UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 10-Q
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended May 31, 2010
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 333-127953
NEW ENERGY TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Nevada |
59-3509694
|
(State or other jurisdiction of |
(I.R.S. Employer |
incorporation or organization) |
Identification No.) |
|
|
3905 National Drive, Suite 110 |
|
Burtonsville, Maryland |
20866 |
(Address of principal executive offices) |
(Zip Code) |
(800) 213-0689
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes T No o.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o Not Applicable T.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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|
|
|
|
|
|
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Non-accelerated filer (Do not check if a smaller reporting company) |
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Smaller reporting company |
x |
|
Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act.) Yes o No T.
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 58,600,600 shares of common stock, par value $0.001, were outstanding on July 9, 2010.
NEW ENERGY TECHNOLOGIES, INC.
(Formerly Octillion Corp.)
FORM 10-Q
For the Quarterly Period Ended May 31, 2010
Table of Contents
PART I FINANCIAL INFORMATION | ||
Item 1. Consolidated Financial Statements (Unaudited) | ||
Consolidated Balance Sheets (Unaudited) | 3 | |
Consolidated Statements of Operations (Unaudited) | 4 | |
Consolidated Statements of Stockholders Equity (Deficit) (Unaudited) | 5 | |
Consolidated Statements of Cash Flows (Unaudited) | 6 | |
Notes to Consolidated Financial Statements (Unaudited) | 7 | |
Item 2. | Management's Discussion and Analysis of Financial Condition and | |
Results of Operations. | 18 | |
Item 4T. Controls and Procedures. | 29 | |
PART II OTHER INFORMATION | ||
Item 1. | Legal Proceedings. | 30 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 30 |
Item 3. | Defaults Upon Senior Securities. | 30 |
Item 4. | Submission of Matters to a Vote of Security Holders. | 30 |
Item 5. | Other Information. | 30 |
Item 6. | Exhibits. | 30 |
Signatures | ||
Certifications |
Item 1. Consolidated Financial Statements (Unaudited)
NEW ENERGY TECHNOLOGIES, INC. | ||||
(Formerly "Octillion Corp.") | ||||
(A Development Stage Company) | ||||
CONSOLIDATED BALANCE SHEETS | ||||
MAY 31, 2010 AND AUGUST 31, 2009 | ||||
(Expressed in U.S. Dollars) | ||||
(Unaudited) | ||||
May 31, |
August 31, | |||
2010 |
2009 | |||
ASSETS | ||||
Current assets |
||||
Cash and cash equivalents |
$ |
1,048,347 |
$ |
2,736,221 |
Deferred research and development costs |
43,130 |
39,559 | ||
Prepaid expenses and other current assets |
25,537 |
7,586 | ||
Total current assets |
1,117,014 |
2,783,366 | ||
Total assets |
$ |
1,117,014 |
$ |
2,783,366 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
Current liabilities |
||||
Accounts payable |
$ |
94,743 |
$ |
98,467 |
Accrued liabilities |
244,259 |
156,109 | ||
Warrant liability |
406,673 |
- | ||
Total current liabilities |
745,675 |
254,576 | ||
Total liabilities |
745,675 |
254,576 | ||
Commitments and contingencies |
||||
Stockholders' equity |
||||
Preferred stock: $0.10 par value; 1,000,000 shares authorized, no shares issued and outstanding at May 31, 2010 and August 31, 2009 |
- |
- | ||
Common stock: $0.001 par value; 100,000,000 shares authorized, 58,600,600 shares issued and outstanding at May 31, 2010 and August 31, 2009 |
58,601 |
58,601 | ||
Additional paid-in capital |
7,358,812 |
8,622,458 | ||
Deficit accumulated during the development stage |
(7,046,074) |
(6,152,269) | ||
Total stockholders' equity |
371,339 |
2,528,790 | ||
Total liabilities and stockholders' equity |
$ |
1,117,014 |
$ |
2,783,366 |
(The accompanying notes are an integral part of these consolidated financial statements) |
3
NEW ENERGY TECHNOLOGIES, INC. | ||||||||||
(Formerly "Octillion Corp.) | ||||||||||
(A Development Stage Company) | ||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2010 AND 2009 AND FOR THE | ||||||||||
PERIOD FROM INCEPTION (MAY 5, 1998) TO MAY 31, 2010 | ||||||||||
(Expressed in U.S. Dollars) | ||||||||||
(Unaudited) | ||||||||||
Cumulative | ||||||||||
Three Months Ended |
Nine Months Ended |
May 5, 1998 | ||||||||
May 31, |
May 31, |
(Inception) to | ||||||||
2010 |
2009 |
2010 |
2009 |
May 31, 2010 | ||||||
Revenue |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
Operating (income) expense |
||||||||||
Investor relations |
30,245 |
12,312 |
98,342 |
28,812 |
2,289,160 | |||||
Marketing |
222,677 |
11,015 |
436,713 |
11,465 |
808,933 | |||||
Wages and benefits |
132,463 |
40,369 |
605,250 |
(3,337,562) |
1,409,246 | |||||
Management fees - related party |
- |
- |
- |
4,472 |
207,546 | |||||
Professional fees |
136,847 |
47,903 |
364,207 |
210,935 |
1,089,312 | |||||
Research and development |
72,025 |
98,868 |
514,152 |
179,838 |
1,274,927 | |||||
Travel and entertainment |
22,380 |
1,592 |
53,022 |
35,962 |
352,320 | |||||
Other operating expenses |
54,410 |
19,423 |
199,662 |
54,404 |
518,512 | |||||
Total operating (income) expense |
671,047 |
231,482 |
2,271,348 |
(2,811,674) |
7,949,956 | |||||
Income (loss) from operations |
(671,047) |
(231,482) |
(2,271,348) |
2,811,674 |
(7,949,956) | |||||
Other income (expense) |
||||||||||
Interest income |
- |
- |
- |
7,743 |
98,582 | |||||
Interest expense |
- |
- |
- |
(267) |
(11,002) | |||||
Loss on disposal of fixed assets |
- |
- |
- |
- |
(5,307) | |||||
Gain on dissolution of foreign subsidiary |
- |
- |
- |
59,704 |
59,704 | |||||
Foreign exchange loss |
(638) |
- |
(1,344) |
(52,918) |
(84,885) | |||||
Change in fair value of warrant liability |
165,660 |
- |
1,721,658 |
- |
1,721,658 | |||||
Payable forgiven |
- |
- |
- |
- |
30,000 | |||||
Total other income (expense) |
165,022 |
- |
1,720,314 |
14,262 |
1,808,750 | |||||
Income (loss) from continuing operations |
(506,025) |
(231,482) |
(551,034) |
2,825,936 |
(6,141,206) | |||||
Loss from discontinued operations |
- |
- |
- |
- |
(162,097) | |||||
Net income (loss) |
$ |
(506,025) |
$ |
(231,482) |
$ |
(551,034) |
$ |
2,825,936 |
$ |
(6,303,303) |
Net income (loss) per common share - basic and diluted |
$ |
(0.01) |
$ |
(0.00) |
$ |
(0.01) |
$ |
0.05 |
||
Weighted average number of common shares outstanding - basic and diluted |
58,600,600 |
57,754,600 |
58,600,600 |
57,754,600 |
||||||
(The accompanying notes are an integral part of these consolidated financial statements) |
4
NEW ENERGY TECHNOLOGIES, INC. |
| |||||||||||||||||
(formerly "Octillion Corp.") |
||||||||||||||||||
(A Development Stage Company) |
||||||||||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) |
| |||||||||||||||||
FROM MAY 5, 1998 (INCEPTION) TO MAY 31, 2010 |
| |||||||||||||||||
(Expressed in U.S. Dollars) |
| |||||||||||||||||
(Unaudited) |
| |||||||||||||||||
Accumulated |
Deficit | |||||||||||||||||
Other |
Accumulated |
Total | ||||||||||||||||
Preferred Stock |
Common Stock |
Additional |
Comprehensive |
During the |
Comprehensive |
Stockholders' |
||||||||||||
Shares |
Amount |
Shares |
Amount |
Paid-in Capital |
Income (Loss) |
Development Stage |
Income (Loss) |
Equity (Deficit) |
||||||||||
Restricted common stock |
||||||||||||||||||
issued to related parties for |
||||||||||||||||||
management services |
||||||||||||||||||
at $0.003 per share |
- |
$ - |
9,000,000 |
$ 9,000 |
$ (6,000) |
$ - |
$ - |
$ - |
$ 3,000 |
|||||||||
Unrestricted common stock sales |
||||||||||||||||||
to third parties at $0.13 per share |
- |
- |
1,125,000 |
1,125 |
148,875 |
- |
- |
- |
150,000 |
|||||||||
Comprehensive income (loss) |
||||||||||||||||||
Net loss for the period |
- |
- |
- |
- |
- |
- |
(12,326) |
(12,326) |
(12,326) |
|||||||||
Total comprehensive loss |
(12,326) |
|||||||||||||||||
Balance, August 31, 1998 |
- |
- |
10,125,000 |
10,125 |
142,875 |
- |
(12,326) |
- |
140,674 |
|||||||||
Comprehensive income (loss) |
||||||||||||||||||
Net loss for the year |
- |
- |
- |
- |
- |
- |
(77,946) |
(77,946) |
(77,946) |
|||||||||
Total comprehensive loss |
(77,946) |
|||||||||||||||||
Balance, August 31, 1999 |
- |
- |
10,125,000 |
10,125 |
142,875 |
- |
(90,272) |
- |
62,728 |
|||||||||
Comprehensive income (loss) |
||||||||||||||||||
Net loss for the year |
- |
- |
- |
- |
- |
- |
(12,446) |
(12,446) |
(12,446) |
|||||||||
Total comprehensive loss |
(12,446) |
|||||||||||||||||
Balance, August 31, 2000 |
- |
- |
10,125,000 |
10,125 |
142,875 |
- |
(102,718) |
- |
50,282 |
|||||||||
Comprehensive income (loss) |
||||||||||||||||||
Net loss for the year |
- |
- |
- |
- |
- |
- |
(12,904) |
(12,904) |
(12,904) |
|||||||||
Total comprehensive loss |
(12,904) |
|||||||||||||||||
Balance, August 31, 2001 |
- |
- |
10,125,000 |
10,125 |
142,875 |
- |
(115,622) |
- |
37,378 |
|||||||||
Comprehensive income (loss) |
||||||||||||||||||
Net loss for the year |
- |
- |
- |
- |
- |
- |
(54,935) |
(54,935) |
(54,935) |
|||||||||
Total comprehensive loss |
(54,935) |
|||||||||||||||||
Balance, August 31, 2002 |
- |
- |
10,125,000 |
10,125 |
142,875 |
- |
(170,557) |
- |
(17,557) |
|||||||||
Restricted common stock issued to |
||||||||||||||||||
a related party to satisfy outstanding |
||||||||||||||||||
management fees at $0.003 per share |
||||||||||||||||||
on December 19, 2002 |
- |
- |
24,000,000 |
24,000 |
56,000 |
- |
- |
- |
80,000 |
|||||||||
Restricted common stock issued to a |
||||||||||||||||||
related party to satisfy outstanding |
||||||||||||||||||
management fees at $0.003 per share |
||||||||||||||||||
on March 18, 2003 |
- |
- |
6,999,600 |
7,000 |
16,332 |
- |
- |
- |
23,332 |
|||||||||
Comprehensive income (loss) |
||||||||||||||||||
Net loss for the year |
- |
- |
- |
- |
- |
- |
(97,662) |
(97,662) |
(97,662) |
|||||||||
Total comprehensive loss |
(97,662) |
|||||||||||||||||
Balance, August 31, 2003 |
- |
- |
41,124,600 |
41,125 |
215,207 |
- |
(268,219) |
- |
(11,887) |
|||||||||
Comprehensive income (loss) |
||||||||||||||||||
Net loss for the year |
- |
- |
- |
- |
- |
- |
(19,787) |
(19,787) |
(19,787) |
|||||||||
Total comprehensive loss |
(19,787) |
|||||||||||||||||
Balance, August 31, 2004 |
- |
- |
41,124,600 |
41,125 |
215,207 |
- |
(288,006) |
- |
(31,674) |
|||||||||
Comprehensive income (loss) |
||||||||||||||||||
Net loss for the year |
- |
- |
- |
- |
- |
- |
(103,142) |
(103,142) |
(103,142) |
|||||||||
Total comprehensive loss |
(103,142) |
|||||||||||||||||
Balance, August 31, 2005 |
- |
- |
41,124,600 |
41,125 |
215,207 |
- |
(391,148) |
- |
(134,816) |
|||||||||
Issuance of common stock and warrants |
||||||||||||||||||
at $0.17 per share on May 16, 2006 |
- |
- |
3,000,000 |
3,000 |
497,000 |
- |
- |
- |
500,000 |
|||||||||
Comprehensive income (loss) |
||||||||||||||||||
Net loss for the year |
- |
- |
- |
- |
- |
- |
(157,982) |
(157,982) |
(157,982) |
|||||||||
Total comprehensive loss |
(157,982) |
|||||||||||||||||
Balance, August 31, 2006 |
- |
- |
44,124,600 |
44,125 |
712,207 |
- |
(549,130) |
- |
207,202 |
|||||||||
Exercise of Class A Warrants at $0.167 |
||||||||||||||||||
per share during November - December 2006 |
- |
- |
3,000,000 |
3,000 |
497,000 |
- |
- |
- |
500,000 |
|||||||||
Exercise of Class B Warrants at $0.183 |
||||||||||||||||||
per share November - May 2007 |
- |
- |
3,000,000 |
3,000 |
547,000 |
- |
- |
- |
550,000 |
|||||||||
Exercise of Class C Warrants at $0.50 |
||||||||||||||||||
per share during August 2007 |
- |
- |
980,000 |
980 |
489,020 |
- |
- |
- |
490,000 |
|||||||||
Exercise of Class D Warrants at $0.55 |
||||||||||||||||||
per share during August 2007 |
- |
- |
880,000 |
880 |
483,120 |
- |
- |
- |
484,000 |
|||||||||
Exercise of Class E Warrants at $0.60 |
||||||||||||||||||
per share during August 2007 |
- |
- |
880,000 |
880 |
527,120 |
- |
- |
- |
528,000 |
|||||||||
Issuance of common stock and warrants |
||||||||||||||||||
at $0.50 per share on April 23, 2007 |
- |
- |
1,000,000 |
1,000 |
499,000 |
- |
- |
- |
500,000 |
|||||||||
Dividend paid - spin off of MircoChannel |
||||||||||||||||||
Technologies Corporation |
- |
- |
- |
- |
- |
- |
(400,000) |
- |
(400,000) |
|||||||||
Comprehensive income (loss) |
||||||||||||||||||
Foreign currency translation adjustments |
- |
- |
- |
- |
- |
(1,811) |
- |
(1,811) |
(1,811) |
|||||||||
Net loss for the year |
- |
- |
- |
- |
- |
- |
(1,442,769) |
(1,442,769) |
(1,442,769) |
|||||||||
Total comprehensive loss |
(1,444,580) |
|||||||||||||||||
Balance, August 31, 2007 |
- |
- |
53,864,600 |
53,865 |
3,754,467 |
(1,811) |
(2,391,899) |
1,414,622 |
||||||||||
Common stock and warrants issued for cash |
- |
- |
3,675,000 |
3,675 |
3,392,280 |
- |
- |
- |
3,395,955 |
|||||||||
and services at $1.00 per Unit in February 2008 |
||||||||||||||||||
Exercise of Class C Warrants at $0.50 |
- |
- |
||||||||||||||||
per share during March 2008 |
20,000 |
20 |
9,980 |
- |
- |
- |
10,000 |
|||||||||||
Exercise of Class D Warrants at $0.55 |
- |
- |
||||||||||||||||
per share during May 2008 |
20,000 |
20 |
10,980 |
- |
- |
- |
11,000 |
|||||||||||
Exercise of Class F Warrants at $1.25 |
||||||||||||||||||
per share during April - May 2008 |
- |
- |
175,000 |
175 |
218,575 |
- |
- |
- |
218,750 |
|||||||||
Stock based compensation |
- |
- |
- |
- |
3,600,303 |
- |
- |
- |
3,600,303 |
|||||||||
Comprehensive income (loss) |
||||||||||||||||||
Foreign currency translation adjustments |
- |
- |
- |
- |
- |
12,504 |
- |
12,504 |
12,504 |
|||||||||
Net loss for the year |
- |
- |
- |
- |
- |
- |
(5,721,545) |
(5,721,545) |
(5,721,545) |
|||||||||
Total comprehensive loss |
(5,709,041) |
|||||||||||||||||
Balance, August 31, 2008 |
- |
- |
57,754,600 |
57,755 |
10,986,585 |
10,693 |
(8,113,444) |
2,941,589 |
||||||||||
Reversal of stock based compensation due to forfeiture |
||||||||||||||||||
of stock options |
- |
- |
- |
- |
(3,591,093) |
- |
- |
- |
(3,591,093) |
|||||||||
Exercise of Class E Warrants at $0.60 |
||||||||||||||||||
per share during July 2009 |
- |
- |
20,000 |
20 |
11,980 |
- |
- |
- |
12,000 |
|||||||||
Exercise of Class F Warrants at $1.25 |
||||||||||||||||||
per share during July - August 2009 |
- |
- |
826,000 |
826 |
1,031,674 |
- |
- |
- |
1,032,500 |
|||||||||
Stock based compensation |
- |
- |
- |
- |
183,312 |
- |
- |
- |
183,312 |
|||||||||
Comprehensive income |
||||||||||||||||||
Foreign currency translation adjustments |
- |
- |
- |
- |
- |
(10,693) |
- |
(10,693) |
(10,693) |
|||||||||
Net income for the year |
- |
- |
- |
- |
- |
- |
1,961,175 |
1,961,175 |
1,961,175 |
|||||||||
Total comprehensive income |
1,950,482 |
|||||||||||||||||
Balance, August 31, 2009 |
- |
- |
58,600,600 |
58,601 |
8,622,458 |
- |
(6,152,269) |
2,528,790 |
||||||||||
Stock based compensation |
- |
- |
- |
- |
521,914 |
- |
- |
- |
521,914 |
|||||||||
Cumulative adjustment upon adoption of ASC 815-40 |
- |
- |
- |
- |
(1,785,560) |
- |
(342,771) |
- |
(2,128,331) |
|||||||||
Net loss for the nine months ended May 31, 2010 |
- |
- |
- |
- |
- |
- |
(551,034) |
(551,034) |
(551,034) |
|||||||||
Total comprehensive loss |
$ (551,034) |
|||||||||||||||||
Balance, May 31, 2010 |
- |
$ - |
58,600,600 |
$ 58,601 |
$ 7,358,812 |
$ - |
$ (7,046,074) |
$ 371,339 |
||||||||||
(The accompanying notes are an integral part of these consolidated financial statements) |
|
5
NEW ENERGY TECHNOLOGIES, INC. | ||||||
(Formerly "Octillion Corp.") | ||||||
(A Development Stage Company) | ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
FOR THE NINE MONTHS ENDED MAY 31, 2010 AND 2009 AND FOR THE | ||||||
PERIOD FROM INCEPTION (MAY 5, 1998) TO MAY 31, 2010 | ||||||
(Expressed in U.S. Dollars) | ||||||
(Unaudited) | ||||||
Cumulative | ||||||
Nine Months Ended |
May 5, 1998 | |||||
May 31, |
(Inception) to | |||||
2010 |
2009 |
May 31, 2010 | ||||
Cash flows from operating activities |
||||||
Income (loss) from continuing operations |
$ |
(551,034) |
$ |
2,825,936 |
$ |
(6,141,206) |
Add: loss from discontinued operations |
- |
- |
(162,097) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities |
||||||
Depreciation |
- |
- |
4,482 | |||
Reversal of stock based compensation expense due to forfeiture of stock options |
- |
(3,591,093) |
(3,591,093) | |||
Stock based compensation expense |
521,914 |
48,755 |
4,305,529 | |||
Change in fair value of warrant liability |
(1,721,658) |
- |
(1,721,658) | |||
Loss of disposal of fixed assets |
- |
- |
5,307 | |||
Payable written off |
- |
- |
(30,000) | |||
Common stock issued for services |
- |
- |
3,000 | |||
Common stock issued for debt settlement |
- |
- |
103,332 | |||
Changes in operating assets and liabilities: |
||||||
Decrease (increase) in deferred research and development costs |
(3,571) |
107,904 |
(43,130) | |||
Increase in prepaid expenses and other current assets |
(17,951) |
(577) |
(25,537) | |||
Increase (decrease) in accounts payable |
(3,724) |
33,486 |
94,743 | |||
Increase in accrued liabilities |
88,150 |
- |
244,259 | |||
Increase in accounts payable - related party |
- |
- |
30,000 | |||
Net cash used in operating activities |
(1,687,874) |
(575,589) |
(6,924,069) | |||
Cash flows from investing activity |
||||||
Purchase of fixed assets |
- |
- |
(9,789) | |||
Net cash used in investing activity |
- |
- |
(9,789) | |||
Cash flows from financing activities |
||||||
Proceeds from the issuance of common stock and exercise of warrants, net |
- |
- |
8,382,205 | |||
Repayment of promissory note |
- |
- |
(155,000) | |||
Proceeds from promissory notes |
- |
- |
155,000 | |||
Dividend paid |
- |
- |
(400,000) | |||
Net cash provided by financing activities |
- |
- |
7,982,205 | |||
Increase (decrease) in cash and cash equivalents |
(1,687,874) |
(575,589) |
1,048,347 | |||
Effect of foreign currency translation |
- |
(10,693) |
- | |||
Cash and cash equivalents at beginning of period |
2,736,221 |
2,992,010 |
- | |||
Cash and cash equivalents at end of period |
$ |
1,048,347 |
$ |
2,405,728 |
$ |
1,048,347 |
Supplemental disclosure of cash flow information: |
||||||
Interest paid in cash |
$ |
- |
$ |
267 |
$ |
11,002 |
Income taxes paid in cash |
$ |
- |
$ |
- |
$ |
- |
Supplemental disclosure of non-cash transactions: |
||||||
Accrued management fees converted to equity |
$ |
- |
$ |
- |
$ |
103,332 |
Warrants issued for broker commissions |
$ |
- |
$ |
- |
$ |
642,980 |
(The accompanying notes are an integral part of these consolidated financial statements) |
6
NEW ENERGY TECHNOLOGIES, INC.
(Formerly Octillion Corp.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2010
(Expressed in U.S. Dollars)
(Unaudited)
Note 1: Organization and Nature of Operations
New Energy Technologies, Inc. (the Company) was incorporated in the State of Nevada on May 5, 1998, under the name Octillion Corp. On December 2, 2008, the Company amended its Articles of Incorporation to effect a change of name to New Energy Technologies, Inc. The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Sungen Energy, Inc. (Sungen), Kinetic Energy Corporation (KEC), Octillion Technologies Limited (Octillion Technologies) and New Energy Solar Corporation (New Energy Solar).
Sungen was incorporated on July 11, 2006 in the State of Nevada and has no assets and no liabilities.
KEC was incorporated on June 19, 2008 in the State of Nevada and has no assets and no liabilities.
Octillion Technologies was incorporated on April 11, 2007 in the Province of British Columbia, Canada for providing administrative services to the Companys Canadian office. The Company ceased to conduct business in Canada on August 31, 2008 and closed this office. As a result, the Company dissolved Octillion Technologies and eliminated all intercompany balances, effective December 1, 2008.
New Energy Solar was incorporated on February 9, 2009 in the State of Florida and has no assets and no liabilities.
On August 22, 2007, the Company spun off its wholly-owned biotechnology subsidiary, MicroChannel Technologies Corporation (MicroChannel) with the shareholders of the Company. The net assets and results of operations of MicroChannel of the prior period have been reclassified as discontinued operations.
Since inception, the Company has been a technology incubator focused on the identification, acquisition, development and eventual commercialization of emerging technologies initially in the biotech and subsequently in the alternative energy sectors. However, commencing in August 2007 with the spinoff of the Companys then wholly-owned subsidiary, MicroChannel Technologies Corporation, the Company elected to focus all of its resources on alternative energy technologies. Accordingly, effective December 2, 2008 the Company changed its name to New Energy Technologies, Inc. so as to more accurately reflect its focus on alternative energy technologies. The Companys strategy is to develop new technologies and, where warranted, acquire rights to obtain licenses to technologies and products that are being developed by third parties, primarily universities and government agencies, through sponsored research and development agreements.
The Company conducts its current operations through its two wholly-owned subsidiaries:
· KEC; and
· New Energy Solar
The Company is currently focusing its development efforts on two technologies, namely:
7
· MotionPower™ Technology for capturing the kinetic energy of moving vehicles in order to use this captured energy to generate electricity; and
· SolarWindow™ Technology which enables transparent glass windows to generate electricity by coating their glass surfaces with the worlds smallest known solar cells.
Note 2. Going Concern Uncertainties
The Company is a development stage company, has not generated any revenues, has an accumulated deficit of $7,046,074 as of May 31, 2010, and does not have positive cash flows from operating activities. The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern, which is dependent upon the Companys ability to establish itself as a profitable business.
Due to the start-up nature of the Companys business, the Company expects to incur additional losses as it continues to develop its technologies. To date, the Companys cash flow requirements have primarily been met by a private placement of common stock and warrants for net proceeds of $3,395,955 on February 12, 2008 and proceeds received from the exercise of warrants. Management recognizes that in order to meet the Companys capital requirements, and continue to operate, additional financing will be necessary. The Company expects to raise additional funds through private or public equity investments in order to support existing operations and expand the range and scope of its business operations. The Company will seek access to private or public equity but there is no assurance that such additional funds will be available for the Company to finance its operations on acceptable terms, if at all. Furthermore, there is no assurance that the net proceeds received from any successful financing arrangement will be sufficient to cover cash requirements during the initial stages of the Companys operations. If the Company is unable to raise additional capital or generate positive cash flow, it is unlikely that the Company will be able to continue as a going concern.
In view of these conditions, the ability of the Company to continue as a going concern is in substantial doubt and dependent upon achieving a profitable level of operations and on the ability of the Company to obtain necessary financing to fund ongoing operations. These consolidated financial statements do not give effect to any adjustments which will be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements.
Note 3. Presentation of Interim Information
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with Form 10-Q instructions and in the opinion of management of New Energy Technologies, Inc., include all adjustments (of a normal recurring nature) considered necessary to present fairly the financial position of the Company as of May 31, 2010 and August 31, 2009 and the related results of operations, stockholders equity (deficit), and cash flows for the three and nine months ended May 31, 2010 and 2009 and for the cumulative period from May 5, 1998 (inception) to May 31, 2010. These results have been determined on the basis of generally accepted accounting principles and practices in the United States and applied consistently with those used in the preparation of the Companys 2009 Annual Report on Form 10-K.
Certain information and footnote disclosures normally included in the quarterly financial statements presented in accordance with generally accepted accounting principles in the United States have been condensed or omitted. It is suggested that the accompanying unaudited interim consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto incorporated by reference in the Companys 2009 Annual Report on Form 10-K.
8
Note 4. Summary of Significant Accounting Policies
Estimates
The preparation of the Companys consolidated financial statements requires management to make estimates and use assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and assumptions are affected by managements application of accounting policies. Critical accounting policies for the Company include accounting for research and development costs and accounting for stock-based compensation. On an on-going basis, the Company evaluates its estimates. Actual results and outcomes may differ materially from these estimates and assumptions.
Research and development costs represent costs incurred to develop the Companys technology, including salaries and benefits for research and development personnel, allocated overhead and facility occupancy costs, supplies, equipment purchase and repair and other costs. Research and development costs are expensed when incurred, except for nonrefundable advance payments for future research and development activities which are capitalized and recognized as expense as the related services are performed.
During the three months ended May 31, 2010 and 2009, the Company incurred $72,025 and $98,868 on research and development activities. During the nine months ended May 31, 2010 and 2009, the Company incurred $514,152 and $179,838 on research and development activities.
The Company measures all employee stock-based compensation awards using a fair value method on the date of grant and recognizes such expense in its consolidated financial statements over the requisite service period. The Company uses the Black-Scholes pricing model to determine the fair value of stock-based compensation awards on the date of grant. The Black-Scholes pricing model requires management to make assumptions regarding the warrant and option lives, expected volatility, and risk free interest rates. See Note 9. Warrants and Note 10. Stock Options for additional information on the Companys stock-based compensation plans.
Recently Adopted Accounting Pronouncements
In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures, which amends the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires disclosure of transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy, including the reasons and the timing of the transfers and information on purchases, sales, issuance, and settlements on a gross basis in the reconciliation of the assets and liabilities measured under Level 3 of the fair value measurement hierarchy. The guidance is effective for annual and interim reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual and interim periods beginning after December 15, 2010. The Company adopted this guidance at the beginning of its third quarter of fiscal 2010, except for the Level 3 reconciliation disclosures on the rollforward activities, which it will adopt at the beginning of its third quarter of fiscal 2011. Other than requiring additional disclosures, the adoption of this standard did not and will not have a material impact on the Companys consolidated financial position and results of operations.
Note 5. Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common and dilutive common equivalent shares outstanding during the period.
During the three and nine months ended May 31, 2010 and the three months ended May 31, 2009, the Company recorded a net loss. Therefore, the issuance of shares of common stock from the exercise of stock options or
9
warrants would be anti-dilutive. Excluded from the computation of diluted net loss per share for the three and nine months ended May 31, 2010, because their effect would be anti-dilutive, are stock options and warrants to acquire 6,138,500 shares of common stock with a weighted-average exercise price of $0.91 per share. Excluded from the computation of diluted net loss per share for the three months ended May 31, 2009, because their effect would be anti-dilutive, are stock options and warrants to acquire 4,284,500 shares of common stock with a weighted-average exercise price of $1.23 per share.
During the nine months ended May 31, 2009, stock options and warrants to purchase 4,284,500 shares of common stock with a weighted-average exercise price of $1.23 per share were not included in the diluted earnings per share computation as the effects would have been anti-dilutive.
For purposes of earnings per share computations, shares of common stock that are issuable at the end of a reporting period are included as outstanding.
Following is the computation of basic and diluted net income per share for the three and nine months ended May 31, 2010 and 2009:
Three Months Ended |
Nine Months Ended | ||||||||
May 31, |
May 31, | ||||||||
2010 |
2009 |
2010 |
2009 | ||||||
Basic and Diluted EPS Computation |
|||||||||
Numerator: net income (loss) |
$ (506,025) |
$ (231,482) |
$ (551,034) |
$ 2,825,936 | |||||
Denominator: |
|||||||||
Weighted average number of common shares outstanding - basic and diluted |
58,600,600 |
57,754,600 |
58,600,600 |
57,754,600 | |||||
Basic and diluted net income (loss) per common share |
$ (0.01) |
$ (0.00) |
$ (0.01) |
$ 0.05 |
Note 6. SolarWindow™ Technology
Current Research Agreements
USF Sponsored Research Agreement and Option Agreement
On May 20, 2009, the Company, through its wholly-owned subsidiary, New Energy Solar Corporation (New Energy Solar), entered into a research agreement (the USF Sponsored Research Agreement) with University of South Florida Board of Trustees (USF), for support to the project entitled Semitransparent Flexible Power Foil (SFPF) relating to the development of a prototype flexible semi-transparent organic power foil (1ft by 1ft dimension) for use as an energy-generating window glass in building-integrated photovoltaic products (the USF Technology). Pursuant to Rule 24b-2, the Company submitted a request to the SEC for confidential treatment of certain portions of the USF Sponsored Research Agreement, relating to the payment terms, scope of work under the USF Sponsored Research Agreement. The Companys request was granted by the SEC on June 11, 2009. Accordingly, the terms of the USF Sponsored Research Agreement have not been disclosed.
On June 21, 2010, the Company, through its wholly-owned subsidiary, New Energy Solar, also entered into a License Agree Agreement (the USF License Agreement) with the University of South Florida Research Foundation, Inc., a corporation not for profit under Chapter 617 Florida Statutes, and a direct support organization of USF, pursuant to which New Energy Solar has obtained exclusive worldwide commercial license under certain patents relating to the USF Technology. Pursuant to Rule 24b-2, on June 28, 2010 the Company submitted a request to the SEC for confidential treatment of certain portions of the USF License Agreement (the USF CTR), relating to the payment terms, scope of work under the USF Option Agreement. The USF CTR is pending.
10
Terminated Research Agreements
UIUC Sponsored Research Agreement
On August 25, 2006, through its wholly-owned subsidiary, Sungen Energy, Inc. (Sungen), the Company entered into a Sponsored Research Agreement (UIUC Sponsored Research Agreement) with the University of Illinois at Urbana-Champaign (UIUC) for the development of a new patent-pending technology to integrate films of silicon nanoparticle material on glass substrates, acting as photovoltaic solar cells that have the potential to convert normal home and office glass windows into ones capable of converting solar energy into electricity, with limited loss of transparency and minimal changes in manufacturing infrastructure (the UIUC Silicon Nanoparticle Energy Technology). On July 23, 2007, the Company through its wholly owned subsidiary, Sungen, amended its Sponsored Research Agreement with the UIUC. Pursuant to this amended Sponsored Research Agreement, the Company agreed to provide an additional $203,617 to the previously awarded amount of $219,201 for a total of $422,818, to the University of Illinois in order to accelerate the development of films of silicon nanoparticle material composed of nanosilicon photovoltaic solar cells that have the potential to convert solar radiation to electrical energy.
The UIUC Sponsored Research Agreement expired on August 22, 2008. As of this date, the Company had advanced a total of $266,709 to the University of Illinois pursuant to the terms of the UIUC Sponsored Research Agreement. Pursuant to the terms of the UIUC Sponsored Research Agreement, the Company was to advance an additional $156,109 to the University of Illinois, which is included in other accrued liabilities at May 31, 2010 and August 31, 2009. However, the Company has not made the advance pending determination as to whether funds previously paid to UIUC under the terms of the UIUC Sponsored Research Agreement have been fully expended. The Company is of the opinion that to the extent these funds were not expended they are refundable to the Company.
During both the three and nine month periods ended May 31, 2010 and 2009, the Company did not record any research and development expense pursuant to the UIUC Sponsored Research Agreement. During the period from inception (May 5, 1998) to May 31, 2010, the Company recorded $422,818 as research and development expense pursuant to the UIUC Sponsored Research Agreement.
Oakland Sponsored Research Agreement
On August 18, 2008, the Company entered into a two-year Sponsored Research Agreement (Oakland Sponsored Research Agreement) with scientists at Oakland University to further the development of the Companys photovoltaic technology for generating electricity on transparent glass windows.
Pursuant to the terms of the Oakland Sponsored Research Agreement the Company agreed to advance a total of $348,066 to fund the research and development activities of which $140,519 was payable on or before September 1, 2008, $127,547 was payable on or before October 1, 2009 and $80,000 was payable on demand during the contract period for reimbursement of materials provided by Oakland University. In August 2008, the Company advanced $140,519 to Oakland University pursuant to the Oakland Sponsored Research Agreement. In February 2009, the Company, in order to preserve its working capital, decided that it was in its best interest not to proceed forward with the Oakland Sponsored Research Agreement and exercised its termination right by providing written notice to Oakland University of its election to terminate the Oakland Sponsored Research Agreement. As of the termination date of the Oakland Sponsored Research Agreement, $20,220 of the $140,519 initially advanced to Oakland University had been expended, all during the quarter ended February 28, 2009, and is included in research and development expense for the nine months ended May 31, 2009. The remaining $120,299 was refunded to the Company in April 2009.
11
Note 7. MotionPower™ Technology
Veryst Agreement
On November 4, 2008, the Company, through its wholly-owned subsidiary, KEC, entered into an agreement with Veryst Engineering LLC (the Veryst Agreement) relating to the development of a car and truck energy harvester. The Veryst Agreement continues until terminated by either Veryst Engineering LLC or KEC. Pursuant to Rule 24b-2 the Company submitted a request for confidential treatment of certain portions of the Veryst Agreement, relating to the payment terms, scope of work and the milestone terms of the license agreement under the Veryst Agreement. The Companys request was granted on November 25, 2008.
On September 9, 2009, the Company entered into an agreement with Veryst Engineering, LLC (Veryst) whereby Veryst is performing ongoing testing of the Companys vehicle energy harvester and advancing prototyping.
Additionally, on September 9, 2009, the Company entered into an agreement with Veryst, whereby Veryst is developing a commercial scale truck energy harvester.
During the three and nine months ended May 31, 2010, the Company recorded $46,969 and $280,259 as research and development expense pursuant to the agreements with Veryst entered into on September 9, 2009. During the period from inception (May 5, 1998) to May 31, 2010, the Company recorded $284,435 as research and development expense pursuant to these same agreements.
The Company continues to utilize Veryst, on a consulting basis, to further test and calibrate the MotionPower™ Technology.
Sigma Design Agreement
On May 1, 2009, KEC entered into a consulting agreement (the Initial Sigma Consulting Agreement) with Sigma Design Company (Sigma Design) whereby Sigma Design provides ongoing engineering and product development services relating to the development of the MotionPower™ Technology. On August 25, 2009, KEC entered into an additional consulting agreement with Sigma Design whereby Sigma Design continues to provide engineering services relating to the development of the MotionPower™ Technology (the Additional Sigma Consulting Agreement and, together with the Initial Sigma Consulting Agreement, collectively the Sigma Design Agreements). Each of the Sigma Design Agreements may be terminated by either Sigma Design or KEC upon 30 days written notice to the other party. The Company has also engaged Sigma Design to assist the Company in conducting durability field tests of its MotionPower™ Technology.
During the three and nine months ended May 31, 2010, the Company recorded $0 and $121,025 as research and development expense pursuant to the Sigma Design Agreements and services provided for the durability field tests. During both the three and nine month periods ended May 31, 2009, the Company recorded $18,847 as research and development expense pursuant to the Sigma Design Agreements. During the period from inception (May 5, 1998) to May 31, 2010, the Company recorded $202,694 as research and development expense pursuant to the Sigma Design Agreements and services provided for the durability field tests.
Note 8. Capital Stock
Preferred Stock
At May 31, 2010 there were 1,000,000 shares of preferred stock (par value $0.10 per share) authorized, of which no shares were issued and outstanding. The Board of Directors has the authority to issue such stock in one or more series, to fix the number of shares and to fix and determine the relative rights and preferences of the shares of any such series so established to the full extent permitted by the laws of the State of Nevada and the Articles of Incorporation.
12
Common Stock
On February 12, 2008, the Company consummated the sale of an aggregate of 3,675,000 shares of its common stock and Class F Callable Warrants to purchase up to an additional 3,675,000 shares of the Companys common stock for aggregate gross proceeds of $3,675,000 pursuant to the terms of a Securities Purchase Agreement dated February 8, 2008 (the 2008 Private Placement) with certain institutional and other accredited investors, as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the Investors). The Class F Callable Warrants are exercisable for a period of three years from the date of issuance at an initial exercise price of $1.25 per share.
The number of shares issuable upon exercise of the Class F Callable Warrants and the exercise price of the Class F Callable Warrants are adjustable in the event of stock splits, combinations and reclassifications, but not in the event of the issuance by the Company of additional securities, unless such issuance is at a price per share which is less than the then applicable exercise price of the Class F Callable Warrants (Dilutive Issuance), in which event then the exercise price shall be reduced and only reduced to equal the lower issuance price and the number of shares issuable upon exercise thereof shall be increased such that the aggregate exercise price payable thereunder, after taking into account the decrease in the exercise price, shall be equal to the aggregate exercise price prior to such adjustment. The potential adjustment to the Class F Callable Warrants exercise price and number of underlying shares of common stock results in a settlement amount that does not equal the difference between the fair value of a fixed number of the Companys common stock and a fixed exercise price. Accordingly, the Class F Callable Warrants are not considered indexed to the Companys own stock and therefore need to be accounted for as a derivative. As of May 31, 2010 the Company has not sold any shares of common stock or common stock equivalents that would result in an adjustment to the exercise price or number of shares of common stock underlying the Class F Callable Warrants. See Note 9. Warrants.
The Class F Callable Warrants are callable by the Company, at a repurchase price of $0.001 per warrant, subject to certain conditions, after the earlier to occur of (i) the expiration of the then applicable hold periods for a cashless exercise under Rule 144 as promulgated pursuant to the Securities Act of 1933, as amended or (ii) the date the registration statement filed pursuant to the Registration Rights Agreement is declared effective by the SEC, which was declared effective by the SEC on March 21, 2008, if New Energy Technologies, Inc.s common stock, the volume weighted average price for each of 5 consecutive Trading Days exceeds $1.75.
Pursuant to the 2008 Private Placement and the Registration Rights Agreement, the Company and the Investors have made other covenants and representations and warranties regarding matters that are customarily included in financings of this nature.
The Company engaged an agent (the Agent) to help in the fund raising efforts of the 2008 Private Placement. The Agent was paid a total cash fee of 7% ($257,250) of the aggregate gross proceeds and Class F Callable Warrants to purchase 514,500 shares of the Companys common stock valued at $642,980 and representing 7% of the total number of shares purchased by the Investors. In addition, the Agent was reimbursed $6,045 for expenses incurred on behalf of the Company.
At the time of grant, the fair value of the 4,189,500 Class F Callable warrants was $5,236,875, using the Black-Scholes Option Pricing Model with the following weighted average assumptions: dividend yield of 0%, expected volatility of 159.33%, risk-free interest rates of 4.76%, and expected lives of 3 years. The proceeds received pursuant to the 2008 Private Placement allocated to the warrants were $2,337,885.
Note 9. Warrants
Class E Warrants
On April 23, 2010, the Companys outstanding 100,000 Class E Warrants expired unexercised. Therefore, as of May 31, 2010, there are no Class E Warrants outstanding.
13
Class F Callable Warrants
On February 12, 2008, the Company completed the 2008 Private Placement (see Note 8. Capital Stock). Pursuant to the 2008 Private Placement and payment of a commission to an Agent, the Company issued 4,189,500 Class F Callable Warrants, each to purchase a share of common stock at $1.25 per share, expiring on February 12, 2011. Refer to Note 8. Capital Stock - Common Stock for additional disclosures regarding the terms and conditions related to the Class F Callable Warrants.
As of May 31, 2010, there were 3,188,500 Class F Callable Warrants outstanding and exercisable.
Class F Callable Warrant Liability
On September 1, 2009, the Company adopted guidance which is now part of ASC 815-40, Contracts in Entitys Own Equity. The Company determined that its Class F Callable Warrants contained a Dilutive Issuance provision. As a result, the Company reclassified 3,188,500 of its Class F Callable Warrants to long-term warrant liability, resulting in a cumulative adjustment to accumulated deficit as of September 1, 2009 of $342,771.
The Companys Class F Callable Warrants are considered derivative financial liabilities and are therefore required to be adjusted to fair value each quarter. Fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, the Company uses a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entitys own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
The Company has valued its warrant liability at May 31, 2010 using a Black-Scholes model (Level 3 inputs) containing the following assumptions: dividend yield of 0%, expected volatility of 104.62%, risk-free interest rate of 0.22%, and expected term of 0.7 years. The Company recorded non-cash gains related to the Class F Callable Warrants of $165,660 and $1,721,658 during the three and nine months ended May 31, 2010. The Company does not intend to sell any shares of common stock or common stock equivalents at a price that is below the exercise price of Class F Callable Warrants, prior to their expiration date of February 12, 2011, which would result in an adjustment to the exercise price or number of shares of common stock underlying the Class F Callable Warrants. Since the Company determined that the future probability of a Dilutive Issuance is deemed unlikely, it did not have a material impact on the fair value of the Class F Callable Warrants at May 31, 2010.
The following reconciles the warrant liability for the nine months ended May 31, 2010:
Beginning Balance, September 1, 2009 |
$ |
2,128,331 |
Change in fair value of warrant liability |
(1,721,658) | |
Ending Balance, May 31, 2010 |
$ |
406,673 |
There were no Class E Warrants or Class F Callable Warrants granted or exercised during the three and nine months ended May 31, 2010.
Note 10. Stock Options
On October 10, 2006, the Board of Directors (the Board) of the Company adopted and approved the 2006 Incentive Stock Option Plan (the 2006 Stock Plan) that provides for the grant of stock options to employees, directors, officers and consultants. The 2006 Plan provides for the granting of stock options to purchase a maximum of 15,000,000 shares of the Companys common stock. Stock options granted to employees under the Companys
14
2006 Plan generally vest over two to five years or as otherwise determined by the plan administrator. Stock options to purchase shares of the Companys common stock expire no later than ten years after the date of grant.
The per share exercise price for each stock option is determined by the Board and may not be below fair market value on the date of grant. The fair market value of the Companys common stock is the closing price of the common stock as listed on the Over the Counter Bulletin Board (the OTCBB) on the date of grant or, if the Companys common stock is not traded on the date of grant, the first day of active trading following the date of grant.
The Company measures all stock-based compensation awards using a fair value method on the date of grant and recognizes such expense in its consolidated financial statements over the requisite service period. The grant date fair value of stock options is based on the price of a share of the Companys common stock on the date of grant. In determining the grant date fair value of stock options, the Company uses the Black-Scholes option pricing model which requires management to make assumptions regarding the option lives, expected volatility, and risk free interest rates, all of which impact the fair value of the option and, ultimately, the expense that will be recognized over the life of the option.
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for a bond with a similar term. The Company does not anticipate declaring dividends in the foreseeable future. Volatility is calculated based on the historical weekly closing stock prices for the same period as the expected life of the option. The Company uses the simplified method for determining the expected term of its plain vanilla stock options. The Company recognizes compensation expense for only the portion of stock options that are expected to vest. Therefore, the Company applies an estimated forfeiture rate that is derived from historical employee termination data and adjusted for expected future employee turnover rates. If the actual number of forfeitures differs from those estimated by the Company, additional adjustments to compensation expense may be required in future periods.
A summary of the Companys stock option activity for the nine months ended May 31, 2010 and related information follows:
|
|
Number of Options |
|
Weighted Average Exercise Price |
|
Weighted Average Remaining Contractual Term |
|
Aggregate Intrinsic Value |
|
|
|
|
|
|
|
|
|
Outstanding at August 31, 2009 |
|
2,150,000 |
|
$ 0.56 |
|
|
|
|
Grants |
|
800,000 |
|
0.50 |
|
|
|
|
Outstanding at May 31, 2010 |
|
2,950,000 |
|
$ 0.54 |
|
7.8 years |
|
$ 578,000 |
|
|
|
|
|
|
|
|
|
Exercisable at May 31, 2010 |
|
350,000 |
|
$ 0.53 |
|
4.9 years |
|
$ 86,800 |
|
|
|
|
|
|
|
|
|
Available for grant at May 31, 2010 |
|
12,050,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value in the table above represents the total pretax intrinsic value for all in-the-money options (i.e. the difference between the Companys closing stock price on the last trading day of its third quarter of 2010 and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options on May 28, 2010 (May 31, 2010 was a Monday, Memorial Day, which is considered a national holiday). The intrinsic value changes based on the fair market value of the Companys common stock.
Stock Option Grants During the Quarter Ended May 31, 2010
On April 6, 2010, the Company entered into an Amendment to the Employment Agreement dated June 24, 2009 with Mr. Meetesh Patel (the Amended Employment Agreement), the Companys Chief Executive Officer,
15
President, and Chief Financial Officer. Mr. Patel is also one of the Companys directors. Pursuant to the Amended Employment Agreement, Mr. Patel agreed to continue to serve as the Companys President and Chief Executive Officer, until March 31, 2011 (the Employee Employment Commitment). In consideration of the Employee Employment Commitment, Mr. Patel was granted a stock option to purchase up to 150,000 shares of the Companys common stock at an exercise price of $0.58 per share, the fair market value of the Companys common stock on the date of grant as quoted on the OTCBB on April 6, 2010, the date of grant. The stock option expires five years from the date of grant on April 6, 2015. Subject to the terms, restrictions and earlier termination provisions as set forth in the option agreement dated April 6, 2010 between the Company and Mr. Patel, the option vests as follows:
(a) as to 37,500 on June 30, 2010;
(b) as to 37,500 on September 30, 2010;
(c) as to 37,500 on December 31, 2010; and
(d) as to 37,500 on March 31, 2011.
The grant date fair value of the 150,000 stock options granted Mr. Patel was $72,403, estimated using the Black-Scholes option pricing model with the following weighted average assumptions: expected volatility of 139.58%, risk-free interest rate of 2.71%, expected life of 3.75 years, and a 0% dividend yield.
On April 1, 2010, the Company entered into a consulting agreement with Mr. John A. Conklin whereby Mr. Conklin will provide technical advice, guidance, and management oversight to help advance the commercial development of the Companys technologies, including but not necessarily limited to its SolarWindow™ and MotionPower™ technologies. In consideration of Mr. Conklins services, the Company will pay Mr. Conklin $11,000 per calendar month for the first three calendar months of the consulting agreement and $12,444 for each calendar month of service thereafter. In additional consideration of Mr. Conklins services, the Company granted Mr. Conklin a stock option to purchase up to 250,000 shares of the Companys common stock at an exercise price of $0.54 per share, the fair market value of the Companys common stock on the date of grant as quoted on the OTCBB. The stock option expires five years from the date of grant on April 1, 2015. The stock option granted Mr. Conklin vests upon the achievement of specific technical, product development, and/or business milestones. Under the terms of the stock option agreement, the stock option agreement will terminate and there will be no further vesting of stock options effective as of the date that Mr. Conklin ceases to provide consulting services to the Company. Upon termination of such service, Mr. Conklin will have a specified period of time to exercise vested stock options, if any. The grant date fair value of the 250,000 stock options granted Mr. Conklin was $119,975, estimated using the Black-Scholes option pricing model with the following weighted average assumptions: expected volatility of 139.53%, risk-free interest rate of 2.59%, expected life of five years, and a 0% dividend yield.
The following table sets forth the share-based compensation cost resulting from stock option grants, including those previously granted and vesting over time, that was recorded in the Companys consolidated statements of operations for the three and nine months ended May 31, 2010 and 2009:
Three Months Ended |
Nine Months Ended | ||||||||||
May 31, |
May 31, | ||||||||||
2010 |
2009 |
2010 |
2009 | ||||||||
Wages and benefits |
$ |
85,369 |
$ |
- |
$ |
451,661 |
$ |
(3,573,778) | |||
Professional fees |
26,557 |
13,078 |
70,253 |
31,440 | |||||||
Total |
$ |
111,926 |
$ |
13,078 |
$ |
521,914 |
$ |
(3,542,338) |
The share-based compensation expense table above includes the reversal of stock compensation expense related to stock options that were previously granted and forfeited.
During the three months ended February 28, 2009, the Company recorded a reversal of stock compensation expense previously recorded of $4,053, which is included in management fees related party. Upon the resignation of Mr. Frank Fabio as Chief Financial Officer of the Company on January 9, 2009, 50,000 stock options that were previously granted were forfeited.
16
During the nine months ended May 31, 2009, the Company recorded a reversal of stock compensation expense previously recorded of $3,591,093, of which $3,573,778 is included in wages and benefits and $17,315 is included in professional fees. Upon the resignation of Mr. Frank Fabio as Chief Financial Officer of the Company on January 9, 2009, 50,000 stock options that were previously granted him were forfeited. Mr. Nicholas Cucinelli, the Companys former President and Chief Operating Officer forfeited 1,250,000 stock options upon his resignation on October 15, 2008 and Mr. Gladwin forfeited 50,000 stock option upon his resignation as a Board member on September 9, 2008.
As of May 31, 2010, the Company had $720,883 of total unrecognized compensation cost related to unvested stock options which is expected to be recognized over a period of four years.
The following table summarizes information about stock options outstanding and exercisable at May 31, 2010:
|
|
Stock Options Outstanding |
|
|
|
|
Stock Options Exercisable |
|
| ||||||||
Weighted |
Weighted |
||||||||||||||||
Average |
Weighted |
Average |
Weighted | ||||||||||||||
Number of |
Remaining |
Average |
Number of |
Remaining |
Average | ||||||||||||
Options |
Contractual |
Exercise |
Options |
Contractual |
Exercise | ||||||||||||
Exercise Prices |
Outstanding |
Life (Years) |
Price |
Exercisable |
Life (Years) |
Price | |||||||||||
$ |
0.44 |
400,000 |
4.6 |
$ |
0.44 |
310,000 |
4.6 |
$ |
0.44 | ||||||||
0.52 |
2,000,000 |
9.1 |
0.52 |
|
|
| |||||||||||
0.54 |
250,000 |
4.8 |
0.54 |
|
|
| |||||||||||
0.58 |
150,000 |
4.9 |
0.58 |
|
|
| |||||||||||
0.85 |
100,000 |
8.3 |
0.85 |
20,000 |
8.3 |
0.85 | |||||||||||
1.66 |
50,000 |
7.8 |
1.66 |
20,000 |
7.8 |
1.66 | |||||||||||
$ |
0.44 $ 1.66 |
2,950,000 |
7.8 |
$ |
0.54 |
350,000 |
4.9 |
$ |
0.53 |
The Company does not repurchase shares to fulfill the requirements of options that are exercised. Further, the Company issues new shares when options are exercised.
Note 11. Related Party Transactions
Non-employee Board members receive $2,500 per quarter for services rendered in the capacity of a Board member.
During the three months ended May 31, 2010, the Company incurred $20,927, including stock compensation of $13,427, for services rendered by non-employee directors of the Company, which is included in professional fees.
During the nine months ended May 31, 2010, the Company incurred $79,623, including stock compensation of $57,123, for services rendered by non-employee directors of the Company, which is included in professional fees.
During the three and nine months ended May 31, 2010, the law firm of Sierchio & Company, LLP (S&C LLP), the Companys corporate and securities legal counsel, provided $121,892 and $203,232 of legal services to the Company. Joseph Sierchio, a non-employee director of the Company, is a principal of S&C LLP. At May 31, 2010, the Company owed S&CG LLP $26,185 which is included in accounts payable.
The Companys corporate office is located at 3905 National Drive, Suite 110, Burtonsville, Maryland 20866. On December 1, 2009, the Company entered into a one year sublease agreement with MVP Law Group, P.A., of which the Companys Chief Executive Officer and President is a founder and managing attorney, with respect to this office space. Monthly rent is $900. Additionally, the Company paid a $900 security deposit.
17
All related party transactions are recorded at the exchange amount established and agreed to between related parties and are in the normal course of business.
18
Item 2. Managements discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Report on Form 10-Q contains forward-looking statements which involve assumptions and describe our future plans, strategies, and expectations, and are generally identifiable by use of the words may, will, should, expect, anticipate, estimate, believe, , intend, or project or the negative of these words or other variations on these words or comparable terminology. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished.
Such forward-looking statements include statements regarding, among other things, (a) the potential markets for our technologies, our potential profitability, and cash flows (b) our growth strategies, (c) expectations from our ongoing sponsored research and development activities (d) anticipated trends in the technology industry, (e) our future financing plans and (f) our anticipated needs for working capital. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under Managements Discussion and Analysis of Financial Condition and Results of Operations as well as in this Form 10-Q generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various and matters described in this Form 10-Q generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. In addition to the information expressly required to be included in this filing, we will provide such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.
Although forward-looking statements in this report reflect the good faith judgment of our management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities and Exchange Commission which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.
The following Managements Discussion and Analysis (MD&A) is intended to help the reader understand our consolidated results of operations and financial condition. The MD&A is provided as a supplement to, and should be read in conjunction with our consolidated financial statements and the accompanying notes to the consolidated financial statements included in this Form 10-Q.
Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosures. We review our estimates on an ongoing basis.
Overview
We were incorporated in the State of Nevada on May 5, 1998, under the name Octillion Corp. On December 2, 2008, we amended our Articles of Incorporation to effect a change of name to New Energy Technologies, Inc. The accompanying consolidated financial statements include the accounts of New Energy Technologies, Inc. and its wholly-owned subsidiaries, Sungen Energy, Inc. (Sungen), Kinetic Energy Corporation (KEC), Octillion Technologies Limited (Octillion Technologies) and New Energy Solar Corporation (New Energy Solar).
19
Sungen was incorporated on July 11, 2006 in the State of Nevada and has no assets and no liabilities.
KEC was incorporated on June 19, 2008 in the State of Nevada and has no assets and no liabilities.
Octillion Technologies was incorporated on April 11, 2007 in the Province of British Columbia, Canada for providing administrative services to the Canadian office. We ceased to conduct business in Canada on August 31, 2008 and closed this office. As a result, we dissolved Octillion Technologies and eliminated all intercompany balances, effective December 1, 2008.
New Energy Solar was incorporated on February 9, 2009 in the State of Florida and has no assets and no liabilities.
Our research and development activities include the development of a technology to adapt home and office glass windows, skylights, and building facades into products capable of generating electricity from solar energy without losing significant transparency or requiring major changes in manufacturing infrastructure, and technologies to harness the kinetic energy of vehicles to generate electricity.
Ultimately, we plan to market MotionPower™ Technology and/or SolarWindow™ Technology products, if any, subject to receiving any requisite regulatory approvals, through co-marketing, co-promotion, licensing and distribution arrangements with third party collaborators. The decision as to which method or methods of commercialization we will pursue will depend on various factors including, but not limited to, our financial resources at the time, manufacturing costs, market acceptance of the product(s), and competing technologies or products at the time.
We believe that this approach could provide immediate access to pre-existing distribution channels, therefore potentially increasing market penetration and commercial acceptance of our products and enabling us to avoid expending significant funds for development of a large sales and marketing organization. Currently no such products or arrangements exist, nor can we currently project with any degree of accuracy when, if ever, such products or arrangements may exist. If we do not ultimately commercialize products derived from our MotionPower™ Technology and/or SolarWindow™ Technology we will not generate revenues from our operations as currently conducted.
Our success will be dependent upon our ability to develop products that are superior to existing products and products introduced in the future, and which are cost effective. In addition, we may be required to continually enhance any products that are developed as well as introduce new products that keep pace with technological change and address the increasingly sophisticated needs of the marketplace. There can be no assurance that we will be able to keep pace with the technological demands of the marketplace or successfully develop products that will succeed in the marketplace.
We cannot currently estimate with any accuracy the amount of either the additional funds or time required to successfully commercialize either technology, because the actual cost and time may vary significantly depending on results of current basic research and development and product testing, cost of acquiring an exclusive license, changes in the focus and direction of our research and development programs, competitive and technological advances, the cost of filing, prosecuting, defending and enforcing patent claims, the regulatory approval process, manufacturing, marketing and other costs associated with commercialization of products following receipt of regulatory approvals and other factors.
Because we are a smaller reporting company, we are not required to make certain disclosures otherwise required to be made on a Form 10-Q.
20
SolarWindow™ Technology
Current Research Agreements
USF Sponsored Research Agreement and Option Agreement
On May 20, 2009, our wholly-owned subsidiary, New Energy Solar, entered into the USF Sponsored Research Agreement with USF, for support to the project entitled Semitransparent Flexible Power Foil (SFPF) relating to the development of a prototype flexible semi-transparent organic power foil (1ft by 1ft dimension) for use as an energy-generating window glass in building-integrated photovoltaic products which we refer to in this Prospectus as the SolarWindow™ Technology. Pursuant to Rule 24b-2 we submitted a request to the SEC for confidential treatment of certain portions of the USF Sponsored Research Agreement, relating to the payment terms and scope of work under the USF Sponsored Research Agreement; our request was granted by the SEC on June 11, 2009. Accordingly, the terms of the USF Sponsored Research Agreement have not been disclosed.
On May 20, 2009, our wholly-owned subsidiary, New Energy Solar, also entered into an Option Agreement (the USF Option Agreement) with the University of South Florida Research Foundation, Inc., a corporation not for profit under Chapter 617 Florida Statutes, and a direct support organization of USF, pursuant to which New Energy Solar has the right to an exclusive option to obtain an exclusive worldwide commercial license under certain patents relating to the SolarWindow™ Technology. Pursuant to Rule 24b-2 we submitted a request to the SEC for confidential treatment of certain portions of the USF Option Agreement, relating to the payment terms and scope of work under the USF Option Agreement; our request was granted by the SEC on June 11, 2009. Accordingly, these terms of the USF Option Agreement have not been disclosed.
Terminated Research Agreements
UIUC Sponsored Research Agreement
On August 25, 2006, through our wholly owned subsidiary, Sungen, we entered into a Sponsored Research Agreement (UIUC Sponsored Research Agreement) with the University of Illinois at Urbana-Champaign (UIUC) for the development of a new patent-pending technology to integrate films of silicon nanoparticle material on glass substrates, acting as photovoltaic solar cells that have the potential to convert normal home and office glass windows into ones capable of converting solar energy into electricity, with limited loss of transparency and minimal changes in manufacturing infrastructure (the UIUC Silicon Nanoparticle Energy Technology). On July 23, 2007, Sungen, amended its Sponsored Research Agreement with UIUC. Pursuant to this amended Sponsored Research Agreement, we agreed to provide an additional $203,617 to the previously awarded amount of $219,201 for a total of $422,818, to the University of Illinois in order to accelerate the development of films of silicon nanoparticle material composed of nanosilicon photovoltaic solar cells that have the potential to convert solar radiation to electrical energy.
The UIUC Sponsored Research Agreement expired on August 22, 2008. As of this date, we had advanced a total of $266,709 to the University of Illinois pursuant to the terms of the UIUC Sponsored Research Agreement. Pursuant to the terms of the UIUC Sponsored Research Agreement, we were to advance an additional $156,109 to the University of Illinois, which is included in other accrued liabilities at May 31, 2010 and August 31, 2009. However, we have not made the advance pending determination as to whether funds previously paid to UIUC under the terms of the UIUC Sponsored Research Agreement have been fully expended. We are of the opinion that to the extent these funds were not expended they are refundable to us.
During both the three and nine month periods ended May 31, 2010 and 2009, we did not record any research and development expense pursuant to the UIUC Sponsored Research Agreement. During the period from inception (May 5, 1998) to May 31, 2010, we recorded $422,818 as research and development expense pursuant to the UIUC Sponsored Research Agreement.
21
Oakland Sponsored Research Agreement
On August 18, 2008, we entered into a two-year Sponsored Research Agreement (Oakland Sponsored Research Agreement) with scientists at Oakland University to further the development of our photovoltaic technology for generating electricity on transparent glass windows.
Pursuant to the terms of the Oakland Sponsored Research Agreement we agreed to advance a total of $348,066 to fund the research and development activities of which $140,519 was payable on or before September 1, 2008, $127,547 was payable on or before October 1, 2009 and $80,000 was payable on demand during the contract period for reimbursement of materials provided by Oakland University. In August 2008, we advanced $140,519 to Oakland University pursuant to the Oakland Sponsored Research Agreement. In February 2009, in order to preserve our working capital, we decided that it was in our best interest not to proceed forward with the Oakland Sponsored Research Agreement and exercised our termination right by providing written notice to Oakland University of our election to terminate the Oakland Sponsored Research Agreement. As of the termination date of the Oakland Sponsored Research Agreement, $20,220 of the $140,519 initially advanced to Oakland University had been expended, all during the quarter ended February 28, 2009, and is included in research and development expense for the nine months ended May 31, 2009. The remaining $120,299 was refunded to us in April 2009.
MotionPower™ Technology
Veryst Agreement
On November 4, 2008, our wholly-owned subsidiary, KEC, entered into an agreement (the Veryst Agreement) with Veryst Engineering LLC (Veryst) relating to the development of a car and truck energy harvester . The Veryst Agreement continues until terminated by either Veryst Engineering LLC or KEC. Pursuant to Rule 24b-2 we submitted a request for confidential treatment of certain portions of the Veryst Agreement, relating to the payment terms, scope of work and the milestone terms of the license agreement under the Veryst Agreement. Our request was granted on November 25, 2008.
On September 9, 2009, we entered into another agreement with Veryst whereby Veryst is performing ongoing testing of our vehicle energy harvester and advancing prototyping.
Additionally, on September 9, 2009, we entered into an agreement with Veryst, whereby Veryst is developing a commercial scale truck energy harvester.
During the three and nine months ended May 31, 2010, we recorded $46,969 and $280,259 as research and development expense pursuant to the agreements with Veryst entered into on September 9, 2009. During the period from inception (May 5, 1998) to May 31, 2010, we recorded $284,435 as research and development expense pursuant to these same agreements.
We continue to utilize Veryst, on a consulting basis, to further test and calibrate our MotionPower™ Technology.
Sigma Design Agreement
On May 1, 2009, KEC entered into a consulting agreement (the Initial Sigma Consulting Agreement) with Sigma Design Company (Sigma Design) whereby Sigma Design provides ongoing engineering and product development services relating to the development of the MotionPower™ Technology. On August 25, 2009, KEC entered into an additional consulting agreement with Sigma Design whereby Sigma Design continues to provide engineering services relating to the development of the MotionPower™ Technology (the Additional Sigma Consulting Agreement and, together with the Initial Sigma Consulting Agreement, collectively the Sigma Design Agreements). Each of the Sigma Design Agreements may be terminated by either Sigma Design or us upon 30 days written notice to the other party. The Company has also engaged Sigma Design to assist the Company in conducting durability field tests of its MotionPower™ Technology.
22
During the three and nine months ended May 31, 2010, we recorded $0 and $121,025 as research and development expense pursuant to the Sigma Design Agreements and services provided for the durability field tests. During both the three and nine month periods ended May 31, 2009, recorded $18,847 as research and development expense pursuant to the Sigma Design Agreements. During the period from inception (May 5, 1998) to May 31, 2010, we recorded $202,694 as research and development expense pursuant to the Sigma Design Agreements and services provided for the durability field tests.
Nerve Regeneration Technology
On August 22, 2007, we spun off our wholly-owned biotechnology subsidiary, MicroChannel Technologies Corporation (MicroChannel) with our shareholders. The net assets and results of operations of MicroChannel of the prior period have been reclassified as discontinued operations.
Results of Operations
Operating Expenses
A summary of our operating income (expense) for the three and nine months ended May 31, 2010 and 2009 was as follows:
Three Months Ended |
||||||||||||
|
May 31, |
|
Increase / |
Percentage |
||||||||
2010 |
2009 |
(Decrease) |
Change |
|||||||||
Operating (income) expense |
||||||||||||
Investor relations |
$ |
30,245 |
$ |
12,312 |
$ |
17,933 |
146 |
% | ||||
Marketing |
222,677 |
11,015 |
211,662 |
1,922 |
||||||||
Wages and benefits |
132,463 |
40,369 |
92,094 |
228 |
||||||||
Professional fees |
136,847 |
47,903 |
88,944 |
186 |
||||||||
Research and development |
72,025 |
98,868 |
(26,843) |
(27) |
||||||||
Travel and entertainment |
22,380 |
1,592 |
20,788 |
1,306 |
||||||||
Other operating expenses |
54,410 |
19,423 |
34,987 |
180 |
||||||||
Total operating (income) expense |
$ |
671,047 |
$ |
231,482 |
$ |
439,565 |
190 |
% |
Nine Months Ended |
||||||||||||
|
May 31, |
|
Increase / |
Percentage |
||||||||
2010 |
2009 |
(Decrease) |
Change |
|||||||||
Operating (income) expense |
||||||||||||
Investor relations |
$ |
98,342 |
$ |
28,812 |
$ |
69,530 |
241 |
% | ||||
Marketing |
436,713 |
11,465 |
425,248 |
3,709 |
||||||||
Wages and benefits |
605,250 |
(3,337,562) |
3,942,812 |
* |
||||||||
Management fees - related party |
- |
4,472 |
(4,472) |
* |
||||||||
Professional fees |
364,207 |
210,935 |
153,272 |
73 |
||||||||
Research and development |
514,152 |
179,838 |
334,314 |
186 |
||||||||
Travel and entertainment |
53,022 |
35,962 |
17,060 |
47 |
||||||||
Other operating expenses |
199,662 |
54,404 |
145,258 |
267 |
||||||||
Total operating (income) expense |
$ |
2,271,348 |
$ |
(2,811,674) |
$ |
5,083,022 |
* |
% |
* Not meaningful
23
Investor Relations
Investor relations costs represent fees paid to publicize our technology within the industry and investor community with the purpose of increasing company recognition.
The increase in investor relations expense during the three and nine months ended May 31, 2010 compared to the same time periods in 2009 is primarily due to us entering into a Shareholder Communications Agreement and a Public Relations Agreement (the PR Agreement) as described below.
Effective October 1, 2008, we entered into a one-year Market Access Services Agreement (the Market Agreement) to publicize our technology within the industry and increase company recognition and branding. In accordance with the terms of the Market Agreement, we pay $1,900 per month for investor and public relations, corporate branding and corporate image services. The Market Agreement automatically renewed on October 1, 2009 for another one-year term.
Effective April 15, 2009, we entered into a one-year Shareholder Communication Services Agreement (the Shareholder Communications Agreement) with a third party consultant to provide shareholder communication and related administrative services. In accordance with the terms of the Shareholder Communications Agreement, we initially paid the third party consultant $1,250 per month. As a result of an increase in services provided to us, effective September 15, 2009, the Shareholder Communications Agreement was amended, increasing the amount paid the consultant to $1,500 per month. The Shareholder Communications Agreement was subsequently amended again, effective February 1, 2010, increasing the amount paid to the consultant to $1,667 per month.
Effective July 29, 2009, we entered into a one-year PR Agreement with a third party consultant to implement a public relations program. In accordance with the terms of the PR Agreement, we pay the third party consultant $6,500 per month. After the initial one-year term, either party may cancel the PR Agreement upon 60-days written notice.
Marketing
Marketing costs represent fees paid to advertise our technology, targeting potential customers.
Marketing costs represent fees paid to advertise our technology, target potential customers, and maintain shareholder and public relations. We initially undertook a targeted marketing program designed to establish our brand name recognition early on in our corporate development. During this time our marketing efforts, in addition to keeping our shareholders apprised of the advances to our technologies, have generated more than 70 news media stories, including online, radio, television, and print media coverage in leading mainstream media in the United States.
As the development of our MotionPower™ Technology and SolarWindow™ Technology products advances, we intend to continue to further develop and market our brand name, pending commercialization of our MotionPower™ Technology and SolarWindow™ Technology products, if any. Subject to the receipt of any requisite regulatory approvals, we believe our marketing strategy ultimately will facilitate the distribution, sale and public acceptance of our MotionPower™ Technology and SolarWindow™ Technology products. We anticipate that as our technologies advance we may be required to expend increasing amounts in connection with our marketing efforts.
Wages and benefits
During the three months ended May 31, 2010 and 2009, we incurred $43,969 and $40,369 in wages and benefits expense for services rendered by Mr. Meetesh Patel, our President, Chief Executive Officer (the CEO), Chief Financial Officer (the CFO), and Director. Additionally, during the three months ended May 31, 2010, we recorded stock compensation expense of $85,369, $60,229 of which is the amortization of the fair value of the stock option granted to Mr. Patel on June 24, 2009 and $25,140 of which is the amortization of the stock option granted to Mr. Patel on April 6, 2010 (see Note 10. Stock Options).
24
During the nine months ended May 31, 2010, we incurred $581,187 in wages, benefits, and stock compensation expense for services rendered by Mr. Patel. We also incurred $566 in wages and benefits expense for services rendered by Mr. Nicholas Cucinelli, our former President and CEO and $23,497 in wages and benefits expense for services rendered by Mr. James B. Wilkinson. On February 1, 2010 we entered into an at will employment agreement with Mr. Wilkinson pursuant to which Mr. Wilkinson was to serve as the Vice President Corporate Development and Chief Operating Officer of the Company, in consideration for which Mr. Wilkinson was to receive an annual salary of $150,000 (the Wilkinson Agreement). On February 15, 2010, we received Mr. Wilkinsons resignation, effective as of February 15, 2010, and his concurrence to the mutual termination of the Wilkinson Agreement. The termination was not based upon any disagreement between us and Mr. Wilkinson. As of February 28, 2010, Mr. Wilkinson had resigned from all positions with us.
During the nine months ended May 31, 2009, we incurred $108,359 in wages and benefits expense for services rendered by Mr. Patel. We also incurred $77,154 in wages and benefits expense for services rendered by Mr. Cucinelli, which includes $50,000 severance pursuant to an Employment Termination Agreement, dated October 15, 2008 between us and Mr. Cucinelli.
On October 15, 2008, Mr. Cucinelli resigned as President and Chief Executive Officer. As a result, the stock option granted to him on February 15, 2008 to purchase 1,250,000 shares of common stock was forfeited pursuant to the terms of an Employment Termination Agreement between us and Mr. Cucinelli. As a result of Mr. Cucinellis resignation, stock option compensation expense of $3,573,778 previously recorded for Mr. Cucinellis stock option was reversed during the quarter ended November 30, 2008 and is included in wages and benefits for the nine months ended May 31, 2009.
Wages and benefits for the nine months ended May 31, 2009 also includes $50,703 for severance paid to employees in our former administrative office in Vancouver, British Columbia, which was closed effective August 31, 2008.
Management fees related party
During the nine months ended May 31, 2009, we incurred $4,472 for services rendered by Mr. Frank Fabio, our former consultant Chief Financial Officer (the CFO). Mr. Fabio resigned as CFO, effective January 9, 2009.
Professional fees
Professional fees primarily consist of accounting, audit and tax fees, legal fees, non-employee Board fees, SEC related filing fees, and consulting services provided to advance our MotionPower™ Technology and SolarWindow™ Technology products (Energy Consulting Services).
Professional fees increased $88,944 during the three months ended May 31, 2010 compared to the same period in 2009 primarily as a result of increases in accounting and audit related fees of approximately $6,600, legal fees of approximately $28,300, SEC filing fees of approximately $11,200, and Energy Consulting Services of approximately $37,200. The increases in accounting, audit, legal and SEC filing fees are directly related to the preparation and filing of our Form S-1, and amendments thereto. Energy Consulting Services were incurred pursuant to a consulting agreement that we entered into on April 1, 2010, with Mr. John A. Conklin whereby Mr. Conklin provides technical advice, guidance, and management oversight to help advance the commercial development of our technologies, including but not necessarily limited to our SolarWindow™ and MotionPower™ technologies. In consideration of Mr. Conklins services, we pay Mr. Conklin $11,000 per calendar month for the first three calendar months of the consulting agreement and $12,444 for each calendar month of service thereafter. In additional consideration of Mr. Conklins services, we granted Mr. Conklin a stock option to purchase up to 250,000 shares of our common stock at an exercise price of $0.54 per share, expiring five years from the date of grant on April 1, 2015. The stock option granted Mr. Conklin vests upon the achievement of specific technical, product development, and/or business milestones. The grant date fair value of the 250,000 stock options granted Mr. Conklin was $119,975, estimated using the Black-Scholes option pricing model (see Note 10. Stock Options). Included in professional fees for the nine months ended May 31, 2010 is $13,131 for the amortization of the fair value of this stock option.
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Professional fees increased $153,272 during the nine months ended May 31, 2010 compared to the same period in 2009 primarily as a result of increases in accounting and audit related fees of approximately $13,500, legal fees of approximately $53,400, SEC filing fees of approximately $27,300, Board fees of approximately $23,900, and Energy Consulting Services of approximately $37,200. The increases in accounting, audit, legal and SEC filing fees are directly related to the preparation and filing of our Form S-1, and amendments thereto. The increase in Board fees is entirely due to stock compensation related to stock options that were granted to non-employee board members on December 15, 2009. Energy Consulting Services were incurred pursuant to the consulting agreement that we entered into with Mr. John A. Conklin (see previous paragraph).
Research and development
Research and development costs represent costs incurred to develop our technology and are incurred pursuant to our sponsored research agreements with USF, development agreements with Veryst, consulting agreements with Sigma Design, and agreements with other third party providers. These agreements include salaries and benefits for research and development personnel, allocated overhead and facility occupancy costs, contract services and other costs. Research and development costs are expensed when incurred, except for nonrefundable advance payments for future research and development activities which are capitalized and recognized as expense as the related services are performed.
Please refer to the appropriate sections above for disclosure of the specific terms and amounts incurred for each research and development agreement.
Travel and entertainment
Travel and entertainment increased during both the three and nine months ended May 31, 2010 compared to the same periods of the prior year primarily due to executive and Board member travel required as part of the ongoing research and development efforts as well as in connection with the preparation and filing of our Form S-1 and amendments thereto.
Other operating expenses
Other operating expenses includes rent, patent filing costs, utilities, office supplies, insurance, press releases, information technology related fees, printing costs, and other administrative costs.
Other operating expenses increased $34,987 during the three months ended May 31, 2010 as compared to the same period of the prior year as a result of increases in printing and postage costs of approximately $5,300, patent expense of approximately $2,900, rent of approximately $3,200, press release of approximately $12,100 and directors and officers insurance of approximately $11,100. During the quarter ended May 31, 2010 we distributed a letter from our President to all of our stockholders providing them an update on the results of our testing of our MotionPower™ and SolarWindow™ Technologies, thus incurring printing and postage for this mailing. The increase in rent of $3,200 is due to the one year sublease agreement we entered into, effective December 1, 2009, with MVP Law Group, P.A., of which our Chief Executive Officer and President is a founder and managing attorney, with respect to this office space. Monthly rent is $900. As we continue to advance our MotionPower™ and SolarWindow™ Technologies we will continue to make announcements by way of press releases, resulting in additional fees for press releases.
Other operating expenses increased $145,258 during the nine months ended May 31, 2010 as compared to the same period of the prior year as a result of increases in printing and postage costs of approximately $10,200, patent expense of approximately $47,900, rent of approximately $6,700, press releases of approximately $39,900, directors and officers insurance of approximately $27,800, and website re-design fees of approximately $6,000. In both October 2009 and May 2010 we distributed letters from our President to all of our stockholders providing them an update on the results of our testing of our MotionPower™ and SolarWindow™ Technologies, thus incurring printing and postage for this mailing. Patent expense increased as a result of filing United States and international patent applications for our MotionPower™ Technology and SolarWindow™ Technology. The increase in rent of $3,200 is due to the one year sublease agreement we entered into, effective December 1, 2009, with MVP Law Group, P.A., of which our Chief Executive Officer and President is a founder and managing attorney, with respect to
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this office space. Monthly rent is $900. As we continue to advance our MotionPower™ and SolarWindow™ Technologies we will continue to make announcements by way of press releases, resulting in additional fees for press releases.
Other income (expense)
A summary of our other income (expense) for the three and nine months ended May 31, 2010 and 2009 was as follows:
Three Months Ended |
||||||||||||
May 31, |
Increase / |
Percentage |
||||||||||
2010 |
2009 |
(Decrease) |
Change |
|||||||||
Other income (expense) |
||||||||||||
Foreign exchange loss |
$ |
(638) |
$ |
- |
$ |
638 |
* |
% | ||||
Change in fair value of warrant liability |
165,660 |
- |
165,660 |
* |
||||||||
Total other income (expense) |
$ |
165,022 |
$ |
- |
* Not meaningful
Nine Months Ended |
||||||||||||
May 31, |
Increase / |
Percentage |
||||||||||
2010 |
2009 |
(Decrease) |
Change |
|||||||||
Other income (expense) |
||||||||||||
Interest income |
$ |
- |
$ |
7,743 |
$ |
(7,743) |
* |
% | ||||
Interest expense |
- |
(267) |
(267) |
* |
||||||||
Gain on dissolution of foreign subsidiary |
- |
59,704 |
(59,704) |
* |
||||||||
Foreign exchange loss |
(1,344) |
(52,918) |
(51,574) |
(97) |
||||||||
Change in fair value of warrant liability |
1,721,658 |
- |
1,721,658 |
* |
||||||||
Total other income (expense) |
$ |
1,720,314 |
$ |
14,262 |
* Not meaningful
Change in fair value of warrant liability
On September 1, 2009, we adopted guidance which is now part of ASC 815-40, Contracts in Entitys Own Equity. We determined that our Class F Callable Warrants contained a Dilutive Issuance provision. As a result, we reclassified 3,188,500 of our Class F Callable Warrants to warrant liability, resulting in a cumulative adjustment to accumulated deficit as of September 1, 2009 of $342,771.
Our Class F Callable Warrants are considered derivative financial liabilities and are therefore required to be adjusted to fair value each quarter. We have valued our warrant liability at May 31, 2010 using a Black-Scholes model containing the following assumptions: dividend yield of 0%, volatility of 104.62%, risk-free rate of 0.22%, and a term of 0.7 years. Decreases in the remaining term and volatility of the Class F Callable Warrants during three months ended May 31, 2010 resulted in a decrease in the warrant liability and a non-cash gain related to the Class F Callable Warrants of $165,660 during the three months ended May 31, 2010.
Decreases in the remaining term and volatility of the Class F Callable Warrants during the nine months ended May 31, 2010 and a decline in the fair value of our common stock from September 1, 2009 to May 31, 2010 resulted in a decrease in the warrant liability and a non-cash gain related to the Class F Callable Warrants of $1,721,658 during the nine months ended May 31, 2010.
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Interest income
Interest income decreased during the nine months ended May 31, 2010 as compared to the same period in the prior year primarily due to the closing of the administrative office in Vancouver, British Columbia, Canada. As of December 31, 2008, we transferred all of the funds in our interest bearing cash account maintained at a Canadian owned financial institution to non-interest bearing bank accounts at U.S. financial institutions.
Gain on dissolution of foreign subsidiary
Octillion Technologies provided administrative services to our Canadian office. We ceased to conduct business in Canada, effective August 31, 2008 and closed this office. As a result, we dissolved Octillion Technologies and eliminated all intercompany balances and recorded a gain on our investment in Octillion Technologies equal to the accumulated other comprehensive income at December 1, 2008, the time of the dissolution.
Foreign exchange loss
We translate assets and liabilities of our foreign subsidiaries, other than those denominated in United States Dollars, at the rate of exchange at the balance sheet date. The foreign exchange loss during the nine months ended May 31, 2009 is substantially the result of cash infusions made from New Energy Technologies to our former foreign subsidiary, Octillion Technologies (denominated in Canadian dollars), thereby increasing the intercompany payable on Octillion Technologies balance sheet. Octillion Technologies was dissolved, effective December 1, 2008.
Liquidity and Capital Resources
The accompanying financial statements have been prepared assuming we will continue as a going concern. We have incurred cumulative losses of $7,046,074 through May 31, 2010. Due to the "start up" nature of our business, we expect to incur losses as we continue development of our photovoltaic and energy harvesting technologies and expand. These conditions raise substantial doubt about our ability to continue as a going concern. Management recognizes that in order for us to meet our capital requirements, and continue to operate, additional financing will be necessary. We expect to raise additional funds through private or public equity investment in order to expand the range and scope of its business operations. We will seek access to private or public equity but there is no assurance that such additional funds will be available for us to finance our operations on acceptable terms, if at all. If we are unable to raise additional capital or generate positive cash flow, it is unlikely that we will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our principal source of liquidity is cash in the bank. At May 31, 2010, we had a cash and cash equivalents balance of $1,048,347. We have financed our operations primarily pursuant to a Securities Purchase Agreement in which we received net proceeds of $3,395,955 in February 2008 and from the exercise of warrants.
Net cash used in operating activities was $1,687,874 for the nine months ended May 31, 2010, compared to net cash used of $575,589 for the same period in 2009. The increase in cash used of $1,112,285 substantially reflects increases in amounts paid for investor relations of approximately $70,000, marketing of $357,000, and research and development of $401,000.
Securities Purchase Agreement
On February 12, 2008, we consummated the sale of an aggregate of 3,675,000 shares of our common stock and Class F Callable Warrants to purchase up to an additional 3,675,000 shares of our common stock for aggregate gross proceeds of $3,675,000 pursuant to the terms of a Securities Purchase Agreement dated February 8, 2008 (the 2008 Private Placement ) with certain institutional and other accredited investors (the Investors).
We engaged an agent (the Agent) to help in the fund raising efforts of the 2008 Private Placement. The agent was paid a total cash fee of 7% ($257,250) of the aggregate proceeds ($257,250) and received Class F Callable Warrants to purchase 514,500 shares of our common stock valued at $642,980 and representing 7% of the total number of shares purchased by the Investors. In addition, the Agent was reimbursed $6,045 for expenses incurred on our behalf.
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Related Party Transactions
Non-employee Board members receive $2,500 per quarter for services rendered in the capacity of a Board member.
During the three months ended May 31, 2010, we incurred $20,927, including stock compensation of $13,427, for services rendered by our non-employee directors, which is included in professional fees.
During the nine months ended May 31, 2010, we incurred $79,623, including stock compensation of $57,123, for services rendered by our non-employee directors, which is included in professional fees.
During the three and nine months ended May 31, 2010, the law firm of Sierchio & Company, LLP (S&C LLP), our corporate and securities legal counsel, provided $121,892 and $203,232 of legal services to us. Joseph Sierchio, one of our non-employee directors, is a principal of S&C LLP. At May 31, 2010, we owed S&C LLP $26,185 which is included in accounts payable.
Our corporate office is located at 3905 National Drive, Suite 110, Burtonsville, Maryland 20866. On December 1, 2009, we entered into a one year sublease agreement with MVP Law Group, P.A., of which our Chief Executive Officer and President is a founder and managing attorney, with respect to this office space. Monthly rent is $900. Additionally, we paid a $900 security deposit.
All related party transactions are recorded at the exchange amount established and agreed to between related parties and are in the normal course of business.
Other Contractual Obligations
In addition to the contractual obligations discussed above for the research and development agreement with USF, as of May 31, 2010, we have future minimum lease payments of $8,300 under our corporate and other office operating leases. In addition, we have future minimum payments totaling $7,600 pursuant to the Market Agreement entered into on October 1, 2008, $17,500 pursuant to the Shareholder Communications Services Agreement entered into on April 15, 2009, and $6,500 pursuant to the PR Agreement entered into on July 29, 2009.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Recently Issued Accounting Pronouncements
See Note 3. Presentation of Interim Information to the Consolidated Financial Statements in this Form 10-Q.
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Item 4T. Controls and Procedures
(a) Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act), as of the end of the period covered by this quarterly report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of May 31, 2010 that our disclosure controls and procedures were effective such that the information required to be disclosed in our United States Securities and Exchange Commission (the SEC) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
30
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits
3.1 Articles of Incorporation (1)
3.2 Certificate of Amendment to the Articles of Incorporation changing name to New Energy Technologies, Inc. (1)
3.3 By Laws (1)
4.1 Securities Purchase Agreement dated February 8, 2008 (1)
10.1 Employment Termination Agreement with Mr. Cucinelli (1)
10.2 Employment Agreement dated June 24, 2009 between New Energy Technologies, Inc. and Mr. Meetesh Patel (1)
10.3 Amendment to the Employment Agreement dated April 6, 2010 between New Energy Technologies, Inc. and Meetesh Patel (1)
10.4 Stock Option Agreement Dated April 6, 2010 between New Energy Technologies, Inc. and Meetesh Patel(1)
10.5 Employment Agreement dated February 1, 2010 between New Energy Technologies, Inc. and James B. Wilkinson (1)
10.6 Resignation and Mutual Determination to terminate employment between New Energy Technologies, Inc. and Brent Wilkinson, dated February 15, 2010 (1)
10.7 Redacted USF Sponsored Research Agreement (1)
10.8 Redacted USF Option Agreement (1)
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10.9 Redacted Veryst Agreement (1)
10.10 Redacted Sigma Design Agreement (1)
10.11 Amended Form of Stock Option Agreement dated as of December 15, 2009 between Meetesh Patel and New Energy Technologies, Inc., correcting the grant date (1)
10.12 Amended Form of Stock Option Agreement dated as of December 15, 2009 between New Energy Technologies, Inc. and its non-employee directors, correcting the grant date (1)
10.13 Redacted Standard Exclusive License Agreement with Sublicensing Terms entered into on June 21, 2010 by and between the University of South Florida Research Foundation and New Energy Solar Corporation. (2)
31.1 Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1 Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 USC. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
____________________
(1) Incorporated by reference to the exhibits filed as part of the report on Form 10-Q filed by New Energy Technologies, Inc. on April 16, 2010.
(2) Incorporated by reference to the Form 8-K filed by New Energy Technologies, Inc. on June 28, 2010.
*Filed herewith
32
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
New Energy Technologies, Inc.
(Registrant)
July 15, 2010
By: /s/ Meetesh Patel
Meetesh Patel
President, Chief Executive Officer,
Chief Financial Officer, Secretary, Director
33
Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
This draft is dated the 10th day of June, 2010, and is solely for purposes of negotiation. No contract shall exist until a final, written agreement is signed by an authorized representative of Licensor and an authorized representative of Licensee. This draft shall expire on 21stth June, 2010.
STANDARD EXCLUSIVE LICENSE AGREEMENT
WITH SUBLICENSING TERMS
Agreement # Number ____________.
This Agreement is made effective 21st June, 2010, (the “Effective Date”) by and between the University of South Florida Research Foundation (hereinafter called “ Licensor”), a nonstock, nonprofit Florida corporation, under Chapter 617 Florida Statutes, and a direct support organization of the University of South Florida (“University”) pursuant to section 1004.28 Florida Statutes and New Energy Solar Corporation (hereinafter called “Licensee”), a small corporation organized and existing under the laws of the State of Florida.
WHEREAS, Licensor is the exclusive licensee of certain inventions that are described in the “Licensed Patents” defined below (Licensor Reference # 08B117 Lewis_Fabrication of Organic Solar Array for Applications in Microelectromechanical Systems and Others), and Licensor is willing to grant a license to Licensee under any one or all of the Licensed Patents and Licensee desires a license under all of them;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, the parties covenant and agree as follows:
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
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Initials /s/ VLM MP1735585.1
Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
2.1.2 The license granted hereunder shall not be construed to confer any rights upon Licensee by implication, estoppel, or otherwise as to any technology not part of the Licensed Patents or Know How in the specified Licensed Field and specified Licensed Territory.
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
USF Research Foundation
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
Attn: Business Manager
3802 Spectrum Blvd, Suite 100
Tampa, Florida 33612
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
9.4 If Licensee or any of its Affiliates brings a Patent Challenge against Licensor, or assists another party in bringing a Patent Challenge against Licensor (except as required under a court order or subpoena), then Licensor may immediately terminate this Agreement and/or the license granted hereunder. If a Sublicensee brings a Patent Challenge against Licensor, or assists another party in bringing a Patent Challenge against Licensor (except as required under a court order or subpoena), then Licensor may send a written demand to Licensee to terminate such Sublicense. If Licensee fails to so terminate such Sublicense within forty-five (45) days after Licensor’s demand, Licensor may immediately terminate this Agreement and/or the license granted hereunder
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
9.5 If Licensee, any of its Affiliates or a Sublicensee (i) brings a Patent Challenge against Licensor or (ii) assists another party in bringing a Patent Challenge against Licensor (except as required under a court order or subpoena), and if Licensor does not choose to exercise its rights to terminate this Agreement pursuant to Section 9.4 then, in the event that such the Patent Challenge is successful, Licensee will have no right to recoup any consideration, including royalties, paid during the period of challenge. In the event that the Patent Challenge is unsuccessful, Licensee shall reimburse Licensor for all reasonable legal fees and expenses incurred in its defense against the Patent Challenge.
This Agreement may not be transferred or assigned by Licensee except with the prior written consent of Licensor, in which case assignee assumes all responsibilities under this license.
In the event either party intends to file a lawsuit against the other with respect to any matter in connection with this Agreement, compliance with the procedures set forth in this Section shall be a condition precedent to the filing of such lawsuit, other than for injunctive relief. Either party may terminate this Agreement as provided in this Agreement without following the procedures set forth in this section.
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
If any issue is not resolved at the meeting with the Neutral Advisor, either party may file appropriate administrative or judicial proceedings with respect to the issue that remains in dispute. No new issues may be included in the lawsuit without the mandatory procedures set forth in this section having first been followed.
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
Licensee and its Sublicensee(s) shall not use the names of Licensor, nor of any of either institution's employees, agents, or affiliates, nor the name of any inventor of Licensed Patents, nor any adaptation of such names, in any promotional, advertising or marketing materials or any other similar form of publicity, or to suggest any endorsement by the such entities or individuals, without the prior written approval of Licensor in each case, except that Licensor may state that the Licensed Patents are licensed from Licensee. Licensor acknowledges that Licensee is a corporation having a reporting obligation under the Securities Exchange Act of 1934, as amended, which has or may have certain disclosure and filing obligations under applicable law, including but not limited to the public announcement and disclosure of this Agreement and the filing of the same with the United States Securities and Exchange Commission; it is acknowledged and agreed that such disclosure and filing shall not be deemed a violation of this Agreement.
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
· Section 6 Record Keeping
· Section 9 Requirement to pay royalties on sale of Licensed Products made, and in process, at time of License Agreement termination
· Section 12 Product Liability; Conduct of Business
· Section 13 Use of Names
Section 18 Confidentiality
Any notice required to be given pursuant to the provisions of this Agreement shall be in writing and shall be deemed to have been given (a) when delivered personally; or (b) if sent by facsimile transmission, when receipt thereof is acknowledged at the facsimile number of the recipient as set forth below; or (c) the second day following the day on which the notice has been delivered prepaid to a national air courier service; or five (5) business days following deposit in the U.S. mail if sent certified mail, (return receipt acknowledgement is not required to certify delivery).
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
USF Research Foundation
Attn: Business Manager
3802 Spectrum Blvd, Suite 100
Tampa, Florida 33612
Development reports, updates, and all other notices and communications to:
USF Division of Patents & Licensing
Attn: Assistant Vice President
3802 Spectrum Blvd, Suite 100
Tampa, Florida 33612
(Insert licensee’s contact information)
The submission of this Agreement does not constitute an offer, and this document shall become effective and binding only upon the execution by duly authorized representatives of both Licensee and Licensor. Copies of this Agreement that have not been executed and delivered by both Licensor and Licensee shall not serve as a memorandum or other writing evidencing an agreement between the parties. This Agreement shall automatically terminate and be of no further force and effect, without the requirement of any notice from Licensor to Licensee, if Licensor does not receive the License Issue Fee or certificates representing shares issued to Licensor pursuant to this Agreement, as applicable, within thirty (30) days of the Effective Date.
No default, delay, or failure to perform on the part of Licensee or Licensor shall be considered a default, delay or failure to perform otherwise chargeable hereunder, if such default, delay or failure to perform is due to causes beyond either party’s reasonable control including, but not limited to: strikes, lockouts, or inactions of governmental authorities, epidemics, war, embargoes, fire, earthquake, hurricane, flood, acts of God, or default of common carrier. In the event of such default, delay or failure to perform, any date or times by which either party is otherwise scheduled to perform shall be extended automatically for a period of time equal in duration to the time lost by reason of the excused default, delay or failure to perform.
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the dates indicated below.
LICENSOR
/s/ Valerie L. McDevitt Date: June 16, 2010
_________________________________________________________
Valerie L. McDevitt,
Assistant Vice President
Division of Patents & Licensing
LICENSEE
By: /s/ Meetesh Patel Date: June 21, 2010
Name and Office: Meetesh Patel, President and CEO
ACKNOWLEDGED AND AGREED:
UNIVERSITY OF SOUTH FLORIDA BOARD OF INVENTOR
TRUSTEES A PUBLIC BODY CORPORATE
/s/ Rebecca Puig /s/
INVENTOR
_____________________________________________ /s/
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
Schedule I
U.S. Patent Application No. 12/630,398 filed December 3rd 2009, titled Fabrication of Organic Solar Array for Applications in Microelectromechanical Systems and Others.
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
Appendix A - Development Plan
A Development Plan of the scope outlined below shall be submitted to Licensor by Licensee prior to the execution of this Agreement. In general, the plan should provide Licensor with a summary overview of the activities that Licensee believes are necessary to bring products to the marketplace.
I. Development Program
II. Governmental Approval
III.
Proposed Market Approach
IV. Competitive Information
A. Potential competitors
1. There are no direct competitors known to be developing a see-thru BIPV product with the characteristics specific to Licensee’s proposed application of the Licensed Patents and Licensed Know-How to its SolarWindow™ technology
2. There are numerous solar/photovoltaic/BIPV companies, which may develop products and/or technologies capable of competing against Licensee:
a) Konarka Technologies, Inc.
b) Nanosolar, Inc.
c) General Electric
d) BP Solar
e) Energy Conversion Devices / United Solar Ovonic
B. Potential competitive devices/compositions
1. Solar blinds
2. Ultra-thin films
3. Embedded solar ‘strips’ inside glass windows
C. Anticipated date of product launch
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
Appendix B - Development Report
When appropriate, indicate estimated start date and finish date for activities.
I. Date Development Plan Initiated and Time Period Covered by this Report.
II. Development Report (4-8 paragraphs).
A. Activities completed since last report including the object and parameters of the development, when initiated, when completed and the results.
B. Activities currently under investigation, i.e., ongoing activities including object and parameters of such activities, when initiated, and projected date of completion.
III. Future Development Activities (4-8 paragraphs).
A. Activities to be undertaken before next report including, but not limited to, the type and object of any studies conducted and their projected starting and completion dates.
B. Estimated total development time remaining before a product will be commercialized.
IV. Changes to Initial Development Plan (2-4 paragraphs).
A. Reasons for change.
B. Variables that may cause additional changes.
V. Items to be Provided if Applicable:
A. Information relating to Licensed Products or Licensed Processes that has become publicly available, e.g., published articles, competing products, patents, etc.
B. Development work being performed by third parties, other than Licensee, to include name of third party, reasons for use of third party, planned future uses of third parties including reasons why and type of work.
C. Update of competitive information trends in industry, government compliance (if applicable) and market plan.
D. Information and copies of relevant materials evidencing the status of any patent applications or other protection relating to Licensed Products, or Licensed Processes or the Licensed Patents.
PLEASE SEND DEVELOPMENT REPORTS TO:
USF Division of Patents & Licensing
Attn: Assistant Vice President
3802 Spectrum Blvd, Suite 100
Tampa, Florida 33612
Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
Appendix C - Licensor Royalty Report
Licensee: Agreement No.:
Inventor: P#: P
Period Covered: From: / /2 Through: / /2
Prepared By Date:
Approved By: Date:
If license covers several major product lines, please prepare a separate report
for each line. Then combine all product lines into a summary report.
Report Type: ¨ Single Product Line Report:
¨ Multiproduct Summary Report. Page 1 of ______ Pages
¨ Product Line Detail. Line: Tradename: Page:
Report Currency: ¨ U. S. Dollars ¨ Other
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Confidential Treatment-Redacted Copy
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER A CONFIDENTIAL TREATMENT REQUEST, PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT AT THE APPROPRIATE PLACE WITH FOUR ASTERISKS [****].
Total Royalty: _______________ Conversion Rate: ____________ Royalty in U.S. Dollars: $
The following royalty forecast is non-binding and for Licensor’s internal planning purposes only:
Royalty Forecast Under This Agreement: Next Quarter:__________ Q2:__________ Q3:__________ Q4:__________
* On a
separate page, please indicate the reasons for returns or other adjustments
if significant. Also note any
unusual occurrences that affected royalty amounts during this period. To assist
Licensor’s forecasting, please comment on any significant expected trends
in sales volume.
PLEASE SEND ROYALTY REPORTS TO:
USF Research Foundation
Attn: Business Manager
3802 Spectrum Blvd, Suite 100
Tampa, Florida 33612
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Appendix D - Milestones
APPENDIX E: ENUMERATED KNOW HOW
Exclusive license to all Trade Secrets (“Enumerated Know-How”), in the Licensed Territory and Licensed Field which relate to the methods and processes by which materials, including but not limited to starting materials, solar materials, conducting materials, substrates, and substrate surfaces, are: created and prepared; applied to substrates and their surfaces; protected from degradation; and manufactured. Trade secrets ("Enumerated Know-How") mean any formula, pattern, device or compilation of information that is used in the licensed process that gives the licensee an opportunity to obtain an advantage over competitors who do not know or use it.
1
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Meetesh Patel, certify that:
1. I have reviewed this quarterly report on Form 10-Q of New Energy Technologies, Inc. (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. As the registrant’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. As the registrant's certifying officer, I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: July 15, 2010 /s/ Meetesh Patel
Meetesh Patel
President, Chief Executive Officer and Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURUSANT TO 18 U.S.C. 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of New Energy Technologies, Inc. (the “Company”) on Form 10-Q for the quarter ending May 31, 2010, as filed with the Securities and Exchange Commission on July 15, 2010 (the “Report”), I, Meetesh Patel, President, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: July 15, 2010 /s/ Meetesh Patel
Meetesh Patel
President, Chief Executive Officer, and Chief Financial Officer