UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] | QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2009 |
| |
OR | |
| |
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 000-53699
NEOHYDRO TECHNOLOGIES CORP.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
200 Centennial Avenue
Suite 200
Piscataway, New Jersey 08854
(Address of principal executive offices, including zip code.)
732-377-2057
(telephone number, including area code)
Check whether the issuer (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 last 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,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] 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 [X] NO [ ]
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 73,490,000 as of August 14, 2009.
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Neohydro Technologies Corp.
(A Development Stage Company)
June 30, 2009
Index
FINANCIAL STATEMENTS
Balance Sheets .....................................................................................................F–1
Statements of Operations ...................................................................................F–2
Statements of Stockholders’ Equity (Deficit) ..................................................F–3
Statements of Cash Flows ..................................................................................F–4
NOTES TO FINANCIAL STATEMENTS ........................................................F–5
Neohydro Technologies Corp. | | | | | | |
(A Development Stage Company) | | | | | | |
Balance Sheets | | | | | | |
(Expressed in US Dollars) | | | | | | |
| | | | | | |
| | | | | | |
| | June 30, | | | December 31, | |
| | 2009 | | | 2008 | |
| | (Unaudited) | | | | |
ASSETS | |
Current Assets | | | | | | |
Cash and cash equivalents | | $ | 57 | | | $ | 2,268 | |
Prepaid expenses (Note 8) | | | 866,667 | | | | 25,295 | |
Total current assets | | | 866,724 | | | | 27,563 | |
License agreement costs, net of accumulated amortization and allowance | | | | | | | | |
for impairment of $500,000 (Note 3) | | | - | | | | - | |
Total Assets | | $ | 866,724 | | | $ | 27,563 | |
| | | | | | | | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |
Current Liabilities | | | | | | | | |
Accounts payable and accrued liabilities | | | 51,674 | | | | 31,842 | |
Due to related party (Note 4) | | | 18,561 | | | | 16,520 | |
Amount due Licensor of license agreement (Note 3) | | | - | | | | 500,000 | |
Total current liabilities | | | 70,235 | | | | 548,362 | |
| | | | | | | | |
Commitments | | | | | | | | |
Stockholders' Deficit | | | | | | | | |
Preferred Stock, $0.00001 par value; | | | | | | | | |
authorized 100,000,000 shares, none issued and outstanding | | | - | | | | - | |
Common Stock, $0.00001 par value; | | | | | | | | |
authorized 800,000,000 shares, | | | | | | | | |
73,490,000 and 73,050,000 shares issued and outstanding | | | 735 | | | | 731 | |
Additional paid-in capital | | | 1,117,765 | | | | 142,769 | |
Deficit accumulated during the development stage | | | (322,011 | ) | | | (664,299 | ) |
Total stockholders' deficit | | | 796,489 | | | | (520,799 | ) |
Total Liabilities and Stockholders' Deficit | | $ | 866,724 | | | $ | 27,563 | |
Neohydro Technologies Corp. | | | | | | | | | | |
(A Development Stage Company) | | | | | | | | | | |
Statements of Operations | | | | | | | | | | |
(Expressed in US Dollars) | | | | | | | | | | |
(Unaudited) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | Three months ended June 30, 2009 | | | Three months ended June 30, 2008 | | | Six months ended June 30, 2009 | | | Six months ended June 30, 2008 | | | Period from November 13, 2007 (Date of Inception) to June 30, 2009 | |
| | | | | | | | | | | | | | | |
Revenue | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | | | | | |
Costs and expenses | | | | | | | | | | | | | | | | | | | | |
Stock-based compensation | | | 108,333 | | | | - | | | | 108,333 | | | | - | | | | 108,333 | |
Other general and administrative | | | 12,046 | | | | - | | | | 12,046 | | | | - | | | | 12,046 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | 120,379 | | | | - | | | | 120,379 | | | | - | | | | 120,379 | |
| | | | | | | | | | | | | | | | | | | | |
Loss from continuing operations | | | (120,379 | ) | | | - | | | | (120,379 | ) | | | - | | | | (120,379 | ) |
| | | | | | | | | | | | | | | | | | | | |
Discontinued operations (Note 6) | | | | | | | | | | | | | | | | | | | | |
Gain on disposal of discontinued operations | | | 518,177 | | | | - | | | | 518,177 | | | | - | | | | 518,177 | |
Operations | | | - | | | | (11,365 | ) | | | (55,510 | ) | | | (31,859 | ) | | | (719,809 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total discontinued operations | | | 518,177 | | | | (11,365 | ) | | | 462,667 | | | | (31,859 | ) | | | (201,632 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net Income (loss) | | $ | 397,798 | | | $ | (11,365 | ) | | $ | 342,288 | | | $ | (31,859 | ) | | $ | (322,011 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Net income (loss) per share - Basic and Diluted: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations | | $ | (0.00 | ) | | $ | - | | | $ | (0.00 | ) | | $ | - | | | | | |
Discontinued operations | | | 0.01 | | | | (0.00 | ) | | | 0.00 | | | | (0.00 | ) | | | | |
Net income (loss) | | $ | 0.01 | | | $ | (0.00 | ) | | $ | 0.00 | | | $ | (0.00 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Weighted Average Shares Outstanding | | | | | | | | | | | | | | | | | | | | |
Basic and Diluted | | | 69,272,400 | | | | 72,800,000 | | | | 71,151,000 | | | | 72,800,000 | | | | | |
Neohydro Technologies Corp. | | | | | | | |
(A Development Stage Company) | | | | | | | |
Statements of Stockholders' Equity (Deficit) | | | | | | | |
For the Period November 13, 2007 (Inception) to June 30, 2009 | | | | |
(Expressed in US Dollars) | | | | | | | |
(Unaudited) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | Common Stock, $0.00001 par value | | Additional Paid-in | | | Deficit Accumulated During the Development | | | |
| | Shares | | | Amount | | | Capital | | | Stage | | | Total | |
| | | | | | | | | | | | | | | |
Common shares sold for cash at $0.000125 per share | | | 40,000,000 | | | $ | 400 | | | $ | 4,600 | | | $ | - | | | $ | 5,000 | |
Common shares sold for cash at $0.00125 per share | | | 32,800,000 | | | | 328 | | | | 40,672 | | | | - | | | | 41,000 | |
Donated services | | | - | | | | - | | | | 1,500 | | | | - | | | | 1,500 | |
Net Loss | | | - | | | | - | | | | - | | | | (26,792 | ) | | | (26,792 | ) |
Balance - December 31, 2007 | | | 72,800,000 | | | | 728 | | | | 46,772 | | | | (26,792 | ) | | | 20,708 | |
| | | | | | | | | | | | | | | | | | | | |
Common shares sold for cash at $0.40 per unit, less costs of $10,000 | | | 250,000 | | | | 3 | | | | 89,997 | | | | - | | | | 90,000 | |
Donated services | | | - | | | | - | | | | 6,000 | | | | - | | | | 6,000 | |
Net Loss | | | - | | | | - | | | | - | | | | (637,507 | ) | | | (637,507 | ) |
Balance - December 31, 2008 | | | 73,050,000 | | | | 731 | | | | 142,769 | | | | (664,299 | ) | | | (520,799 | ) |
| | | | | | | | | | | | | | | | | | | | |
Common shares returned and cancelled (Note 3) | | | (14,560,000 | ) | | | (146 | ) | | | 146 | | | | - | | | | - | |
Common shares issued pursuant to fee agreement (Note 8) | | | 15,000,000 | | | | 150 | | | | 974,850 | | | | - | | | | 975,000 | |
Net Income | | | - | | | | - | | | | - | | | | 342,288 | | | | 342,288 | |
Balance - June 30, 2009 | | | 73,490,000 | | | $ | 735 | | | $ | 1,117,765 | | | $ | (322,011 | ) | | $ | 796,489 | |
Neohydro Technologies Corp. | | | | | | | | | |
(A Development Stage Company) | | | | | | | | | |
Statements of Cash Flows | | | | | | | | | |
(Expressed in US Dollars) | | | | | | | | | |
(Unaudited) | | | | | | | | | |
| | Six months ended June 30, 2009 | | | Six months ended June 30, 2008 | | | Period from November 13, 2007 (Date of Inception) to June 30, 2009 | |
Cash Flows from Operating Activities | | | | | | | | | |
Net income (loss) | | $ | 342,288 | | | $ | (31,859 | ) | | $ | (322,011 | ) |
Adjustments to reconcile net income (loss) to net cash used | | | | | | | | | | | | |
for operating activities: | | | | | | | | | | | | |
| | | | | | | | | | | | |
Stock-based compensation | | | 108,333 | | | | - | | | | 108,333 | |
Donated services | | | - | | | | 4,500 | | | | 7,500 | |
Impairment of mineral property acquisition costs | | | - | | | | - | | | | 6,500 | |
Amortization of license agreement costs | | | - | | | | - | | | | 1,096 | |
Impairment of license agreement costs | | | - | | | | - | | | | 498,904 | |
Gain on disposal of discontinued operations | | | (518,177 | ) | | | - | | | | (518,177 | ) |
Change in operating assets and liabilities: | | | | | | | | | | | | |
Prepaid expenses | | | 25,295 | | | | 118 | | | | - | |
Accounts payable and accrued liabilities | | | 38,009 | | | | 8,622 | | | | 69,851 | |
Net cash used for operating activities | | | (4,252 | ) | | | (18,619 | ) | | | (148,004 | ) |
Cash Flows from Investing Activities | | | | | | | | | | | | |
Mineral property acquisition costs | | | - | | | | - | | | | (6,500 | ) |
Net cash used for investing activities | | | - | | | | - | | | | (6,500 | ) |
| | | | | | | | | | | | |
Cash Flows from Financing Activities | | | | | | | | | | | | |
Proceeds from sales of common stock - net | | | - | | | | - | | | | 136,000 | |
Advances from related party | | | 2,041 | | | | 46 | | | | 18,561 | |
Net cash provided by financing activities | | | 2,041 | | | | 46 | | | | 154,561 | |
| | | | | | | | | | | | |
Decrease in cash | | | (2,211 | ) | | | (18,573 | ) | | | 57 | |
| | | | | | | | | | | | |
Cash - beginning of period | | | 2,268 | | | | 20,596 | | | | - | |
| | | | | | | | | | | | |
Cash - end of period | | $ | 57 | | | $ | 2,023 | | | $ | 57 | |
| | | | | | | | | | | | |
Supplemental disclosures of cash flow information: | | | | | | | | | | | | |
Interest paid | | $ | - | | | $ | - | | | $ | - | |
Income taxes paid | | $ | - | | | $ | - | | | $ | - | |
Non cash investing and financing activities: | | | | | | | | | | | | |
Acquisition of license agreement in exchange | | | | | | | | | | | | |
for liability due Licensor of license agreement | | $ | - | | | $ | - | | | $ | 500,000 | |
Issuance of 15,000,000 shares of common | | | | | | | | | | | | |
stock for future services | | $ | 975,000 | | | $ | - | | | $ | 975,000 | |
Neohydro Technologies Corp.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Expressed in US Dollars)
June 30, 2009
(Unaudited)
Rioridge Resources Corp. (the “Company”) was incorporated in the State of Nevada on November 13, 2007. On July 22, 2008, the Company changed its name to Neohydro Technologies Corp. From December 14, 2007 to September 20, 2008, the Company’s principal business was the acquisition and exploration of mineral resources. On September 22, 2008 (see Note 3), the Company entered into a licensing agreement and acquired the exclusive worldwide marketing, distribution and licensing rights to the Licensor’s water sterilization technology. On March 31, 2009, this License Agreement was terminated by the Licensor. On June 8, 2009 (see Note 8), the Company entered into a licensing agreement to market and sell in Canada an environmental fuel efficient turbo technology called Green Interactive Hybrid System (“GIHS”).
2. | Summary of Significant Accounting Policies |
These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. The Company’s fiscal year-end is December 31.
b) | Interim Financial Information |
The unaudited financial statements as of June 30, 2009 and for the three and six months ended June 30, 2009 and 2008 and for the period November 13, 2007 (inception) to June 30, 2009 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with instructions to Form 10-Q. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of June 30, 2009 and the results of operations and cash flows for the periods then ended. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three and six months period ended June 30, 2009 is not necessarily indicative of the results to be expected for any subsequent quarters of the entire year ending December 31, 2009. The balance sheet at December 31, 2008 has been derived from the audited financial statements at that date.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. These unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended December 31, 2008 as included in our Form 10-K filed with the Securities and Exchange Commission on May 8, 2009.
Neohydro Technologies Corp.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Expressed in US Dollars)
June 30, 2009
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
c) | Financial Instruments and Fair Value Measures |
The Statement of Financial Accounting Standards (“SFAS”) No. 157 “Fair Value Measurements” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. SFAS No. 157 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. SFAS No. 157 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
Financial instruments consist principally of cash, accounts payable and accrued liabilities, and amounts due to related parties. Pursuant to SFAS No. 157, the fair value of cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all of other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
The Company’s operations are in Canada, which results in exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.
Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.
e) | The Company has evaluated subsequent events through the filing date of this Form 10-Q and has determined that there were no subsequent events to recognize or disclose in these financial statements. |
Neohydro Technologies Corp.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Expressed in US Dollars)
June 30, 2009
(Unaudited)
3. | Licence Agreement Costs, Net |
License agreement costs, net, consist of:
| | June 30, 2009 | | December 31, 2008 |
| | | | |
Amount due Licensor | $ | 500,000 | $ | 500,000 |
Less accumulated amortization | | (1,096) | | (1,096) |
Less allowance for impairment | | (498,904) | | (498,904) |
| | | | |
License agreement costs, net | $ | – | $ | – |
On September 22, 2008, the Company entered into an agreement with Neohydro Corp. ("Licensor") and Dean Themy ("Themy") and acquired the exclusive worldwide marketing, distribution and distribution rights, along with patent and intellectual rights, to the Licensor's water sterilization technology for the treatment of industrial waste water in industries such as the oil and gas industry. Licensor reserved the sole and exclusive right to manufacture the Licensed Products.
The price for the license was $500,000. No due date for payment, or interest provisions were specified in the agreement. In addition, the Company's majority stockholder and president transferred 14,560,000 shares of Company Common Stock to Themy, president of the Licensor. On September 10, 2008, Themy was appointed director of the Company. On September 22, 2008, Themy was appointed president of the Company.
The agreement also provided for the payment of royalties to Licensor of 10% of sales of licensed products. The Company was also to use its best efforts to provide funding for business development of $1,400,000, $100,000 on or before September 26, 2008, $150,000 by October 15, 2008, $250,000 by October 30, 2008, $300,000 by January 15, 2009, $300,000 by April 15, 2009, and $300,000 by July 15, 2009. The Company was also to use its best efforts to provide funding of $1,000,000 for marketing.
The Company initially capitalized the $500,000 license agreement cost and recorded amortization expense of $1,096 for the period September 22, 2006 to September 30, 2008 (using the straight line method over the estimated 10 year economic life of the agreement). As at September 30, 2008, the Company reviewed the remaining $498,904 carrying value of the license agreement costs for potential impairment. Considering all facts and circumstances, the Company concluded that it was not more likely than not that any of the $498,904 carrying cost were recoverable. Accordingly, the Company expensed a $498,904 provision for impairment of license agreement costs at September 30, 2008 and reduced the license agreement costs, net, to $0.
On March 31, 2009 (see Note 6), the License Agreement was terminated by the Licensor due to the Company’s failure to comply with funding schedules set forth in the agreement.
Neohydro Technologies Corp.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Expressed in US Dollars)
June 30, 2009
(Unaudited)
3. | Licence Agreement Costs, Net (continued) |
On April 22, 2009, the Company executed an Agreement and Release with Licensor and Themy. Themy returned the 14,560,000 shares of Company common stock transferred to him pursuant to the License Agreement. Also, Licensor and Themy released the Company from any liabilities and claims due them and agreed to hold harmless the Company from any and all claims by third parties which Themy incurred while affiliated with the Company. The Company released Licensor and Themy from any claims due to the Company and agreed to hold harmless Licensor and Themy from any claims.
4. | Related Party Balances/Transactions |
a) | For the six months ended June 30, 2009, the Company incurred $0 (2008 - $2,250) in donated services by the former chief executive officer of the Company, and is indebted to this individual for $18,561 (December 31, 2008 - $16,520) for advances and expenses paid for on behalf of the Company, which is non-interest bearing, unsecured and has no specific terms of repayment. |
b) | Pursuant to a consulting agreement with Themy, the chief executive officer of the Company from September 22, 2008 to April 5, 2009, the Company paid Themy consulting fees of $10,000 during the three month period ended March 31, 2009 (2008 - $0). |
c) | Pursuant to a consulting agreement with the former secretary and director of the Company, the Company paid this individual consulting fees of $1,000 during the six months ended June 30, 2009 (2008 - $0). |
5. | Share Purchase Warrants |
A summary of the changes in the Company’s common share purchase warrants is presented below:
| Number of Warrants | Weighted Average Exercise Price |
| | |
Balance – December 31, 2008 | 250,000 | $0.40 |
| | |
Issued | – | – |
| | |
Balance – June 30, 2009 | 250,000 | $0.40 |
As at June 30, 2009, the following common share purchase warrants were outstanding:
Description | Number of Warrants | Exercise Price | Expiry Date |
| | | |
Issued September 23, 2008 | 250,000 | $0.40 | September 23, 2011 |
| | | |
Total | 250,000 | | |
| | | |
Neohydro Technologies Corp.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Expressed in US Dollars)
June 30, 2009
(Unaudited)
6. | Discontinued Operations |
On September 20, 2008, the Company decided to discontinue its mineral exploration business.
On March 31, 2009, the License Agreement referred to in Note 3 was terminated by the Licensor due to the Company’s failure to comply with funding schedules set forth in the agreement. Accordingly, the Company discontinued all operations related to the business of developing, marketing, selling and distributing products for the treatment of industrial water.
The gain on disposal of discontinued operations relating to the water sterilization operations for the six months ended June 30, 2009 is summarized as follows:
Discharge of amount due to Licensor of license agreement | | $ 500,000 | |
Discharge of accounts payable and accrued liabilities | | 18,177 | |
| | | |
Total | | $ 518,177 | |
The results of operations of discontinued operations (relating to mineral exploration operations for the period December 14, 2007 to September 20, 2008 and water sterilization operations from September 22, 2008 to June 30, 2009) are summarized as follows:
| | Three Months Ended June 30, | | | Three Months Ended June 30, | | | Six Months Ended June 30, | | | Six Months Ended June 30, | | | Period from November 13, 2007 (Date of Inception) to June 30, | |
| | 2009 | | | 2008 | | | 2009 | | | 2008 | | | 2009 | |
| | | | | | | | | | | | | | | |
Revenue | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Costs and expenses | | | | | | | | | | | | | | | | | | | | |
Amortization of licence agreement costs | | | – | | | | – | | | | – | | | | – | | | | 1,096 | |
Impairment of licence agreement costs | | | – | | | | – | | | | – | | | | – | | | | 498,904 | |
General and administrative | | | – | | | | 11,365 | | | | 55,510 | | | | 31,859 | | | | 219,809 | |
| | | | | | | | | | | | | | | | | | | | |
Total costs and expenses | | | – | | | | 11,365 | | | | 55,510 | | | | 31,859 | | | | 719,809 | |
| | | | | | | | | | | | | | | | | | | | |
Net Loss | | $ | – | | | $ | (11,365 | ) | | $ | (55,510 | ) | | $ | (31,859 | ) | | $ | (719,809 | ) |
Neohydro Technologies Corp.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Expressed in US Dollars)
June 30, 2009
(Unaudited)
No provisions for income taxes have been recorded in the periods presented since the Company has incurred net losses since inception.
Based on management’s present assessment, the Company has not yet determined it to be more likely than not that a deferred tax asset of $70,101 at June 30, 2009 (December 31, 2008 - $53,684) attributable to the future utilization of the net operating loss carry-forward of $206,178 at June 30, 2009 (December 31, 2008 - $157,895) will be realized. Accordingly, the Company has provided a 100% allowance against the deferred tax asset in the financial statements. The Company will continue to review this valuation allowance and make adjustments as appropriate. The $206,178 net operating loss carry-forward expires $25,292 in year 2027, $132,603 in year 2028, and $48,283 in year 2029.
Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.
The components of the net deferred income tax assets consist of:
| | June 30, 2009 | | December 31, 2008 |
| | | | |
Net operating loss carry-forward | $ | 70,101 | $ | 53,684 |
| | | | |
Valuation allowance | | (70,101) | | (53,684) |
| | | | |
Net deferred income tax assets | $ | – | $ | – |
Expected income tax expense (benefit) computed by applying the U.S. statutory income tax rate of 34% to pre-tax income (loss) differs from the Company’s provision for (benefit from) income taxes, as follows:
| | Six Months Ended |
| | June 30, 2009 | | June 30, 2008 |
| | | | |
Expected income tax expense (benefit) at 34% | $ | 116,378 | $ | (10,832) |
Non-taxable portion of gain on disposal of discontinued operations | | (169,628) | | – |
Non-deductible stock-based compensation | | 36,833 | | – |
Non-deductible donated services | | – | | 1,530 |
| | | | |
Change in valuation allowance | | 16,417 | | 9,302 |
| | | | |
Provision for (benefit from) income taxes | $ | – | $ | – |
Neohydro Technologies Corp.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Expressed in US Dollars)
June 30, 2009
(Unaudited)
8. | Commitments and Contingencies |
a) | On June 8, 2009, the Company entered into a licensing agreement with Gene Peckover, a sole proprietor as president of Gene Vettes of Lynden, a Washington corporation (the “GIHS Licensor”) to be formed, wherein Licensor granted to the Company an exclusive license covering the territory of Canada and other such territories that shall be mutually agreed upon and the right to market and sell an environmental fuel efficient turbo technology called Green Interactive Hybrid System (“GIHS”). The term of the license is three years subject to the following: |
| 1. | The Company must purchase and have operational a demonstration GIHS by December 31, 2009. |
| 2. | The Company must sell at least 3 GIHS units by December 31, 2009. |
| 3. | The Company must sell at least 25 GIHS units by December 31, 2010. |
| 4. | The Company must sell at least 200 GIHS units by December 31, 2011. |
| 5. | The Company must sell at least 500 GIHS units by December 31, 2012. |
b) | On June 8, 2009, the Company entered into a fee agreement with Michael Kulcheski and Harry Gelbard wherein the Company agreed to issue Kulcheski 9,000,000 restricted shares of common stock and Gelbard 6,000,000 restricted shares of common stock in consideration of Kulcheski and Gelbard using reasonable commercial efforts to sell, market, distribute, and manufacture the GIHS license granted to the Company by the GIHS Licensor and to manage the development of our technology. |
If the first and second milestones of the GIHS licensing agreement described in the preceding paragraph are not achieved, Kulcheski and Gelbard are to return the 15,000,000 shares of common stock held by them to the treasury of the Company. The Company recorded the $975,000 estimated fair value of the 15,000,000 shares of common stock, which value was calculated based on the $0.13 closing price for NHYT on June 8, 2009 and a 50% restricted stock discount, as prepaid expenses on June 8, 2009 and is amortizing this amount as stock-based compensation expense evenly over the period June 8, 2009 to December 31, 2009.
On June 8, 2009, Kulcheski was appointed chief executive officer, chief financial officer and director of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Cautionary Statement Regarding Forward-looking Statements
This section of the report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking states are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
Plan of Operation
We are a start-up, focused on “Green” technologies in the automotive, transportation, power generation, and, focused initially on the light -duty trucking industry, but we have not yet generated or realized any revenues from our business activities.
Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not generated any revenues and no revenues are anticipated in the near future.
We have since terminated our mining operations and we are no longer in the business of treating wastewater.
On June 8, 2009, the Company entered into a licensing agreement with Gene Peckover, a sole proprietor as president of Gene Vettes of Lynden, a Washington corporation (“Licensor”) to be formed wherein Licensor granted to the Company an exclusive license covering the territory of Canada and other such territories that shall be mutually agreed upon and the right to market and sell an environmental fuel efficient turbo technology called Green Interactive Hybrid System (“GIHS”). The term of the license is three years with automatic subsequent renewals subject to the following:
| 1. | The Company must purchase and have operational one demonstration GIHS by December 31, 2009. |
| 2. | The Company must sell at least three GIHS units by December 31, 2009. |
| 3. | The Company must sell at least twenty-five GIHS units by December 31, 2010. |
| 4. | The Company must sell at least two hundred GIHS units by December 31, 2011. |
| 5. | The Company must sell at least five hundred GIHS units by December 31, 2012. |
This revolutionary Green Interactive Hybrid System™ is proven to cause an engine to operate with less effort, less fuel consumption, and enhanced power. In addition, advanced tuning methods significantly decrease harmful emissions.
To meet our need for cash we seek additional capital. If we obtain any purchase orders from our customers and if the purchase orders prove profitable, we will attempt to raise additional money through a subsequent private placement, public offering or through loans. If we do not have enough money to complete our sales and marketing initiatives, we will have to find alternative sources, like a second public offering, a private placement of securities, or loans from our officers or others.
Our officers and directors are willing to loan us money except to cover expenses relating to the purchase of inventory in supplies and materials required to assemble the units at this time. At the present time, we are looking at arrangements to raise additional cash to fulfill our obligations to the License Agreement. If we need additional cash and can't raise it, we will either have to suspend activities until we do raise the cash, or cease activities entirely. Other than as described in this paragraph, we have no other financing plans.
We own a 100% interest in a Mineral Claim located in Clark County, Nevada, in consideration for $6,500. The claim is registered in the name of the company. The claim has been renewed for an additional year and will expire on August 31, 2009. The company does not intend to renew this claim in 2009 and will allow it to expire.
We lease our office space. We do not intend to hire additional employees at this time other than occasional temporary office staff as needed from time to time to assist in market research.
General
We are a company specializing in the marketing, distribution and licensing of systems for the Green Interactive Hybrid System™ (GIHS). Neohydro is a Technology Company focused on “Green” technologies in the automotive, transportation, and power generation, focused initially on the light duty trucking industry. Neohydro has licensed a unique patented turbo hybrid system. This revolutionary Green Interactive Hybrid System™ is proven to assist an engine to operate more efficiently, with less effort, less fuel consumption, and enhanced horsepower and torque. Thus increasing engine life as well as adding obvious economic benefits, and enhanced horsepower to many significantly underpowered vehicles, such as limousines and fleet vehicles where incremental cost for larger engines may not be an economically viable option. Advanced tuning methods also significantly decrease harmful emissions. In the case of most technological enhancements with vehicles, there are significant concerns about negating existing factory warranty protection. At present the Company’s technology is only engineered for one automobile manufacturer where it does not void the manufacturer’s warranty. However, plans are underway to engineer the technology to include other manufacturers as well.
The core of the GIHS process is the combination of the patented STS turbo device and the remote tuning proprietary software, which together creates more horsepower and greater engine efficiency.
Neohydro’s technology can be used in a variety of applications, which include commercial fleets of industrial vehicles and trucks, limousine and fleet vehicles, and marine crafts.
Manufacturing& Assembly
The patented STS turbo device are not manufactured by the Company. The units are purchased directly from Genes Vettes of Lynden, Washington and then are combined with the proprietary remote tuning software and together the GIHS is assembled. Currently all testing and retrofitting of any vehicles of the GIHS are been done by Gene Vettes, the Licensor of the technology. However, there are future plans to establish an upfitting facility in Calgary, Alberta for the installation of the GIHS in new fleet vehicles as well as individual new consumer vehicles. The vehicles will be tuned remotely over the internet by the licensors head office over the internet with the licensors proprietary software. As the company expands more upfitting centers are envisioned to be located in major centers across the country. If the company is successful in raising additional capital, it will seek to purchase equipment it will require such as dynamometers, hoists, tools, hydraulic equipment, computers, and standard garage equipment.
We anticipate spending monies for capital expenditures only for the retrofitting of a demonstration model in order to have a demostartion model available for customers in the Canadian market. At this point our market is limited to GM vehicles models fitted with the 5.3 liter V8 only Such as Silverado, Sierra and Avalanche trucks, Suburban, Yukon and Tahoe SUV’s, GM and Chevy vans as well as Corvettes.
Marketing
We are attempting to increase its customer base through advertising and marketing and aggressively promote the demonstration vehicle.
We plan on marketing market the licensed technology through trade shows, investment forums, and through demonstrations in the field. We are currently only allowed to market the licensed technology in the Canadian markets. We also promote the licensed technology through local car shows, our website at www.neohydrotechnology.com and through trade magazines, and newspapers.
Patents and Trademarks
We own no patents or trademarks as the technology is a trade secret and Licensed from Gene Vettes.
License
We acquired a license to the Canadian rights from Gene Vettes of Lynden, a Washington corporation (“Licensor”) to be formed wherein Licensor granted to the Company an exclusive license covering the territory of Canada and other such territories that shall be mutually agreed upon and the right to market and sell an environmental fuel efficient turbo technology called Green Interactive Hybrid System (“GIHS”). The term of the license is three years with automatic subsequent renewals subject to the following:
| 1. | The Company must purchase and have operational one demonstration GIHS by December 31, 2009. |
| 2. | The Company must sell at least three GIHS units by December 31, 2009. |
| 3. | The Company must sell at least twenty-five GIHS units by December 31, 2010. |
| 4. | The Company must sell at least two hundred GIHS units by December 31, 2011. |
| 5. | The Company must sell at least five hundred GIHS units by December 31, 2012. |
This license of the Green Interactive Hybrid System™ is proven to cause an engine to operate with less effort, less fuel consumption, and enhanced power. In addition, advanced tuning methods significantly decrease harmful emissions.
Operations
General and administrative expenses relating to discontinued operations increased for the six months ended June 30, 2009 to approximately $55,510 from approximately $31,859 for the six-month period ended June 30, 2008. The increase of $23,000 was primarily due to costs related to legal and accounting fees associated with the termination of the License Agreement with Neohydro Corp., and the development expenses.
Milestones
We have one milestone for the next twelve months. It is to sell a sufficient number of GIHS systems to generate revenues in order to operate profitably.
Other milestones are as follows:
1. Raise additional capital.
2. Form a Canadian Subsidiary Company in the next 90 days.
3. Purchase the first demonstration GIHS system.
4. Establish a partnership or joint venture with a dealership in Alberta who will supply vehicles at fleet prices.
We have nominal cash at the present time and cannot operate until we raise additional capital.
Limited Operating History; Need for Additional Capital
There is no historical financial information about us upon which to base an evaluation of our performance. We have just started our current operations and have not generated any revenues from activities. We cannot guarantee we will be successful in our business activities. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the sales cycle and manufacturing, and possible cost overruns due to price and cost increases in metals.
To become profitable and competitive, we must sell a sufficient number of our GIHS systems to generate a profit.
We have no assurance that future financing will be available to us in the future on satisfactory terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our activities. Equity financing could result in additional dilution to existing shareholders.
From Inception on November 13, 2007
The Company acquired the Rio Lode Claim, which was located on November 24, 2007 and filed on December 7, 2007 in the Clark County recorder’s office in Las Vegas as File 081, Page 0010 in the official records book No. T20070212450. The Rio Lode Claim is located within Section 6, Township 25-S, Range 58-E, in the Yellow Pine Mining District of Clark County, Nevada. Since then the claims have been renewed until August 31, 2009. Accordingly, we have not conducted any work on the property and plan to terminate our mining operations in the future.
On September 22, 2008, we entered into a licensing agreement with Neohydro Corp., a Nevada corporation located in Houston, Texas (“Neohydro Corp”) to use all of Neohydro Corp.’s patent and intellectual rights for the purpose of the exclusive worldwide marketing, distribution and licensing rights of the Business for the treatment of industrial waste water for industries. The Neohydro Corp.’s intellectual rights and trade secrets are directed at the use of water sterilization technology, which utilizes innovative high voltage electrolysis devices to transform water. The technology is able to change the nature of the water itself. The Company agreed to use its best efforts to provide funding for business development.
On September 23, 2008, we completed a private placement for 250,000 units at $0.40 per unit for proceeds of $100,000. Each unit consists of one share of common stock and one Series A Warrant. Each Series A Warrant entitles the holder to purchase one share of common stock at $0.40 per share expiring three years from the closing date. The Company incurred finder’s fees of $10,000 in connection with the private placement.
On March 31, 2009, Neohydro Corp. terminated its licensing agreement with us as a result of our failure to comply with the funding schedule set out in Section 3.2 of the Licensing Agreement. On September 25, 2008 we reported in our Form 8-K that on September 22, 2008, we entered into a licensing agreement with Neohydro Corp., a Nevada corporation located in Houston Texas (“Neohydro Corp.”) and Dean Themy (“Themy”) whereby we were granted a worldwide license from Neohydro Corp. to use its intellectual property rights for the purposes of developing, modifying, marketing, selling, offering or otherwise distributing products for the treatment of industrial water. Specifically excluded therefrom was the right to manufacture products. We also executed an non-compete agreement with Neohydro Corp. The fee for the license was $500,000, also, the Company was to use its best efforts to provide funding for business development of $1,400,000 payable as follows: $100,000 by September 26, 2008; $150,000 by October 15, 2008; $250,000 by October 30, 2008; $300,000 by January 15, 2009; $300,000 by April 15, 2009; and, $300,000 by July 15, 2009. In addition we were obligated to issue to Neohydro Corp. an amount of common stock equal to the value of 20% of our total outstanding common shares or approximately 14,560,000 restricted shares of common stock for this license. Also we were obligated to pay a royalty of 10% of the gross proceeds from the sale of products. We did not make any sales.
We are no longer in either business.
On April 22, 2009, the Company executed an Agreement and Release with Licensor and Themy. Themy returned the 14,560,000 shares of Company common stock transferred to him pursuant to the License Agreement. Also, Licensor and Themy released the Company from any liabilities and claims due them and agreed to hold harmless the Company from any and all claims by third parties which Themy incurred while affiliated with the Company. The Company released Licensor and Themy from any claims due to the Company and agreed to hold harmless Licensor and Themy from any claims.
On June 8, 2009, the Company entered into a licensing agreement with Gene Peckover, a sole proprietor as president of Gene Vettes of Lynden, a Washington corporation (the “GIHS Licensor”) to be formed, wherein Licensor granted to the Company an exclusive license covering the territory of Canada and other such territories that shall be mutually agreed upon and the right to market and sell an environmental fuel efficient turbo technology called Green Interactive Hybrid System (“GIHS”). The term of the license is three years subject to the following:
| 1. | The Company must purchase and have operational a demonstration GIHS by December 31, 2009. |
| 2. | The Company must sell at least 3 GIHS units by December 31, 2009. |
| 3. | The Company must sell at least 25 GIHS units by December 31, 2010. |
| 4. | The Company must sell at least 200 GIHS units by December 31, 2011. |
| 5. | The Company must sell at least 500 GIHS units by December 31, 2012. |
On June 8, 2009, the Company entered into a fee agreement with Michael Kulcheski and Harry Gelbard wherein the Company agreed to issue Kulcheski 9,000,000 restricted shares of common stock and Gelbard 6,000,000 restricted shares of common stock in consideration of Kulcheski and Gelbard using reasonable commercial efforts to sell, market, distribute, and manufacture the GIHS license granted to the Company by the GIHS Licensor and to manage the development of our technology. On June 8, 2009, Kulcheski was appointed chief executive officer, chief financial officer and director of the Company.
If the first and second milestones of the GIHS licensing agreement described in the preceding paragraph are not achieved, Kulcheski and Gelbard are to return the 15,000,000 shares of common stock held by them to the treasury of the Company. The Company recorded the $975,000 estimated fair value of the 15,000,000 shares of common stock, which value was calculated based on the $0.13 closing price for NHYT on June 8, 2009 and a 50% restricted stock discount, as prepaid expenses on June 8, 2009 and is amortizing this amount as stock-based compensation expense evenly over the period June 8, 2009 to December 31, 2009.
Liquidity and Capital Resources
We do not have sufficient funds to operate. Future operating activities are expected to be funded by loans from our officers and directors.
We own a 100% interest in a Mineral Claim located in Clark County, Nevada, in consideration for $6,500. The claim is registered in the name of the company. The claim has been renewed for an additional year and will expire on August 31, 2009. The company does not intend to renew this claim in 2009 and will allow it to expire.
In November, 2007, we issued 40,000,000 shares of common stock to our sole officer and director, Venugopal Rao Balla, pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933. The purchase price of the shares was $5,000. This was accounted for as an acquisition of shares. Venugopal Rao Balla covered some of our initial expenses by paying $125.00 for incorporation documents. The amount owed to Mr. Balla is non-interest bearing, unsecured and due on demand. Further the agreement with Mr. Balla is oral and there is no written document evidencing the agreement.
In December 2007, we issued 32,800,000 shares of common stock to 41 individuals in exchange for $41,000. The shares were issued pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933.
In April 2009, Dean Themy returned 14,560,000 shares to the Company.
On June 8, 2009, the Company entered into a fee agreement with Michael Kulcheski and Harry Gelbard wherein the Company agreed to issue Kulcheski 9,000,000 restricted shares of common stock and Gelbard 6,000,000 restricted shares of common stock.
As of June 30, 2009, our total assets were $866,724 and our total liabilities were $70,235.
We lease our office space. We do not intend to hire additional employees at this time.
Limited Operating History; Need for Additional Capital
There is no historical financial information about us upon which to base an evaluation of our performance. We have just started our current operations and have not generated any revenues from activities. We cannot guarantee we will be successful in our business activities. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the sales cycle and manufacturing, and possible cost overruns due to price and cost increases in metals.
We have no assurance that future financing will be available to us in the future on satisfactory terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our activities. Equity financing could result in additional dilution to existing shareholders.
Results of Activities
From Inception on November 13, 2007 to June 30, 2009
We acquired 100% interest in a mineral claim located in Clark County, Nevada. We do not own any interest in any property, but merely have the right to conduct exploration activities on one property. The claim is registered in the name of the company. The claim has been renewed for an additional year and will expire on August 31, 2009. The company does not intend to renew this claim in 2009 and will allow it to expire. We have discontinued our mining operations.
On September 22, 2008, we entered into a licensing agreement with Neohydro Corp., a Nevada corporation located in Houston, Texas (“Neohydro Corp”) to use all of Neohydro Corp.’s patent and intellectual rights for the purpose of the exclusive worldwide marketing, distribution and licensing rights of the Business for the treatment of industrial waste water for industries. The Neohydro Corp.’s intellectual rights and trade secrets are directed at the use of water sterilization technology, which utilizes innovative high voltage electrolysis devices to transform water. The technology is able to change the nature of the water itself.
On March 31, 2009, Neohydro Corp. terminated its licensing agreement with us as a result of our failure to comply with the funding schedule set out in Section 3.2 of the Licensing Agreement.
We are no longer in either business.
On June 8, 2009, the Company entered into a licensing agreement with Gene Peckover, a sole proprietor as president of Gene Vettes of Lynden, a Washington corporation (the “GIHS Licensor”) to be formed, wherein Licensor granted to the Company an exclusive license covering the territory of Canada and other such territories that shall be mutually agreed upon and the right to market and sell an environmental fuel efficient turbo technology called Green Interactive Hybrid System (“GIHS”).
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. | CONTROLS AND PROCEDURES. |
Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that these disclosure controls and procedures are effective even though we failed to file the March 31, 2009 Form 10-Q in a timely manner. We failed to file this Form 10-Q in a timely manner as a result of the termination of the License agreement by Neohydro Corp on March 31, 2009. Thus, we were left with no management to complete the 10-Q in a timely fashion. We believe the foregoing will not occur in the future. As a result, we have not made any changes to our disclosure controls and procedures; Further, there were no changes in our internal control over financial reporting during the quarter ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
The following documents are included herein:
Exhibit No. | Document Description |
| |
31.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities on this 13th day of August, 2009.
| NEOHYDRO TECHNOLOGIES CORP. |
| | |
| BY: | MICHAEL R. KULCHESKI |
| | Michael R. Kulcheski, President, Principal Executive Officer, Secretary, Treasurer, Principal Financial Officer, Principal Accounting Officer and a member of the Board of Directors. |
EXHIBIT INDEX
Exhibit No. | Document Description |
| |
31.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002. |