 per year as well as
other benefits generally provided to management.
Equity
Awards
No stock
options or stock appreciation rights were outstanding with respect to any of our
directors or executive officers as of September 30, 2009.
On
February 9, 2010, pursuant to the 2010 Stock Option Plan, we granted to the
following executive officers stock options to acquire the number of shares of
our common stock set forth next to such person’s name:
Eric
Takamura
|
900,000
|
Henry
Toh
|
450,000
|
Alan
Pritzker
|
150,000
|
28
Subject
to vesting, these options are exercisable during the ten years from the grant
date at an exercise price of $0.45 per share. The options vest pro rata in 24 equal monthly
installments as of the last day of each fiscal month), with the first
installment vesting as of January 1, 2010. All of the options vest immediately
upon a Change of Control Event. These options terminate immediately following
the termination of such person’s employment with us for “Cause” (as defined in
the applicable agreement and other than Cause relating to the employee’s
material uncured breach of his employment agreement in which case the options
terminate in accordance with their stated term) and 180 days after such person
voluntarily terminates his employment other than for “Good Reason.”
See
“-Letter with John Saltino” for information regarding his
options.
Compensation
of Directors
No
compensation has been paid to any of our directors in consideration for their
services rendered in their capacity as directors during our fiscal year ended
September 30, 2009. Commencing February 2010, the Board determined that an
independent director will receive $1,000 for each board meeting attended and
$500 for each committee meeting attended.
Director
and Officer Liability Insurance
We
currently have directors’ and officers’ liability insurance insuring our
directors and officers against liability for acts or omissions in their
capacities as directors or officers, subject to certain exclusions. Such
insurance also insures us against losses which we may incur in indemnifying our
officers and directors.
Code
of Ethics
We intend
to adopt a code of ethics that applies to our officers, directors and employees,
including our Chief Executive Officer and Chief Financial Officer, but have not
done so to date due to our relatively small size.
Board
Committees
Our board
of directors has established an audit committee, a compensation committee and a
corporate governance committee. The members of each committee are appointed by
the board of directors and serve one year terms. The composition and
responsibilities of each committee are described below. Our board of directors
has not appointed a nominating committee and has not yet adopted procedures by
which security holders may recommend nominees to our board of
directors.
Audit Committee. The sole
member of our audit committee is Dr. Michael Kleinman. The audit committee’s
functions include overseeing the integrity of our financial statements, our
compliance with legal and regulatory requirements, the selection and
qualifications of our independent registered public accounting firm, and the
performance of our internal audit function and controls regarding finance,
accounting, legal compliance and ethics that management and our board of
directors have established. In this oversight capacity, the audit committee
reviews the scope, timing and fees for the annual audit and the results of audit
examinations performed by the internal auditors and independent registered
accounting firm, including any recommendations to improve the system of
accounting and internal controls. The audit committee is comprised of outside
directors who are not officers or employees of us or our subsidiaries. In the
opinion of the board of directors, Dr. Kleinman is “independent” as that term is
defined in the rules of the New York Stock Exchange.
Compensation Committee. The
sole member of our compensation committee is Dr. Michael Kleinman. The
compensation committee determines the goals and objectives, and makes
determinations regarding the salary and bonus for the CEO, approves salaries and
bonuses for the other executive officers, administers our incentive compensation
plans and makes recommendations to the board of directors and senior management
regarding our compensation programs.
Governance Committee. The
sole member of our nominating and governance committee is Dr. Michael Kleinman.
The governance committee is responsible for evaluating our governance and the
governance of our board and its committees, monitoring our compliance and that
of the board and its committees with our corporate governance guidelines,
evaluating our corporate governance guidelines and reviewing those matters that
require the review and consent of the independent directors of the board and
that are not otherwise within the responsibilities delegated to another
committee of the board.
29
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
From
October 2006 to January 2009, Eric Takamura, our Chairman, Chief Executive
Officer, President, and a director and a principal stockholder, made loans to us
in the aggregate principal amount of $551,382. On September 30, 2009, Eric
Takamura agreed to forgive $1,346,693 owed to him by our company ($686,169 of
which was pursuant to such outstanding loans and accrued interest thereon, and
$660,524 was for accrued and unpaid salary).
Eric
Takamura was Chief Operating Officer of NGM from June 2004 to February 27, 2007.
Henry Toh, Vice Chairman of our board of directors and an officer, is an officer
and a director of Four M International, Inc.(“Four M”). In connection with the
Asset Purchase Agreement, we assumed, among other things, outstanding
indebtedness to Four M in the amount of $62,500. In connection with the Merger,
Four M received 386,250 shares in exchange for the cancellation of indebtedness
of $57,938 which was still outstanding.
From
August 2006 to June 2009, Ron Takamura, a principal stockholder and brother of
Eric Takamura, our Chairman, Chief Executive Officer, President, and a director
and a principal stockholder, made loans to us in the aggregate principal amount
of $371,500. As of December 31, 2009 these loans accrued a total of $93,976 of
interest thereon. We issued 3,103,173 shares of Common Stock to Ron Takamura in
the Private Placement as a result for the cancellation of his debt (including
accrued interest).
Director
Independence
We are
not subject to listing requirements of any national securities exchange or
national securities association and, as a result, we are not at this time
required to have our board comprised of a majority of “independent directors.”
Notwithstanding, in the opinion of the board of directors, Dr. Kleinman is
“independent” as that term is defined in the rules of the New York Stock
Exchange.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table lists, as of March 22, 2010, the number of shares of our common
stock that are beneficially owned by (i) each person or entity known to us to be
the beneficial owner of more than 5% of our common stock; (ii) each executive
officer and director of our company; and (iii) all executive officers and
directors as a group. Information relating to beneficial ownership of Common
Stock by our principal shareholders and management is based upon information
furnished by each person using “beneficial ownership” concepts under the rules
of the Securities and Exchange Commission. Under these rules, a person is deemed
to be a beneficial owner of a security if that person has or shares voting
power, which includes the power to vote or direct the voting of the security, or
investment power, which includes the power to vote or direct the voting of the
security. The person is also deemed to be a beneficial owner of any security of
which that person has a right to acquire beneficial ownership within 60 days.
Under the Securities and Exchange Commission rules, more than one person may be
deemed to be a beneficial owner of the same securities, and a person may be
deemed to be a beneficial owner of securities as to which he or she may not have
any pecuniary beneficial interest. Except as noted below, each person has sole
voting and investment power.
30
The
percentages below are calculated based on 50,381,564 shares of our common stock
issued and outstanding as of the date of this Prospectus. Unless otherwise
indicated, the address of each person listed is NuGen Holdings, Inc, 44645
Gilford Drive, Suite 201, Ashburn, Virginia 20147.
Name of Beneficial Owner
|
Number of Shares
of Common Stock
Beneficially Owned
|
Percent of
Common
Stock
Beneficially
Owned
|
||||||
Eric
Takamura
|
22,436,875 | (1)(2)(3) | 44.5 | % | ||||
Henry
Toh
|
1,738,750 | (4) | 3.4 | % | ||||
Alan
Pritzker
|
247,917 | (5) | * | |||||
John
Salatino
|
0 | (6) | 0 | |||||
Michael
Kleinman, M.D.
|
116,667 | * | ||||||
All
directors and executive officers as
a group (5 persons)
|
24,540,209 | 48.4 | % | |||||
Ronald
Takamura
|
7,987,182 | 15.9 | % |
* Less
than 1%
(1)
Includes 1,200,000 shares which are pledged to secure the repayment of a
two-year 5% promissory note in the principal amount of $300,000 entered into by
Mr. Takamura in November 2009. Also, includes the pledge of 1,000,000 of his
shares of common stock to a representative of eleven investors to secure his
obligation to transfer to such investors his shares if we issue, with certain
exceptions shares of common stock or securities convertible into, or exercisable
for, common stock at a price below $0.15 per share during the period ending
August 11, 2011. Does not include shares owned by his brother, Ronald Takamura,
over which he disclaims beneficial ownership.
(2) Each
investor in the Private Placement had the right to purchase an option from Mr.
Takamura to purchase 50,000 shares of his common stock for an exercise price of
$0.50 per share. The purchase price of this option was $250, and 33 investors
purchased this option from Mr. Takamura. Accordingly, the number indicated above
includes 2,595,000 shares which are subject to being purchased from Mr. Takamura
for an exercise price of $0.50 per share until January 29, 2012.
(3)
Includes options exercisable within 60 days of the date hereof to acquire
187,500 shares of common stock. Does not include options to acquire 712,500
shares which are not exercisable within 60 days of the date hereof.
(4)
Includes options exercisable within 60 days of the date hereof to acquire 93,750
shares of common stock. Does not include options to acquire 356,250 shares which
are not exercisable within 60 days of the date hereof.
(5)Includes
options exercisable within 60 days of the date hereof to acquire 31,250 shares
of common stock. Does not include options to acquire 118,750 shares which are
not exercisable within 60 days of the date hereof.
(6)Excludes
options to acquire 400,000 shares as such options are not exercisable within 60
days of the date hereof.
31
DESCRIPTION
OF SECURITIES
Common
Stock
We are
authorized to issue 200,000,000 shares of common stock, par value $0.001 per
share, of which 50,381,564 shares are issued and outstanding as of the date of
this Prospectus. Each holder of our shares of our common stock is entitled to
one vote per share on all matters to be voted upon by the stockholders,
including the election of directors. The holders of shares of common stock have
no preemptive, conversion, subscription or cumulative voting rights. Other than
as provided below, there is no provision in our Certificate of Incorporation or
By-laws that would delay, defer or prevent a change in control of our
Company.
Preferred
Stock
We are
authorized to issue 50,000,000 shares of preferred stock, none of which is
issued and outstanding, although we have an agreement to issue shares of Series
A Preferred Stock. See “Business-Recent Developments and Change in Control-
Private Placement”. Our board of directors has the right, without shareholder
approval, to issue preferred shares with rights superior to the rights of the
holders of shares of common stock. As a result, preferred shares could be issued
quickly and easily, negatively affecting the rights of holders of common shares
and could be issued with terms calculated to delay or prevent a change in
control or make removal of management more difficult. Because we may issue up to
50,000,000 shares of preferred stock in order to raise capital for our
operations, your ownership interest may be diluted which results in your
percentage of ownership in us decreasing.
Transfer
Agent
Currently,
we act as our own transfer agent.
Anti-Takeover Effect of Delaware Law,
Certain By-Law Provisions
Certain
provisions of our By-Laws are intended to strengthen our board of director’s
position in the event of a hostile takeover attempt. These provisions have the
following effects:
|
·
|
they
provide that only business brought before an annual meeting by our board
of directors or by a stockholder who complies with the procedures set
forth in the By-Laws may be transacted at an annual meeting of
stockholders; and
|
|
·
|
they
provide for advance notice of certain stockholder actions, such as the
nomination of directors and stockholder
proposals.
|
We are
also subject to the provisions of Section 203 of the DGCL, an anti-takeover law.
In general, Section 203 prohibits a publicly held Delaware corporation from
engaging in a “business combination” with an “interested stockholder” for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. For purposes of Section 203, a “business combination”
includes a merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder, and an “interested stockholder” is a
person who, together with affiliates and associates, owns, or within three years
prior, did own, 15% or more of the voting stock of the Delaware
corporation.
SELLING
SECURITY HOLDERS
The
selling shareholders named in the table titled 'Selling Shareholders' are
offering all of the shares of common stock offered through this prospectus.
Other than the costs of preparing this prospectus and a registration fee to the
SEC, we are not paying any costs relating to the sales by the selling security
holders. None of the selling security holders is a registered broker-dealer or
an affiliate of a registered broker-dealer.
32
The
persons listed in the following table plan to offer the shares shown opposite
their respective names by means of this prospectus. The owners of the shares to
be sold by means of this prospectus are referred to as the “selling”
shareholders”. These shares may be sold by one or more of the following methods,
without limitations
|
·
|
A
block trade in which a broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the
transaction;
|
|
·
|
Purchase
by a broker or dealer as principal and resale by such broker or dealer for
its account pursuant to this
prospectus;
|
|
·
|
Ordinary
brokerage transactions and transactions in which the broker solicits
purchasers
|
|
·
|
Face
to face transactions between sellers and purchasers without a
broker/dealer.
|
In
competing sales, brokers or dealers engaged by the selling shareholders may
arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions or discounts from selling shareholders in amounts to be
negotiated. As to any particular broker-dealer, this compensation might be in
excess of customary commissions. Neither, we nor the selling stockholders can
presently estimate the amount of such compensation.
The
selling shareholders and any broker/dealers who act in connection with the sale
of the shares will be deemed to be “underwriters” within the meaning of the
Securities Acts of 1933, and any commissions received by them and any profit on
any resale of the shares as a principal might be deemed to be underwriting
discounts and commissions under the Securities Act.
If any
selling shareholders enters into an agreement to sell his or her shares to a
broker/dealer as principal and the broker/dealer is acting as an underwriter, we
will file a post-effective amendment to the registration statement, of which
this prospectus is a part, identifying the broker/dealer, providing required
information concerning the plan of distribution, and otherwise revising the
disclosures in this prospectus as needed. We will also file the agreement
between the selling shareholder and the broker/dealer as an exhibit to the
post-effective amendment to the registration statement.
We have
advised the selling shareholders that they and any securities broker/dealers or
others who will be deemed to be statutory underwriters will be subject to the
prospectus delivery requirements under the Securities Act of 1933. We have
advised each selling shareholder that in the event of a “distribution” of the
shares owned by the selling shareholder, such selling shareholder, any
“affiliated purchasers”, and any broker/dealer or other person who participates
in the distribution may be subject to Rule 102 of Regulation M under the
Exchange Act until their participation in that distribution is complete. Rule
102 makes it unlawful for any person who is participating in a distribution to
bid for or purchase stock of the same class, as is the subject of the
distribution. A “distribution” is defined in Rule 102 as an offering of
securities “that is distinguished from ordinary trading transaction by the
magnitude of the offering and the presence of special selling efforts and
selling methods”. We have advised the selling shareholders that Rule 101 of
Regulation M under the 1934 Act prohibits any “stabilizing bid” or “stabilizing
purchase” for purpose of pegging, fixing or stabilizing the price of the common
stock in connection with this offering.
No
selling shareholder has, or had, any material relationship with our officers or
directors. To our knowledge, no selling shareholder is affiliated with a
broker/dealer.
The
shares of common stock owned by the selling shareholders may be offered and sold
by means of this prospectus from time to time as market conditions permit. If
and when our common stock becomes quoted on the OTC Bulletin Board, the shares
owned by the selling shareholders may be sold in public market or in private
transactions for cash at prices to be determined at that time. We will not
receive any proceeds from the sale of the shares by the selling
shareholders.
33
Based
upon information available to us as of March 22, 2010 the following table sets
forth the names of the selling shareholders, the number of shares owned, the
number of shares registered by this prospectus and the number and percent of
outstanding shares that the selling shareholders will own after the sale of the
registered shares, assuming all of the shares are sold. The information provided
in the table and discussions below has been obtained from the selling
shareholders. The selling shareholders may have sold, transferred or otherwise
disposed of, or may sell, transfer or otherwise dispose of, at any time or from
time to time since the date on which it provided the information regarding the
shares beneficially owned, all or a portion of the shares of common stock
beneficially owned in transactions exempt from the registration requirements of
the Securities Act of 1933. As used in this prospectus, "selling shareholder"
includes donees, pledgees, transferees or other successors-in-interest selling
shares received from the named selling shareholder as a gift, pledge,
distribution or other non-sale related transfer.
Beneficial
ownership is determined in accordance with Rule 13d-3(d) promulgated by the
Commission under the Securities Exchange Act of 1934. Unless otherwise noted,
each person or group identified possesses sole voting and investment power with
respect to the shares, subject to community property laws where
applicable.
|
Common Shares
Owned by the
Selling Security
|
Number of
Shares Offered
By Selling
|
Number of Shares and
Percent of Total Issued and
Outstanding Held After the
Offering
|
|||||||||||||
Name of Selling Security Holders
|
Holder
|
Security Holder
|
# of Shares
|
% of Class
|
||||||||||||
Eric
Takamura (1)
|
19,654,375 | 3,000,000 | 16,654,375 | 33.06 | % | |||||||||||
Ronald
Takamura
|
7,987,182 | 3,103,173 | 4,884,009 | 9.69 | % | |||||||||||
Henry
Toh
|
1,738,750 | 645,000 | 1,093,750 | 2.17 | % | |||||||||||
Jardine
Capital Corp.
|
1,147,073 | 1,147,073 | - | 0.00 | % | |||||||||||
Po
Shin Wong
|
1,016,667 | 1,016,667 | - | 0.00 | % | |||||||||||
Exchequer
Inc.
|
1,000,000 | 1,000,000 | - | 0.00 | % | |||||||||||
David
H. Peterson (2)
|
866,667 | 866,667 | - | 0.00 | % | |||||||||||
William
Zuo
|
732,500 | 500,000 | 232,500 | 0.46 | % | |||||||||||
Jimin
Wang (3)
|
650,000 | 650,000 | - | 0.00 | % | |||||||||||
Uzi
HaLevy (3)
|
650,000 | 650,000 | - | 0.00 | % | |||||||||||
Zeevi
Hi-Tec Investment Holdings (3)
|
650,000 | 650,000 | - | 0.00 | % | |||||||||||
HNDB
Investments (4)
|
606,667 | 606,667 | - | 0.00 | % | |||||||||||
Xiaojing
Li
|
532,500 | 500,000 | 32,500 | 0.06 | % | |||||||||||
Richard
G. McKee Jr. (5)
|
520,000 | 520,000 | - | 0.00 | % | |||||||||||
3K
Partners, Ltd. (6)
|
433,333 | 433,333 | - | 0.00 | % | |||||||||||
Allen
Becker (6)
|
433,333 | 433,333 | - | 0.00 | % | |||||||||||
Arthur
Schechter (6)
|
433,333 | 433,333 | - | 0.00 | % | |||||||||||
Goldeneye
Partners II, Ltd. (6)
|
433,333 | 433,333 | - | 0.00 | % | |||||||||||
Lakeview
Investments, Inc. (6)
|
433,333 | 433,333 | - | 0.00 | % | |||||||||||
Four
M International
|
386,253 | 386,253 | - | 0.00 | % | |||||||||||
Edward
C. Gomez (8)
|
383,333 | 383,333 | - | 0.00 | % | |||||||||||
Antonio
Martins
|
333,333 | 333,333 | - | 0.00 | % | |||||||||||
Ariel
Leibovitz (7)
|
325,000 | 325,000 | - | 0.00 | % | |||||||||||
Paul
Xiaoming Lee
|
300,000 | 300,000 | - | 0.00 | % | |||||||||||
Stephen
& Kathy Najarian (8)
|
250,000 | 250,000 | - | 0.00 | % | |||||||||||
Louis
Jack Staley
|
233,333 | 233,333 | - | 0.00 | % | |||||||||||
Adam
& Susan Finn Revocable Trust dtd Sept 27, 2006 (8)
|
216,667 | 216,667 | - | 0.00 | % | |||||||||||
Benjamin
S. Warren (8)
|
216,667 | 216,667 | - | 0.00 | % | |||||||||||
Bradley
Ray Freels (8)
|
216,667 | 216,667 | - | 0.00 | % | |||||||||||
Charles
M Weiser IRA Guarantee & Trust Co Trustee (8)
|
216,667 | 216,667 | - | 0.00 | % | |||||||||||
Equity
Trust Co Custodian FBO Anthony J. Padon IRA (8)
|
216,667 | 216,667 | - | 0.00 | % | |||||||||||
Hugo
E. Garcia Jr. (8)
|
216,667 | 216,667 | - | 0.00 | % | |||||||||||
ITC
Trading Company, LTD. (8)
|
216,667 | 216,667 | - | 0.00 | % | |||||||||||
Jordan
Stuart Finn (8)
|
216,667 | 216,667 | - | 0.00 | % | |||||||||||
Juan
Alberto Rincon (8)
|
216,667 | 216,667 | - | 0.00 | % | |||||||||||
Ted
Izzatt (8)
|
216,667 | 216,667 | - | 0.00 | % | |||||||||||
Xiaohua
Li
|
200,000 | 200,000 | - | 0.00 | % | |||||||||||
Xuan
Shirley Li
|
200,000 | 200,000 | - | 0.00 | % | |||||||||||
Stephen
H. McKnight (9)
|
195,000 | 195,000 | - | 0.00 | % | |||||||||||
Edward
S. Taylor
|
166,667 | 166,667 | - | 0.00 | % | |||||||||||
Leba
Investments LP
|
166,667 | 166,667 | - | 0.00 | % | |||||||||||
Ying-Shi
& Andy Lai
|
166,667 | 166,667 | - | 0.00 | % | |||||||||||
Mark
Lichtenstein
|
133,334 | 133,334 | - | 0.00 | % | |||||||||||
David
E. Houge (10)
|
130,000 | 130,000 | - | 0.00 | % | |||||||||||
John
McClure (10)
|
130,000 | 130,000 | - | 0.00 | % | |||||||||||
Tyler
Hughes (10)
|
130,000 | 130,000 | - | 0.00 | % | |||||||||||
Elaine
Lau Wong
|
116,667 | 116,667 | - | 0.00 | % | |||||||||||
Hershel
M. & Hilda A. Rich (11)
|
108,333 | 108,333 | - | 0.00 | % | |||||||||||
Jackie
A. Reiner (11)
|
108,333 | 108,333 | - | 0.00 | % | |||||||||||
William
J. Hickl III (11)
|
108,333 | 108,333 | - | 0.00 | % | |||||||||||
Zak
Elgamal
|
100,000 | 100,000 | - | 0.00 | % | |||||||||||
Peter
Michaels
|
91,667 | 91,667 | - | 0.00 | % | |||||||||||
Shu
Rong Sun
|
83,334 | 83,334 | - | 0.00 | % | |||||||||||
Tim
M. Lam
|
83,334 | 83,334 | - | 0.00 | % | |||||||||||
Kaixun
Liu
|
66,667 | 66,667 | - | 0.00 | % | |||||||||||
Lynn
Pamela Liu
|
66,667 | 66,667 | - | 0.00 | % | |||||||||||
Michael
Kleinman
|
66,667 | 50,000 | 16,667 | 0.03 | % | |||||||||||
Xiaoxia
Neufer
|
66,667 | 66,667 | - | 0.00 | % | |||||||||||
Mario
L. Mendias
|
50,000 | 50,000 | - | 0.00 | % | |||||||||||
Michael
& Ellen Kleinman
|
50,000 | 50,000 | - | 0.00 | % | |||||||||||
Robyn
S. Kravit
|
50,000 | 50,000 | - | 0.00 | % | |||||||||||
Shuguo
Sun
|
50,000 | 50,000 | - | 0.00 | % | |||||||||||
Andrew
Xia & Lucy Yangfei Li
|
33,334 | 33,334 | - | 0.00 | % | |||||||||||
Bing
Qiang Guo
|
33,334 | 33,334 | - | 0.00 | % | |||||||||||
Bolong
Cui & Ting Li
|
33,334 | 33,334 | - | 0.00 | % | |||||||||||
Hsiaoya
Chao & Lihua Ying
|
33,334 | 33,334 | - | 0.00 | % | |||||||||||
Mingfa
Qu
|
33,334 | 33,334 | - | 0.00 | % | |||||||||||
Yick
- Cheng Leung
|
33,334 | 33,334 | - | 0.00 | % | |||||||||||
Jacky
Kwun Man Lo & Tat Wing Wong
|
30,000 | 30,000 | - | 0.00 | % | |||||||||||
Yan
Fang Liu & Lin Jia
|
30,000 | 30,000 | - | 0.00 | % | |||||||||||
Lijuan
Wang & Maki Toyokawa
|
28,888 | 28,888 | - | 0.00 | % | |||||||||||
Xiaoxia
& Gregory Earl Neufer
|
28,888 | 28,888 | - | 0.00 | % | |||||||||||
Yiu
Fai Lo
|
20,000 | 20,000 | - | 0.00 | % | |||||||||||
Maki
Toyokawa & Gregory Matthews
|
18,888 | 18,888 | - | 0.00 | % | |||||||||||
Alan
& Brenda Pritzker
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Allexa
Shu-Ling & Jesse Chih-Yung Lin
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Binshow
Paula Wang
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Chen
Mien Peng
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Cheng
Hung & Nancy Lee
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Chiung-Fen
Lin Wang & Wang Jye Ren
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Jack
Li
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Jeannie
Ng
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Jianming
Zhang
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Junxiang
Zhang
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Richard
A. Kravit
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Ruey
J. & Grace Y. Jou
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Shu
Huei Yu
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Shu
Mien Yang
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Shu-Ying
Lin & Psei-Jen Joyce Yen
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Sze-Ting
Feng
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Tiffany
LiFen Lin
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Xiaobo
& Jing Zhou
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Xiaoyu
Shou & Ming Zhou
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Yi
& Chaohui Zhang
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Yiming
Zhang
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
Ying
Tak Lau
|
16,667 | 16,667 | - | 0.00 | % | |||||||||||
47,905,314 | 24,991,513 | 22,913,801 | 45.48 | % |
(1) The
number below does not include the 2,595,000 shares which are subject to being
purchased from Mr. Takamura for an exercise price of $0.50 per share until
January 29, 2012. See "Security Ownership of Beneficial Owners and Management" -
Eric Takamura
(2)
Includes 200,000 shares which the person has the right to purchase from Eric
Takamura at an exercise price of $0.50 per share until February
2012.
(3)
Includes 150,000 shares which the person has the right to purchase from Eric
Takamura at an exercise price of $0.50 per share until February
2012.
(4)
Includes 140,000 shares which the person has the right to purchase from Eric
Takamura at an exercise price of $0.50 per share until February
2012.
(5)
Includes 120,000shares which the person has the right to purchase from Eric
Takamura at an exercise price of $0.50 per share until February
2012.
(6)
Includes 100,000 shares which the person has the right to purchase from Eric
Takamura at an exercise price of $0.50 per share until February
2012.
(7)
Includes 75,000 shares which the person has the right to purchase from Eric
Takamura at an exercise price of $0.50 per share until February
2012.
(8)
Includes 50,000 shares which the person has the right to purchase from Eric
Takamura at an exercise price of $0.50 per share until February
2012.
(9)
Includes 45,000 shares which the person has the right to purchase from Eric
Takamura at an exercise price of $0.50 per share until February
2012.
(10)
Includes 30,000shares which the person has the right to purchase from Eric
Takamura at an exercise price of $0.50 per share until February
2012.
(11)
Includes 25,000 shares which the person has the right to purchase from Eric
Takamura at an exercise price of $0.50 per share until February
2012.
PLAN
OF DISTRIBUTION
No
underwriters or brokers are involved or are expected to be involved in the
distribution. On January 29, 2010 we acquired NuGen pursuant to a reverse
subsidiary merger in which we issued 27,133,384 shares of common stock to the
two stockholders of NuGen. We also issued an aggregate of 16,969,834 shares of
common stock in connection with the Debt Conversion and the private placement
consummated in February 2010(inclusive of the 1,000,000 shares issued to
Martinez). Such shares, together with the remaining 6,278,346 shares, were
issued by us in transactions exempt from the Securities Act of 1933. A copy
of this prospectus will be mailed to each selling security holder upon
effectiveness. We will also mail copies of this prospectus to brokers and
dealers who may reasonably be expected in the future to trade or make a market
in our common stock. However, we do not anticipate that an active market for its
common stock will develop in the near future, and there can be no assurance that
a trading market will develop at any time.
The
selling shareholders will act independently of us in making decisions with
respect to the timing, manner and size of each sale. The selling shareholders
may sell the shares from time to time:
|
·
|
In
transactions on the Pink Sheets, the Over-the-Counter Bulletin Board or on
any national securities exchange or U.S. inter-dealer system of a
registered national securities association on which our common stock may
be listed or quoted at the time of
sale;
|
|
·
|
In
private transactions and transactions otherwise than on these exchanges or
systems or in the over-the-counter
market;
|
|
·
|
At
a price of $1.00 per share for the duration of the offering or until our
shares are quoted on the OTC Bulletin Board and thereafter at prevailing
market prices or privately negotiated
prices;
|
|
·
|
In
negotiated transactions;
|
|
·
|
In
a combination of such methods of sale;
or
|
|
·
|
Any
other method permitted by law.
|
The
selling shareholders may effect such transactions by offering and selling the
shares directly to or through securities broker-dealers, and such broker-dealers
may receive compensation in the form of discounts, concessions or commissions
from the selling shareholders and/or the purchasers of the shares for whom such
broker-dealers may act as agent or to whom the selling shareholders may sell as
principal, or both, which compensation as to a particular broker-dealer might be
in excess of customary commissions.
34
If our
common stock becomes traded on the Over-the-Counter Bulletin Board electronic
quotation service, then the sales price to the public will vary according to the
selling decisions of each selling shareholder and the market for our stock at
the time of resale. In these circumstances, the sales price to the public may
be:
|
·
|
The
market price of our common stock prevailing at the time of
sale;
|
|
·
|
A
price related to such prevailing market price of our common stock;
or
|
|
·
|
Such
other price as the selling shareholders determine from time to
time.
|
We can
provide no assurance that all or any of the common stock offered will be sold by
the selling shareholders named in this prospectus.
We will
cover all the expenses in connection with the registration of our common stock
in this prospectus. The selling shareholders, however, will pay any commissions
or other fees payable to brokers or dealers in connection with any sale of the
common stock.
On or
prior to the effectiveness of the registration statement to which this
prospectus is a part, we will advise the selling shareholders that they and any
securities broker-dealers or others who may be deemed to be statutory
underwriters will be governed by the prospectus delivery requirements under the
Securities Act. Under applicable rules and regulations under the Securities
Exchange Act, any person engaged in a distribution of any of the shares may not
simultaneously engage in market activities with respect to the common stock for
the applicable period under Regulation M prior to the commencement of such
distribution. In addition and without limiting the foregoing, the selling
shareowners will be governed by the applicable provisions of the Securities and
Exchange Act, and the rules and regulations thereunder, including without
limitation Rules 10b-5 and Regulation M, which provisions may limit the timing
of purchases and sales of any of the shares by the selling shareholders. All of
the foregoing may affect the marketability of our securities.
On or
prior to the effectiveness of the registration statement to which this
prospectus is a part, we will advise the selling shareholders that the
anti-manipulation rules under the Securities Exchange Act may apply to sales of
shares in the market and to the activities of the selling security owners and
any of their affiliates. We have informed the selling shareholders that they may
not:
|
·
|
Engage
in any stabilization activity in connection with any of the
shares;
|
|
·
|
Bid
for or purchase any of the shares or any rights to acquire the
shares;
|
|
·
|
Attempt
to induce any person to purchase any of the shares or rights to acquire
the shares other than as permitted under the Securities Exchange Act;
or
|
|
·
|
Effect
any sale or distribution of the shares until after the prospectus shall
have been appropriately amended or supplemented, if required, to describe
the terms of the sale or
distribution.
|
We have
informed the selling shareholders that they must effect all sales of shares in
broker's transactions, through broker-dealers acting as agents, in transactions
directly with market makers, or in privately negotiated transactions where no
broker or other third party, other than the purchaser, is involved. The selling
shareholders may indemnify any broker-dealer that participates in transactions
involving the sale of the shares against certain liabilities, including
liabilities arising under the Securities Act. Any commissions paid or any
discounts or concessions allowed to any broker-dealers, and any profits received
on the resale of shares, may be deemed to be underwriting discounts and
commissions under the Securities Act if the broker-dealers purchase shares as
principal. In the absence of the registration statement to which this prospectus
is a part, certain of the selling shareholders would be able to sell their
shares only pursuant to the limitations of Rule 144 promulgated under the
Securities Act.
Penny Stock Regulations
Our
shares are "penny stocks" covered by Section 15(g) of the Exchange Act, and
Rules 15g-1 through 15g-6 and Rule 15g-9 promulgated thereunder. They impose
additional sales practice requirements on broker/dealers who sell our securities
to persons other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouses). While Section 15(g) and Rules 15g-1 through 15g-6 apply to
brokers-dealers, they do not apply to us.
35
Rule
15g-1 exempts a number of specific transactions from the scope of the penny
stock rules.
Rule
15g-2 declares unlawful broker/dealer transactions in penny stocks unless the
broker/dealer has first provided to the customer a standardized disclosure
document.
Rule
15g-3 provides that it is unlawful for a broker/dealer to engage in a penny
stock transaction unless the broker/dealer first discloses and subsequently
confirms to the customer current quotation prices or similar market information
concerning the penny stock in question.
Rule
15g-4 prohibits broker/dealers from completing penny stock transactions for a
customer unless the broker/dealer first discloses to the customer the amount of
compensation or other remuneration received as a result of the penny stock
transaction.
Rule
15g-5 requires that a broker/dealer executing a penny stock transaction, other
than one exempt under Rule 15g-1, disclose to its customer, at the time of or
prior to the transaction, information about the sales persons
compensation.
Rule
15g-6 requires broker/dealers selling penny stocks to provide their customers
with monthly account statements.
Rule
15g-9 requires broker/dealers to approved the transaction for the customer's
account; obtain a written agreement from the customer setting forth the identity
and quantity of the stock being purchased; obtain from the customer information
regarding his investment experience; make a determination that the investment is
suitable for the investor; deliver to the customer a written statement for the
basis for the suitability determination; notify the customer of his rights and
remedies in cases of fraud in penny stock transactions; and, the FINRA's toll
free telephone number and the central number of the North American
Administrators Association, for information on the disciplinary history of
broker/dealers and their associated persons. The application of the penny stock
rules may affect your ability to resell your shares.
The FINRA
has adopted rules that require that in recommending an investment to a customer,
a broker/dealer must have reasonable grounds for believing that the investment
is suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the FINRA believes that there is a high probability that
speculative low priced securities will not be suitable for at least some
customers. The FINRA requirements make it more difficult for broker/dealers to
recommend that their customers buy our common stock, which may have the effect
of reducing the level of trading activity and liquidity of our common stock.
Further, many brokers charge higher transactional fees for penny stock
transactions. As a result, fewer broker/dealers may be willing to make a market
in our common stock, reducing a stockholder's ability to resell shares of our
common stock
Again,
the foregoing rules apply to broker/dealers. They do not apply to us in any
manner whatsoever. Since our shares are covered by Section 15(g) of the
Exchange Act, which imposes additional sales practice requirements on
broker/dealers, many broker/dealers may not want to make a market in our shares
or conduct any transactions in our shares. As such, your ability to dispose of
your shares may be adversely affected.
36
Blue Sky Restrictions on
Resale
If a
selling security holder wants to sell shares of our common stock under this
registration statement in the United States, the selling security holders will
also need to comply with state securities laws, also known as "Blue Sky laws,"
with regard to secondary sales. All states offer a variety of exemption from
registration for secondary sales. Many states, for example, have an exemption
for secondary trading of securities registered under Section 12(g) of the
Securities Exchange Act of 1934 or for securities of issuers that publish
continuous disclosure of financial and non-financial information in a recognized
securities manual, such as Standard & Poor's. The broker for a selling
security holder will be able to advise a selling security holder which states
our common stock is exempt from registration with that state for secondary
sales.
Any
person who purchases shares of our common stock from a selling security holder
under this registration statement who then wants to sell such shares will also
have to comply with Blue Sky laws regarding secondary sales. When the
registration statement becomes effective, and a selling security holder
indicates in which state(s) he desires to sell his shares, we will be able to
identify whether it will need to register or it will rely on an exemption there
from.
LEGAL
MATTERS
David
Lubin & Associates, PLLC , 5 North Village Avenue, Suite 1100, Rockville
Centre, New York, will opine upon the validity of the common stock offered by
this prospectus.
INTEREST
OF NAMED EXPERTS AND COUNSEL
No expert
or counsel named in this prospectus as having prepared or certified any part of
this prospectus or having given an opinion upon the validity of the securities
being registered or upon other legal matters in connection with the registration
or offering of the common stock was employed on a contingency basis, or had, or
is to receive, in connection with the offering, a substantial interest, direct
or indirect, in the registrant or any of its parents or subsidiaries. Nor was
any such person connected with the registrant or any of its parents or
subsidiaries as a promoter, managing or principal underwriter, voting trustee,
director, officer, or employee.
The
consolidated financial statements of NuGen Mobility, Inc. as of and for the
years ended September 30, 2009 and 2008 appearing in this prospectus have been
audited by Webb & Company, P.A. Independent Registered Public Accountants,
as set forth in their report thereon appearing elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
On
December 28, 2009 our Board of Directors approved the dismissal of Salberg &
Company, P.A. (“SalbergCo”) as our principal independent registered public
accountants.
SalbergCo
was the independent registered public accounting firm for our financial
statement periods from February 11, 2008 (inception) to September 30, 2008 and
for the interim periods since then. The report of SalbergCo’s on our financial
statements from February 11, 2008 (inception) to September 30, 2008 did not, (a)
contain an adverse opinion or disclaimer of opinion, (b) was not modified as to
uncertainty, audit scope, or accounting principles, except that there was an
explanatory paragraph describing conditions that raised substantial doubt about
the Company’s ability to continue as a going concern, or (c) did not contain any
disagreements on any matters of accounting principles or practices financial
statement disclosure, or auditing scope or procedures, which disagreements, if
not resolved to the satisfaction of SalbergCo would have caused it to make
reference to the subject matter of the disagreements in connection with its
reports. None of the reportable events set forth in Item 304(a)(1)(iv)(B) of
Regulation S-K occurred during the period in which SalbergCo served as our
principal independent accountants.
We
engaged Webb & Company, P.A. of Boynton Beach, Florida, as our principal
independent registered public accountants as of December 28, 2009.We did not
consult with Webb & Company, P.A. regarding either the application of
accounting principles to a specific transaction, either completed or proposed,
or the type of audit opinion that might be rendered on our financial statements.
Neither a written report nor oral advice was provided to us by Webb &
Company, P.A. that they concluded was an important factor considered by us in
reaching a decision as to the accounting, auditing or financial reporting
issue. We did not consult Webb & Company, P.A. regarding any matter
that was either the subject of a “disagreement” (as defined in Item
304(a)(1)(iv) of Regulation S-K and the related instructions) or any of the
reportable events set forth in Item 304(a)(1)(v) of Regulation S-K and related
instructions.
37
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our
Certificate of Incorporation and Bylaws provide that we will indemnify our
directors, officers, employees and agents to the extent and in the manner
permitted by the provisions of the DGCL, as amended from time to time, subject
to any permissible expansion or limitation of such indemnification, as may be
set forth in any stockholders’ or directors’ resolution or by contract. We
believe that these indemnification provisions are necessary to attract and
retain qualified persons as directors and officers. Insofar as indemnification
for liabilities arising under the Securities Act of 1933 (the "Act" or
"Securities Act") may be permitted to directors, officers or persons controlling
us pursuant to the foregoing provisions, or otherwise, we have been advised that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We file
reports, proxy statements, and other information with the SEC. We have also
filed a registration statement on Form S-1 (Commission file No. 333-132165),
including exhibits, with the SEC with respect to the shares being offered in
this offering. This prospectus is part of the registration statement, but it
does not contain all of the information included in the registration statement
or exhibits. You may read and copy the registration statement and our other
filed reports, proxy statements, and other information at the SEC's Public
Reference Room at Room 1580, 100 F Street, N.E., Washington, D.C. 20549. You can
obtain information about operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC at http://www.sec.gov. Copies of
the materials filed with the SEC can be obtained from the public reference
section of the SEC at prescribed rates. Statements contained in this prospectus
as to the contents of any contract or other document filed as an exhibit to the
registration statement are not necessarily complete and in each instance
reference is made to the copy of the document filed as an exhibit to the
registration statement, each statement made in this prospectus relating to such
documents being qualified in all respect by such reference.
For
further information about us and the securities being offered under this
prospectus, reference is hereby made to the registration statement, including
the exhibits thereto and the financial statements, notes, and schedules filed as
a part thereof.
38
FINANCIAL
STATEMENTS
Item
1.
NUGEN
HOLDINGS, INC.
FINANCIAL
STATEMENTS
As of
December 31, 2009
(UNAUDITED)
Table of
Contents
Page
#
|
|
FINANCIAL
STATEMENTS
|
|
Balance
Sheets
|
F-1
|
Statements
of Operations
|
F-2
|
Statements
of Changes in Stockholders’ Equity (Deficit)
|
F-3
|
Statements
of Cash Flows
|
F-4
|
Notes
to Financial Statements
|
F-5
|
39
NUGEN
HOLDINGS, INC.
|
||||||||
BALANCE
SHEETS
|
||||||||
December
31,
|
September
30,
|
|||||||
2009
|
2009
|
|||||||
(UNAUDITED)
|
||||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$ | 70,878 | $ | 58,929 | ||||
Accounts
receivable, net
|
158,001 | 214,006 | ||||||
Prepaid
expenses
|
16,324 | 5,491 | ||||||
Total
current assets
|
245,203 | 278,426 | ||||||
Machiney
& Equipment, Net
|
5,130 | 5,596 | ||||||
Other
Assets
|
7,365 | 7,365 | ||||||
Total
assets
|
$ | 257,698 | $ | 291,387 | ||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
Current
liabilities
|
||||||||
Current
portion of long term liabilities
|
$ | 438,756 | $ | 388,640 | ||||
Accounts
payable and accrued expenses
|
250,301 | 199,447 | ||||||
Due
to related parties
|
465,476 | 491,931 | ||||||
Total
current liabilities
|
1,154,533 | 1,080,018 | ||||||
Long-Term
Notes Payable
|
598,650 | 599,339 | ||||||
Total
liabilities
|
1,753,183 | 1,679,357 | ||||||
Commitments
and contingencies
|
- | - | ||||||
Stockholders'
deficit
|
||||||||
Preferred
stock - $0.001 par value; 50,000,000
|
||||||||
shares
authorized, none issued and outstanding
|
- | - | ||||||
Common
stock - $0.001 par value; 200,000,000
|
||||||||
shares
authorized, 27,133,384 shares issued and outstanding
|
27,133 | 27,133 | ||||||
Additional
paid-in capital
|
1,512,600 | 1,475,100 | ||||||
Accumulated
deficit
|
(3,035,218 | ) | (2,890,203 | ) | ||||
Total
stockholders' deficit
|
(1,495,485 | ) | (1,387,970 | ) | ||||
$ | 257,698 | $ | 291,387 |
The
accompanying notes are an integral part of these unaudited financial
statements
F-1
NUGEN
HOLDINGS, INC.
|
||||||||
STATEMENTS
OF OPERATIONS
|
||||||||
(UNAUDITED)
|
||||||||
For
the Three Months ended
|
||||||||
December
31,
|
||||||||
2009
|
2008
|
|||||||
Revenues
|
$ | 150,141 | $ | 130,000 | ||||
Direct
costs
|
8,100 | 35,974 | ||||||
Direct
labor
|
160,148 | 104,894 | ||||||
Gross
profit (loss)
|
(18,107 | ) | (10,868 | ) | ||||
Operating
expenses
|
||||||||
Compensation
|
58,481 | 27,883 | ||||||
Rent
& office
|
22,738 | 23,730 | ||||||
Professional
fees
|
3,499 | - | ||||||
Travel
expenses
|
7,384 | 1,759 | ||||||
Other
general and administrative expenses
|
8,079 | 7,952 | ||||||
Total
operating expenses
|
100,181 | 61,324 | ||||||
Net
loss from operations
|
(118,288 | ) | (72,192 | ) | ||||
Other
income and (expense)
|
||||||||
Interest
expense
|
(26,727 | ) | (39,037 | ) | ||||
Total
other income and (expense)
|
(26,727 | ) | (39,037 | ) | ||||
Net
loss
|
$ | (145,015 | ) | $ | (111,229 | ) | ||
Net
loss per share - basic and diluted
|
$ | (0.01 | ) | $ | (0.00 | ) | ||
Weighted
average number of shares outstanding
|
||||||||
during
the quarter - basic and diluted
|
27,133,384 | 27,133,384 |
The
accompanying notes are an integral part of these unaudited financial
statements
F-2
NUGEN
HOLDINGS, INC.
|
||||||||||||||||||||||||||||
STATEMENTS
OF CHANGES IN STOCKHOLDERS' DEFICIT
|
||||||||||||||||||||||||||||
From
October 1, 2009 to December 31, 2009
|
||||||||||||||||||||||||||||
(UNAUDITED)
|
||||||||||||||||||||||||||||
Preferred
Stock
|
Common
Stock
|
Additional
|
||||||||||||||||||||||||||
Number
of
|
Par
|
Number
of
|
Par
|
Paid-in
|
Accumulated
|
|||||||||||||||||||||||
Shares
|
Value
|
Shares
|
Value
|
Capital
|
Deficit
|
Total
|
||||||||||||||||||||||
Balance
at September 30, 2009
|
- | - | 27,133,384 | 27,133 | 1,475,100 | (2,890,203 | ) | (1,387,970 | ) | |||||||||||||||||||
Contributed
services
|
- | - | - | - | 37,500 | - | 37,500 | |||||||||||||||||||||
Net
loss from October 1, 2009
|
||||||||||||||||||||||||||||
to
December 31, 2009
|
- | - | - | - | - | (145,015 | ) | (145,015 | ) | |||||||||||||||||||
Balance
at December 31, 2009
|
- | - | 27,133,384 | 27,133 | 1,512,600 | (3,035,218 | ) | (1,495,485 | ) |
The
accompanying notes are an integral part of these unaudited financial
statements
F-3
NUGEN
HOLDINGS, INC.
|
||||||||
STATEMENTS
OF CASH FLOWS
|
||||||||
(UNAUDITED)
|
||||||||
For
the Three Months Ended
|
||||||||
December
31,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (145,015 | ) | $ | (111,229 | ) | ||
Adjustments
to reconcile net loss to net cash (used in)
|
||||||||
provided
by operating activities:
|
||||||||
Contributed
services
|
37,500 | - | ||||||
Depreciation
expense
|
466 | 466 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
56,005 | 127,633 | ||||||
Prepaid
expenses
|
(10,833 | ) | - | |||||
Customer
deposits
|
- | 33,518 | ||||||
Accounts
payable and accrued expenses
|
50,970 | 42,742 | ||||||
Due
to related parties
|
(26,455 | ) | (11,795 | ) | ||||
Net
cash provided by (used in) operating activities
|
(37,362 | ) | 81,335 | |||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from issuance of note payable
|
50,000 | - | ||||||
Principal
payments on debt
|
(689 | ) | (317 | ) | ||||
Net
cash provided by (used in) financing activities
|
49,311 | (317 | ) | |||||
Net
increase in cash and cash equivalents
|
11,949 | 81,018 | ||||||
Cash
and cash equivalents at beginning of period
|
58,929 | 72,060 | ||||||
Cash
and cash equivalents at end of period
|
$ | 70,878 | $ | 153,078 | ||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid during the period for interest
|
$ | 9,743 | $ | 7,736 | ||||
Cash
paid during the period for taxes
|
$ | - | $ | - |
The
accompanying notes are an integral part of these unaudited financial
statements
F-4
NUGEN
HOLDINGS, INC.
CONDENSED
NOTES TO FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2009
(UNAUDITED)
NOTE
A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Merger
On
January 29, 2010, NuGen Holdings, Inc., a Delaware corporation (the “Company” or
“NuGen Holdings”), completed the acquisition of NuGen Mobility, Inc., a Delaware
corporation (“NuGen Mobility”), pursuant to the Merger Agreement dated January
29, 2010 (the “Merger Agreement”), by and among Nugen Mobility, NuGen
Mobility and InovaChem Mergerco II, Inc., a wholly-owned subsidiary of
NuGen Holdings. Pursuant to the terms of the Merger Agreement, NuGen
Holdings merged (the “Merger”) with and into InovaChem Mergerco II, and
NuGen Mobility, as the surviving corporation, became a wholly-owned subsidiary
of NuGen Holdings.
Upon the
closing of the Merger contemplated by the Merger Agreement, each issued and
outstanding share of NuGen Mobility common stock was converted into one share of
NuGen’s Holdings common stock. As a result, an aggregate of 27,133,384
shares of NuGen's Holdings common stock, par value $0.001 per share (“Common
Stock”) were issued to the two shareholders of NuGen Mobility.
The
Merger is being accounted for as a reverse acquisition and recapitalization.
NuGen Mobility is the acquirer for accounting purposes and NuGen Holdings
is the acquiree. Accordingly, NuGen’s Mobility historical financial
statements for periods prior to the acquisition become those of the acquirer
retroactively restated for the equivalent number of shares received in the
Merger. The accumulated deficit of NuGen is carried forward after the
acquisition. Operations prior to the Merger are those of NuGen. Earnings per
share for the period prior to the Merger are restated to reflect the equivalent
number of shares outstanding.
Description of
Business
The
Company is engaged, through its wholly-owned subsidiary NuGen Mobility, in the
research, development and manufacture of permanent magnet electric motors and
the electronic controls for such motors. Our facility is located in Ashburn, VA.
Our revenue is derived primarily from product sales to customers in the
automotive and industrial markets, and from contract research and development
services. We are impacted by other factors such as the continued receipt of
contracts from industrial and governmental parties, our ability to protect and
maintain the proprietary nature of our technology, continued product and
technological advances and our ability to commercialize our products and
technology.
Basis of
Presentation
The
accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and the rules and regulations of the United States Securities and Exchange
Commission for interim financial information. Accordingly, they do not include
all the information and footnotes necessary for a comprehensive presentation of
financial position and results of operations.
It is
management's opinion, however, that all material adjustments (consisting of
normal recurring adjustments) have been made which are necessary for a fair
financial statement presentation. The results for the interim period are not
necessarily indicative of the results to be expected for the year.
For
further information, refer to the audited financial statements and footnotes of
the Company for the years ended September 30, 2009 and 2008, included in
the Company's Form 8-K filed with the Securities and Exchange Commission on
February 4, 2010.
F-5
NUGEN
HOLDINGS, INC.
CONDENSED
NOTES TO FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2009
(UNAUDITED)
Cash and Cash
Equivalents
We
consider cash on hand and investments with original maturities of three months
or less to be cash and cash equivalents.
Accounts
Receivable
We extend
unsecured credit to most of our customers following a review of the customers'
financial condition and credit history. We establish an allowance for doubtful
accounts based upon a number of factors including the length of time accounts
receivables are past due, the customer's ability to pay its obligation to us,
the condition of the general economy, estimates of credit risk, historical
trends and other information. Accounts receivable are deemed to be past due when
they have not been paid by their contractual due date. We write off accounts
receivable when they become uncollectible against our allowance for doubtful
accounts. At December 31, 2009, no allowance for doubtful accounts was deemed
necessary.
Machinery and
Equipment
Machinery
and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, which range
from 3 to 5 years. Maintenance and repairs are charged to expense as incurred.
Depreciation expense for the fiscal quarters ended December 31, 2009 and 2008
was $466 and $466, respectively.
Impairment of Long-Lived
Assets
We
periodically evaluate whether circumstances or events have affected the
recoverability of long-lived assets including intangible assets with finite
useful lives. The assessment of possible impairment is based on our ability to
recover the carrying value of the asset or groups of assets from expected future
cash flows estimated by management.
If
expected future cash flows are less than the carrying value, an impairment loss
is recognized to adjust the asset to fair value as determined by expected
discounted future cash flows.
Revenue and Cost
Recognition
We
manufacture proprietary products and other products. Revenue from sales of
products are generally recognized at the time title to the goods and the
benefits and risks of ownership passes to the customer which is typically when
products are shipped based on the terms of the customer purchase
agreement.
Revenue
relating to long-term fixed price contracts is recognized using the percentage
of completion method. Under the percentage of completion method, contract
revenues and related costs are recognized based on the percentage that costs
incurred to date bear to total estimated costs.
Changes
in job performance, estimated profitability and final contract settlements may
result in revisions to cost and revenue, and are recognized in the period in
which the revisions are determined.
Contract
costs include all direct materials, subcontract and labor costs and other
indirect costs. Selling, general and administrative costs are charged to expense
as incurred. At the time a loss on a contract becomes known, the entire amount
of the estimated loss is accrued.
F-6
NUGEN
HOLDINGS, INC.
CONDENSED
NOTES TO FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2009
(UNAUDITED)
Income
Taxes
The
Company accounts for income taxes in accordance with ASC 740, Income Tax. Under
the asset and liability method of ASC 740, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis and operating loss and tax credit
carry-forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The valuation of
deferred tax assets may be reduced if future realization is not
assured.
The
effect of a change in tax rates on deferred tax assets and liabilities is
recognized in income in the period that includes the enactment
date.
Research and
Development
Costs of
researching and developing new technology, or significantly altering existing
technology, are expensed as incurred.
Loss per Common
Share
Basic
earnings per share is computed by dividing income or loss available to common
stockholders by the weighted average number of common shares outstanding during
the periods presented. Diluted earnings per share is computed by dividing income
or loss available to common stockholders by all outstanding and potentially
dilutive shares during the periods presented, unless the effect is antidilutive.
As of December 31, 2009, there are no potentially dilutive securities
outstanding.
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 and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those
estimates.
New Accounting
Pronouncements
In
June 2009, the FASB issued ASC 105 Accounting Standards
Codification TM and the Hierarchy of Generally
Accepted Accounting Principles. The FASB Accounting Standards
Codification TM (the
“Codification”) has become the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in accordance with Generally Accepted
Accounting Principles (“GAAP”). All existing accounting standard documents are
superseded by the Codification and any accounting literature not included in the
Codification will not be authoritative. Rules and interpretive releases of the
SEC issued under the authority of federal securities laws, however, will
continue to be the source of authoritative generally accepted accounting
principles for SEC registrants. Effective September 30, 2009, all
references made to GAAP in our financial statements will include references to
the new Codification. The Codification does not change or alter existing GAAP
and, therefore, did not have an impact on our financial position, results of
operations or cash flows.
F-7
NUGEN
HOLDINGS, INC.
CONDENSED
NOTES TO FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2009
(UNAUDITED)
In June
2009, the FASB issued changes to the consolidation guidance applicable to a
variable interest entity (VIE). FASB ASC Topic 810, "Consolidation," amends the
guidance governing the determination of whether an enterprise is the primary
beneficiary of a VIE, and is, therefore, required to consolidate an entity, by
requiring a qualitative analysis rather than a quantitative analysis. The
qualitative analysis will include, among other things, consideration of who has
the power to direct the activities of the entity that most significantly impact
the entity's economic performance and who has the obligation to absorb losses or
the right to receive benefits of the VIE that could potentially be significant
to the VIE. This standard also requires continuous reassessments of whether an
enterprise is the primary beneficiary of a VIE. FASB ASC 810 also requires
enhanced disclosures about an enterprise's involvement with a VIE. Topic 810 is
effective as of the beginning of interim and annual reporting periods that begin
after November 15, 2009. This will not have an impact on the Company’s financial
position, results of operations or cash flows.
In June
2009, the FASB issued Financial Accounting Standards Codification No. 860 -
Transfers and Servicing. FASB ASC No. 860 improves the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a transfer of
financial assets; the effects of a transfer on its financial position, financial
performance, and cash flows; and a transferor's continuing involvement, if any,
in transferred financial assets. FASB ASC No. 860 is effective as of the
beginning of each reporting entity's first annual reporting period that begins
after November 15, 2009, for interim periods within that first annual reporting
period and for interim and annual reporting periods thereafter. The Company is
evaluating the impact the adoption of FASB ASC No. 860 will have on its
financial statements.
NOTE
B – GOING CONCERN
As
reflected in the accompanying financial statements, the Company has a working
capital deficiency of $909,330, a stockholders’ deficit of $1,495,485, an
accumulated deficit of $3,035,218 and negative cash flows from operations of
$37,362 during the quarter ended December 31, 2009. This raises substantial
doubt about its ability to continue as a going concern. The ability of the
Company to continue as a going concern is dependent on the Company’s ability to
raise additional capital and implement its business plan. The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
Management
believes that actions presently being taken to obtain additional loans, equity
funding, and to implement its strategic plans provide the opportunity for the
Company to continue as a going concern (See Note G – Subsequent
Events).
F-8
NUGEN
HOLDINGS, INC.
CONDENSED
NOTES TO FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2009
(UNAUDITED)
NOTE
C – DEBT
Long-term
debt consists of:
December 31, 2009
|
September 30, 2009
|
|||||||
Promissory
note dated August 23, 2007
|
$ | 596,108 | $ | 596,108 | ||||
Promissory
notes dated July 13, 2007
|
229,998 | 230,089 | ||||||
Promissory
note dated June 5, 2009
|
150,000 | 150,000 | ||||||
Related
Parties
|
465,476 | 491,931 | ||||||
Other
|
47,142 | 11,782 | ||||||
1,488,724 | 1,479,910 | |||||||
Less:
current portion
|
890,074 | 880,571 | ||||||
Total
long term debt
|
$ | 598,650 | $ | 599,339 |
Pursuant
to the Promissory Note dated as of August 23, 2007 the Company accrues interest
on the loan at the rate of 6% per annum. Quarterly payments are made based on a
formula that multiplies the Company’s gross revenues by 2% for calendar year
2007, 3% for calendar year 2008, 4% for calendar year 2009, 5% for calendar year
2010 and 6% for calendar year 2011 and for all subsequent years until the loan
is paid in full. In all years the Company is required to pay a minimum of $7,500
per quarter and any payment made that exceeds the amount that would be due under
the formula shall be treated as an advance against subsequent quarterly amounts
due in excess of the $7,500 minimum payment.
As of
December 2009 no payments of principal have been made as the Company’s quarterly
revenues, multiplied by the appropriate percentage, have not exceeded the $7,500
minimum payment. The payments made have gone towards accrued interest
only. Additionally, further revenue contingent payments may be owed,
in the future (see Note F – Commitments and Contingencies – below).
Pursuant
to the Promissory Notes dated as of July 13, 2007, the Company accrues interest
on these loans at the rate of 10% per annum. As the Company has not made
payments of principal that were due, the loans are in technical default.
Accordingly, they are classified under the Current portion of long-term debt on
the Company’s Balance Sheets.
Pursuant
to the Promissory Note dated as of June 5, 2009, the Company accrues interest on
this loan at the rate of LIBOR plus 5% per annum (currently a total of 5.6%). As
the note is due on demand, it is classified under the current portion of
long-term debt on the Company’s Balance Sheet. These amounts were converted to
equity in January 2010 (See Note G – Subsequent Events).
In
November 2007, the Company purchased computer equipment and issued a four year
note payable in the amount of $9,326. The Company accrues interest on this loan
at the rate of 18.45% per annum and makes monthly fixed payments of interest and
principal.
In
January 2008, the Company converted $35,650 of accounts payable, for advisory
services and expenses, from a related party (see note E – Related party
transactions) into a note payable. The Company accrues interest on this loan at
the rate of 1% per annum. As the note was due in September 2008, the loan is in
technical default. Accordingly, it is classified under the current portion of
long-term debt on the Company’s Balance Sheets.
In December 2009, the Company received $50,000 as a bridge loan.
The loan bears interest at 5% per annum and was converted in January 2010
in exchange for 333,333 shares of the Company’s common stock in connection
with its private placement.
F-9
NUGEN
HOLDINGS, INC.
CONDENSED
NOTES TO FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2009
(UNAUDITED)
NOTE
D - RELATED PARTY TRANSACTIONS
Related
Parties
A
significant shareholder of the Company is the brother of the Company’s Chairman,
CEO and President. He loaned a total of $371,500 to the Company between August
2007 and September 2009 which is included in the Balance Sheet of the Company in
Due to related parties, along with $93,976 of accrued interest at December 31,
2009. These amounts were converted to equity in January 2010 (See Note F –
Subsequent Events).
NOTE
E - COMMITMENTS AND CONTINGENCIES
Pursuant
to the Asset Purchase Agreement dated as of July 13, 2007 the Company is
required to pay the Seller the following amounts from its Gross Revenues (i)
$596,108 plus accrued interest at the rate of 6% per annum plus (ii) if prior to
July 13, 2014, the Company paid the amount described in (i) in full, then the
Company shall pay each year, on a quarterly basis, 2.5% multiplied by the amount
of Gross Revenues accrued in each quarter until July 13, 2014. Gross Revenues
means the aggregate amount of (i) all fees and other revenue that the Company
actually receives from any source, (ii) the then-current fair market value of
(x) the assets purchased from the seller, or (y) the business (as a going
concern) or portion thereof sold or otherwise transferred to an affiliate of the
Company and / or its Chairman, President and CEO, and (iii) the proceeds from
the sale or other disposition by the Company to any other third party of all or
any portion of (x) the assets and/or (y) the business as a going
concern.
As part
of the Asset purchase in 2007, the Company acquired a $10,000,000 license
agreement with an Indian manufacturer in which its technology is embedded in
that manufacturer’s three-wheel Auto-Rickshaw. In connection with this contract,
the Company also agreed to assume the commitment, entered into by the Seller,
for a conditional grant of $700,000 from an Indian export bank, which will be
paid back through a 2% royalty on the license agreement until $1,400,000 is paid
back. Additionally, the Indian export bank also provided a loan of $500,000 to
the Seller that was converted to a conditional grant similar to the grant
outlined above and assumed by the Company in 2007. While the Company has the
agreement with the Indian export bank converting the Seller’s loan to a grant,
it has not yet been formally executed (the Indian export bank agreed to postpone
execution of this agreement). As of December 31, 2009 no payments are owed to
the Indian export bank as the Indian manufacturer is not actively marketing its
product at present, however, with the recent emphasis on electric vehicles, the
Company expects that marketing of this product will begin in the next two
years.
Lease
Commitments
Rental
expense for the quarters ended December 31, 2009 and 2008, respectively, was
$19,766 and $19,699.
F-10
NUGEN
HOLDINGS, INC.
CONDENSED
NOTES TO FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2009
(UNAUDITED)
NOTE
F – STOCKHOLDERS’ EQUITY
Contributed
Capital
During
the quarter ended December 31, 2009, the Company’s CEO worked for the Company
without compensation. Included in Compensation expense is $37,500 of contributed
capital by the CEO. Management believes its estimate of the value of this
contributed service is reasonable.
NOTE G
- SUBSEQUENT EVENTS
Private placement and
reverse merger
On
January 29, 2010, NuGen Holdings, completed the acquisition of
NuGen Mobility pursuant to the Merger Agreement dated January 29,
2010, by and among NuGen Holdings, NuGen Mobility and InovaChem Mergerco
II, Inc., a wholly-owned subsidiary of NuGen Holdings. Pursuant to the terms of
the Merger Agreement, NuGen Mobility merged with and into InovaChem Mergerco II,
and NuGen Mobility, as the surviving corporation, became a wholly-owned
subsidiary of InovaChem.
Upon the
closing of the Merger contemplated by the Merger Agreement, each issued and
outstanding share of NuGen’s Mobility common stock was converted into one
share of NuGen’s Holdings common stock. As a result, an aggregate of
27,133,384 shares of InovaChem’s common stock, par value $0.001 per share
(“Common Stock”) were issued to the shareholders of NuGen Mobility.
In
connection with the Merger the Company redeemed shares of stock from certain of
its pre-merger stockholders such that a total of 6,278,346 shares of NuGen
Holdings common stock were outstanding prior to the Merger. In connection with
the Company’s private offering of its common stock, on January 29, 2010 and
February 16, 2010, NuGen Holdings issued an aggregate of 6,733,336 and
3,599,999, respectively, shares of Common Stock in the Private Placement at a
purchase price of $0.15 per share. In addition the Company has issued 1,000,000
shares to its placement agent in connection with the Private
Placement.
Conversion of debt to
equity
Also, in
connection with the Merger, holders of an aggregate of $846,475 of outstanding
indebtedness of NuGen Mobility converted their promissory notes (based on a
$0.15 per share conversion price) into an aggregate of 5,636,499 shares of
Common Stock (“Debt Conversion”).
Changes
to the Board of Directors and Executive Officers
Simultaneous
with the closing of the Merger, William Zuo, PhD. resigned as Chairman, Chief
Executive Officer and as a director, Shao Jun Xu, PhD resigned as Chief Science
and Technical Officer and Xiaojing Li resigned as Vice President and Corporate
Secretary and as a director. The new board of directors consists of the member
of the board of directors of NuGen Mobility, Eric Takamura, and two current
members of the board of directors of NuGen Holdings, Henry Toh and Michael
Kleinman, M.D.
Eric
Takamura was appointed as the Chairman, Chief Executive Officer and President of
NuGen Holdings, and John Salatino became the Vice President of Engineering &
Programs. Henry Toh remains in his current position as the Vice Chairman and
Executive Vice President of Corporate Development and Alan Pritzker remains as
the Chief Financial Officer.
Employment
Agreements
On
February 9, 2010, we entered into employment agreements with our Executive
Chairman and Chief Executive Officer (CEO) and our Chief Financial Officer
(CFO)and on February 11 we entered into a letter agreement with our VP of
Engineering and Programs (VP Engineering). The agreements, for the CEO, VP
Engineering and CFO, provide for annual salaries, of $180,000, $160,000 and
$120,000 respectively; signing bonuses of $30,000, $20,000 and
$10,000 respectively; and, grants of options to purchase 900,000, 400,000 and
150,000 shares of our common stock, respectively. The shares subject to the
options for the CEO and CFO have an exercise price of $0.45 per share and vest
pro ratably in 24 equal monthly installments as of the last day of each month
commencing January 1, 2010. The shares subject to the options for the VP
Engineering are at an exercise price of $0.15 per share, which option may be
exercised on a cashless basis and may be exercised until February 29, 2012.
Generally, options to acquire 100,000 shares may be exercised on a cumulative
basis during the two weeks preceding August 31, 2010, February 28, 2011, August
31, 20111, and February 29, 2012 subject to accelerated exercise upon a change
in control as provided therein and the right to exercise his remaining option in
the event of the termination of his employment.
F-11
NUGEN
HOLDINGS, INC.
FINANCIAL
STATEMENTS
FOR
THE YEARS ENDED
SEPTEMBER
30, 2009 AND 2008
F-12
NUGEN HOLDINGS,
INC.
CONTENTS
PAGE
|
F-14
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
|
PAGE
|
F-15
|
BALANCE
SHEETS AS OF SEPTEMBER 30, 2009 AND 2008.
|
PAGE
|
F-16
|
STATEMENTS
OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND
2008.
|
PAGE
|
F-17
|
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE YEARS ENDED SEPTEMBER 30, 2009
AND 2008.
|
PAGE
|
F-18
|
STATEMENTS
OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND
2008.
|
PAGES
|
F-19
- F-27
|
NOTES
TO FINANCIAL
STATEMENTS.
|
F-13
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors of:
NuGen
Holdings, Inc.
We have
audited the accompanying balance sheets of NuGen Holdings, Inc. (the “Company”)
as of September 30, 2009 and 2008 and the related statements of operations,
changes in stockholders’ deficit and cash flows for the years then ended.
These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We
conducted our audits in accordance with the 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 NuGen Holdings, Inc. as September
30, 2009 and 2008 and the results of its operations and its cash flows for the
years then ended 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 B
to the financial statements, the Company has a negative cash flow from
operations of $154,326, a working capital deficiency of $801,592 and a
stockholders' deficiency of $1,387,970. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans concerning these matters are also described in
Note B. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
WEBB
& COMPANY, P.A.
Certified
Public Accountants
Boynton
Beach, Florida
December
21, 2009
F-14
NUGEN
HOLDINGS, INC.
BALANCE
SHEETS
September 30,
|
||||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$ | 58,929 | $ | 72,060 | ||||
Accounts
receivable
|
214,006 | 129,203 | ||||||
Prepaid
expenses
|
5,491 | 2,991 | ||||||
Total
current assets
|
278,426 | 204,254 | ||||||
Machinery
& equipment, net
|
5,596 | 7,461 | ||||||
Other
assets
|
7,365 | 7,365 | ||||||
$ | 291,387 | $ | 219,080 | |||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
Current
liabilities
|
||||||||
Current
portion of long term liabilities
|
$ | 388,640 | $ | 239,980 | ||||
Accounts
payable and accrued expenses
|
199,447 | 457,946 | ||||||
Customer
deposits
|
- | 27,110 | ||||||
Due
to related parties
|
491,931 | 1,304,394 | ||||||
Total
current liabilities
|
1,080,018 | 2,029,430 | ||||||
Long-term
notes payable
|
599,339 | 601,804 | ||||||
Total
liabilities
|
1,679,357 | 2,631,234 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders'
deficit
|
||||||||
Preferred
stock - $0.001 par value, 50,000,000 shares autorized, none issued and
outsanding
|
||||||||
Common
stock - $0.001 par value; 200,000,000 shares
|
||||||||
authorized,
27,133,384 shares issued and outstanding
|
27,133 | 27,133 | ||||||
Additional
paid-in capital
|
1,475,100 | 128,407 | ||||||
Accumulated
deficit
|
(2,890,203 | ) | (2,567,694 | ) | ||||
Total
stockholders' deficit
|
(1,387,970 | ) | (2,412,154 | ) | ||||
$ | 291,387 | $ | 219,080 |
See
accompanying notes to the financial statements
F-15
NUGEN
HOLDINGS, INC.
STATEMENTS OF
OPERATIONS
For
Years Ended
|
||||||||
September
30,
|
||||||||
2009
|
2008
|
|||||||
Revenues
|
$ | 796,847 | $ | 624,695 | ||||
Direct
costs
|
103,122 | 51,520 | ||||||
Direct
labor
|
481,865 | 531,180 | ||||||
Total
cost of goods sold
|
584,987 | 582,700 | ||||||
Gross
profit
|
211,860 | 41,995 | ||||||
Operating
expenses
|
||||||||
Compensation
|
196,818 | 143,334 | ||||||
Rent
& office
|
96,995 | 87,580 | ||||||
Professional
fees
|
12,817 | 93,848 | ||||||
Travel
expenses
|
36,827 | 31,108 | ||||||
Other
general and administrative expenses
|
33,397 | 26,469 | ||||||
Total
operating expenses
|
376,854 | 382,339 | ||||||
Net
loss from operations
|
(164,994 | ) | (340,344 | ) | ||||
Other
income and (expense)
|
||||||||
Interest
expense
|
(157,515 | ) | (149,239 | ) | ||||
Total
other income and (expense)
|
(157,515 | ) | (149,239 | ) | ||||
Net
loss
|
$ | (322,509 | ) | $ | (489,583 | ) | ||
Net
loss per share - basic and diluted
|
$ | (0.01 | ) | $ | (0.02 | ) | ||
Weighted
average number of shares outstanding
|
||||||||
during
the year - basic and diluted
|
27,133,384 | 27,133,384 |
See
accompanying notes to the financial statements
F-16
NUGEN
HOLDINGS, INC.
STATEMENTS
OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED
SEPTEMBER 30, 2009 AND 2008
Common Stock
|
Additional
|
|||||||||||||||||||||||
Number
of
|
Par
|
Paid-in
|
Deferred
|
Accumulated
|
||||||||||||||||||||
Shares
|
Value
|
Capital
|
Compensation
|
Deficit
|
Total
|
|||||||||||||||||||
Balance
at September 30, 2007
|
27,133,384 | $ | 27,133 | $ | 128,407 | $ | (4,782 | ) | $ | (2,078,111 | ) | $ | (1,927,353 | ) | ||||||||||
Recognition
of deferred compensation
|
4,782 | 4,782 | ||||||||||||||||||||||
Net
loss from October 1, 2007
|
||||||||||||||||||||||||
to
September 30, 2008
|
- | - | - | (489,583 | ) | (489,583 | ) | |||||||||||||||||
Balance
at September 30, 2008
|
27,133,384 | 27,133 | 128,407 | - | (2,567,694 | ) | (2,412,154 | ) | ||||||||||||||||
Forgiveness
of debt, related party
|
1,346,693 | - | 1,346,693 | |||||||||||||||||||||
Net
loss from October 1, 2008
|
||||||||||||||||||||||||
to
September 30, 2009
|
- | - | - | - | (322,509 | ) | (322,509 | ) | ||||||||||||||||
Balance
at September 30, 2009
|
27,133,384 | $ | 27,133 | $ | 1,475,100 | $ | - | $ | (2,890,203 | ) | $ | (1,387,970 | ) |
See
accompanying notes to the financial statements
F-17
NUGEN
HOLDINGS, INC.
STATEMENTS OF CASH
FLOWS
For Years Ended
|
||||||||
September 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (322,509 | ) | $ | (489,583 | ) | ||
Adjustments
to reconcile net loss to net cash (used in)
|
||||||||
provided
by operating activities:
|
||||||||
Depreciation
expense
|
1,865 | 1,865 | ||||||
Deferred
compensation
|
- | 4,782 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
(84,803 | ) | (114,924 | ) | ||||
Prepaid
expenses
|
(2,500 | ) | (2,991 | ) | ||||
Other
assets
|
- | (1,001 | ) | |||||
Accounts
payable and accrued expenses
|
158,447 | 279,191 | ||||||
Due
to related parties
|
95,174 | 87,550 | ||||||
Net
cash (used in) operating activities
|
(154,326 | ) | (235,111 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from issuance of note payable
|
150,000 | - | ||||||
Proceeds
from issuance of note payable, related parties
|
- | 324,650 | ||||||
Principal
payments on debt
|
(3,804 | ) | (19,827 | ) | ||||
Principal
payments on related party debt
|
(5,001 | ) | - | |||||
Net
cash provided by financing activities
|
141,195 | 304,823 | ||||||
Net
(decrease) increase in cash and cash equivalents
|
(13,131 | ) | 69,712 | |||||
Cash
and cash equivalents at beginning of year
|
72,060 | 2,348 | ||||||
Cash
and cash equivalents at end of year
|
$ | 58,929 | $ | 72,060 | ||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid during the period for interest
|
$ | 55,047 | $ | 37,413 | ||||
Cash
paid during the period for taxes
|
$ | - | $ | - |
Supplemental
Schedule of noncash investing and financing activities:
In
September 2009, the Company’s Chairman, CEO & President, who is also a major
shareholder, forgave $1,346,693 of indebtedness owed him by the Company. This
amount was credited to Additional Paid-in Capital.
During
2008 the Company purchased computer equipment and issued a note payable for
$9,326.
See
accompanying notes to the financial statements
F-18
NUGEN
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
SEPTEMBER 30, 2009 AND 2008
NOTE
A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of
Business
NuGen
Holdings, Inc. is engaged in the research, development and manufacture of
permanent magnet electric motors and the electronic controls for such motors.
Our facility is located in Ashburn, VA. Our revenue is derived primarily from
product sales to customers in the automotive and industrial markets, and from
contract research and development services. We are impacted by other factors
such as the continued receipt of contracts from industrial and governmental
parties, our ability to protect and maintain the proprietary nature of our
technology, continued product and technological advances and our ability to
commercialize our products and technology.
Cash and Cash
Equivalents
We
consider cash on hand and investments with original maturities of three months
or less to be cash and cash equivalents.
Accounts
Receivable
We extend
unsecured credit to most of our customers following a review of the customers'
financial condition and credit history. We establish an allowance for doubtful
accounts based upon a number of factors including the length of time accounts
receivables are past due, the customer's ability to pay its obligation to us,
the condition of the general economy, estimates of credit risk, historical
trends and other information. Accounts receivable are deemed to be past due when
they have not been paid by their contractual due date. We write off accounts
receivable when they become uncollectible against our allowance for doubtful
accounts. At September 30, 2009 and 2008, no allowance for doubtful accounts was
deemed necessary.
Machinery and
Equipment
Machinery
and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, which range
from 3 to 5 years. Maintenance and repairs are charged to expense as incurred.
Depreciation expense for the fiscal years ended September 30, 2009 and 2008 was
$1,865 and $1,865, respectively.
Impairment of Long-Lived
Assets
We
periodically evaluate whether circumstances or events have affected the
recoverability of long-lived assets including intangible assets with finite
useful lives. The assessment of possible impairment is based on our ability to
recover the carrying value of the asset or groups of assets from expected future
cash flows estimated by management.
If
expected future cash flows are less than the carrying value, an impairment loss
is recognized to adjust the asset to fair value as determined by expected
discounted future cash flows.
F-19
NUGEN
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
SEPTEMBER 30, 2009 AND 2008
Revenue and Cost
Recognition
We
manufacture proprietary products and other products. Revenue from sales of
products are generally recognized at the time title to the goods and the
benefits and risks of ownership passes to the customer which is typically when
products are shipped based on the terms of the customer purchase
agreement.
Revenue
relating to long-term fixed price contracts is recognized using the percentage
of completion method. Under the percentage of completion method, contract
revenues and related costs are recognized based on the percentage that costs
incurred to date bear to total estimated costs.
Changes
in job performance, estimated profitability and final contract settlements may
result in revisions to cost and revenue, and are recognized in the period in
which the revisions are determined.
Contract
costs include all direct materials, subcontract and labor costs and other
indirect costs. Selling, general and administrative costs are charged to expense
as incurred. At the time a loss on a contract becomes known, the entire amount
of the estimated loss is accrued.
Income
Taxes
The
Company accounts for income taxes in accordance with ASC 740, Income Tax. Under
the asset and liability method of ASC 740, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis and operating loss and tax credit
carry-forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The valuation of
deferred tax assets may be reduced if future realization is not
assured.
The
effect of a change in tax rates on deferred tax assets and liabilities is
recognized in income in the period that includes the enactment
date.
Research and
Development
Costs of
researching and developing new technology, or significantly altering existing
technology, are expensed as incurred.
Loss per Common
Share
Basic
earnings per share is computed by dividing income or loss available to common
stockholders by the weighted average number of common shares outstanding during
the periods presented. Diluted earnings per share is computed by dividing income
or loss available to common stockholders by all outstanding and potentially
dilutive shares during the periods presented, unless the effect is
antidilutive.
F-20
NUGEN
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
SEPTEMBER 30, 2009 AND 2008
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 and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those
estimates.
New Accounting
Pronouncements
In
June 2009, the FASB issued ASC 105 Accounting Standards
Codification TM and the Hierarchy of Generally
Accepted Accounting Principles. The FASB Accounting Standards
Codification TM (the
“Codification”) has become the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in accordance with Generally Accepted
Accounting Principles (“GAAP”). All existing accounting standard documents are
superseded by the Codification and any accounting literature not included in the
Codification will not be authoritative. Rules and interpretive releases of the
SEC issued under the authority of federal securities laws, however, will
continue to be the source of authoritative generally accepted accounting
principles for SEC registrants. Effective September 30, 2009, all
references made to GAAP in our consolidated financial statements will include
references to the new Codification. The Codification does not change or alter
existing GAAP and, therefore, will not have an impact on our financial position,
results of operations or cash flows.
In June
2009, the FASB issued changes to the consolidation guidance applicable to a
variable interest entity (VIE). FASB ASC Topic 810, "Consolidation," amends the
guidance governing the determination of whether an enterprise is the primary
beneficiary of a VIE, and is, therefore, required to consolidate an entity, by
requiring a qualitative analysis rather than a quantitative analysis. The
qualitative analysis will include, among other things, consideration of who has
the power to direct the activities of the entity that most significantly impact
the entity's economic performance and who has the obligation to absorb losses or
the right to receive benefits of the VIE that could potentially be significant
to the VIE. This standard also requires continuous reassessments of whether an
enterprise is the primary beneficiary of a VIE. FASB ASC 810 also requires
enhanced disclosures about an enterprise's involvement with a VIE. Topic 810 is
effective as of the beginning of interim and annual reporting periods that begin
after November 15, 2009. This will not have an impact on the Company’s financial
position, results of operations or cash flows.
In June
2009, the FASB issued Financial Accounting Standards Codification No. 860 -
Transfers and Servicing. FASB ASC No. 860 improves the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a transfer of
financial assets; the effects of a transfer on its financial position, financial
performance, and cash flows; and a transferor's continuing involvement, if any,
in transferred financial assets. FASB ASC No. 860 is effective as of the
beginning of each reporting entity's first annual reporting period that begins
after November 15, 2009, for interim periods within that first annual reporting
period and for interim and annual reporting periods thereafter. The Company is
evaluating the impact the adoption of FASB ASC No. 860 will have on its
financial statements.
F-21
NUGEN
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
SEPTEMBER 30, 2009 AND 2008
NOTE
B – GOING CONCERN
As
reflected in the accompanying financial statements, the Company has a working
capital deficiency of $801,592, a stockholders’ deficit of $1,387,970, an
accumulated deficit of $2,890,203 and negative cash flows from operations of
$154,326 during the year ended September 30, 2009. This raises substantial doubt
about its ability to continue as a going concern. The ability of the Company to
continue as a going concern is dependent on the Company’s ability to raise
additional capital and implement its business plan. The financial statements do
not include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
Management
believes that actions presently being taken to obtain additional loans, equity
funding, and to implement its strategic plans provide the opportunity for the
Company to continue as a going concern.
NOTE
C – DEBT
Long-term
debt consists of:
September 30, 2009
|
September 30, 2008
|
|||||||
Promissory
note dated August 23, 2007
|
$ | 596,108 | $ | 596,108 | ||||
Promissory
notes dated July 13, 2007
|
230,089 | 231,751 | ||||||
Promissory
note dated June 5, 2009
|
150,000 | - | ||||||
Related
Parties
|
491,931 | 1,304,394 | ||||||
Other
|
11,782 | 13,925 | ||||||
1,479,910 | 2,146,178 | |||||||
Less:
current portion
|
880,571 | 1,544,374 | ||||||
Total
long term debt
|
$ | 599,339 | $ | 601,804 |
Pursuant
to the Promissory Note dated as of August 23, 2007 the Company accrues interest
on the loan at the rate of 6% per annum. Quarterly payments are made based on a
formula that multiplies the Company’s gross revenues by 2% for calendar year
2007, 3% for calendar year 2008, 4% for calendar year 2009, 5% for calendar year
2010 and 6% for calendar year 2011 and for all subsequent years until the loan
is paid in full. In all years the Company is required to pay a minimum of $7,500
per quarter and any payment made that exceeds the amount that would be due under
the formula shall be treated as an advance against subsequent quarterly amounts
due in excess of the $7,500 minimum payment.
F-22
NUGEN
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
SEPTEMBER 30, 2009 AND 2008
As of
September 2009 no payments of principal have been made as the Company’s
quarterly revenues, multiplied by the appropriate percentage, have not exceeded
the $7,500 minimum payment. The payments made have gone towards accrued interest
only. Additionally, further revenue contingent payments may be owed, in
the future (see Note G – Commitments and Contingencies – below).
Pursuant
to the Promissory Notes dated as of July 13, 2007, the Company accrues interest
on these loans at the rate of 10% per annum. As the Company has not made
payments of principal that were due, the loans are in technical default.
Accordingly, they are classified under the Current portion of long-term debt on
the Company’s Balance Sheets.
Pursuant
to the Promissory Note dated as of June 5, 2009, the Company accrues interest on
this loan at the rate of LIBOR plus 5% per annum (currently a total of 5.6%). As
the note is due on demand, it is classified under the current portion of
long-term debt on the Company’s Balance Sheet.
The
Company’s Chairman, CEO and President and his brother have loaned a total of
$551,382 and $371,500 to the Company, respectively. The Company accrues interest
on these loans at the rate of 10.2% per annum. As the Company has not made
payments of principal that were due, the loans are in technical default.
Accordingly, they are classified under the Current portion of long-term debt on
the Company’s Balance Sheets. The Company’s Chairman, CEO and President has
forgiven his debt as of September 30, 2009. (See note E – Related party
transactions).
In
November 2007, the Company purchased computer equipment and issued a four year
note payable in the amount of $9,326. The Company accrues interest on this loan
at the rate of 18.45% per annum and makes monthly fixed payments of interest and
principal.
In
January 2008, the Company converted $35,650 of accounts payable, for advisory
services and expenses, from a related party (see note E – Related party
transactions)into a note payable. The Company accrues interest on this loan at
the rate of 1% per annum. As the note was due in September 2008, the loan is in
technical default. Accordingly, it is classified under the current portion of
long-term debt on the Company’s Balance Sheets.
NOTE
D - INCOME TAXES
The
Company’s tax expense differs from the “expected” tax expense for the period
ended September 30, 2009 and 2008 (computed by applying the U.S. federal income
tax rate of 34 percent to the loss before taxes), as follows:
F-23
NUGEN
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
SEPTEMBER 30, 2009 AND 2008
Year Ended
|
Year Ended
|
|||||||
September 30, 2009
|
September 30, 2008
|
|||||||
Computed
"expected" tax benefit – Federal
|
$ | (109,653 | ) | $ | (166,458 | ) | ||
Computed
"expected" tax benefit - State
|
(12,771 | ) | (19,387 | ) | ||||
Increase
in taxes resulting from:
|
||||||||
In
kind contribution of services
|
- | 1,815 | ||||||
Change
in valuation allowance
|
122,424 | 184,030 | ||||||
$ | - | $ | - |
The tax
effects of temporary differences that give rise to significant portions of
deferred tax assets and liabilities at September 30, 2009 and 2008 is as
follows:
September 30, 2009
|
September 30, 2008
|
|||||||
Deferred
tax assets:
|
||||||||
Net
operating loss carry-forwards
|
$ | (1,091,222 | ) | $ | (968,798 | ) | ||
Total
deferred tax assets
|
(1,091,222 | ) | (968,798 | ) | ||||
Less
valuation allowance
|
1,091,222 | 968,798 | ||||||
Net
deferred tax assets, net
|
$ | - | $ | - |
As of
September 30, 2009 we had net operating loss carry-forwards (NOL) of
approximately $2,874,663 for U.S. income tax purposes that expire in varying
amounts through 2029.
The
valuation allowance for deferred tax assets of $1,091,222 and $968,798 at
September 30, 2009 and September 30, 2008, respectively, relates principally to
the uncertainty of the utilization of certain deferred tax assets, primarily net
operating loss carry forwards in various tax jurisdictions. The Company
continually assesses both positive and negative evidence to determine whether it
is more-likely-than-not that the deferred tax assets can be realized prior to
their expiration. Based on the Company's assessment it has determined the
deferred tax assets are not currently realizable.
F-24
NUGEN
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
SEPTEMBER 30, 2009 AND 2008
NOTE
E - RELATED PARTY TRANSACTIONS
Forgiveness of
debt
The
Company’s Chairman, CEO and President agreed to forgive $1,346,693 of the notes
and salary owed him by the Company, as of September 30, 2009. The debt has been
reclassified to Paid in capital on the Company’s Balance Sheet as of September
30, 2009.
Related
Parties
A
significant shareholder of the Company is the brother of the Company’s Chairman,
CEO and President. He loaned a total of $371,500 to the Company between August
2007 and September 2009 which is included in the Balance Sheet of the Company in
Due to related parties at September 30, 2009.
In
December 2006 the Company entered into an agreement with a firm to provide
financial advisory services to the Company. The Company granted the firm 111
shares of its Common Stock per the terms of the agreement.
In
January 2008 the Company terminated its agreement with the firm and converted
the $35,650 it owed the firm into a note payable which is included in the
Balance Sheet of the Company in Due to related parties at September 30,
2009.
NOTE
F - SIGNIFICANT CUSTOMERS
We have
historically derived significant revenue from a few key customers. Revenue from
one customer totaled $671,649 and $525,000 for the years ended September 30,
2009 and 2008, respectively, which was 84 percent and 84 percent of total
revenue, respectively.
Accounts
receivable from this same customer were 96 percent and 97 percent of total
accounts receivable as of September 30, 2009 and 2008,
respectively.
NOTE
G - COMMITMENTS AND CONTINGENCIES
Pursuant
to the Asset Purchase Agreement dated as of July 13, 2007 the Company is
required to pay the Seller the following amounts from its Gross Revenues (i)
$596,108 plus accrued interest at the rate of 6% per annum plus (ii) if prior to
July 13, 2014, the Company paid the amount described in (i) in full, then the
Company shall pay each year, on a quarterly basis, 2.5% multiplied by the amount
of Gross Revenues accrued in each quarter until July 13, 2014. Gross Revenues
means the aggregate amount of (i) all fees and other revenue that the Company
actually receives from any source, (ii) the then-current fair market value of
(x) the assets purchased from the seller, or (y) the business (as a going
concern) or portion thereof sold or otherwise transferred to an affiliate of the
Company and / or its Chairman, President and CEO, and (iii) the proceeds from
the sale or other disposition by the Company to any other third party of all or
any portion of (x) the assets and/or (y) the business as a going
concern.
F-25
NUGEN
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
SEPTEMBER 30, 2009 AND 2008
As part
of the Asset purchase in 2007, the Company acquired a $10,000,000 license
agreement with an Indian manufacturer in which its technology is embedded in
that manufacturer’s three-wheel Auto-Rickshaw. In connection with this contract,
the Company also agreed to assume the commitment, entered into by the Seller,
for a conditional grant of $700,000 from an Indian export bank, which will be
paid back through a 2% royalty on the license agreement until $1,400,000 is paid
back. Additionally, the Indian export bank also provided a loan of $500,000 to
the Seller that was converted to a conditional grant similar to the grant
outlined above and assumed by the Company in 2007. While the Company has the
agreement with the Indian export bank converting the Seller’s loan to a grant,
it has not yet been formally executed (the Indian export bank agreed to postpone
execution of this agreement). As of September 30, 2009 no payments are owed to
the Indian export bank as the Indian manufacturer is not actively marketing
i ts
product at present, however, with the recent emphasis on electric vehicles, the
Company expects that marketing of this product will begin in the next two
years.
Lease
Commitments
Rental
expense for the years ended September 30, 2009 and 2008, respectively, was
$79,744 and $70,603.
NOTE
H - SUBSEQUENT EVENTS
Private placement and
reverse merger
In
November, 2009, the NuGen Mobility Inc. and NuGen Holdings Inc., a Delaware
corporation based in Houston, Texas (“NuGen Holdings”), entered into a letter of
intent relating to the NuGen Holdings’ proposed acquisition of NuGen Holding for
approximately 80% of the capital stock of NuGen Holdings on a fully-diluted
basis (the “Consideration”). Consummation of the contemplated transaction is
subject to the negotiation and execution of a mutually satisfactory definitive
share exchange agreement or merger agreement (the “Definitive Agreement”),
setting forth the specific terms and conditions of the transaction. The
execution of the Definitive Agreement is subject to the consummation by NuGen
Holdings of a private placement of no less than $1,000,000, approval by the
Board of Directors of both NuGen Mobility and NuGen Holdings, approval by the
shareholders of NuGen Mobility and the completion by NuGen Holdings of a
satisfactory review of the legal, financial and business condition of NuGen
Mobility, including the receipt of NuGen Holdings’ financial statements audited
in accordance with applicable SEC rules. NuGen Mobility, Inc. and NuGen
Holdings are obligated to use their reasonable best efforts to negotiate in good
faith the Definitive Agreement, which will contain, among other standard terms
and conditions, representations, warranties, covenants, indemnities and other
provisions customary in transactions of this nature, including without
limitation, representations and warranties as to the condition of the title held
to the assets of NuGen Mobility, the financial statements of NuGen Holdings, the
payment of taxes and contingent liabilities. Any necessary third-party consents
shall be obtained prior to consummation of the Transaction, including but not
limited to any consents required to be obtained from NuGen
Mobility lenders, creditors, vendors and lessors. As of the date of
this report, the transaction has not closed.
F-26
NUGEN
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
SEPTEMBER 30, 2009 AND 2008
Conversion of debt to
equity
Concurrent
with the private placement, the holders of approximately $750,000 of debt in the
Company have agreed to exchange their debt for shares of stock based upon the
$0.15 share price offered in the private placement. Included in this total is
$371,500 of debt held by the brother of the Company’s Chairman, President and
CEO.
F-27
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item 13.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The
following table sets forth the expenses in connection with the issuance and
distribution of the securities being registered hereby. All such expenses will
be borne by the registrant; none shall be borne by any selling
stockholders.
Securities
and Exchange Commission registration fee
|
$ | 1,781.92 | ||
Legal
fees and expenses (1)
|
15,000.00 | |||
Accounting
fees and expenses (1)
|
3,000.00 | |||
Printing
expenses
|
1,000.00 | |||
Blue
sky fees and expenses
|
N/A | |||
Transfer
agent and registrar fees and expenses
|
N/A | |||
Miscellaneous
|
— | |||
Total
|
$ | 20,781.92 |
(1)
Estimated.
Item
14. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS.
Section
145 of the Delaware General Corporation Law (“DGCL”) provides, in general, that
a corporation incorporated under the laws of the State of Delaware, such as our
company, may indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding
(other than a derivative action by or in the right of the corporation) by reason
of the fact that such person is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another enterprise, against expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person’s conduct was unlawful. In the case of a
derivative action, a Delaware corporation may indemnify any such person against
expenses (including attorneys’ fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, except that no
indemnification will be made in respect of any claim, issue or matter as to
which such person will have been adjudged to be liable to the corporation unless
and only to the extent that the Court of Chancery of the State of Delaware or
any other court in which such action was brought determines such person is
fairly and reasonably entitled to indemnity for such expenses.
Our
Certificate of Incorporation and Bylaws provide that we will indemnify our
directors, officers, employees and agents to the extent and in the manner
permitted by the provisions of the DGCL, as amended from time to time, subject
to any permissible expansion or limitation of such indemnification, as may be
set forth in any stockholders’ or directors’ resolution or by
contract.
Any
repeal or modification of these provisions approved by our stockholders shall be
prospective only, and shall not adversely affect any limitation on the liability
of a director or officer of ours existing as of the time of such repeal or
modification.
We are
also permitted to apply for insurance on behalf of any director, officer,
employee or other agent for liability arising out of his actions, whether or not
the DGCL would permit indemnification.
40
Item 15.
RECENT SALES OF UNREGISTERED SECURITIES.
On
January 29, 2010, pursuant to the Merger, each share of NuGen’s common stock
issued and outstanding immediately prior to the closing of the Merger was
converted into the right to receive one share of InovaChem’s common stock. An
aggregate of 27,133,384 shares of Common Stock were issued to the two holders of
NuGen’s common stock, Eric Takamura and Ronald Takamura. The securities were
offered and sold in reliance on the exemption from registration afforded by
Section 4(2) under the Securities Act.
In
connection with the Merger, 4 holders of an aggregate of $846,475 of outstanding
indebtedness of NuGen converted their promissory notes (based on a $0.15 per
share conversion price) into an aggregate of 5,636,499 shares of Common Stock
(“Debt Conversion”). Simultaneous with the closing of the Merger, 15,165,000
shares of Common Stock were redeemed by InovaChem for a cash payment of $152.
The securities were offered and sold in reliance on the exemption from
registration afforded by Section 4(2) under the Securities Act.
On
January 29, 2010, and in connection with the Merger we accepted subscriptions
(the “Private Placement”) from 29 investors to purchase a total of 6,733,336
shares at a purchase price of $0.15 per share, or gross proceeds of $1,010,000.
On
February 11, 2010, we closed on the Private Placement and accepted subscriptions
from an additional thirteen investors for a total of 3,599,999 shares of our
common stock at a purchase price of $0.15 per share, or gross proceeds of
$540,000. Each investor in this offering had the
right to purchase an option from Eric Takamura, our Chairman, Chief Executive
Officer, President and a director, to purchase 50,000 shares of his common stock
for an exercise price of $0.50 per share. The purchase price of this option was
$250, and as of March 4, 2010 an aggregate of 33 investors purchased this option
from Mr. Takamura for an aggregate of 2,595,000 shares.
This
offering was made solely to “accredited investors,” as that term is defined in
Regulation D under the Securities Act. The securities sold in this offering were
not registered under the Securities Act, or the securities laws of any state,
and were offered and sold in reliance on the exemption from registration
afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act
and corresponding provisions of state securities laws, which exempt transactions
by an issuer not involving any public offering.
In
connection with the Private Placement, we issued Martinez-Ayme Securities
(“Martinez”), the placement agent, 1,000,000 shares of Common Stock pursuant to
the exemption from registration afforded by Section 4(2) and Regulation D (Rule
506) under the Securities Act.
In July
2008, we sold a total of 1,423,346 shares of our common stock to an aggregate of
46 people pursuant to our private securities offering, at a price of $.30 per
share, for aggregate proceeds of $426,999.
On
February 11, 2008, Exchequer, Inc. purchased all of the 100,000 outstanding
shares of our common stock from our original sole stockholder. We were then
renamed InovaChem, Inc. Following the purchase, we declared a stock dividend of
8.7 shares for every share of our common stock issued and outstanding, and
issued an additional 870,000 shares of common stock to Exchequer, Inc. for a
total of 970,000 outstanding shares of common stock. In connection with the
stock dividend, we then issued 1,530,000 shares of common stock to five
additional people for an aggregate of $153,000. These amounts total the
2,500,000 common shares that were deemed issued to the pre-capitalization
shareholders of InovaChem, Inc. pursuant to the June 2008
recapitalization.
41
Item 16.
Exhibits and Financial Statement Schedules
Exhibit No.
|
Description
|
|
2.1
|
Merger
Agreement, dated as of January 29, 2010, among NuGen Mobility, Inc.,
InovaChem, Inc. and InovaChem Mergerco II, Inc. (3)
|
|
|
||
2.2
|
Certificate
of Merger, dated January 29, 2010, between NuGen Mobility, Inc. and
InovaChem Mergerco II, Inc.(3)
|
|
|
||
3.1
|
Certificate
of Incorporation (1)
|
|
|
||
3.2
|
Articles
of Amendment to Articles of Incorporation (2)
|
|
|
||
3.3
|
Bylaws
(1)
|
|
|
||
3.4
|
Amended
and Restated Bylaws (2)
|
|
4.1
|
Warrant
dated March 22, 2010 issued to Uzi Halevy
|
|
|
||
5.1
|
Opinion
of David Lubin & Associates, PLLC
|
|
|
||
10.1
|
Form
of Subscription Agreement for the Private Placement (3)
|
|
|
||
10.2
|
Stock
Redemption, dated as of November 17, 2009, among Inovachem, Inc., William
Zuo, Xiaojing Li, Shao Jun Xu and Lu Yiu (3)
|
|
|
||
10.3
|
Form
of Conversion Agreement, dated as of January 29, 2010, among InovaChem and
each of Jardine Capital Corp., Four M International, Inc., Po Shin Wong
and Ron Takamura (3)
|
|
|
||
10.4
|
Asset
Purchase Agreement, dated July 13, 2007, between NuGen Mobility, Inc. and
New Generation Motors Corporation(3)
|
|
|
||
10.5
|
Technical
Assistance Agreement, dated June 9, 2009, between NuGen Mobility Inc. and
Mahindra & Mahindra Ltd.(3)
|
|
|
||
10.6
|
Technical
Support Agreement, dated as of September 23, 2009, between NuGen
Mobility, Inc. and Tube Investments of India Limited: Division BSA
Motors & TI Cycles of India (3)
|
|
|
||
10.7
|
Master
License Agreement, dated December 17, 2005 between New
Generation Motors Corporation and Bajaj Auto, Ltd.
(3)
|
|
|
||
10.8
|
SBIR
Contract with the US Department of Defense(3)
|
|
|
||
10.9
|
Engagement
letter between NuGen Mobility, Inc. and Martinez-Ayme Securities, dated
November 9, 2009(3)
|
|
|
||
10.10
|
6%
Promissory Note, dated August 23, 2007 made by NuGen Mobility, Inc in
favor of New Generation Motors(3)
|
|
10.11
|
Conditional
Grant Agreement, dated October 3, 2001 with The ICICI
Limited(3)
|
|
10.12
|
Employment Agreement dated as of January 1, 2010 by and between Eric Takamura and InovaChem, Inc.(4) | |
10.13
|
Employment Agreement dated as of January 1, 2010 by and between Alan Pritzker and InovaChem, Inc.(4) |
42
10.14
|
2010 Stock Option Plan(4) | |
|
||
10.15
|
Letter Agreement dated as of February 2010 by and between Inovachem, Inc and the representative of certain investors. (4) | |
|
||
10.16
|
Stock Pledge Agreement dated as of February 11, 2010, between Eric Takamura and Uzi Halevy(4) | |
10.17
|
Letter between InovaChem, Inc and John Salatino(4) | |
23.1
|
Consent of Webb & Company, P.A. | |
23.2
|
Consent of David Lubin & Associates, PLLC (Included in Exhibit 5.1) |
(1) Filed
as an exhibit to our Registration Statement on Form 10-SB filed with the SEC on
October 22, 2008
(2) Filed
as an exhibit to our Current Report on Form 8-K filed with the SEC on February
14, 2008
(3) Filed
as an exhibit to our Current Report on Form 8-K filed with the SEC on February
4, 2010
(4) Filed
as an exhibit to our Current Report on Form 8-K filed with the SEC on February
17, 2010
Item
17. Undertakings
The
undersigned Company hereby undertakes to:
|
1)
|
File,
during any period in which offers or sales are being made, a
post-effective amendment to this registration statement
to:
|
|
(i)
|
Include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933,
as amended (the “Securities Act”);
|
|
(ii)
|
Reflect
in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total dollar
value of the securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) under the Securities Act
if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement, and
|
|
(iii)
|
Include
any additional or changed material information on the plan of
distribution.
|
|
2)
|
For
determining liability under the Securities Act, treat each post-effective
amendment as a new registration statement of the securities offered, and
the offering of the securities at that time to be the initial bona fide
offering.
|
|
3)
|
File
a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the
offering.
|
|
4)
|
For
determining liability of the undersigned small business issuer under the
Securities Act to any purchaser in the initial distribution of the
securities, the undersigned undertakes that in a primary offering of
securities of the undersigned small business issuer pursuant to this
registration statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered or sold to
such purchaser by means of any of the following communications, the
undersigned small business issuer will be a seller to the purchaser and
will be considered to offer or sell such securities to such
purchaser:
|
|
(i)
|
Any
preliminary prospectus or prospectus of the undersigned small business
issuer relating to the offering required to be filed pursuant to Rule
424;
|
|
(ii)
|
Any
free writing prospectus relating to the offering prepared by or on behalf
of the undersigned small business issuer or used or referred to by the
undersigned small business issuer;
|
43
|
(iii)
|
The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned small business
issuer or its securities provided by or on behalf of the undersigned small
business issuer; and
|
|
(iv)
|
Any
other communication that is an offer in the offering made by the
undersigned small business issuer to the
purchaser.
|
Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable.
In the
event that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule 430B
or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of the date it is first
used after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use.
44
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Ashburn, the State of
Virginia, in the United States of America, on the 25th day of March,
2010.
NUGEN
HOLDINGS, INC
|
||
By:
|
/s/ Eric Takamura
|
|
Eric
Takamura
Chief
Executive Officer
(Principal
Executive Officer)
|
||
By:
|
/s/ Alan Pritzker
|
|
Alan
Pritzker
Chief
Financial Officer and Secretary
(Principal
Accounting Officer and Principal Financial
Officer)
|
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
SIGNATURE
|
TITLE
|
DATE
|
||
/s/
Eric Takamura
|
CEO and
Director
|
March 25,
2010
|
||
Eric
Takamura
|
(principal
executive officer)
|
|||
/s/
Alan Pritzker
|
Chief
Financial Officer and Secretary
|
March 25,
2010
|
||
Alan
Pritzker
|
(principal
accounting officer and principal financial officer)
|
|||
/s/
Henry Toh
|
Director
|
March 25,
2010
|
||
Henry
Toh
|
||||
/s/
Dr. Michael Kleinman
|
Director
|
March 25,
2010
|
||
Dr.
Michael Kleinman
|
45