UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
[X]
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT
OF 1934
For
the
quarter ended March 31, 2008
[
]
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT
OF 1934
For
the
transition period from _____ to _____
Commission
File Number: 000-51249
ENERGTEK
INC.
----------------------------------------------------
(Exact
name of registrant as specified in its charter)
Nevada
-------------------------------------------------
(State
or other jurisdiction of incorporation)
|
42-1708652
--
--------------------------------------
(IRS
Employer Identification No.)
|
c/o
David
Lubin & Associates, PLLC
26
East
Hawthorne Avenue
Valley
Stream, NY 11580
-----------------------------------------------------------
(Address
of Principal Executive Offices, Zip Code)
(516)
887-8200
--------------------------------------------------------------------
(Registrant’s
Telephone Number, Including Area Code)
-----------------------------------------------------------------
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and
(2) has been subject to such filing requirements for the past 90 days.
Yes
[ X
]
No [ ]
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
¨
(Do not check if a smaller reporting company)
|
Smaller
Reporting Company
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
[
]
No [ X ]
The
number of shares outstanding of the issuer’s common stock as of May 11, 2008 was
71,861,259 shares of common stock.
TABLE
OF CONTENTS
PART
I - FINANCIAL INFORMATION
|
4
|
Item
1.
|
Financial
Statements.
|
4
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
9
|
Note
1 - Business Organization and Summary of Significant Accounting
Policies
|
9
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
10
|
Note
1 - Business Organization and Summary of Significant Accounting Policies
(Cont.)
|
10
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
11
|
Note
1 - Business Organization and Summary of Significant Accounting Policies
(Cont.)
|
11
|
Note
2 - Stockholders Equity
|
11
|
Note
3 - Going Concern
|
11
|
Note
4 - Subsequent Events:
|
11
|
Item
2.
|
Management’s
Discussion and Analysis or Plan of Operations.
|
12
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
16
|
Item
4T.
|
Controls
and Procedures.
|
16
|
PART
II - OTHER INFORMATION
|
18
|
Item
1.
|
Legal
Proceedings.
|
18
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds.
|
18
|
Item
3.
|
Defaults
Upon Senior Securities.
|
19
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders.
|
19
|
Item
5.
|
Other
Information.
|
19
|
Item
6.
|
Exhibits
|
20
|
PART
I - FINANCIAL INFORMATION
Item
1.
|
Financial
Statements.
|
The
accompanying financial statements have been prepared by Energtek Inc.
("Energtek" or "the Company") without audit. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary
to
present fairly the financial position, results of operations and cash flows
at
March 31, 2008 and 2007 and for the periods then ended have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company’s December 31, 2007 audited financial statements. The results of
operations for the periods ended March 31, 2008 and 2007 are not necessarily
indicative of the operating results for the full year.
ENERGTEK
INC.
|
(A
DEVELOPMENT STAGE ENTERPRISE)
|
CONSOLIDATED
CONDENSED BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
Note
|
|
As
of
31/03/2008
(Unaudited)
$
|
|
As
of
31/12/2007
(Audited)
$
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
1,956,200
|
|
|
2,527,681
|
|
Advances
paid to suppliers
|
|
|
|
|
|
364,188
|
|
|
274,150
|
|
Vat
Refund Receivable
|
|
|
|
|
|
106,763
|
|
|
127,296
|
|
Prepaid
expenses and others
|
|
9,651
|
|
|
9,397
|
|
Inventory
|
|
|
|
|
|
13,836
|
|
|
-
|
|
Total
current assets
|
|
|
|
|
|
2,450,638
|
|
|
2,938,524
|
|
|
|
|
|
|
|
|
|
|
|
|
ADVANCES&DEPOSITS
|
|
|
|
|
|
45,622
|
|
|
33,337
|
|
FIXED
ASSETS, NET
|
|
|
|
|
|
207,783
|
|
|
185,577
|
|
INVESTMENTS:
|
|
|
|
|
|
|
|
|
|
|
Investments
in Shares
|
|
|
|
|
|
24,500
|
|
|
24,500
|
|
Patent
rights
|
|
|
|
|
|
40,736
|
|
|
41,920
|
|
|
|
|
|
|
|
65,236
|
|
|
66,420
|
|
TOTAL
ASSETS
|
|
2,769,279
|
|
|
3,223,858
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDER EQUITY
|
|
|
|
|
|
|
Short
Term Loans
|
|
|
|
|
|
481,997
|
|
|
468,965
|
|
Accounts
payable and Accrued Liabilities
|
|
|
|
|
|
228,954
|
|
|
239,448
|
|
TOTAL
CURRENT LIABILITIES
|
|
710,951
|
|
|
708,413
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDER
EQUITY
|
|
|
2
|
|
|
|
|
|
|
|
Preferred
Stock: $0.001 par value; 5,000,000 authorized,
|
|
|
|
none
issued and outstanding
|
|
|
|
|
|
|
|
|
|
|
Common
Stock: $0.001 par value; 750,000,000 authorized, 71,111,259 issued
and
outstanding
|
|
|
|
|
|
71,111
|
|
|
70,754
|
|
Additional
Paid-in Capital
|
|
|
|
|
|
7,568,444
|
|
|
7,251,051
|
|
Accumulated
Deficit
|
|
|
|
|
|
(5,581,227
|
)
|
|
(4,806,360
|
)
|
TOTAL
SHAREHOLDER EQUITY
|
|
|
|
|
|
2,058,328
|
|
|
2,515,445
|
|
Total
Liabilities and Stockholders' Equity
|
|
2,769,279
|
|
|
3,223,858
|
|
ENERGTEK
INC.
|
(A
DEVELOPMENT STAGE ENTERPRISE)
|
CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Since
the
|
|
|
|
Note
|
|
March-31
|
|
March-31
|
|
beginning
of
the
development stage entity
|
|
|
|
|
|
2008
|
|
2007
|
|
until
March 31, 2008
|
|
Revenues
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
|
|
|
|
|
|
98,256
|
|
|
201,799
|
|
|
1,335,617
|
|
Consulting-Related
parties
|
|
|
|
|
|
-
|
|
|
-
|
|
|
122,900
|
|
Research
and
Development
expenses
|
|
|
|
|
|
166,390
|
|
|
-
|
|
|
1,497,225
|
|
Market
Research-
Related
parties
|
|
|
|
|
|
-
|
|
|
-
|
|
|
120,020
|
|
General
and administrative
expenses
|
|
|
|
|
|
503,920
|
|
|
388,104
|
|
|
2,034,745
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
|
|
|
768,566
|
|
|
589,903
|
|
|
5,110,506
|
|
|
|
|
|
|
|
Net
loss from operations
|
|
|
|
|
|
(768,566
|
)
|
|
(589,903
|
)
|
|
(5,110,506
|
)
|
|
|
|
|
|
|
Other
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income (losses), net
|
|
|
|
|
|
(6,300
|
)
|
|
4,681
|
|
|
(35,397
|
)
|
Investments
impairment
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(50,000
|
)
|
Patent
impairment
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(100,000
|
)
|
Total
other income(expenses)
|
|
|
|
|
|
(6,300
|
)
|
|
4,681
|
|
|
(185,397
|
)
|
|
|
|
|
|
|
Net
Loss
|
|
|
|
|
|
(774,866
|
)
|
|
(585,222
|
)
|
|
(5,295,903
|
)
|
|
|
|
|
|
|
Weighted
Average Shares
Common
Stock
Outstanding
|
|
|
|
|
|
71,009,490
|
|
|
50,208,512
|
|
|
|
|
Net
Loss Per Common Share
(Basic
and Fully Diluted)
|
|
|
|
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
|
|
ENERGTEK
INC.
|
(A
DEVELOPMENT STAGE ENTERPRISE)
|
CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Since
the
|
|
|
|
March-31
|
|
March-31
|
|
beginning
of
the
development stage entity
|
|
|
|
2008
|
|
2007
|
|
until
March 31, 2008
|
|
Cash
Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
(774,866
|
)
|
|
(585,222
|
)
|
|
(5,295,903
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
|
Provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and Amortization
|
|
|
11,056
|
|
|
39,358
|
|
|
1,130,764
|
|
Foreign
exchange difference on loans
|
|
|
13,032
|
|
|
|
|
|
54,908
|
|
Impairment
and Adjustments of Patent
|
|
|
-
|
|
|
-
|
|
|
102,147
|
|
Impairment
of Option Investment
|
|
|
-
|
|
|
-
|
|
|
50,000
|
|
Non-employees'
share compensation
|
|
|
62,750
|
|
|
181,268
|
|
|
759,293
|
|
Severance
pay liability
|
|
|
-
|
|
|
-
|
|
|
(11,295
|
)
|
Decrease
(Increase) in accounts receivable
|
|
|
5,240
|
|
|
370
|
|
|
(121,565
|
)
|
Increase
in Inventory
|
|
|
(13,836
|
)
|
|
-
|
|
|
(13,836
|
)
|
Accounts
payable and accrued liabilities
|
|
|
(10,494
|
)
|
|
68,191
|
|
|
(2,532
|
)
|
Net
cash used in Operating Activities
|
|
|
(707,118
|
)
|
|
(296,035
|
)
|
|
(3,348,019
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows to Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
Investment
in new-consolidated subsidiaries and purchase of new-activity
|
|
|
-
|
|
|
(10,327
|
)
|
|
(160,688
|
)
|
Investment
in shares
|
|
|
-
|
|
|
(30,000
|
)
|
|
(24,500
|
)
|
Investment
in Option
|
|
|
-
|
|
|
-
|
|
|
(50,000
|
)
|
Deposit
|
|
|
(12,285
|
)
|
|
(4,755
|
)
|
|
(41,931
|
)
|
Advances
paid to suppliers of fixed assets
|
|
|
(75,000
|
)
|
|
-
|
|
|
(334,340
|
)
|
Purchase
of fixed assets
|
|
|
(32,078
|
)
|
|
(303
|
)
|
|
(151,346
|
)
|
Net
cash used in Investing Activities
|
|
|
(119,363
|
)
|
|
(45,385
|
)
|
|
(762,805
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock
|
|
|
255,000
|
|
|
1,122,762
|
|
|
4,618,262
|
|
Warrants
exercise
|
|
|
-
|
|
|
-
|
|
|
1,295,000
|
|
Redemption
of warrants
|
|
|
-
|
|
|
-
|
|
|
(250,000
|
)
|
Repayment
of loan
|
|
|
-
|
|
|
-
|
|
|
(220,000
|
)
|
Net
cash from Financing Activities
|
|
|
255,000
|
|
|
1,122,762
|
|
|
5,443,262
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Increase (Decrease) in Cash
|
|
|
(571,481
|
)
|
|
781,342
|
|
|
1,332,438
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
at Beginning of Period
|
|
|
2,527,681
|
|
|
287,301
|
|
|
623,762
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
at End of Period
|
|
|
1,956,200
|
|
|
1,068,643
|
|
|
1,956,200
|
|
ENERGTEK
INC.
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
1 -
Business
Organization and Summary of Significant Accounting
Policies
About
Energtek
Energtek
provides proprietary solutions to meet the technical, economical and logistical
challenges of Natural Gas (NG) delivery for vehicles worldwide, with a major
focus on the 2- and 3-wheel vehicles market.
The
Company is considered to be a development stage company and as such the
financial statements presented herein are presented in accordance with Statement
of Financial Accounting Standards (“SFAS”) No. 7 “Accounting and Reporting by
Development Stage Enterprises”.
Inception
of Development Stage
The
cumulative data from inception of the development stage entity is presented
since September, 2006, when the Company changed its area of activities to clean
energy related technologies.
Condensed
Financial Statements
The
accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, at March 31, 2008 and the results of operations and cash flows at
March 31, 2008 and 2007 and for the periods then ended have been made. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Company’s December 31,
2007 audited financial statements. The results of operations for the
periods ended March 31, 2008 and 2007 are not necessarily indicative of the
operating results for the full year.
Recently
Issued Standards
In
March
2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about
Derivative Instruments and Hedging Activities - An Amendment of SFAS
No. 133” (“SFAS 161”). SFAS 161 seeks to improve financial reporting for
derivative instruments and hedging activities by requiring enhanced disclosures
regarding the impact on financial position, financial performance, and cash
flows. To achieve this increased transparency, SFAS 161 requires (1) the
disclosure of the fair value of derivative instruments and gains and losses
in a
tabular format; (2) the disclosure of derivative features that are credit
risk-related; and (3) cross-referencing within the footnotes. SFAS 161 is
effective for us on January 1, 2009. We are in the process of evaluating
the new disclosure requirements under SFAS 161.
ENERGTEK
INC.
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
1 -
Business
Organization and Summary of Significant Accounting Policies
(Cont.)
In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
Combinations” (“SFAS 141R”). SFAS 141R continues to require the purchase method
of accounting to be applied to all business combinations, but it significantly
changes the accounting for certain aspects of business combinations. Under
SFAS
141R, an acquiring entity will be required to recognize all the assets acquired
and liabilities assumed in a transaction at the acquisition-date fair value
with
limited exceptions. SFAS 141R will change the accounting treatment for certain
specific
acquisition related items including: (1) expensing acquisition related
costs as incurred; (2) valuing noncontrolling interests at fair value at
the acquisition date; and (3) expensing restructuring costs associated with
an acquired business. SFAS 141R also includes a substantial number of new
disclosure requirements. SFAS 141R is to be applied prospectively to business
combinations for which the acquisition date is on or after January 1, 2009.
We expect SFAS 141R will have an impact on our accounting for future business
combinations once adopted but the effect is dependent upon the acquisitions
that
are made in the future.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements” (“SFAS 160”). SFAS 160 establishes new
accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
noncontrolling interest in a subsidiary (minority interest) is an ownership
interest in the consolidated entity that should be reported as equity in the
Consolidated Financial Statements and separate from the parent company’s equity.
Among other requirements, this statement requires consolidated net income to
be
reported at amounts that include the amounts attributable to both the parent
and
the noncontrolling interest. It also requires disclosure, on the face of the
Consolidated Statement of Operations, of the amounts of consolidated net income
attributable to the parent and to the noncontrolling interest. This statement
is
effective for us on January 1, 2009. This amount was included in retirement
and insurance programs and other long-term obligations on our Consolidated
Balance Sheets. We are still in the process of evaluating the impact SFAS 160
will have on our Consolidated Financial Statements.
Recently
Adopted Standards
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 allows
entities to voluntarily choose to measure certain financial assets and
liabilities at fair value (“fair value option”). The fair value option may be
elected on an instrument-by-instrument basis and is irrevocable, unless a new
election date occurs. If the fair value option is elected for an instrument,
SFAS 159 specifies that unrealized gains and losses for that instrument be
reported in earnings at each subsequent reporting date. SFAS 159 was effective
for us on January 1, 2008. We did not apply the fair value option to any of
our outstanding instruments and, therefore, SFAS 159 did not have an impact
on
our Condensed Consolidated Financial Statements.
ENERGTEK
INC.
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
1 -
Business
Organization and Summary of Significant Accounting Policies
(Cont.)
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”
(“SFAS 157”), which defines fair value, establishes a framework for measuring
fair value in accordance with generally accepted accounting principles, and
expands disclosures about fair value measurements. SFAS 157 was effective for
us
on January 1, 2008 for all financial assets and liabilities and for
nonfinancial assets and liabilities recognized or disclosed at fair value in
our
Condensed Consolidated Financial Statements on a recurring basis (at least
annually). For all other nonfinancial assets and liabilities, SFAS 157 is
effective for us on January 1, 2009. As it relates to our non-pension
financial assets and liabilities and for nonfinancial assets
and
liabilities recognized or disclosed at fair value in our Condensed Consolidated
Financial Statements on a recurring basis (at least annually), the adoption
of
SFAS 157 did not have a material impact on our Condensed Consolidated Financial
Statements. We are still in the process of evaluating the impact that SFAS
157
will have on our pension related financial assets and our nonfinancial assets
and liabilities not valued on a recurring basis (at least
annually).
Note
2 - Stockholders Equity
Between January
1, 2008 and March 31, 2008, the Company raised an aggregate of $255,000 by
selling to purchasers an aggregate of 340,000 units of the Company’s
securities, each unit consisting of one share of common stock and one warrant,
designated Class 2007-J Warrant. Each Class 2007-J Warrant entitles the holder
thereof to purchase one share of common stock at a purchase price of $1.50
until
February 28, 2011. The purchase price paid to the Company for each unit was
$0.75.
Commissions
in cash, in the amount of $12,750 are to be paid on the said fund raising and
additional 17,000 shares of our common stock are to be issued as commission.
Note
3 - Going Concern
The
Company's consolidated financial statements are prepared using generally
accepted accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal course
of
business. The Company is working on the basis of a budget that will enable
it to
operate during the coming year. However the Company will need additional working
capital for its future planned expansion of activities and to service its debt,
which raises doubt about its ability to continue as a going concern.
Continuation of the Company as a going concern is dependent upon obtaining
sufficient capital to be successful in that effort. The accompanying
consolidated financial statements do not include any adjustments relating to
the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result from the outcome of this
uncertainty.
Note
4 -
Subsequent Events
:
On
April
1, 2008 the Company signed an agreement with Chelsea Holdings, Inc. (hereinafter
"CHELSEA") for the provision of PR/IR services for a period of 90 days,
renewable for successive periods of 90 days. In exchange .for their services
the
Company agreed to issue to CHELSEA 50,000 (fifty thousand) shares of common
stock of the Company. The agreement provides for no other payments except of
reimbursement of expenses pre-approved by the Company
On
April
15, 2008, the Company raised an aggregate of $500,000 by selling to purchasers
an aggregate of 666,667 units of the Company’s securities, each unit
consisting of one share of common stock and one warrant, designated Class 2007-J
Warrant. Each Class 2007-J Warrant entitles the holder thereof to purchase
one
share of common stock at a purchase price of $1.50 until February 28, 2011.
The
purchase price paid to the Company for each unit was $0.75.. Commissions in
cash, in the amount of $25,000 are to be paid on the said fund raising and
additional 33,333 shares of our common stock are to be issued as commission.
ENERGTEK
INC.
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Item
2.
|
Management’s
Discussion and Analysis or Plan of
Operations.
|
As
used
in this Form 10-Q, references to the “Company”, "Corporation", “Energtek,” “we,”
“our” or “us” refer to Energtek Inc. or to Energtek Inc. together with its
subsidiaries, unless the context otherwise indicates.
This
Management’s Discussion and Analysis or Plan of Operation should be read in
conjunction with the financial statements and the notes thereto.
Forward-Looking
Statements
This
Form
10-Q contains forward-looking statements. For this purpose, any statements
contained in this Form 10-Q that are not statements of historical fact may
be
deemed to be forward-looking statements. You can identify forward-looking
statements by those that are not historical in nature, particularly those that
use terminology such as “may,” “will,” “should,” “expects,” “anticipates,”
“contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,”
“potential,” or “continue” or the negative of these similar terms. In evaluating
these forward-looking statements, you should consider various factors, including
the following: (a) those risks and uncertainties related to general economic
conditions, (b) whether we are able to manage our planned growth efficiently
and
operate profitable operations, (c) whether we are able to generate sufficient
revenues or obtain financing to sustain and grow our operations, (d) whether
we
are able to successfully fulfill our primary requirements for cash. The
Company’s actual results may differ significantly from the results projected in
the forward-looking statements. The Company assumes no obligation to update
forward-looking statements, except as otherwise required under the applicable
federal securities laws.
Overview
We
were
incorporated under the laws of the state of Florida on November 18, 1998 under
the name “Elderwatch, Inc.” On September 20, 2006, we changed our Company’s
state of incorporation from Florida to Nevada by the merger of Elderwatch,
Inc.
with and into its wholly-owned subsidiary, Energtek Inc., a Nevada corporation,
which was formed for such purpose. Simultaneously with such merger, we changed
our Company name from "Elderwatch, Inc." to "Energtek Inc." in order to better
reflect our proposed business operations. We also increased the number of our
shares of authorized common stock from 50,000,000 shares to 250,000,000 shares,
and we decreased the number of our shares of authorized preferred stock from
10,000,000 shares to 5,000,000 shares. On October 30, 2006, we implemented
a one
for three forward stock split of our common stock and further increased the
authorized shares of our common stock to 750,000,000 shares, par value
$0.001.
On
or
about May 24, 2006, we changed our focus to the field of clean energy
technologies, with special emphasis being put on the field of Natural Gas
Vehicles (NGV). We are currently preparing our infrastructure for operations
through some of our subsidiaries and we are also looking at various alternatives
in this field
Following
the change of control of the Company in May 2006, Energtek has focused
on:
|
·
|
Identifying
and assessing alternative energy technologies and opportunities;
and
|
|
·
|
Acquiring,
establishing and supporting the activities of several subsidiaries
in the
U.S., Israel, India and Ukraine.
|
The
Company enables the conversion of vehicles, especially two and three wheelers,
into natural gas powered vehicles, allowing this much cleaner and cheaper fuel
to replace other more expensive and environmentally damaging fuel
sources.
We
currently have no business operations or revenues. We are devoting substantially
all of our efforts to establishing a new business. In our efforts to establish
such new business, our management has been engaged principally in the following
activities: raising funds; investigating clean energy technologies and related
business opportunities; analyzing proposed or identified opportunities; entering
into agreements for pursuing such opportunities; identifying management and
industry specialists; and acquiring operational and technological
assets.
We
have
also entered into agreements with consultants for the provision of consulting
services related to the identification and assessment of clean energy
technologies and opportunities. We currently have six subsidiaries and one
affiliate. All of our subsidiaries and affiliates are in development
stage.
We
have
the following six subsidiaries:
|
1.
|
Moregastech
LLC, a Nevada limited liability
company.
|
|
2.
|
Primecyl
LLC, a New York limited liability
company.
|
|
3.
|
Energtek
Products Ltd., a company organized under the laws of the State of
Israel.
|
|
4.
|
GATAL
(Natural Gas for Israel) Ltd., a company organized under the laws
of the
State of Israel.
|
|
5.
|
Angstore
Technologies Ltd., a company organized under the laws of the State
of
Israel.
|
|
6.
|
Ukcyl
Ltd., a company registered in Ukraine (99.5% ownership through Primecyl
LLC).
|
We
also
own, through Moregastech LLC, 50% of the issued and outstanding shares of
Moregastech India Private Limited, a company registered in India.
Business
conducted or under development through Subsidiaries and Affiliate:
|
·
|
AngStore
Technologies Ltd, Israel:
Developer of Adsorbed Natural Gas (ANG) storage technology
|
|
·
|
Energtek
Products Ltd, Israel:
Developer
of Natural Gas (NG) bulk transportation
technologies
|
|
·
|
GATAL
Ltd, Israel:
Distribution of Natural Gas utilizing bulk NG transportation technology,
and facilitator of Natural Gas Vehicles (NGV)
projects
|
|
·
|
MoreGasTech
India Private Limited, India:
Manufacturing and distribution of NGV equipment and pipeless gas
supply
technology
|
|
·
|
Ukcyl
Ltd, Ukraine:
Manufacturing of high-pressure gas storage tanks
|
|
·
|
Moregastech
LLC, USA:
Supplier of NGV Infrastructure and high-pressure
equipment
|
We
intend
to further acquire or establish additional subsidiaries in selected countries,
in order to sustain our business activities in such countries.
Specific
fast interchangeable tanks (FIT) and low-pressure mobile pipeline (LMP) business
development efforts are ongoing in several countries: Philippines, India,
Israel, Thailand, and Indonesia.
On
March
17, 2008, the Company executed a Memorandum of Understanding with Confidence
Petroleum India Ltd., a company traded on the Bombay Stock Exchange, which
has
been operating for several years in India manufacturing cylinders for liquefied
petroleum gas and is among the major manufacturers in Asia of such cylinders.
Confidence and the Company will form a joint venture for fostering the
introduction of natural gas on-board vehicle systems, for the supply of natural
gas in India and surrounding countries through the use of bulk transportation
systems and for manufacturing and marketing high pressure cylinders and
ancillary equipment. Confidence shall invest $2,000,000 in the venture in
exchange for, among others, approximately 50% interest in Primecyl.
On
May 2,
2008 in furtherance of the terms of the MOU, the Company and Confidence
Petroleum India signed another agreement which provides that the joint venture
will have exclusivity in India, Pakistan, Bangladesh and Sri-Lank for the sales
of Natural Gas through the use of the FIT and LMP systems developed by the
Company. The exclusivity is subject to the joint venture obtaining funding
of at
least $23,000,000 for the projects to take place in the mentioned countries.
Pursuant to the agreements, it is the responsibility of Confidence to obtain
the
financing for the projects.
Plan
of Operation
Over
the
next twelve months, we intend to continue investing and engaging in the field
of
natural gas and clean energy technologies, initially focusing on activities
related to natural gas. We intend to develop the activities in which we have
invested and increase our research and development efforts. We also intend
to
continue analyzing a series of issues, markets, projects and investments
proposed to us in areas related to clean energy technologies. We anticipate
entering into additional agreements with experts and consultants in the relevant
areas, in order to perform evaluations of the proposals. Such evaluation process
may include in some cases the performance of evaluation experiments, which
may
require entering into subcontracting agreements with laboratories and companies
capable of performing the same. We expect that once a proposal/project is
identified as being of interest to us, we will enter into development activities
and/or will purchase a stake in such activities and/or will invest in such
activities.
We
are
contemplating the opening of subsidiaries in the Philippines and in the European
Union. The expansion of activities that already took place and those that are
planned will require the expansion of the teams of the Company and its
subsidiaries.
In
the
last period our engineering and PR teams have been enlarged. We expect further
enlargements of the engineering team, the R&D team, the team in the
Philippines, the team in India, the business development team and others
teams.
Results
of Operations for the Three Months Ended March 31, 2008
The
consolidated financial statements include the accounts of Energtek, Inc. and
all
of its wholly owned and majority-owned subsidiaries.
Revenue.
The
Company has never generated any revenues.
Consulting
Expenses.
During
the quarter ended March 31, 2008, we incurred $98,256 in consulting expenses
compared with $201,799 for the three months ended March 31, 2007. Expenses
for
the quarter ended March 31, 2008 consist primarily of expenses incurred for
the
analyses financial situation, processes and business opportunities compared
with
the three months ended March 31, 2007 where expenses consisted primarily of
expenses incurred for the analyses of clean energy technologies, as well as
in
depth analyses of natural gas storage systems and production processes for
such
systems.
Research
and Development expenses.
During
the quarter ended March 31, 2008, we incurred $166,390 in research and
development expenses compared with no expenses for the three months ended March
31, 2007. We started in research and development activity after full acquisition
of Angstore Technologies Ltd took place in August 2007.
General
and Administrative Expenses.
General
and administrative expenses consist of management compensation, rent,
professional fees, telephone, travel and other general corporate expenses.
General and administrative expenses were $503,920 during the quarter ended
March
31, 2008 compared with $388,104 for the three months ended March 31, 2007.
Increase in G&A expenses is a result of increase in travel expenses and
salary.
Interest
Income, net.
The
Company recorded net interest losses of $6,300 during the quarter ended March
31, 2008 compared with net interest income of $4,681 for the three months ended
March 31, 2007.
Going
Concern Consideration
For
the
fiscal quarter ended March 31, 2008, the Company recorded a net loss of $774,866
and an accumulated deficit of $5,581,227. The Company's consolidated financial
statements were prepared using generally accepted accounting principles
applicable to a going concern which contemplates the realization of assets
and
liquidation of liabilities in the normal course of business. The Company is
working on the basis of a budget that will enable it to operate during the
coming year. However the Company will need additional working capital for its
future planned expansion activities and to service its debt, which raises doubt
about its ability to continue as a going concern. Continuation of the Company
as
a going concern is dependent upon obtaining sufficient capital to be successful
in that effort. The accompanying consolidated financial statements do not
include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result from the outcome of this uncertainty.
Off
Balance Sheet Arrangements
Our
wholly-owned subsidiary UkCyl Ltd has total commitments for the acquisition
of
the equipment
in
amount
of
$198,660 (not including value added taxes) as follows:
On
April
17, 2007, UkCyl entered into a Purchase Agreement with Pavlograd Plant for
Technological Equipment, a Ukrainian limited liability company (“Pavlograd”).
Pursuant to such agreement, Pavlograd agreed to sell to UkCyl certain machinery.
The aggregate purchase price to be paid by UkCyl to Pavlograd for such machinery
is approximately $343,000.
Up
to
April 10, 2008 the company has paid to Pavlograd total $174,340 (not including
value added taxes) according to the progress in the done work.
On
September 26, 2007, UkCyl entered into an agreement with Dynatech Furnaces
(Bombay) Pvt. Ltd. (“Dynatech”) to purchase a high pressure steel seamless
Cylinder Heat Treatment Furnace Line (the “Agreement”). UkCyl is to pay a total
purchase price of $190,000, which will be paid in three installments at
specified intervals. The first installment, in the amount of $85,000, was paid
to Dynatech within 10 weeks following execution of the Agreement.
An
inspection and approval of the equipment took place in India in March 2008,
Dynatech dismantled the equipment and prepared it for shipment to Ukcyl’s
facility in Ukraine. Dynatech received a second installment in the amount of
$75,000.
Upon
arrival of the equipment to Ukcyl's facilities in Ukraine, Dynatech shall assist
in the installation and testing of the equipment. Following the installation
and
the initial operation of the equipment, Dynatech shall be paid $30,000
representing the balance of the purchase price. In the event the equipment
does
not conform to the specifications required pursuant to the Agreement, Dynatech
shall pay damages in the amount of $160,000. The payment of such damage amount
does not limit any other legal rights and remedies available to
Ukcyl.
The
equipment purchased is subject to a one year warranty as of the date of
installation and commencement of operation in Ukcyl’s facility. In addition, for
a period of three years following installation, Dynatech shall provide technical
support with respect to the operation of the equipment.
Item
3.
|
Quantitative
and Qualitative Disclosures About Market
Risk.
|
Smaller
reporting companies are not required to provide the information required by
Item
305.
Item
4T.
|
Controls
and Procedures.
|
Evaluation
of Disclosure Controls and Procedures
Our
disclosure controls and procedures are designed to ensure that information
required to be disclosed in reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within
the
time periods specified in the rules and forms of the United States Securities
and Exchange Commission. Our principal executive and financial officer have
reviewed the effectiveness of our "disclosure controls and procedures" (as
defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15
within
the end of the period covered by this Quarterly Report on Form 10-Q
and
have
concluded that the disclosure controls and procedures are effective to ensure
that material information relating to the Company is recorded, processed,
summarized, and reported in a timely manner.
Changes
in Internal Controls over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over our financial reporting. Internal control over financial reporting
is designed to provide reasonable assurance to our management and the board
of
directors regarding the reliability of financial reporting and the preparation
and fair presentation of published financial statements. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can
provide only reasonable assurances with respect to financial statement
preparation and presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may decline.
PART
II - OTHER INFORMATION
Item
1.
|
Legal
Proceedings.
|
On
October 17, 2007, Ukcyl filed two legal demands with the Court for Commercial
Demands at Perechyn, Ukraine, against Steatit - Open Joint Stock Company
("SOJSC"), the seller of a building that was bought by Ukcyl. In the demands,
Ukcyl requested that the Court order the SOJSC to comply with the Sale-Purchase
Agreement dated May 15, 2007, by removing machinery belonging to the SOJSC
and
demolishing an old building located on the premises. The location of the
machinery and old building do not currently prevent us from constructing Ukcyl’s
facility or commencing operations. The demands further requested that SOJSC
be
ordered to pay the Company’s legal expenses incurred in connection with these
actions.
According
to the decisions of the Court dated November 23, 2007, SOJSC was ordered to
remove from the premises any object belonging to SOJSC and to demolish residuals
of the old building. On January 11, 2008 the Department of the State Executive
Service of the area opened an executive prosecution in pursuance of the order
of
the Court. To date, all equipment of SOJSC has been removed from the premises.
With respect to demolishing the old building, SOJSC appealed the decision of
the
Court to the Lviv Court of Appeal (Court of Appeal). On February 12, 2008,
the
Court of Appeals ordered the dismissal of the appeal upon SOJSC’s request. The
old building does not currently prevent Ukcyl from constructing the Company’s
facility or commencing operations.
On
January 3, 2008 the SOJSC filed a lawsuit with the Court for Commercial Demands
- against Ukcyl concerning recognition of invalidity of certain clauses and
appendix of the Agreement in the issues related to the purchased premises.
On
February 5, 2008 the case was closed due to the SOJSC’s failure to appear at the
Court session.
During
the quarter ended March 31, 2008, there were no pending legal proceedings to
which the Company was a party or in which 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 was a party adverse to
the
Company or had a material interest adverse to the Company. The Company’s
property was not the subject of any pending legal proceedings.
There
have been no material changes to the risks to our business described in our
Annual Report on Form 10-K for the year ended December 31, 2007 filed
with the SEC on March 27, 2008.
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds.
|
Unregistered
Sales of Equity Securities
On
April
1, 2008 we signed an agreement with Chelsea Holdings, Inc. (hereinafter
"CHELSEA") for the provision of PR/IR services for a period of 90 days,
renewable for successive periods of 90 days. In exchange for their services
we
agreed to issue to CHELSEA fifty thousand shares of common stock of the Company.
The agreement provides for no other payments except of reimbursement of expenses
pre-approved by the Company. The aforementioned securities were issued in
reliance upon the exemption afforded by the provisions of Section 4(2) of the
Securities Act of 1933, as amended, and Rule 506 promulgated thereunder, and
in
reliance on the purchaser's representations as to its status as an accredited
investor, and that it was acquiring the shares for investment purposes and
with
not a view to any sale or distribution. In addition, the shares bear a 1933
Act
restrictive legend.
On
April 15, 2008, we raised an aggregate of $500,000 by selling to purchasers
an
aggregate of 666,667 units of the Company’s securities, each unit
consisting of one share of common stock and one warrant, designated Class 2007-J
Warrant. Each Class 2007-J Warrant entitles the holder thereof to purchase
one
share of common stock at a purchase price of $1.50 until February 28, 2011.
The
purchase price paid to the Company for each unit was $0.75. The units were
offered and sold pursuant to a placement held under Regulation S promulgated
under the Securities Act of 1933, as amended.
The
purchasers represented to us that such purchasers were not United States persons
(as defined in Regulation S) and were not acquiring the shares for the account
or benefit of a United States person. The purchasers further represented that
at
the time of the origination of contact concerning the subscription for the
units
and the date of the execution and delivery of the subscription agreement for
such units, such purchasers were outside of the United States. We did not make
any offers in the United States, and there were no selling efforts in the United
States. There were no underwriters or broker-dealers involved in the private
placement and no underwriting discounts. Commissions in cash, in the amount
of
$25,000 are to be paid on the said fund raising and additional 33,333 shares
of
our common stock are to be issued as commission.
Purchases
of Equity Securities by the Issuer and Affiliated
Purchasers
None.
Item
3.
|
Defaults
Upon Senior Securities.
|
None.
Item
4.
|
Submission
of Matters to a Vote of Security
Holders.
|
None.
Item
5.
|
Other
Information.
|
On
May 4,
2008, the Board of Directors established a compensastion committee and appointed
Mr. Yishai Aizik and Mr. Eliezer Sandberg as members of said
committee.
On
May 4,
2008 the Board of Directors of the Company has approved issuance of up to
7,500,000 shares of the Company's common stock in consideration of Employee
Stock Option Plans ("ESOP") of the Company and its subsidiaries, out of which
2,700,000 are reserved for issuance to Israeli resident employees under the
Israeli ESOP. The remaining 5,200,000 shares of common stock are reserved for
issuance under future ESOPs.
On
May 4,
2008, the Company adopted an Employee Stock Option Plan providing for the grant
of an aggregate of 7, 500,000 shares of common stock pursuant to such plan,
2,700,000 of which are reserved for issuance to Israeli resident employees
of
the Company and its affiliates.
On
May 4,
2008, the Company amended its Management Services Agreement with EuroSpark
S.A.,
a Belgian corporation, providing for an increase in the monthly management
fee
payable to EuroSpark from €6,600 Euros to €12,000 Euros per month. EuroSpark
provides operational and financial management services to the Company through
Lev Zaidenberg, the chief executive officer and a director of
Eurospark.
Exhibit
No.
|
|
Description
|
31.1
|
|
Principal
Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2
|
|
Principal
Financial Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32.1
|
|
Principal
Executive Officer Certification Pursuant to 18 U.S.C. Section 1350,
as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2
|
|
Principal
Financial Officer Certification Pursuant to 18 U.S.C. Section 1350,
as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
10.33
|
|
Appendix
to Management Services Agreement with Eurospark S.A.
|
|
|
|
10.34
|
|
2008-IL
key employee option plan
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated:
May
14,
2008
ENERGTEK
INC.
By::
|
/s/
Lev Zaidenberg
|
By:
|
/s/
Doron Uziel
|
Name:
|
Lev
Zaidenberg
|
Name:
|
Doron
Uziel
|
Title:
|
Chief
Executive Officer
|
Title:
|
Treasurer
|
|
(Principal
Executive Officer)
|
|
(Principal
Financial Officer)
|