Unassociated Document
U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-QSB
x
QUARTERLY REPORT
PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the quarterly period ended March 31, 2007
o
TRANSITION REPORT
PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Commission
file number 000-51696
Trulite,
Inc.
(Exact
name of small business issuer as specified in its charter)
Delaware
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|
20-1372858
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(State
or other jurisdiction of
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|
(I.R.S.
employer
|
incorporation
or organization)
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|
identification
number)
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1401
McKinney Street
Suite
900
Houston,
TX 77010
(Address
of principal executive offices)
Issuer's
telephone number, including area code: (713) 888-0660
Copies
to:
James
Ryan, III, Esq.
Jackson
Walker
100
Congress Avenue, Suite 100
Austin,
TX 78701
Tel:
(512) 232-2253
Fax:
(512) 391-2126
Check
whether the issuer (1) filed all reports required to be filed by Section 13
or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes x No o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes o No x
APPLICABLE
ONLY TO CORPORATE ISSUERS
State
the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: 11,785,491 shares of Common Stock, par value
$.0001 per share, outstanding as of April 30, 2007.
Transitional
Small Business Disclosure Format (Check one): YES
o NO
x
TRULITE,
INC.
INDEX
to Form 10-QSB
PART
I- FINANCIAL INFORMATION
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Item
1. Financial Statements:
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Balance
Sheets
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4
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Statements
of Operations
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5
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Statements
of Cash Flows
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6
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Statements
of Stockholders’ Deficit
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7
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Notes
to Financial Statements
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8
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Item
2. Management's Discussion and Analysis and Plan of
Operation
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15
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Item
3. Controls and Procedures
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19
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PART
II - OTHER INFORMATION
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Item
1. Legal Proceedings
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19
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Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
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19
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Item
3. Defaults Upon Senior Securities
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19
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Item
4. Submission of Matters to a Vote of Security Holders
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19
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Item
5. Other Information
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19
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Item
6. Exhibits
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20
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Signatures
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21
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Note
Regarding Forward-looking Statements
This
Form
10-QSB for the quarter ended March 31, 2007, contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended
(the
“Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), including statements regarding, among other items,
our growth strategies, anticipated trends in our business and our future results
of operation, market conditions in the research and development industry and
the
impact of governmental regulation. These forward-looking statements are based
largely on our expectations and are subject to a number of risks and
uncertainties, many of which are beyond our control. Actual results could differ
materially from these forward-looking statements as a result of, among other
things:
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·
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Our
ability to raise capital
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·
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Our
ability to sell our products
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·
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Our
ability to retain and attract experienced and knowledgeable personnel;
and
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·
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Our
ability to compete in the renewable energy
industry
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In
addition, the words “believe,” “may,” “will,” “estimate,” “continue,”
“anticipate,” “intend,” “expect,” and similar expressions, as they relate to us,
our business or our management, are intended to identify forward-looking
statements.
We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise
after the date of this Form 10-QSB. In light of these risks and uncertainties,
the forward-looking events and circumstances discussed in this Form 10-QSB
may
not occur and actual results could differ materially from those anticipated
or
implied in the forward-looking statements.
PART
1. FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
Trulite,
Inc. (a Development Stage Company)
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Balance
Sheets
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March
31,
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December
31,
|
|
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2007
|
|
2006
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ASSETS
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Current
assets:
|
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|
|
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Cash
and cash equivalents
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$
|
156,126
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|
$
|
275,957
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|
Patent
application fees
|
|
|
19,843
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|
|
19,843
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Prepaid
expenses and other current assets
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2,700
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|
13,372
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Total
current assets
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178,669
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309,172
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Property
and equipment, net
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51,168
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|
50,079
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|
|
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|
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Total
assets
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$
|
229,837
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|
$
|
359,251
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LIABILITIES
AND STOCKHOLDERS' DEFICIT
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Current
liabilities:
|
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Accounts
payable and accrued expenses
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$
|
474,189
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|
$
|
301,907
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Notes
payable
|
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|
1,850,000
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1,250,000
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|
Total
current liabilities
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2,324,189
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1,551,907
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Commitments
and contingencies
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Stockholders'
(deficit) equity:
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8%
Cumulative Convertible, Series A Preferred Stock;
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$0.0001
par value, 1,500,000 shares authorized, 0 shares
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issued
and outstanding as of March 31, 2007 and
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December
31, 2006.
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-
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-
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Common
Stock; $0.0001 par value, 20,000,000 shares
authorized,
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11,785,491
shares issued and outstanding as of
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March
31, 2007 and December 31, 2006.
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1,178
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|
|
1,178
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|
Additional
paid-in-capital
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9,679,517
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9,537,426
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Deficit
accumulated during the development stage
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(11,775,047
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)
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(10,731,260
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)
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Total
stockholders' deficit
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(2,094,352
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)
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(1,192,656
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)
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Total
liabilities and stockholders' deficit
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|
$
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229,837
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$
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359,251
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|
The
accompanying notes are an integral part of these financial
statements.
|
Trulite,
Inc. (a Development Stage Company)
|
Statements
of Operations
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Period
From
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Inception
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Three
Months Ended
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(July
15, 2004)
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March
31,
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Through
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2007
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2006
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March
31, 2007
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Sales
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$
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-
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$
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8,333
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$
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26,750
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Cost
of sales
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-
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5,912
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18,778
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GROSS
PROFIT
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-
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2,421
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7,972
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Operating
expenses:
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Research
and development
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417,867
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148,546
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2,684,406
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Depreciation
|
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5,642
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|
2,720
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|
28,453
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|
General
and administrative
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471,590
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230,801
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3,305,870
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TOTAL
OPERATING EXPENSES
|
|
|
895,099
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|
382,067
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|
6,018,729
|
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|
|
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LOSS
FROM OPERATIONS
|
|
|
(895,099
|
)
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|
(379,646
|
)
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|
(6,010,757
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)
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|
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Other
income (expense):
|
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|
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|
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Interest
expense
|
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|
(45,469
|
)
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|
(59
|
)
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|
(75,858
|
)
|
Interest
income
|
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|
1,661
|
|
|
471
|
|
|
12,784
|
|
Other
|
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|
-
|
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|
-
|
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|
(4,411
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)
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|
|
|
|
|
|
|
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|
TOTAL
OTHER INCOME (EXPENSE)
|
|
|
(43,808
|
)
|
|
412
|
|
|
(67,485
|
)
|
|
|
|
|
|
|
|
|
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|
LOSS
BEFORE INCOME TAXES
|
|
|
(938,907
|
)
|
|
(379,234
|
)
|
|
(6,078,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
|
(938,907
|
)
|
|
(379,234
|
)
|
$
|
(6,078,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Deemed
dividend on
warrant extension |
|
|
(104,880 |
)
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock dividends
|
|
|
-
|
|
|
(29,095
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS ATTRIBUTABLE TO
|
|
|
|
|
|
|
|
|
|
|
COMMON
STOCKHOLDERS
|
|
$
|
(1,043,787
|
)
|
$
|
(408,329
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER COMMON SHARE
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.08
|
)
|
$
|
(0.10
|
)
|
|
|
|
Preferred
and deemed dividends
|
|
|
|
)
|
|
(0.01
|
)
|
|
|
|
Attributable
to common stockholders
|
|
$
|
(0.09
|
)
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE COMMON
|
|
|
|
|
|
|
|
|
|
|
SHARES
OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
11,785,491
|
|
|
3,631,500
|
|
|
|
|
Diluted
|
|
|
11,785,491
|
|
|
3,631,500
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
|
Trulite,
Inc. (a Development Stage Company)
|
Statements
of Cash Flows
|
|
|
|
|
|
|
Period
From
|
|
|
|
|
|
|
|
Inception
|
|
|
|
Three
Months
Ended
|
|
(July
15, 2004)
|
|
|
|
March
31,
|
|
Through
|
|
|
|
2007
|
|
2006
|
|
March
31, 2007
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(938,907
|
)
|
$
|
(379,234
|
)
|
$
|
(6,078,242
|
)
|
Adjustments
to reconcile net loss to net
|
|
|
|
|
|
|
|
|
|
|
cash
used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
5,642
|
|
|
2,720
|
|
|
28,453
|
|
Common
stock issued for consulting services
|
|
|
-
|
|
|
-
|
|
|
285,000
|
|
Common
stock issued for management fees
|
|
|
-
|
|
|
-
|
|
|
133,840
|
|
Stock-based
compensation expense
|
|
|
37,211
|
|
|
-
|
|
|
548,368
|
|
Warrants
issued for consulting services
|
|
|
-
|
|
|
-
|
|
|
162,155
|
|
Write-off
of research and development expenses
|
|
|
-
|
|
|
-
|
|
|
606,798
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Due
from affiliate
|
|
|
-
|
|
|
23,773
|
|
|
-
|
|
Accounts
receivable
|
|
|
-
|
|
|
8,334
|
|
|
-
|
|
Patent
application fees
|
|
|
-
|
|
|
-
|
|
|
(19,843
|
)
|
Prepaid
expenses and other current assets
|
|
|
10,672
|
|
|
5,144
|
|
|
(4,168
|
)
|
Grants
receivable
|
|
|
-
|
|
|
85,483
|
|
|
850
|
|
Accounts
payable and accrued expenses
|
|
|
172,282
|
|
|
53,811
|
|
|
466,080
|
|
Net
cash used in operating activities
|
|
|
(713,100
|
)
|
|
(199,969
|
)
|
|
(3,870,709
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(6,731
|
)
|
|
-
|
|
|
(73,165
|
)
|
Net
cash used in investing activities
|
|
|
(6,731
|
)
|
|
-
|
|
|
(73,165
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock
|
|
|
-
|
|
|
-
|
|
|
1,000,000
|
|
Issuance
of notes payable
|
|
|
600,000
|
|
|
-
|
|
|
1,850,000
|
|
Issuance
of preferred stock
|
|
|
-
|
|
|
-
|
|
|
1,250,000
|
|
Net
cash provided by financing activities
|
|
|
600,000
|
|
|
-
|
|
|
4,100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND
|
|
|
|
|
|
|
|
|
|
|
CASH
EQUIVALENTS
|
|
|
(119,831
|
)
|
|
(199,969
|
)
|
|
156,126
|
|
CASH
AND CASH EQUIVALENTS, beginning of period
|
|
|
275,957
|
|
|
235,982
|
|
|
-
|
|
CASH
AND CASH EQUIVALENTS, end of period
|
|
$
|
156,126
|
|
$
|
36,013
|
|
$
|
156,126
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for consulting services
|
|
$
|
-
|
|
$
|
-
|
|
$
|
285,000
|
|
Common
stock issued for management fees
|
|
$
|
-
|
|
$
|
-
|
|
$
|
133,840
|
|
Warrants
issued for consulting services
|
|
$
|
-
|
|
$
|
-
|
|
$
|
162,155
|
|
Common
stock options issued for compensation
|
|
$
|
37,211
|
|
$
|
-
|
|
$
|
548,368
|
|
Preferred
stock issued for acquisition
|
|
$
|
-
|
|
$
|
-
|
|
$
|
20,000
|
|
Common
stock issued for acquisition
|
|
$
|
-
|
|
$
|
-
|
|
$
|
592,460
|
|
Cash
paid for interest
|
|
$
|
-
|
|
$
|
-
|
|
$
|
28,897
|
|
The
accompanying notes are an integral part of these financial
statements.
|
Trulite,
Inc. (a Development Stage Company)
|
Statements
of Stockholders' Deficit
|
For
the Periods From Inception (July 15, 2004) Through March 31,
2007
|
|
|
8%
Cumulative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
Series A
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Paid-in
|
|
Accumulated
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
Total
|
|
Cash
issuances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
28, 2004; issuance of preferred stock at $1.00 per share
|
|
|
100,000
|
|
$
|
10
|
|
|
-
|
|
$
|
-
|
|
$
|
99,990
|
|
$
|
-
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November
5, 2004; issuance of preferred stock at $1.00 per share
|
|
|
190,000
|
|
|
19
|
|
|
-
|
|
|
-
|
|
|
189,981
|
|
|
-
|
|
|
190,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November
12, 2004; issuance of preferred stock at $1.00 per share
|
|
|
10,000
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
9,999
|
|
|
-
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
issuances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
22, 2004; preferred stock issued in the acquisition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
Trulite Technology, LC based on fair value of stock issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
$1.00 per share
|
|
|
20,000
|
|
|
2
|
|
|
-
|
|
|
-
|
|
|
19,998
|
|
|
-
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
22, 2004; common stock issued in the acquisition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
Trulite Technology, LC based on fair value of stock issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
$0.20 per share (post April 2005 split)
|
|
|
-
|
|
|
-
|
|
|
2,962,300
|
|
|
296
|
|
|
592,164
|
|
|
-
|
|
|
592,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
28, 2004; common stock issued for management services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
based
on fair value of stock issued of $0.20 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(post
April 2005 split)
|
|
|
-
|
|
|
-
|
|
|
343,850
|
|
|
34
|
|
|
68,736
|
|
|
-
|
|
|
68,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion
of dividends
|
|
|
-
|
|
|
6,624
|
|
|
-
|
|
|
-
|
|
|
(6,624
|
)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(878,022
|
)
|
|
(878,022
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2004
|
|
|
320,000
|
|
|
6,656
|
|
|
3,306,150
|
|
|
330
|
|
|
974,244
|
|
|
(878,022
|
)
|
|
103,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
issuances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February
1, 2005; issuance of preferred stock, at $1.00 per share
|
|
|
200,000
|
|
|
20
|
|
|
-
|
|
|
-
|
|
|
199,980
|
|
|
-
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
1, 2005; issuance of preferred stock at $0.80 per share
|
|
|
934,725
|
|
|
93
|
|
|
-
|
|
|
-
|
|
|
749,907
|
|
|
-
|
|
|
750,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
issuances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
28, 2005; common stock issued for management services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
based
on fair value of stock issued of $0.20 per share (post April
2005
split)
|
|
|
-
|
|
|
-
|
|
|
325,350
|
|
|
33
|
|
|
65,037
|
|
|
-
|
|
|
65,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion
of dividends
|
|
|
-
|
|
|
84,074
|
|
|
-
|
|
|
-
|
|
|
(84,074
|
)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(825,952
|
)
|
|
(825,952
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2005
|
|
|
1,454,725
|
|
|
90,843
|
|
|
3,631,500
|
|
|
363
|
|
|
1,905,094
|
|
|
(1,703,974
|
)
|
|
292,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
issuances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
13, 2006; issuance of common stock and warrants
|
|
|
-
|
|
|
-
|
|
|
1,000,000
|
|
|
100
|
|
|
999,900
|
|
|
-
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
issuances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
26, 2006; common stock issued for consulting services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
based
on fair value of stock issued of $0.95 per share
|
|
|
-
|
|
|
-
|
|
|
300,000
|
|
|
30
|
|
|
284,970
|
|
|
-
|
|
|
285,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
26, 2006; warrants to purchase common stock issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
consulting services based on fair value of warrants issued
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
162,155
|
|
|
-
|
|
|
162,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion
of dividends
|
|
|
-
|
|
|
39,275
|
|
|
-
|
|
|
-
|
|
|
(39,275
|
)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May
2, 2006; accretion of preferred stock for deemed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dividend
on conversion of accrued dividends to common stock
|
|
|
-
|
|
|
161,388
|
|
|
-
|
|
|
-
|
|
|
(161,388
|
)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May
2, 2006; accretion of preferred stock for deemed dividend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on
conversion to common stock
|
|
|
-
|
|
|
1,424,762
|
|
|
-
|
|
|
-
|
|
|
(978,493
|
)
|
|
(446,269
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May
2, 2006; conversion of preferred stock to common stock
|
|
|
(1,454,725
|
)
|
|
(1,716,268
|
)
|
|
6,853,991
|
|
|
685
|
|
|
6,853,306
|
|
|
(5,137,723
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
511,157
|
|
|
-
|
|
|
511,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,443,294
|
)
|
|
(3,443,294
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2006
|
|
|
-
|
|
|
-
|
|
|
11,785,491
|
|
|
1,178
|
|
|
9,537,426
|
|
|
(10,731,260
|
)
|
|
(1,192,656
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
37,211
|
|
|
-
|
|
|
37,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed
dividend on
warrant extension |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
104,880 |
|
|
(104,880 |
)
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(938,907
|
)
|
|
(938,907
|
)
|
Balance,
March 31, 2007
|
|
|
-
|
|
$
|
-
|
|
|
11,785,491
|
|
$
|
1,178
|
|
$
|
9,679,517
|
|
$
|
(11,775,047
|
)
|
$
|
(2,094,352
|
)
|
The
accompanying notes are an integral part of these financial
statements.
|
Trulite,
Inc. (a Development Stage Company)
Notes
to Financial Statements
As
of and for the Period from Inception (July 15, 2004) Through March 31,
2007
NOTE
1 - Basis of Presentation
The
unaudited financial statements included herein have been prepared pursuant
to
the rules and regulations of the Securities and Exchange Commission (“SEC”) for
interim reporting, and in the opinion of management reflect all adjustments
,
including those of a normal recurring nature, that are necessary for a fair
presentation of financial position and results of operations for the interim
periods presented. As permitted under those requirements, certain footnotes
or
other financial information that are normally required by accounting principles
generally accepted in the United States of American have been condensed or
omitted. As used herein, the terms “Trulite,” “the Company,” “we,” “our” and
“us” refer to Trulite, Inc.
For
further information, refer to the financial statements and footnotes included
in
our Annual Report on Form 10-KSB for the year ended December 31, 2006.
Interim results are not necessarily indicative of results to be expected for
the
full fiscal year ending December 31, 2007. Certain reclassifications have
been made to conform prior period amounts to the current period presentation.
These reclassifications had no effect on net loss or stockholders deficit.
The
Company from inception (July 15, 2004) through March 31, 2007, did not have
significant revenues. The Company has no significant operating history as of
March 31, 2007. The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. From inception (July
15,
2004) through March 31, 2007, management has raised additional equity and debt
financing to fund operations and to provide additional working capital. However,
there is no assurance that future such financing will be in amounts sufficient
to meet the Company’s needs.
New
Accounting Pronouncements:
In
February 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 155, “Accounting for
Certain Hybrid Financial Instruments.” SFAS No. 155 provides entities with
relief from having to separately determine the fair value of an embedded
derivative that would otherwise have to be bifurcated from its host contract
in
accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities.” SFAS No. 155 allows an entity to make an irrevocable election to
measure such a hybrid financial instrument at fair value in its entirety, with
changes in fair value recognized in earnings. SFAS No. 155 was effective for
the
Company for all financial instruments acquired, issued or subject to a
remeasurement event occurring after January 1, 2007. The adoption of SFAS No.
155 did not have an impact on the Company’s financial statements as the Company
has no hybrid financial instruments.
In
March
2006, the FASB issued SFAS No. 156, “Accounting for Serving of Financial Assets
an Amendment to FASB Statement No. 140.” SFAS No. 156 requires entities to
recognize a servicing asset or liability each time they undertake an obligation
to service a financial asset by entering into a servicing contract in certain
situations. This statement also requires all separately recognized servicing
assets and servicing liabilities to be initially measured at fair value and
permits a choice of either the amortization or fair value measurement method
for
subsequent measurements. SFAS No. 156 was effective for the Company January
1,
2007. This pronouncement did not have an impact on the Company’s financial
statements as it does not have any servicing contracts.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements.” SFAS No. 157 defines fair value and applies to other
accounting pronouncements that require or permit fair value measurements and
expands disclosures about fair value measurements. SFAS No. 157 is
effective for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. The Company is currently evaluating the
impact of adopting SFAS No. 157 on its financial statements.
In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting
For Defined Benefit Pension and Other Postretirement Plans - an amendment of
FASB Statements No. 87, 88, 106 and 132(R).” The standard requires
companies to recognize the funded status (plan obligations less the fair value
of plan assets) of pension and other postretirement benefit plans on their
balance sheets, effective for fiscal years ending after December 15, 2006.
The statement will also require fiscal year-end measurements of plan assets
and
benefit obligations, effective for fiscal years ending after December 15,
2008. SFAS No. 158 will have no effect on the Company’s financial
statements, as the Company does not maintain defined benefit pension or other
postretirement plans.
Trulite,
Inc. (a Development Stage Company)
Notes
to Financial Statements
As
of and for the Period from Inception (July 15, 2004) Through March 31,
2007
In
September 2006, the SEC issued Staff Accounting Bulletin (“SAB”)
No. 108, to address diversity in practice in quantifying financial
statement misstatements and the potential for the build up of improper amounts
on the balance sheet. SAB No. 108 identifies the approach that registrants
should take when evaluating the effects of unadjusted misstatements on each
financial statement, the circumstances under which corrections of misstatements
should result in a revision to financial statements, and disclosures related
to
the correction of misstatements. SAB No. 108 was effective for the Company
on January 1, 2007, but had no effect on the Company’s financial
statements.
In
February 2007, the FASB issued SFAS 159, "The Fair Value Option for Financial
Assets and Financial Liabilities," which permits the choice to measure certain
financial assets and liabilities at their fair value at specified election
dates. The new standard is effective for the Company on January 1, 2008, unless
early adoption is elected. The Company does not expect the new standard to
have a material impact on its financial position or results of
operation.
NOTE
2 - Stock-Based Compensation
The
Company has granted options to purchase common stock to employees, consultants
and outside directors under the Trulite, Inc. Stock Option Plan, as amended
and
restated (the “Plan”). A total of 3,110,805 shares are reserved for issuance
and, as of March 31, 2007, 765,841 shares remained available for grant under
the
Plan.
For
the
three month period ended March 31, 2007, total stock-based compensation expense
recognized was $37,211. The compensation expense related to the three month
period ended March 31, 2006 was not significant. The total unrecognized
compensation cost at March 31, 2007, relating to non-vested share-based
compensation arrangements granted under the Plan, was $544,392. That cost is
expected to be recognized over four years, with a weighted average period of
3.2
years.
There
were no additional options granted during the three month period ended March
31,
2007. During the three months ended March 31, 2006, the Company granted options
to purchase 5,000 shares of common stock under the Plan. The exercise price
of
these options was $0.88 per common share, whereas the fair value of a share
of
common stock on the date of grant was $0.18, and the options vest over four
years and have a contractual live of seven years. The fair value of these
options was based upon the weighted average assumptions noted
below:
Risk
free rate
|
|
|
4.30
|
%
|
Expected
life (in years)
|
|
|
4.8
|
|
Expected
volatility
|
|
|
71
|
%
|
Expected
dividends
|
|
|
-
|
|
Fair
value
|
|
$
|
0.05
|
|
The
Company estimates the fair value of stock options under SFAS No. 123R at the
date of grant using a Black-Scholes-Merton valuation model. The risk-free rate
is based on the U.S. Treasury yield curve in effect at the time of grant. The
expected term (estimated period of time outstanding) of option grants is based
on the “simplified” method of estimating expected term for “plain vanilla”
options allowed by SEC Staff Accounting Bulletin No. 107, and varies based
on
the vesting period and contractual term of the option. Expected volatility
has
historically been based on an evaluation of similar companies’ trading activity.
The Company has not issued any cash dividends on its common stock.
Trulite,
Inc. (a Development Stage Company)
Notes
to Financial Statements
As
of and for the Period from Inception (July 15, 2004) Through March 31,
2007
The
following summary presents information regarding outstanding options as of
March
31, 2007, and the changes during the three months then ended:
|
|
Shares
|
|
Weighted
Average
|
|
Weighted
Average
|
|
Aggregate
|
|
|
|
Under
|
|
Exercise
Price
|
|
Remaining
|
|
Intrinsic
|
|
|
|
Options
|
|
Per
Share
|
|
Contractual
Term
|
|
Value
|
|
Outstanding
at January 1, 2007
|
|
|
2,344,864
|
|
$
|
0.94
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2007
|
|
|
2,344,864
|
|
|
0.94
|
|
|
4.8
years
|
|
$
|
845,748
|
|
Vested
or expected to vest at March 31, 2007
|
|
|
2,216,918
|
|
|
0.94
|
|
|
|
|
|
805,740
|
|
Exercisable
at March 31, 2007
|
|
|
1,081,193
|
|
$
|
0.88
|
|
|
3.1
years
|
|
$
|
452,301
|
|
NOTE
3 - Property and Equipment
Property
and Equipment consists of the following:
|
|
March
31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
Office
equipment
|
|
$
|
60,835
|
|
$
|
59,249
|
|
Manufacturing
equipment
|
|
|
11,687
|
|
|
9,491
|
|
Test
equipment
|
|
|
7,100
|
|
|
4,150
|
|
Total
fixed assets
|
|
|
79,622
|
|
|
72,890
|
|
|
|
|
|
|
|
|
|
Accumulated
depreciation
|
|
|
(28,453
|
)
|
|
(22,811
|
)
|
Property
and equipment, net
|
|
$
|
51,168
|
|
$
|
50,079
|
|
NOTE
4 - Accounts Payable and Accrued liabilities
|
|
March
31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
Accounts
payable
|
|
$
|
397,940
|
|
$
|
197,267
|
|
Accrued
expenses
|
|
|
76,249
|
|
|
104,640
|
|
|
|
$
|
474,189
|
|
$
|
301,907
|
|
NOTE
5 - Income taxes
Since
inception, the Company has incurred net operating losses and, accordingly,
no
provision for current income taxes has been recorded in these financial
statements. In addition, no benefit for income taxes has been recorded in
respect of the net deferred tax assets as management believes it is more likely
than not that the deferred tax assets will not be fully realizable. Accordingly,
the Company has provided for a full valuation allowance against its net deferred
tax assets at March 31, 2007 and December 31, 2006.
In
June
2006, the FASB issued FASB Interpretation No.48, “Accounting for Uncertainty in
Income Taxes-an interpretation of SFAS No.109”. The interpretation addresses the
determination of whether tax benefits claimed or expected to be claimed on
a tax
return should be recorded in the financial statements. Under FIN 48, the Company
may recognize the tax benefit from an uncertain tax position only if it is
more
likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The tax
benefits recognized in the financial statements from such a position should
be
measured based on the largest benefit that has a greater than fifty percent
likelihood of being realized upon ultimate settlement. FIN 48 also provides
guidance on derecognition, classification, interest and penalties on income
taxes, accounting in interim periods and requires increased
disclosures.
Trulite,
Inc. (a Development Stage Company)
Notes
to Financial Statements
As
of and for the Period from Inception (July 15, 2004) Through March 31,
2007
The
Company adopted the provisions of FIN 48 on January 1, 2007. After application
of the provisions of FIN 48, it was not necessary for the Company to recognize
any liability for unrecognized tax benefits or adjustment to the balance of
retained earnings as of January 1, 2007. The Company’s policy is to classify
interest and penalties related to unrecognized tax benefits in income tax
expense. As of January 1, 2007, the Company had no accrued interest and
penalties related to unrecognized tax benefits. As of January 1, 2007, after
the
implementation of FIN 48, the Company’s unrecognized tax benefits were $0. The
amount, if recognized, that would affect the effective tax rate is
$0.
The
Company files an income tax return in the U.S. federal jurisdiction. For federal
tax purposes, the Company’s 2004 through 2006 tax years remain open for
examination by the tax authorities under the normal three year statute of
limitations. The adoption of FIN 48 on January 1, 2007 did not have a material
effect on the Company’s results of operations or financial
condition.
NOTE
6 - Research and Development Costs
Expenditures
for research activities relating to product development and improvement are
charged to expense as incurred. Such expenditures amounted to $417,867 and
$148,546 for the quarters ended March 31, 2007 and 2006, respectively.
NOTE
7 - Series A Preferred Stock
In
May
2006, all of the Company’s 8% Cumulative Convertible Series A Preferred Stock
was converted into the Company’s common stock.
The
8%
Cumulative Convertible Series A Preferred Stock (“Series A Preferred Stock”) had
a liquidation value of $1.00 per share plus dividends whether or not earned
or
declared from the issuance date thereof at the annual rate of eight percent
(8%)
(the “Preferred Dividends”) of $1.00 per share (the “Original Issue Price”),
payable at the option of the Company in cash or in shares of Series A Preferred
Stock. In addition, the Preferred Stock had preferential treatment in
liquidation to all Common Stock and any other stock of the Company ranking
junior to the Series A Preferred Stock. Accretion of cumulative dividends
outstanding on these shares was $29,095 during the three months ended March
31,
2006.
On
February 6, 2007, the Company incurred indebtedness of $600,000 pursuant to
the
terms of two promissory notes. Under the terms of the first promissory note,
the
Company borrowed $240,000 from Contango Venture Capital Corporation, LLC
(“CVCC”) which beneficially owns approximately 17.0% of the Company’s common
stock. Under the terms of the second promissory note, the Company borrowed
$360,000 from Standard Renewable Energy Group, LLC, (“SREG”). SREG owns NewPoint
Energy Solutions, LP (“NewPoint”), the owner of approximately 45.2% of the
Company’s common stock. Both notes bear interest at a rate of 11.25% until
August 6, 2007, at which time the rate will become the prime rate plus 3%.
Both
notes mature on October 31, 2007, and may be prepaid by the Company at any
time without penalty.
NOTE
9 - Stockholders’ Equity
On
February 22, 2007, the Company’s Board of Directors agreed to extend the term of
the warrants, until April 13, 2008, that were issued April 2006 in connection
with the issuance of common stock for cash consideration of $1.00 per share.
These warrants entitled the holders to purchase an additional 1,000,000 shares
of common stock of the Company at an exercise price of $1.50 per common share
that were originally set to expire on April 13, 2007. A difference of $104,880
in the fair value of these warrants after modification, when compared to their
fair value immediately prior to the modification, was recorded as a deemed
dividend in the first quarter of 2007.
Trulite,
Inc. (a Development Stage Company)
Notes
to Financial Statements
As
of and for the Period from Inception (July 15, 2004) Through March 31,
2007
NOTE
10 - Commitments and Related Party
Transactions
Leases
Rent
expense during the three months ended March 31, 2007 and 2006, was $14,043
and
$2,915, respectively. Rent expense is included in general and administrative
expenses in the accompanying statements of operations.
As
of
March 31, 2007, total future rental commitments under operating leases (all
of
which expire in 2007) total approximately $21,870.
Interest
During
the three months ended March 31, 2007, the Company incurred interest expense
of
$23,062, $18,891, and $3,516 related to outstanding promissory notes with SREG,
CVCC and Standard Renewable Energy, LP, a wholly owned subsidiary of SREG,
respectively. No promissory notes were outstanding during the first quarter
of
2006.
Other
The
Company had employment agreements with certain employees that expire during
2007, under which the committed obligations totaled $216,250 at March 31,
2007.
During
the three months ended March 31, 2007, SREG billed the Company $96,948 for
management and administrative services.
Trulite,
Inc. (a Development Stage Company)
Notes
to Financial Statements
As
of and for the Period from Inception (July 15, 2004) Through March 31,
2007
NOTE
11 - Net Loss Per Share
|
|
Three
Months Ended March 31,
|
|
|
|
2007
|
|
2006
|
|
Numerator:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(938,907
|
)
|
$
|
(379,234
|
)
|
|
|
|
|
|
|
|
|
Increases
to Net Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed
dividend on warrant extension
|
|
|
(104,880 |
)
|
|
- |
|
|
|
|
|
|
|
|
|
Preferred
stock dividends
|
|
|
-
|
|
|
(29,095
|
)
|
|
|
|
|
|
|
|
|
Net
loss attributable to common stockholders
|
|
$
|
(1,043,787
|
)
|
$
|
(408,329
|
)
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
Basic
earnings per share - weighted average
|
|
|
|
|
|
|
|
common
shares outstanding
|
|
|
11,785,491
|
|
|
3,631,500
|
|
|
|
|
|
|
|
|
|
Weighted-average
dilutive effect of stock-based
|
|
|
|
|
|
|
|
awards
and common stock issuable upon conversion
|
|
|
|
|
|
|
|
of
preferred stock, net of assumed repurchase of
|
|
|
|
|
|
|
|
treasury
stock
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Fully-diluted
earnings per share - weighted
|
|
|
|
|
|
|
|
average
common shares outstanding
|
|
|
11,785,491
|
|
|
3,631,500
|
|
|
|
|
|
|
|
|
|
Net
loss per common share
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.08
|
)
|
$
|
(0.10
|
)
|
Preferred
and deemed dividends
|
|
|
|
)
|
|
(0.01
|
)
|
Attributable
to common stockholders
|
|
$
|
(0.09
|
)
|
$
|
(0.11
|
)
|
Basic
and
diluted net loss per share for the three months ended March 31, 2007 and 2006
are the same since the effect of all common stock equivalents are antidilutive
to the Company’s net loss in accordance with Statement of Financial Accounting
Standards No. 128, Earnings
per Share.
The
following weighted average securities are not included in the computation of
diluted loss per share as their effect would have been
anti-dilutive:
|
|
Three
Months Ended March 31,
|
|
|
|
2007
|
|
2006
|
|
Common
stock options
|
|
|
2,344,864
|
|
|
421,327
|
|
Common
stock warrants
|
|
|
1,400,000
|
|
|
-
|
|
8%
cumulative convertible
|
|
|
|
|
|
|
|
series
A preferred stock
|
|
|
-
|
|
|
1,454,725
|
|
NOTE
12 - Subsequent Events
On
April
4, 2007, the Company entered into a consulting agreement with the Fenway
Advisory Group (“Fenway Consulting Agreement”) for the following services: (i)
identification of potential investors; (ii) general consulting advice regarding
financing strategies; and (iii) general consulting advice regarding the
Company’s business. The agreement terminates on May 31, 2007. In exchange for
these services, the Company issued to Fenway 150,000 shares of common stock
and
warrants having a five year term to purchase 100,000 shares of common stock
at
an exercise price of $3.00 per share. Effective May 11, 2007, the Fenway
Consulting Agreement dated April 4, 2007, was terminated by the Company. Around
May 11, 2007, Fenway Advisory Group informed a consultant to the Company that
Fenway Advisory Group would not be able to provide the services described in
the
Fenway Consulting Agreement, so on May 11, 2007, the Company terminated the
Fenway Consulting Agreement without issuing to Fenway Advisory Group any shares
of common stock or warrants to purchase common stock. No early termination
penalties were incurred by the Company in connection with termination of the
Fenway Consulting Agreement.
Trulite,
Inc. (a Development Stage Company)
Notes
to Financial Statements
As
of and for the Period from Inception (July 15, 2004) Through March 31,
2007
On
April
5, 2007, the Company entered into agreements with SREG, Standard Renewable
Energy, LP, and CVCC regarding the exchange of all of the Company’s outstanding
promissory notes aggregating $1,850,000 in principal amount for shares of the
Company’s common stock. Under each of these agreements, the Company and the
holder of the note agreed that on the third business day following the last
of
the first ten trading days on which the Company’s common stock has been traded
on the Over the Counter Bulletin Board, all principal and accrued but unpaid
interest on the notes would be canceled, and in consideration of cancellation
the Company would issue to the holder of the notes in a private transaction
a
number of shares of the Company’s common stock determined by multiplying 2 times
the quotient of (x) the aggregate principal balance of and accrued but unpaid
interest on the notes as of the close of business on the day before such
issuance divided by (y) the average closing sale price for the Company’s common
stock as quoted on the Over the Counter Bulletin Board for the first ten trading
days. March 31, 2007, accrued but unpaid interest on the notes aggregated
$45,469.
On
April
24, 2007, the Company and SREG, Standard Renewable Energy, LP and CVCC each
amended their agreed upon agreement to exchange of all of the Company’s
outstanding promissory notes aggregating $1,850,000 in principal amount for
shares of the Company’s common stock such that said exchange would not occur
until the last to occur of; (i) the first business day following the filing
by
Company with the State of Delaware of a Certificate of Amendment to the
Certificate of Incorporation of the Company to reflect an increase in the number
of authorized shares of common stock to 50,000,000; (ii) the third business
day
following the last of the first ten (10) trading days on which the Company’s
common stock has traded on the Over the Counter Bulletin Board; or (iii) the
first business day following the date on which the Company first has outstanding
13,785,491 shares of common stock.
On
August
9, 2006, the Company incurred indebtedness of $250,000 pursuant to the terms
of
two promissory notes. Under the terms of the first promissory note, the Company
borrowed $125,000 from CVCC. Under the terms of the second promissory note,
the
Company borrowed $125,000 from Standard Renewable Energy, LP. Both notes bore
interest at a rate of 11.25% and were to be repaid on May 1, 2007. In connection
with the agreement noted above to convert all of the outstanding notes, plus
accrued and unpaid interest, into shares of the Company’s common stock, each of
the Company, CVCC and Standard Renewable Energy, LP agreed to extend the
maturity date of these two notes to June 30, 2007.
Item
2. Management's Discussion and Analysis and Plan of Operation
The
following Management’s Discussion and Analysis and Plan of Operation highlights
the principal factors that have affected the Company’s financial condition and
results of operations as well as the Company’s liquidity and capital resources
for the periods described and should be read in conjunction with our unaudited
financial statements for the three months ended March 31, 2007, with their
explanatory notes included as part of this Form 10-QSB, and our Management’s
Discussion and Analysis and Plan of Operation for the twelve months ended
December 31, 2006 included in our Form 10-KSB.
Overview
and Plan of Operation
Trulite
is engaged in the development and production of portable and stationary products
that produce hydrogen for the generation of electricity for commercial and
consumer markets. Our strategy is to leverage the Company’s unique hydrogen
source and control technology to develop fuel cell products to address end-user
applications in three identified markets: Industrial Remote Monitoring; Back-up
Power Generation; and Recreational Off-Site uses.
The
Company is a development stage company and, as such, has not had any meaningful
revenues and has accumulated a deficit since its inception on July 15, 2004.
From July 15, 2004 through December 31, 2004, the Company had $1,750 in sales.
For the years ended December 31, 2005 and 2006, the Company had revenue of
$16,667 and $8,333, respectively. For the three months ended March 31, 2007,
the
Company had no sales. We estimate that we will begin to have commercially viable
products resulting from the ongoing research and development and product
development by the fourth quarter of 2007. Research and development expenditures
will be made to further enhance the performance of the hydrogen fuel sources,
to
develop the electronics that control the process to generate electricity, to
improve the performance of the fuel cells and other components, to increase
the
electrical output of the products and to test the performance and reliability
of
the products. Since our inception, we have spent $2,684,406 in research and
development, including $417,867 in the first quarter of 2007, and anticipate
that we will spend at least $2.0 million during 2007, prior to having the first
products commercially available. We will have ongoing research and development
expenditures for the foreseeable future as products are developed for new
applications and markets. The timing, amount and success of the research and
development and manufacturing estimates are dependent on a number of factors
that are difficult to project, including but not limited to the availability
of
qualified people, the success of the technologies under development, the cost
to
implement technologies, the cost of the product, the requirements of the
marketplace, regulatory requirements, the availability of funds, and other
factors.
We
do not
currently have sufficient capital to fully execute our business plan and we
anticipate the need to raise additional capital to develop, promote, and
distribute our product. Historically, our activities have been funded through
a
combination of common and preferred stock issuances and loans from existing
investors. Our current financial plans require us to secure between $2.0 million
and $5.0 million in 2007. Additional funding may be raised through public or
private, equity or debt financings. Additional funding may not be available
under favorable terms, if at all. If adequate funds are not available, we may
be
required to curtail operations significantly or to obtain funds on terms not
as
favorable as we would hope.
Results
of Operations
The
following table summarizes our results of operations for the three months ended
March 31, 2007 and 2006:
|
|
Three
Months Ended March 31,
|
|
|
|
2007
|
|
2006
|
|
Sales
|
|
$
|
-
|
|
$
|
8,333
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
-
|
|
|
5,912
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
-
|
|
|
2,421
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
417,867
|
|
|
148,546
|
|
Depreciation
|
|
|
5,642
|
|
|
2,720
|
|
General
and administrative
|
|
|
471,590
|
|
|
230,801
|
|
|
|
|
|
|
|
|
|
TOTAL
OPERATING EXPENSES
|
|
|
895,099
|
|
|
382,067
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(895,099
|
)
|
|
(379,646
|
)
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(45,469
|
)
|
|
(59
|
)
|
Interest
income
|
|
|
1,661
|
|
|
471
|
|
Other
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
TOTAL
OTHER INCOME (EXPENSE)
|
|
|
(43,808
|
)
|
|
412
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE INCOME TAXES
|
|
|
(938,907
|
)
|
|
(379,234
|
)
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(938,907
|
)
|
$
|
(379,234
|
)
|
Revenues
For
the
three months ended March 31, 2007, revenues totaled zero versus $8,333 for
the
same period ended March 31, 2006.
Gross
profit
For
the
three months ended March 31, 2007, the Company had no gross profit versus $2,421
for the same period ended March 31, 2006.
Operating
expenses
For
the
three months ended March 31, 2007, as compared to 2006, operating expenses
increased by $513,032. Operating expenses were $895,099 for the three month
period ended March 31, 2007, as compared to $382,067 for the period ending
March
31, 2006. Research and development expenses increased to $417,867 for the three
month period ended March 31, 2007, as compared to $148,546 for the corresponding
prior year period. This increase was due to a scale up of research and
development of the KH-4X 150-watt power system, as compared to the first quarter
of 2006 when there was only a small development team supporting an early stage
design. Depreciation expense increased $2,922 for the three months ended March
31, 2007, compared to the corresponding prior year period. This increase was
due
to additions of equipment purchased for research and development. General and
administrative costs increased to $471,590 for the three months ended March
31,
2007, as compared to $230,801 for the corresponding prior period in 2006,
primarily due to legal, accounting and administrative charges.
Loss
from Operations
Operating
losses were $895,099 for the three months ended March 31, 2007, as compared
to
operating losses of $379,646 for the three months ended March 31, 2006, due
to
the increases in operating expenses noted above.
Other
Income (Expense)
Other
income (expense) for the three months ended March 31, 2007, totaled a loss
of
$43,808, a decrease from the $412 of other income for the three months ended
March 31, 2006, primarily due to interest expense on outstanding borrowings.
Net
Loss
Net
loss
for the three months ended March 31, 2007, was $938,907 as compared to $379,234
for the three months ended March 31, 2006. The net loss was primarily due to
increased operating expenses as noted above.
Cash
position and sources and uses of cash
Our
cash
position at March 31, 2007, was $156,126 as compared to $275,957 at December
31,
2006.
Our
operating activities for the three months ended March 31, 2007, used cash in
the
amount of $713,100, as compared to $199,969 used in the three months ended
March
31, 2006. Cash used in operating activities for the three month period ending
March 31, 2007, and March 31, 2006, reflected a net loss of $938,907 and
$379,234, respectively, both partially offset by adding back the non-cash
charges associated with depreciation and stock-based compensation.
The
Company used $6,731 and $0 in investing activities for the purchase of property
and equipment for the three months ended March 31, 2007 and 2006,
respectively.
The
Company had cash inflows from financing activities of $600,000 during 2007
from
the issuance of two promissory notes. Under the terms of the first promissory
note, the Company borrowed $240,000 from Contango Venture Capital Corporation,
LLC (“CVCC”) which beneficially owns approximately 17.0% of the Company’s common
stock. Under the terms of the second promissory note, the Company borrowed
$360,000 from Standard Renewable Energy Group, LLC, (“SREG”). SREG owns NewPoint
Energy Solutions, LP (“NewPoint”), the owner of approximately 45.2% of the
Company’s common stock. Both notes bear interest at a rate of 11.25% until
August 6, 2007, at which time the rate will become the prime rate plus 3%.
Capital
Resources Going Forward
Our
intended plan of operations for the twelve month period beginning January 1,
2007, is to manufacture, sell and distribute limited quantities of our KH-3X
product and to continue to develop our KH-4X product. In the past, the Company
primarily used funds derived from the private placement of its securities to
fund its operations.
Cash
on
hand as of March 31, 2007, and cash generated by operations in conjunction
with
our working capital, will not be sufficient to continue our business for the
next twelve months. We continually review our overall capital and funding needs,
taking into account current business needs, as well as the Company’s future
goals and requirements. Based on our business strategy, we believe we will
need
to increase our available capital through the sale of additional securities.
Should
our costs and expenses prove to be greater than we currently anticipate, or
should we change our current business plan in a manner that will increase or
accelerate our anticipated costs and expenses, the depletion of our working
capital would be accelerated. To the extent it becomes necessary to raise
additional cash in the future as our cash on hand and working capital resources
are depleted, we intend to raise additional capital through the sale of
additional equity securities, public or private sale of debt or equity
securities, debt financing or short term loans, or a combination of these
options. We currently do not have a binding commitment for, or readily available
sources of, additional financing. We cannot give any assurance that we will
be
able to secure the additional cash or working capital that we may require to
continue our operations under such circumstances or that it will be on terms
that would not hinder our ability to execute our business strategy.
Our
anticipated costs are estimates based upon our current business plan. Our actual
costs could vary materially from these estimates. Further, we could change
our
current business plans, which may also result in a change in our anticipated
costs.
Off
Balance Sheet Arrangements
There
are
no guarantees, commitments, lease and debt agreements or other agreements that
would trigger adverse changes in our credit rating, earnings, or cash flows,
including requirements to perform under stand by agreements.
Critical
Accounting Policies
The
discussion and analysis of our financial condition and results of operations
are
based upon our financial statements, which have been prepared in accordance
with
accounting principles generally accepted in the United States of
America.
Impairment
of Long Lived Assets
On
an
ongoing basis, we evaluate our estimates and impairment of long lived assets.
We
base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results
may
differ from these estimates, including those for the above described
items.
The
Company reviews the recoverability of its long-lived assets, such as property
and equipment, when events or changes in circumstances occur that indicate
the
carrying value of the asset or asset group may not be recoverable. The
assessment of possible impairment is based on the Company’s ability to recover
the carrying value of the asset or asset group from the expected future pre-tax
cash flows (undiscounted) of the related operations. If these cash flows are
less than the carrying value of such asset, an impairment loss is recognized
for
the difference between estimated fair value and carrying value.
Revenue
Recognition
Although
at this stage in our development we have had no significant revenues we consider
revenue recognition a critical accounting policy as it affects the timing of
earnings recognition. We recognize revenues on delivery and to date our
operations have not involved any uncertainty of accounting treatment, subjective
judgment or estimates over revenue recognition.
Item
3. Controls and Procedures
Evaluation
of disclosure controls and procedures.
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed pursuant to the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules, regulations and related forms,
and
that such information is accumulated and communicated to our principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
Within
the 90 days prior to the filing date of this quarterly report, we carried out
an
evaluation, under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer,
of
the effectiveness of the design and operation of our disclosure controls and
procedures. Based on this evaluation, our principal executive officer and
principal financial officer concluded that our disclosure controls and
procedures were effective.
Changes
in internal controls.
There
have been no significant changes in our internal controls or in other factors
that could significantly affect these controls and procedures subsequent to
the
date we completed our evaluation. Therefore, no corrective actions were
taken.
PART
II — OTHER INFORMATION
Item
1. Legal Proceedings.
To
the
best knowledge of the officers and directors, the Company is not a party to
any
legal proceeding or litigation.
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.
Effective
May 11, 2007, the consulting agreement dated April 4, 2007, between the Company
and Fenway Advisory Group (the “Fenway Consulting Agreement”) was terminated by
the Company. The Fenway Consulting Agreement provided for Fenway Advisory Group
to (i) identify potential investors in the Company, (ii) provide general
consulting advice regarding financing strategies and (iii) provide general
consulting advice regarding the Company’s business, in consideration of the
Company’s agreement to issue to Fenway Advisory Group 150,000 shares of the
Company’s Common Stock and warrants to purchase 100,000 shares of the Company’s
Common Stock. Around May 11, 2007, Fenway Advisory Group informed a consultant
to the Company that Fenway Advisory Group would not be able to provide the
services described in the Fenway Consulting Agreement, so on May 11, 2007 the
Company terminated the Fenway Consulting Agreement without issuing to Fenway
Advisory Group any shares of Common Stock or warrants to purchase Common Stock.
No early termination penalties were incurred by the Company in connection with
termination of the Fenway Consulting Agreement.
Item
6. Exhibits.
(a)
Exhibits required by Item 601 of Regulation S-B.
Exhibit
No.
|
|
Description
|
|
|
|
10.57(1)**
|
|
Employment
Agreement dated January 1, 2007, with Kenneth Pearson
|
|
|
|
10.61(2)
|
|
Promissory
Note dated February 6, 2007, made by Trulite in favor of Standard
Renewable Energy Group, LLC
|
|
|
|
10.62(2)
|
|
Promissory
Note dated February 6, 2007, made by Trulite in favor of Contango
Venture
Capital Corporation
|
|
|
|
31.1
|
|
Certification
of the Company’s Principal Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly
Report on Form 10-QSB for the quarter ended March 31,
2007.
|
|
|
|
31.2
|
|
Certification
of the Company’s Principal Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly
Report on Form 10-QSB for the quarter ended March 31,
2007.
|
|
|
|
32.1
|
|
Certification
of the Company’s Principal Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of
2002.
|
|
|
|
32.2
|
|
Certification
of the Company’s Principal Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of
2002.
|
**
Management contract or compensatory plan
(1)
|
Previously
filed as an exhibit to Form SB-2/A, filed January 30, 2007, and
incorporated herein by reference
|
(2)
|
Previously
filed as an exhibit to the Company’s Form 8-K dated January 1, 2007, and
incorporated herein by reference
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused the Report to be signed on its behalf by the
undersigned thereunto duly authorized.
|
|
|
Dated:
May 14, 2007 |
Trulite,
Inc. |
|
|
|
|
By: |
/s/
Jonathan Godshall |
|
Jonathan
Godshall
President
|