10-K 1 liionmotors10k073112.htm liionmotors10k073112.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 10-K
 

 
(Mark One)
 
 
x
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Fiscal Year Ended July 31, 2012
 
or
 
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                                      to                                     
 
Commission file number 000-33391
 
(Name of Registrant as Specified in Its Charter)
 
Nevada
(State or Other Jurisdiction
of Incorporation or Organization)
 
88-0490890
(I.R.S. Employer
Identification No.)
 
4894 Lone Mountain #168, Las Vegas, Nevada
(Address of Principal Executive Offices)
 
 
89130
(Zip Code)
 
(702) 940-9940
(Issuer’s Telephone Number, Including Area Code)
 
Securities registered under Section 12(b) of the Exchange Act:
None
 
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Par value $0.01 per share
 

 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x No
 
 
Indicate by checkmark if the registrant is not required to file reports to Section 13 or 15(d) of the Act. o Yes     x No
 
 
Indicate by check mark whether the issuer:  (1)  filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x Yes     o No
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes  x No 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o                                                                                                                       Accelerated filer o

Non-accelerated filer o                                                                                                                        Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o Yes  x No
 
The aggregate market value of voting and non-voting common equity held by non-affiliates as of January 31, 2012, was $9,047,301, based on the average bid and asked prices on the OTC Bulletin Board on that date.
 
On November 16, 2012, there were 32,373,470 shares of common stock outstanding.
 
 
Table of Contents
 
Item 1. Business. 4
Item 1A. Risk Factors. 8
Item 1B. Unresolved Staff Comments. 9
Item 2. Properties. 10
Item 3. Legal Proceedings.  10
Item 4. [Removed and Reserved]. 11
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 12
Item 6. Selected Financial Data.  13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.  13
Item 7A. 18
Item 8. Financial Statements and Supplementary Data.  19
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure. 42
Item 9A (T). Controls and Procedures. 42
Item 9B. Other Information.  42
Item 10. Directors, Executive Officers and Corporate Governance.  43
Item 11. Executive Compensation.  44
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.  45
Item 13. Certain Relationships and Related Transactions, and Director Independence.  45
Item 14.  Principal Accountant Fees and Services.  46
Item 15. Exhibits and Financial Statement Schedules. 47
 
 
EXPLANATORY NOTE


The Company is filing this Annual Report late due to delays in the audit of its financial statements as of and for the year ended July 31, 2012 by the Company’s independent registered public accounting firm, Madsen & Associates, CPA (“Madsen”). The offices of the Madsen auditors for the Company are located in New Jersey and, as a result of the devastation from Hurricane Sandy, power was not restored to their offices until November 15, 2012, which then permitted the auditors to commence completion of the audit of the annual financial statements of the Company for its fiscal year ended July 31, 2012.  There were in addition delays in the Company’s auditors’ receipt of the financial information, as well as data loss in financial information sent to the auditors by the Company, which necessitated recreating work papers and draft financial statements. In summary, approximately ten days were lost in the audit of the Company’s annual financial statements.  In conformity with and reliance upon the Order (the “Order”) under Section 36 of the Securities Exchange Act of 1934 Granting Exemptions from Specific Provisions of the Exchange Act and Certain Rules Thereunder (Securities Exchange Act of 1934 Release No. 68224, November 14, 2012), the Company is filing its 2012 Annual Report on or before November 21, 2012 in reliance on and as permitted by the Order since the Company was not able to meet the November 13, 2012 Form 12b-25 extended filing deadline applicable to its Annual Report on Form 10-K for the above stated reasons.
 

 
PART I
 
 NOTE REGARDING FORWARD LOOKING STATEMENTS
 CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
 OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Annual Report contains historical information as well as forward-looking statements. Statements looking forward in time are included in this Annual Report pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to be materially different from any future performance suggested herein. We wish to caution readers that in addition to the important factors described elsewhere in this Form 10-K, the following forward looking statements, among others, sometimes have affected, and in the future could affect, our actual results and could cause our actual consolidated results during 2012, and beyond, to differ materially from those expressed in any forward-looking statements made by or on our behalf.
 
Item 1. Business
 
Company History
 
Li-ion Motors Corp. (“we, “us”, the “Company” or “Li-ion”) was incorporated under the laws of the State of Nevada in April 2000. The Company currently has no employees, (only an accounting consultant with limited hours and the CEO), and is seeking funding to enable us to begin the development and marketing of electric powered vehicles and products based on the advanced lithium battery technology we developed.
 
We changed our name from Whistler Investments, Inc. to Hybrid Technologies, Inc. on March 9, 2005 to reflect our corporate focus on electric products, on January 22, 2009, we changed our name to EV Innovations, Inc. in order to clarify that our vehicles are fully electric, not hybrids. Effective February 1, 2010, we changed our name to Li-ion Motors Corp, to distinguish our motors that all run on lithium ion batteries.

Recent Developments

Our facility in Mooresville, North Carolina, was closed in May 2012, and all employees in North Carolina were released. Currently, all ongoing work is being performed by consultants. The Company is looking to establish a facility in Quebec Canada, where government incentives will help cover expenses related to research and development and also to license its automotive and battery technologies to other electric vehicle manufacturers.
 
 
Foreclosure proceedings on the Company’s facility in Mooresville were initiated in July 2012 by Bayview Loan Servicing, LLC (“Bayview”) and Frontline Asset Management, Inc. (“Frontline”), with the County of Iredell, North Carolina, General Court of Justice, Superior Court Division. The property was sold pursuant to the Frontline notice of foreclosure and sale on August 22, 2012.  On September 14, 2012, the sale of the property pursuant to the Frontline foreclosure and sale was completed, and Frontline assigned to a third party its rights to its foreclosure bid, subject to the rights of Bayview, as the holder of the first mortgage on the property.
 
Liquidity and Capital Resources

As of July 31, 2012, we had cash on hand of $64 and our liabilities totaled $3,351,316. For the year ended July 31, 2012, we incurred a net loss from continuing operations of $2,312,015. On July 31, 2012, we had a working capital deficiency of $2,046,537 and stockholders' deficiency of $2,254,218.

We need capital to continue development and marketing of our electric vehicles, particularly given the number of companies competing in this sector and the fact that many of the larger car manufacturers are developing and marketing electric and hybrid vehicles.
 
We had 32,373,470 shares of common stock issued and outstanding as of November 16, 2012. Our common stock is traded on the OTC Bulletin Board.
 
General
 
We are an early stage technology company. We plan to develop and market electric powered vehicles and products.

Our Electric Battery Pack and Vehicle Technology
 
In late 2007 and early 2008 we began marketing conversions of four-wheel vehicles. Then in 2009, we began to design and manufacture our own new and innovative auto designs. Currently with no employees all work is at a standstill.

We had converted and tested vehicles based on Chrysler PT Cruiser, Mini Cooper, Pontiac Vibe, Toyota Yaris and the Mercedes’ Smart car in the Mooresville, North Carolina facility We replaced the gasoline power systems with all electric lithium battery power systems and battery management systems.  We developed a rapid charge system that reduces charge time by approximately 65%; it was briefly used and tested.

Our Battery Technology

In electric vehicles the battery pack performs the same function as the gas tank in a conventional vehicle: it stores energy needed to operate the vehicle. We used battery packs created in-house from Kokam cells in our converted vehicles. We anticipate using cells created by Sky Power in the future.
 
License Agreements

We entered into a License Agreement (“Sky Power License Agreement”) with Sky Power in April 2008, providing for our license to Sky Power of our patent applications and technologies for rechargeable lithium ion batteries for electric vehicles and other applications (“Licensed Products”). With the closing of the Mooresville facility the space leased to Sky Power is no longer available and we are not certain how this will affect them and their ability to produce batteries or honor the license agreement. Under the Sky Power License Agreement, we have the right to purchase our requirements of lithium ion batteries from Sky Power, and our requirements of lithium ion batteries shall be supplied by Sky Power in preference to, and on a priority basis as compared with, supply and delivery arrangements in effect for other customers of Sky Power. Our cost for lithium ion batteries purchased from Sky Power shall be Sky Power’s actual manufacturing costs for such batteries for the fiscal quarter of Sky Power in which our purchase takes place. On May 25, 2010, the Sky Power License Agreement was amended to reflect Sky Power’s territory would be the United States, U.S. possessions and territories only and the Company can license other companies in other parts of the world.
 
Sky Power agreed to invest a minimum of $1,500,000 in 2008 and 2009, in development of the technology for the Licensed Products. To date, Sky Power has not met the minimum requirements in the development of technology, and therefore, is not in compliance with its obligations under this covenant of the license agreement.  The Company has advised Sky Power that it will not give notice of default against them for their failure to comply with this covenant over the term of the License Agreement.

 
5

 
Effective May 28, 2010, the Company entered into a ten year license agreement with Lithium Electric Vehicle Corp. (“LEVC”) providing for the Company to license to LEVC certain of the Company’s patent applications and technologies for electric vehicles and other applications. The purpose of the licensee is to expand sales of the Company’s line of products by the manufacture and sale of such products in Canada, which is LEVC’s exclusive territory under the license agreement.

The license agreement consists of an annual fee of $500,000 for ten years and an additional $1,750,000 based on a valuation report prepared by an independent third party.  LEVC is required to pay $1 million of the license fee during year one for the initial two years and $500,000 each additional year.  The Company has received $732,666 from LEVC with a balance due of $267,334 as of July 31, 2012, which is now delinquent.  The Company has reflected the delinquent amount due from LEVC in its accounts receivable and has established a reserve for doubtful accounts for the entire amount.

The Company is still in discussions with LEVC regarding the delinquency.

The note of $1,750,000 has been reflected on the books of the Company and the fee is being amortized over the life of the ten-year agreement. Due to LEVC having no assets to secure the note, the Company has recorded a reserve for doubtful accounts for the entire note amount of $1,750,000.
 
Electric Motors

We used a variety of electric motors in our converted vehicles; we were not reliant on any single manufacturer of electric motors. There are many domestic and foreign manufacturers of electric motors, and motors with the specifications we require should be available at reasonable commercial prices from a number of these sources.

An important characteristic of our technology is the lithium battery power source, which is more efficient and powerful than other battery power sources. Vehicles utilizing this technology have the ability to travel greater distances, can recharge in less time and benefit from weight reduction, as compared with vehicles using other battery powered systems. One of the major historic hurdles facing electric vehicle manufacturers was that most power sources do not allow the vehicle to travel more than 100 miles before needing to be recharged. We believe that we can produce electric powered vehicles with a travel range equal to or greater than 200 miles.

A significant difference between electric vehicles and gasoline-powered vehicles is the number of moving parts. The electric vehicle motor has one moving part, the shaft, which is very reliable and requires little or no maintenance, thus reducing repair costs. Whereas the gasoline-powered vehicle’s motor has numerous moving parts, requiring a wide range of maintenance. The controller and charger are electronic devices with no moving parts, and they require little or no maintenance. Electric vehicle batteries are sealed and maintenance free. However, the life of these batteries is limited, and batteries will require periodic replacement. New batteries are being developed that will not only extend the range of electric vehicles, but will also extend the life of the battery pack which may eliminate the need to replace the battery pack during the life of the vehicle.
 
Products Under Development
 
Vehicles

Li-ion designed from the ground up a prototype INIZIO, a luxurious sports car that we expect will achieve speeds up to 200 miles per hour with acceleration from 0 to 60 in 5 seconds and a range of up to 250 miles before recharging. The prototype was built and DOT certification was started. With funding and engineers the certification can be completed.

The Company also designed a prototype WAVE as a family car. The Wave is expected to be available in both two and four door models. The Wave is aerodynamically designed to reach speeds up to 80 miles per hour with acceleration from zero to sixty in twelve seconds. Both these innovative vehicles manufactured by Li-ion Motors have no emissions. DOT certification was also begun for the Wave, with funding and engineers the certification will be completed.
 
 
Commercial Initiatives

On March 9, 2009, the State of North Carolina issued a manufacturing license to the Company. We can manufacture our own original design vehicles with Vehicle Identification Number’s (“VIN”), and continue to convert other vehicles. The manufacturing license is currently suspended.
 
Since February 2004, the LiVTM series electric vehicles were tested and reviewed by a number of government agencies. The testing of the LiVTM series vehicles by NASA, Arcadis, a contractor to the U.S. Environmental Protection Administration, NYC Taxi Commission, and US Paratransit has been completed. The LiVTM WISE is listed in the catalogue of the Unites States General Services Administration, and these vehicles were available for purchase by multiple government agencies. The target market for the LiVTM WISE is federal government offices, utility companies, defense organizations and fleet operators. Li-Ion worked with Zero Truck- USA for commercialization of lithium ion powered heavy duty truck. We hope to offer our own, WAVE two and four door electric vehicles and the INIZIO super cars to the US market. The WAVE electric vehicle is targeted at the commuter environment, and the INIZIO super sport car targets the high performance car market. We anticipate that the INIZIO and WAVE will be the front line vehicles for us.
 
We signed a Space Act agreement with NASA and several of our electric vehicles were driven daily by NASA at the Kennedy Space Center in Florida.

Competition

The discussion below identifies some of our principal competitors in the electric vehicle area, yet is by no means a comprehensive discussion of the companies competing or planning to compete in this area.

Until recently, the market of all electric street-legal vehicles was small due to the technological complexities of producing competitively priced comparable cars. Green Car reports Nissan sold 9,674 Leafs in 2011 and Chevy sold 7,671 Volts. Ford sold 8 Electric Focus hatchbacks, Telsa doesn’t release figures, it is estimated they sell about 10 monthly, from the 2011 plug-in sales figures: “It's going to be slow, and the cars cost more than gasoline cars of similar performance. Plug-ins may not reach even 1 percent of global production (or 1 million vehicles of 100 million built worldwide) until the end of the decade. Advances in electric vehicle technology are allowing the industry to begin expanding.”

The Automotive X-prize drew many companies into the challenge of designing electric vehicles. Aptera, RaceAbout, Project TW4XP, Edision2, OptaMotive all entered that competition, and they anticipate producing electric vehicles.

ZAP has a 100% plug-in electric car designed in a three-wheeled configuration, two wheels in front, one in the rear.  ZAP has sold a three-wheeled city-car and truck called the Xebra since 2006 and has one of the only electric vehicle distribution and service dealer networks in existence.  ZAP has some dealers throughout the USA as well as a number of international distribution points, including South America and The Middle East.
 
Tata Motors is India's largest automobile company, India’s leader in commercial vehicles and among the top three in passenger vehicles. Tata Motors plans to develop cars that are more fuel efficient, cleaner, with minimum impact to the environment.

The Lightning GT is a battery powered sports car manufactured by the United Kingdom British Lightning Car Company that is going into production in early 2013 with a limited run of 20 vehicles. Reservations are 10,000, 12,000 and 15,000 British Pounds.

Employees

As of the date of this report, we have one employee and all other work is being performed by consultants. Our President and CEO, Stacey Fling, has elected to defer her salary. Our accounting consultant is now in a minimal capacity and Holly Roseberry serves in an advisory position in Las Vegas, Nevada. 

Research and Development Expenditures
 
We incurred research and development expenditures of $483,599 in our fiscal year ended July 31, 2012, and $1,318,267 in our fiscal year ended July 31, 2011.
 
 
Patents and Trademarks

            Li-ion Motors Corp.  filed three utility patents, (non-provisional);  each application claims the benefit of the provisional filing date of July 1, 2009.  The Patent Office has issued a Notice of Allowance for the company’s Rechargable Battery Cathode Material patent application. Issuance and publication fees are due January 2013.
 
1. Thermal Management System for Lithium Batteries -  Application No: 12829369
 
It has been observed that lithium ion batteries work efficiently and provide the highest mileage at certain predetermined temperatures.  Below optimum temperature, efficiency drops off drastically.  For example if an electric vehicle can run 100 miles at its battery’s  optimum operational temperature, at zero or subzero temperatures the vehicle’s mileage would drop by approximately forty percent.  To avoid this, a heating system has been introduced to keep the battery temperature at a certain point to achieve the target mileage while driving during the winter  seasons which reach zero or subzero temperatures. The lithium ion battery is also not allowed to charge at zero, subzero or, or below temperatures for safety issues.

2. Rechargeable Battery Cathode Material - Application No. 12829355
 
 A novel cathode material for a rechargeable battery. The patent office has issued a Notice of Allowance.

3. Charging Algorithm for Lithium Batteries - Application No. 12829362

There are two major charging procedures for charging lithium polymer batteries.  One method is to charge at a constant current.  When a target voltage is reached the current is kept constant until the current which normally decreases, rises to a certain value.  Another method of charging is step charging with a constant current.  In this method, the current is stopped at time intervals until the target voltage is reached.  It has been observed that lithium ion batteries are very sensitive to charge rates, temperatures, thermodynamics and kinetics of all components, electrodes and battery chemistry.  A novel method reveals a specific algorithm to efficiently charge lithium batteries by adjusting battery voltage and current output to match the individual chemistry of lithium batteries.

The Company has also filed two provisional patents related to our battery management system and reverse battery management.

Item 1A.  Risk Factors

You should be particularly aware of the inherent risks associated with our business plan. These risks include but are not limited to:

We have ceased electric vehicle operations in North Carolina and our facility there has been foreclosed upon.

Our facility in Mooresville, North Carolina, was closed in May 2012, and all employees in North Carolina were released. Currently, all ongoing work is being performed by consultants. Foreclosure proceedings on the Company’s facility in Mooresville were initiated in July 2012 by the lenders secured by our Mooresville facility, and  the property was sold pursuant to a foreclosure and sale on August 22, 2012.  There is no assurance that we will ever be able to resume production of electric vehicles.

We have incurred substantial losses and anticipate ongoing losses.

We do not have revenues from our joint ventures or substantial sales of our products. We have not signed any definitive joint venture agreements to commercialize any of our products.  As of July 31, 2012, we had cash on hand of $64. At that same date our liabilities totaled $3,351,316.  For the year ended July 31, 2012, we had a net loss from continuing operations of $2,312,015.  On July 31, 2012, we had a working capital deficiency of $2,046,537 and stockholders' deficiency of $2,254,218.
 
We expect that we will continue to have no or minimal earnings or incur operating losses in the future. Failure to achieve or maintain profitability may materially and adversely affect the future value of our common stock.
 
 
If we do not obtain additional financing, our business will fail.

We currently have no operating funds and receive no revenues from converted vehicle sales therefore we are unable to commercialize our products. The X-Prize award was of assistance to us; however, we need to obtain financing to complete our business plan. We do not currently have arrangements for additional financing and we may not find such financing as required. Market factors may make the timing, amount, terms or conditions of additional financing unavailable to us.

  We are subject to all of the risks of a new business.

Our business operations are relatively recent; therefore, we face a potentially higher risk of business failure. Our sales revenues are currently nonexistent as of the date of this report. Potential investors should be aware of the difficulties normally encountered by newer companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the many problems including: expenses, difficulties, complications, delays encountered in connection with the commercialization of our products, unanticipated problems relating to product development, arranging and negotiating with joint venture partners, additional costs and expenses that may exceed current estimates. We have limited history upon which to base any assumption as to the likelihood that our business will prove successful, and investors should be aware that there is a substantial risk that we may not generate any significant operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.

We expect to incur operating losses for the foreseeable future.
 
Our management has limited experience in products utilizing electric battery power and with negotiating commercial arrangements for such products.

Our management has limited experience in negotiating licenses and joint ventures to commercialize the types of products we are developing. As a result of this inexperience, there is a high risk we may be unable to complete our business plan and negotiate profitable licenses or joint ventures for our lithium ion battery powered products. Because of the intense competition for our planned products, there is substantial risk that we will not successfully commercialize these products.
 
Our products are highly regulated.

Our products are highly regulated. There are special safety standards in effect for vehicles with a top speed of up to 25 miles per hour.  Marketing vehicles that compete with passenger cars, requires compliance with the full federal safety standards. Regulatory reviews and compliance have already consumed significant time and resources and will continue to do so as we work towards renewing our dealership license and DOT certification for the INIZIO and the WAVE, which are currently at a standstill. This may adversely affect the timing of bringing products to market, as well as the profitability of such products once regulatory approvals are obtained.
 
 Our electric powered vehicle business is subject to substantial risks.

The electric battery powered product market is competitive and risky. We are competing against numerous competitors with greater financial resources than us, and due to the difficulties of entry into these markets, we may be unsuccessful and not be able to complete our business plan.
 
We intend to rely on lithium ion batteries which, if not properly managed, may pose a fire hazard.

Another manufacturer of electric motor vehicles has received five reports of the batteries overheating, three of which caught fire, though no injuries have been reported. Our battery management systems will need to lessen or eliminate the risk of fire from the use of lithium ion batteries as a power source. If we are not able to develop such systems our business will not develop as planned. If our battery management systems fail, we could be liable to those who are harmed as a result of such failure.
 
Item 1B. Unresolved Staff Comments.

None.
 

Item 2. Properties.

Our principal executive office is located in Las Vegas, Nevada. Our mailing address is 4894 Lone Mountain Rd., Suite 168, Las Vegas, Nevada 89130, for which we pay $25 per month, on a month to month basis.

In May 2006, we purchased 40,000 square foot facility at 158 Rolling Hill in Mooresville, North Carolina. The Company’s facility in Mooresville, North Carolina was financed through Bayview Loan Servicing, LLC (“Bayview”) and Frontline Asset Management, Inc. (“Frontline”), which had a second lien on the property. Li-ion became delinquent with the mortgage payments, and, following a prior foreclosure filing and new agreement as to payments under the mortgage, on July 12, 2012, Bayview refiled a notice of hearing on foreclosure on its deed of trust and security agreement for a hearing on August 21, 2012, the outstanding amount of the loan at July 31, 2012 being $946,279.   A similar notice of foreclosure pursuant to the Frontline deed of trust was filed by the Trustee with the same court on July 25, 2012, noticing a hearing for August 22, 2012, the amended notice of default in the amount of $660,546 having been given on July 23, 2012. The Trustee for Frontline also filed on July 25, 2012, a notice of foreclosure and sale to take place on August 22, 2012.  The Trustee under the Bayview deed of trust on August 21, 2012, filed its notice of foreclosure and sale to take place on September 18, 2012, of the real and personal property securing the deed of trust.   On September 14, 2012, the sale of the property pursuant to the Frontline August 22, 2012 foreclosure and sale was completed, and Frontline assigned its rights to its foreclosure bid to A&S Holdings Inc., a related holding company, subject to the rights of Bayview, as the holder of the first mortgage on the property.

Item 3. Legal Proceedings.

Other than as described below, we are not a party to any material legal proceedings and to our knowledge, no such proceedings are threatened or contemplated.

Caudle & Spears v. EV Innovations, Inc.
 
Caudle & Spears has obtained a default judgment against the Company in Mecklenberg County, North Carolina, General Court, in the amount of $17,686. This law firm represented us in our litigation against Martin Koebler, a former employee, whom we successfully sued for return of Company property and other damages. The Company is in settlement negotiations with Caudle & Spears, since its judgment against Martin Koebler is still in the collection process. A payment agreement has been reached in the amount of $2,500 per month with no interest until paid.  The Company is not current with its payment arrangements and has a balance of $4,263 still due.

Internal Revenue Service

Internal Revenue Service (“IRS”) served the Company with a tax lien dated March 3, 2010 in the total amount of $251,928. Third quarter 2009 taxes are approximately $117,000, which are included in total due.  The Company has been served with an additional tax lien dated January 19, 2011, in the amount of $2,925. The Company had a payment plan in place with IRS; however, the Company is arrears in payments as of July 31, 2012. Management is working with the local IRS office to try and revise the payment agreement.  The balance due on the most recent statement from the IRS is $566,071.

Javad Hajihadian

Tallman Hudders & Sorrentino has obtained a judgment in Lehigh County, Pennsylvania, on behalf of their client Javad Hajihadian, an individual.  Mr. Hajihadian had ordered and paid for, the first super car to be produced by Li-ion Motors in November 2008. The car was in the design stage when it was ordered.  Mr. Hajihadian’s attorney subsequently contacted  the Company to cancel his contract and have his payment refunded. The parties had reached a settlement agreement and the payment was being refunded with interest. The settlement agreement was for $102,500 and stipulated monthly payments of $10,250 commencing in July 2010.  Payments were made through November 2010, totaling $51,250, leaving a balance of five payments or $51,250 still due; which is reflected on the Company’s balance sheet under current liabilities. The Company became delinquent and Mr. Hajihadian proceeded with litigation and on February 4, 2011, a judgment was issued in his favor for $51,750. Management was deposed December 2011, and produced requested documents and information.
 
 Bayview Loan Servicing, LLC

The Company’s facility in Mooresville North Carolina was financed through Bayview Loan Servicing, LLC (“Bayview”) secured by a first lien on the Company’s property located at 158 Rolling Hill Road  in Mooresville. Frontline Asset Management, Inc. (“Frontline”) holds a note in the amount of $2,000,000 (current balance due of $508,492) secured by a second lien on the property..  On July 12, 2012, Bayview  refiled a notice of hearing on foreclosure on its deed of trust and security agreement for a hearing on August 21, 2012, the outstanding amount of the loan at July 31, 2012 being $946,279.   A similar notice of foreclosure pursuant to the Frontline deed of trust was filed by the Trustee with the same court on July 25, 2012, noticing a hearing for August 22, 2012, with an amended notice of default, the amount of $508,492 being outstanding under the loan as of July 31, 2012. The Trustee for Frontline also filed in Superior Court of Iredell County North Carolina on July 25, 2012, a notice of foreclosure and sale to take place on August 22, 2012.  The Trustee under the Bayview deed of trust on August 21, 2012, filed its notice of foreclosure and sale to take place on September 18, 2012, of the real and personal property securing the deed of trust.   On September 14, 2012, the sale of the property pursuant to the Frontline August 22, 2012 foreclosure and sale was completed, and Frontline assigned its rights to its foreclosure bid to A&S Holdings Inc., subject to the rights of Bayview, as the holder of the first mortgage on the property.

 FINE Mobile

Fine Mobile and Li-ion Motors entered into a confession of judgment in relation to the X-Prize winnings.  The parties agreed to a payment arrangement of $10,000 per month for a period of eight (8) months.  If a default were to occur, the debtor would then be entitled to exercise confession of judgment in the amount of $120,000 without further delay.  The initial payment was wired on December 15, 2011; however, the Company was unable to make any additional payments.  On June 18, 2012 Fine Mobile executed the judgment with the Iredell County Sheriff’s Office and on July 2, 2012, the Sherriff took possession of the building located at 158 Rolling Hill Road, Mooresville, NC, seizing all remaining assets.

Item 4. Mine Safety Disclosures.

None.
 
 
 
PART II
 
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our shares of common stock trade and have traded on the NASD OTC Bulletin Board since March 4, 2002. Our common stock also trades on the OTCQB Tier of the Pink OTC Markets.  The following table sets forth for our last two fiscal years by quarter the high and low closing prices of our common shares traded on the OTC Bulletin Board:
 
Period   High       Low  
August 1, 2010 to October 31, 2010   $ 1.56     $ 0.81  
November 1, 2010 - January 31, 2011   $ 1.01     $ 0.55  
February 1, 2011 - April 30, 2011   $ 1.14     $ 0.68  
May 1, 2011 - July 31, 2011   $ 0.85     $ 0.30  
August 1, 2011 to October 31, 2011   $ 1.98     $ 0.65  
November 1, 2011 - January 31, 2012   $ 1.01     $ 0.25  
February 1, 2012 - April 30, 2012   $ 0.39     $ 0.10  
May 1, 2012 - July 31, 2012   $ 0.13     $ 0.05  

(1)  
A one-for-five reverse split was effective January 26, 2012.

The above quotations are taken from information provided by Google and reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

Holders of Common Stock

As of November 16, 2012, we had 176 holders of record of our common stock.

Dividends

Our current policy is to retain earnings in order to finance our operations.  Our board of directors will determine future declaration and payment of dividends, if any, in light of the then-current conditions they deem relevant and in accordance with the Nevada Revised Statutes.

 Securities Authorized for Issuance under Equity Compensation Plans

All stock options under all plans have been granted.
 

Sales of Unregistered Securities

The following table sets forth the sales of unregistered securities for the last three years.
 
Date
 
Title and Amount (1)
 
Purchaser
 
Principal Underwriter
 
Total Offering Price/ Underwriting Discounts
                 
February 23, 2010
 
3,749,999 shares of common stock issued as collateral security pursuant to Loan Agreement, dated May 5, 2008, between the Company and Crystal Capital Investments Inc. Shares issued pursuant to anti-dilution provisions in Loan Agreement.
 
Crystal Capital Investments, Inc.
 
NA
 
NA/NA
                 
May 18, 2010
 
10,000,000 shares of common stock issued as collateral security pursuant to Loan Agreement, dated April 15, 2010, between the Company and Winsor Capital Inc.
 
Winsor Capital, Inc.
 
NA
 
NA/NA
                 
April 29, 2011
 
1,000,000 shares of common stock issued upon conversion of debt.
 
Eurolink Corporation
 
NA
 
NA/NA
                 
April 29,2011
 
1,041,212 shares of common stock issued upon conversion of debt.
 
Kisumu SA
 
NA
 
NA/NA
                 
July 14, 2011
 
20,000,000 shares of common stock issued as collateral security pursuant to Loan Agreement, dated July 14, 2011, between the Company and Cameo Properties LLC. Shares issued pursuant to anti-dilution provisions in Loan Agreement.
 
Cameo Properties, LLC
 
NA
 
NA/NA
                 
September 13, 2012
 
1,300,000 shares of common stock issued upon conversion of debt.
 
Kisumu SA
 
NA
 
NA/NA
                 
October 5, 2012
 
1,450,000 shares of common stock issued upon conversion of debt.
 
Frontline Asset Management
 
NA
 
NA/NA

Item 6. Selected Financial Data.
 
Not applicable.
 
 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
 
Forward Looking Statements

This annual report contains forward-looking statements that involve risks and uncertainties.  We use words such as anticipate, believe, plan, expect, future, intend and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements.  Our actual results are likely to differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in this section.

Recent Developments

Our facility in Mooresville, North Carolina, was closed in May 2012, and all employees in North Carolina were released. Currently, all ongoing work is being performed by consultants. The Company is looking to establish a facility in Quebec Canada, where government incentives will help cover expenses related to research and development and also to license its automotive and battery technologies to other electric vehicle manufacturers.
 
 
Foreclosure proceedings on the Company’s facility in Mooresville were initiated in July 2012 by Bayview Loan Servicing, LLC (“Bayview”) and Frontline Asset Management, Inc. (“Frontline”), with the County of Iredell, North Carolina, General Court of Justice, Superior Court Division. The property was sold pursuant to the Frontline notice of foreclosure and sale on August 22, 2012.  On September 14, 2012, the sale of the property pursuant to the Frontline foreclosure and sale was completed, and Frontline assigned to a third party its rights to its foreclosure bid, subject to the rights of Bayview, as the holder of the first mortgage on the property.

Results of Operations for the Year Ended July 31, 2012

Electric Vehicle Operations

We sold two of our electric prototype vehicles during the fiscal year ended July 31, 2012 to Frontline Asset Management for $255,000 which was applied to our outstanding debt with them. We have closed our facility in North Carolina and liquidated or wrote off most of our assets with some assets being seized by the sheriff’s department in relation to a court action with FINE Mobile. Other sales during fiscal year ended July 31, 2012, were for vehicle parts totaling $7,795.

We had converted and manufactured vehicles in Mooresville, North Carolina. We had teams of highly qualified engineers overseeing electrical and mechanical staff, all engineers and staff were released from contracts when the building was closed just prior to foreclosure proceedings. When we had licensed our lithium battery and electric vehicle technology described below, we hoped to concentrate on sales of our vehicles.

Sky Power License Agreement

We entered into a License Agreement (“Sky Power License Agreement”) with Sky Power in April 2008, providing for our license to Sky Power of our patent applications and technologies for rechargeable lithium ion batteries for hybrid vehicles and other applications (“Licensed Products”).  Under the Sky Power License Agreement, we have the right to purchase our requirements of lithium ion batteries from Sky Power, and our requirements of lithium ion batteries shall be supplied by Sky Power in preference to, and on a priority basis as compared with, supply and delivery arrangements in effect for other customers of Sky Power. Our cost for lithium ion batteries purchased from Sky Power shall be Sky Power’s actual manufacturing costs for such batteries for the fiscal quarter of Sky Power in which our purchase takes place. On May 25, 2010, the Sky Power License Agreement was amended to reflect Sky Power’s territory would be the United States, U.S. possessions and territories only, and the Company can license other companies in other parts of the world.
 
Sky Power agreed to invest a minimum of $1,500,000 in 2008 and 2009 in development of the technology for the Licensed Products. In the initial year under the License Agreement, To date, Sky Power has not met the minimum requirements in the development of technology, and therefore, is not in compliance with its obligations under this covenant of the license agreement.  The Company has advised Sky Power that it will not give notice of default against them for their failure to comply with this covenant over the term of the License Agreement. With the closure of the Mooresville facility and the loss of the leased space to Sky Power, they may be unable to fulfill this agreement.
 
Lithium Electric Vehicle Corp.  License Agreement

Effective May 28, 2010, the Company entered into a ten year license agreement with Lithium Electric Vehicle Corp. (“LEVC”) providing for the Company to license to LEVC certain of the Company’s patent applications and technologies for electric vehicles and other applications. The purpose of the licensee is to expand sales of the Company’s current line of products by the manufacture and sale of such products in Canada, which is LEVC’s exclusive territory under the license agreement.

The license agreement consists of an annual fee of $500,000 for ten years and an additional $1,750,000 based on a valuation report prepared by an independent third party.  LEVC is required to pay $1 million of the license fee during year one for the initial two years and $500,000 each additional year.  The Company has received $732,666 from LEVC with a balance due of $267,334 as of July 31, 2012, which is now delinquent.  The Company has reflected the delinquent amount due from LEVC in its accounts receivable and has established a reserve for doubtful accounts for the entire amount.
 
 
Cost of Sales

Cost of sales as a percentage of net sales for the fiscal year ended July 31, 2012, was approximately 177% as compared to approximately 246% during the same period in 2011.  Cost of sales at July 31, 2012, included $209,947 in inventory write offs due to the facility being closed.  Excluding this write off, our cost of sales would have been 97% of our sales.  Based on our historical review of costs, we expect that cost of sales in the future will remain in line on a percentage basis with our historic level of approximately 105%.  If sales volumes and prices increase, costs should then reduce as a percentage of sales.

General and Administrative Expenses

General and administrative (“SG&A”) expenses decreased to $1,054,901for the fiscal year ended July 31, 2012, as compared to $1,448,274 during the same period in 2011. The decrease was attributable to bad debt expense of $523,226 related to the LEVC note.  This was offset by a reduction in: (1) advertising and promotion expense of $391,015; (2) professional fees of $207,572; (3) finder’s fees related to debt financing of $97,529; (4) travel related expenses of $78,073; (5) insurance expense of $36,897; (6) directors fees of $31,500; (7) utilities of $21,113; (8) warranty expense of $24,600; (9) depreciation expense of $20,095; and (10) other various expenses of $8,204.  Of all SG&A expenses the Company incurred during fiscal 2012, the majority were charges that are expected to be recurring.

Research and Development Expenses

No set amount has been set aside for research and development (“R&D”), however, all projects and purchases require approval prior to initiation. Salaries, payroll taxes, and benefits expensed to R&D for the year ending July 31, 2012, amounted to $471,300 and $1,261,478 for year ending July 31, 2011. Parts and supplies, shipping charges, and battery management systems expensed to R&D were $12,299 and $56,789 for the year ending July 31, 2012 and July 31, 2011, respectively. We expect that research and development expenses will continue to remain substantial and grow as we try to bring products to market.

Interest Expense

Interest expense decreased to $145,088 for the fiscal year ended July 31, 2012 as compared to $422,156 for 2011.  The decrease was due to the conversion of debt to the Company’s common stock. Interest expense consists primarily of interest related to borrowings.

Other Income

Effective April 16, 2008, Sky Power agreed to lease approximately 5,000 square feet of space (“Leased Space”) in our North Carolina facility, such Leased Space to be suitable for, and utilized by Sky Power for, Sky Power’s developmental and manufacturing operations for Licensed Products pursuant to the License Agreement.  The Leased Space is leased on a month-to-month basis at a monthly rental of $3,038 the monthly rental to be escalated five (5%) percent annually.  With the closing of the facility in May 2012, and pending foreclosure this lease is null and void.

Other income for the year ended July 31, 2012, consisted primarily of (1) interest income from the LEVC Note of $175,479; (2) accounting fees and rental income from Sky Power for $62,083; (3) nonrefundable deposit of $30,000; and (4) forgiveness of debt of $17,435.  This income was offset by: (1) write down of lost deposit of $50,000; and (2) other expense of $143.

 Other income for the year ended July 31, 2011, consisted primarily of (1) accounting fees and rental income from Sky Power for $72,625; (2) interest income from the LEVC Note of $118,440; (3) forgiveness of debt of $123,621; and (4) net proceeds of  $2,303,790 from X-Prize.

Net Loss

Net loss attributable to common stockholders for the fiscal year ended July 31, 2012, decreased to $2,312,015 from  net earnings of $118,921 for the previous fiscal year. Basic and diluted loss attributable to common stockholders per share of common stock for the fiscal year ended July 31, 2012, was $0.09 as compared to earnings of $0.00 for the fiscal year ended July 31, 2011.
 
 
Liquidity and Capital Resources

Since our incorporation, we have financed our operations almost exclusively through the sale of our common shares to investors and borrowings.  We expect to finance operations through borrowings and the sale of equity in the foreseeable future as we receive minimal revenue from our current business operations. There is no guarantee that we will be successful in arranging financing on acceptable terms.

At July 31, 2012, we had liabilities of $3,351,316, as compared with $4,292,604 at July 31, 2011; and a working capital deficiency of $2,046,537 and stockholders' deficiency of $2,254,218.

Our property, plant and equipment decreased to $1,054,931 at July 31, 2012, as compared with $1,983,739 at July 31, 2011.  An impairment of $740,000 was determined after an evaluation of the Company’s facility in North Carolina; as well as some assets were sold for pennies on the dollar, others were seized by the sheriff and most have now been written off.

We used net cash in operating activities of $742,456 in the year ended July 31, 2012, as compared with $1,170,778 in 2011, and cash received in investing activities was $35,285 in 2012, as compared with cash used of $135,157 in 2011.

During the year ended July 31, 2012, from the issuance of a promissory note for a receivable, we advanced $81,758 to Sky Power and were repaid $22,984. During the year ended July 31, 2012, we received net proceeds of $838,814 from the issuance of promissory notes for debt, and made repayments of $79,698.  Total cash provided by financing activities in the year ended July 31, 2012 was $700,342 as compared with $1,309,701 in 2011.

On May 5, 2008, the Company entered into a loan agreement with Crystal Capital Ventures Inc. and on October 1, 2010, the loan was assigned to Starglow Asset, Inc. (“Starglow”).  The loan agreement provided for loans to the Company of up to $3,000,000, with a minimum initial loan of $500,000 taking place on May 19, 2008. The loan bore an interest payable monthly in arrears at the rate of 10% per annum, and initially matured  on May 4, 2012. The loan under the loan agreement was secured by shares of the Company’s common stock held by Starglow. The Company was required to issue shares as collateral at the rate of two and one half shares of the Company’s common stock for each dollar principal amount of the loan advanced to the Company.  Following disbursement of the first $1,000,000 of funds pursuant to the loan agreement, on May 27, 2008, the Company issued 2,500,000 shares of common stock as collateral. After the 1:3 reverse stock split in February 2009 the Company issued an additional 5,000,000 shares to make their shares held as collateral total 7,500,000. Pursuant to the anti-dilution provisions in the loan agreement with the 1:2 reverse stock split of February 1, 2010, the Company issued 3,749,999 shares to again  increase their holdings to 7,500,000 post reverse stock split shares.  In connection with the Company's 20% stock dividend, the Company issued an additional 1,500,000 common shares to be held as collateral.

On April 19, 2011, Starglow converted the entire $3,000,000 outstanding loan amount for the 7,500,000 collateralized shares and the Company issued a Stock Purchase Warrant (“Starglow Warrant”) which entitles Starglow, for a three-year period, to purchase at a purchase price of $.001 per share, on a one time basis and only following the effectiveness of the first reverse split of the Company’s common stock following the issuance of the Starglow Warrant , such number of shares of common stock as is equal to the difference between 7,500,000 and the number of shares into which such 7,500,000 shares were changed in such first reverse split, the effect of the Starglow Warrant being to protect Starglow from any dilution to its 7,500,000 shareholding resulting from such first reverse split.

On February 26, 2010, the Company entered into a loan agreement with Frontline. The loan provides for payments to the Company of $2,000,000 with interest at a fixed annual rate of 12%.  On March 1, 2012, an Addendum to the original Promissory Note, dated February 26, 2010, was entered into which amended the term of the note to  provide for interest only payments, due on the last day of every month until maturity date March 30, 2013, when all principal and accrued interest shall be due and payable.  On April 11, 2011, Frontline assigned $850,279 of its debt to Windsor Capital, Inc. (“Windsor”). On April 19, 2011, Frontline partially assigned $437,309 to Kisumu S.A. (“Kisumu”) and Kisumu immediately converted the assigned note for 1,041,212 shares of Common Stock at a fair value price of $0.42 per share.  On April 19, 2011, Frontline assigned $420,000 to Eurolink Corporation (“Eurolink”) and Eurolink immediately converted the assigned note for 1,000,000 shares of Common Stock at a fair value price of $0.42 per share.  On December 27, 2011, Frontline purchased two electric vehicles for $255,000.  On the same day Frontline assigned $250,000 to Cameo Properties, LLC.  On April 26, 2012, the Company assigned $112,500 of its note receivable with SPS to Frontline which reduced the balance due to Frontline by $112,500.

On April 15, 2010, the Company entered into a loan agreement for $2,000,000 with Windsor. The loan provided for payments of up to $2,000,000 to the Company with an initial installment of $250,000 and additional installments of up to $1,750,000 with a 10% interest rate. The entire loan amount was secured by 12,000,000 shares of the Company common stock. Each loan installment matured in three years from issuance of the installment. The loan had an anti-dilution clause for the stock issued as collateral. Stock is issued and delivered proportionately to the delivery of funds.  The loan was fully funded during the third quarter ending April 30, 2011 with (1) cash advances of $250,000; (2) debt assignment from Frontline of $850,279; (3) accrued interest of $33,534; and (4) $97,528 in cash advance fees.
 
 
On April 19, 2011, Windsor converted the entire $2,000,000 outstanding loan amount for the 10,000,000 collateralized shares and the Company issued a Stock Purchase Warrant (“Windsor Warrant”) which entitles Windsor, for a three-year period, to purchase at a purchase price of $.001 per share, on a one time basis and only following the effectiveness of the first reverse split of the Company’s common stock following the issuance of the Windsor Warrant , such number of shares of common stock as is equal to the difference between 10,000,000 and the number of shares into which such 10,000,000 shares were changed in such first reverse split, the effect being to protect Windsor from any dilution to its 10,000,000 share holding resulting from such first reverse split.

The Company entered into a Loan Agreement, dated as of July 14, 2011, with Cameo Properties LLC (“Cameo”) and was amended on October 14, 2011 (the “Amended Loan Agreement”). Each Note issued under the Amended Loan Agreement is due three years from the date of its issuance. The Amended Loan Agreement provides for loans to the Company of up to $750,000 (the “Loan”), with a minimum initial loan of $250,000 within 60 days of the date of the Loan Agreement, and up to an additional $500,000 within the first year and a half from execution of the Amended Loan Agreement. This is not a revolving facility, and any principal repaid by the Company will not be available for additional advances to the Company under the Amended Loan Agreement. The Company cannot, without the Lender’s consent, prepay all or part of the Loan. The notes evidencing the installments of the loans bear interest payable monthly in arrears at the rate of 10% per annum, and mature and are due and payable three years from the date of issuance. On December 27, 2011, Frontline assigned $250,000 of its receivable to Cameo.

Liquidity Issues

On October 27, 2010, we received the $2,500,000 in funds for the X-Prize award, from the competition sponsored by Progressive Insurance Casualty Company. Those funds have all been used and we need capital to recommence development and marketing of our electric vehicles. Given the number of companies competing in this sector and the fact that many of the larger car manufacturers are developing and marketing electric and hybrid vehicles there is no guarantee we will achieve or maintain a place in this market.

The Company has substantial obligations to the Internal Revenue Service and other creditors. The Company is trying to make payments to the Internal Revenue Service (IRS) for delinquent payroll taxes, and had a plan in place with one of two judgment creditors, upon which we have defaulted.  There is no assurance that we will be able raise additional required capital to meet obligations arising from the settlements of these obligations and litigation matters, as well as the settlement payments with the IRS, and continue operations.

Our current operating funds will not allow any commercialization of our planned products, and therefore we need to obtain additional financing in order to complete our business plan.  In addition, our facility in Mooresville, North Carolina, was closed in May 2012, and all employees in North Carolina were released. Currently, all ongoing work is being performed by consultants. Foreclosure proceedings on the Company’s facility in Mooresville were initiated in July 2012 by the lenders secured by our Mooresville facility, and  the property was sold pursuant to a foreclosure and sale on August 22, 2012.  There is no assurance that we will ever be able to resume production of electric vehicles.
We anticipate approximately $2,000,000 of additional working capital will be  required  over the next 12  months for certification and market introduction  of these products through joint venture partners or otherwise.  We do not have sufficient cash on hand to meet these anticipated obligations, which are in addition to payments we will owe to judgment creditors and the IRS.

We do not currently have any additional arrangements for financing, and we may not be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including investor sentiment.  Market factors may make the timing,  amount,  terms or  conditions  of  additional  financing unavailable to us.

 Critical Accounting Issues

The Company's discussion and analysis of its financial condition and results of  operations are based upon the Company's financial statements, which have been  prepared in accordance with accounting principles generally accepted in the  United States of America. The preparation of the financial statements requires  the Company to make estimates and judgments that affect the reported amount of  assets, liabilities, and expenses, and related disclosures of contingent assets  and liabilities. On an on-going basis, the Company evaluates its estimates,  including those related to intangible assets, income taxes and contingencies and  litigation. The Company bases its estimates on historical experience and on  various assumptions that are believed to be reasonable under the circumstances,  the results of which form the basis for making judgments about carrying values  of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

 
Other Matters

None. 

New Financial Accounting Standards

The Financial Accounting Standards Board (“FASB”) has codified a single source of U.S. Generally Accepted Accounting Principles (“GAAP”), the Accounting Standards Codification™. Unless needed to clarify a point to readers, we will refrain from citing specific section references when discussing application of accounting principles or addressing new or pending accounting rule changes. There are no recently issued accounting standards that are expected to have a material effect on our financial condition, results of operations or cash flows.
 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
 
            Interest Rate Risk - Interest rate risk refers to fluctuations in the value of a security resulting from changes in the general level of interest rates. Investments that are classified as cash and cash equivalents have original maturities of three months or less. Our interest income is sensitive to changes in the general level of U.S. interest rates.  We do not have significant short-term investments, and due to the short-term nature of our investments, we believe that there is not a material risk exposure.  Our debt is at fixed interest rates.

Credit Risk - Our accounts receivables are subject, in the normal course of business, to collection risks. We regularly assess these risks and have established policies and business practices to protect against the adverse effects of collection risks. As a result we do not anticipate any material losses in this area.

 
 
 

Item 8. Financial Statements and Supplementary Data.
 
LI-ION MOTORS, CORP.

CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2012 and 2011
 
 

TABLE OF CONTENTS
 
 

Madsen & Associates, CPA's Inc.
684 East Vine Street
Murray, UT 84107
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
Board of Directors
Li-ion Motors Corp.
Las Vegas, NV

We have audited the accompanying consolidated balance sheets of Li-ion Motors Corp. (formerly EV
Innovations, Inc.) (collectively, the “Company”) as of July 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income (loss), stockholders' equity (deficiency) and cash flows for the years then ended.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  We were not engaged to perform an audit of the Company’s internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.  We believe that our audit provide a reasonable basis for our opinion.

In our opinion, the 2012 and 2011 financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2012 and 2011, and the results of its operations and its cash flows each of the two years then ended, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the Company has changed its accounting policy of recognizing revenue from licensing agreements.  The Company's licensee is in default in making timely payments to the Company.  The Company's revenue recognition policy is to recognize license revenue only to the extent the amount of payments received.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  The Company did not have any revenue from vehicle sales in 2012 other than from related parties, does not have cash flows to support its current operations and needs to cover expenses in future periods as the Company continues to incur losses from operations.  The building where the Company conducts its operations in North Carolina was foreclosed upon and sold to a third party subsequent to the balance sheet date.  These factors and others described in Note 1 raise substantial doubt about the Company’s ability to continue as a going concern.

These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary in the event the Company cannot continue in existence.

/s/ Madsen & Associates, CPA's Inc.
Madsen & Associates, CPA's Inc.
November 19, 2012
 
 
 
Li-ion Motors Corp.
Consolidated Balance Sheets
 
   
July 31,
 
   
2012
   
2011
 
Assets
           
             
Current assets:
           
Cash and cash equivalents
  $ 64     $ 5,118  
Accounts receivable, net of allowance for doubtful accounts of $561,237 and $0, respectively
    -       -  
Notes receivable, net of allowance for doubtful accounts of $2,458,602 and $762,327, respectively
    -       1,750,000  
Inventories
    1,500       380,558  
Building and building improvements, net
    1,049,146          
Other current assets
    3,190       193,893  
Total current assets
    1,053,900       2,329,569  
                 
Property and equipment, net
    5,785       1,983,739  
                 
Deferred patent and trademark costs
    37,413       35,858  
Total assets
  $ 1,097,098     $ 4,349,166  
                 
Liabilities and Stockholders' Equity (Deficiency)
               
                 
Current liabilities:
               
Accounts payable and accrued expenses
  $ 1,538,060     $ 1,156,136  
Current portion of long-term debt
    1,460,189       399,407  
Customer deposits
    102,188       102,287  
Deferred license agreement revenue
    -       324,333  
Total current liabilities
    3,100,437       1,982,163  
                 
Long-term liabilities:
               
                 
Long-term debt, less current portion
    250,879       939,608  
Deferred license agreement revenue, less current portion
    -       1,370,833  
Total liabilities
    3,351,316       4,292,604  
                 
Commitments and contingencies
    -       -  
Stockholders' equity (deficiency)
               
                 
Preferred stock, $.001 par value, 5,000,000 shares authorized, 0 issued and outstanding
    -       -  
Common stock, $.001 par value, 400,000,000 shares authorized, 26,423,470 and 26,423,470 issued
and 26,423,470 and 6,423,470 outstanding at July 31, 2012 and July 31, 2011, respectively.
    26,423       26,423  
Additional paid-in capital
    62,619,444       62,639,444  
Accumulated deficit
    (64,892,123 )     (62,580,108 )
Accumulated other comprehensive loss
    (7,962 )     (9,197 )
                 
      (2,254,218 )     76,562  
Less: Treasury stock, 20,000,000 shares at cost at July 31, 2011
    -       (20,000 )
Stockholders' equity (deficiency) attributable to Li-ion Motors Corp.
    (2,254,218 )     56,562  
                 
Non-controlling interests
    -       -  
Stockholders' equity (deficiency)
    (2,254,218 )     56,562  
Total stockholders' equity (deficiency)
    (2,254,218 )     56,562  
Total liabilities and stockholders' equity (deficiency)
  $ 1,097,098     $ 4,349,166  
 
See accompanying notes to consolidated financial statements
 
 
Li-ion Motors Corp.
Consolidated Statements of Operations
 
   
For the Year Ended
 
   
July 31,
 
   
2012
   
2011
 
Revenue:
           
Sales
  $ 262,795     $ 7,013  
License agreement revenue
    149,333       704,167  
Total revenue
    412,128       711,180  
                 
Costs and expenses:
               
Cost of sales
    464,623       17,243  
General and administrative
    1,054,901       1,448,274  
Loss on disposal of property and equipment
    70,786       -  
Impairment charge
    740,000       -  
Research and development
    483,599       1,318,267  
Total costs and expenses
    2,813,909       2,783,784  
                 
Loss from operations
    (2,401,781 )     (2,072,604 )
                 
Other (expenses) income:
               
Interest expense
    (145,088 )     (422,156 )
Other income
    234,854       2,613,681  
                 
Earnings (loss) before provision for (benefit from) income taxes
    (2,312,015 )     118,921  
                 
Provision for (benefit from) income taxes
    -       -  
                 
Net earnings (loss)
    (2,312,015 )     118,921  
                 
Less: Net earnings (loss) attributable to non-controlling interest
    -       -  
                 
Net earnings (loss) attributable to Li-ion Motors Corp
  $ (2,312,015 )   $ 118,921  
                 
Earnings (loss) per share - basic and diluted:
               
Earnings (loss) per common share attributable to Li-ion Motors Corp. common shareholders
  $ (0.09 )   $ 0.00  
                 
Weighted average number of shares outstanding - basic and diluted
    26,423,470       26,127,867  
 
See accompanying notes to consolidated financial statements
 
 
Li-ion Motors Corp.
Consolidated Statement of Comprehensive Income (Loss)
 
   
For the Year Ended
 
   
July 31,
 
   
2012
   
2011
 
Net earnings (loss)
  $ (2,312,015 )   $ 118,921  
                 
Other comprehensive income
               
Currency translation adjustment
    1,235       (761 )
                 
Comprehensive income (loss)
    (2,310,780 )     118,160  
Comprehensive income (loss) attributable to noncontrolling interest
    -       -  
Comprehensive income (loss) attributable to Li-ion Motors Corp
  $ (2,310,780 )   $ 118,160  
 
See accompanying notes to consolidated financial statements
 
 
Li-ion Motors Corp.
Consolidated Statements of Cash Flows
 
   
For the Year Ended
 
   
July 31,
 
   
2012
   
2011
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net earnings (loss)
  $ (2,312,015 )   $ 118,921  
Adjustments to reconcile net earnings (loss) to net cash utilized by operating activities
               
Depreciation
    51,003       71,099  
Loss on disposal of property and equipment, net
    70,786       -  
Impairment charge
    740,000       -  
Loss on disposal of inventory due to facility closure
    209,947       -  
Loss on finished goods write down
    31,527       -  
Loss on deposit
    50,000       -  
Provision for doubtful accounts
    444,346       (78,880 )
Licensing fees
    56,567       (204,167 )
Non-cash sale of inventories
    (255,000 )     -  
Increase (decrease) in cash flows from changes in operating assets and liabilities
               
Note receivable, net
    -       (1,750,000 )
Inventories
    -       (345,558 )
Employee advances
    -       10,000  
Prepaid expenses and other current assets
    22,278       (142,890 )
Deferred patent and trademark costs
    (1,555 )     (11,600 )
Bank overdraft
    -       (14,104 )
Accounts payable and accrued expenses
    390,759       (140,598 )
Customer deposits
    (99 )     2,287  
Deferred revenue
    (241,000 )     1,314,712  
Net cash used in operating activities
    (742,456 )     (1,170,778 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Sale of property and equipment
    35,825       -  
Additions to property and equipment
    -       (135,157 )
Net cash used in investing activities
    35,825       (135,157 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Advances on notes receivable
    (81,758 )     (208,587 )
Payments received on notes receivable
    22,984       287,467  
Proceeds from issuance of debt
    838,814       2,403,163  
Payments on debt
    (79,698 )     (1,172,342 )
Net cash provided by financing activities
    700,342       1,309,701  
                 
Effect of exchange rate changes on cash and cash equivalents
    1,235       (761 )
      -          
CHANGE IN CASH AND CASH EQUIVALENTS
               
Net increase (decrease) in cash and cash equivalents
    (5,054 )     3,005  
Cash and cash equivalents at beginning of period
    5,118       2,113  
                 
Cash and cash equivalents at end of period
  $ 64     $ 5,118  
                 
SUPPLEMENTAL CASH FLOW DISCLOSURES
               
Cash paid during the period for:
               
Interest
  $ 20,470     $ 394,927  
Income taxes
  $ -     $ -  
                 
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
               
Property and equipment and inventories exchanged for payment on debt
  $ 255,000     $ -  
Assignment of note receivable with Sky Power Solutions Corp. to Frontline Asset Management debt
  $ 112,500     $ -  
Shares issued for debt
  $ -     $ 5,857,309  
 
See accompanying notes to consolidated financial statements
 
 
Li-ion Motors Corp.
Consolidated Statement of Stockholders' Equity (Deficiency)
For the Periods Ended As Noted
 
   
Number of
Common Shares
   
Common Shares
$0.01
Par Value
   
Additional Paid in
Capital
   
Accumulated
Deficit
   
Accumulated Other
Comprehensive
Income (Loss)
   
Treasury Stock
at Cost
   
Non-Controlling Interest
   
Comprehensive
Income (Loss)
   
Total
 
                                                       
Balance - August 1, 2010
    6,015,227     $ 6,015     $ 56,782,543     $ (62,699,029 )   $ (8,436 )   $ -     $ -           $ (5,918,907 )
                                                                       
Issuance of stock for conversion of promissory notes
    408,243       408       5,856,901       -       -       -       -             5,857,309  
Common stock issued as collateral on loan
    20,000,000       20,000       -       -       -       (20,000 )     -             -  
Foreign currency translation
    -       -       -       -       (761 )     -       -     $ (761 )     (761 )
Net earnings
    -       -       -       118,921       -       -       -       118,921       118,921  
Comprehensive income
                                                          $ 118,160       -  
Balance - July 31, 2011
    26,423,470       26,423       62,639,444       (62,580,108 )     (9,197 )     (20,000 )     -               56,562  
                                                                         
Common stock issued as collateral on loan released to lender
    -       -       (20,000 )     -       -       20,000       -               -  
Foreign currency translation
    -       -       -       -       1,235       -       -     $ 1,235       1,235  
Net earnings
    -       -       -       (2,312,015 )     -       -       -       (2,312,015 )     (2,312,015 )
Comprehensive income
                                                          $ (2,310,780 )     -  
Balance - July 31, 2012
    26,423,470     $ 26,423     $ 62,619,444     $ (64,892,123 )   $ (7,962 )   $ -     $ -             $ (2,254,218 )
 
See accompanying notes to consolidated financial statements
 
 
Li-ion Motors Corp.
Notes to Consolidated Financial Statements
For the Years Ended and as of July 31, 2012 and 2011
 
Note 1. Financial Statement Presentation
 
History and Nature of Business
 
Li-ion Motors Corp was incorporated under the laws of the State of Nevada on April 12, 2000. The Company is currently pursuing the development and marketing of electric powered vehicles and products based on the advanced lithium battery technology it has developed.
 
On April 16, 2008, the Company sold their controlling interest of approximately 69% of the outstanding common stock in Zingo, Inc. (presently Sky Power Solutions Corp., “SPS”). Prior to April 16, 2008, SPS was a related party that provided telecommunication services to business and residential customers utilizing VOIP technology and currently is researching and developing rechargeable lithium ion batteries.
 
Effective April 15, 2008, the Company entered into a License Agreement (“License Agreement”) with SPS providing for their license to SPS of their patent applications and technologies for rechargeable lithium ion batteries for electric vehicles and other applications (“Licensed Products”). Under the License Agreement, the Company has the right to purchase their requirements of lithium ion batteries from SPS, and their requirements of lithium ion batteries shall be supplied by SPS in preference to, and on a priority basis as compared with, supply and delivery arrangements in effect for other customers of SPS. The Company’s cost for lithium ion batteries purchased from SPS shall be SPS’s actual manufacturing costs for such batteries for the fiscal quarter of SPS in which the Company’s purchase takes place. On May 25, 2010, the license agreement was amended to reflect Sky Power’s territory would only be the United States and US possessions and territories and we can license to other companies in other parts of the world. The Company issued a license to a firm for the rights in Canada in 2010.
 
Under the terms of the license agreement, SPS has agreed to invest a minimum of $1,500,000 in each of the next two years in development of the technology for the Licensed Products. To date, SPS has not met the minimum requirements in the development of technology, and therefore, is not in compliance with its obligations under this covenant of the license agreement.  The Company has advised SPS that it will not give notice of default against them for their failure to comply with this covenant over the term of the License Agreement.
 
Effective May 28, 2010, the Company entered into a ten year license agreement with Lithium Electric Vehicle Corp. (“LEVC”) providing for the Company to license to LEVC certain of the Company’s patent applications and technologies for electric vehicles and other applications. The purpose of the licensee is to expand sales of the Company’s current line of products by the manufacture and sale of such products in Canada, which is LEVC’s exclusive territory under the license agreement.
 
The license agreement consists of an annual fee of $500,000 for ten years and an additional $1,750,000 based on a valuation report prepared by an independent third party.  LEVC is required to pay $1 million of the license fee during year one for the initial two years and $500,000 each additional year.  The Company has received $732,666 from LEVC with a balance due of $267,334 as of July 31, 2012, which is now delinquent.  The Company has reflected the delinquent amount due from LEVC in its accounts receivable and has established a reserve for doubtful accounts for the entire amount.
 
The Company is currently in discussions with LEVC regarding the delinquency.
 
The note of $1,750,000 has been reflected on the books of the Company. Due to LEVC having no assets to secure the note, the Company has recorded a reserve for doubtful accounts for the entire note amount of $1,750,000.
 

Basis of Presentation
 
Going Concern
 
The Company’s financial statements for the year ended July 31, 2012, have been prepared on a going concern basis which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business.  The Company did not have any cash revenue from vehicle sales in 2012.  Management recognized that the Company’s continued existence is dependent upon its ability to obtain needed working capital through additional equity and/or debt financing and revenue to cover expenses, as the Company continues to incur losses from operations.
 
Since its incorporation, the Company financed its operations through advances and loans from its controlling shareholders.  The Company expects to finance operations through the sale of equity or other investments as well as continued advances from shareholders for the foreseeable future, as the Company does not expect to receive significant revenue from vehicle sales until the required certifications have been received.  There is no guarantee that the Company will be successful in arranging financing on acceptable terms.
 
The Company’s facility in Mooresville, North Carolina was financed through Bayview Loan Servicing, LLC (“Bayview”) and Frontline Asset Management, Inc. (“Frontline”), which had a second lien on the property. Li-ion became delinquent with the mortgage payments, and, following a prior foreclosure filing and new agreement as to payments under the mortgage, on July 12, 2012, Bayview refiled a notice of hearing on foreclosure on its deed of trust and security agreement for a hearing on August 21, 2012, the outstanding amount of the loan at July 31, 2012 being $946,279.   A similar notice of foreclosure pursuant to the Frontline deed of trust was filed by the Trustee with the same court on July 25, 2012, noticing a hearing for August 22, 2012, the amended notice of default in the amount of $660,546 having been given on July 23, 2012. The Trustee for Frontline also filed on July 25, 2012, a notice of foreclosure and sale to take place on August 22, 2012.  The Trustee under the Bayview deed of trust on August 21, 2012, filed its notice of foreclosure and sale to take place on September 18, 2012, of the real and personal property securing the deed of trust.   On September 14, 2012, the sale of the property pursuant to the Frontline August 22, 2012 foreclosure and sale was completed, and Frontline assigned its rights to its foreclosure bid to A&S Holdings Inc., a related holding company, subject to the rights of Bayview, as the holder of the first mortgage on the property.
 
As of the filing of this Report, the Company does not have any substantive plan on where its facilities will be or how it will continue the manufacturing process of its electric vehicles.
 
The Company’s ability to raise additional capital is affected by trends and uncertainties beyond its control.  The Company does not currently have any arrangements for financing and it may not be able to find such financing if required.  Obtaining additional financing would be subject to a number of factors, including investor sentiment.  Market factors may make the timing, amount, terms or conditions of additional financing unavailable to it.  These uncertainties raise substantial doubt about the ability of the Company to continue as a going concern.  The accompanying financial statements do not include adjustments that might result from the outcome of these uncertainties. The Company has reduced the workforce to a few consultants, even if financing is obtained qualified engineers and technicians that would need to be hired may not be readily available.
 
Common Stock
 
On June 24, 2011, the Board of Directors unanimously approved an amendment to the Company’s Articles of Incorporation to increase the authorized number of shares of common stock from 100 million shares, par value $.001 per share, to 300 million shares, par value $.001 per share.  The Company filed the amendment with the Secretary of State of Nevada on August 10, 2011, after mailing a Definitive Information Statement to the Company’s stockholders and the amendment was effective August 10, 2011.
 
On December 13, 2011, the Board of Directors unanimously approved an amendment to the Company’s Articles of Incorporation to decrease the authorized number of shares of common stock from 300 million shares, par value $.001 per share, to 60 million shares, par value $.001 per share.  The Company filed the amendment with the Secretary of State of Nevada on December 14, 2011.
 
Effective January 26, 2012, the Financial Industry Regulatory Authority approved a one-for-five reverse split of the common stock.  All share and per share amounts have been restated to reflect the one-for-five reverse stock split.

 
All shares and per share information has been revised to give retroactive effect to the reverse stock split.
 
Our board of directors unanimously approved an amendment to our Articles of Incorporation to increase the authorized number of shares of common stock from 60,000,000 shares, par value $.001 per share, to 400,000,000 shares, par value $.001 per share, on July 20, 2012. On the same date we received the written consent from shareholders of our company holding a majority (75.69%) of the outstanding shares of our common stock. We filed the amendment with the Secretary of State of Nevada on August 30, 2012, and the amendment was effective on that date.
 
Note 2.  Summary of Significant Accounting Policies
 
Basis of Consolidation
 
The consolidated financial statements included the accounts and records of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The Company does not have any special purpose entities. For those consolidated subsidiaries in which the company's ownership is less than 100 percent (100%), the outside stockholders' interests are shown as non-controlling interest.  The non-controlling interest of the company's earnings or loss is classified as net income (loss) attributable to non-controlling interest in the consolidated statement of operations.
The following is a listing of the Company's subsidiaries and its ownership interests:
 
Global Electric, Corp.
    67.57 %
R Electric Car, Co.
    67.57 %
Solium Power, Corp.
    67.57 %
Hybrid Technologies USA Distributing Inc.
    100 %
Hybrid Electric Vehicles India Pvt. Ltd.
    100 %
 
Reclassifications
 
Certain prior period amounts have been reclassified to conform with current period other income presentations.
 
Use of Estimates
 
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates and judgments, including those related to revenue recognition, inventories, adequacy of allowances for doubtful accounts, valuation of long-lived assets and goodwill, income taxes, litigation and warranties. The Company bases its estimates on historical and anticipated results and trends and on various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. The policies discussed below are considered by management to be critical to an understanding of the Company’s financial statements. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from those estimates.
 
Fair Value Measurements
 
The Company utilizes the accounting guidance for fair value measurements and disclosures for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis or on a nonrecurring basis during the reporting period.  The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date.  The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability.  The accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.  These tiers are defined as follows:
 
Level 1 -  Observable inputs such as quoted market prices in active markets
 
Level 2 -  Inputs other than quoted prices in active markets that are either directly or indirectly observable
 
Level 3 - Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions
 

As of July 31, 2012, the Company held certain financial assets that are measured at fair value on a recurring basis.  These consisted of cash and cash equivalents.  The fair values of the cash and cash equivalents is determined based on quoted market prices in public markets and is categorized as Level 1.  The Company does not have any financial assets measured at fair value on a recurring basis as Level 3 and there were no transfers in or out of Level 1, Level 2 or Level 3 during the years ended July 31, 2012 and 2011.
 
The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring basis as of July 31, 2012 and 2011.
 
         
Assets at Fair Value as of July 31, 2011 and 2010 Using
 
                         
         
Quoted Prices in
Activated Markets for Identical Assets
   
Significant Other
Observable Inputs
   
Significant Observable
Inputs
 
   
Total
   
(Level 1)
   
(Level 2)
   
(Level 2)
 
July 31, 2012
                       
Cash and Cash Equivalents
  $ 64     $ 64     $ -     $ -  
                                 
July 31, 2011
                               
Cash and Cash Equivalents
  $ 5,118     $ 5,118     $ -     $ -  

The Company has other financial instruments, such as receivables, accounts payable and other liabilities which have been excluded from the tables above.  Due to the short-term nature of these instruments, the carrying value of receivables, accounts payable and other liabilities approximate their fair values.  The Company did not have any other financial instruments with the scope of the fair value disclosure requirements as of July 31, 2012.
 
Non-financial assets and liabilities, such as goodwill and long-lived assets, are accounted for at fair value on a nonrecurring basis.  These items are tested for impairment on the occurrence of a triggering event or in the case of goodwill, on at least an annual basis.  The Company's annual test on its long-lived assets indicated that the carrying value of its long-lived assets was recoverable and that no impairment existed as of the testing date.
 
Cash and Cash Equivalents
 
Cash and cash equivalents consist of highly liquid investments, which are readily convertible into cash with original maturities of three months or less.
 
Accounts Receivable
 
The Company provides credit to customers in the normal course of business. An allowance for accounts receivable is estimated by management based in part on the aging of receivables and historical transactions. Periodically management reviews accounts receivable for accounts that appear to be uncollectible and writes off these uncollectible balances against the allowance accordingly.
 
Inventories
 
Inventories are stated at the lower of cost or market using the first-in, first-out (“FIFO”) method. The Company may write down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions.
 
Property and Equipment
 
Property and equipment are recorded at cost less accumulated depreciation. Depreciation of property and equipment are accounted for by methods over the following estimated useful lives:
 
 
Lives
 
Methods
Building Improvements
39 Years
 
Straight Line
Furniture and Fixtures
10 years
 
Accelerated
Software
3-5 years
 
Straight Line
Computers
5 years
 
Straight Line

Significant improvements are capitalized, while maintenance and repairs are charged to operations as incurred.

 
Evaluation of Long-Lived Assets
 
The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable in accordance with the guidance in ASC 360-15-35 “Impairment or Disposal of Long-Lived Assets”.  An impairment exists when the carrying amount of the long-lived assets is not recoverable and exceeds its fair value.  The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.  If an impairment exists the resulting write-down would be the difference between the fair market value of the long-lived asset and the related net book value.  The Company’s building in North Carolina was foreclosed upon and sold to a third party subsequent to the balance sheet date.  The first mortgage debt was liquidated upon the sale and the amount due to the second mortgagee was reduced by $50,000.  As a result of the sale of the building, the Company recorded a $740,000 impairment charge related to the building during the year ended July 31, 2012.
 
Deferred Patent Costs
 
The Company capitalizes costs directly incurred in pursuing patent applications as deferred patent costs. When such applications result in an issued patent, the related costs are amortized over the remaining legal life of the patents, which is assumed to be 17 years, using the straight-line method. On a quarterly basis, the Company reviews the issued patents and pending patent applications and if the Company determines to abandon a patent application, or an issued patent no longer has economic value, the unamortized balance in deferred patent costs relating to that patent is immediately expensed. As of July 31, 2012, the Company’s patents were in the approval processing phase.
 
Revenue Recognition
 
The Company recognizes revenue in accordance with the guidance contained in Financial Accounting Standards Board Accounting Standards Codification 605, “Revenue Recognition”, (“ASC 605”) and other relevant accounting literature.  Revenue is recognized when the product has been delivered and title and risk of loss have passed to the customer, collection of the resulting receivable is deemed reasonably assured by management, persuasive evidence of an arrangement exists and the sale price is fixed and determinable.
 
Revenue received from the sale of license agreements is earned over the life of the agreement.  Revenue received but not earned is classified as deferred revenue on the Company's consolidated balance sheet.  The Company has changed its accounting policy of recognizing revenue from licensing agreements.  The Company’s licensee is in default in making timely payments to the Company.  The Company’s revenue recognition policy is to recognize license revenue only to the extent the amount of payments received.
 
The Company typically has a twenty-four month warranty policy for workmanship defects.  The Company establishes an accrual for warranty work and expenses the amount over a two year period.
 
Customer Deposits
 
The Company receives advances from customers for automobiles to be manufactured in the future.  The Company applies these advances against future billings.  As of July 31, 2012 and 2011, customer deposits amounted to $102,188 and $102,287, respectively.
 
Shipping and Handling
 
Shipping and handling costs related to services and product sales are expensed as incurred.
 
Advertising
 
Advertising costs are expensed as incurred and are included in general and administrative expenses. Total advertising expenditures for the year ended July 31, 2012 and 2011, amounted to $5,019 and $369,034, respectively.
 
Research and Development
 
No set amount has been set aside for research and development (“R&D”), however, all projects and purchases require approval prior to initiation. Salaries, payroll taxes, and benefits expensed to R&D for the year ending  July 31, 2012 and 2011, were $471,300 and $1,261,479, respectively.  Parts and supplies; battery and motor management systems; and shipping charges were $12,299 and $56,788, for the year ending July 31, 2012 and July 31, 2011, respectively. The Company expects the research and development expenses will continue to remain substantial and grow as the Company aggressively moves to bring products to market.

 
Concentration of Risk
 
The Company maintains cash deposit accounts and may have certificates of deposits which at times may exceed federally insured limits. These accounts have not experienced any losses and the Company believes it is not exposed to any significant credit risk related to cash.
 
Income taxes
 
Deferred income tax assets or liabilities are computed based on the temporary differences between the financial statement and income tax bases of assets and liabilities using the statutory marginal income tax rate in effect for the years in which the differences are expected to reverse. Deferred income tax expenses or credits are based on the changes in the deferred income tax assets or liabilities from period to period. A valuation allowance against deferred tax assets is required if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. 
 
Foreign Currency Translation
 
The functional currency for some foreign operations is the local currency. The reporting currency is the US Dollar. Assets and liabilities of foreign operations are translated at balance sheet date rates of exchange and income, expense and cash flow items are translated at the average exchange rate for the period. Translation adjustments in future periods will be recorded in Other Comprehensive Income (Loss). The translation gain for the year ended July 31, 2012, was $1,235 and the translation loss for the year ended July 31, 2011, was $761.
 
Comprehensive Loss
 
The Company reports comprehensive loss in accordance with the requirements of FASB ASC 220-10-15, “Comprehensive Income”, and (“ASC 220-10-15”). For the years ended July 31, 2012 and 2011, the difference between net loss and comprehensive loss was foreign currency translation.
 
Net Earnings (Loss) Per Common Share
 
Basic earnings (loss) per common share is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding during the specified period.  Diluted earnings (loss) per common share is computed by dividing net earnings (loss) by the weighted average number of common shares and potential common shares during the specified period. All potentially dilutive securities have been excluded from the computations for the year ending July 31, 2012, as their effect is anti-dilutive.
 
Recently Issued Pronouncements
 
FASB has codified a single source of U.S. Generally Accepted Accounting Principles, the Accounting Standards Codification™. Unless needed to clarify a point to readers, we will refrain from citing specific section references when discussing application of accounting principles or addressing new or pending accounting rule changes. There are no recently issued accounting standards that are expected to have a material effect on our financial condition, results of operations or cash flows.
 
Note 3. Notes Receivable
 
During the year ended July 31, 2012, the Company advanced Sky Power Solutions Corp. (“SPS”) $81,758. The advances were reduced by $22,984 in payments through a reimbursement for a leased employee and $112,500 through an assignment of debt to Frontline.  During the year ended July 31, 2011 the Company advanced SPS $208,587 of which $287,467 was repaid ($173,600 in the form of cash and $113,867 in reimbursement for a leased employee).  As of July 31, 2012 and July 31, 2011, an allowance for doubtful accounts in the amount of $698,207 and $762,327, respectively, was recorded against the note receivable, reducing the amount to $0.

 
On November 26, 2010, LEVC issued the Company a Secured Promissory Note (“LEVC Note”) in the amount of $1,750,000 in accordance with the license agreement.  The LEVC Note bears interest at ten (10%) percent per annum on the outstanding amount of the loan and shall accrue for the first 12 months during which the outstanding amount, or any portion thereof is outstanding. Commencing for the first month following the first year and for all subsequent months during which any portion of the amount is outstanding, LEVC shall make monthly interest payments in arrears on the first day of the month following the month for which the interest payment is made on the outstanding amount of the LEVC Note, including any accrued unpaid interest thereon. The outstanding amount and any accrued but unpaid interest thereon, shall be repaid in full by LEVC within sixty (60) days of receiving written demand for repayment by the Company. LEVC shall have the right to repay the LEVC Note in whole or in part, at any time without notice, bonus or penalty.    The LEVC Note is secured by LEVC’s (1) inventory; (2) equipment, other than inventory; (3) receivables; and (4) all other property, including leasehold interests, chattel paper, documents of title, securities, instruments, money and intangibles.  In addition, the LEVC Note includes a conversion right in which the Company can convert the LEVC Note if LEVC should begin trading on the TSX Venture Exchange.  The conversion clause stipulates that the LEVC Note will be converted at a price the greater of  fifteen cents ($0.15) per share or ninety percent (90%) of the average ten (10) day trading price and if the conversion of the LEVC Note results in a fractional share, LEVC shall, in lieu of issuing such fractional share, pay to the Company an amount equal to the conversion value of the fractional share.
 
LEVC is currently attempting to complete a public registration in Germany.  The Company has the option, upon the completion of the registration, of converting the note into LEVC common stock.  Due to the uncertainty of LEVC’s ability to complete the public registration in Germany and with LEVC having no assets to secure the note, the Company has recorded a reserve for doubtful accounts for the entire note amount of $1,750,000.
 
The Company recognized interest income of $175,479, none of which has been received, in accordance to the terms of the LEVC Note for the year ended July 31, 2012.  The Company has reflected the amount due from LEVC in its accounts receivable and has established a reserve for doubtful accounts for the entire amount and is included in general and administrative expenses on the Company’s consolidated statement of operations.
 
Note 4. Inventories
 
Inventories consist of the following:
 
   
Years Ended
 
   
July 31,
 
   
2012
   
2011
 
Raw Materials
  $ -     $ 1,103  
Work-In-Progress
    -       344,455  
Finished Goods
    1,500       35,000  
    $ 1,500     $ 380,558  

Raw materials, work in progress and finished goods for the year ended July 31, 2012 and July 31, 2011, are related to the Company’s planned sales of electric powered vehicles. On May 31, 2012, the Company closed its facility in North Carolina and wrote off $209,947 of the inventory it had in raw materials and work-in-process at May 31, 2012.  This amount is included in  cost of sales on the Company’s consolidated statement of operations.  In addition, at July 31, 2012, management evaluated the value of its finished goods and wrote down $33,500 which was offset by a reserve of $1,973, for a net effect of $31,527, and is included in cost of goods sold on the Company’s consolidated statement of operations.

 
Note 5. Property and Equipment
 
Property and equipment consist of:
 
   
July 31,
   
July 31,
 
   
2012
   
2011
 
Building and Improvements
  $ 552,276     $ 1,292,276  
Equipment and Furniture and Fixtures
    4,827       328,663  
Vehicles
    66,429       66,429  
Software Costs
    -       28,913  
Land
    700,000       700,000  
      1,323,532       2,416,281  
                 
Less Accumulated Depreciation
    (268,601 )     (432,542 )
Net Property and Equipment
  $ 1,054,931     $ 1,983,739  

Depreciation expense for the year ended July 31, 2012 and 2011 was $51,003 and $71,099, respectively and is included in general and administrative expenses on the Company’s consolidated statement of operations. 
 
In accordance with the guidance in ASC 360-15-35 “Impairment or Disposal of Long-Lived Assets”, The Company reviewed its building in North Carolina at July 31, 2012, for impairment and determined  the amount carried on the books exceeded current fair market value by $740,000.  Therefore, the company reduced the carrying amount and recorded the impairment under operating costs on the consolidated statement of operations.  The building was sold subsequent to the balance sheet date and accordingly, the Company has reclassified the building and improvements to current assets.
 
During the year ended July 31, 2012, the Company closed its office in Las Vegas, subsequent to year end, and its facility in North Carolina has been foreclosed upon.  All employees were laid off and minimal consultants are working on projects in North Carolina.  The Company evaluated its remaining fixed asset inventory of equipment, furniture and fixtures, and software and wrote off $99,304 due to obsolescence.  This was offset by a net effect of $3,693 for the surrender of equipment to Treger Financial (See Note 8); $5,975 from the seizure of assets (See below) and cash from individuals in the amount of $18,850 for various equipment.
 
During the year ended July 31, 2012, the Company signed a confession of judgment on November 7, 2011, which was filed with the Iredell Country, North Carolina Superior Court Division. The plaintiff enforced the judgment and the Company’s assets at our North Carolina facility were seized and auctioned off.  The Sherriff’s office received $5,975 which was applied to the Company’s accrued expense account and partially offset the write off of obsolete assets.
 
Note 6. Other Current Assets

   
Years Ended
 
   
July 31,
 
   
2011
   
2011
 
             
Deposits
  $ 3,190     $ 4,957  
Deferred Product Asset
    -       4,958  
Prepaid Expenses
    -       65,553  
Interest Receivable
    -       118,425  
Total
  $ 3,190     $ 193,893  
 
The deferred product asset is for product liability costs that the Company prepared and amortized over the two year life in the amount of $24,936 and $20,636  as of July 31, 2012 and 2011, respectively and is included in accrued expenses-other.

 
Note 7. Accounts Payable and Accrued Expenses
 
Accounts payable and accrued expenses and other current liabilities at July 31, 2012 and 2011 consisted of:
 
   
Years Ended
 
   
July 31,
 
   
2012
   
2011
 
             
Accounts Payable
  $ 291,156     $ 608,623  
Accounts Payable - Related Parties
    4,682       28,029  
Wages, Paid Leave and Payroll Related Taxes
    948,410       259,122  
Accrued Interest
    120,067       8,403  
Legal Settlements
    152,976       171,750  
Other
    20,769       80,209  
Total
  $ 1,538,060     $ 1,156,136  
 
Accounts payable due to related parties are reimbursable general and administrative expenses paid by the Company’s President and Consultant.
 
Note 8. Long-Term Debt
 
Long-term debt consists of:

   
July 31,
   
July 31,
 
   
2012
   
2011
 
5% Note payable to Bayview Loan Servicing, LLC, payable in monthly installments of $5,433 including interest, collateralized by real property.  Due to foreclosure of the building, the entire  balance is included in current portion of long-term debt. (1)
  $ 946,279     $ 951,921  
                 
9.367% Note payable to Allegiance Direct Bank, payable in monthly installments of approximately $1000, due in full on February 28, 2012 (2)
    -       6,112  
                 
12% Note  payable to Frontline Asset Management, payable in monthly installments of interest only, due in full on March 1, 2012 (3)
    508,492       349,465  
                 
48.956% Note payable to Amicus Funding Group, LLC, payable in monthly installments of approximately $467, collateralized by real property due in full on September 1, 2013 (4)
    6,297       7,394  
                 
26.85% Note payable to Treger Financial, payable in monthly installments of approximately $2,000, collateralized by real property due in full on June 1, 2012 (5)
    -       24,123  
                 
10% Note payable to Cameo Properties, LLC payable in monthly installments of interest only, due in full on December 27, 2014 (6)
    250,000       -  
                 
      1,711,068       1,339,015  
Less Current Portion
    (1,460,189 )     (399,407 )
    $ 250,879     $ 939,608  
 

Principal maturities for long-term debt are as follows for the years ended July 31:
 
2013   $ 1,460,189  
2014     879  
2015     250,000  
2016     -  
2017     -  
Thereafter     -  
    $ 1,711,068  
 
(1) In November 2007, the Company refinanced the first mortgage loan on its Mooresville, North Carolina building (the “property”) with Bayview. On March 31, 2010, the Company entered into a stipulation agreement with Bayview which reduced the monthly payment to $5,349, including interest. On May 27, 2011, the Company entered into a loan adjustment agreement with Bayview which increased the unpaid liability by $9,043 to $953,316 and decreased the monthly payments to $5,433, including interest. In 2013, Bayview may step up the interest rate at that time.  The loan is set to mature on March 31, 2038.  Effective April 1, 2012, the interest rate adjusted to Prime plus 4.875%. Interest rate changes are limited to 2% increase or decrease in any annual adjustments. Interest expense for the year ended July 31, 2012 and 2011, was $47,981 and $34,753, respectively.  The Company is in default of this note, and on the debt secured by a second lien on the property held by Frontline.  On July 25, 2012, Frontline, the junior lien holder noticed a foreclosure hearing and sale to take place on August 22, 2012, and the sale of the property to an assignee of Frontline, which was the only bidder, was completed on September 14, 2012.  The Company debt to Bayview was reduced to zero upon the completion of the sale.
 
(2) On February 28, 2011, the Company financed a general liability insurance policy with Allegiance Direct Bank (“Allegiance”) for the period February 28, 2011 to February 28, 2012 for $13,351. The Company was required to make a down payment of $3,351 in February 2011 and monthly payments including interest of 9.4%.  During the year ended July 31, 2012 and 2011, the Company repaid $6,111 and $8,888, respectively.  The Company was unable to make the final three payments on the note and the Company’s general liability insurance was cancelled.  The remaining months unused in the policy was credited back to the note of $3,098, which left a zero balance due to Allegiance.  Interest expense for the year ended July 31, 2012 and 2011, paid to Allegiance Direct Bank is $197 and $692, respectively.
 
(3) On February 26, 2010, the Company entered into a loan agreement with Frontline. The loan provides for payments to the Company of $2,000,000 with interest at a fixed annual rate of 12%.  On March 1, 2012, an Addendum to the original Promissory Note, dated February 26, 2010, was entered into which amended the term of the note to  provide for interest only payments, due on the last day of every month until maturity date March 30, 2013, when all principal and accrued interest shall be due and payable.  On April 11, 2011, Frontline assigned $850,279 of its debt to Winsor Capital, Inc. (“Winsor”). On April 19, 2011, Frontline partially assigned $437,309 to Kisumu S.A. (“Kisumu”) and Kisumu immediately converted the assigned note for 1,041,212 shares of Common Stock at a fair value price of $0.42 per share.  On April 19, 2011, Frontline assigned $420,000 to Eurolink Corporation (“Eurolink”) and Eurolink immediately converted the assigned note for 1,000,000 shares of Common Stock at a fair value price of $0.42 per share.  On December 27, 2011, Frontline purchased two electric vehicles for $255,000.  On the same day Frontline assigned $250,000 to Cameo Properties, LLC.  On April 26, 2012, the Company assigned $112,500 of its note receivable with SPS to Frontline which reduced the balance due to Frontline by $112,500.
 
Loans under the Frontline loan agreement are secured by a junior deed of trust on the Company’s  property located at 158 Rolling Hill Road, Mooresville, North Carolina.  On August 22, 2012, the foreclosure by Frontline of the property took place, pursuant to a notice of foreclosure and sale dated July 25, 2012, and the foreclosure sale to an assignee of Frontline, which was the only bidder, was completed on September 14, 2012.  Frontline received $50,000 upon the sale of the foreclosed property and this amount will reduce the debt to Frontline.
 
During the year ended July 31, 2012 and 2011, the Company received advances totaling $838,814 and $1,968,314, respectively; and made payments of $62,288 and $1,146,665, respectively.  Interest expense for the year ended July 31, 2012 and 2011, was $65,071 and $101,522, respectively.
 
(4) On March 11, 2011, the Company financed $7,992 for office equipment with Amicus Funding Group, LLC (“Amicus”) and monthly payments including interest of 48.956% are approximately $467.  During the year ended July 31, 2012 and 2011, the Company repaid $1,097 and $598, respectively. Interest expense for the year ended July 31, 2012 and 2011, was $3,109 and $1,269, respectively. The Company is in default on this note.

 
(5) On February 1, 2011, the Company financed $29,750 for production equipment with Treger Financial (“Treger”) and monthly payments including interest of 26.85% are approximately $2,000.  During the year ended July 31, 2012 and 2011, the Company repaid $4,560 and $5,627, respectively. Interest expense for the year ended July 31, 2012 and 2011, was $2,591 and $3,996, respectively.
 
On June 13, 2012, the Company entered into an agreement with Treger in which we agreed to surrender the production equipment to them in return for; (1) $11,000 in cash; (2) all late fees incurred of $9,423; (3) the outstanding principal balance of $19,563;  and (4) accrued interest of $2,207 would be eliminated.
 
(6) The Company entered into a Loan Agreement, dated as of July 14, 2011, with Cameo Properties LLC (“Cameo”) and was amended on October 14, 2011 (the “Amended Loan Agreement”). Each Note issued under the Amended Loan Agreement is due three years from the date of its issuance. The Amended Loan Agreement provides for loans to the Company of up to $750,000 (the “Loan”), with a minimum initial loan of $250,000 within 60 days of the date of the Loan Agreement, and up to an additional $500,000 within the first year and a half from execution of the Amended Loan Agreement. This is not a revolving facility, and any principal repaid by the Company will not be available for additional advances to the Company under the Amended Loan Agreement. The Company cannot, without the Lender’s consent, prepay all or part of the Loan. The notes evidencing the installments of the loans bear interest payable monthly in arrears at the rate of 10% per annum, and mature and are due and payable three years from the date of issuance. On December 27, 2011, Frontline assigned $250,000 of its receivable to Cameo.  Interest expense for the year ended July 31, 2012 and 2011, was $14,863 and $0, respectively.
 
Note 9. Stockholders’ Equity (Deficiency)
 
On April 15, 2010, the Company entered into a loan agreement for $2,000,000 with Winsor. The entire loan amount was secured by 10,000,000 shares of the Company common stock.  On April 19, 2011, Winsor converted the entire $2,000,000 outstanding loan amount for the 10,000,000 collateralized common stock.
 
On April 19, 2011, Frontline partially assigned $437,309 to Kisumu S.A. (“Kisumu”) and Kisumu immediately converted the assigned note for 1,041,212 shares of Common Stock at a fair value price of $0.42 per share.  On April 19, 2011, Frontline assigned $420,000 to Eurolink Corporation (“Eurolink”) and Eurolink immediately converted the assigned note for 1,000,000 shares of Common Stock at a fair value price of $0.42 per share.
 
On April 19, 2011, Starglow Assets, Inc. converted the entire $3,000,000 outstanding loan amount for the 7,500,000 collateralized shares.
 
On July 14, 2011, the Company entered into a Loan Agreement with Cameo Properties LLC (“Cameo”). The loans under the Loan Agreement are secured, over the life of the loan, by 20 million shares of our common stock.  If the Company should default on the loan, Cameo will retain all of the 20 million shares of common stock.  In the event of a reverse stock split or combination of shares, the number of shares of common stock constituting the Share Collateral will, immediately following such reverse stock split or combination of shares, be increased by a new issuance of common stock of the Company to that number of shares constituting the Share Collateral immediately prior to such reverse stock split or combination of shares. The certificates representing any share dividends that the Company pays during the term of the Loan with respect to the Shares being held in escrow shall be credited and delivered to the Lender and held by the Lender pursuant to the terms of the Loan Agreement.
 
Effective January 26, 2012, the Securities and Exchange Commission approved a one-for-five reverse split of the common stock.  Pursuant to the anti-dilution provisions in the Cameo Properties loan agreement the Company issued 16,000,000 shares to Cameo Properties, so they again held 20,00,000 post reverse stock split shares.
 
Changes to Authorized Common Stock
 
On June 24, 2011, the Board of Directors unanimously approved an amendment to the Articles of Incorporation to increase the authorized number of shares of common stock from 100 million shares, par value $.001 per share, to 300 million shares, par value $.001 per share. The Company filed the amendment with the Secretary of State of Nevada on August 10, 2011, after mailing a Definitive Information Statement to the Company’s stockholders and the amendment was effective August 10, 2011.
 
On December 13, 2011, the Board of Directors unanimously approved an amendment to the Company’s Articles of Incorporation to change the authorized number of shares of common stock from 300 million shares, par value $.001 per share, to 60 million shares, par value $.001 per share, and to effect a reverse split in the outstanding common stock in the same ratio.  The Company filed the amendment with the Secretary of State of Nevada on December 14, 2011.
 
 
Our board of directors unanimously approved an amendment to our Articles of Incorporation to increase the authorized number of shares of common stock from 60,000,000 shares, par value $.001 per share, to 400,000,000 shares, par value $.001 per share, on July 20, 2012. On the same date we received the written consent from shareholders of our company holding a majority (75.69%) of the outstanding shares of our common stock. We filed the amendment with the Secretary of State of Nevada on August 30, 2012, and the amendment was effective on that date.
 
Note 10. Net Earnings (Loss) Per Common Share
 
The following table sets forth the reconciliation of the basic and diluted net earnings (loss) per common share computations for the years ended July 31, 2012 and 2011.

   
Years Ended
 
   
July 31,
 
   
2012
   
2011
 
Basic and Diluted Earnings (Loss) Per Share
           
Net Earnings (Loss) Ascribed to Common Shareholders - Basic and Diluted
  $ (2,312,015 )   $ 118,921  
Weighted Average Shares Outstanding - Basic and Diluted
    26,423,470       26,127,867  
Basic and Diluted Net Earnings (Loss) Per Common Share
  $ (0.09 )   $ 0.00  

The amounts previously reported for the year ended July 31, 2012, was as follows:
 
   
Year Ended
 
   
July 31, 2011
 
Basic and Diluted Loss Per Common Share
  $ -  
Weighted Average Number of Shares
      Outstanding -Basic and Diluted
    30,628,907  

Note 11. Share Based Compensation
 
The Company records compensation expense in its consolidated statement of operations related to employee stock-based options and awards in accordance with FASB ASC 718, “Compensation”, and (“ASC 718”).
 
The Company recognizes the cost of all employee stock options on a straight-line attribution basis over their respective contractual terms, net of estimated forfeitures. The Company has selected the modified prospective method of transition.
 
Stock Option Plan
 
As of July 31, 2012, there are no shares of common stock remaining and available for issuance under the stock option plans.
 
Note 12. Income Taxes
 
The Company adopted the provisions of ASC 740, “Income Taxes” (“ASC 74”) on August 1, 2007. The implementation of ASC 740 did not impact the total amount of the Company’s liabilities for uncertain tax position.
 
The Company recorded no provisions for income taxes for the years ended July 31, 2012 and 2011.
 
 
A reconciliation of taxes on income computed at federal statuary rate to the amount provided is as follows:
 
   
Years Ended
 
   
July 31,
 
   
2012
   
2011
 
Tax Provisions Computed at Federal Statuary Rate of 35%
           
Continuing Operations
  $ (809,205 )   $ 41,622  
                 
Increase (Decrease) in Taxes Resulting From:
               
(Used) Unused Operating Losses
    809,205       (41,622 )
    $ -     $ -  

Components of deferred income tax assets are as follows:
 
   
Years Ended
 
   
July 31,
 
   
2012
Tax Effect
   
2011
Tax Effect
 
             
Deferred Tax Assets - Current:
           
             
United States Net Operating Loss
  $ 22,705,162     $ 21,895,957  
Valuation Allowances
    (22,705,162 )     (21,895,957 )
    $ -     $ -  
 
The net operating loss carry forward as of July 31, 2012, is approximately $64.9 million and will expire in years through 2026.
 
Note 13. Commitments and Contingencies
 
Lease Agreement
 
Effective April 16, 2008, SPS agreed to lease approximately 5,000 square feet of space in the Company’s North Carolina facility at a rental rate of $2,500 per month and the monthly rental to be escalated five (5%) percent annually beginning April 16, 2009.  The leased space was suitable for, and utilized by SPS for, SPS’s developmental and manufacturing operations for licensed products pursuant to the License Agreement. The leased space was leased on a month-to-month basis at a monthly rental of $3,038. Although the lease was signed, the space was only 80% completed as of July 31, 2012. On May 31, 2012, with the Company closing its facility in North Carolina, Sky Power’s lease was terminated and we are no longer collecting rent from them.
 
Total rental income for the years ended July 31, 2012 and 2011 was $32,083and $42,625, respectively.
 
Surety Bond
 
The Company renewed the manufacturing license with the North Carolina Department of Motor Vehicles. This license requires a surety bond of $50,000 for three years which the Company acquired from Kaercher Campbell & Associates and is effective through February 18, 2012. The Company is licensed as a motor vehicle dealer to engage in the business of selling motor vehicles by the State of North Carolina DMV.  The Company's license was effective through March 31, 2012. The bond was not renewed and subsequently lapsed.  With the economic downturn, the status of the North Carolina facility still unresolved, the layoff of employees, the company has not sought another bond to renew the manufacturing license. It is possible that when funding is available, engineers and technicians have been hired, the present location or a new location has been secured that applying for a manufacturing license may need to be commenced anew without the possibility of renewing the lapsed license.
 
 
Legal Proceedings
 
The Company is currently involved in various claims and legal proceedings. Quarterly, the Company reviews the status of each significant matter and assesses its potential financial exposure and if the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss.
 
Caudle & Spears has obtained a default judgment against the Company in Meckenberg County, North Carolina, General Court, in the amount of $17,686. This law firm represented us in our litigation against Martin Koebler, a former employee, whom we successfully sued for return of Company property and other damages. The Company is in settlement negotiations with Caudle & Spears, since its judgment against Martin Koebler is still in the collection process. A payment agreement has been reached in the amount of $2,500 per month with no interest until paid.  The Company is not current with its payment arrangements and has a balance of $4,263 still due.
 
Internal Revenue Service (“IRS”) served the Company with a tax lien dated March 3, 2010 in the total amount of $251,928. Third quarter 2009 taxes are approximately $117,000, which are included in total due.  The Company has been served with an additional tax lien dated January 19, 2011, in the amount of $2,925. The Company had a payment plan in place with IRS; however, the Company is arrears in payments as of July 31, 2012. Management is working with the local IRS office to try and revise the payment agreement.  The balance due on the most recent statement from the IRS is $566,071.
 
Tallman Hudders & Sorrentino has obtained a judgment in Lehigh County, Pennsylvania, on behalf of their client Javad Hajihadian, an individual.  Mr. Hajihadian had ordered and paid for, the first super car to be produced by Li-ion Motors in November 2008. The car was in the design stage when it was ordered.  Mr. Hajihadian’s attorney subsequently contacted the Company to cancel his contract and have his payment refunded. The parties had reached a settlement agreement and the payment was being refunded with interest. The settlement agreement was for $102,500 and stipulated monthly payments of $10,250 commencing in July 2010.  Payments were made through November 2010, totaling $51,250, leaving a balance of five payments or $51,250 still due; which is reflected on the Company’s balance sheet under current liabilities. The Company became delinquent and Mr. Hajihadian proceeded with litigation and on February 4, 2011, a judgment was issued in his favor for $51,750.
 
The Company’s facility in Mooresville, North Carolina was financed through Bayview and Frontline, which had a second lien on the property. Li-ion became delinquent with the mortgage payments, and, following a prior foreclosure filing and new agreement as to payments under the mortgage, on July 12, 2012, Bayview  refiled a notice of hearing on foreclosure on its deed of trust and security agreement for a hearing on August 21, 2012, the outstanding amount of the loan at July 31, 2012 being $946,279.   A similar notice of foreclosure pursuant to the Frontline deed of trust was filed by the Trustee with the same court on July 25, 2012, noticing a hearing for August 22, 2012, with an amended notice of default, the amount of $508,492 being outstanding under the loan as of July 31, 2012. The Trustee for Frontline also filed on July 25, 2012, a notice of foreclosure and sale to take place on August 22, 2012.  The Trustee under the Bayview deed of trust on August 21, 2012, filed its notice of foreclosure and sale to take place on September 18, 2012, of the real and personal property securing the deed of trust.   On September 14, 2012, the sale of the property pursuant to the Frontline August 22, 2012 foreclosure and sale was completed, and Frontline assigned its rights to its foreclosure bid to A&S Holdings Inc., subject to the rights of Bayview, as the holder of the first mortgage on the property.
 
Fine Mobile and Li-ion Motors entered into a confession of judgment in relation to X-Prize winnings.  The parties agreed to a payment arrangement of $10,000 per month for a period of eight (8) months.  If a default were to occur, the debtor would then be entitled to exercise confession of judgment in the amount of $120,000 without further delay.  The initial payment was wired on December 15, 2011; however, the Company was unable to make any additional payments.  On June 18, 2012 Fine Mobile executed the judgment with the Iredell County Sheriff’s Office and on July 2, 2012, the Sherriff took possession of the building located at 158 Rolling Hill Road, Mooresville, NC, seizing all remaining assets.
 
Note 14. Other Miscellaneous Income
 
Other income for the year ended July 31, 2012, consisted primarily of accounting fees and rental income from Sky Power for $62,083 and interest income from the LEVC Note of $175,479.  This income was offset by other miscellaneous expenses of $2,708.
 
Other income for the year ended July 31, 2011, consisted primarily of (a) accounting fees and rental income from Sky Power for $72,625; (b) interest income from the LEVC Note of $118,440; (c) forgiveness of debt in connection with the adjustment of previously recorded accounts payable of $123,621; and (d) net proceeds of  $2,303,790 from X-Prize.

 
Note 15. Subsequent Events
 
Our board of directors unanimously approved an amendment to our Articles of Incorporation to increase the authorized number of shares of common stock from 60,000,000 shares, par value $.001 per share, to 400,000,000 shares, par value $.001 per share, on July 20, 2012. On the same date we received the written consent from shareholders of our company holding a majority (75.69%) of the outstanding shares of our common stock. We filed the amendment with the Secretary of State of Nevada on August 30, 2012, and the amendment was effective on that date.
 
On August 25, 2012, the Board approved a debt conversion at $.03 per share.  Frontline assigned $39,000 debt to Kisumu S.A. 1,300,000 shares were issued on September 13, 2012 and that portion of the debt was retired.
 
On September 28, 2012, the Board approved the cancellation of $12,180 of Frontline debt at $0.0084 per share and issued 1,450,000 shares of common stock.
 
On July 12, 2012, Bayview  filed a notice of hearing on foreclosure on its deed of trust and security agreement on the Company’s property at 158 Rolling Hill Road, Mooresville, NC (the “property”), with the County of Iredell, North Carolina, General Court of Justice, Superior Court Division, for a hearing on August 21, 2012.   A similar notice of foreclosure pursuant to  the Frontline deed of trust was filed by the Trustee with the same court on July 25, 2012, noticing a hearing for August 22, 2012, the amended notice of default in the amount of $660,546 having been given on July 23, 2012. The Frontline Trustee also filed on July 25, 2012, a notice of foreclosure and sale to take place on August 22, 2012.  The Trustee under the Bayview deed of trust on August 21, 2012, filed its notice of foreclosure and sale to take place on September 18, 2012, of the real and personal property securing the deed of trust.   On September 14, 2012, the sale of the property pursuant to the Frontline August 22, 2012 foreclosure and sale was completed, and Frontline assigned its rights to its foreclosure bid to A&S Holdings Inc., subject to the rights of Bayview, as the holder of the first mortgage on the property.
 
 
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
 
None.
 
Item 9A (T). Controls and Procedures.
 
Evaluation of Disclosure Controls and Procedures
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive and financial officer, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost- benefit relationship of possible controls and procedures.

As of July 31, 2012, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not as effective as they have previously been. We are tightening procedures to ensure in the future control and paperwork of finances meet GAAP standards.

Management's Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Management assessed the effectiveness of internal control over financial reporting as of July 31, 2012. We carried out this assessment using the criteria of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.  In this assessment management noted that Frontline Asset Management, who has loaned and funded the company, made some direct wage payments for Li-ion and other liability payments, paperwork on these items was not turned over to the company. Some employees have provided written confirmation of payments received; others were not willing to provide written confirmation.  Li-ion has instructed Frontline in the future all funds must go directly to the company so records are properly maintained.

Management's report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission. Management concluded in this assessment that, as of July 31, 2012, given management’s actions with regard to the above reportable conditions, our internal control over financial reporting was effective.

There have been no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of our 2012 fiscal year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 Limitations on the Effectiveness of Controls
 
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. The Company's disclosure controls and procedures are designed to provide reasonable assurance of achieving its objectives. The Company's Chief Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures are effective at that reasonable assurance level.

Item 9B. Other Information.

None.
 
 
PART III
 
Item 10. Directors, Executive Officers, and Corporate Governance.

Our executive officers and directors and their respective ages as of October 31, 2012 are as follows:
 
Name
 
Age
 
Position
Stacey Fling
 
53
 
Chief Executive Officer, President and Director
 
Our Board of Directors consists of one director. The following information with respect to the principal occupation or employment of each officer and director, the principal business of the corporation or other organization in which such occupation or employment is carried on, and such person's business experience during the past five years, has been furnished to the Company by the respective officers and director:

Stacey Fling has been the President of A & S Holdings, Inc., since 2003, a real estate investment and development company located in Las Vegas, NV.  Prior to 2003, Ms. Fling managed the administrative offices of an environmental remediation and monitoring company with offices in San Diego, California, as well as in Las Vegas, Nevada.

Term of Office

Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.

Committees

We do not have any committees of the Board of Directors.

Corporate Code of Conduct

We have adopted a  corporate code of conduct, which  provides for internal procedures concerning the reporting and disclosure of corporate matters that are material to our business and to our stockholders. The corporate code of conduct  includes a code of ethics for our  officers  and  employees as to workplace  conduct,  dealings with customers, compliance  with laws,  improper payments, conflicts  of  interest,   insider  trading,   company  confidential information, and behavior with honesty and integrity.

Significant Employees

We have no significant employees other than the officers described above.
 
 Section 16(A) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Exchange Act requires the Company’s executive officers and directors, and persons who beneficially  own more  than ten  percent  of the Company's  equity  securities,  to file  reports  of  ownership  and  changes in ownership with the Securities and Exchange Commission.  Officers,  directors and greater than ten percent  shareholders are required by SEC regulation to furnish the  Company  with copies of all  Section  16(a)  forms they file.  Based on its review of the copies of such forms  received  by it, the Company  believes  that during the fiscal  year ended  July  31,  2012, all such  filing  requirements applicable to its officers and  directors  were  complied  with.
 
 
Item 11. Executive Compensation.

The following table sets forth certain information as to the Company's  highest paid executive officers and directors for  the  Company's  fiscal years ended July 31, 2012, 2011, and 2010.  No other compensation was paid to any such  officer or director other than the cash compensation set forth below.

Summary Compensation Table
 
Name and
Principal
Position
 
Year*
 
Salary ($)
 
Bonus ($)
 
Stock
Awards ($)
 
Option
Awards ($)
 
Non-Equity
Incentive Plan
Compensation ($)
 
Change in Pension
Value and Nonqualified
Deferred
Compensation
Earnings ($)
 
All Other
Compensation
($)
 
Total
($)
 
(a)
 
(b)
 
( c )
 
(d)
 
(e)
 
(f)
 
(g)
 
(h)
 
(i)
 
(j)
 
Stacey Fling, President
 
2010
  $ 74,100   $ -   $ -   $ -   $ -   $ -   $ -   $ 74,100  
   
2011
    61,200     -     -     -     -     -     -     61,200  
   
2012
    62,400     -     -     -     -     -     -    
62,400
 
                                                       
Holly Roseberry, Director
 
2010
    -     -     -     -     -     -     -     -  
   
2011
    -     -     -     -     -     -     -     -  
   
2012
    -     -     -     -     -     -     -     -  

* Years ended July 31, 2012, 2011 and 2010.
** Holly  Roseberry held the office of President from November 15, 2002 to April 30, 2009 .

Option/SAR Grants in Last Fiscal Year

There were no grant of options to purchase our common stock to our officers or directors in fiscal 2012, and there were no exercises of such options during or options held at the end of such fiscal year by officers or directors.
 
Directors’ Compensation

The following table shows compensation paid to our directors in the fiscal year ended July 31, 2012.
Director Compensation
 
             
Change in
       
             
Pension Value and
       
             
Nonqualified
       
   
Fees Earned
   
Non-Equity
Deferred
       
   
or Paid in
 
Stock
Option
Incentive Plan
Compensation
All Other
     
Name
 
Cash ($)
 
Awards ($)
Awards ($)
Compensation ($)
Earnings ($)
Compensation ($)
 
Total ($)
 
(a)
 
(b)
 
( c )
(d)
(e)
(f)
(g)
 
(h)
 
Stacey Fling
  $ 12,000               $ 12,000  
                           
Holly Roseberry
  $ 21,000               $ 21,000  

*  Stacey Fling has acted as a director since May 1, 2009 and Holly Roseberry commenced service as a Director on November 15, 2002 and resigned December 21, 2011.
 
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth certain information concerning the number of shares of our common stock owned  beneficially as of  October 24, 2012, by: (i) each person  (including  any group) known to us to own more than five percent (5%) of any  class of our  voting  securities,  (ii)  each of our  directors, and (iii)officers and directors as a group. Unless otherwise indicated, the shareholders listed possess sole voting and  investment  power with  respect to the shares shown.
 
 
Title of Class
 
Owner
 
Number of
Shares of
Common Stock
   
Percentage of
Outstanding
 
Common Stock
               
   
Stacey Fling, President and Chief Executive Officer
   
107
     
*
 
   
4933 W. Craig Road
               
   
Las Vegas, NV 89130
               
                     
   
Cameo Properties LLC
   
20,000,000
     
68.55
%
   
Hunkins Waterfront Plaza
               
   
PO Box 556
               
   
Charlestown, Nevis, West Indies
               
                     
   
All Officers and Directors  
   
107
     
*
 
   
Directors as a Group (2 persons)
               

*        Less than 1%
(1)
As of November 16, 2012, there were 32,373,470 shares of our common  stock issued and outstanding.
 
Change in Control

We are not aware of any arrangement that might result in a change in control in the future.
 
Item 13. Certain Relationships and Related Transactions, and Director Independence.
 
Effective April 15, 2008, the Company entered into a License Agreement  (“License Agreement”) with Sky Power Solutions Corp. (“SPS”) providing for their license to Sky Power of their patent applications and technologies for rechargeable lithium ion batteries for electric vehicles and other applications (“Licensed Products”).  Under the License Agreement, the Company has the right to purchase their requirements of lithium ion batteries from Sky Power, and their requirements of lithium ion batteries shall be supplied by Superattice in preference to, and on a priority basis as compared with, supply and delivery arrangements in effect for other customers of SPS. The Company’s cost for lithium ion batteries purchased from SPS shall be SPS’s actual manufacturing costs for such batteries for the fiscal quarter of SPS in which the Company’s purchase takes place. On May 25, 2010 the license agreement was amended to reflect SPI’s territory would only be the United States,  U.S. possessions and territories  and we can license other companies in other parts of the world. We have issued a license to a firm for the rights in Canada.

Under the terms of the license agreement, SPS has agreed to invest a minimum of $1,500,000 in each of the next two years in development of the technology for the Licensed Products. To date, SPS has not met the minimum requirements in the development of technology, and therefore, is not in compliance with its obligations under this covenant of the license agreement.  The Company has advised SPS  that it will not give notice of default against them for their failure to comply with this covenant over the term of the License Agreement.
 
 
Effective April 16, 2008, SPS agreed to lease approximately 5,000 square feet of space in the Company’s North Carolina facility at a rental rate of $2,500.00 per month and the monthly rental to be escalated five (5%) percent annually beginning April 16, 2009.  The leased space is suitable for, and utilized by SPS for, SPS’s developmental and manufacturing operations for licensed products pursuant to the License Agreement. The leased space is leased on a month-to-month basis at a current monthly rental of $3,038. Although the lease was signed, the space is only 80% completed as of July 31, 2012. The facility was closed in May 2012, and there is no longer any leased space available.
 
Item 14.  Principal Accountant Fees and Services.
 
   
Fiscal 2012
   
Fiscal 2011
 
             
Audit - Related Fees (1)
  $ 18,250     $ 42,000  
Tax Fees (2)
    -       -  
All Other Fees
    -       -  
Audit committee pre-approval  processes, percentages of
services approved  by  audit committee, percentage of
hours spent on audit engagement by persons other than
principal accountant's full time employees.
    N/A       N/A  
 
(1)       Audit Fees consist of fees billed for professional services rendered for the audit of the Company’s consolidated annual financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Madsen & Associates in connection with statutory and regulatory filings or engagements.
 
(2)       Tax Fees consist of fees billed for professional services rendered for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance, international tax, research, and unclaimed property services.


Item 15. Exhibits and Financial Statement Schedules.
 
Exhibit No.
 
Description
3.1
 
Articles of Incorporation of the Company.(Incorporated herein by reference to Exhibit 3.1 to the Company's Registration Statement on Form SB-2, filed with the Commission on May 29, 2001.)
     
3.1a
 
Certificate of Amendment to Articles of Incorporation filed October 27, 2004. (Incorporated by reference to Exhibit3.1a to the Company’s Current Report on Form 8-K, filed with the Commission on November 2, 2004.)
     
3.1b
 
Form of Restatement of Articles of Incorporation of the Company. (Incorporated by reference to Exhibit 3.1a to the Company’s Quarterly Report on Form 10-QSB, filed with the Commission on December 15, 2004.)
     
3.1c
 
Certificate of Amendment to Articles of Incorporation, filed effective March 9, 2005. (Incorporated by reference to Exhibit 3.1c to the Company’s Annual Report on Form 10-KSB, filed with the Commission on May 23, 2005.)
     
3.1d
 
Certificate of Change, filed effective January 17, 2008. (Incorporated by reference to Exhibit 3.1d to the Company’s Current Report on Form 8-K, filed with the Commission on January 16, 2008.)
     
3.1e
 
Certificate of Amendment to Articles of Incorporation, filed effective December 24, 2007. (Incorporated by reference to Exhibit 3.1e to the Company’s Annual Report on Form 10-K, filed with the Commission on November 12, 2008.)
 
 
3.1f
 
Certificate of Amendment to Articles of Incorporation, filed effective February 19, 2009.(Incorporated by reference to Exhibit 3.1f to the Company’s Current Report on Form 8-K, filed with the Commission on February 27, 2009.)
     
3.1g
 
Certificate of Merger with subsidiary, dated December 28, 2009, amending Articles of Incorporation of Company to change the name of the Company to Li-ion Motors Corp. (Incorporated by reference to Exhibit 3.1g to the Company’s Current Report on Form 8-K, filed with the Commission on June 4, 2010.)
     
3.1h
 
Certificate of Change, filed effective February 1, 2010. (Incorporated by reference to Exhibit 3.1h to the Company’s Current Report on Form 8-K, filed with the Commission on June 4, 2010.)
     
3.1i
 
Certificate of Amendment to Articles of Incorporation, filed effective May 17, 2010. (Incorporated by reference to Exhibit 3.1i to the Company’s Current Report on Form 8-K, filed with the Commission on June 4, 2010.)
     
3.1j
 
Certificate of Amendment to Articles of Incorporation, filed effective August 10, 2011. (Incorporated by reference to Exhibit 3.1j to the Company’s Current Report on Form 8-K, filed with the Commission on August 16, 2011.)
 
       
3.1k
 
Certificate of Change, filed December 13, 2011. (Incorporated by reference to Exhibit 3.1k to the Company’s Current Report on Form 8-K, filed with the Commission on January 31, 2011.)
 
       
3.1l
 
Certificate of Amendment to Articles of Incorporation, filed effective August 30, 2012. (Incorporated by reference to Exhibit 3.1l to the Company’s Current Report on Form 8-K, filed with the Commission on September 7, 2012.)
 
     
3.2
 
By-Laws of the Company. (Incorporated herein by reference to Exhibit 3.2 to the Company's Registration Statement on Form SB-2 filed with the Commission on May 29, 2001.)
     
4.1
 
Specimen Common Stock Certificate. (Incorporated herein by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-KSB, filed with the Commission on November 8, 2006.)
     
4.2
 
Whistler Investments, Inc. 2003 Restricted Stock Plan. (Incorporated herein by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-8 filed with the Commission on July 18, 2003.)
     
10.3
 
Office Services Agreement, dated May 1, 2000, between the Company and Dewey Jones. (Incorporated herein by reference to Exhibit 10.3 to the Company's Registration Statement on Form SB-2 filed with the Commission on May 29, 2001.)
     
10.4
 
Asset Purchase Agreement dated April 10, 2002 between Salim S. Rana Investments Corp. and Whistler Investments, Inc. (Incorporated by reference to Exhibit No. 10.1 to the Company's Annual Report on Form 10-KSB, filed with the Commission on May 6, 2002.)
     
10.5
 
Agreement dated January 1, 2003 between Whistler Investments, Inc. and Kim Larsen respecting the disposition of Azra Shopping Center. (Incorporated by reference to Exhibit 10.1 to the Company's Amendment No. 1 to its Annual Report on Form 10-KSB filed May 8, 2003)
     
10.6
 
Amendment to Licensing Agreement, dated October 21, 2003, between Nu Age Electric Inc. and Whistler Investments, Inc. (Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K, filed with the Commission on November 21, 2003.)
     
10.7
 
Agreement dated October 21,2003, by and between RV Systems, Inc. and Whistler Investments, Inc. (Incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K, filed with the Commission on November 21, 2003.)
 
 
10.8
 
Investment Agreement, dated as of January 19, 2004, by and between Whistler Investments, Inc. and Dutchess Private Equities Fund, L.P. (Incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K, filed with the Commission on January 23, 2004.)
     
10.9
 
Registration Rights Agreement dated as of January 19, 2004, by and between Whistler Investments, Inc. and Dutchess Private Equities Fund, L.P. (Incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K, filed with the Commission on January 23, 2004.)
     
10.10
 
Stock Redemption and Reissuance Agreement, dated as of February 10, 2004, Between Whistler Investments, Inc. and Salim S. Rana Investments, Inc. (Incorporated by reference to Exhibit 10.10 to Amendment No. 1 to the Company’s Annual Report on Form 10-KSB, filed with the Commission on October 4, 2004.)
     
10.11
 
Letter from City of Austin, Texas, dated February 27, 2004. (Incorporated by reference to Exhibit 10.11 to Amendment No. 1 to the Company’s Annual Report on Form 10-KSB, filed with the Commission on October 4, 2004.)
     
10.12
 
Memorandum of Understanding, dated March 15, 2004, between Shanghai Geely Metop International and the Global Electric 21 subsidiary of Whistler Investments, Inc. (Incorporated by reference to Exhibit 10.12 to Amendment No. 1 to the Company’s Annual Report on Form 10-KSB, filed with the Commission on October 4, 2004.)
     
10.13
 
Loan Agreement, made as of the 20th day of February, 2004, among Sterling Capital Inc. and Whistler Investments, Inc. (Incorporated by reference to Exhibit 10.13 to Amendment No. 1 to the Company's Annual Report on Form 10-KSB, filed with the Commission on October 4, 2004.)
     
10.14
 
Letter Agreement, dated February 3, 2004, between Whistler Investments, Inc. and RV Systems, Inc. (Incorporated by reference to Exhibit 10.14 to Amendment No. 1 to the Company's Annual Report on Form 10-KSB, filed with the Commission on October 4, 2004.)
     
10.15
 
Purchase and Sale Agreement, made effective as of the 3rd day of December, 2004, between WhistlerTel, Inc. and Trade Winds Telecom, LLC. (Incorporated by reference to Exhibit 10.15 to the Company's Current Report on Form 8-K, filed with the Commission on December 8, 2004.)
     
10.16
 
Bill of Sale and Assignment, dated as of December 3, 2004, between Trade Winds Telecom LLC and Whistlertel,Inc. (Incorporated by reference to Exhibit 10.16 to the Company's Current Report on Form 8-K, filed with the Commission on December 8, 2004.)
     
10.17
 
Agreement and Plan of Reorganization, dated as of August 18, 2005, among the Company, Whistlertel, Inc. and Javakingcoffee, Inc. (Incorporated by reference to Exhibit 10.17 to the Company's Current Report on Form 8-K, filed with the Commission on August 24, 2005.)
     
10.18
 
Notice, dated July 2, 2005, from EV Innovations, Inc. To RV Systems, Inc. (Incorporated by reference to Exhibit10.18 to the Company’s Annual Report on Form 10-KSB, filed with the Commission on October 26, 2005.)
     
10.19
 
Non-reimbursable Space Act Agreement between National Aeronautics and Space Administration, John F. Kennedy Space Center and EV Innovations, Inc. (Incorporated by reference to Exhibit 10.19 to the Company's Quarterly Report on Form 10-QSB, filed with the Commission on March 17, 2006.
 
 
10.20
 
Agreement dated March 30, 2006 between Paratransit, Inc. and the Company. (Incorporated herein by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-KSB, filed with the Commission on November 8, 2006.)
     
10.21
 
Request for Pilot Approval, submitted May 31, 2006, to New York City Taxi and Limousine Commission by the Company. (Incorporated herein by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-KSB, filed with the Commission on November 8, 2006.)
     
10.22
 
Consulting Agreement, dated March 26, 2007, between Hybrid Technologies, Inc. and Griffen Trading Company.(Incorporated by reference to Exhibit 10.22 to the Company’s Quarterly Report on Form 10-QSB, filed with the Commission on June 19, 2007.)
     
10.23
 
Loan Agreement, dated as of October 29, 2007, between Wyndom Capital Investments, Inc. and the Company.(Incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-KSB, filed with the Commission on November 13, 2007.)
     
10.24
 
Form of Note issuable pursuant to the Loan Agreement, dated October 29, 2007, between Wyndom Capital Investments, Inc. and the Company, filed herewith. (Incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-KSB, filed with the Commission on November 13, 2007.)
     
10.25
 
Stock Purchase Agreement, dated as of April 15, 2008, between the Company and Blue Diamond Investments, Inc.(Incorporated by reference to Exhibit 10.25 to the Company’s Current Report on Form 8-K, filed with the Commission on April 21, 2008.)
     
10.26
 
License Agreement, dated April 15, 2008, between the Company and Zingo, Inc. (now Sky Power Solutions, Inc.).(Incorporated by reference to Exhibit 10.25 to the Company’s Current Report on Form 8-K, filed with the Commission on April 21, 2008.)
     
10.27
 
Loan Agreement, dated as of May 5, 2008, between Crystal Capital Ventures Inc. and the Company. (Incorporated by reference to Exhibit 10.27 to the Company’s Current Report on Form 8-K, filed with the Commission on June 6, 2008.)