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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Hydrogen Hybrid Technologies Inc (CE) | USOTC:HYHY | OTCMarkets | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.0005 | 0.00 | 01:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2009
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 333-76242
Nevada 45-0487463 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) |
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 is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of "accelerated filer and large accelerated filer" 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|
As of May 20, 2009, the registrant's outstanding common stock consisted of 93,750,361 shares, $0.001 Par Value. Authorized - 180,000,000 common voting shares.
Table of Contents Hydrogen Hybrid Technologies, Inc. Index to Form 10-Q For the Quarterly Period Ended March 31, 2009
Part I. Financial Information Page Item 1. Financial Statements Balance Sheets as of March 31, 2009 and September 30, 2008 3 Statements of Operations for the three months and six month ended March 31, 2009 and 2008 4 Statement of Stockholders' Equity 5 Statements of Cash Flows for the six months ended March 31, 2009 and 2008 6 Notes to Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 18 Item 4. Controls and Procedures 18 Part II Other Information Item 1. Legal Proceedings 22 Item 1A. Risk Factors 22 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22 Item 3. Defaults Upon Senior Securities 22 Item 4. Submission of Matters to a Vote of Security Holders 22 Item 5. Other Information 22 Item 6. Exhibits 23 Signatures 24 |
Part I. Financial Information
Item 1. Financial Statements
HYDROGEN HYBRID TECHNOLOGIES, INC.
Balance Sheets
ASSETS ------ March 31, September 30, 2009 2008 ------------ ------------- (Unaudited) CURRENT ASSETS Cash $ 32 $ 812 Prepaid deposits 7,921 24,568 ------------ ------------- Total Current Assets 7,953 25,380 ------------ ------------- DISTRIBUTION RIGHTS 1,865,004 2,284,945 ------------ ------------- TOTAL ASSETS $ 1,872,957 $ 2,310,325 ============ ============= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES Accounts payable and accrued expenses $ 1,130,883 $ 1,397,651 ------------ ------------- Total Current Liabilities 1,130,883 1,397,651 ------------ ------------- STOCKHOLDERS' EQUITY Common shares: $0.001 par value, 180,000,000 shares authorized: 93,750,361 and 89,011,362 shares issued and outstanding, respectively 93,750 89,011 Additional paid-in capital 5,234,309 5,006,837 Accumulated deficit (4,685,611) (4,479,580) Accumulated other comprehensive income 99,626 296,406 ------------ ------------- Total Stockholders' Equity 742,074 912,674 ------------ ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,872,957 $ 2,310,325 ============ ============= |
The accompanying notes are an integral part of these financial statements.
HYDROGEN HYBRID TECHNOLOGIES, INC.
Statements of Operations
(Unaudited)
For the Three Months Ended For the Six Months Ended March 31, March 31, ------------------------------ ------------------------------ 2009 2008 2009 2008 -------------- -------------- -------------- -------------- REVENUES $ - $ 68,145 $ 133,625 $ 137,125 COST OF SALES - 45,632 - 92,480 -------------- -------------- -------------- -------------- GROSS PROFIT - 22,513 133,625 44,645 OPERATING EXPENSES Management expenses 1,004 - 7,406 - General and administrative 17,419 2,569 40,560 3,142 Professional fees 180,745 6,078 195,537 46,942 Amortization expense 25,555 - 53,851 - -------------- -------------- -------------- -------------- Total Operating Expenses 224,723 8,647 297,354 50,084 -------------- -------------- -------------- -------------- LOSS FROM OPERATIONS (224,723) 13,866 (163,729) (5,439) OTHER INCOME (EXPENSE) Interest expense (20,074) - (42,302) - -------------- -------------- -------------- -------------- LOSS BEFORE INCOME TAXES (244,797) 13,866 (206,031) (5,439) INCOME TAX EXPENSE - - - - -------------- -------------- -------------- -------------- NET INCOME (LOSS) $ (244,797) $ 13,866 $ (206,031) $ (5,439) ============== ============== ============== ============== OTHER COMPREHENSIVE INCOME Gain (loss) on foreign currency translation (70,262) (95,215) (196,780) (128,468) -------------- -------------- -------------- -------------- NET COMPREHENSIVE INCOME (LOSS) $ (315,059) $ (81,349) $ (402,811) $ (133,907) ============== ============== ============== ============== BASIC LOSS PER SHARE $ (0.00) $ 0.00 $ (0.00) $ (0.00) ============== ============== ============== ============== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 93,171,151 129,071,362 91,079,765 129,071,362 ============== ============== ============== ============== |
The accompanying notes are an integral part of these financial statements.
HYDROGEN HYBRID TECHNOLOGIES, INC.
Statements of Stockholders' Equity
(Unaudited)
Accumulated Common Stock Additional Other Total -------------------- Paid-in Comprehensive Accumulated Members' Shares Amount Capital Income (Loss) Deficit Equity ----------- -------- ----------- -------- ------------ ------------ Balance, September 30, 2007 129,071,362 $129,071 $4,966,777 $463,359 $(1,319,478) $ 4,239,729 Shares returned to treasury and cancelled (40,000,000)(40,000) 40,000 - - - Foreign exchange translation adjustments for rate changes (166,953) - (166,953) Net loss for the year ended September 30, 2008 - - - - (3,160,102) (3,160,102) ----------- -------- ----------- -------- ------------ ------------ Balance, September 30, 2008 89,071,362 $ 89,071 $5,006,777 $296,406 $(4,479,580) $ 912,674 Shares issued for services at $0.049 per share 4,739,000 4,739 227,472 - - 232,211 Foreign exchange translation adjustments for rate changes (196,780) - (196,780) Net loss for the six months ended March 31, 2009 - - - - (206,031) (206,031) ----------- -------- ----------- -------- ------------ ------------ Balance, March 31, 2009 93,750,362 $ 93,750 $5,234,309 $ 99,626 $(4,685,611) $ 742,074 =========== ======== =========== ======== ============ ============ |
The accompanying notes are an integral part of these financial statements.
HYDROGEN HYBRID TECHNOLOGIES, INC.
Statements of Cash Flows
(Unaudited)
For the Six Months Ended March 31, ------------------------------ 2009 2008 -------------- -------------- OPERATING ACTIVITIES Net income (loss) $ (206,031) $ (5,439) Adjustments to reconcile net loss to net cash used by operating activities: Amortization expense 53,851 - Common stock issued for services 232,211 - Changes in operating assets and liabilities: Changes in accounts receivable - (64,208) Changes in prepaid deposits 16,647 69,539 Changes in accounts payable and accrued liabilities (266,768) (13,028) -------------- -------------- Net Cash Provided by (Used in) Operating Activities (170,090) (13,136) -------------- -------------- INVESTING ACTIVITIES Purchase of distribution rights - - -------------- -------------- Net Cash Used in Investing Activities - - -------------- -------------- FINANCING ACTIVITIES Proceeds from notes payable - 13,199 Issuance of common stock - - -------------- -------------- Net Cash Provided by Financing Activities - 13,199 -------------- -------------- EFFECT OF FOREIGN EXCHANGE RATE CHANGES 169,310 - NET DECREASE IN CASH (780) 63 CASH AT BEGINNING OF PERIOD 812 - -------------- -------------- CASH AT END OF PERIOD $ 32 $ 63 ============== ============== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION CASH PAID FOR: Interest $ - $ - Income taxes $ - $ - |
The accompanying notes are an integral part of these financial statements
HYDROGEN HYBRID TECHNOLOGIES, INC.
Notes to the Condensed Financial Statements March 31, 2009 and 2008
NOTE 1 - 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, results of operations, and cash flows at March 31, 2009, and for all periods presented herein, 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 September 30, 2008 audited financial statements. The results of operations for the periods ended March 31, 2009 and 2008 are not necessarily indicative of the operating results for the full years.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
HYDROGEN HYBRID TECHNOLOGIES, INC.
Notes to the Condensed Financial Statements March 31, 2009 and 2008
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
HYDROGEN HYBRID TECHNOLOGIES, INC.
Notes to the Condensed Financial Statements March 31, 2009 and 2008
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
In May of 2008 the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 163, "Accounting for Financial Guarantee Insurance - an interpretation of FASB Statement No. 60, Accounting and Reporting by Insurance Enterprises". This statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This statement also clarifies how Statement 60 applies to financial guarantee insurance contracts. This statement is effective for fiscal years beginning after December 15, 2008. This statement has no effect on the Company's financial reporting at this time.
In May of 2008, the FASB issued Statement No. 162, "The Hierarchy of
Generally Accepted Accounting Principles." This statement identifies
literature established by the FASB as the source for accounting principles
to be applied by entities which prepare financial statements presented in
conformity with generally accepted accounting principles (GAAP) in the
United States. This statement is effective 60 days following approval by
the SEC of the Public Company Accounting Oversight Board amendments to AU
Section 411, "The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles." This statement will require no changes in
the Company's financial reporting practices.
NOTE 4 - SIGNIFICANT EVENTS
In October 2008, the Company pursuant to its 2005 Employee Stock Incentive Plan approved by the Board of Directors of the Company (the "Board of Directors") registered 9,000,000 shares of its common stock. The 2005 Employee Stock Incentive Plan was created to further provide a method whereby the Company's current employees and officers and non employee directors and consultants may be stimulated and allow the Company to secure and retain highly qualified employees, officers, directors and non employee directors and consultants, thereby advancing the interests of the Company, and all of its shareholders. During January 2009, the Company issued 4,739,000 shares from the 2005 Employee Stock Incentive Plan for services provided to the Company valued at an aggregate value of $232,211.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Information
The Company may from time to time make written or oral "forward-looking statements" including statements contained in this report and in other communications by the Company, which are made in good faith by the Company pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include statements of the Company's plans, objectives, expectations, estimates and intentions, which are subject to change based on various important factors (some of which are beyond the Company's control). The following factors, in addition to others not listed, could cause the Company's actual results to differ materially from those expressed in forward looking statements: the strength of the domestic and local economies in which the Company conducts operations, the impact of current uncertainties in global economic conditions and the ongoing financial crisis affecting the domestic and foreign banking system and financial markets, including the impact on the Company's suppliers and customers, changes in client needs and consumer spending habits, the impact of competition and technological change on the Company, the Company's ability to manage its growth effectively, including its ability to successfully integrate any business which it might acquire, and currency fluctuations. All forward- looking statements in this report are based upon information available to the Company on the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.
There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2008.
Hydrogen Hybrid Technologies, Inc. ("HYHY" or "the Company") was incorporated under the laws of the State of Nevada on February 2, 2002, under the name Eaton Laboratories, Inc.
Hydrogen Hybrid Technologies is engaged in the business of selling and distributing of on-board hydrogen generating and injections systems for the Original Equipment Manufacturer ("OEM"), car and light truck markets globally. HYHY has acquired the exclusive rights to market a proprietary patented technology from a related company. In addition it holds non- exclusive rights to distribute the product to other markets including the heavy goods vehicle market (Commercial Transport Fleets).
The on-board hydrogen generating system strives to improve fuel consumption and reduce pollution through the enhancement of the internal combustion process. The technology consists of an on-board system which generates hydrogen and oxygen by splitting distilled water. Once these gases are available they are not stored but directly injected through the air intake of an internal combustion engine. The result of the Hydrogen Fuel Injection system ("HFI") is a reduction in pollution causing emission and an increase in fuel efficiency and overall engine performance.
The science behind HFI is well documented. It has been known for some time
(since a 1974 paper by the Jet Propulsion Lab of the California Institute of
Technology) that the addition of hydrogen to fossil fuels, burned in internal
combustion engines, will increase the efficiency of that engine. This premise
has been validated by a number of papers published by the Society of
Automotive Engineers (SAE). The concept is valid with any fossil fuel
(diesel, gasoline, propane, natural gas) or bio-fuel (biodiesel, ethanol)
though it is most effective in diesel engines. Among other, more subtle
effects, the faster flame speed of hydrogen allows for a more complete burn
of the fuel earlier in the power cycle. Of course, electrolysis itself is
well understood.
The HYHY technology differs from its competitors in that it focuses on delivering an engineering solution using these scientific principles that is reliable, efficient, and cost-effective. As an integral part of the research and development cycle, HYHY delivers an HFI solution geared toward a specific vertical market that has gone through an extensive field trial and testing verification stage.
A number of the product highlights offered by HYHY's on-board hydrogen generating and injections systems include:
o Reduce fuel consumption 5% to 30% depending on operating environment
o Reduce emissions from 30% to 80% (meets most 2010 emission requirements)
o Functional with any internal combustion engine and any fossil fuel
o Configurations are available for both 12 & 24 volt, plus 120 amp services
o Does not require additional power capabilities within current OEM vehicles
o Simple installation (many trained installers across N.A. - 4 hrs required)
o Leasing provides immediate positive cash flow for Heavy Vehicle Operators
o Product that reduces emissions while increasing cash flow
While the HFI technology is initially an after-market device, HYHY is actively seeking Original Equipment Manufacturers (OEM) during the development and testing phase to license the technology and incorporate it directly into their engineering cycle. Eventually, with exhaust water re- capture technology, the HFI system can be built seamlessly into internal combustion engines.
As HFI technology achieves greater acceptance and penetration in various markets, HYHY will continue to develop hydrogen solutions that meet ongoing public requirements of emission reductions and energy economies. The HFI system is positioned as a bridge technology to handle the transition to products that would, ultimately, allow our society to cease using hydrocarbon fuels. It is management's belief that the term "hybrid" could soon come to mean "hydrogen-hydrocarbon" technologies.
HYHY markets on-demand hydrogen-generating technology designed to increase the efficiency of virtually any combustion process. The technology is based on a patented Hydrogen Fuel Injection ("HFI") system, in which hydrogen and oxygen are generated on demand via electrolysis and then introduced into the combustion process. The HFI system draws power, 12V to 20V, and splits distilled water to produce hydrogen and oxygen; then both gases are injected directly into the air intake of the engine. In the engine, the hydrogen acts as an initiator to promote more complete combustion. By converting more chemical energy into mechanical energy, the engine operator is able to reduce fuel consumption, plus the more complete combustion dramatically lowers exhaust emissions (CO, PM, HC, NOx).
Management plans to market their technology initially towards the Heavy Goods Vehicle (HGV) market. HGVs are Class 7 and Class 8 heavy duty, long-haul trucks (7.3 to 16 liters) that typically run on diesel. The HFI unit uses distilled water, runs for 65 hours between fills, and incorporates a number of safety features the most salient of which is the fact that no hydrogen is stored on-board since it is generated only on-demand.
An on-board digital controller monitors the device and also allows for two- way wireless connection, via satellite, along with full GPS capability. Software updates and monitoring can be performed remotely. Additional revenue streams might be possible by leveraging this communications ability as a complementary business, both as a fleet management service and as a personal communications service.
With the primary focus at HYHY being on the Heavy Goods Vehicle and light truck markets, the principle competition comes from manufacturers of "passive" emissions control technologies. There are a variety of advanced exhaust treatment products, including diesel particulate filters and diesel oxidation catalysts but, while they offer comparable emissions reductions to HFI, in every case they increase fuel consumption (by increasing back pressure on the engine) by an average of 3.5%-as contrast to the 10% fuel savings achieved by HFI. The existing market for these devices is literally billions of dollars, with companies such as Arvin Meritor, Johnson Matthey, and Delphi.
The credible competitor for HYHY is Hy-Drive. They market a product that is based on similar technology, but which is less sophisticated than HYHY HFI models and has only limited application on certain heavy-duty diesel engines. Their primary market is North America for long-haul trucking and above-ground mining equipment, they claim to have secured sales agents in the UK and Australia as well.
There is an extensive list of private companies attempting to develop technologies involving the addition of fractional amounts of hydrogen to fossil fuel engines. To date, none has reached the point of having any real presence in the marketplace.
Hythane Ltd. produces a gas that mixes hydrogen and natural gas before it is pumped into a vehicle gas tank; in other words, doing off-board what HYHY does on-board. With their system, there are the obvious issues related to the storage of large volumes of compressed gas, as well as the sourcing of large volumes of pure hydrogen.
Finally, there are manufacturers of very large electrolysers, used primarily to supply hydrogen for cooling turbines in electrical power generating stations. The two largest North American manufacturers are GE and Hydrogenics, and it is conceivable that after HYHY demonstrates the potential for smaller electrolysers, particularly in applications that have never utilized electrolysis previously, these companies might expand their product lines to include competition for the various HFI models.
Indirect competition would include technologies such as fuel cells, battery- powered vehicles, hybrid vehicles, alternative fuels, and other emission reduction alternatives, such as diesel oxidation catalysts and diesel particulate filters. Of these, the only truly price-competitive products are the diesel particulate filters, but their use on HGVs while accomplishing the goal of reducing PM comes with the financial penalty of reducing fuel efficiency by 3.5 - 4% and does nothing to reduce CO2. Diesel oxidation catalysts, similarly, reduce engine efficiency, and the emissions benefits come with equipment costs on par with an HFI HT.
Hybrid vehicles are gaining customer acceptance, but are not, in fact, a competitor to the HFI system since the HFI system can be regarded as a complementary technology. "Hybrid" may soon refer to the hybrid of hydrogen- hydrocarbon, not gasoline-electric. Alternative fuels, such as ethanol, again can be seen as complementary technologies since the HFI device can be used in conjunction with them. As part of its long-term vision, HYHY plans to develop partnerships with companies in the bio-fuel industry to develop hydrogen blends that will make those fuels even cleaner and less expensive.
Battery-powered vehicles-which do not eliminate emissions, but merely displace them-are not a likely viable alternative, and all but a handful of niche manufacturers have ceased any development work in this field.
For the quarter ending March 31, 2009, the Company generated no revenues as compared to $68,145 for the same period last year. During quarter ending March 31, 2009, the Company had a net comprehensive loss of $(315,059) as compared to a net comprehensive loss of $(81,349) for the same period last year. The company's operating expenses for the quarter ending March 31, 2009 was $224,723 as compared to $8,649 for the same period last year. The bulk of the expenses for the quarter ending March 31, 2009 included professional fees of $180,745.
For the six months ending March 31, 2009, the generated $133,625 in revenues versus $137,125 for the same period last year. During six month period ending March 31, 2009, the Company had a net comprehensive loss of $(402,811) as compared to a net comprehensive loss of $(133,907) for the same period last year.
In the September 30, 2008 year-end financials and the March 31, 2009 quarter- end financials the Company's auditor issued an opinion that the Company's financial condition raises substantial doubt about the Company's ability to continue as a going concern.
For the first quarter year ending March 31, 2009, the Company generated no revenues as compared to $68,145 for the same period last year. For the first six months ending March 31, 2009, the Company generated $133,625 as compared to $137,125 for the same period last year.
The financial conditions evidenced by the accompanying financial statements raise substantial doubt as to our ability to continue as a going concern. Our plans include obtaining additional capital through debt or equity financing. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
The Company designs and markets on-board hydrogen generating and injections systems for the Original Equipment Manufacturer, car and light truck markets globally. For the fiscal year ending September 30, 2008, the company spent $983 in product development as compared to $182,131 for the same period last year. The Company did not spend any monies on product development for the quarter ending March 31, 2009. Management believes that they have developed their fuel injection systems. Management does not anticipate expending additional funds on product research and development at this time.
We do not anticipate the purchase or sale of any plant or significant equipment; as such items are not required by us at this time.
As of March 31, 2009, we did not have any employees. We are dependent upon our sole officer, outside contractors, and a major shareholder for our future business development. As our operations expand we anticipate the need to hire additional employees, consultants and professionals; however, the exact number is not quantifiable at this time.
Our balance sheet as of March 31, 2009 reflects current assets of $7,953 and $1,130,883 in current liabilities. This compares to current assets of $25,380 and $1,397,651 in current liabilities for the year ending September 30, 2008.
Cash and cash equivalents from inception to date have been sufficient to provide the operating capital necessary to operate to date. Notwithstanding, we anticipate generating losses and therefore we may be unable to continue operations in the future. We anticipate we will require additional capital and we would have to issue debt or equity or enter into a strategic arrangement with a third party. We intend to try and raise capital through a private offering. There can be no assurance that additional capital will be available to us. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.
Hydrogen Hybrid Technology has made an initial estimate of its capital needs for its market entry stage and believes it will need between $15-$45 million in additional capital. Furthermore, if Hydrogen Hybrid Technology decides to expand the business beyond what is currently planned; additional capital beyond what is anticipated in our current business plan will be required.
We anticipate the sale of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any of additional sales of our equity securities or arrange for debt or other financing to fund our exploration and development activities.
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.
Revenue Recognition: We recognize revenue from product sales once all of the following criteria for revenue recognition have been met: pervasive evidence that an agreement exists; the services have been rendered; the fee is fixed and determinable and not subject to refund or adjustment; and collection of the amount due is reasonable assured.
In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements". This statement amends ARB 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the de-consolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is equity in the consolidated financial statements. SFAS No. 160 is effective for fiscal years and interim periods beginning after December 15, 2008. The adoption of SFAS 160 is not expected to have a material impact on the Company's financial position, results of operation or cash flows.
As of January 1, 2008 we adopted SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"). SFAS No. 159 allows the company to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The adoption of SFAS 159 has not had a material impact on our financial position, results of operation or cash flows.
As of January 1, 2008 we adopted SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157 defines fair value and provides guidance for measuring and disclosing fair value. The adoption of SFAS 157 has not had a material impact on our financial position, results of operation or cash flows.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
Item 4T. Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of those internal controls. As defined by the SEC, internal control over financial reporting is a process designed by our principal executive officer/principal financial officer, who is also the sole member of our Board of Directors, to provide reasonable assurance regarding the reliability of financial reporting and the reparation of the financial statements in accordance with U. S. generally accepted accounting principles.
As of the end of the period covered by this report, we initially carried out an evaluation, under the supervision and with the participation of our President (who is also our principal financial and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our President and chief financial officer initially concluded that our disclosure controls and procedures were not effective.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company's principal executive and principal financial officers and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
- Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
- Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
- Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of March 31, 2009 management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; and (3) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our President in connection with the review of our financial statements as of March 31, 2009.
Management believes that the material weaknesses set forth in items (2) and
(3) above did not have an effect on our financial results. However,
management believes that the lack of a functioning audit committee and the
lack of a majority of outside directors on our board of directors results in
ineffective oversight in the establishment and monitoring of required internal
controls and procedures, which could result in a material misstatement in our
financial statements in future periods.
This annual report does not include an attestation report of the Corporation's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Corporation's registered public accounting firm pursuant to temporary rules of the SEC that permit the Corporation to provide only the management's report in this annual report.
In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:
We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. And, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.
Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.
We anticipate that these initiatives will be at least partially, if not fully, implemented by September 30, 2009. Additionally, we plan to test our updated controls and remediate our deficiencies by September 30, 2009.
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
A shareholder complaint has been filed in Ontario, Canada concerning a dispute over Company shares owned by a shareholder. Management intends to contest the case vigorously. Although it is difficult to predict the outcome of such disputes, management is hopeful for a favorable outcome.
Item 1A - Risk Factors
See Risk Factors set forth in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2008 and the discussion in Item 1, above, under "Liquidity and Capital Resources."
Item 2 -- Unregistered Sales of Equity Securities and Use of Proceeds
During January 2009, the Company issued 4,739,000 shares from the 2005 Employee Stock Incentive Plan for services provided to the Company valued at an aggregate value of $232,211.
The Company did not repurchase any of our equity securities during the quarter ended March 31, 2009.
Item 3 -- Defaults Upon Senior Securities
None.
Item 4 -- Submission of Matters to a Vote of Security Holders
We did not submit any matters to a vote of our security holders during the first quarter ending March 31, 2009.
Item 5 -- Other Information
On February 12, 2009, the U. S. Securities and Exchange Commission temporary suspended trading of the Company's common stock. The suspension was terminated on February 26, 2009. See SEC Release No. 34-59399.
Item 6 -- Exhibits
Incorporated by reference ------------------------- Filed Period Filing Exhibit Exhibit Description herewith Form ending Exhibit date ------------------------------------------------------------------------------ 3.1 Articles 10-K 3.1 1/13/09 of Incorporation in effect ------------------------------------------------------------------------------ 3.2 Bylaws as currently 10-K 3.2 1/13/09 in effect ------------------------------------------------------------------------------ 3.3 Articles of Merger 8-K 3.3 4/20/06 ------------------------------------------------------------------------------ 3.4 Amended Articles of 8-K 3.4 6/28/07 incorporation in effect ------------------------------------------------------------------------------ 2.1 Acquisition and Plan of Merger 8-K/A 2.1 4/18/06 dated April 14, 2006 ------------------------------------------------------------------------------ 2.2 Acquisition and Plan of Merger 8-K 2.2 4/04/07 dated March 30, 2007 ------------------------------------------------------------------------------ 10.1 Employee Stock Option Plan S-8 10.1 10/17/08 dated February 1, 2005 ------------------------------------------------------------------------------ 31.1 Certification of President X and Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act ------------------------------------------------------------------------------ 32.2 Certification of President X and Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act ------------------------------------------------------------------------------ |
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.
Hydrogen Hybrid Technologies, Inc. ---------------------------------- Registrant Date: May 20, 2009 By: /s/ Ira Lyons ------------ ---------------------- Ira Lyons President and Director |
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