HYGN Hydrogenetics Inc (CE)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

Under Section 12(b) or (g) of the Securities Exchange Act Of 1934

HydroGenetics, Inc.

(Name of Registrant as specified in its charter)

4770 Biscayne Blvd, Suite 1480, Miami, Florida 33137

(Address of principal executive offices)

Registrant’s telephone number, including area code: (305)573-0836

Copies of communications to:

JOSEPH I. EMAS

1224 WASHINGTON AVENUE

MIAMI BEACH, FLORIDA 33139

TELEPHONE NO.: (305) 531-1174

FACSIMILE NO.: (305) 531-1274

Securities to be registered under Section 12(b) of the Act:   None

Securities to be registered under Section 12(g) of the Act: None

TABLE OF CONTENTS

 

EXPLANATORY NOTE

We are filing this General Form for Registration of Securities on Form 10 to register our common stock, par value $.0001, pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Section 12(g) generally requires registration within 120 days after the last day of the first fiscal year in which an issuer has total assets exceeding $10 million and a class of equity security held of record by 500 or more persons.

Once we have completed this registration, we will be subject to the requirements of Regulation 13A under the Exchange Act, which will require us to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and we will be required to comply with all other obligations of the Exchange Act applicable to issuers filing registration statements pursuant to Section 12(g).

Unless otherwise noted, references in this registration statement to “HydroGenetics” the “Company,” “we,” “our” or “us” means HydroGenetics, Inc., a Florida corporation.  Our principal place of business is located at 4770 Biscayne Blvd., Suite 1480, Miami, Florida 33137. Our telephone number is (305)573-0836.

FORWARD LOOKING STATEMENTS

There are statements in this registration statement that are not historical facts. These “forward-looking statements” can be identified by use of terminology such as “believe,” “hope,” “may,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions. You should be aware that these forward-looking statements are subject to risks and uncertainties that are beyond our control.  For a discussion of these risks, you should read this entire Registration Statement carefully, especially the risks discussed under “Risk Factors.” Although management believes that the assumptions underlying the forward looking statements included in this Registration Statement are reasonable, they do not guarantee our future performance, and actual results could differ from those contemplated by these forward looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements.  In the light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking statements contained in this Registration Statement will in fact transpire. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We do not undertake any obligation to update or revise any forward-looking statements.

ITEM 1.  BUSINESS

BUSINESS DEVELOPMENT

HydroGenetics, Inc is a Florida corporation. Until October 1, 2004 it was a wholly-owned subsidiary of Explorations Group, Inc. and at that time it operated under the name of Pop Starz, Inc.  Explorations Group, Inc was a public company that traded on the Over the Counter Bulletin Board. On September 30, 2004, Explorations Group, Inc finalized a Reorganization Agreement with Parking Pro, Inc., a New York corporation ("Parking Pro") and its stockholders.  The agreement provided in part, that within 30 days following the closing, Explorations would spin-off to its common stock shareholders, and those entitled to dividends as if a common stockholder of Explorations shares, on a pro-rata basis shares of Pop Starz common stock. The distribution was made to all of the Explorations Group shareholders of record as of the close of business on the day proceeding the Closing, September 8, 2004. As a result of the spin-off, which was effective at the close of business on September 30, 2004, Explorations Group, Inc. no longer owned any shares of common stock in Pop Starz and Exploration shareholders, and those entitled to dividends as if a common stockholder of Explorations Group owned an aggregate of 3,504,533 common shares of Pop Starz.

No holder of Explorations Group, Inc. common stock was required to pay any cash or other consideration, or to surrender any shares of common stock of Explorations Group, Inc. The spin-off of Pop Starz did not affect the number of outstanding shares of common stock of Explorations Group, Inc. or the rights of its shareholders. The Board of Directors of each Company felt that separating the two companies would provide better growth opportunities for each while at the same time, permit each company to concentrate on its specific business operations.

The Company was originally incorporated on October 28, 1996 as Explorations of Boca Raton, Inc. We subsequently amended our articles of incorporation and changed our name to Explorations Entertainment & Education, Inc. ("Explorations Entertainment") to more accurately reflect the change of our activities. During 2001, Explorations Entertainment pursued discussions with several companies to develop programs in children's entertainment and education, but none of those discussions resulted in a definitive transaction. Because of our experience in these areas, Explorations Entertainment also sought to develop capabilities to provide consulting services to other companies interested in developing programs in these areas. We were not successful in these ventures. When an Explorations Entertainment licensee in New Jersey closed, whose operations were material to the proposed consulting activities, the proposed consulting enterprise was abandoned.

In February 2002, Explorations Entertainment decided to pursue a new direction and its name was changed to Pop Starz, Inc. On July 2, 2007, in connection with the spin-off of Pop Starz Records, Inc. ("PSR") from its parent company, Pop Starz Inc., ("PSI") effective June 29, 2007, PSI distributed 4,067,715 shares of its PSR common stock to all PSI common shareholders, and those entitled to dividends as if a common shareholder, on the basis of one (1) registered PSR share for every ten (10) PSI shares beneficially owned as of the record date and PSI retained 1,932,285 shares. The original purchase price of the 6,000,000 shares was $60,000. On September 30, 2007, Pop Starz Inc. purchased 1,587,250 shares at $0.10 per share.

On April 24, 2008 the company’s name was changed to Global Entertainment Acquisition Corp to better reflect the company’s overall business strategy.  On August 1, 2008 the company again changed its name to HydroGenetics, Inc. (“HydroGenetics”)   This change was specifically made to address an opportunity that had recently been offered to the Board of Directors in the form of alternative energy sources.  In the current state of affairs with the costs of gas and the worldwide pursuit of alternative fuels,  the Board of Directors of HydroGenetics  determined, in its best business judgment, this opportunity will add value for the shareholders.  The assets currently owned by HydroGenetics that were acquired when the company was named Global Entertainment Acquisition Corp will be transferred to a new division of the Company as well as Hydro Axis Technologies and those divisions will continue to operate as wholly owned subsidiaries of the Company.

 Our fiscal year ends December 31 st of each year.  HydroGenetics has not filed for any bankruptcy, receivership or similar proceeding. During the last three fiscal years, we have not been subject to the reporting requirements of the Exchange Act of 1934, as amended.  As such, we have not filed any reports with the Securities and Exchange Commission, however, by this filing we intend to become fully reporting.

HydroGenetics, Inc owns a proprietary technology and has hired patent attorneys who shall apply for patents for this technology, worldwide.  To date we have no marketable product and will rely on our technology experts to continue the development and testing of a Hydrogen Engine Conversion prototype that will retrofit to any carbon based fuel combustion engine.  We will need to raise capital to bring our technology closer to where it can be utilized in the common market.  The Company’s products are anticipated to allow end-users of gasoline or diesel powered vehicles to potentially increase fuel efficiency while reducing fuel emissions into the environment. In addition, the Company owns two other subsidiaries. One holds the license to market and distribute the technology worldwide and the other continues the previous operations of the Company, in the entertainment industry.

Hydro Axis Technologies, Inc., (“Hydro Axis”), a Florida corporation, is a wholly owned subsidiary of HydroGenetics.  Hydro Axis holds the exclusive worldwide license to market, manufacture and distribute the units secured from the developers of the technology.  HydroGenetics is currently investing in the perfecting of the technology as a marketable, manufactured product for retrofit on diesel and gas engines.

The design for the Hydrogen Based System has been completed and the prototype is currently being built.  We will need to raise a sufficient capital in order to complete the prototype and perform base line testing on engines using the existing Hydro Axis technology.  Compliance with state and federal regulators will not be a factor until we have an engineered prototype in a test vehicle completed. The prototype phase of development is anticipated to continue into the end of the fiscal year 2009.

 

Pacific Lights Entertainment, Inc.

      Pacific Lights Entertainment, Inc., a Florida corporation, is wholly owned by HydroGenetics, Inc. It is an emerging film production company. This company focuses on producing small budget films in the Comedy and Sci-Fi genres while searching for and developing emerging talent including writers, directors and actors. In an era of expanded outlets of distribution, content is in higher demand than ever. It is Pacific Lights Entertainment’s mission to become a leading content provider of entertaining, high quality films to feed the global demand. The financial statements attached to this disclosure statement incorporate this company’s operations.

     These are the only products the Company is currently developing.  As they are developed we will begin to roll them out through traditional sales methods.

HYDROGENETICS PRINCIPAL PRODUCTS

The HydroAxis technology is a set of systems making a closed loop energy saving device creating a total process that is unique and cost effective in internal combustion engines as a unit using hydrogen technology as its main component.  This device is useful in all internal combustion engines. HydroAxis can be described as a series of devices in a closed loop system consisting of a generator / reactor, artificial intelligent hydrogenous electronic device with a filter and radiator. What makes this system unique is HydroAxis artificial intelligent hydrogenous electronic device, created by our research and development teams. 

This artificial intelligent hydrogenous electronic device emits positive signals to each automobile ECU (car computer) system and sensor systems. While not interfering with the original operating procedures of any ECU system, the artificial intelligent hydrogenous electronic device is allowed by the ECU system to operate autonomously and has a self-controlled sensor which signals the amount of combustion needed for the engine to operate normally. Management expects will dramatically reduce the consumption of fossil fuel by 75-80%. The device eliminates carbon deposits caused by unburned gasoline and simultaneously steam-cleans the inside of the engine, all the while reducing emission of toxic gases such as Carbon Monoxide (CO) and Nitrogen Oxides (NOx) into the environment.  The Hydro Axis system will achieve a cost effective savings for the end user by significantly reducing the need for fossil fuels in diesel and gas engines.

The worldwide markets for the Hydro Axis Technology is Automotive, Truck, Marine, Farm Tractors, Earth Moving Vehicles, Military, Locomotive Engines, Mining, Home Heating Units, Generators, RV, Fork Trucks, Lawn Mowers using diesel or gas engines.

 

This hydrogen energy is obtained by the electrolysis of water molecules. This process is created without adding any acids, hydroxides or salts. The hydrogen energy obtained by the electrolysis of water molecules is not compressed or stored by our device and there is no danger of any intentional or unintentional explosion of any kind. The hydrogen is created when the internal combustion engine is in operation, and in the event of an accident no matter how severe, the worst case scenario is that if the device is ruptured, there will be a small barely visible, puddle of water on the scene. The compressed hydrogen is contained within ordinary tap water (you can use fresh or salt water) in our device and is non-lethal.  The EPA (Environmental Protection Agency) has evaluated hydrogen generation and tests show it has no negative effect on combustion engines.  Industry studies report that hydrogen inducement will lower the average temperatures of the combustion engine and reduces hydrocarbons in the exhaust. This is done by increasing the flame velocity as much as four times to provide better utilization of the primary fuel.

Another one of the independent energy saving devices used within the system is a small magnet based unit. This magnet base reactor has a built-in electronic temperature monitoring mechanism that prevents our hydrogen combustion technology device from generating a temperature higher than recommended by the original engine manufacture. The amount of water used in our hydrogen combustion technology system is about one gallon. One gallon is capable of producing more than one month of hydrogen combustion (or equivalent to one month of an average American’s fossil fuel consumption – gasoline / diesel). In one gallon of water there are more than 1800 gallons of hydrogen gas and it is 300 times more powerful than gasoline or diesel fossil fuel.  We’ve created a fuel-saving hydrogen combustion technology device that is safe, durable, efficient, reliable and easy to install in all types and makes of internal combustion engines.

 The application of our HydroAxis hydrogen combustion technology device does not require changes to the manufacturer's original electrical, mechanical or structural designs of their internal combustion engine.  We also believe HydroAxis technology will safely guarantee a longer life span in any engine by reducing heat and emissions which is the enemy to any internal combustion engine.  Our hydrogen combustion technology device will assist to preserve and prolong the internal combustion engine because the HydroAxis system injects gaseous hydrogen accompanied by small amounts of water vapor to better operate a cooler and cleaner system. The water vapor increases significantly inside the engine resulting in cleaner and more efficient flash velocity in the combustion of the primary fuel. This process of injecting gaseous hydrogen accompanied by small amounts of water vapor prevents the accumulation of carbon deposits on the pistons, valves and spark plugs.  The temperature of the oil is lowered as the temperature of the engine is cooled down by the hydrogen vapors. Those same vapors are continuously removing toxic gases during engine operation and substantially increases fuel economy that could double the rated miles per gallon (RMPG) by the manufacturer. The HydroGenetics management believes upwards of 75-80% increase in RMPG. This new hydrogen combustion technology device can be used on all internal combustion engines regardless of size. Our system detects the revolutions per minute (RPM) generated by the engine and our integrated feedback system provides the exact amount of hydrogen required by the engine to run at peak manufacture recommended performance.

HydroGenetics engineers believe that the installation of this product will not impact the warranties that are currently provided by the original manufactures of the internal combustion engines.  The HydroGenetics engineering staff will work with each manufacturer directly in order to install and evaluate and demonstrate our HydroAxis conversion system on their engines.  In the pursuit of EPA standards and compliance, we will be testing these devices using a controlled baseline testing process directed by our HydroGenetics CEO Marc A. Walther and the engineering staff.  Management believes that testing will demonstrate a significant reduction in Hydrocarbons (HC) with an immediate positive impact on fuel consumption and the environment.

Our Principal Competitive Strengths

HydroGenetics management believes that we have the following principal competitive strengths, which position us to further grow and become a dominant player in our industry. These strengths are the basic HydroAxis technologies systems that will allow us to enhance or eliminate gas and diesel as primary fuels with water being the only source of fuel.  In addition, HydroGenetics has a staff with experienced and proven management skills that have brought technologies from “Proof in Concept” to “Commercialization”.   The operating officers have built, managed and developed patented technologies and brought them through to manufacturing and distribution in multiple countries. This experience will help in the understanding of the markets, their price points and the sources and uses of funds to control growth in a multi-billion dollar world market.

Our Growth Strategies

In order to capitalize on our competitive advantages and to realize our goal of growing to become a dominant player in our industry, we intend to pursue growth strategies that include the following: The understanding of the sources and uses of funds for controlled growth in an enormous world market.  A targeted approach to the market sectors that our resources will adequately sustain our growth with the fastest return on investment.  Develop or acquire through acquisition, technologies that have synergies and will enhance the current and future technologies in the many market sectors that the company will have investment of corporate resources.  In addition, HydroGenetics will be looking for strategic partnerships worldwide to accelerate the implementation of the technology.

Distribution Methods

HydroGenetics products are for both Original Equipment Manufacturers (OEM) and aftermarket product applications that we intend to install through service centers.  HydroGenetics will own or sell licenses through a network of worldwide partners for installation in combustion engines with strategic partners that have distribution strengths in their market sector.  The technology contains several   components, but will be installed as a single unit that reduces the emission of toxic gases while improving gas mileage and reducing dependence on fossil fuels. We will train and certify installers to distribute the HydroAxis systems.

INDUSTRY OVERVIEW

     

Fuel Cell and Hydrogen Vehicle Industry

The emerging fuel cell and hydrogen vehicle industry offers a technological option to address increasing worldwide energy costs, the long-term limited availability of petroleum reserves and environmental concerns. Fuel cell and hydrogen hybrid electric vehicles have emerged as a potential alternative to existing conventional internal combustion engine vehicles because of their higher efficiency, reduced noise and lower tailpipe emissions. Fuel cell industry participants are currently targeting the transportation and hydrogen refueling infrastructure markets. We believe that our hydrogen combustion technology device along with our vehicle-level system integration experience can be effectively applied in these markets.

A fuel cell is an electrochemical device that produces electricity by combining hydrogen with oxygen from the air. This electrochemical reaction occurs silently and without combustion, with useable heat and water as the only by-products. Hydrogen as a transportation fuel of the future has been gaining support worldwide. Domestically, President –Elect Obama, continues to promote his goal of achieving energy independence for the United States, while dramatically improving the environment, which was a focal point of his campaign.  The Energy Policy Act of 2005 established a comprehensive national policy that includes provisions intended to accelerate the implementation of hydrogen as an energy carrier. The Act includes the authorization of over $3.2 billion dollar investment through 2010 by the government towards the development, demonstration, and ultimate commercialization of hydrogen and fuel cell technologies. The proposed funding is intended to support the research, development, and demonstration of hydrogen production, storage, distribution and dispensing, and transport. The Energy Bill also supports the research, development, and demonstration of fuel cell systems for stationary and portable power generation as well as for transportation applications, including light- and heavy-duty vehicles. The U.S. Department of Energy has published the National Hydrogen Energy Roadmap that provides a plan for the coordinated, long-term, public and private efforts required for hydrogen energy development.

There are now over 100 hydrogen-refueling stations worldwide, with essentially all the stations dispensing compressed hydrogen. In California alone, where Governor Schwarzenegger is actively promoting a “Hydrogen Highway Network,” the aim is to establish 50-100 hydrogen stations by 2010. In addition to signing an executive order that calls for a hydrogen refueling infrastructure throughout California, the Governor continues to support hydrogen technologies and claims that hydrogen is one of the “environmental technologies [that] will allow us to conserve energy, cut pollution and protect our natural resources.” Other states that have recently established statewide initiatives to encourage the implementation of hydrogen and fuel cells include Colorado, Florida, Illinois, Michigan, New Mexico, New York and Ohio.

The number of fuel cell and hydrogen demonstration programs is increasing worldwide, other examples which include the California Fuel Cell Partnership, California Stationary Fuel Cell Collaborative, Compressed Hydrogen Infrastructure Program, Clean Energy Partnership in Berlin, Controlled Hydrogen Fleet & Infrastructure Demonstration and Validation Project, Fuel Cell Bus Club, Japan Hydrogen & Fuel Cell Demonstration Project, Hydrogen Highway Network in California, BC Hydrogen Highway in British Columbia, AQMD Test Fleet, Hi Way Initiative, Ruhr-Alps-Milan Hydrogen Supply Chain Integrated Project, Hydrogen Corridor in Canada, Norwegian HyNor Project, Illinois Hydrogen Highway, The Northern H in the Upper Midwest, Singapore’s Initiative in Energy Technology, Iceland’s SMART-H2 project, and projects in Hungary, Spain, and the United Kingdom.

Fuel cell and hydrogen-powered hybrid vehicles are being designed to provide clean, quiet power for a variety of applications in transportation, fleet, industrial and military vehicles. The commercialization of fuel cells in all of these markets will require cost reductions for the entire system, including the fuel cell stack, fuel system, balance-of-plant, and assembly.

In the automotive market, each of Daimler, Chrysler, Ford, General Motors, Honda, Hyundai, Nissan, and Toyota Motor Corporation has unveiled fuel cell vehicles, with mass production of fuel cell vehicles anticipated by General Motors and Daimler to begin by 2012 to 2015, and by Toyota to begin by 2015.

HydroGenetics management believes that additional markets for fuel cell technologies will develop in other areas, including boats, forklifts, golf carts, recreational vehicles, auxiliary power units, and military applications. The commercialization of fuel cells in all of these markets will require across-the-board cost reductions for the entire system, including the fuel cell stack, fuel system, balance-of-plant, and assembly. As cost reduction targets are achieved in volume production, we believe that the fuel subsystem will represent approximately 20% of the cost of a fuel cell or hydrogen system.

Commercialization of fuel cell vehicles is dependent upon establishing cost-effective on-board fuel storage solutions, hydrogen storage and handling codes and standards, and a hydrogen-refueling infrastructure. Safety is also a primary concern when dealing with highly compressed gases. The fuel storage systems must be able to withstand rigorous testing as individual components and as part of the fuel system on the vehicle. Safety concerns apply to the fuel system as a whole, including the tank, regulator and fuel lines, all of which need to comply with applicable safety standards. Additionally, to ensure widespread commercialization, the fuel storage and delivery systems need to provide adequate range, be of acceptable size and shape, and perform similarly to conventionally fueled vehicles without unacceptably high cost. HydroGenetics management believes interim steps will be taken by governments to provide initial refueling infrastructure for demonstration fleets, government programs, commercial fleet operators, and initial consumer commercialization. This initial infrastructure could include mobile refueling units, compact stationary refueling units and bulk transport trailers.

HydroGenetics, Inc. intends to be a fully integrated alternative energy company and a leader in the development and production of advanced propulsion systems, energy storage technologies, and alternative fuel vehicles. We believe that we are uniquely positioned to integrate advanced fuel systems, electric drive and battery control system technologies for fuel cell and hybrid vehicles based on our years of experience in vehicle-level design, vehicle electronics and system integration.

PRODUCT DEVELOPMENT

The HydroGenetics product development and design department is the most vital component of the company.  It is our goal to search out unique “one of a kind” technologies which impact the human experience and their environment.   

COMPETITION

 

Competition would include technologies such as fuel cells, battery- powered vehicles, hybrid vehicles, alternative fuels, and other emission reduction alternatives, such as diesel oxidation catalysts and diesel particulate filters. Of these, the only truly price-competitive products are the diesel particulate filters.  Unfortunately their use on HGVs while accomplishing the goal of reducing PM comes with the financial penalty of reducing fuel efficiency by 3.5 - 4% and does nothing to reduce CO2. Diesel oxidation catalysts, similarly, reduce engine efficiency, and the emissions benefits come with equipment costs on par with an HFI HT.

 

Hybrid vehicles are gaining customer acceptance, but are not, in fact, a competitor to the HydroGenetics system since our system can be regarded as a complementary technology. "Hybrid" may soon refer to the hybrid of hydrogen- hydrocarbon, not gasoline-electric. Alternative fuels, such as ethanol, again can be seen as complementary technologies since the HFI device can be used in conjunction with them.

 

Battery-powered vehicles-which do not eliminate emissions, but merely displace them-are not a likely viable alternative, and all but a handful of niche manufacturers have ceased any development work in this field.

PRODUCT SOURCES

HydroGenetics and its HydroAxis Technologies are in the “Proof in Concept” phase with our engineers developing the Base Line Testing that will determine precisely what components will be used.  The sources used at this point have been standard components that have been modified by our engineers using small outside suppliers.  At the point of completion, all the components will be blue printed and sent out to qualified suppliers that will manufacture to HydroGenetics Quality Standards for production.  This will bring us into the “Commercialization” Phase which is the product sourcing stage.

PATENTS, TRADEMARKS, LICENSES, FRANCHISES, ROYALTY AGREEMENTS

Patents :

The Company has no patents in its own name, nor has it applied for any patents at this stage of development.

The Company has no trademarks in its own name, nor has it applied for any trademarks to date at this stage of development.

Licenses and Royalties:

We will develop, manufacture, market and sell our hydrogen combustion technology, under an exclusive world-wide license with the inventor of the product.

 

Employees

The company currently has 2 full time employees which does not include the acquisition of Buffalo Biodiesel, Inc.

Regulatory Mandates

General. Our operations covering the combustion technology system for any internal combustible engine may be subject to various types of federal, state and local laws and regulations. The failure to comply with these laws and regulations can result in substantial penalties. These laws and regulations may materially impact our operations and can affect our profitability. However, we do not believe that these laws and regulations affect us in a manner significantly different than our competitors. Matters regulated include requirements for the operation of store fronts, and taxation of production. At various times, regulatory agencies have imposed price controls and limitations on production. Federal, state and local laws regulate production, handling, storage, transportation and disposal of oil and natural gas, by-products from oil and natural gas and other substances and materials produced or used in connection with oil disposal. While we believe we will be able to substantially comply with all applicable laws and regulations, the requirements of such laws and regulations are frequently changed. We cannot predict the ultimate cost of compliance with these requirements or their effect on our actual operations.

 Environmental Matters. The discharge of oil, gas or other pollutants into the air, soil or water may give rise to liabilities to the government and third parties and may require us to incur costs to remedy discharges. Natural gas, oil or other pollutants, including salt water brine, may be discharged in many ways, leakage from pipelines or other gathering and transportation facilities, leakage from storage tanks and sudden discharges from damage oil containers. Discharged hydrocarbons may migrate through soil to water supplies or adjoining property, giving rise to additional liabilities.

 A variety of federal and state laws and regulations govern the environmental aspects of transportation and processing and may, in addition to other laws, impose liability in the event of discharges, whether or not accidental, failure to notify the proper authorities of a discharge, and other noncompliance with those laws. Compliance with such laws and regulations may increase the cost of our intention to convert engines for the general public, although we do not anticipate that compliance will have a material adverse effect on our capital expenditures or earnings. Failure to comply with the requirements of the applicable laws and regulations could subject us to substantial civil and/or criminal penalties and to the temporary or permanent curtailment or cessation of all or a portion of our operations.

 The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), also known as the “superfund law,” imposes liability, regardless of fault or the legality of the original conduct, on some classes of persons that are considered to have contributed to the release of a “hazardous substance” into the environment. These persons include the owner or operator of a disposal site or sites where the release occurred and companies that dispose or arrange for disposal of the hazardous substances found at the time. Persons who are or were responsible for releases of hazardous substances under CERCLA may be subject to joint and severable liability for the costs of cleaning up the hazardous substances that have been released into the environment and for damages to natural resources, and it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. We could be subject to liability under CERCLA because our plan to own and operate conversion store fronts and we will be responsible for the disposal of oil and other hazardous waste.

The Resource Conservation and Recovery Act of 1976, as amended (“RCRA”), is the principal federal statute governing the treatment, storage and disposal of hazardous wastes. RCRA imposes stringent operating requirements, and liability for failure to meet such requirements, on a person who is either a “generator” or “transporter” of hazardous waste or an “owner” or “operator” of a hazardous waste treatment, storage or disposal facility. Repeal or modification of the exemption by administrative, legislative or judicial process, or modification of similar exemptions in applicable state statutes, would increase the volume of hazardous waste we are required to manage and dispose of and would cause us to incur increased operating expenses.

The Oil Pollution Act of 1990 (“OPA”) and regulations hereunder impose a variety of regulations on “responsible parties” related to the prevention of oil spills and liability for damages resulting from such spills in United States waters. The OPA assigns liability to each responsible party for oil removal costs and a variety of public and private damages. While liability limits apply in some circumstances, a party cannot take advantage of liability limits if the spill was caused by gross negligence or willful misconduct or resulted from violation of federal safety, construction or operating regulations. Few defenses exist to the liability imposed by OPA. In addition, to the extent that our operations affect state waters, we may be subject to additional state and local clean-up requirements or incur liability under state and local laws. OPA also imposes ongoing requirements on responsible parties, including proof of financial responsibility to cover at least some costs in a potential spill. We cannot predict whether the financial responsibility requirements under the OPA amendments will adversely restrict our proposed operations or impose substantial additional annual costs to us or otherwise materially adversely affect us. The impact, however, should not be any more adverse to us than it will be to other similarly situated owners or operators.

The Federal Water Pollution Control Act Amendments of 1972 and 1977 (“Clean Water Act”) imposes restrictions and controls on the discharge of produced waters and other wastes into navigable waters. Permits must be obtained to discharge pollutants into state and federal waters and to conduct construction activities in waters and wetlands. Costs may be associated with the treatment of wastewater or developing and implementing storm water pollution prevention plans. The Clean Water Act and comparable state statutes provide for civil, criminal and administrative penalties for unauthorized discharges of crude oil and other pollutants and impose liability on parties responsible for those discharges for the costs of cleaning up any environmental damage caused by the release and for natural resource damages resulting from the release. This may be a development that we must address when the conversion of engines are implemented in our store fronts or with our licensees.  We believe that our operations will comply in all material respects with the requirements of the Clean Water Act and state statutes enacted to control water pollution.

The Clean Air Act of 1963 and subsequent extensions and amendments, known collectively as the “Clean Air Act”, and state air pollution laws adopted to fulfill its mandate provide a framework for national, state and local efforts to protect air quality. Our operations may utilize equipment that emits air pollutants which may be subject to federal and state air pollution control laws. These laws require utilization of air emissions abatement equipment to achieve prescribed emissions limitations and ambient air quality standards, as well as operating permits for existing equipment and construction permits for new and modified equipment. We believe that we will be in compliance in all material respects with the requirements of applicable federal and state air pollution control laws.

 There are numerous state laws and regulations in the states in which will operate which relate to the environmental aspects of our business. These state laws and regulations generally relate to air and water quality.

 We do not believe that our environmental risks will be materially different from those of comparable companies in the alternative energy industry. We believe our present activities substantially comply, in all material respects, with existing environmental laws and regulations. Nevertheless, we cannot assure you that environmental laws will not result in a curtailment of production or material increase in the cost of production, development or exploration or otherwise adversely affect our financial condition and results of operations. Although we maintain liability insurance coverage for liabilities from pollution, environmental risks generally are not fully insurable.

 Additionally, various legislative and regulatory climate change initiatives are currently being considered to address emissions of greenhouse gases, including carbon dioxide and methane. It is not possible at this time to predict how climate change provisions that may be implemented would impact our business. However, future laws and regulations could result in increased compliance costs or additional operating restrictions, and could have a material adverse effect on our business.

 

Reports to Security Holders

 

The public may read and copy any materials we file with the Securities and Exchange Commission (“SEC”).  at the SEC's Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20002. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at (http://www.sec.gov).

ITEM 1A. RISK FACTORS

You should carefully consider the following risk factors before making an investment decision. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. In such cases, the trading price of our common stock could decline and you may lose all or a part of your investment.

OUR COMMON STOCK IS SUBJECT TO PENNY STOCK REGULATION

Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act. The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on the NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Since our shares are deemed to be "penny stock", trading in the shares will be subject to additional sales practice requirements on broker/dealers who sell penny stock to persons other than established customers and accredited investors.

WE MAY NOT HAVE ACCESS TO SUFFICIENT CAPITAL TO PURSUE OUR LITIGATION AND THEREFORE WOULD BE UNABLE TO ACHIEVE OUR PLANNED FUTURE GROWTH:

 

We intend to pursue a growth strategy that includes development of the Company business and technology.  Currently we have limited capital which is insufficient to pursue our plans for development and growth.  Our ability to implement our growth plans will depend primarily on our ability to obtain additional private or public equity or debt financing.  We are currently seeking additional capital.  Such financing may not be available at all, or we may be unable to locate and secure additional capital on terms and conditions that are acceptable to us.  Our failure to obtain additional capital will have a material adverse effect on our business.

OUR LACK OF DIVERSIFICATION IN OUR BUSINESS SUBJECTS INVESTORS TO A GREATER RISK OF LOSSES:

 

All of our efforts are focused on the development and growth of that business and its technology in an unproven area.  Although the medical billing is substantial, we can make no assurances that the marketplace will accept our products.

 

WE DO NOT INTEND TO PAY DIVIDENDS

 

We do not anticipate paying cash dividends on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are rapid, there is no assurance with respect to the amount of any such dividend.

 

BECAUSE WE ARE QUOTED ON THE OTCBB INSTEAD OF AN EXCHANGE OR NATIONAL QUOTATION SYSTEM, OUR INVESTORS MAY HAVE A TOUGHER TIME SELLING THEIR STOCK OR EXPERIENCE NEGATIVE VOLATILITY ON THE MARKET PRICE OF OUR STOCK.

 

Our common stock is traded on the OTCBB. The OTCBB is often highly illiquid, in part because it does not have a national quotation system by which potential investors can follow the market price of shares except through information received and generated by a limited number of broker-dealers that make markets in particular stocks. There is a greater chance of volatility for securities that trade on the OTCBB as compared to a national exchange or quotation system. This volatility may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and ask quotations, lower trading volume, and market conditions. Investors in our common stock may experience high fluctuations in the market price and volume of the trading market for our securities. These fluctuations, when they occur, have a negative effect on the market price for our securities. Accordingly, our stockholders may not be able to realize a fair price from their shares when they determine to sell them or may have to hold them for a substantial period of time until the market for our common stock improves.

 

 

FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS.

 

It may be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implement appropriate additional internal controls, processes and reporting procedures. If we are unable to comply with these requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires of publicly traded companies.

 

If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock.

 

Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, beginning with our annual report on Form 10-K for our fiscal period ending December 31, 2007, we will be required to prepare assessments regarding internal controls over financial reporting and beginning with our annual report on Form 10-K for our fiscal period ending December 31, 2008, furnish a report by our management on our internal control over financial reporting. We have begun the process of documenting and testing our internal control procedures in order to satisfy these requirements, which is likely to result in increased general and administrative expenses and may shift management time and attention from revenue-generating activities to compliance activities. While our management is expending significant resources in an effort to complete this important project, there can be no assurance that we will be able to achieve our objective on a timely basis. There also can be no assurance that our auditors will be able to issue an unqualified opinion on management’s assessment of the effectiveness of our internal control over financial reporting. Failure to achieve and maintain an effective internal control environment or complete our Section 404 certifications could have a material adverse effect on our stock price.

 

In addition, in connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover “material weaknesses” in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB defines “significant deficiency” as a deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected.

 

In the event that a material weakness is identified, we will employ qualified personnel and adopt and implement policies and procedures to address any material weaknesses that we identify. However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we will take will remediate any material weaknesses that we may identify or that we will implement and maintain adequate controls over our financial process and reporting in the future.

 

 

Any failure to complete our assessment of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknesses that we may identify, would adversely affect the annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

 

THE REPORT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONTAINS EXPLANATORY LANGUAGE THAT SUBSTANTIAL DOUBT EXISTS ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN

 

The independent auditor’s report on our financial statements contains explanatory language that substantial doubt exists about our ability to continue as a going concern. The report states that we depend on the continued contributions of our executive officers to work effectively as a team, to execute our business strategy and to manage our business. The loss of key personnel, or their failure to work effectively, could have a material adverse effect on our business, financial condition, and results of operations. If we are unable to obtain sufficient financing in the near term or achieve profitability, then we would, in all likelihood, experience severe liquidity problems and may have to curtail our operations. If we curtail our operations, we may be placed into bankruptcy or undergo liquidation, the result of which will adversely affect the value of our common shares.

 

OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE FLUCTUATIONS IN OUR SHARE PRICE. THE PRICE AT WHICH YOU PURCHASE OUR COMMON SHARES MAY NOT BE INDICATIVE OF THE PRICE THAT WILL PREVAIL IN THE TRADING MARKET. YOU MAY BE UNABLE TO SELL YOUR COMMON SHARES AT OR ABOVE YOUR PURCHASE PRICE, WHICH MAY RESULT IN SUBSTANTIAL LOSSES TO YOU.   THE MARKET PRICE FOR OUR COMMON SHARES IS PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A SMALL AND THINLY TRADED PUBLIC FLOAT, LIMITED

 

The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common shares are sporadically and thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or “risky” investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.

 

 

Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.

 

VOLATILITY IN OUR COMMON SHARE PRICE MAY SUBJECT US TO SECURITIES LITIGATION, THEREBY DIVERTING OUR RESOURCES THAT MAY HAVE A MATERIAL EFFECT ON OUR PROFITABILITY AND RESULTS OF OPERATIONS.

 

As discussed in the preceding risk factors, the market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.

 

ITEM 2. FINANCIAL INFORMATION

Financial Information “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to “anticipates”, “believes”, “plans”, “expects”, “future” and similar statements or expressions, identify forward looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company’s business, including but not limited to, reliance on key customers and competition in its markets, market demand, product performance, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company. The Company adopted at management’s discretion, the most conservative recognition of revenue based on the most astringent guidelines of the SEC in terms of recognition of software licenses and recurring revenue. Management will elect additional changes to revenue recognition to comply with the most conservative SEC recognition on a forward going accrual basis as the model is replicated with other similar markets (i.e. SBDC). The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein.

Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled “Risk Factors” in the Form 10, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.

 

In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements.

 

Plan of Operations

 

Overview

Pop Starz, Inc. is a Florida corporation. Until October 1, 2004 it was a wholly owned subsidiary of Explorations Group, Inc., a public company that trades on the Over the Counter Bulletin Board. In September 2004, Explorations Group, Inc. closed on a Reorganization Agreement with Parking Pro, Inc., a New York corporation ("Parking Pro ") and the stockholders of Parking Pro. The agreement provided in part that within 30 days following the closing, Explorations would spin off to its common stock shareholders, and those entitled to dividends as if a common stockholder of Explorations shares, on a pro rata basis shares of Pop Starz common stock. The distribution was made to all of the Explorations Group shareholders of record as of the close of business on the day proceeding the Closing, September 8, 2004. As a result of the spin off, which was effective at the close of business on September 30, 2004, Explorations Group, Inc. no longer owned any shares of common stock in Pop Starz and Exploration shareholders, and those entitled to dividends as if a common stockholder of Explorations owned an aggregate of 3,504,533 common shares of Pop Starz.

No holder of Explorations Group, Inc. common stock was required to pay any cash or other consideration, or to surrender any shares of common stock of Explorations Group, Inc. The spin ‐ off of Pop Starz did not affect the number of outstanding shares of common stock of Explorations Group, Inc. or the rights of its shareholders. The Board of Directors of each Company felt that separating the two companies would provide better growth opportunities for each while at the same time, permit each company to concentrate on its specific business operations. The Company was originally incorporated on October 28, 1996 as Explorations of Boca Raton, Inc. We subsequently amended our articles of incorporation and changed our name to Explorations Entertainment & Education, Inc. ("Explorations Entertainment") to more accurately reflect the change of our activities. During 2001, Explorations Entertainment pursued discussions with several companies to develop programs in children's entertainment and education, but none of those discussions resulted in a definitive transaction. Because of our experience in these areas, Explorations Entertainment also sought to develop capabilities to provide consulting services to other companies interested in developing programs in these areas. We were not successful in these ventures. When an Explorations Entertainment licensee in New Jersey closed, whose operations were material to the proposed consulting activities, the proposed consulting enterprise was abandoned.

In February 2002, Explorations Entertainment decided to pursue a new direction and its name was changed to Pop Starz, Inc. On July 2, 2007, in connection with the spin ‐ off of Pop Starz Records, Inc. ("PSR") from its parent company, Pop Starz Inc., ("PSI") effective June 29, 2007, PSI distributed 4,067,715 shares of its PSR common stock to all PSI common shareholders, and those entitled to dividends as if a common shareholder, on the basis of one (1) registered PSR share for every ten (10) PSI shares beneficially owned as of the record date and PSI retained 1,932,285 shares. The original purchase price of the 6,000,000 shares was $60,000. On September 30, 2007, Pop Starz Inc. purchased 1,587,250 shares at $0.10 per share.

On April 24, 2008 the company’s name was changed to Global Entertainment Acquisition Corp to better reflect the company’s overall business strategy. On August 1, 2008 the company again changed its name to HydroGenetics, Inc. This change was specifically made to address an opportunity that had recently been offered to the Board of Directors in the form of alternative energy. In the current state of affairs with the costs of gas and the economic downturn in the country the Board of Directors has determined, in its best business judgment, this opportunity will add value for the shareholders. The assets currently owned by HydroGenetics that were acquired when the company was named Global Entertainment Acquisition Corp will be transferred to a new division of the company and that division will continue to operate as a wholly owned subsidiary of the company.

HydroGenetics, Inc is in the business of acquiring and operating emerging technology businesses both in the alternative energy sector, as well as the entertainment field. It is the company's mission to incubate these emerging technology companies into revenue producing, profitable businesses utilizing investment capital and other resources including management and strategic planning for the benefit of its business units. HydroGenetics, Inc. owns Hydro Axis Technologies, Inc, a wholly owned technology development company and also has an entertainment division which oversees and owns Pacific Lights Entertainment Inc and Hilarity Films.

Regulations

General - Our operations covering the combustion technology system for any internal combustible engine may be subject to various types of federal, state and local laws and regulations. The failure to comply with these laws and regulations can result in substantial penalties. These laws and regulations may materially impact our operations and can affect our profitability. However, we do not believe that these laws and regulations affect us in a manner significantly different than our competitors. Matters regulated include requirements for the operation of store fronts, and taxation of production. At various times, regulatory agencies have imposed price controls and limitations on production. Federal, state and local laws regulate production, handling, storage, transportation and disposal of oil and natural gas, by-products from oil and natural gas and other substances and materials produced or used in connection with oil disposal. While we believe we will be able to substantially comply with all applicable laws and regulations, the requirements of such laws and regulations are frequently changed. We cannot predict the ultimate cost of compliance with these requirements or their effect on our actual operations.

We have two subsidiaries Pacific Entertainment, Inc. and as of our most recent acquisitions on December 10, 2008 Buffalo Biodesiel, Inc. which are wholly owned subsidiaries of the HydroGenetics, Inc.

Recent Acquisitions

On December 10, 2008, HydroGenetics, Inc.(HYGN) purchased Buffalo Biodiesel, Inc.(BBD) to make it a wholly owned subsidiary of HYGN.  The acquisition was for a trade of stock, 200 shares of BBD common shares for 5,736,196 shares of HYGN.  It also includes a purchase of 101 preferred shares at 175,000 per share over 24 months .   The Company will provide a working capitol al line or credit up to $3,000,000 in exchange of the preferred shares.

Buffalo Biodiesel Inc., (BBD) (a New York corporation) is a leading regional provider of feedstock sourcing services for the Biodiesel industry in upstate New York and Pennsylvania.   The emergence of global concern over carbon emissions and greenhouse gases, combined with historically high crude oil prices have all converged in recent years to spur intense interest and demand in alternate fuel sources. Additional attention has also been focused on generating energy in an environmentally friendly manner.  The recycling of cooking oil, particularly waste vegetable oil and refining it into Biodiesel, a clean biodegradable, non-toxic energy source produces an energy source that emits approximately 65% less carbon emissions than equivalent conventional diesel refined from petroleum.  In addition, extensive recycling reduces a pernicious waste problem created by myriad of restaurants, fast food chains and other commercial food preparation establishments who normally dispose of their used cooking oil down drains which end up polluting and clogging sewer systems.  Biodiesel generated from waste vegetable oil has considerable competitive advantages over other forms of Biodiesel.   It requires no large scale dedicated agricultural operations to generate the raw material, such as ethanol made from sugar cane or wheat or Biodiesel processed from soy, rapeseed and other agricultural sources.  No pollutants, pesticides or fertilizers are used to create the feedstock and it is readily available worldwide in large commercial quantities.  At present there is a fundamental shortage of Biodiesel feedstock and an excess of refining capacity worldwide that has generated strong demand for sourcing companies such as Buffalo Biodiesel.

BUFFALO BIODIESEL’S CORE OPERATIONS

Buffalo Biodiesel was formed in 2005 to establish a presence in the Buffalo, New York region in the rendering industry. The company has expanded its collection sources as far east as New York City and well into most parts of Pennsylvania. At present, the Company focuses its core operations on collection and sourcing of waste vegetable oil (WVO) from commercial food preparation establishments in its region and reselling the material as raw feedstock to Biodiesel refineries around the globe where it is filtered, heated, dewatered and placed in a centrifuge for final refining.

The Company sources WVO from over 1700 locations in its region, including both single site locations as well as multiple fast food locations, including Arby’s, Kentucky Fried Chicken, Kenyans, Hyatt Hotels, Quality Markets, Taco Bell. The company also obtained a waste oil collection agreement to service most of the Wal-Mart Stores in New York State.    The Company currently collects, on an annual basis, 1.6MM gallons (approximately 6.08 Million Liters) of WVO either by charging collection fees or paying nominal fees depending on market conditions and competition.  The Company grows its feedstock base by sending sales representatives door to door to food preparation establishments.  The sales process is relatively straightforward and requires little by way of explanation as the Company provides a basic service for which an inherent need already exists.

The Company resells the raw feedstock at wholesale prices of approximately $1.50 per gallon.  The wholesale price of WVO derived Biodiesel is at $2.50 per gallon, while refined Agri-biodiesel is at $3.00 per gallon.   The Company predominantly sells to domestic refineries, but on occasion, ships feedstock overseas as demand is high.  The Company’s principal buyers for WVO are Eagle Biodiesel, Pennsylvania Biodiesel, Northern Biodiesel, Atlantic Biodiesel, Fiber By-Products, Niagara Lubricants, Metalico, Green Global Energy and Baqi.  These customers are all relatively large scale enterprises who have the capacity to consume virtually any amount of source feedstock that Buffalo Biodiesel can supply.

Buffalo Biodiesel operates a 28,000 square foot plant on 8 acres of industrial zoned property in Tonawanda, New York a town located  30 miles outside of Buffalo, New York.  The Company’s equipment comprises 2 small trucks, 3 box trucks, 6 trailers, 1 vacuum truck and 3 tractors.  The plant is strategically located near convenient rail transport as well as having access to conventional truck transport for delivery of its product.  BBD employees consist of 4 drivers for collection of WVO, 3 plant operators, 4 sales people and 4 administrative office personnel.   Gross profit margins are in the 65% range while overhead remains very low.

Management anticipates growing the Company by adding sales personnel and expanding the regional footprint to such large urban markets as Cleveland, Rochester, Syracuse, NYC and Albany all of which can be served by the current facility.  Management intends to establish a system of smaller regional hubs for collection where the WVO can then be aggregated and transported in tanker trucks to the centralized plant.

At present, BBD holds a strong competitive advantage in its region in that it has a well located, expandable facility, maintains strong relations with feedstock sources and has a growing customer base.  Relatively modest access to capital will allow BBD to rapidly add to their truck and collection fleet to address a broader market, while building out their plant to optimalize transportation and customer service.

Buffalo Biodiesel Management

Sumit Majumdar, President  & Founder

Mr. Majumdar is the founder of Buffalo Biodiesel Inc.  He served as a Vice President and Chief Executive Officer of several companies in the IT, Biotech, and waste management industries.  Primarily focused on sales, Mr. Majumdar has developed a waste oil collection and sales system that has generated over 1,000 contracts for the company.  He has also been able to secure extensive export markets for the company, having shipped to Korea, Israel, Spain, Germany, Canada and China.  As CEO of Innofone.com (NASDAQ OTCBB: INNF) , Mr. Majumdar was involved at all levels of public reporting to the Securities Exchange Commission.

Michael Fayle- VP of Sales & Marketing

Mr. Fayle brings over 30 years of direct sales experience to the Company with   extensive experience selling and managing sales teams within the Utilities and Service industries primarily in Western New York. He maintains key strategic relationships with small business owners throughout the Western New York region and holds two US Patents.

Joseph Lalonde- Director of Corporate Sales

Mr. Lalonde has 35 years of retail experience, having served as a Vice President of Fays Drugs for 25 years, 8 years with Kinney Drugs as a Vice President and 4 years with Wal-Mart as a store manager and store opener. Mr. Lalonde also serves as Director of Corporate Development for the Upstate Medical University located in Syracuse New York.  Mr. Lalonde is responsible for all of the Wal-Mart accounts currently being serviced by Buffalo Biodiesel Inc.

Thomas Wiley, Plant Operations

Mr. Wiley has over 30 years in the mechanical and fabrication industry.  Hands on, Mr. Wiley served as a Diesel Mechanic for the United States Marine Corps and for several trucking outfits.  Mr. Wiley handles all of the day to day plant operations keeping both production and fleet equipment running for the Buffalo operations.

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.

Accounting Policies and Estimates

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.

As such, in accordance with the use of accounting principles generally accepted in the United States of America, our actual realized results may differ from management’s initial estimates as reported.  A summary of significant accounting policies are detailed in notes to the financial statements which are an integral component of this filing.

Revenue Recognition

Revenue from product sales is recognized upon shipment to customers at which time such customers are invoiced.  Units are shipped under the terms of FOB shipping point when determination is made that collectibility is probable.  Revenues for services are recognized upon completion of the services.  For consulting services and other fee-for-service arrangements, revenue is recognized upon completion of the services.  The Company has adopted the Securities and Exchange Commission’s Staff Accounting Bulletin (SAB) No. 104, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements.

Reclassifications

 

Certain prior year amounts have been reclassified to conform to the current period presentation for comparative purposes.

Stock Based Compensation

In December 2004, the FASB issued a revision of SFAS No. 123 ("SFAS No. 123(R)") that requires compensation costs related to share-based payment transactions to be recognized in the statement of operations. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be re-measured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS No. 123(R) replaces SFAS No. 123 and is effective as of the beginning of January 1, 2006. Based on the number of shares and awards outstanding as of December 31, 2005 (and without giving effect to any awards which may be granted in 2006), we do not expect our adoption of SFAS No. 123(R) in January 2006 to have a material impact on the financial statements.

FSP FAS 123(R)-5 was issued on October 10, 2006. The FSP provides that instruments that were originally issued as employee compensation and then modified, and that modification is made to the terms of the instrument solely to reflect an equity restructuring that occurs when the holders are no longer employees, then no change in the recognition or the measurement (due to a change in classification) of those instruments will result if both of the following conditions are met: (a). There is no increase in fair value of the award (or the ratio of intrinsic value to the exercise price of the award is preserved, that is, the holder is made whole), or the antidilution provision is not added to the terms of the award in contemplation of an equity restructuring; and (b). All holders of the same class of equity instruments (for example, stock options) are treated in the same manner. The provisions in this FSP shall be applied in the first reporting period beginning after the date the FSP is posted to the FASB website. The Company has adopted SP FAS 123(R)-5 but it did not have a material impact on its consolidated results of operations and financial condition.

 

NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

RESULTS OF OPERATIONS

 

Revenues for the three months ended September 30, 2008 decreased to $0.00 from $475 for the three months ended September 30, 2007 respectively. Revenues for the nine months ended September 30, 2008 decreased to $0.00 from $56,740 for the nine months ended September 30, 2007 respectively. Our future revenue plan is dependent on our ability to effectively introduce our products to our target consumers, generate sales, and obtain contract manufacturing opportunities.

General and administrative expenses for the three months ended September 30, 2008 decreased to $29,205 from $32,672 for three months ended September 30, 2007.  General and administrative expenses for nine months ended September 30, 2008 increased to $86,455 from $41,240 for the nine months ended September 30, 2008, respectively.  The increase in general and administrative expenses relates to employing full time employees and officers during 2008, and relates to increased costs of being a public reporting company, including costs associated with our filings with the pink sheets which matches with our overall business plan.

Selling and marketing expenses for the three months ended September 30, 2008 decreased to $4,102 from $4,671 for the three months ended September 30, 2007.  Selling and marketing expenses for nine months ended September 30, 2008 decreased to $1,065 from $13,849 for the nine months ended September 30, 2007, respectively.  The decrease in sales and marketing services relates to the decrease in the costs associated with hiring investor relations firms, marketing firms, advertising firms, company sponsors, and stock related services also increased travel to promote the sales of our products.

 

We incurred losses of approximately $33,307, and $57,069 for the three months ended September 30, 2008 and 2007, respectively and incurred losses of $118,406 and $221,729 for the nine months ended September 30, 2008 and 2007, respectively.  Our losses since our inception through September 30, 2008 amount to $1,847,712.  The increase in the loss reflects our investment in product development.

 

Liquidity and Capital Resources

 

We have maintained a minimum of three months of working capital in the bank.  This reserve was intended to allow for an adequate amount of time to secure additional funds from investors as needed.

Our cash used in operating activities is $105,583 and $73,244 in the nine months ended September 30, 2008 and 2007 respectively.  The increase is mainly attributable to the increase in operating expenses in the current year.

Cash used in investing activities was $336,000 and $2,519 for the nine months ended September 30, 2008 and 2007, respectively. The increase is due to the investment in Grodfilm Corporation of $45,000, purchase of proprietary technology, and execution of a licensing agreement for media content.

Cash provided by (used in) financing activities was $423,562 and ($3,300) for the nine months ended September 30, 2008 and 2007, respectively. The increase is due to an increase in raising funds from our shareholders to develop our products for sale in the market.  Also the increase is related to the obligation of the payment of our licensing agreement for media content.

SELECTED FINANCIAL DATA

YEARS ENDED DECEMBER 31, 2007 AND 2006

The following information has been summarized from financial information included elsewhere and should be read in conjunction with such financial statements and notes thereto.

Summary of Statements of Operations of HYGN

 Nine months ended December 31, 2007 and 2006