News Column


May 20, 2014

Forward-Looking Statements

Management's Discussion and Analysis contains various "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-Q, 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, delayed payments of accounts receivables, 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. 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 Company's Annual Report on Form 10-K for the year ended March 31, 2014, 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.

Our Company

On August 15, 2013 we completed an acquisition of 100% of the outstanding shares of capital stock of GEI. As part of the closing of this transaction, control of the Company was transferred to Dr. Berry.

GEI, founded in 2007, is part of the fuel cell and sustainable/alternative energy industry. Fuel cells are an efficient, combustion-less, reliable, and virtually pollution-free energy source that provide electricity to power a wide array of applications, including buildings (manufacturing facilities, hotels and hospitals), primary power for grid integration, automobiles, emergency back-up systems, and base load grid power. A fuel cell uses fuel - usually hydrogen, extracted from common fuels such as natural gas, and oxygen - to produce electricity. In principle, a fuel cell is an electrochemical device that operates like a battery. However, unlike a battery, a fuel cell requires re-fueling and not recharging. Fuel cells will continue to produce electricity and heat as long as there is a constant fuel source. Hydrogen fuel cells work simply, have no moving parts, and operate silently, with water and excess heat as their only by-products. Fuel cells thus provide the ideal solution for a myriad of portable, on-board and stationary electric power generation applications.

The GEI fuel cell systems can operate on a number of fuel sources such as natural gas, ethanol, propane and biofuels. This would permit GEI to take advantage of the existing logistic fuel infrastructure, as fuel sources such as natural gas are cost-competitive and abundant in the United States and certain other regions. Since the GEI X5 "brand" fuel cell system is intended to be scalable and stackable, it enables the Company to become a market leader in every category of the fuel cell Industry and has the potential to create new categories. GEI can build fuel cells ranging from 2 kW - 100 kW and since the Company has the ability of stacking the fuel cells like building blocks it can build fuel cell power plants that are multi-megawatt in size.

The GEI fuel cell system provides primary power for homes and buildings and is viewed by management to have a competitive advantage due to very restrictive offerings from other companies with only back-up power (due to fuel restrictions) or power to one singular application (due to technology restrictions). The GEI X5 core strategy is to avoid providing a "niche" technology for a "niche" application, but rather provide a robust and scalable systems technology applicable across multiple platforms that allow high volume cost reductions and savings in design and manufacturing cost. There are currently 3 patents that protect this technology and the Company plans for several more to be filed before the end of 2013.

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We design develop and manufacture fuel cell systems. We operate in the "clean energy" sector of the power industry.

Our principal product, the X5 Smart Adaptable Fuel Cell Auxiliary Power Unit (the "GEI X5") is a "hybrid" fuel cell auxiliary power unit (APU) at the core of systems that can be sized to meet the power requirements for many different applications. The technology allows the cells to run on a variety of fuel types, most notably natural gas. We believe that our fuel cell products can be easily paired with other types of power generating units such as solar and wind. Our products are intended to be both adaptable and reliable. The power stacks provide a range of power outputs from 5 kW to 100 kW, which can be combined further to achieve even greater power outputs.

We have identified opportunities in a number of different applications. These include large scale power generators, commercial trucking and recreational or military vehicles, and backup stationary power for residential or commercial outlets. We will seek to generate income through power generation in partnership or by licensing to large operators, through the sale of our units of various sizes, and through licensing agreements and joint ventures with other manufacturers.

We anticipate that we will achieve full commercial operations in 2014.

Corporate Information

We were incorporated on April 28, 2010 as a Nevada corporation. Pursuant to a Share Purchase Agreement dated August 15, 2013 we acquired all of the capital stock of Global Energy Innovations, Inc. ("GEI"), a Michigan corporation that was incorporated in 2007. As a result of our acquisition of GEI, GEI's founder, Dr. K. Joel Berry ("Dr. Berry"), acquired control and became our Chairman, Chief Executive Officer and Director. Our executive offices are located at 6060 Covered Wagons Trail, Flint, MI 48532 USA; our telephone number is (810) 743-8491. Our website is located at The information on our website is not part of this Report. We are an emerging growth company, as that term is defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

GEI's Products

Hybrid technology GEI's X5 Smart Adaptable Fuel Cell Auxiliary Power Unit (the "GEI X5") is a "hybrid" fuel cell auxiliary power unit (APU) that incorporates a high temperature polymer electrolyte membrane (PEM) fuel cell and a high-energy density Lithium Polymer (LIPO) battery. Although fuel cell systems typically have a higher energy density compared with traditional batteries, fuel cell systems alone do not have the peak power and load following capabilities of a battery. The GEI X5 hybrid system thus benefits from the strengths of both technologies.

GEI's X5 hybrid fuel cell power systems can be sized to meet the power requirements for any application. The battery or energy storage system responds to instant power demands, provides for instant start capability, and most importantly, provides for smooth operations. The fuel cell charges the battery during periods of low power demands. Since fuel processors are unable to respond instantly to changing load demands, systems without an energy storage media result in exceptionally difficult control strategies. Conversely, the GEI X5 hybrid system provides for simple, reliable, fuel efficient and cost effective control systems.

Fuel supply, by-products and efficiencies The GEI X5 is designed primarily to run on natural gas. The ideal location for a large scale operation of, for example, 100MW is thus a natural gas field where the gas can be converted to electricity and fed into the grid immediately. Smaller operations, such as 25kW installations for apartments, restaurants and other businesses feed off the natural gas installed network. The GEI X5 can, however, be powered by any fuel from which hydrogen can be readily extracted.

Major by-products are oxygen and water. Heat generated in the cooling process is used in the process of extracting hydrogen from the natural gas, resulting in an overall fuel to electricity efficiency of between 40% and 50%. Harmful by-products are minimized due to the recapturing of the fuel cell stack exhaust.

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Integration with other generators The GEI X5 can be produced as large stationary systems or smaller portable systems. As such it can be plugged in as an auxiliary unit alongside other power sources such as solar, wind, tidal generators. The portable systems are suitable for less permanent locations such as mining camps or military installations where solar units are frequently the major power source.

GEI's proprietary technologies GEI, through an exclusive license on one patent held by Dr. Berry and two patents pending, has proprietary rights over its Configurable Input High-Power DC-DC Converter (US: 7,843,185) (power management), its fuel cell bipolar plate for optimal uniform delivery of reactant gases and efficient water removal (patent pending) (thermal systems management), and its stack design and assembly of high temperature PEM fuel cells (patent pending).

GEI's Markets

Industry background and trends The industry in which GEI operates - power generation - is not new. With increasing development however, especially in the highly populated developing countries of Asia, power generators throughout the world are being required to provide more efficient, cleaner, more affordable and flexible power in ever increasing quantities from power sources that are scarce and possibly finite. We believe that economic, regulatory and political pressure will continue to be applied to power generators, whether their source is fossil fuels, hydro, solar, wind, bio-fuels or any other source.

The most likely areas of significant growth in the foreseeable future are in Asia. The growing middle class in Asia requires greater access to electrical power but is hampered by the lack of infrastructure, particularly well-developed electrical grids. GEI's fuel-flexible and scalable fuel cell systems offer very appropriate stand-alone systems that can be paired with other stand-alone but less dependable systems such as solar and wind.

Patents, Trademarks and Copyrights

We hold an exclusive license to one United States patent owned by Dr. Berry, and we hold directly right to two pending patent applications. These patent rights concern our Configurable Input High-Power DC-DC Converter (US: 7,843,185) (power management), our fuel cell bipolar plate for optimal uniform delivery of reactant gases and efficient water removal (patent pending) (thermal systems management), and our stack design and assembly of high temperature PEM fuel cells (patent pending). While there is no assurance that the pending patents will be issued or that additional patents will be granted, we intend to continue to apply for patent protection covering key portions of the technology used in our fuel cell products.

We presently own the U.S. trademarks to the name GEI Global Energy Innovations.

Results of Operations for the Three-Month Period Ended March 31, 2014 and March 31, 2013

The Company did not generate any revenues for the three-month periods ended March 31, 2014 and March 31, 2013.

Selling, general and administrative expenses increased to $2,129,506 from $10,220 for the three-month period ended March 31, 2014 and March 31, 2013, respectively. The increase in our selling, general and administrative expenses are related to the salaries of management of $765,160 and business development of $547,630, professional fees of $791,930, Rent of $10,150 and Office expense of $14,636 in the three-month period ended March 31, 2014 compared to $10,220 in the three-month period ended March 31, 2013.

Consulting expense increased to $1,501,031 from $nil for the three-month period ended March 31, 2014 and March 31, 2013, respectively. Our consulting expense increased as a result of the increase in consulting services needs to develop our demonstration asset.

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Interest expense increased to $14,595 from $776 for the three-month period ended March 31, 2014 and March 31, 2013, respectively. Our interest expense increased as a result of the increase in outstanding borrowings.

Depreciation expense increased to $3,048 from $nil for the three-month period ended March 31, 2014 and March 31, 2013, respectively. Our depreciation expense increased as a result of the increase in our leasehold improvements.

Liquidity and Capital Resources

We expect to incur substantial expenses and generate significant operating losses as we continue to grow our operations, as well as incur expenses related to operating as a public company and compliance with regulatory requirements.

We have an accumulated deficit at March 31, 2014 of $8,032,742 and need additional cash flows to maintain our operations. We depend on the continued contributions of our executive officers to finance our operations and need to obtain additional funding sources to explore potential strategic relationships and to provide capital and other resources for the further development and marketing of our products and business. We expect our cash needs for the next 12 months to be $850,000 to fund our operations. The ability of the Company to continue its operations is dependent on the successful execution of management's plans, which include expectations of raising debt or equity based capital until such time that funds from operations are sufficient to fund working capital requirements. The Company may need to incur additional liabilities with related parties to sustain the Company's existence. There is no assurance that such funding, if required will be available to us or, if available, will be available upon terms favorable to us.

Cash flows from operations. Our cash used in operating activities were $62,295 and $4,000 for the three-month periods ended March 31, 2014 and March 31, 2013, respectively. The increase in cash used in operations was primarily attributable to the increase of general and administrative expenses in 2014 as compared to the 2013 period.

Cash flows from investing activities. Our cash used in investing activities were $37,612 and $nil for the three-month periods ended March 31, 2014 and March 31, 2013, respectively. The increase in cash used in investing activities was the purchase of equipment for our demonstration asset.

Cash flows from financing activities. Cash provided by financing activities was $113,460 and $4,000 for the three-month periods ended March 31, 2014 and March 31, 2013, respectively. We received cash from convertible debt of $84,960 and advances from our CEO of $43,500 during the three-month period ended March 31, 2014. During the three-month period ended March 31, 2013, we received $4,000 from the issuance of a note payable.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements including arrangements that would affect the liquidity, capital resources, market risk support and credit risk support or other benefits.


You are advised to read this Quarterly Report on Form 10-Q in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q, Annual Report on Form 10-K, and Current Reports on Form 8-K that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC'sPublic Reference Room at 100 F. Street, N.E.Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website

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Source: Edgar Glimpses

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