UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report filed under Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the Quarterly Period Ended September 30, 2005
or
[_] Transitional report filed under Section 13 or 15 (d) of the
Exchange Act.
Commission File No. 0-23365
NEWGEN TECHNOLOGIES, INC.
(A development stage company)
(Name of Small Business Issuer in its Charter)
Nevada 33-0840184
-------- -------------
State or other jurisdiction of I.R.S. Employer Identification Number
incorporation or organization
6000 Fairview Road 12th Floor, Charlotte, North Carolina 28210
(Address of principal executive office)
Issuer's telephone number: (704) 552-3590
BONGIOVI ENTERTAINMENT, INC.
(Former Name)
39 Hansen Farm Road, North Haven, Connecticut 06473 (203) 239-9734
(Address of principal executive office and telephone number)
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) been
subject to such filing requirements for the past ninety (90) days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date: As of November 21, 2005, there were
36,788,024 shares of Common Stock, par value $0.001 per share, outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PART I FINANCIAL INFORMATION
Page
----
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
a. Condensed Consolidated Balance Sheet as of September 30, 2005(Unaudited) 1
b. Condensed Consolidated Statements of Operations for the three months
ended September 30, 2005 and for the period from June 1, 2005(Inception)
to September 30, 2005 (Unaudited) 2
c. Condensed Consolidated Statement of Changes in Stockholders' Equity for
the period from June 1, 2005 (Inception) to September 30, 2005
(Unaudited) 3
d. Condensed Consolidated Statements of Cash Flows for
the period from June 1, 2005 (Inception) to September 30, 2005 (Unaudited) 4
e. Notes to Condensed Consolidated Financial Statements as of September 30, 2005 5
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS 9
Item 3. CONTROLS AND PROCEDURES 10
PART II OTHER INFORMATION 14
Item 1. LEGAL PROCEEDINGS
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Item 3. DEFAULTS ON SENIOR SECURITIES
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 5. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON 8-K
SIGNATURES PAGE 15
CERTIFICATIONS 16
PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this Plan of Operation of this Quarterly Report on Form
10-QSB include "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933 as amended (the "Securities Act") and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which could cause the actual results of the Company (sometimes
referred to as "we", "us" or the "Company"), performance (financial or
operating) or achievements expressed or implied by such forward-looking
statements not to occur or be realized. Such forward-looking statements
generally are based upon the Company's best estimates of future results, general
merger and acquisition activity in the marketplace, performance or achievement,
based upon current conditions and the most recent results of operations.
Forward-looking statements may be identified by the use of forward-looking
terminology such as "may," "will," "project," "expect," "believe," "estimate,"
"anticipate," "intends," "continue", "potential," "opportunity" or similar
terms, variations of those terms or the negative of those terms or other
variations of those terms or comparable words or expressions. (See the Company's
Form 10SB for a description of certain of the known risks and uncertainties of
the Company.)
NEWGEN TECHNOLOGIES, INC. (Formerly Bongiovi Entertainment, Inc.)
(A development stage company)
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
September 30,
2005
--------------
Current assets:
Cash $ 816,981
Prepaid royalties 187,500
Other current assets 23,334
--------------
Total Current Assets 1,027,815
--------------
Investment in joint venture 35,486
Deposit on land and improvements 170,000
--------------
Total Other Assets 205,486
--------------
TOTAL ASSETS $ 1,233,301
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses - related parties $ 500,200
Accounts payable and accrued expenses - other 237,289
Note payable, related party 281,500
--------------
TOTAL LIABILITIES 1,018,989
--------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 10,000,000 shares
authorized, none issued and outstanding --
Common stock, $0.001 par value; 100,000,000 shares authorized,
31,468,524 shares issued and outstanding 31,468
Additional paid-in capital 1,068,323
Common stock to be issued (5,319,500 shares) 2,659,750
Common stock subscriptions receivable (27,581)
Deferred equity-based expenses (1,033,608)
Deficit accumulated during development stage (2,484,040)
--------------
TOTAL STOCKHOLDERS' EQUITY 214,312
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,233,301
==============
The accompanying notes are an integral part of the
condensed consolidated financial statements
1
NEWGEN TECHNOLOGIES, INC. (Formerly Bongiovi Entertainment, Inc.)
(A development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005, AND FOR THE
PERIOD FROM JUNE 1, 2005 (INCEPTION) TO SEPTEMBER 30, 2005
(UNAUDITED)
For the three For the period from
months ended June 1, 2005 (Inception) to
September 30, 2005 September 30, 2005
--------------------------- ---------------------------
Revenues $ -- $ --
--------------------------- ---------------------------
General and administrative expenses 946,246 2,445,642
--------------------------- ---------------------------
Loss from operations (946,246) (2,445,642)
--------------------------- ---------------------------
Other (expenses)
Interest (8,998) (20,137)
Bank fees (3,747) (3,747)
Loss from investment in joint venture (14,514) (14,514)
--------------------------- ---------------------------
Total other (expenses) (27,259) (38,398)
--------------------------- ---------------------------
Loss before provision for income taxes (973,505) (2,484,040)
Provision for income taxes -- --
--------------------------- ---------------------------
Net loss $ (973,505) $ (2,484,040)
=========================== ===========================
Loss per share - basic and diluted $ (0.03) $ (0.08)
=========================== ===========================
Weighted average number of common
shares outstanding - basic and diluted 33,044,247 32,580,309
=========================== ===========================
The accompanying notes are an integral part of the
condensed consolidated financial statements
2
NEWGEN TECHNOLOGIES, INC. (Formerly Bongiovi Entertainment, Inc.)
(A development stage company)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JUNE 1, 2005 (INCEPTION) TO SEPTEMBER 30, 2005
(UNAUDITED)
Additional Common Common Stock Deferred
Common Stock Paid-In Stock to Subscriptions Equity Based
Shares Amount Capital be issued Receivable Expenses
----------- ----------- ----------- ----------- ------------ ------------
-- $ -- $ -- $ -- $ -- $ --
Balance at June 1, 2005
Issuance of shares of common stock 27,711,000 27,711 (24,940) -- (2,581) --
to founders in exchange for
subscriptions receivable
Issuance of shares of common stock 424,033 424 211,596 -- -- (62,842)
in exchange for services and
expense reimbursement
Transfer of shares of common stock 3,333,491 3,333 (3,333) -- -- --
in a share exchange agreement
Common stock to be issued -- -- -- 2,112,750 (25,000) --
for cash (4,225,500 shares)
Common stock to be issued -- -- -- 547,000 -- (122,641)
for services and expense
reimbursement (1,094,000 shares)
Non-cash compensation expense -- -- 885,000 -- -- (848,125)
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ------------ ------------
Balance at September 30, 2005 31,468,524 $ 31,468 $ 1,068,323 $ 2,659,750 $ (27,581) $ (1,033,608)
=========== =========== =========== =========== ============ ============
Deficit Accumulated
During
Development Stage Total
------------------ -----------
$ -- $ --
Balance at June 1, 2005
Issuance of shares of common stock -- 190
to founders in exchange for
subscriptions receivable
Issuance of shares of common stock -- 149,178
in exchange for services and
expense reimbursement
Transfer of shares of common stock -- --
in a share exchange agreement
Common stock to be issued -- 2,087,750
for cash (4,225,500 shares)
Common stock to be issued -- 424,359
for services and expense
reimbursement (1,094,000 shares)
Non-cash compensation expense -- 36,875
Net loss (2,484,040) (2,484,040)
------------------ -----------
Balance at September 30, 2005 $ (2,484,040) $ 214,312
================== ===========
The accompanying notes are an integral part of the
condensed consolidated financial statements
3
NEWGEN TECHNOLOGIES, INC. (Formerly Bongiovi Entertainment, Inc.)
(A development stage company)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JUNE 1, 2005 (INCEPTION) TO SEPTEMBER 30, 2005
(UNAUDITED)
Cash flows from operating activities:
Net loss $(2,484,040)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock issued for services and expense reimbursement 573,537
Noncash compensation expense 36,875
Loss from investment in joint venture 14,514
Changes in operating assets and liabilities:
Increase in prepaid royalties (187,500)
Increase in other current assets (23,334)
Increase in accounts payable and accrued expenses - related parties 500,200
Increase in accounts payable and accrued expenses - other 237,289
Note payable issued for expenses paid on behalf of the Company
and accrued interest, net of repayments 281,500
-----------
Net cash used in operating activities (1,050,959)
-----------
Cash flows from investing activities:
Deposit on land and improvements (170,000)
Investment in joint venture (50,000)
-----------
Net cash used in investing activities (220,000)
-----------
Cash flows from financing activities:
Proceeds received for common stock issued to founders 190
Proceeds received for common stock to be issued 2,087,750
-----------
Net cash provided by financing activities 2,087,940
-----------
Net increase in cash 816,981
Cash, beginning of period --
-----------
Cash, end of period $ 816,981
===========
Non cash investing and financing activities:
Common stock issued for deferred equity based expenses $ 573,537
===========
Common stock issued for subscriptions receivable $ 27,581
===========
The accompanying notes are an integral part of the
condensed consolidated financial statements
4
NewGen Technologies, Inc. (formerly Bongiovi Entertainment, Inc.)
(A development stage company)
Notes to the Condensed Consolidated Financial Statements September 30, 2005
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP") for interim financial information. They do not
include all of the information and footnotes required for complete financial
statements. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair presentation have
been included. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full year. For
further information refer to the June 30, 2005, financial statements of Refuel
America, Inc., included in the Company's filing on Form 8K on October 18, 2005.
(2) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Refuel America, Inc. (a development stage company), (the "Company") was
incorporated on June 1, 2005 under the laws of the state of Delaware. The
Company was formed for the purpose of developing and distributing innovative
alternative fuels including biodiesel. The Company's offices are located in
Charlotte, North Carolina, its only location. The Company's fiscal year end is
December 31.
There have been no significant operations since inception and the Company is in
the process of raising additional capital and financing for future operations.
On July 29, 2005, Bongiovi Entertainment, Inc. ("Bongiovi"), a totally inactive
reporting public shell corporation, consummated a Share Exchange Agreement (the
"Agreement") with Refuel America, Inc. ("Refuel") whereby all of the
shareholders in Refuel had their shares converted into 28,135,033 shares of
Bongiovi, or approximately 89% of the common stock of Bongiovi. As part of the
reverse merger between Bongiovi and Refuel, warrants were issued to a
shareholder to purchase 2,255,000 common shares. One warrant for 2,155,000
common shares has no expiration date and has an exercise price of $0.50 per
share. The other warrant for 100,000 common shares is exercisable for a term of
five years and has an exercise price of $5.00. Under generally accepted
accounting principles, a company whose stockholders receive over fifty percent
of the stock of the surviving entity in a business combination is considered the
acquirer for accounting purposes. Accordingly, the transaction was accounted for
as an acquisition of Bongiovi, the legal acquirer, and a recapitalization of
Refuel, the accounting acquirer.
On August 10, 2005, to effect a name change, Bongiovi executed a merger and
reorganization agreement with the sole shareholder of NewGen Technologies, Inc,
a newly formed Nevada corporation. This transaction effectively changed the
registrant's name from Bongiovi Entertainment, Inc. to NewGen Technologies, Inc.
(NewGen).
Principles of Consolidation
The accompanying condensed consolidated financial statements include the
accounts of NewGen Technologies, Inc. and its wholly-owned subsidiary Refuel
America, Inc. (collectively, the Company). All material intercompany accounts
and transactions have been eliminated in consolidation.
Cash
The Company maintains its cash balances in financial institutions. Balances in
the institutions may at times exceed the Federal Deposit Insurance Corporation
limits.
Loss per Share
Basic net loss per common share for the three months ended June 30, 2005 and for
the period from June 1, 2005 (Inception) to September 30, 2005 are computed
based on the weighted average number of common shares outstanding during the
period. Diluted net loss per common share is computed based on the weighted
average number of common shares and common stock equivalents outstanding during
the period. The exercise of outstanding options and warrants to purchase
2,555,000 common shares as of September 30, 2005, were not included in the
computation of diluted loss per because the assumed conversion and exercise
would be anti-dilutive for all periods presented.
5
NewGen Technologies, Inc. (formerly Bongiovi Entertainment, Inc.)
(A development stage company)
Notes to the Condensed Consolidated Financial Statements September 30, 2005
(Unaudited)
Use of Estimates
In preparing the condensed consolidated financial statements in conformity with
accounting principles generally accepted in the United States, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclose the nature of contingent assets and
liabilities at the date of the condensed consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts based on enacted tax laws and statutory tax rates applicable
to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
Fair Value of Financial Instruments
At September 30, 2005, the carrying value of the Company's financial
instruments, which include cash, cash held in escrow with attorney, accounts
payable, accrued expenses and notes payable-related party, approximates their
fair value due to the short-term maturity of those instruments.
Joint Ventures
The Company intends to operate its manufacturing and distribution through
various joint ventures. The equity method is used for all joint ventures where
the Company's voting control is 50% or less. When the Company has voting control
greater than 50% the joint venture will be consolidated in the financial
statements. The Company has formed joint ventures with Advanced Biotechnologies,
LLC and PowerSHIFT Biofuels LLC, both will build and operate biodiesel plants
and power generation facilities in the United States. Currently, the Company has
contributed capital of $50,000 for initial start up costs to Advanced
Biotechnologies, LLC. The Company's 50% voting and share of loss for the period
from June 1, 2005, (inception) to September, 30, 2005 is $14,514. An additional
$100,000 for was contributed for working capital subsequent to September 30,
2005.
The Company has advanced $25,000 for initial start up costs to PowerSHIFT, LLC
subsequent to September 30, 2005. The Company has a 50% voting and share of
PowerSHIFT Biofuels LLC.
Stock-Based Compensation
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation, which encourages but does not require companies to recognize
compensation expense for stock-based awards based on their fair market value at
the date of grant. SFAS No. 123 allows companies to continue to employ the
intrinsic value method under APB No. 25 provided that pro-forma disclosures of
net income and earnings per share under the fair value method are included in
the notes to the condensed consolidated financial statements. The required
disclosures were amended in December 2002 with the issuance of SFAS No. 148,
Accounting for Stock Based Compensation - Transition and Disclosure. The Company
has adopted the disclosure requirements of SFAS No. 123 as amended by SFAS No.
148, but will continue to account for stock-based compensation using the
intrinsic value method prescribed under APB No. 25.
The Company accounts for its employee stock options in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." Accordingly, compensation expense is recorded on the date of grant
only if the current market price of the underlying stock exceeds the exercise
price. The Company provides pro-forma net income and pro-forma earnings per
share disclosures for employee stock option grants as if the fair-value-based
method had been applied in accordance with Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation." Had the cost of
stock options issued to employees been determined based on the fair value of
options at the grant date, the Company's net loss and loss per share pro-forma
amounts would be as follows:
6
NewGen Technologies, Inc. (formerly Bongiovi Entertainment, Inc.)
(A development stage company)
Notes to the Condensed Consolidated Financial Statements September 30, 2005
(Unaudited)
For the period from
For the three months June 1, 2005 (Inception) to
September 30, 2005 September 30, 2005
---------------------------- ----------------------------
Net loss as reported $ (973,505) $ (2,484,040)
Add: Stock based employee compensation expense
included in reported net income net of related tax effects 36,875 36,875
Deduct: Total stock based employee compensation
expense determined under fair value based method
net of related tax effects (42,612) (42,612)
---------------------------- ----------------------------
Pro forma net loss $ (979,242) $ (2,489,777)
============================ ============================
Loss per share:
Basic and diluted - as reported $ (0.03) $ (0.08)
============================ ============================
Basic and diluted - pro forma $ (0.03) $ (0.08)
============================ ============================
On September 7, 2005, the Company adopted an incentive based Non Qualified Stock
Option (NQSO) Stock Option Plan with a vesting period of four (4) years to begin
after the first year of employment. 8 million shares or 15% of the float of
Common Stock will be provided for the plan. The incentive awards will be tiered
as follows: Chairman/CEO 100%, next level 50 to 75%, and the next level 25% of
their cash compensation.
In addition, a special one time recognition for the Company contributors was
adopted. The amount of shares allocated for this effort is 300,000 shares of the
Company's common stock. The shares will be issued as of September 9, 2005, and
participants will be fully vested over a two-year timeframe. The value of the
shares is at $.50 per share. The shares are to be equally split between Mike
D'Onofrio, John King, Bruce Wunner, and Mike Woods. Another award of 500,000 was
shares granted to Scott Deininger at $1.00 per share effective as of October 10,
2005, the date of employment and vesting period of 4 years.
Recent Accounting Pronouncements
In December 2004, the FASB issued SFAS No. 123 (R), "Share-Based Payment". SFAS
No. 123 (R) revises SFAS No. 123, "Accounting for Stock-Based Compensation" and
supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees". SFAS
No. 123 (R) focuses primarily on the accounting for transactions in which an
entity obtains employee services in share-based payment transactions. SFAS No.
123 (R) requires companies to recognize in the statement of operations the cost
of employee services received in exchange for awards of equity instruments based
on the grant-date fair value of those awards (with limited exceptions).
SFAS No. 123 (R) is effective as of the first interim or annual reporting period
that begins after June 15, 2005 for non-small business issuers and after
December 15, 2005 for small business issuers. Accordingly, the Company will
adopt SFAS No. 123 (R) in its quarter ending March 31, 2006. The Company is
currently evaluating the provisions of SFAS No. 123 (R) and has not yet
determined the impact, if any, that SFAS No. 123 (R) will have on its financial
statement presentation or disclosures.
(3) DEPOSIT ON LAND AND IMPROVEMENTS
On September 28, 2005, the Company executed a definitive agreement in the amount
of $1,700,000 for the purchase of three fuel terminals, subject only to
obtaining financing, that are strategically located near existing fuel pipelines
in the Southeast United States. In conjunction with this purchase contract, a
deposit of $170,000 was given to the seller. The terminals, with a total storage
capacity of over 10 million gallons, and an annual throughput capacity of more
than 350 million gallons, will be used for the distribution and storage of
alternative fuels, including biodiesel and ethanol blends, as well as
traditional hydrocarbons. The Company expects the closing of this purchase,
subject to financing and customary terms and conditions, to occur before year
end.
7
NewGen Technologies, Inc. (formerly Bongiovi Entertainment, Inc.)
(A development stage company)
Notes to the Condensed Consolidated Financial Statements September 30, 2005
(Unaudited)
(4) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
For the period from June 1, 2005 (inception) through September 30, 2005, various
officers and directors of the Company agreed to defer a portion of their
salaries, payable under employment agreements, and expense reimbursement until
such time as adequate funds have been received by the Company. The amount
deferred as of September 30, 2005 was $500,200, which is included in accounts
payable and accrued expenses - related parties. Accounts payable and accrued
expenses consisted of the following as of September 30, 2005:
Related Non-related
---------- ----------
Accounts Payable $ 14,466 $ 101,447
Accrued Expenses 485,734 135,842
---------- ----------
Total $ 500,200 $ 237,289
========== ==========
(5) NOTE PAYABLE - RELATED PARTY
The Company's wholly-owned subsidiary, Refuel executed a promissory note on June
30, 2005 from an Executive Director in the amount of $316,500, which includes
$5,863 in accrued interest included in the note payable. As of September 30,
2005 the principal balance is $281,500 and accrued interest of $13,188 which is
included in accrued expenses-related parties. The note is due December 1, 2005
and bears interest at 10% per annum.
(6) COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases office space under three non-cancelable operating leases, two
of which expire on November 30, 2005 and one expires February 28, 2006. Rent
expense for all operating leases for the period from June 1, 2005 (Inception)
through September 30, 2005 was $11,208. The leases are renewable every six
months.
Commitments
The Company has entered into two management services contracts (commencing on
October 1, 2005 and November 1, 2005) for management of two fuel terminals
(storage tanks, piping and racks for dispensing) for $8,333 per month for the
next sixty (60) months, per contract. At September 30, 2005, the Company has
prepaid $8,333 in terminal management services.
Contingency
The Company signed an agreement, subject only to financing to purchase three
fuel terminals (see note 3). A deposit of $170,000 has been paid. This deposit
may be forfeited if the closing does not occur by February 28, 2006 or other
breach of the contract by the buyer. The company firmly believes the transaction
will close by year end.
On November 3, 2005, NewGen was advised by two Directors that a personal lawsuit
against them in the United Kingdom alleging they improperly obtained technology
owned by another company has been dropped. In any event, NewGen is marketing
products utilizing technology received from the two Directors under a royalty
agreement. The management of NewGen firmly believes that the technology is
materially different than that referred to in the aforementioned lawsuit.
Further, the two NewGen Directors have filed patent applications in the United
Kingdom for protection of their technology used by NewGen.
(7) INCOME TAXES
September 30, 2005
------------------
Taxes at U.S. federal statutory rate of 34% $ (844,574)
Valuation Allowance 844,574
------------------
Tax expense (benefit) $ --
==================
8
NewGen Technologies, Inc. (formerly Bongiovi Entertainment, Inc.)
(A development stage company)
Notes to the Condensed Consolidated Financial Statements September 30, 2005
(Unaudited)
The tax effects of temporary differences that give rise to significant portions
of deferred tax assets and liabilities at September 30, 2005 are presented
below:
September 30, 2005
------------------
Deferred income tax assets:
Net operating loss carryforwards $ 844,574
Deferred income tax liabilities: --
------------------
844,574
Valuation Allowance (844,574)
------------------
Net deferred tax assets $ --
==================
As of September, 30, 2005, the Company has a net operating loss carryforward for
federal income tax purposes in the amount of $2,484,040, which expires in 2025.
The Company has recorded a valuation allowance of $844,574 as of September 30,
2005. The valuation allowance was recorded due to the doubt surrounding the
Company's ability to utilize the deferred tax asset.
(8) STOCKHOLDERS' EQUITY
The total number of shares of all classes of stock which the Company is
authorized to issue is 100,000,000 shares of common stock, par value $ 0.001,
("Common Stock"). The Common Stock shall be identical and shall entitle each of
the holders thereof to the same rights and privileges. When dividends (if any)
are declared upon the Common Stock, whether payable in cash, in property or in
shares of stock of the Company, the holders of Common Stock shall be entitled to
share equally, share for share, in such dividends. Each holder of Common Stock
shall be entitled to one vote per share.
In June 2005, the Company issued 27,711,000 shares of common stock to founders
at a value of $0.001 per share for total subscriptions receivable of 2771, of
which $190 has been received as of September 30, 2005.
In June 2005, the Company issued a total of 424,033 shares of common stock to
various individuals in exchange for services rendered, future services to be
rendered and expense reimbursement, at a value of $0.50 per share for a total of
$212,020, of which $62,842 has been deferred.
During August and September, 2005 the Company sold 4,225,500 shares of common
stock to various individuals at a value of $0.50 per share for cash proceeds of
$2,087,750 and a subscription receivable of $25,000.
On September 9, 2005, the Company issued to employees, 300,000 options having an
intrinsic value of $885,000, of which $848,125 has been deferred over a two year
vesting period.
Various individuals exchanged services, future services and expense
reimbursements at a value of $0.50 per share for 1,094,000 shares of common
stock totaling $547,000 of which $122,641 has been deferred.
(9) RELATED PARTY TRANSACTIONS
The Company's wholly-owned subsidiary, Refuel executed a promissory note on June
30, 2005 from an Executive Director in the amount of $316,500, which includes
$5,863 in accrued interest included in the note payable. As of September 30,
2005 the principal balance is $281,500 and accrued has interest of $13,188. The
note is due December 1, 2005 and bears interest at 10% per annum.
Various officers and directors of the Company agreed to defer a portion of their
salaries, payable under employment agreements, and expense reimbursement until
such time as adequate funds have been received by the Company. The amount
deferred as of September 30, 2005 was $498,365, which is included in accounts
payable and accrued expenses - related parties.
On July 1, 2005, the Company entered into an assignment and royalty agreement
with two directors and shareholders of the Company, whereby various Great
Britain patent applications were assigned to the Company. According to the terms
of the agreement, the Company is required to pay $250,000 at the inception of
the agreement (paid July 1, 2005) and a continuing royalty fee of the greater of
$250,000 or 0.1% of the aggregate products sold per year utilizing the assigned
patents during the term of the royalty agreement (indefinite until cancelled by
either the directors or the Company). As of September 30, 2005, 187,500 of the
$250,000 inception payment remains prepaid and $62,500 has been amortized.
9
NewGen Technologies, Inc. (formerly Bongiovi Entertainment, Inc.)
(A development stage company)
Notes to the Condensed Consolidated Financial Statements September 30, 2005
(Unaudited)
On September 14, 2005, the Company entered into a two-month management services
agreement with Treasure Coast Capital Partners ("TCCP"), a company owned by a
shareholder and officer of the Company. The agreement provides for the Company
to pay $43,250 in fees, of which $30,000 has been paid.
(10) GOING CONCERN
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has a small amount of working
capital as of September 30, 2005 and a cash flow deficiency from operations of
$1,050,959 and a net loss of $2,484,040 for the period from June 1 (inception)
to September 30, 2005. These matters raise substantial doubt about its ability
to continue as a going concern. The Company's existence is dependent on
management's ability to develop profitable operations and resolve the Company's
liquidity problems.
In order to improve the Company's liquidity, management is actively pursuing
additional equity and debt financing through discussions with investment bankers
and private investors. There can be no assurance the Company will be successful
in its efforts to raise additional financing.
These financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
(11) SUBSEQUENT EVENTS
The Company has entered into a management services contract for management of a
fuel terminal (storage tanks, piping and racks for dispensing) located in
Spartanburg, GA. for $8,333 per month. The term of the agreement is for a period
of sixty months beginning October 1, 2005 through September 30, 2010.
On October 28, 2005, the Company executed a letter of intent to merge with
Prolong International Corporation ("Prolong"), a maker of proprietary lubricants
and fuel additives. The merger is subject to satisfactory due diligence,
definitive agreements, regulatory approvals and shareholder consent. Under the
letter of intent, the Company will merge with Prolong, with Prolong being the
surviving company. Prolong will take the name NewGen Technologies, Inc.,
operating through two subsidiaries, Refuel America, Inc. and Prolong Super
Lubricants, Inc., and will trade on the American Stock Exchange (AMEX). Current
NewGen Technologies, Inc. shareholders will own approximately 93.6% of the new
company, with the balance owned by current Prolong shareholders. The board and
senior management of the merged parent company will come from NewGen
Technologies, Inc.
On November 1, 2005, the Company has entered into a management services contract
for management of a fuel terminal (storage tanks, piping and racks for
dispensing) located in Paw Creek, NC. for $8,333 per month. The term of the
agreement is for a period of sixty months beginning November 1, 2005 through
October 31, 2010.
On November 3, 2005, the Company was advised by two Directors that a personal
lawsuit against them in the United Kingdom alleging they improperly obtained
technology owned by another company has been dropped. In any event, the Company
is marketing products utilizing technology received from the two Directors under
a royalty agreement.
The Company firmly believes that the technology is materially different than
that referred to in the aforementioned lawsuit. Further, the two Directors have
filed patent applications in the United Kingdom for protection of their
technology used by the Company.
On November 8, 2005, the Company, has formed a joint venture with PowerSHIFT
Energy Company, Inc., a provider of alternative energy solutions, to build
biodiesel plants and power generation facilities in the United States. The joint
venture, PowerSHIFT Biofuels, LLC, is equally owned by NewGen and PowerSHIFT
Energy. PowerSHIFT Biofuels has already identified several potential
opportunities in California, Hawaii, and Iowa to provide biodiesel and complete
green energy solutions for utilities, industry and transportation. The first of
these projects could potentially be operational by the fourth quarter of 2006,
and all identified plants combined would produce in excess of 140 million
gallons of biodiesel. Additional sites are currently being explored in the
Midwest and Rocky Mountain states.
For Advanced Biotechnologies, LLC an additional $100,000 was contributed for
working capital subsequent to September 30, 2005. The Company has advanced
$25,000 for initial start up costs to PowerSHIFT, LLC subsequent to September
30, 2005. The Company has a 50% voting and share of PowerSHIFT Biofuels LLC.
An award of 500,000 shares was granted to Scott Deininger at $1.00 per share
effective as of October 10, 2005, the date of employment and vesting period of 4
years.
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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
CORPORATE HISTORY
Refuel America, Inc. (a development stage company), (the "Company") was
incorporated on June 1, 2005 under the laws of the state of Delaware. The
Company was formed for the purpose of developing and distributing innovative
alternative fuels including biodiesel. The Company's offices are located in
Charlotte, North Carolina, its only location. The Company's fiscal year end is
December 31.
There have been no significant operations since inception and the Company is in
the process of raising additional capital and financing for future operations.
On July 29, 2005, Bongiovi Entertainment, Inc. ("Bongiovi"), a totally inactive
reporting public shell corporation, consummated a Share Exchange Agreement (the
"Agreement") with Refuel America, Inc. ("Refuel") whereby all of the
shareholders in Refuel had their shares converted into 28,135,033 shares of
Bongiovi, or approximately 89% of the common stock of Bongiovi. As part of the
reverse merger between Bongiovi and Refuel, warrants were issued to a
shareholder to purchase 2,255,000 common shares. One warrant for 2,155,000
common shares has no expiration date and has an exercise price of $0.50 per
share. The other warrant for 100,000 common shares is exercisable for a term of
five years and has an exercise price of $5.00. Under generally accepted
accounting principles, a company whose stockholders receive over fifty percent
of the stock of the surviving entity in a business combination is considered the
acquirer for accounting purposes. Accordingly, the transaction was accounted for
as an acquisition of Bongiovi, the legal acquirer, and a recapitalization of
Refuel, the accounting acquirer.
On August 10, 2005, to effect a name change, Bongiovi executed a merger and
reorganization agreement with the sole shareholder of NewGen Technologies, Inc,
a newly formed Nevada corporation. This transaction effectively changed the
registrant's name from Bongiovi Entertainment, Inc. to NewGen Technologies, Inc.
(NewGen).
OVERVIEW
Bongiovi was an entertainment content provider and independent record label,
whose market is the global entertainment/music consumer. Bongiovi was engaged in
the acquisition of music industry assets and in operational activities that
included: the signing and development of artists for the purpose of creating,
promoting, marketing and distributing and selling recorded material, the
utilization and development of a national/international record promotion and
distribution network, the identification, acquisition and development of a
"catalog" of recorded works and other entertainment related activities.
Since June 14, 2004, Bongiovi had no operating business and did not intend to
develop its own operating business but instead was seeking to effect a merger
with a corporation and undertake a merger for its own corporate purposes. This
merger occurred on August 2, 2005, whereby the Bongiovi became the legal
acquirer and Refuel became the accounting acquirer. As such, the inception date
of Newgen Technologies, Inc. is June 1, 2005 which is the inception date of
Refuel America. Accordingly, the profit and loss and cash flow statements
include only activity from June 1, 2005 (inception) to September 30, 2005.
PLAN OF OPERATIONS
To date we have not derived any revenues and we have not derived a profit from
our operations. There can be no assurance that we will be able close on the
transactions noted below or conduct operations profitably in the future, if at
all, or that we will be able to generate revenues from operations in the future.
We currently do not have sufficient cash reserves to meet all of our anticipated
obligations for the next twelve months. As a result, we are in the process of
soliciting additional equity and debt funding in the near future.
Newgen and its wholly-owned subsidiary, Refuel is a fuel production and
distribution company engaged in the development of fuel technology, including
bio fuels, which can increase an automobile's miles per gallon while providing
cleaner fuel emissions by changing the property of fuel to allow more complete
combustion and decrease the dependency on foreign fuels.
While we have not yet begun distribution, we intend to utilize our patent
pending technology to produce fuel products, which we plan to distribute to both
the wholesale and retail segments of the fuel marketplace. We intend to continue
development of our technology to diversify our product offerings. We utilize
technology that is multi-functional and multi-purpose, allowing it to be used in
a wide range of fuels including gasoline, diesel, Biodiesel and Ethanol. Our
products include proprietary formulae, designed to positively alter the
combustion characteristics of the fuel. Because of the unique character of the
proprietary formulae, our formulations are designed to create a mono-layer on
the fuel delivery system, increasing lubricity (reducing engine wear and tear)
while the detergent character of the formulae is designed to prevent deposit
formation on fuel injectors. The technology is also designed to result in
greater atomization and efficiency of combustion, to provide increases in fuel
economy and reductions in emissions.
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Currently, we are in the process of working with a joint venture partner through
our Refuel subsidiary to build and operate biodiesel plants in the Southeast. A
facility that is planned to produce 60 million gallons annually will be based in
Sandersville, Georgia. This joint venture serves as the initial step in our
plans to manufacture, process, and distribute biofuels in the U.S. with the aim
of substantially increasing a vehicle's operating efficiency while reducing the
amount of carbon monoxide, particulates, and nitrous oxides produced. Current
cash requirements are projected to be approximately $1,400,000 in general and
administrative costs and approximately $35,000,000 to $40,000,000 in capital
expenditures over the next twelve to fourteen months. Operations are planned to
commence in the fourth quarter 2006.
In addition, we have signed a definitive contract subject only to financing for
the purchase of three fuel terminals in the southeast United States from Crown
Central, LLC. The terminals, with a total storage capacity of over 10 million
gallons, and an annual throughput capacity of more than 350 million gallons,
will be used for the distribution and storage of alternative fuels, including
biodiesel and ethanol blends, as well as traditional hydrocarbon fuels. The
three terminals are strategically located near existing fuel pipelines with
railcar access. NewGen expects the closing of this purchase, subject to
financing and customary terms and conditions, to occur before year end. The
purchase of these terminals will give NewGen the opportunity to process, blend,
and store its proprietary biodiesel and ethanol products as well as hydrocarbon
fuels. This agreement is a crucial next step in our growth strategy - allowing
the Company to blend biodiesel with hydrocarbon fuels for distribution
domestically and internationally. We intend to offer proprietary products to
meet the increasing demand for biofuels, driven by greater fuel efficiency,
cleaner exhaust, and a growing need for energy independence.
A $170,000 deposit has been made in accordance with the agreement to purchase
for $1,700,000 and we will require financing for an additional $3,500,000 -
$4,000,000 for additional equipment and working capital for this project. An
independent terminal management company has been engaged to start up and operate
the terminal.
On October 26, 2005, we executed a letter of intent to merge with Prolong
International Corporation ("Prolong"), a maker of proprietary lubricants and
fuel additives. The merger is subject to satisfactory due diligence, definitive
agreements, regulatory approvals and shareholder consent. Under the letter of
intent, the Company will merge with Prolong, with Prolong being the surviving
company.
Prolong will take the name NewGen Technologies, Inc., operating through two
subsidiaries, ReFuel America, Inc. and Prolong Super Lubricants, Inc., and will
trade on the American Stock Exchange (AMEX), subject to approval. Current NewGen
Technologies, Inc. shareholders will own approximately 93.6% of the new company,
with the balance owned by current Prolong shareholders. However, there can be no
assurance that we will be able close on this transaction timely or conduct
operations profitably in the future, if at all.
On November 8, 2005, we announced that our wholly-owned subsidiary, ReFuel, has
formed a joint venture with PowerSHIFT Energy Company, Inc., a provider of
alternative energy solutions, to build biodiesel plants and power generation
facilities in the United States. The joint venture, PowerSHIFT Biofuels, LLC, is
equally owned by NewGen and PowerSHIFT Energy. PowerSHIFT Biofuels has already
identified several potential opportunities in California, Hawaii, and Iowa to
provide biodiesel and complete green energy solutions for utilities, industry
and transportation. The first of these projects could potentially be operational
by the fourth quarter of 2006, and all identified plants combined would produce
in excess of 140 million gallons of biodiesel. Additional sites are currently
being explored in the Midwest and Rocky Mountain states.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2005, we had a cash balance of $816,981 and negative cash
flow from operations of $1,050,959. During August and September, 2005 the
Company issued 3,333,491 shares to acquire Bongiovi, and sold 4,225,500 shares
of common stock to various individuals at a value of $0.50 per share for cash
proceeds of $2,087,750 and a subscription receivable of $25,000. The proceeds
from this offering were used for the repayment of outstanding debt obligation,
professional expenses, working capital and general corporate expenses. In
addition, the Company issued to employees, 300,000 options having an intrinsic
value of $885,000 of which $848,125 has been deferred. We currently do not have
sufficient cash reserves to meet all of our anticipated obligations for the next
twelve months. As a result, we will require additional equity and debt funding
in the near future. Accordingly, the condensed consolidated financial statements
as of June 30, 2005 have been prepared on a going concern basis.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB issued SFAS No. 123 (R), "Share-Based Payment". SFAS
No. 123 (R) revises SFAS No. 123, "Accounting for Stock-Based Compensation" and
supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees". SFAS
No. 123 (R) focuses primarily on the accounting for transactions in which an
entity obtains employee services in share-based payment transactions. SFAS No.
123 (R) requires companies to recognize in the statement of operations the cost
of employee services received in exchange for awards of equity instruments based
on the grant-date fair value of those awards (with limited exceptions).
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SFAS No. 123 (R) is effective as of the first interim or annual reporting period
that begins after June 15, 2005 for non-small business issuers and after
December 15, 2005 for small business issuers. Accordingly, the Company will
adopt SFAS No. 123 (R) in its quarter ending March 31, 2006. The Company is
currently evaluating the provisions of SFAS No. 123 (R) and has not yet
determined the impact, if any, that SFAS No. 123 (R) will have on its financial
statement presentation or disclosures.
RESULTS OF OPERATIONS
Our consolidated net loss for the three months ended September 30, 2005 was
$973,505. General and administrative expenses primarily consisted of the
following: a) professional fees of approximately $374,000 of which $200,000
related to a Bongoivi consultant; b) wages approximating $355,000; c)
approximately $97,000 in travel related expenses and d) royalty expense of
$62,500 relating the assignment to the company of the Great Britain patent
applications from related parties.
Our consolidated net loss for the period from June 1, 2005 (inception) to
September 30, 2005 was $2,484,040. General and administrative expenses primarily
consisted of the following: a) professional fees of approximately $951,000 of
which $515,000 related to consulting prior to inception which consisted of
approximately $200,000 for the Bongoivi consultant; approximately $184,000 in
legal fees and $154,000 in accounting fees; b) wages approximating $813,000; c)
approximately $280,000 in travel related expenses; d) marketing studies
approximating $241,000; and e) royalty expense of $62,500 relating the
assignment to the company of the Great Britain patent applications from related
parties.
Currently there are no signed contracts that will produce revenue and there can
be no assurances that management will be successful in negotiating such
contracts.
Prior to June 1, 2005, the Company had no operating business.
GOING CONCERN
The Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flows to meets its obligations on a timely basis, to
obtain additional financing as may be required and ultimately and to attain
profitability.
CRITICAL ACCOUNTING POLICIES
Income Taxes
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts based on enacted tax laws and statutory tax rates applicable
to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclose the nature of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Item 3. Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer (the "Certifying
Officers") are responsible for establishing and maintaining disclosure controls
and procedures and internal controls and procedures for financial reporting for
the Company. The Certifying Officers have designed such disclosure controls and
procedures and internal controls and procedures for financial reporting to
ensure that material information are made known to them, particularly during the
period in which this report was prepared. The Certifying Officers have evaluated
the effectiveness of the Company's disclosure controls and procedures and
internal controls and procedures for financial reporting as of September 30,
2005 and believes that the Company's disclosure controls and procedures and
internal controls and procedures for financial reporting are effective based on
the required evaluation. There have been no significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of their evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On November 3, 2005, NewGen was advised by two Directors that a personal lawsuit
against them in the United Kingdom alleging they improperly obtained technology
owned by another company has been dropped. In any event, NewGen is marketing
products utilizing technology received from the two Directors under a royalty
agreement. The management of NewGen firmly believes that the technology is
materially different than that referred to in the aforementioned lawsuit.
Further, the two NewGen Directors have filed patent applications in the United
Kingdom for protection of their technology used by NewGen.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On September 7, 2005, the Company adopted an incentive based Non Qualified Stock
Option (NQSO) Stock Option Plan with a vesting period of four (4) years to begin
after the first year of employment. 8 million shares or 15% of the float of
Common Stock will be provided for the plan. The incentive awards will be tiered
as follows: Chairman/CEO 100%, next level 50 to 75%, and the next level 25% of
their cash compensation.
In addition, a special one time recognition for the Company contributors was
adopted. The amount of shares allocated for this effort is 300,000 shares of the
Company's common stock. The shares will be issued as of September 9, 2005, and
participants will be fully vested over a two-year timeframe. The value of the
shares is at $.50 per share. The shares are to be equally split between Mike
D'Onofrio, John King, Bruce Wunner, and Mike Woods. Another award of 500,000 was
shares granted to Scott Deininger at $1.00 per share effective as of October 10,
2005, the date of employment and vesting period of 4 years.
All other sales have been previously reported on Form 8-K.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5 - OTHER INFORMATION
On August 10, 2005, Bongiovi Entertainment, Inc. executed a merger and
reorganization agreement with the sole shareholder of NewGen Technologies, Inc.
whereby, NewGen shall be merged into the Company. The Company is the surviving
company and has effectively changed its name to New Gen Technologies, Inc.
A $170,000 deposit has been made in accordance with the agreement to purchase
for $1,700,000 and we will require financing for an additional $3,500,000 -
$4,000,000 for additional equipment and working capital for this project. An
independent terminal management company has been engaged to start up and operate
the terminal.
On October 26, 2005, we executed a letter of intent to merge with Prolong
International Corporation ("Prolong"), a maker of proprietary lubricants and
fuel additives. The merger is subject to satisfactory due diligence, definitive
agreements, regulatory approvals and shareholder consent. Under the letter of
intent, the Company will merge with Prolong, with Prolong being the surviving
company. Prolong will take the name NewGen Technologies, Inc., operating through
two subsidiaries, ReFuel America, Inc. and Prolong Super Lubricants, Inc., and
will trade on the American Stock Exchange (AMEX), subject to approval. Current
NewGen Technologies, Inc. shareholders will own approximately 93.6% of the new
company, with the balance owned by current Prolong shareholders. However, there
can be no assurance that we will be able close on this transaction timely or
conduct operations profitably in the future, if at all.
ITEM 6 - EXHIBITS
31.1 - Certification of Principal Executive Officer pursuant to Rule
13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange
Act of 1934, as amended
31.2 - Certification of Principal Financial Officer pursuant to Rule
13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange
Act of 1934, as amended
32.1 - Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive
Officer)
32.2 - Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial
Officer)
14
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
NEWGEN TECHNOLOGIES, INC. . (Formerly Bongiovi Entertainment, Inc.)
Date: November 21, 2005 By: /s/ S. Bruce Wunner
------------------------------------
Bruce Wunner
Chief Executive Officer
By: /s/ Scott A. Deininger
------------------------------------
Scott Deininger
Chief Financial Officer
15