NUGEN HOLDINGS, INC. - FORM 10-Q

Attached files

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EX-32.2 - NUGEN HOLDINGS, INC.	v211926_ex32-2.htm
EX-31.1 - NUGEN HOLDINGS, INC.	v211926_ex31-1.htm
EX-31.2 - NUGEN HOLDINGS, INC.	v211926_ex31-2.htm
EX-32.1 - NUGEN HOLDINGS, INC.	v211926_ex32-1.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2010

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________

Commission File No.

000-52865

NUGEN HOLDINGS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	26-1946130
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

44645 Guilford Drive, Suite 201 Ashburn, VA	20147
(Address of principal executive offices)	(Zip Code)

(703) 858-0036

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company x
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

Common stock outstanding ($.001 par value) as of February 17, 2011: 56,294,064 shares.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3. Quantitative and Qualitative Disclosures About Market Risk	8
Item 4. Controls and Procedures	8

PART II -OTHER INFORMATION	9
Item 1. Legal Proceedings.	9
Item 1A. Risk Factors	9
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	9
Item 3. Defaults Upon Senior Securities.	9
Item 4. Removed and Reserved	9
Item 5. Other Information	9
Item 6. Exhibits	9

SIGNATURES	10

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

NUGEN HOLDINGS, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2010

(UNAUDITED)

Table of Contents

		Page #
FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS		F-1

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS		F-2

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)		F-3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS		F-4

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS		F- 5

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NUGEN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31,			September 30,
	2010			2010
	(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents	$	276,097		$	863,876
Accounts receivable, net		466,977			253,754
Prepaid expenses		14,668			11,309
Inventory		152,833			222,915

Total current assets		910,575			1,351,854

Machiney & Equipment, Net		57,111			43,325
Other Assets		7,365			7,365

	$	975,051		$	1,402,544

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities
Current portion of long term liabilities	$	12,987		$	13,428
Convertible notes		70,000			-
Accounts payable and accrued expenses		452,585			479,951
Customer deposits		26,960			150,000

Total current liabilities		562,532			643,379

Long-Term Notes Payable		602,576			603,916

Total liabilities		1,165,108			1,247,295

Commitments and contingencies

Stockholders' equity (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, 56,294,064 and 55,881,564 shares issued and outstanding		56,295			55,882
Additional paid-in capital		4,707,198			4,631,656
Accumulated deficit		(4,953,550	)		(4,532,289	)
Total stockholders' equity (deficit)		(190,057	)		155,249

	$	975,051		$	1,402,544

The accompanying notes are an integral part of these condensed consolidated financial statements

F-1

NUGEN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months ended
	December 31,
	2010			2009

Revenues	$	690,482		$	150,141

Direct costs		419,751			8,100
Direct labor		289,178			160,148

Gross loss		(18,447	)		(18,107	)

Operating expenses
Compensation		218,841			58,481
Rent & office		41,921			22,738
Professional fees		20,462			3,499
Travel expenses		79,191			7,384
Other general and administrative expenses		31,637			8,079
Total operating expenses		392,052			100,181

Net loss from operations		(410,499	)		(118,288	)

Other income and (expense)
Interest income		154			-
Interest expense		(10,916	)		(26,727	)
Total other income and (expense)		(10,762	)		(26,727	)

Net loss	$	(421,261	)	$	(145,015	)

Net loss per share - basic and diluted	$	(0.01	)	$	(0.01	)

Weighted average number of shares outstanding during the period - basic and diluted		55,998,140			27,133,384

The accompanying notes are an integral part of these condensed consolidated financial statements

F-2

NUGEN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

(UNAUDITED)

From October 1, 2010 to December 31, 2010

	Preferred Stock				Common Stock				Additional
	Number of		Par		Number of		Par		Paid-in		Accumulated
	Shares		Value		Shares		Value		Capital		Deficit			Total

Balance at October 1, 2010		-	$	-		55,881,564	$	55,882	$	4,631,656	$	(4,532,289	)	$	155,249

Issuance of common stock for cash		-		-		412,500		413		65,587		-			66,000

Vesting of stock options		-		-		-		-		9,955		-			9,955

Net loss from October 1, 2010 to December 31, 2010		-		-		-		-		-		(421,261	)		(421,261	)

Balance at December 31, 2010		-	$	-		56,294,064	$	56,295	$	4,707,198	$	(4,953,550	)	$	(190,057	)

The accompanying notes are an integral part of these condensed consolidated financial statements

F-3

NUGEN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Three Months ended
	December 31,
	2010			2009
Cash flows from operating activities:
Net loss	$	(421,261	)	$	(145,015	)
Adjustments to reconcile net loss to net cash used in operating activities:
Contributed services		-			37,500
Vesting of stock options		9,955			-
Depreciation expense		2,891			466
Changes in operating assets and liabilities:
Accounts receivable		(213,223	)		56,005
Prepaid expenses		(3,359	)		(10,833	)
Inventory		70,082			-
Customer deposits		(123,040	)		-
Due to related parties		-			(26,455	)
Accounts payable and accrued expenses		(27,366	)		50,970

Net cash used in operating activities		(705,321	)		(37,362	)

Cash flows from investing activities:
Purchase of property and equipment		(16,677	)		-

Net cash used in investing activities		(16,677	)		-

Cash flows from financing activities:
Proceeds from sale of common stock, net		66,000			-
Proceeds from issuance of notes payable		70,000			50,000
Principal payments on debt		(1,781	)		(689	)

Net cash provided by financing activities		134,219			49,311

Net increase (decrease) in cash and cash equivalents		(587,779	)		11,949

Cash and cash equivalents at beginning of period		863,876			58,929

Cash and cash equivalents at end of period	$	276,097		$	70,878

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	7,638		$	9,743
Cash paid during the period for taxes	$	-		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements

F-4

NUGEN HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2010

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Merger

On January 29, 2010, InovaChem, Inc., a Delaware corporation, completed the acquisition of NuGen Mobility, Inc., a Delaware corporation (“NuGen” or “NuGen Mobility”), pursuant to the Merger Agreement dated January 29, 2010(the “Merger Agreement”), by and among InovaChem, Inc., NuGen and InovaChem Mergerco II, Inc., a wholly-owned subsidiary of InovaChem, Inc. Pursuant to the terms of the Merger Agreement, NuGen merged (the “Merger”) with and into InovaChem Mergerco II, and NuGen, as the surviving corporation, became a wholly-owned subsidiary of InovaChem, Inc. 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 “Company” or “NuGen Holdings”). The Certificate of Amendment to the Certificate of Incorporation became effective on March 4, 2010.

Upon the closing of the Merger contemplated by the Merger Agreement, each issued and outstanding share of NuGen’s common stock was converted into 24,422.48 shares of NuGen Holdings’ common stock. As a result, an aggregate of 27,133,384 shares of NuGen Holdings’ common stock, par value $0.001 per share (“Common Stock”) were issued to the two shareholders of NuGen. Simultaneous with the closing of the Merger, 15,236,667 shares of Common Stock were redeemed by NuGen Holdings for a cash payment of $152. Following the redemption of these shares, the two shareholders of NuGen owned approximately 81% of NuGen Holdings.

The Merger is being accounted for as a reverse acquisition and recapitalization. NuGen is the acquirer for accounting purposes and NuGen Holdings 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.

Description of Business

The Company is engaged, through its wholly-owned subsidiary NuGen, in the research, development and sale of permanent magnet electric motors and the electronic controls for such motors. Our facility is located in Ashburn, Virginia. Our revenue is derived primarily from contract research and development engineering services. Our technology relates to specialty electric drive engines and related components. This technology is currently being sold directly to original equipment manufacturers (“OEMs”) pursuant to technical assistance agreements. The agreements generally provide for us to engineer our technology to run in various platforms (e.g. vehicles, electric generators and motors) and to be adapted to a customer’s particular application. We offer these services from our facility located in Virginia, to customers that require high-efficiency, reliable, compact permanent magnet electrical motor systems, controllers, vehicle interface modules (including energy storage, management and monitoring systems) and related software. Our technology is used primarily to convert electrical power into mechanical power so that mechanical power can be used to propel a vehicle or run a generator and may be used in markets ranging from electric/hybrid electric vehicles to materials handling equipment, distributive power, ground support equipment, motion control, and military systems.

Basis of Presentation

The accompanying unaudited condensed 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, 2010 and 2009, included in the Company's Form 10-K filed with the Securities and Exchange Commission on January 13, 2011.

Principles of Consolidation

The consolidated financial statements include the accounts of NuGen Holdings, Inc, and its wholly owned subsidiaries, NuGen Mobility, Inc., and Trinterprise, LLC. All significant inter-company balances and transactions have been eliminated in consolidation.

F-5

NUGEN HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2010

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. The Company at times has cash in banks in excess of FDIC insurance limits. The Company did not have deposits in excess of FDIC insurance limits as of December 31, 2010.

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, 2010, no allowance for doubtful accounts was deemed necessary.

Inventory

Inventory is stated at the lower of cost (first-in, first-out basis) or market (net realizable value). At December 31, 2010 and September 30, 2010 the Company had $17,839 and $120,317 respectively, of work in process inventory. At December 31, 2010 and September 30, 2010 the Company had $134,994 and $102,598 respectively, of raw materials inventory.

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, computer equipment, which is 5 years. Maintenance and repairs are charged to expense as incurred. Depreciation expense for the quarters ended December 31, 2010 and 2009 was $2,891 and $466, respectively.

Revenue and Cost Recognition

We currently generate revenue primarily from contract research and development services and may derive additional revenues in the future from the sale of our products to customers. Our products are specialty electric drive engines and related components. These products are a direct result of the services to design and build each unit, which are built to each customer’s specifications. We account for the products sold as one unit. We intend in the future to derive revenue from sales of products and will recognize the sale 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.

Some customers are asked to provide deposits prior to the Company accepting their orders. Customer deposits are reflected on the balance sheet as a current liability and are reclassified to revenue at the time when title to the goods and the benefits and risks of ownership passes to the customer.

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.

The Company recently entered into Small Business Innovation Research contracts with both the US Army and the US Navy, the revenue under these contracts will be recognized in the same period as allowable and billable costs are incurred.

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. 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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2010

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.

Stock-Based Compensation

In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation . Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.

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 anti-dilutive. As of December 31, 2010 and September 30, 2010 there were 360,000 warrants outstanding and 2,400,000 options outstanding to purchase the Company’s common stock. The Company also has convertible promissory notes outstanding that can be converted , at the Company’s option, to 388,889 shares of common stock. These options, warrants and convertible shares have not been included in the weighted average number of shares as their effect would have been anti-dilutive.

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.

Fair Value of Financial Instruments

The carrying amounts on the Company’s financial instruments including accounts payable, approximate fair value due to the relatively short period to maturity for this instrument.

Recent Accounting Pronouncements

In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements. This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers. Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of ASU 2010-06 did not have a material impact on the Company’s consolidated financial statements.

F-7

NUGEN HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2010

In February 2010, the FASB issued Accounting Standards Update No. 2010-09 (“ASU 2010-09”) as amendments to certain recognition and disclosure requirements. The amendments remove the requirement for an SEC filer to disclose a date in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of U.S. GAAP. Those amendments remove potential conflicts with the SEC’s literature. All of the amendments in ASU 2010-09 were effective upon issuance for interim and annual periods. The adoption of ASU 2010-09 did not have a material impact on the Company’s consolidated financial statements.

NOTE B – GOING CONCERN

As reflected in the accompanying unaudited condensed financial statements, the Company has an accumulated deficit of $4,953,550, a net loss of $421,261 for the quarter ending December 31, 2010 and negative cash flows from operations of $705,321 for the quarter ending December 31, 2010. 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 generate additional revenues from operations, raise additional funds 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 revenues and funding, and to implement its strategic plans provide the opportunity for the Company to continue as a going concern. There can be no assurance that the Company will be able to raise such funds if and when it wishes to do so or on terms acceptable to us. This raises substantial doubt about our ability to continue as a going concern. Specifically, in the event that the Company is not successful at raising capital to a level sufficient to pay its expenditures, the Company will have to reduce administrative overhead and reduce marketing and public relations expenditures. If the Company is unable to cut expenses to earn profits or raise additional debt or equity capital the Company will have to discontinue operations.

NOTE C – DEBT

Long-term debt consists of:

	December 31, 2010		September 30, 2010
	(UNAUDITED)
Promissory note dated August 23, 2007	$	596,108	$	596,108

Other		19,455		21,236

		615,563		617,344

Less: current portion		12,987		13,428

Total long term debt	$	602,576	$	603,916

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 revenue of NuGen’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 NuGen 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 September 30, 2010, no payments of principal have been made as NuGen’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).

In November 2007, the Company purchased computer equipment and issued a four year note payable, included in “Other” on the above table, 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 August 2010, the Company purchased computer equipment and issued a three year note payable, included in “Other” on the above table, in the amount of $12,910. The Company accrues interest on this loan at the rate of 0.38% per annum and makes monthly fixed payments of interest and principal.

F-8

NUGEN HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2010

Convertible promissory notes

On October 22, 2010, the Company entered into subscription agreements with two accredited investors pursuant to which the Company issued 3% convertible promissory notes (the “Notes”) in the aggregate principal amount of $70,000 which is included on the Company’s Balance Sheet under convertible notes.

The Notes were offered and sold in reliance on the exemption from registration afforded by Rule 506 of Regulation D promulgated under Section 4(2) of the Securities Act of 1933, as amended. The Notes have a one-year term and are convertible by the Company into Common Stock at a price of $0.18 per share, subject to adjustment if the Company effects a stock split or issues a stock dividend. If the Company effects a merger, sale of all or substantially all of its assets or any person acquires 50% of its stock, then the Note will be convertible into such number and kind of shares as would have been issuable on account of such transaction. The Company may prepay all or a portion of the outstanding principal and interest under the Notes upon 3 business days’ notice and may repay any accrued interest in cash or additional shares of Common Stock. The amount due under the Notes will become immediately due and payable if the Company fails to pay unpaid principal on the maturity date which failure continues for 10 days, any representation or warranty made by the Company is false, incorrect, incomplete or misleading, or the Company dissolves, liquidates, ceases operations, is unable to pay its debts when due, a receiver or trustee is appointed or bankruptcy proceeding are instituted

NOTE D - RELATED PARTY TRANSACTIONS

Related Parties

On December 5, 2010, a foreign investor entered into a subscription agreement with the Company pursuant to which, among other things, the Company issued an aggregate of 412,500 shares of its common stock at a purchase price of $0.16 per share, for total cash proceeds of $66,000. The proceeds were received by the Company in December 2010. Such issuances were made in reliance on an exemption from registration under Regulation S promulgated under the Securities Act. Pursuant to the Subscription Agreements the investor executed and delivered to the Company (i) an irrevocable proxy appointing the Company’s Chief Executive Officer as her proxy to vote her shares and (ii) a lock-up agreement pursuant to which the investor agreed not to transfer, dispose of or encumber any of the Company’s securities for a nine-month period.

NOTE E - COMMITMENTS AND CONTINGENCIES

In August 2007, our subsidiary, NuGen Mobility entered into an asset purchase agreement pursuant to which it acquired substantially all of the assets, and specified liabilities of New Generation Motors Corporation, a Delaware corporation. The agreement requires the payment to New Generation Motors of $1,000,000 pursuant to a promissory note, which bears simple interest at the rate of six percent. The principal amount of this note was reduced to $596,108 by the application of $403,892 in credits. These credits consist of (i) an aggregate of $273,741 in operational loans made by our principal shareholders to New Generation Motors to allow them to continue operations prior to August 2007, (ii) $101,804 in customer deposits that they retained though we were responsible for fulfilling such customer orders, and (iii) $29,068 in amounts we agreed to pay to New Generation Motors’s landlord for back rent.

The principal and interest on the loan is to be repaid, on a quarterly basis, until all amounts due thereon have been paid. The amount of each payment is equal to the greater of (i) $7,500 and (ii) the product obtained by multiplying our Gross Revenues (as defined) for the quarter by the applicable percentage rate. The applicable percentage rate increases by one percentage point per year beginning at 2% for 2007 increasing to 6% for 2011 and all subsequent years. The payment is first applied to the accrued interest on the loan and the remainder, if any, to the principal amount owed. As of the date hereof, an aggregate of $82,500 has been paid (11 quarterly payments of $7,500 per quarter) and all of the payments have been applied to accrued interest. Accordingly, the principal balance of the loan has been $596,108 since August 2007.

In addition, if prior to July 13, 2014 we have paid this note in full, we are also required to pay until July 13, 2014, on a quarterly basis, the product obtained by multiplying 2.5% by the Gross Revenues in the applicable quarter. Gross Revenues is defined as (i) all fees and other revenue that NuGen Mobility receives from any source, (ii) the then-current fair market value of (x) the assets purchased from New Generation Motors, 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 NuGen Mobility to any other third party of all or any portion of (x) the assets and/or (y) the business as a going concern. To date, we have not been required to make any such payments.

F-9

NUGEN HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2010

In connection with this transaction, NuGen also agreed to assume the commitment, entered into by New Generation Motors, 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 New Generation Motors. In connection with this asset purchase agreement, NuGen Mobility assumed this $500,000 loan on the condition that the loan would be converted to a conditional grant (similar to the $700,000 conditional grant). The Company reached such agreement with the Indian export bank but the Company and such bank never ratified such agreement. As of December 31, 2010 no payments are owed to the Indian export bank, as the Indian manufacturer is not actively marketing the product at present and no payments are required until sales from this product are generated.

Lease Commitments

On October 7, 2010, the Company’s wholly owned subsidiary, NuGen Mobility Inc. entered into a three year lease for a combined office / warehouse space in the same building complex as the Company’s current space. The rent, which commenced effective December 1, 2010, is approximately $5,595 per month and increases by 3% on each anniversary date of the lease. We also entered into a one-year lease commencing October 1, 2010 for our current space of approximately 6,500 square feet, for a monthly rental of $4,860. Rental expense for the quarters ended December 31, 2010 and 2009 was $37,053 and $19,766 respectively.

Employment Agreements

During the quarter ending March 31, 2010, we entered into employment agreements with our Executive Chairman and Chief Executive Officer (CEO), our Chief Financial Officer (CFO) and our Vice President 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 February 28, 2010. The shares subject to the options for the VP Engineering are at an exercise price of $0.15 per share and vest pro ratably in 24 equal monthly installments as of the last day of each month commencing February 28, 2010, 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, 2011, 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.

As part of the asset purchase agreement in August 2007, NuGen also agreed to assume the commitment, entered into by New Generation Motors, for a conditional grant of $700,000 from an Indian export bank, which is only required to be paid back once the Indian manufacturer begins paying licensing fees. NuGen does not have a written assignment from the Indian export bank regarding its assumption of this commitment. NuGen will then be obligated to pay the Indian export bank a royalty received from the Indian manufacturer until $1,400,000 is repaid based on a schedule in the agreement. Since the dates provided for in the schedule to the agreement have passed, the agreement provides that if the actual sales deviate substantially, the royalty schedule will have to be changed. To date, the parties have not updated the schedule of royalty payments. Additionally, the Indian export bank also provided a loan of $500,000 to New Generation Motors. In connection with this asset purchase agreement, NuGen assumed this $500,000 loan on the condition that the loan would be converted to a conditional grant (similar to the $700,000 conditional grant). In 2006, both New Generation Motors and the Indian export bank agreed to convert this second $500,000 loan to a conditional grant under the same terms and conditions as the previous agreement. However NuGen does not have a signed document indicating such agreement. Currently, no demand has been made to NuGen for payment; accordingly, it is not reflected as a liability on the Company’s balance sheet but rather it is included under “Commitments and Contingencies”. As of December 31, 2010 no payments are owed to the Indian export bank, as the Indian manufacturer is not actively marketing the product at present and no payments are required until sales from this product are generated.

Concentration of Credit Risk

We have historically derived significant revenue from a few key customers. Revenue from one customer totaled $553,585 for the quarter ended December 31, 2010 which was 80 percent of our quarter ending December 31, 2010 revenues. Revenue from a different customer was $111,081 for the quarter ended December 31, 2009 which was 74 percent of total revenue.

NOTE F – STOCKHOLDERS’ EQUITY (DEFICIT)

Private Offerings

On December 5, 2010, the Company entered into a subscription agreement (the “Subscription Agreement”) with an “accredited investor” pursuant to which the Company issued an aggregate of 412,500 shares of common stock at a purchase price of $0.16 per share, for aggregate gross proceeds of $66,000. Such issuances were made in reliance on an exemption from registration under Regulation D and/or S promulgated under the Securities Act. The investor also executed and delivered to the Company (i) an irrevocable proxy appointing Eric Takamura, the Company’s Chief Executive Officer, as her proxy to vote her shares, and (ii) a lock-up agreement pursuant to which the investor agreed not to transfer, dispose of or encumber any of the Company’s securities for a nine-month period.

F-10

NUGEN HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2010

On October 22, 2010, the Company entered into subscription agreements with two accredited investors pursuant to which the Company issued 3% convertible promissory notes (the “Notes”) in the aggregate principal amount of $70,000. The Notes were offered and sold in reliance on the exemption from registration afforded by Rule 506 of Regulation D promulgated under Section 4(2) of the Securities Act of 1933, as amended.

The Notes have a one-year term and are convertible by the Company into Common Stock at a price of $0.18 per share, subject to adjustment if the Company effects a stock split or issues a stock dividend. If the Company effects a merger, sale of all or substantially all of its assets or any person acquires 50% of its stock, then the Note will be convertible into such number and kind of shares as would have been issuable on account of such transaction. The Company may all or a portion of the outstanding principal and interest under the Notes upon 3 business days’ notice and may repay any accrued interest in cash or additional shares of Common Stock. The amount due under the Notes will become immediately due and payable if the Company fails to pay unpaid principal on the maturity date which failure continues for 10 days, any representation or warranty made by the Company is false, incorrect, incomplete or misleading, or the Company dissolves, liquidates, ceases operations, is unable to pay its debts when due, a receiver or trustee is appointed or bankruptcy proceeding are instituted.

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.

Preferred Stock

The Company entered into an agreement with a representative of eleven accredited investors confirming that such investors have the right, but not the obligation, to purchase, in the aggregate, 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. Although we have not been contacted by these persons or their representatives, we believe that the investors may have the right to exercise their right to purchase the Preferred Stock even though the 60 day period has expired. We also issued the representative of such investors warrants to acquire until March 16, 2011, 360,000 shares of our common stock at an exercise price of $0.001 per share. We have not yet filed a certificate of designation designating this Preferred Stock. Since we have not heard from the investors or their counsel, negotiations regarding the terms of the certificate of designation with respect to the Series A Preferred Stock have not commenced. 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” (i.e., so that we shall issue, free of charge to each holder of such preferred stock, such additional shares of Preferred Stock so that the total number of shares held by the such holder equals that number that would have been issued at the lower price) 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. Since we have not commenced negotiating the terms of the certificate of designation, we are unsure as to the form the options, warrants or similar rights would take. We have not heard from the potential purchasers of the preferred stock or their counsel regarding this transaction. However, there will be included in either the terms of the Preferred Stock or pursuant to a separate convertible security, the right to purchase an additional share of common stock from the Company’s CEO at $0.15 per share.

We tentatively agreed that if we would ever grant certain rights to shareholders holding a prescribed percentage of our stock, the holders of the preferred shares would have the right to cumulate their shareholdings to determine if they are entitled to such rights. For example, if we would ever provide that more than 70% of the holders of our shares could require us to file a registration statement on their behalf, the holders of the preferred shares could aggregate their holdings to be part of that group. We also agreed to give these 11 investors an additional 10% of the value of their investment in preferred stock based on a share value of $0.15 per share. The exact value of such additional equity and the form of the additional consideration and the method for determining such value has not yet been negotiated and is presently unknown. If and when the preferred shares are purchased, each investor will also have the right for 18 months to purchase shares of common stock from the Company’s CEO for an exercise price of $0.50 per share.

F-11

NUGEN HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2010

Valuation of Stock-Based Awards, Common Stock and Warrants

Stock-Based Compensation

We adopted the fair value method of accounting for our stock options granted to employees which requires us to measure the cost of employee services received in exchange for the stock options, based on the grant date fair value of the award. The fair value of the awards is estimated using the Black-Scholes option-pricing model. The resulting cost is recognized over the period during which an employee is required to provide service in exchange for the award, usually the vesting period which is generally two years.

We amortize the fair value of our stock-based compensation for equity awards granted on a straight-line basis, which we believe better reflects the level of service to be provided by our employees over the vesting period of the awards.

The fair value of each new employee option awarded was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions.

	2010			2009
Risk-free interest rate		2.2	%		-
Expected term (in years)		2			-
Expected volatility		82	%		-
Dividend yield		0	%		-

The Black-Scholes option-pricing model requires inputs such as the risk-free interest rate, expected term and expected volatility. Further, the forfeiture rate also affects the amount of aggregate compensation. These inputs are subjective and generally require significant judgment.

The risk-free interest rate that we use is based on the United States Treasury yield in effect at the time of grant for zero coupon United States Treasury notes with maturities approximating each grant’s expected life. Given our limited history with employee grants, we use the “simplified” method in estimating the expected term for our employee grants. The “simplified” method, as permitted by the SEC, is calculated as the average of the time-to-vesting and the contractual life of the options.

Our expected volatility is derived from the historical volatilities of several unrelated public companies within industries related to our business, including the automotive OEM and battery technology industries, because we have no trading history on our common stock. When making the selections of our peer companies within industries related to our business to be used in the volatility calculation, we also considered the stage of development, size and financial leverage of potential comparable companies. Our historical volatility is weighted based on certain qualitative factors and combined to produce a single volatility factor. We have not estimated our forfeiture rate as these are the first options granted by us after our merger in January 2010.

We account for stock options issued to nonemployees also based on their estimated fair value determined using the Black-Scholes option-pricing model. However, the fair value of the equity awards granted to nonemployees is re-measured as the awards vest, and the resulting increase in value, if any, is recognized as expense during the period the related services are rendered.

Stock-based compensation expense for the quarters ended December 31, 2010 and 2009 was $9,955 and $0, respectively.

Common Stock Valuation

We granted stock options with exercise prices equal or greater than the fair value of our common stock as determined at the date of grant by our Board of Directors. Because there has been no public market for our common stock, our Board of Directors has determined the fair value of our common stock by considering a number of objective and subjective factors, including the following:

• arm’s length, third-party sales of our stock;

• our operating and financial performance; and

• the lack of liquidity of our capital stock;

F-12

NUGEN HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2010

Equity Awards

On February 9, 2010, pursuant to the 2010 Stock Option Plan, the Company granted options to acquire an aggregate of 2,000,000 shares of the Company’s common stock to several executive officers and employees. 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 the Company for “Cause” (as defined in such employee’s employment agreement described above 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” (as defined in such person’s employment agreement).

On February 11, 2010, the Company granted an option to acquire an aggregate of 400,000 shares of its common stock to an executive officer of the Company 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, 2011, and February 29, 2012, subject to accelerated exercise upon a change in control and the right to exercise the remaining option in the event of the termination of employment.

The following tables summarize all stock option and warrant grants to employees and consultants for the quarters ended December 31, 2010 and 2009, and the related changes during these periods are presented below.

	Number of Options		Weighted Average Exercise Price
Stock Options
Balance at September 30, 2010		2,400,000	$	0.40
Granted		-
Exercised		-
Forfeited		-
Balance at December 31, 2010		2,400,000	$	0.40
Options Exercisable at December 31, 2010		1,079,166	$	$0.40
Weighted Average Fair Value of Options Granted During 2010			$	$0.40

Of the total options granted, 1,079,166 are fully vested, exercisable and non-forfeitable.

The following table summarizes information about stock options and warrants for the Company as of December 31, 2010:

2010 Options Outstanding							Options Exercisable
Range of Exercise Price		Number Outstanding at December 31, 2010		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable at December 31, 2010		Weighted Average Exercise Price
$	0.15		400,000	9.25 years	$	0.15		183,333	$	0.15
$	0.45		2,000,000	9.25 years	$	0.45		895,833	$	0.45

2010 Warrants Outstanding							Warrants Exercisable
Range of Exercise Price		Number Outstanding at December 31, 2010		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable at December 31, 2010		Weighted Average Exercise Price
$	0.001		360,000	.33 years	$	0.001		360,000	$	0.001

In February 2010, we issued the representative of eleven investors warrants to acquire until March 16, 2011, 360,000 shares of our common stock at an exercise price of $0.001 per share.

F-13

ITEM 2.

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” .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:

general economic conditions,

our ability to evaluate and predict our future operations and expenses, being an early stage development company with limited assets and no current operations,

the possibility of future product-related liability claims,

our future capital needs and our ability to obtain financing,

our ability to protect our intellectual property and trade secrets, both domestically and abroad,

expenses involved in protecting our intellectual property and trade secrets,

our ability to attract and retain key management, technical, and research and development personnel,

our ability to research and develop new technology and design and manufacturing techniques,

technological advances, technology for new and competing products, and new design and manufacturing techniques developed by our competitors,

anticipated and unanticipated trends and conditions in our industry,

our ability to predict consumer preferences,

changes in the costs of operation,

our ability to compete,

our ability to manage growth and carry out growth strategies, including international expansion,

possible necessity of obtaining government approvals for both new and continuing operations,

risks, expenses and requirements involved in operating in various foreign markets, including India and China,

exposure to foreign currency risk and interest rate risk,

possible foreign import controls and United States-imposed embargoes,

possible disruption in commercial activities due to terrorist activity, armed conflict and government instability, and

other factors set forth in this Prospectus.

You are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements to reflect new information or the occurrence of unanticipated events or otherwise.

Recent Developments

We currently generate revenue primarily from contract research and development services and may derive additional revenues in the future from the sale or license of our technology to customers. Our technology is related to specialty electric drive engines and related components. This technology is currently being sold directly to OEMs pursuant to technical assistance agreements. The agreements generally provide for us to engineer our products to run in various platforms (e.g. vehicles, electric generators and motors). Our technology is used primarily to convert electrical power into mechanical power so that mechanical power can be used to propel a vehicle or run a generator. As our technology can be adapted for a particular application, our services utilizing our technology is customarily included in an engineering service component. Accordingly, the Company reflects its revenue in one line on its financial statements.

In the fiscal quarter ended December 31, 2010 $553,585 of our revenues were sales to Hefei New Generation Electro-Motor System Co. Ltd. (“Hefei”). $411,106 of that amount was for the sale of a machine and related components to Heifei, an additional $142,479 were billed for engineering services. Heifei may be a supplier of one of our electric motor systems to fulfill a potential order from Mahindra.

Our technical support agreement with BSA Motors expired in September 2010 and the contract work under the agreement was completed. We are in discussions with BSA Motors regarding entering into a new commercial contract for the next stage of work required. While we hope to enter into such an agreement with BSA Motors, there can be no assurances that we will be able to do so or that the terms of such agreement would be favorable or that BSA would decide to continue to do business with our company.

Results of Operations

Comparison of Quarters ending December 31, 2010 and 2009

Revenues. Our sales increased by $540,341 to $690,482 for the fiscal quarter ended December 31, 2010 from $150,141 for the fiscal quarter ended December 31, 2009. For the fiscal quarter ended December 31, 2010 the Company had $553,585 in sales to Hefei, $79,854 in sales to the Department of Defense (Navy SBIR) and $57,043 in sales pursuant to our contract with the Department of Defense (Army SBIR), versus sales for the fiscal year ended December 31, 2009 of $111,081 to Mahindra, pursuant to our Technical Assistance Agreements with Mahindra and $39,060 in sales to BSA Motors which were primarily for engineering services. In the fiscal quarter ending December 31, 2010, the Company provided various engineering services and delivered a machine and various components to Hefei for use in their facility in the Anhui province of China. The machine and related components delivered accounted for $411,106 of the revenues for the fiscal quarter, and we billed them $142,479 for engineering services to assist them in setting up their production facility.

Gross Loss. Our gross loss was $18,447 for the fiscal quarter ended December 31, 2010 versus $18,107 for the fiscal quarter ended December 31, 2009. The Company had increased direct labor expenses in the quarter ending December 31, 2010 due to its providing engineering services to Hefei.

Operating Expenses. Our operating expenses increased by $291,871 for the fiscal quarter December 31, 2010 from $100,181 for the fiscal quarter ended December 31, 2009. Operating expenses consist primarily of compensation, rent and office, professional fees and travel expenses. The increase consisted primarily of an increase in our compensation expense of $160,360; $100,000 of the increase was due primarily to the increase in the number of executive officers receiving compensation (four in 2010 compared to only one executive in 2009). We currently estimate that the current compensation rates will remain steady in the short term. Professional fees and travel expenses were increased due to the increased cost of being a publicly reporting company as well as additional travel expense associated with the increased number of executive officers in 2010.

Other Expenses. These expenses consist of interest expense which for the quarter ended December 31, 2010 decreased by $15,811 from $26,727 in 2009 primarily due to the conversion of a large portion of our debt to equity in January 2010. Additionally, the bridge loans made by our Chairman and CEO, Eric Takamura, were forgiven at the end of our fiscal 2009 year resulting in reduced interest expense in 2010.

Liquidity and Capital Resources

Our principal source of funds has been equity provided by our stockholders, various borrowings (including borrowings from a principal stockholder) and sales to our customers. Our principal use of funds has been for operating expenses and direct labor costs. We estimate that we have sufficient funds to continue operations until approximately March 2011 (without giving effect to exercise of options to acquire our Series A Preferred Stock which if exercised, as to which no assurance can be given, would raise between $500,000 to $700,000) and we will require additional funds to continue operations thereafter. There can be no assurance that we will be able to raise such funds if and when we wish to do so or on terms acceptable to us. This raises substantial doubt about our ability to continue as a going concern. . Specifically, in the event that we are not successful at raising capital to a level sufficient to pay our expenditures, we are prepared to reduced our administrative overhead and reduce our marketing and public relations expenditures. If we are unable to cut expenses to earn profits or raise additional debt or equity capital we will have to discontinue operations. The doubt about our ability to continue as a going concern was reflected in the opinion of our auditors expressed with respect to our financial statements for the years ended September 30, 2010 and 2009 which opinion was qualified on a “going concern basis”. The auditors noted that in light of our negative cash flow from operations, our working capital deficiency and stockholders’ deficiency, there was substantial doubt about our ability to continue as a going concern. Management currently intends to attempt to raise additional capital through public or private offerings, the conversion of its preferred stock option, the acquisition of a company; or merger with or into another company.

Our working capital was $348,043, at December 31, 2010 compared to working capital of $708,475 at September 30, 2009. Net cash used in operating activities was $705,321 and $37,362 for the fiscal quarters ended December 31, 2010 and 2009, respectively. Cash flows from financing activities provided, in the fiscal quarter ended December 31, 2010, $134,219 and was primarily due to the net proceeds from the sale of the Company’s equity securities as well the sale of convertible notes. In the fiscal quarter ended December 31, 2009 cash flows from financing activities provided $49,311 which was primarily from the proceeds of a bridge loan, which was converted in the private placement to common stock. At December 31, 2010, we had $276,097 of cash on hand.

On December 5, 2010, we entered into a subscription agreement with foreign accredited investors pursuant to which, among other things, we issued an aggregate of 412,500 shares of our common stock, par value $0.001 per share, at a purchase price of $0.16 per share, for aggregate gross proceeds of $66,000. In connection with the subscription agreements, the investor executed and delivered (i) an irrevocable proxy appointing, Eric Takamura, our Chief Executive Officer, as proxy to vote his shares, and (ii) a lock-up agreement pursuant to which each investor agreed not to transfer, dispose of or encumber any of our securities for a nine-month period. On October 22, 2010 we entered into subscription agreements with two investors pursuant to which we issued 3% convertible promissory notes in the aggregate principal amount of $70,000. The notes have a one-year term and are convertible by us into common stock at $0.18 per share. We may prepay all or apportion of the outstanding principal and interest under the notes and may repay any accrued interest in cash or additional shares of our common stock.

As of December 31, 2010, the Company had a total of $685,563 of debt outstanding. The primary components of this total are $596,108 owed to New Generation Motors and $70,000 owed to the holders of the Company’s convertible promissory notes. The Company also has the potential exercise of options to acquire a Series A Preferred Stock which could raise between $500,000-$700,000. The Company is not currently in default with respect to any material financing arrangement.

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. 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.

Revenue and Cost Recognition - We currently generate revenue primarily from contract research and development services and may derive additional revenues in the future from the sale of our products to customers. Our products are specialty electric drive engines and related components. These products are a direct result of the services to design and build each unit, which each are built to each customer’s specifications. We account for the products sold as one unit. We intend in the future to derive revenue from sales of products and will recognize the sale 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.

Some customers are asked to provide deposits prior to the Company accepting their orders. Customer Deposits are reflected on the balance sheet as a current liability and are reclassified to revenue at the time when title to the goods and the benefits and risks of ownership passes to the customer.

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.

Recent Accounting Pronouncements

Off Balance Sheet Arrangements

(i)

an aggregate of $273,741 in operational loans made by our principal shareholders to New Generation Motors to allow them to continue operations prior to August 2007,

(ii)

$101,804 in customer deposits that they retained though we were responsible for fulfilling such customer orders, and

(iii)

$29,068 in amounts we agreed to pay to New Generation Motors’s landlord for back rent.

The principal and interest on the loan is to be repaid, on a quarterly basis, until all amounts due thereon have been paid. The amount of each payment is equal to the greater of:

(i)

$7,500, and

(ii)

the product obtained by multiplying our Gross Revenues (as defined) for the quarter by the applicable percentage rate.

The applicable percentage rate increases by one percentage point per year beginning at 2% for 2007 increasing to 6% for 2011 and all subsequent years. The payment is first applied to the accrued interest on the loan and the remainder, if any, to the principal amount owed. As of the date hereof, an aggregate of $ 82,500 has been paid (eleven quarterly payments of $7,500 per quarter) and all of the payments have been applied to accrued interest. Accordingly, the principal balance of the loan has been $596,108 since August 2007.

(i)all fees and other revenue that NuGen Mobility receives from any source,

(ii) the then-current fair market value of (x)the assets purchased from New Generation Motors, 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 NuGen Mobility to any other third party of all or any portion of (x) the assets and/or (y) the business as a going concern. To date, we have not been required to make any such payments.

Although the purchased assets included a license agreement between New Generation Motors and Bajaj Auto Ltd., an Indian based manufacturer of two and three-wheel vehicles, pursuant to which Bajaj Auto licensed our technology which is embedded in Bajaj Auto’s three-wheel Auto-Rickshaw, do not have a consent from Bajaj Auto to the assignment of this agreement with New Generation Motors to us nor do we have any other agreement with Bajaj.

As part of this asset purchase agreement, we agreed to assume New Generation Motor’s commitment to reimburse a conditional grant of $700,000 that it had received from ICICI. We do not have a written assignment from ICICI regarding the assumption of this commitment. This conditional grant is only required to be paid back once Bajaj begins paying licensing fees on the technology mentioned above. If we had been assigned this agreement we would then be obligated to pay ICICI a royalty on the licensing fees received from Bajaj agreement until $1,400,000 is repaid based upon a schedule in the agreement. Since the dates provided for in the schedule to the agreement have passed, the agreement provides that if the actual sales deviate substantially, the royalty schedule will have to be changed. ICICI also provided a loan of $500,000 to New Generation Motors. In connection with this asset purchase agreement, NuGen Mobility assumed this $500,000 loan on the condition that the loan would be converted to a conditional grant (similar to the conditional grant executed by New Generation Motors and ICICI in 2001). In 2006, both New Generation Motors and ICICI agreed to convert this second $500,000 loan to a conditional grant under the same terms and conditions as the previous 2001 agreement. We have commenced discussions with ICICI with respect to an agreement for the conditional grant which we currently expect to enter into by March 2011. However, we currently do not have a signed document indicating such agreement and there can be no assurances that our discussions will result in such conditional grant agreement. Currently, no demand has been made to NuGen Mobility for payment; accordingly, we do not reflect this as a liability on our balance sheet but rather we include it under “Commitments and Contingencies” in our financial statement footnotes.

As of September 30, 2010, no payments are owed to ICICI, as Bajaj is not actively marketing its product at present.

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.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

NOT REQUIRED

ITEM 4.

CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the Company conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of December 31, 2010. Based on this evaluation, our principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that the Company’s disclosure and controls are designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in the internal controls over financial reporting during the three months ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are currently not a party to any pending legal proceedings and no such actions by, or to the best of its knowledge, against us have been threatened.

ITEM 1A. RISK FACTORS.

Not required.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On September 29, 2010 and December 5, 2010, the Company entered into subscription agreements (the “Subscription Agreements”) with “accredited investors” pursuant to which the Company issued an aggregate of 5,912,500 shares of common stock at a purchase price of $0.16 per share, for aggregate gross proceeds of $946,000. Such issuances were made in reliance on an exemption from registration under Regulation D and/or S promulgated under the Securities Act. In connection with the purchases made by three of the investors (representing 5,500,000 of the shares), said investors also executed and delivered to the Company (i) an irrevocable proxy appointing Eric Takamura, the Company’s Chief Executive Officer, as his proxy to vote their shares, and (ii) a lock-up agreement pursuant to which each investor agreed not to transfer, dispose of or encumber any of the Company’s securities for a nine-month period. The September 29, 2010 investors are affiliates of Hefei.

On October 22, 2010, the Company entered into subscription agreements with two accredited investors pursuant to which the Company issued 3% convertible promissory notes (the “Notes”) in the aggregate principal amount of $70,000. The Notes were offered and sold in reliance on the exemption from registration afforded by Rule 506 of Regulation D promulgated under Section 4(2) of the Securities Act of 1933, as amended.

ITEM. 3. DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4. REMOVED AND RESERVED

ITEM 5. OTHER INFORMATION.

None

ITEM 6. EXHIBITS

Exhibit No.		Description

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)

32.1		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act (filed herewith)

32.2		Certification of Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act (filed herewith)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

By:	/s/ Eric Takamura
Eric Takamura
President, Chief Executive Officer

February 18, 2011

By:	/s/Alan Pritzker
Alan Pritzker
Chief Financial Officer

February 18, 2011

NUGEN HOLDINGS, INC. - FORM 10-Q - February 18, 2011

Attached files

NUGEN HOLDINGS, INC. Reports