UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549


FORM
      10-KSB




(Mark
      One)




x ANNUAL REPORT
      UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For the fiscal year ended March 31,
              2006




o TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT


For
                  the transition period from ____________ to_________________
                
                Commission
                  file number 000-51108


Splinex
      Technology Inc.







(Name
      of
      small business issuer in its charter)




**Delaware**
              **20-0715816**(State or other jurisdiction of incorporation
                or organization)
              (IRS
                  Employer Identification
                  Number)





500
      W.
      Cypress Creek Road Suite 100


Fort
      Lauderdale, FL 33309


(Address
      of principal executive offices)





(954)
      556-4020


(Issuer’s
      telephone number)





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 $0.001 per share(Title
                  of
                  class)




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes xNo o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will 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-KSB or any
      amendment to this Form 10-KSB. x





State
      issuer’s revenues for its most recent fiscal year. $1,971.





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of a
      specified date within the past 60 days. (See definition of affiliate in Rule
      12b-2 of the Exchange Act.) The aggregate market value of the voting common
      equity held by non-affiliates was $94,000 based upon the last traded price
      of
      $0.04 per share on July 5, 2006










At
      July
      14, 2006, the number of shares outstanding of the issuer’s common stock was
      100,507,770 shares.





DOCUMENTS
      INCORPORATED BY REFERENCE


None.








Transitional
      Small Business Disclosure Format (Check one): Yes o No x











SPLINEX
      TECHNOLOGY INC.


Form
      10-KSB


For
      the
      Year Ended March 31, 2006


INDEX





PageNo.PART
                IItem
                1.
            Description
                of Business
            4Item
                2.
            Description
                of Property
            9Item
                3.
            Legal
                Proceedings
            9Item
                4.
            Submission
                of Matters to Vote
            9PART
                IIItem
                5.
            Market
                for Common Equity and Related Stockholder Matters
            10Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operations
            11Item
                7.
            Financial
                Statements
            16Item
                8.
            Changes
                In and Disagreements With Accountants on Accounting and Financial
                Disclosure
            31Item
                8A.
            Controls
                and Procedures
            31Item
                8B.
            Other
                Information
            31.
            PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance With
                Section
                16(a) of the Exchange Act
            32Item
                10.
            Executive
                Compensation
            35Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters.
            40Item
                12.
            Certain
                Relationships and Related Transactions.
            41Item
                13.
            Exhibits
            45Item
                14.
            Principal
                Accountant Fees and Services.
            48Signatures
            49Certifications
            50




3




PART
      I




Item
      1.
      Description of Business




**Overview**




Splinex
      Technology Inc. (“Splinex”) develops, licenses and services software that
      enables the generation, manipulation, viewing and image-based searching of
      complex, multi-dimensional mathematical objects and information. We believe
      end-users of our software products, such as mathematicians, scientists, graphic
      designers or digital artists working on complex, graphical three-dimensional
      problems, will experience greater productivity through improved interaction
      with, enhanced visual representation and faster manipulation of, and greater
      technical and artistic precision in representing, multi-dimensional mathematical
      objects and information.





Since
      inception, we have operated in a development phase typical of a software company
      and have focused on developing technologies and products and securing
      intellectual property rights while we develop relationships with potential
      customers and resellers. Our corporate activities to date have included raising
      capital, strategic and business planning, completing the registration of our
      common stock with the U. S. Securities and Exchange Commission (the
“Commission”), and retaining executive management. We have minimal sales and no
      sales contracts and are considered to be in the development stage as of March
      31, 2006.





During
      September 2005, the Company implemented a change in its business strategy and
      took certain actions to reduce its overhead costs. We began marketing and sales
      activities for our ***nViz*** ***xTM*** product
      line in late June 2005 under a marketing and distribution agreement (the
“Reseller Agreement”) with a leading mathematical computational software
      developer; however, sales under the Reseller Agreement have been minimal to
      date. The Company intends to continue to offer for sale its existing ***nViz*** ***x*** visualization products, including continuing to market these products under
      the
      Reseller Agreement and in its internet web store, but the Company does not
      presently plan to introduce new versions of the product or upgrades unless
      and
      until sales for the current products increase significantly. The Company has
      discontinued its development projects unrelated to ***nViz*** ***x*** .
      The
      Company has terminated its use of software development services previously
      provided to the Company by Splinex Outsourcing, Inc., a Russian outsourcing
      company, and significantly reduced its software development team in the United
      States. In addition, the Company has terminated or accepted resignations from
      certain executives and managers. The Company intends to explore alternative
      uses
      of its existing technology through licensing or other business development
      activities. The Company has borrowed funds from a related party, Ener1 Group,
      Inc., to pay certain ongoing expenses while it pursues such alternatives, which
      could include acquisitions of or joint ventures with companies that could
      benefit from certain of the Company’s core technologies. The Company does not
      anticipate receiving funding from Ener1 Group, Inc. sufficient to pay past
      due
      obligations including severance obligations until it has been able to implement
      its business development further. As of March 31, 2006, the Company had borrowed
      $429,000 from Ener1 Group, Inc. under a demand note.





On
      December 13, 2005, the Company signed a letter of intent to acquire EnerSoft,
      Inc. (“EnerSoft”), a privately held technology company that specializes in the
      development of video processing filters, signal and imaging processing and
      video
      compression technologies. Ener1 Group, Inc., a company affiliated with the
      Company by common ownership and common control, owns 95% of the equity of
      EnerSoft. EnerSoft is a development stage software company with no assets or
      revenues. The Company discontinued further due diligence activities and
      negotiations related to EnerSoft in May 2006.





In
      accordance with the funding provisions in the Predecessor’s operating agreement,
      certain members of the Predecessor contributed capital of $2,000,000 to the
      Predecessor. As of July 27, 2005, the Company had borrowed $2,500,000 under
      a
      $2,500,000 revolving loan agreement with a company that is affiliated with
      the
      Company through common ownership (the “Bzinfin Loan”). The Company borrowed an
      additional $50,000 from Bzinfin during September 2005, and the loan agreement
      was amended to include the additional borrowing under the same terms and
      conditions.





Several
      factors exist that raise significant doubt as to our ability to continue
      operating as a going concern. These factors include our history of net losses
      and the facts that our company is in the development stage and we have earned
      minimal revenues to date. Our independent auditors’ report on our financial
      statements for the year ended March 31, 2006 contains an explanatory
      paragraph about our ability to continue as a going concern. In the absence
      of
      attaining profitable operations and achieving positive cash flow from
      operations, or obtaining significant additional debt or equity financing, we
      will have difficulty meeting current and long-term obligations.




4




Company
      History





We
      were
      organized under the laws of the State of Delaware in February 2004 to
      conduct the business and operations of Splinex, LLC, a Florida limited liability
      company (our “Predecessor”). Effective April 1, 2004, Splinex, LLC
      reorganized as a corporation and, as a result, contributed its assets,
      liabilities and operations to us under a contribution agreement. Our financial
      statements include the accounts of Splinex Technology Inc. and our Predecessor,
      and all material inter-company transactions have been eliminated. We began
      activity October 28, 2003 (inception).





On
      January 18, 2005, we merged with a subsidiary of Ener1, Inc., an affiliated
      company controlled by certain direct and indirect beneficial owners of the
      membership interests of our Predecessor (the “Merger”). We survived the Merger
      and issued 5,000,000 shares of our common stock to Ener1, Inc. in the Merger.
      Ener1, Inc. declared a dividend of the 5,000,000 shares that it received to
      its
      shareholders of record as of January 17, 2005 (the “Distribution”). The dividend
      was paid on January 24, 2005. Immediately after the Merger, and prior to the
      Distribution, Splinex, LLC and Ener1, Inc. owned 95% and 5%, respectively,
      of
      our then outstanding common stock. We registered the Distribution by Ener1,
      Inc.
      of our common stock on a registration statement on Form S-1 filed with the
      Commission. As a result of the Merger and the Distribution, we became a public
      reporting company subject to the information and reporting requirements of
      the
      Securities Exchange Act of 1934. The Merger and the Distribution are described
      further in our Registration Statement on Form S-1, filed with the Commission
      on
      December 27, 2004 (Registration No. 333-116817).





Our
      principal executive offices are located at 500 W. Cypress Creek Road,
      Suite 100, Fort Lauderdale, Florida 33309. Our telephone number is
      (954) 556-4020 and our website address is www.splinex.com.




*While
      we intend to operate our business as described in this document, we are a new
      company with a limited operating history. As we further develop our products,
      expand our market presence, and grow our business, our experience, changes
      in
      market conditions, and other factors outside our control, may require us to
      alter our market focus and anticipated methods of conducting our
      business.*




**Our
      Technology**




Our
      software is based upon proprietary mathematic algorithms developed by, or
      exclusively on behalf of, our company. Our software is intended to address
      workflow problems that have long been associated with the use, including the
      creation, manipulation, editing and rendering, of 3D graphics for digital
      content creation and with the related need to manage 3D information. We believe
      our software will enable more precise and rapid display of 3D surface and solid
      models, including models based on natural and synthetic data sources. For the
      end-user of our products, this may allow faster results with greater levels
      of
      accuracy while requiring less expensive computer hardware than presently
      required.




***Our
      Strategy***




Our
      strategy is to sell our software as an add-on software program compatible with
      Mathematica and MapleSoft. We offer our product for sale on our internet web
      store and through the Reseller Agreement. If the Company had additional funding,
      it would consider increasing the marketing expenditures to target the
      Mathematica and MapleSoft users.




**Principal
      Products and Their Markets**




Our
      principal product is ***nViz*** ***x*** ,
      a
      software program that allows users to visualize sophisticated and complex
      multi-dimensional data and objects faster and with greater control and detail
      than was previously possible with other products. The first versions of ***nViz*** ***x*** are
      add-ons (i.e., a product sold separately and used in connection with the
      technical computing software) which were released for use with Mathematica
      and Maple, two third-party technical computing software programs published
      by
      Wolfram Research Inc. (“WRI”) and Waterloo Maple, Inc., respectively.
      Mathematica and Maple are programs used for advanced mathematical functions
      and
      problem solving, such as numeric and symbolic computation plus interactive
      document creation.




5




We
      began
      marketing ***nViz*** ***x*** v1.5 for
      Maplesoft in June 2005 under a Reseller Agreement with Waterloo Maple Inc.,
      the
      developer of Maplesoft software. Under the Reseller Agreement, Maplesoft and
      Splinex will conduct a number of joint marketing efforts. Maplesoft currently
      makes ***nViz*** ***x*** for
      Maplesoft v1.5 available for purchase on its web site.





Due
      to
      limited financing sources, we may license our software and technology to users
      in various vertical markets.




**Distribution**




All
      of
      our current products are marketed and sold on the Internet through our website
      where they are also made available for download and limited free trial. Also,
      under the Reseller Agreement, our ***nViz*** ***x*** v1.5 for
      Maplesoft product became available for sale in June 2005 through Maplesoft’s
      distribution channels including their web store, their direct sales force and
      their worldwide network of resellers.




*Advertising
      and promotion*




We
      conducted a limited marketing effort from February through August 2005,
      including:




·
            providing
                direct sample/limited trial offers and sales through direct mail
                campaigns
                and over the Internet;




·
            attracting
                unique visitors through search engine and similar key word technology
                on
                the Internet;




·
            distributing
                trial and sample versions of our programs at seminars and industry
                events;
                and




·
            buying
                sponsored search links, such as AdWords offered by Google,
                Inc.




**Customer
      service and support and training**




We
      do not
      currently offer technical support and customer service. Our software is
      accompanied by a thorough user guide. Our web site contains examples of
      applications of the software. We held webinars from March through August 2005,
      which are web-based training sessions.




**Sources
      and availability of physical product components**




We
      expect
      most of our customers to download the purchased product and related manuals
      over
      the Internet. For customers who want to purchase a physical product consisting
      of a CD-ROM and printed manuals, we make a physical product kit available at
      no
      extra charge.  To date, we have not experienced difficulties in
      obtaining raw materials for the manufacture of our products, the replication
      of
      CD-ROMs, or the printing and assembly of components and do not expect to in
      the
      future




**Dependence
      on a few major resellers**




We
      are a
      new company without a sales force and limited visibility in the market. We
      rely
      on internet visits to our web store and web site and a small number of resellers
      such as Maplesoft, with well established international sales and distribution
      networks, for our sales.




**Our
      intellectual property**




*Our
      provisional and utility patent applications*




We
      have
      currently on file five provisional patent applications and one utility patent
      application with the United States Patent and Trademark Office that cover the
      underlying technology in several of our existing and planned products. These
      provisional and utility patent applications are for problem-solving formulas
      and
      mathematical procedures that we believe are unique and allow a more efficient
      representation or management of three-dimensional graphic data.




*The
      provisional patent process*




Since
      June 8, 1995, the U.S. Patent and Trademark Office has offered inventors
      the option of filing a provisional application for patent, which is designed
      to
      provide a lower-cost first patent filing in the United States. A provisional
      application for patent allows filing without a formal patent claim, oath or
      declaration, or any information disclosure statement and provides the means
      to
      establish an early effective filing date. It also allows the applicant to use
      the term “Patent Pending.”. It allows the holder to provide proof of the date
      that the invention was first submitted to the U.S. Patent and Trademark Office,
      but does not allow the holder to sue others for infringement. Provisional patent
      applications are confidential and are not released to the public.




6




A
      provisional application for patent has a term of 12 months from the date
      the provisional application is filed. The 12-month term cannot be extended.
      During the term, the inventor can determine whether it is beneficial to incur
      the additional cost of prosecuting a non-provisional patent application. The
      provisional application can be converted to a non-provisional utility or design
      patent application by filing the non-provisional application with a specific
      reference to the provisional application.




*Trademarks*




As
      appropriate, we will seek to register some of our product names and logos in
      the
      United States and internationally, if we determine that such registration is
      prudent.




*Protection
      of our intellectual property*




Our
      success and ability to compete is dependent in part on our ability to develop
      and maintain the proprietary aspects of our technology and operate without
      infringing upon the proprietary rights of others. To protect our proprietary
      information we rely primarily on a combination of patent
      and trademark protection, anti-piracy measures, copyrights, trade secret and
      confidentiality procedures, and contractual confidentiality
      provisions. We also
      use contractual provisions to protect many of our intellectual property rights.
      We require employees, consultants and many of those with whom we have business
      relationships to sign non-disclosure and confidentiality agreements. We require
      all employees and consultants to sign invention assignment agreements.




**Research
      and development**




Our
      research and development expenses were $661,994 and $1,208,722 for the years
      ending March 31, 2006 and 2005, respectively, or 30% and 44% of our fiscal
      year
      2006 and 2005 operating costs. Until their curtailment in September 2005, our
      research and development activities, which consist primarily of computer
      programming development, were conducted by scientists and mathematicians at
      our
      facilities in Fort Lauderdale, Florida and by software engineers, scientists,
      mathematicians and graphic designers employed by Splinex Outsourcing, LLC,
      a
      Russian limited liability company located in Ekaterinburg, Russia.




We
      began
      working with Russia-based programmers in October, 2003. Initially, the expenses
      of our Russian operations were paid on our behalf by a Russian consultant who
      handled administrative matters for us in Russia. We agreed to pay this
      consultant $20,000 per month to fund our Russian operations, including all
      costs
      associated with our development efforts in Russia, including wages and benefits
      paid to Russian personnel, rent and computer-related expenses. We agreed to
      increase this amount to $24,000 per month in January 2004. In March 2004,
      the consultant formed Splinex Outsourcing to handle administrative and
      employment matters in connection with our Russian operations. Splinex
      Outsourcing generally seeks to enter into invention assignment, consulting
      and
      other agreements with the employees, consultants, contractors and vendors
      involved in our development efforts in Russia as necessary to secure our
      intellectual property rights. In July 2004, the Russian consultant became an
      employee in our Fort Lauderdale offices., and his employment was terminated
      in
      September 2005.




Between
      July 2004 and September 2004, we had an arrangement with ANTAO, Ltd.,
      a company formed by one of the members of Splinex, LLC, our majority
      stockholder, to be the administrative vehicle for our development efforts in
      Russia, under which we forwarded funds to ANTAO to forward to Splinex
      Outsourcing and to cover ANTAO’s administrative costs and taxes. In
      September 2004, all of the outstanding stock of ANTAO was contributed to us
      and it became our wholly-owned subsidiary. The owner of the outstanding
      securities of Splinex Outsourcing has agreed to contribute these securities
      to
      ANTAO at which time Splinex Outsourcing would become our indirect, wholly-owned
      subsidiary. Currently, Splinex Outsourcing has a nominal amount of assets,
      primarily computers and office furniture, and the contribution would be recorded
      at fair value. We do not have any plans to effect this contribution in the
      near
      future.




**Our
      Customers**





We
      target
      sales of our products and services to Mathematica and MapleSoft users. We offer
      our product for sale on our internet web store and through the Reseller
      Agreement. Our products are used by end-users who create sophisticated
      computational and analytical models, digital content, or manage 3D information.
       Potential customers in this market segment include mathematics,
      science and engineering educational institutions and students.





If
      the
      Company had additional funding for development, other additional markets for
      derivatives of our product include software used for visualization of images
      in
      m edical
      imaging, geomatics imaging, terrestrial imaging, metrological imaging,
      entertainment imaging, seismic and sonar scan arrays imaging and national
      security & military imaging.





7




**Competition**




*In
      general*




The
      markets for visualization software and technologies are numerous and very
      diverse. The majority of vendors choose to focus on sales in a specific vertical
      market segment such as satellite imagery, medical imaging, oil & gas
      exploration, or metrology.





Our
      current strategy for ***nViz*** ***x*** is to
      sell it as an add-on product for general purpose technical computing programs
      such as Mathematica and Maple. Competition in some segments of the market is
      intense, due to the fact that certain companies, such as Wolfram Research,
      offer
      plug-in visualization software for their flagship products. Furthermore,
      competing software programs are also available for free download on the internet
      (“freeware”).





The
      products we primarily compete with in the professional end-user market segment
      are Dynamic Visualizer TM distributed by Wolfram Research and SimulinkTM
distributed by The MathWorks. Dynamic Visualizer, like ***nViz*** ***x*** for
      Mathematica, can be used to create 3D graphics using data from Mathematica.
      We
      believe ***nViz*** ***x*** for
      Mathematica has a richer features set, provides for higher levels of
      interaction, and offers higher performance than competing products.





Many
      products available today such as MathematicaTM, MatLabTM, MapleTM and MathCADTM
include some of the basic functionality found within our products. As the demand
      for visualization within the add-on market for ***nViz*** ***x*** grows,
      we
      anticipate producers of computational software will respond by providing
      additional visualization capabilities in their products. These producers may
      seek to accomplish this by developing new products in-house, licensing software
      and/or technology or entering into reseller agreements with companies such
      as
      ours.




The
      overall market for visualization software and technologies includes many
      different segments. Our competitors include several large, well-funded
      companies, as well as many smaller and private companies. Many of our
      competitors and potential competitors may have greater name recognition and
      financial, technical, and/or marketing resources than we have. They may be
      able
      to devote greater resources to the development, promotion and sale of their
      products than we can. Competitive pressures may result in decreased sales
      volumes, price reductions and/or increased operating costs, and could result
      in
      lower revenues, margins and net income. Potential customers may have concerns
      about purchasing from us because of our size relative to larger competitors.




Many
      of
      our future potential competitors operate both internationally and regionally,
      and many of them have well-recognized product lines that will compete with
      us in
      a wide range of our planned products. As we begin our marketing efforts into
      new
      market segments, we will be at a disadvantage to established competitors until
      we develop brand recognition and customer loyalty for our products. We also
      expect competition from other emerging companies. We expect competition to
      persist and intensify as the multi-dimensional visualization markets develop
      and
      competitors develop additional product and service offerings.





We
      believe that the principal competitive factors in our industry are:




·
            the
                ability to continue to create innovative and relevant technology;




·
            the
                quality and breadth of product and service
                offerings;




·
            the
                ease and speed with which a product can be integrated with existing
                customers’ software and systems, embedded in semiconductors, integrated
                with a manufacturer’s existing internal systems and deployed to
                end-users;




·
            whether
                the software operates efficiently within numerous
                environments;




·
            financial
                resources;




·
            price;




·
            time
                to market; and




·
            effectiveness
                of sales and marketing efforts.




8




We
      cannot
      be certain that we will be able to compete successfully in the future.




**Employees**





At
      July
      1, 2006, we employed 2 people based at our Fort Lauderdale, Florida office,
      one
      of whom is a senior programmer and developer of nVizx. None of our
      employees are represented by a collective bargaining agreement.




Item
      2.
      Description of Property




Until
      June 1, 2006 we subleased approximately 4,000 square feet of office and research
      and development space at 550 W. Cypress Creek Road, Suite 410, Fort
      Lauderdale, Florida, from an affiliated company, Ener1 Group. Our sublease
      of
      this property expires on February 28, 2008. We paid $62,363 annually to
      Ener1 Group under this sublease, and we believe this property was adequately
      covered by insurance. We vacated the space as a result of restructuring
      activities on June 1, 2006, and shared space thereafter at the offices of Ener1
      Inc. at 500 West Cypress Creek road Suite 100. We believe that our current
      facilities are adequate to meet our current and immediately foreseeable needs,
      and additional space is readily available in the area on reasonable terms if
      we
      need additional space to accommodate additional growth.




Item
      3.
      Legal Proceedings




From
      time
      to time, we may be involved in litigation relating to claims arising out of
      our
      intellectual property and operations. We are not currently a party to any such
      proceedings.




Item
      4.
      Submission of Matters to Vote





None.




9




PART
      II




Item
      5.
      Market for Common Equity and Related Stockholder Matters





At
      July
      14, 2006, the number of shares outstanding of the issuer’s common stock was
      100,507,770 shares. There was no established public trading market for our
      common stock prior to July 2005. The approximate number of record holders of
      our
      common stock at July 1, 2006 was 200. The
      number of shareholders of record does not include beneficial owners of common
      stock whose shares are held in the names of various dealers, clearing agencies,
      banks, brokers and other fiduciaries. The principal market for our stock was
      the
      Over-the-Counter Bulletin Board. On July 7, 2006, the closing price of our
      common stock was $0.04.





The
      following table sets forth the high and low prices for our common stock for
      the
      period indicated as reported by the OTC Electronic Bulletin Board. No shares
      were reported traded before July 7, 2005. The quotations reflect inter-dealer
      prices, without retail mark-up, mark-down or commission and may not represent
      actual transactions.




**Year**
              
              **Fiscal
                  Quarter Ended**
              
              **High**
              
              **Low**2006
              
              
              September
                  30, 2005
              
              $
              0.51
              
              $
              0.05December
                  31, 2005
              
              $
              0.51
              
              $
              0.25March
                  31, 2006
              
              $
              0.25
              
              $
              0.06


We
      have
      not paid any cash dividends during the last two fiscal years and do not
      anticipate paying any cash dividends on our common stock.




**Plan
      Shares Outstanding**




The
      following table sets forth information with respect to our equity compensation
      plan approved by our security holders and equity compensation plans not approved
      by security holders. The information in this table is as of July 14,
      2006.




Plan
                Category
            Number
                of Securities to be Issued Upon Exercise of Outstanding Options,
                Warrants
                and Rights
            Weighted-average
                exercise price of outstanding options, warrants and rights
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in the first
                column)Equity
                compensation plans approved by security holders.
            800,000
            $0.10
            4,200,000
                (1)




(1)
      The
      terms of our equity compensation plan provide that a fter
      June
      30, 2005, we may grant options under our equity compensation plan to purchase
      up
      to the lesser of an additional 5,000,000 shares of common stock, 5 percent
      of our outstanding shares of common stock on such date, or an amount determined
      by our board of directors. No increase in the plan has been approved under
      this
      provision.




**Recent
      Sales of Unregistered Securities**




None




10




Item
      6.
      Management’s Discussion and Analysis or Plan of Operations





*This
      Annual Report on Form 10-KSB contains forward -looking statements within the
      meaning of Section 27A of the Securities Act of 1933, as amended, and Section
      21E of the Securities Exchange Act of 1934, as amended. These statements relate
      to our expectations, hopes, intentions or strategies regarding future events
      or
      future financial performance.  Any statements contained in this report that
      are not statements of historical fact may be deemed forward-looking statements.
      In some cases, forward-looking statements can be identified by terminology
      such
      as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend”, “believe,”
“estimate,” “predict,” “potential” or “continue,” or the negative of such terms
      or other comparable terminology. Forward-looking statements include but are
      not
      limited to statements regarding: the expected release dates and future sales
      of
      our products; development of other products; expected hiring levels; marketing
      plans; increases of selling, general and administrative costs and research
      and
      development spending; our product development strategy; and financing
      requirements.  These statements are only predictions and are subject to a
      number of assumptions, risks and uncertainties that could cause actual results
      to differ materially from those expressed or implied in the forward-looking
      statements. The following important factors, in addition to those discussed
      in
      our filings with the Commission from time to time, and other unforeseen events
      or circumstances, could affect our future results and could cause those results
      or other outcomes to differ materially from those expressed or implied in our
      forward-looking statements: general economic conditions; competition; our
      ability to raise capital; our ability to control costs; changes within our
      industries; release of new and upgraded products and services by us or our
      competitors; development of our sales force; employee retention; our ability
      to
      protect our intellectual property; legal and regulatory issues; changes in
      accounting policies or practices; and successful adoption of our products and
      services.*




*All
      forward-looking statements are based on information available to us on the
      date
      of this filing, and we assume no obligation to update such
      statements.*


**


*The
      following discussion should be read in conjunction with our other filings with
      the Commission and the consolidated financial statements and related notes
      included in this Annual Report.*





**Overview**





Splinex
      develops, licenses and services software that enables the generation,
      manipulation, viewing and image-based searching of complex, multi-dimensional
      mathematical objects and information. We believe end-users of our software
      products, such as mathematicians, scientists, graphic designers or digital
      artists working on complex graphical three-dimensional problems, will experience
      greater productivity through improved interaction with, enhanced visual
      representation and faster manipulation of, and greater technical and
      artistic precision in representing, multi-dimensional mathematical objects
      and
      information.





Since
      inception, we have operated in a development phase typical of a software company
      and have focused on developing technologies and products and securing
      intellectual property rights while we develop relationships with potential
      customers and resellers. Our corporate activities to date have included raising
      capital, strategic and business planning, completing the registration of our
      securities with the Commission, and retaining executive management. We have
      minimal sales and no sales contracts and are considered to be in the development
      stage as of March 31, 2006.





We
      began
      activity October 28, 2003 (inception). Effective April 1, 2004, our
      Predecessor reorganized as a corporation and, as a result, contributed its
      assets, liabilities and operations to us. Our financial statements include
      the
      accounts of Splinex Technology Inc. and our Predecessor, and all material
      inter-company transactions have been eliminated.





The
      Company’s financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the settlement of liabilities
      and commitments in the normal course of business. The Company is in the
      development stage and has had minimal revenues since inception. Management
      recognizes that the Company must raise capital sufficient to fund start up,
      development and marketing activities until such time as it can generate revenues
      and net cash flows in amounts necessary to enable it to continue in existence.
      The realization of assets and satisfaction of liabilities in the normal course
      of business is dependent upon the Company achieving these goals. Management’s
      plans include continuing efforts to develop the Company’s first commercial
      product, borrowing funds under the revolving loan agreement described below,
      and
      raising additional capital.




11




In
      accordance with the funding provisions in the Predecessor’s operating agreement,
      certain members of the Predecessor contributed capital of $2,000,000 to the
      Predecessor. As of July 27, 2005, the Company had borrowed $2,500,000 under
      a
      $2,500,000 revolving loan agreement with a company that is affiliated with
      the
      Company through common ownership (the “Bzinfin Loan”). The Company borrowed an
      additional $50,000 from Bzinfin during September 2005, and the loan agreement
      was amended to include the additional borrowing under the same terms and
      conditions. From October 2005 through March 31, 2006, the Company borrowed
      $429,000 from Ener1 Group, Inc. under a demand note.





During
      September 2005, the Company implemented a change in its business strategy and
      took certain actions to reduce its overhead costs. The Company intends to
      maintain and support its existing ***nViz*** ***x*** visualization products, but the Company does not presently plan to introduce
      new
      versions of the product or upgrades unless and until sales for the current
      products increase significantly. The Company has discontinued its development
      projects unrelated to ***nViz*** ***x*** .
      The
      Company has terminated its use of software development services previously
      provided to the Company by Splinex Outsourcing, Inc., a Russian outsourcing
      company, and significantly reduced its software development team in the United
      States. In addition, the Company has terminated or accepted resignations from
      certain executives and managers. The Company intends to explore alternative
      uses
      of its existing technology through licensing or other business development
      activities. The Company has borrowed funds from a related party, Ener1 Group,
      Inc., to pay certain ongoing expenses while it pursues such alternatives, which
      could include acquisitions of or joint ventures with companies that could
      benefit from certain of the Company’s core technologies. The Company does not
      anticipate receiving funding from Ener1 Group, Inc. sufficient to pay past
      due
      obligations including severance obligations until it has been able to implement
      its business development further.





Management
      believes that actions presently being taken, as described in the preceding
      paragraphs, provide the opportunity for the Company to continue as a going
      concern; however, there is no assurance this will occur.




**Plan
      of Operation**




During
      the period from inception on October 28, 2003 through October 1, 2004, our
      research and development activities were primarily directed towards developing
      core technologies and software libraries that could be used in various
      applications and market segments.




During
      the period from October 1, 2004 through August 2005, we have directed most
      of
      our software development activities to developing and releasing a commercial
      version of our software product called *nViz* *x* ,
      the
      first versions of which were designed for use with Mathematica and Maple, two
      third-party technical computing software programs published by Wolfram Research
      Inc. and Waterloo Maple, Inc., respectively. Mathematica and Maple are programs
      used for advanced mathematical functions and problem solving, such as numeric
      and symbolic computation plus interactive document creation. *nViz* *x* is an
      add-on (i.e., a product sold separately and used in connection with the
      technical computing software) software program that allows users to visualize
      sophisticated and complex multi-dimensional data and objects faster and with
      greater control and detail than is currently possible.





The
      first
      version of *nViz* *x* v1.0 for
      Mathematica was commercially released and made available for purchase in March
      2005. *nViz* *x* v1.5 for
      Maplesoft was commercially released and made available for purchase in June
      2005. In June 2005, we entered into a Reseller Agreement with Waterloo Maple
      Inc., the parent company of Maplesoft, the developer of Maple software. Under
      the Reseller Agreement, Maplesoft and Splinex agreed to conduct a number of
      joint marketing and sales initiatives. Additionally, Maplesoft agreed to promote *nViz* *x* v1.5 for
      Maple through its web site and other marketing activities directed to its
      customer base. We have not had significant sales of either product, and do
      not
      have sufficient funds to market the product to achieve higher sales. Our current
      marketing activities consist solely of the marketing efforts of our reseller
      and
      availability of the product for purchase at our internet web store.





Using
      our
      core software libraries, we have the capability to develop additional versions
      of n *nViz* *x* as
      visualization add-ons for other technical computing software products similar
      to
      Mathematica and Maplesoft and for spreadsheet products like Microsoft
      Excel.  However, due to low product sales, we intend to make available for
      purchase our existing *nViz* *x* visualization products, but do not presently plan to introduce new versions
      of
      the product or upgrades unless and until sales of the current products increase
      significantly. We may explore alternative uses of our existing technology
      through licensing or other business development activities. We may pursue
      acquisitions of, or joint ventures with, companies that can benefit from our
      technology.





On
      December 13, 2005, we signed a letter of intent to acquire EnerSoft, Inc.
      (“EnerSoft”), a privately held technology company that specializes in the
      development of video processing filters, signal and imaging processing and
      video
      compression technologies. Ener1 Group, Inc., a company affiliated with our
      Company by common ownership and common control, owns 95% of the equity of
      EnerSoft. EnerSoft is a development stage software company with no assets or
      revenues. The Company discontinued further due diligence activities and
      negotiations related to EnerSoft in May 2006.




12




At
      March
      31, 2006, we had cash of $9,458 and negative working capital of $4.4 million,
      of
      which $3.3 million was owed to a related party.  Through employee
      terminations, the termination of our use of software development services
      previously provided to us by Splinex Outsourcing, Inc., and implementation
      of
      other expense controls, we have reduced our monthly cash expenses to
      approximately $60,000. We are currently dependent upon funds advanced from
      Ener1
      Group, Inc. to pay these ongoing expenses. We do not anticipate receiving
      funding sufficient to pay our past due obligations, including severance
      obligations, until we have been able to implement our business development
      plans
      further.





We
      cannot
      provide assurance you that we will be able to raise additional funds on terms
      favorable to us or at all. If we raise additional funds through the sale of
      equity or convertible debt securities, our current stockholders’ ownership
      percentage of our common stock will be reduced. In addition, these transactions
      may dilute the value of our common stock. We may have to issue securities that
      have rights, preferences and privileges senior to our common stock. The terms
      of
      any additional indebtedness may include restrictive financial and operating
      covenants that would limit our ability to compete and expand. Our failure to
      obtain any required future financing could materially and adversely affect
      our
      financial condition.





As
      of
      March 31, 2006, we have no material planned capital expenditures.





**Results
      of Operations for the Year Ended March 31, 2006 Compared to the Year Ended
      March
      31, 2005**





We
      incurred a loss of $2,263,329, or $0.02 per share, for the year ended March
      31,
      2006 (which we refer to as “fiscal 2006”) compared to a loss of $3,296,189,
      or $0.03 per share, for the year ended March 31, 2005 (which we refer to as
      “fiscal 2005”). Our total operating expenses for fiscal 2006 were $2,138,323.
      Our total operating expenses for fiscal 2005 were $2,770,859 and non-operating
      expenses related to the Merger were $512,321. Interest expenses in fiscal 2006
      were $126,977 compared to fiscal 2005 interest expense of $13,058. Our operating
      expenses decreased significantly during fiscal 2006 as we terminated product
      development activities and related personnel and terminated most of our
      workforce.





Operating
      expenses in fiscal 2006 included $196,018 for sales and marketing expenses,
      $1,280,311 for general and administrative expenses, and $661,994 for research
      and development costs. Operating expenses in fiscal 2005 included $365,278
      for
      sales and marketing expenses, $1,196,859 for general and administrative
      expenses, and $1,208,722 for research and development costs.





Sales
      and
      marketing expenses in fiscal 2006 consisted primarily of wages and benefits
      of
      $96,064, advertising and promotional expenses of $73,804, and web store
      development and ecommerce costs of $19,283. Sales and marketing expenses in
      fiscal 2005 consisted primarily of wages and benefits of $171,336, advertising
      and promotional expenses of $116,935, and web store development and ecommerce
      costs of $33,086. Advertising and promotion activities, which included direct
      mail and email campaigns, began primarily in February 2005 and continued though
      April 2005. We discontinued marketing activities and terminated the marketing
      personnel in September 2005.





General
      and administrative expenses for fiscal 2006 included wages and benefits of
      $261,612; consulting fees of $200,000 paid to a director, Dr. Novak and a
      related party, Mike Zoi; severance costs related to the departure of the chief
      executive officer of $404,960; travel and related costs of $4,402; audit fees
      of
      $62,583; legal expenses of $79,046, of which $9,200 was payable to Ener1 Group
      to reimburse Ener1 Group for the services of our general counsel, who is also
      an
      officer of Ener1 Group; information technology; rent of $62,363; insurance
      costs
      of $84,538; and depreciation of $34,910. General and administrative expenses
      for
      fiscal 2005 included wages and benefits of $410,389; consulting fees of $200,000
      paid to a director, Dr. Novak and a related party, Mike Zoi; executive
      recruiting fees of $75,015 related to our search for a chief executive officer;
      travel and related costs of $76,449; audit fees of $59,699; general legal
      expenses of $48,636, of which $35,530 was payable to Ener1 Group to reimburse
      Ener1 Group for the services of our general counsel, who is also an officer
      of
      Ener1 Group; information technology and web site costs of $69,317; rent of
      $60,606; insurance costs of $26,239; and depreciation of $24,075. Wages
      decreased due to the termination of the CEO in September 2005. Insurance expense
      increased due to directors and officers insurance which we obtained when we
      went
      public in January 2005.





Research
      and development expenses for fiscal 2006 included $473,032 for wages and
      benefits paid to U.S. based programmers; $156,207 for wages and administrative
      costs of our Russian-based scientists and programmers; $20,570 paid to software
      consultants; and $10,000 for immigration and employee relocation costs. Research
      and development expenses for fiscal 2005 included $589,099 for wages and
      benefits paid to U.S. based programmers; $295,000 for wages and administrative
      costs of our Russian-based scientists and programmers; $205,802 paid to software
      consultants; and $86,447 for immigration and employee relocation costs. We
      terminated our use of software development services previously provided to
      the
      Company by Splinex Outsourcing, Inc., a Russian outsourcing company, and
      significantly reduced our software development team in the United States in
      September 2005.




13




Historically,
      we have outsourced a substantial amount of our research and software development
      services to Russia based scientists and programmers. Our Russia based research
      and development expenses consist primarily of payroll and related expenses
      for
      Russia based programmers and administrative costs, which include rent and
      related facility costs, computer-related expenses such as personal computers,
      software and related supplies and equipment. We outsourced programming work
      to
      approximately 30 scientists and programmers in Russia.




Related
      parties reimburse the Company for the time spent by one of its employees for
      patent and research work; as a result, administrative wages and research and
      development wages are net of reimbursements of $17,160 and $46,080,
      respectively, for the year ended March 31, 2005. Other administrative services
      were provided by personnel of Ener1, Inc. in the amount of $1,782 and $5,849
      for
      the years ended March 31, 2006 and 2005.





Costs
      incurred in fiscal 2005 in connection with the Merger and becoming a public
      company of $512,320 include legal expenses of $321,485, audit and related fees
      of $122,832, and printing and other costs of $68,003.





Interest
      expenses increased to $126,977 for the year ended March 31, 2006 compared to
      $13,058 in fiscal 2005 from due to borrowings under the Bzinfin loan and loans
      from Ener1 Group. Interest under the Bzinfin loan is due at maturity in February
      2007.





**Liquidity
      and capital resources**





At
      March
      31, 2006, we had negative working capital of $4,448,961 and cash of $9,458
      and
      we have no further borrowing availability under the Bzinfin Loan.





Several
      factors exist that raise significant doubt as to our ability to continue
      operating as a going concern. These factors include our history of net losses
      and the facts that our company is in the development stage and we have earned
      minimal revenues to date. We have no remaining funds available under our
      revolving loan agreement and are dependent upon Ener1 Group, Inc. to fund our
      operations. Our independent auditors’ report on our financial statements for the
      year ended March 31, 2006 contains an explanatory paragraph about our
      ability to continue as a going concern. In the absence of attaining profitable
      operations and achieving positive cash flow from operations or obtaining
      significant additional debt or equity financing, we will continue to have
      difficulty meeting current and long-term obligations.





During
      September 2005, the Company implemented a change in its business strategy and
      took certain actions to reduce its overhead costs. The Company intends to
      maintain and support its existing ***nViz*** ***x*** visualization products, but the Company does not presently plan to introduce
      new
      versions of the product or upgrades unless and until sales for the current
      products increase significantly. The Company has discontinued its development
      projects unrelated to ***nViz*** ***x*** .
      The
      Company has terminated its use of software development services previously
      provided to the Company by Splinex Outsourcing, Inc., a Russian outsourcing
      company, and significantly reduced its software development team in the United
      States. In addition, the Company has terminated or accepted resignations from
      certain executives and managers. The Company may explore alternative uses of
      its
      existing technology through licensing or other business development activities.
      The Company has borrowed funds from a related party, Ener1 Group, Inc., to
      pay
      certain ongoing expenses while it pursues such alternatives, which could include
      acquisitions of or joint ventures with companies that could benefit from certain
      of the Company’s core technologies. The Company does not anticipate receiving
      funding from Ener1 Group, Inc. sufficient to pay past due obligations including
      severance obligations until it has been able to implement its business
      development further.





In
      accordance with the funding provisions in the Predecessor’s operating agreement,
      certain members of the Predecessor contributed capital of $2,000,000 to the
      Predecessor. As of July 27, 2005, we had borrowed $2,500,000 under the Bzinfin
      loan. We borrowed an additional $50,000 from Bzinfin during September 2005,
      and
      the loan agreement was amended to include the additional borrowing under the
      same terms and conditions. We borrowed $429,000 from Ener1 Group during fiscal
      2006, and an additional $106,000 From April 1, 2006 through July 1, 2006. The
      loans are demand notes, and bear interest at an annual rate of 5% payable at
      maturity.





14




In
      the
      absence of attaining profitable operations and achieving positive cash flows
      from operations or obtaining significant additional debt or equity financing,
      we
      will continue to have difficulty meeting current and long-term obligations.





During
      the year ending March 31, 2005, one of our affiliates, Ener1 Group, Inc., loaned
      us $800,000 to fund our working capital needs. This loan had an annual interest
      rate of 5%. These loans were assumed by Bzinfin, S.A., our lender under the
      revolving loan agreement, effective February 21, 2005 and, as a result, are
      included in the $1,700,000 outstanding balance at March 31, 2005 under the
      revolving loan agreement.





Prior
      to
      April 1, 2004, we operated through our Predecessor as a limited liability
      company. On April 1, 2004, our Predecessor contributed all of its assets,
      liabilities and operations to us. Under SEC Staff Accounting Bulletin Topic
      4
      (B), the undistributed earnings (losses) of our Predecessor were treated as
      a constructive distribution to the members of our Predecessor followed by a
      capital contribution to us. On April, 1, 2004, the effective date of the
      contribution, we reclassified the accumulated deficit to date of $822,847 to
      additional paid in capital.





We
      do not
      have material exposure to market risks associated with changes in interest
      rates
      related to cash equivalent securities held at March 31, 2006.





**Off-balance
      sheet arrangements**





At
      March
      31, 2006, we did not have any off-balance sheet arrangements, as defined in
      tem
      303(c)(4)(2) of SEC Regulation S-B.





**Recent
      accounting pronouncements**





SFAS
      No. 154, Accounting Changes and Error Corrections, was issued in May 2005
      and replaces APB Opinion No. 20 and SFAS No. 3.  SFAS No. 154 requires
      retrospective application for voluntary changes in accounting principle in
      most
      instances and is required to be applied to all accounting changes made in fiscal
      years beginning after December 15, 2005.   We do not expect our
      adoption of SFAS No. 154 on April 1, 2006 will have a material impact on
      our financial position, results of operations or cash flows.





15




**Report
      of Independent R** **egistered
      Public Accounting Firm**




To
      the
      Board of Directors and Stockholders


of
      Splinex Technologies, Inc.





We
      have
      audited the accompanying consolidated balance sheets of Splinex Technologies,
      Inc. (a Development Stage Company) as of March 31, 2006 and 2005, and the
      related consolidated statements of operations, changes in stockholders’
deficiency in assets and cash flows for the years then ended and for the period
      from October 28, 2003 (inception) through March 31, 2006. These consolidated
      financial statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these consolidated 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 financial
      statements are free of material misstatement. The Company has determined that
      it
      is not required to have, nor were we engaged to perform, an audit of its
      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. Accordingly, we express no such opinion. An audit
      also includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements assessing the accounting principles
      used
      and significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Splinex Technologies, Inc.
      as of March 31, 2006 and 2005, and the results of their operations and their
      cash flows for the years then ended and from October 28, 2003 (inception)
      through March 31, 2006, in conformity with accounting principles generally
      accepted in the United States of America.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note 2 to the
      consolidated financial statements, the Company has experienced recurring losses
      in the development stage. This raises substantial doubt about the Company’s
      ability to continue as a going concern. Management’s plans in regard to these
      matters are also described in Note 2. The consolidated financial statements
      do
      not include any adjustments that might result from the outcome of this
      uncertainty.





/s/
      Daszkal Bolton LLP




Boca
      Raton, Florida


June
      30,
      2006




16





SPLINEX
      TECHNOLOGY INC.


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      BALANCE SHEETS




**ASSETS**
              
              March
                  31, 2005
              
              March
                  31, 2006Current
                  assetsCash
              
              $
              256,347
              
              $
              9,458Prepaid
                  expenses and other
              
              
              30,925
              
              
              38,358Loans
                  and advances to employees - current portion
              
              
              13,834
              
              
              831Total
                  current assets
              
              
              301,106
              
              
              48,647Property
                  and equipment, net
              
              
              49,862
              
              
              7,340Accounting
                  software license
              
              
              37,000
              
              
              20,192Other
                  assets
              
              
              9,881
              
              
              9,881Loans
                  to employees - long term portion
              
              
              9,875
              
              
              —Total
                  assets
              
              $
              407,724
              
              $
              86,060**LIABILITIES
                  AND STOCKHOLDERS' DEFICIENCY IN ASSETS**Current
                  liabilitiesDemand
                  note payable and accrued interest due to related party - Ener1
                  Group
              
              
              —
              
              
              435,540Note
                  payable and accrued interest due to related party -
                  Bzinfin
              
              
              —
              
              
              2,677,707Accounts
                  payable
              
              
              434,967
              
              
              563,006Accrued
                  expenses
              
              
              221,572
              
              
              683,093Due
                  to related parties
              
              
              106,760
              
              
              138,262Other
                  current liabilities
              
              
              30,655
              
              
              —Total
                  current liabilities
              
              
              793,954
              
              
              4,497,608Long
                  term liabilitiesNote
                  payable and accrued interest due to related party -
                  Bzinfin
              
              
              1,708,240
              
              
              —Total
                  liabilities
              
              
              2,502,194
              
              
              4,497,608**COMMITMENTS
                  AND CONTINGENCIES****STOCKHOLDERS'
                  DEFICIENCY IN ASSETS**Preferred
                  stock ($.001 par value, 150,000,000 sharesauthorized
                  and no shares issued and outstanding)
              
              
              —
              
              
              —Common
                  stock ($.001 par value, 300,000,000 sharesauthorized
                  and 100,670,270 and 100,757,770 sharesissued
                  and outstanding)
              
              
              100,670
              
              
              100,758Treasury
                  stock, at cost; 0 and 250,000 shares, respectively
              
              
              —
              
              
              (62,500
              )Paid
                  in capital
              
              
              1,101,049
              
              
              1,109,712Deficit
                  accumulated during the development stage
              
              
              (3,296,189
              )
              
              (5,559,518
              )Total
                  stockholders' deficiency in assets
              
              
              (2,094,470
              )
              
              (4,411,548
              )Total
                  liabilities and stockholders' deficiency in assets
              
              $
              407,724
              
              $
              86,060




See
      accompanying notes to consolidated financial statements.




17




SPLINEX
      TECHNOLOGY INC.


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      STATEMENTS OF OPERATIONS


CumulativeFrom
                  Inception(October
                  28,Year
              
              Year
              
              2003)Ended
              
              Ended
              
              ThroughMarch
                  31, 2005
              
              March
                  31, 2006
              
              March
                  31, 2006Net
                  sales
              
              $
              49
              
              $
              1,971
              
              $
              2,020Operating
                  ExpensesSales
                  and marketing
              
              
              365,278
              
              
              196,018
              
              
              561,296General
                  and administrative
              
              
              1,196,859
              
              
              1,280,311
              
              
              3,186,217Research
                  and development
              
              
              1,208,722
              
              
              661,994
              
              
              1,984,516Total
                  operating expenses
              
              
              2,770,859
              
              
              2,138,323
              
              
              5,732,029Costs
                  of merger and registration
              
              
              512,321
              
              
              —
              
              
              512,321Total
                  expenses
              
              
              3,283,180
              
              
              2,138,323
              
              
              6,244,350Loss
                  from operations
              
              
              (3,283,131
              )
              
              (2,136,352
              )
              
              (6,242,330
              )Interest
                  expense, net
              
              
              (13,058
              )
              
              (126,977
              )
              
              (140,035
              )Loss
                  before income taxes
              
              
              (3,296,189
              )
              
              (2,263,329
              )
              
              (6,382,365
              )Income
                  taxes
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              $
              (3,296,189
              )
              $
              (2,263,329
              )
              $
              (6,382,365
              )Net
                  loss per basic and fully diluted share
              
              $
              (0.03
              )
              $
              (0.02
              )
              $
              (0.07
              )Weighted
                  average shares outstanding
              
              
              96,113,724
              
              
              100,582,154
              
              
              97,730,721




See
      accompanying notes to consolidated financial statements.




18


.


SPLINEX
      TECHNOLOGY INC.


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      STATEMENTS OF CHANGES IN


STOCKHOLDERS’
      DEFICIENCY IN ASSETS




**Deficit****Accumulated**
              
              **Total****Additional**
              
              **During
                  the**
              
              **Stockholders'****Preferred****Stock**
              
              **Common****Stock**
              
              **Treasury**
              
              **Paid
                  in**
              
              **Development**
              
              **Deficiency****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Stock**
              
              **Capital**
              
              **Stage**
              
              **in
                  Assets**Balance
                  at March 31, 2004
              
              
              —
              
              $
              —
              
              
              95,000,000
              
              $
              95,000
              
              
              
              
              $
              (67,847
              )
              $
              —
              
              $
              27,153Capital
                  contributions
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              
              
              
              1,150,000
              
              
              —
              
              
              1,150,000Shares
                  issued as executive compensationand
                  other non-cash expenses
              
              
              —
              
              
              —
              
              
              670,270
              
              
              670
              
              
              —
              
              
              23,896
              
              
              —
              
              
              24,566Shares
                  issued in Merger
              
              
              —
              
              
              —
              
              
              5,000,000
              
              
              5,000
              
              
              —
              
              
              (5,000
              )
              
              —
              
              
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (3,296,189
              )
              
              (3,296,189
              )Balance
                  at March 31, 2005
              
              
              —
              
              
              —
              
              
              100,670,270
              
              
              100,670
              
              
              
              
              
              1,101,049
              
              
              (3,296,189
              )
              
              (2,094,470
              )Acquisition
                  of treasury stock
              
              
              —
              
              
              —
              
              
              —
              
              
              
              
              
              (62,500
              )
              
              
              
              
              
              
              
              (62,500
              )Stock
                  options exercised
              
              
              —
              
              
              —
              
              
              87,500
              
              
              88
              
              
              —
              
              
              8,663
              
              
              
              
              
              8,751Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (2,263,329
              )
              
              (2,263,329
              )Balance
                  at March 31, 2006
              
              
              —
              
              $
              —
              
              
              100,757,770
              
              $
              100,758
              
              $
              (62,500
              )
              $
              1,109,712
              
              $
              (5,559,518
              )
              $
              (4,411,548
              )




See
      accompanying notes to consolidated financial statements.




19




SPLINEX
      TECHNOLOGY INC.


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


CumulativeFrom
                  Inception(October
                  28,Year
              
              Year
              
              2003)Ended
              
              Ended
              
              ThroughMarch
                  31, 2005
              
              March
                  31, 2006
              
              March
                  31, 2006Cash
                  flows from operating activities:Net
                  loss
              
              $
              (3,296,189
              )
              $
              (2,263,329
              )
              $
              (6,382,365
              )Adjustments
                  to reconcile net loss to netcash
                  used in operating activities:Depreciation
              
              
              24,075
              
              
              34,909
              
              
              64,477Executive
                  compensation and other expenses
              
              
              
              
              
              
              
              
              —paid
                  with common stock
              
              
              24,566
              
              
              7,613
              
              
              32,179Non
                  cash interest expense
              
              
              8,240
              
              
              126,007
              
              
              134,247Changes
                  in operating assets and liabilities:
              
              
              
              
              
              
              
              
              —Prepaid
                  expenses and other
              
              
              (31,158
              )
              
              (21,280
              )
              
              (58,550
              )Due
                  to related parties
              
              
              106,759
              
              
              31,502
              
              
              138,261Other
                  assets
              
              
              —
              
              
              —
              
              
              (9,881
              )Accounts
                  payable
              
              
              376,469
              
              
              128,040
              
              
              563,007Accrued
                  expenses
              
              
              72,531
              
              
              407,771
              
              
              629,343Total
                  adjustments
              
              
              581,482
              
              
              714,562
              
              
              1,493,083Net
                  cash used in operating activities
              
              
              (2,714,707
              )
              
              (1,548,767
              )
              
              (4,889,282
              )Cash
                  flows from investing activities:Purchase
                  of equipment
              
              
              (24,200
              )
              
              —
              
              
              (79,429
              )Employee
                  loans and advances, net
              
              
              (20,159
              )
              
              22,878
              
              
              (831
              )Net
                  cash used in investing activities
              
              
              (44,359
              )
              
              22,878
              
              
              (80,260
              )Cash
                  flows from financing activities:Note
                  payable related party
              
              
              1,700,000
              
              
              1,279,000
              
              
              2,979,000Contributed
                  capital from equity investors
              
              
              1,150,000
              
              
              —
              
              
              2,000,000Net
                  cash provided by financing activities
              
              
              2,850,000
              
              
              1,279,000
              
              
              4,979,000Net
                  increase (decrease) in cash
              
              
              90,934
              
              
              (246,889
              )
              
              9,458Cash
                  at beginning of period
              
              
              165,413
              
              
              256,347
              
              
              —Cash
                  at end of period
              
              $
              256,347
              
              $
              9,458
              
              $
              9,458Supplemental
                  Disclosure of Cash Flow InformationCash
                  paid during the year for:Interest
              
              $
              —
              
              $
              —
              
              $
              —Income
                  taxes
              
              $
              —
              
              $
              —
              
              $
              —Non-cash
                  investing and financing activities:Common
                  stock issued in merger
              
              $
              150,000
              
              $
              —
              
              $
              150,000Costs
                  of merger recorded asreduction
                  in paid in capital
              
              $
              (150,000
              )
              $
              —
              
              $
              (150,000
              )


See
      accompanying notes to consolidated financial statements.




20




SPLINEX
      TECHNOLOGY INC.


(A
      DEVELOPMENT STAGE COMPANY)


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS





NOTE
      1.
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Organization
      and Basis of Presentation





Splinex
      Technology Inc. ( “Technology”) was organized under the laws of the State of
      Delaware as a wholly owned subsidiary of Splinex, LLC, a Florida limited
      liability company (the “Predecessor”), to conduct the business and operations of
      the Predecessor. Under an agreement effective April 1, 2004 (the
“Contribution Agreement”), the Predecessor contributed substantially all of its
      assets, liabilities and operations to Technology. The financial statements
      include the accounts of Technology and the Predecessor (combined, the
“Company”), and all material intercompany transactions have been eliminated.
      Certain items have been reclassified to the current year’s presentation. The
      Company began its development stage activity on October 28, 2003
      (“Inception”).





Reclassifications





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





Basis
      of
      Consolidation




The
      consolidated financial statements include the accounts of Splinex Technology
      Inc. and its wholly owned subsidiary, ANTAO Ltd., a limited liability company
      formed under the laws of Russia (“ANTAO”). All material intercompany accounts
      and transactions have been eliminated in consolidation.





Business
      Activity





The
      Company develops, licenses and services software that enables the generation,
      manipulation, viewing and image-based searching of complex, multi-dimensional
      mathematical objects and information. Since inception, the Company has operated
      in a development phase typical of a software company and has focused on
      developing technologies and products and securing intellectual property rights
      while developing relationships with potential customers. Corporate activities
      to
      date have included raising capital, strategic and business planning, completing
      the registration of the Company’s securities with the U. S. Securities and
      Exchange Commission, and retaining executive management. The Company has minimal
      sales and no sales contracts and is considered to be in the development stage
      as
      of March 31, 2006.





The
      Company has no revenues to date. Since its inception, the Company has been
      dependent upon the receipt of capital investment or other financing to fund
      its
      continuing activities. In addition to the normal risks associated with a new
      business venture, there can be no assurance that the Company’s product
      development will be successfully completed or that it will be a commercial
      success. Further, the Company is dependent upon certain related parties to
      provide continued funding and capital resources.





Use
      of
      Estimates





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosures of contingent assets and liabilities as of the
      balance sheet date and the reported amounts of expenses for the period
      presented. Actual results could differ from those estimates.




21




Cash
      and
      Cash Equivalents





Cash
      and
      cash equivalents include highly liquid money market investments purchased with
      an original maturity of three months or less. At March 31, 2006, the Company
      had
      no cash equivalents. The Company maintains its cash in a bank deposit account
      which, at times, may exceed federally insured limits. Accounts are guaranteed
      by
      the Federal Deposit Insurance Corporation (FDIC) up to $100,000. At March
      31, 2006, the Company had no deposits in excess of FDIC insured limits.





Foreign
      Currency Transactions





All
      transactions of the Company are denominated in U.S. dollars. The Company paid
      Russian research, programming and administrative costs under a U.S. dollar
      denominated agreement. Consolidated general and administrative expenses include
      immaterial foreign exchange rate losses on small Russian bank balances
      maintained by ANTAO. The Company has not engaged in foreign currency hedging
      activities.





Stock-Based
      Compensation





Statement
      of Financial Accounting Standards (“SFAS”) No. 123R, “Accounting for
      Stock-Based Compensation,” requires companies to record employee stock option
      compensation at fair value. The Company adopted SFAS 123R during the quarter
      ending March 31, 2005.





Software
      Development Costs





The
      Company accounts for software development costs in accordance with SFAS
      No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased
      or Otherwise Marketed.” Costs incurred to establish the technological
      feasibility of a computer software product are considered research and
      development costs and are expensed as incurred. When the technological
      feasibility of a software product has been established using the working model
      approach, development cost are capitalized. Capitalization of these costs ceases
      when the product is ready for production. The Company has expensed all software
      development costs since inception.





Revenue
      recognition





The
      Company expects to recognize revenues, net of sales returns and other
      allowances, from the licensing of products and from service revenues.





Product
      revenues will consist of revenues from end-user licenses (sometimes referred
      to
      as royalties) and fees for stand-alone software and technology under time-based
      or perpetual licenses. Service revenues will consist of fees from professional
      services, which will include fees for software development services, software
      maintenance contracts and customer training and consulting services.





The
      Company will recognize revenues in accordance with Statement of Position or
      “SOP” 97-2, “Software Revenue Recognition,” as amended, SOP 81-1, “Accounting
      for Performance of Construction-Type and Certain Production-Type Contracts,” and
      Staff Accounting Bulletin or “SAB” 104, “Revenue Recognition.” The Company will
      recognize revenues when persuasive evidence of an arrangement exists, delivery
      has occurred, the vendor’s fee is fixed or determinable, vendor-specific
      objective evidence exists for all undelivered elements of the arrangement and
      collection is determined to be probable.





Fixed
      assets





The
      Company depreciates computer equipment and software over the useful lives of
      such assets, generally three years.





Earnings
      Per Share





Basic
      net
      earnings (loss) per common share are computed by dividing net earnings (loss)
      applicable to common shareholders by the weighted-average number of common
      shares outstanding during the period. Diluted net earnings (loss) per common
      share is determined using the weighted-average number of common shares
      outstanding during the period, adjusted for the dilutive effect of common stock
      equivalents, consisting of shares that would be issued upon exercise of common
      stock options. In periods when losses are reported, the weighted-average number
      of common shares outstanding excludes common stock equivalents, because their
      inclusion would be anti-dilutive.




22




On
      January 18, 2005, the Company completed a 95,000 for one stock split.
      Stockholders’ equity has been restated to give retroactive recognition to the
      stock split for all periods presented by reclassifying the par value of the
      additional shares arising from the split from paid-in-capital to common stock.
      All references in the financial statements and notes to number of shares and
      per
      share amounts reflect the stock split.





Promotional
      and Advertising Expenses





Promotional
      and advertising expenses were $73,804 and $116,935 for the years ended March
      31,
      2006 and 2005, respectively.





Fair
      Value of Financial Instruments





The
      Company’s financial instruments consist mainly of cash, short-term payables and
      borrowings under the notes payable. The Company believes that the carrying
      amounts approximate fair value, due to their short-term maturities and current
      interest rates.





Impairment
      of Long-Lived Assets





The
      Company reviews its long-lived assets for impairment whenever events or changes
      indicate that the carrying amount of an asset or group of assets may not be
      recoverable. No impairment losses were recorded during the fiscal periods ended
      March 31, 2006 and 2005.





Recently
      Issued Accounting Pronouncements and Interpretations





SFAS
      No. 154, Accounting Changes and Error Corrections, was issued in May 2005
      and replaces APB Opinion No. 20 and SFAS No. 3.  SFAS No. 154 requires
      retrospective application for voluntary changes in accounting principle in
      most
      instances and is required to be applied to all accounting changes made in fiscal
      years beginning after December 15, 2005.   The Company’s expected
      April 1, 2006 adoption of SFAS No. 154 is not expected to have a material
      impact on the Company’s financial position, results of operations or cash flows.





NOTE
      2.
      GOING CONCERN CONSIDERATIONS





The
      Company’s financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the settlement of liabilities
      and commitments in the normal course of business. The Company is in the
      development stage and has had minimal revenues since inception. Management
      recognizes that the Company must raise capital sufficient to fund start up,
      development and marketing activities until such time as it can generate revenues
      and net cash flows in amounts necessary to enable it to continue in existence.
      The realization of assets and satisfaction of liabilities in the normal course
      of business is dependent upon the Company achieving these goals. Management’s
      plans include continuing efforts to develop the Company’s first commercial
      product, borrowing funds under the revolving loan agreement described below,
      and
      raising additional capital.





In
      accordance with the funding provisions in the Predecessor’s operating agreement,
      certain members of the Predecessor contributed capital of $2,000,000 to the
      Predecessor. As of July 27, 2005, the Company had borrowed $2,500,000 under
      a
      $2,500,000 revolving loan agreement with a company that is affiliated with
      the
      Company through common ownership (the “Bzinfin Loan”). The Company borrowed an
      additional $50,000 from Bzinfin during September 2005, and the loan agreement
      was amended to include the additional borrowing under the same terms and
      conditions. From October 2005 through March 31, 2006, the Company borrowed
      $429,000 from Ener1 Group, Inc. under a demand note.





23




During
      September 2005, the Company implemented a change in its business strategy and
      took certain actions to reduce its overhead costs. The Company intends to
      maintain and support its existing ***nViz*** ***x*** visualization products, but the Company does not presently plan to introduce
      new
      versions of the product or upgrades unless and until sales for the current
      products increase significantly. The Company has discontinued its development
      projects unrelated to ***nViz*** ***x*** .
      The
      Company has terminated its use of software development services previously
      provided to the Company by Splinex Outsourcing, Inc., a Russian outsourcing
      company, and significantly reduced its software development team in the United
      States. In addition, the Company has terminated or accepted resignations from
      certain executives and managers. The Company intends to explore alternative
      uses
      of its existing technology through licensing or other business development
      activities. The Company has borrowed funds from a related party, Ener1 Group,
      Inc., to pay certain ongoing expenses while it pursues such alternatives, which
      could include acquisitions of or joint ventures with companies that could
      benefit from certain of the Company’s core technologies. The Company does not
      anticipate receiving funding from Ener1 Group, Inc. sufficient to pay past
      due
      obligations including severance obligations until it has been able to implement
      its business development further.





Management
      believes that actions presently being taken, as described in the preceding
      paragraphs, provide the opportunity for the Company to continue as a going
      concern; however, there is no assurance this will occur.





NOTE
      3.
      SEGMENT INFORMATION





The
      Company’s sole reportable business segment is visual communication software
      products and services. The Company’s accounting policies for segments are the
      same as those described in the summary of significant accounting policies.





NOTE
      4.
      PROPERTY AND EQUIPMENT





Property
      and equipment consisted of the following at March 31, 2005 and
      2006:




2005
              
              2006Office
                  and computer equipment
              $
              53,082
              
              $
              40,225Computer
                  software
              
              26,308
              
              
              26,30879,390
              
              
              66,533Less
                  accumulated depreciation
              
              (29,529
              )
              
              (59,193
              )$
              49,862
              
              $
              7,340





Depreciation
      expense was $34,910 and $24,075 for the fiscal years ending March 31, 2006
      and
      2005, respectively.





NOTE
      5.
      EMPLOYEE LOANS AND ADVANCES





The
      Company advanced expatriate employees certain relocation-related costs. The
      employees signed promissory notes with an annual simple interest rate of 6%.
      Principal and interest due under these notes is payable over a period of 24
      months from the date of the note, and all principal was paid by terminated
      employees during 2006. The current portion of the remaining note receivable
      is
      included in current assets.




24




NOTE
      6.
      ACCRUED EXPENSES





Accrued
      liabilities represent expenses that apply to the reported period and have not
      been billed by the provider or paid by the Company. At March 31, 2005 and
      2006, accrued liabilities consisted of the following:




2005
              
              
              
              2006Accrued
                  severance and termination obligations
              $
              -
              
              
              $
              561,111Executive
                  relocation and legal
              
              85,472
              
              
              
              -Accrued
                  Russian programming closing costs
              
              17,627
              
              
              
              43,000Audit
              
              40,000
              
              
              
              40,000Accrued
                  vacation
              
              35,285
              
              
              
              11,555Miscellaneous
              
              43,188
              
              
              
              27,426$
              221,572
              
              
              $
              683,093




NOTE
      7.
      STOCKHOLDERS’ EQUITY RECAPITALIZATION AND MERGER





On
      January 18, 2005, the Company effected a 95,000-for-one split of its common
      stock, and amended its Certificate of Incorporation to increase the authorized
      common stock to 300,000,000 shares and increase the authorized preferred stock
      to 150,000,000 shares; the common stock and preferred stock each have a par
      value of $0.001 per share. Each stockholder of common stock is entitled to
      one
      vote for each share held. The preferred stock may be divided into series with
      the designations, powers, preferences, and relative rights and any
      qualifications, limitations or restrictions as determined by the Company’s board
      of directors.





Prior
      to
      April 1, 2004, the Company operated through the Predecessor as a limited
      liability company. On April 1, 2004, the Predecessor contributed substantially
      all of its assets, liabilities and operations to Technology pursuant to a
      Contribution Agreement. Under SEC Staff Accounting Bulletin Topic 4 (B), the
      undistributed earnings (losses) of the limited liability company were
      treated as a constructive distribution to the owners followed by a contribution
      of the capital to the new C Corporation. On April, 1, 2004, the effective date
      of the Contribution Agreement, the Company reclassified the accumulated deficit
      to date of $822,847 to additional paid in capital.





On
      January 18, 2005, the Company and Ener1, Inc., an affiliated company controlled
      by certain direct and indirect beneficial owners of the membership interests
      of
      the Predecessor, completed the merger of Ener1 Acquisition Corp., a wholly-owned
      subsidiary of Ener1, Inc., into the Company (the “merger”) in exchange for
      5,000,000 shares of the Company’s common stock. The Company survived the merger.
      Ener1, Inc. declared a dividend of the 5,000,000 shares that it received in
      the
      merger to its shareholders of record as of January 17, 2005 (the
“distribution”). The Company registered the distribution on a registration
      statement on Form S-1 initially filed with the Securities and Exchange
      Commission on June 24, 2004 and declared effective on January 11, 2005. The
      dividend was paid on January 24, 2005. Immediately after the merger, and prior
      to the distribution, the Predecessor and Ener1, Inc. owned 95% and 5%,
      respectively, of the Company’s then-outstanding common stock. As a result of the
      merger and the distribution, the Company became a public reporting company
      subject to the information and reporting requirements of the Securities Exchange
      Act of 1934. The merger and the distribution are described further in the
      Company’s Registration Statement on Form S-1, filed with the Securities and
      Exchange Commission on December 27, 2004 (Registration No. 333-116817). Ener1
      Acquisition Corp. had no operations and no assets or liabilities prior to the
      merger. The acquisition was recorded at Ener1 Acquisition Corp.’s book value on
      the date of acquisition, which was zero.





During
      October 2005, a former employee forfeited 62,500 restricted shares of the
      Company's common stock. The Company has recorded the forfeited restricted stock
      as treasury stock at the closing price of the common stock on the date of the
      forfeiture.





NOTE
      8.
      STOCK OPTIONS AND STOCK GRANTS





In
      June
      2004, the board of directors of the Company formally approved the 2004 Stock
      Option Plan (the “Plan”), which initially authorizes the issuance of grants to
      Company employees to purchase up to 5,000,000 shares of the Company’s common
      stock. After June 30, 2005, the Company may grant options under the Plan to
      purchase up to the lesser of an additional 5,000,000 shares of common stock,
      5 percent of the outstanding shares of the Company common stock on such
      date, or an amount determined by the board of directors.





25




During
      the year ended March 31, 2005, the Company approved the issuance of options
      to
      purchase up to 4,825,000 shares of the Company’s common stock under the Plan, as
      follows:





On
      January 18, 2005, pursuant to an employment agreement dated September 1,
      2004, the Company granted to its chief executive officer an option to purchase
      2,000,000 shares of common stock under the Plan. These options have an exercise
      price of $0.20 per share. As of March 31, 2005, this option was vested with
      respect to 388,888 shares, and the remaining shares vest at a rate of 55,555
      per
      month over the following 29 months.





Pursuant
      to an employment agreement dated January 25, 2005, the Company granted to an
      executive officer an option to purchase 1,000,000 shares of common stock under
      the Plan with an exercise price of $0.20 per share. The options will vest with
      respect to 250,000 shares on January 25, 2006 and at a rate of 20,833 shares
      per
      month thereafter.





In
      January 2005, the Company’s board of directors approved the issuance of options
      to purchase an aggregate of 1,825,000 shares of the Company common stock to
      employees of the Company. These options have an exercise price of $0.10 per
      share, and vested 12.5% on the date of grant, 12.5% on June 24, 2005, and 12.5%
      every six months thereafter and expire on the ten-year anniversary of the grant.
      The options were formally delivered in May and June 2005.





During
      the year ended March 31, 2005, the Company approved the issuance of options
      to
      purchase 2,250,000 shares of the Company common stock, which are not under
      the
      Plan, as follows:





On
      January 18, 2005, pursuant to an employment agreement dated September 1,
      2004, the Company granted to its chief executive officer an option to purchase
      1,500,000 shares of common stock. This option has an exercise price of $0.50
      per
      share. This option will be fully vested upon the first to occur of (1) the
      date
      that the cumulative revenues of the Company exceed $50,000,000 or (2) September
      1, 2009.





On
      January 25, 2005, the Company agreed to grant to an executive officer an option
      to purchase 750,000 shares of the Company’s common stock if the Company has not
      commenced development and committed funding of a specified research and
      development project by January 25, 2006. If granted, this option will have
      an
      exercise price per share equal to the fair market value on the date of grant.
      This option would vest in three equal installments beginning on the one-year
      anniversary of the date of grant.




26




During
      the year ending March 31, 2006, 5,437,500 shares expired or were forfeited,
      and
      87,500 shares were exercised. No options were granted during fiscal 2006. The
      following table summarizes the changes in stock options for the two years ending
      March 31, 2006.




**Options**
              
              **Number
                  of**
                **Options**
              
              **Weighted
                  Average Price**
              
              **Average
                  Remaining Contractual Term**
              
              **Intrinsic**
                **Value**Outstanding
                  at March 31, 2004
              
              
              —Granted
              
              
              6,325,000
              
              $
              0.24
              
              
              10Exercised
              
              
              —Forfeited
                  or expired
              
              
              —Outstanding
                  at March 31, 2005
              
              
              6,325,000
              
              $
              0.24
              
              
              9.8Granted
              
              
              —Exercised
              
              
              (87,500
              )
              $
              0.10Forfeited
                  or expired
              
              
              (5,437,500
              )
              $
              0.23Outstanding
                  at March 31, 2006
              
              
              800,000
              
              $
              0.10
              
              
              8.8
              
              $
              —Vested
                  or expected to vest at March 31, 2006
              
              
              300,000
              
              $
              0.10
              
              
              8.8
              
              $
              —Exercisable
                  at March 31, 2006
              
              
              300,000
              
              $
              0.10
              
              
              8.8
              
              $
              —




During
      the quarter ending March 31, 2005, the Company adopted the provisions of SFAS
      No. 123 for accounting for transactions in which an entity exchanges its equity
      instruments for goods or services, including obtaining employee services in
      share-based payment transactions. The weighted average Black-Scholes value
      of
      options granted under the stock plans during fiscal 2005 was $0. Accordingly,
      no
      compensation expense has been recorded for stock option grants as such grants
      were all considered to be made at or above fair market value on the date of
      grant. The fair **v** alue
      of
      each option grant is estimated on the date of grant using the Black-Scholes
      option-pricing model with the following weighted average assumptions used for
      grants made in fiscal 2005:




Weighted average expected life in
              years
            10Dividend per share
            noneVolatility
            0%Risk free interest rate
            4.0%




The
      Black-Scholes option valuation model was developed for use in estimating the
      fair value of traded options that have no vesting restrictions and are fully
      transferable. In addition, option valuation models require the input of highly
      subjective assumptions. The Company assumed zero stock price volatility because
      its stock did not have an established trading market. Because the Company's
      employee stock options have characteristics different from those of traded
      options, and because changes in the subjective input assumptions can materially
      affect the fair value estimate, in management's opinion, the existing models
      do
      not necessarily provide a reliable single measure of the fair value of its
      employee stock options.





During
      the year ended March 31, 2005, the Company granted 400,000 shares of restricted
      common stock to its chief executive officer; as of March 31, 2006, the
      restrictions as to the transferability of such shares had lapsed. The Company
      also granted 250,000 shares of restricted common stock to an executive that
      was
      subject to a lapsing right of forfeiture commencing in January 2006; the
      employee forfeited the 250,000 shares in October 2005 under a termination
      agreement. The Company recorded compensation expense of $19,500 for these
      restricted stock grants during fiscal 2005.





NOTE
      9.
      LONG TERM DEBT DUE TO RELATED PARTY





Effective
      April 1, 2004, a company that is affiliated with the Company through common
      ownership, entered into a revolving loan agreement with the Company under which
      the Company borrowed $2,550,000 in aggregate principal through March 31, 2006.
      Loans under this agreement bear interest at an annual rate of 5% and must be
      repaid two years from the date of the initial funding, which occurred on
      February 7, 2005.




27




During
      the year ending March 31, 2005, Ener1 Group, Inc., a company that is affiliated
      with the Company through common ownership, loaned the Company $800,000 to fund
      working capital needs. These loans were assumed by Bzinfin, S.A., the lender
      under the Company’s revolving loan agreement, effective February 21, 2005,
      and **** are
      included in the $2,550,000 outstanding balance at March 31, 2006 under the
      revolving loan agreement. At March 31, 2006, the Company had borrowed $429,000
      from Ener1 Group under a demand note bearing annual interest of 5% to fund
      working capital needs.




NOTE
      10.
      INCOME TAXES




Deferred
      income taxes reflect the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting purposes
      and
      the amounts of assets and liabilities used for income tax purposes. At March
      31,
      2006 and 2005, the Company had cumulative federal net operating loss carry
      forwards (NOL) of approximately $5,039,000 and $2,780,000, respectively. The
      NOL
      expires during the year 2025.





The
      net
      provision (benefit) for income taxes consisted of the following at March
      31, 2005 and 2006:




2005
              
              
              2006Current
                  Federal income taxes
              $
              —
              
              
              $
              —Deferred
                  income tax benefit
              
              (1,045,000
              )
              
              
              (850,000
              )Change
                  in valuation allowance
              
              1,045,000
              
              
              
              850,000Total
                  income tax provision
              $
              —
              
              
              $
              —





Significant
      components of the Company's deferred tax assets at March 31, 2005 and 2006
      are
      as follows:




2005
              
              
              2006Net
                  operating loss carryforwards
              $
              1,032,000
              
              
              $
              1,635,000Accrued
                  compensation and other
              
              13,000
              
              
              
              260,0001,045,000
              
              
              
              1,895,000Valuation
                  allowance for deferred tax assets
              
              (1,045,000
              )
              
              
              (1,895,000
              )Net
                  deferred tax asset
              $
              —
              
              
              $
              —





A
      reconciliation between actual income taxes and amounts computed by applying
      the
      federal statutory rate of 34% to pre-tax loss is summarized as
      follows:




2005
              
              
              2006U.
                  S. Federal statutory rate on lossbefore
                  income taxes
              
              34.0
              %
              
              
              34.0
              %Non
                deductible items registration cost
              
              -5.9
              %
              
              
              —
              %State
                  income tax, net of federal tax benefit
              
              3.6
              %
              
              
              3.6
              %Increase
                  in valuation allowance
              
              -31.7
              %
              
              
              -37.6
              %Total
                  income tax provision
              
              0.0
              %
              
              
              0.0
              %




Operating
      losses of the Predecessor in the amount of $822,847 prior to the date of the
      Contribution Agreement were allocated to the Predecessor and are not available
      to the Company as net operating loss carryforwards. On a pro forma basis, had
      the Company been taxed as a C corporation for federal income tax purposes,
      the
      income tax benefit would have been $279,768 for the period ending March 31,
      2004, which would have been fully offset by a valuation allowance.





NOTE
      11.
      RELATED PARTY TRANSACTIONS





On
      January 1, 2004 and February 1, 2004, the Company entered into
      consulting agreements with two members of the Predecessor, one of whom is also
      director of the Company. The consulting agreements engage the members to provide
      consulting services including advice regarding equity restructuring, business
      planning, strategic planning, and international licensing in exchange for
      $100,000 per year or a monthly fee to each consultant of $8,333. General and
      administrative expenses for the years ended March 31, 200 6 and 2005 include
      consulting fees under these agreements of $200,000 and $200,000, respectively.
      Accounts payable includes $184,000 and $0 due to the related party consultants
      at March 31, 2006 and March 31, 2005 respectively.




28




The
      Company shares personnel with Ener1, Inc. and Ener1 Group, Inc., entities
      affiliated with the Company by common ownership. In
      addition, Ener1, Inc. paid certain expenses of the Company related to the merger of
      the
      Company with Ener1 Acquisition Corp (discussed below under Note 8, “Subsequent
      Events”) .  Accordingly,
      amounts have been allocated to and from the Company for the services of
      personnel and other expenses. The Company incurred rent expense for its office
      space under a sublease with Ener1 Group, Inc. in the amounts of $62,263 and
      $60,274 for the years ended March 31, 2006 and 2005, respectively. On January
      24, 2005, the Company issued 20,629 shares of restricted common stock to Ener1
      Group, Inc. in partial reimbursement for certain expenses paid for by Ener1
      Group, Inc. at a value of $0.25 per share.




Related
      parties reimburse the Company for the time spent by one of its employees for
      patent and research work; as a result, administrative wages and research and
      development wages are net of reimbursements of $17,160 and $46,080,
      respectively, for the year ended March 31, 2005. Administrative expenses for
      the
      years ended March 31, 2006 and 2005 include legal expenses payable to Ener1
      Group, Inc. for the services of an Ener1 Group employee who serves as the
      Company’s general counsel in the amount of $9,200 and $35,530, respectively.
      Other administrative services were provided by personnel of Ener1, Inc. in
      the
      amount of $1,782 and $5,849 for the years ended March 31, 2006 and
      2005.





The
      Company worked with Russia-based scientists and programmers who were paid on
      the
      Company’s behalf under an agreement with a Russian consultant who handled
      administrative matters for the Company in Russia through July 2004. This
      consultant became an employee of the Company in July 2004. The Company paid
      the
      expenses of the Company’s operations in Russia through this consultant in the
      amounts of $93,800 and $48,000 for the period from inception through March
      31,
      2004 and for the year ended March 31, 2005, respectively. In March 2004,
      the consultant formed Splinex Outsourcing LLC to handle administrative and
      employment matters in connection with the Company’s Russian operations. In
      April 2004, a member of the Predecessor formed ANTAO to facilitate the
      payment of expenses to Splinex Outsourcing; ANTAO became a subsidiary of the
      Company on September 12, 2004. From July 2, 2004 through March 31, 2005, the
      Company paid $260,000 to ANTAO, of which ANTAO had retained $10,000 for minimum
      cash requirements and payment of its administrative expenses, and paid $250,000
      to Splinex Outsourcing LLC to date. During the year ending March 31, 2006, the
      Company paid $120,207 (unaudited) to Splinex Outsourcing LLC, of which $40,207
      was paid through ANTAO and $80,000 was paid through Ener1 Group, Inc. In
      September 2005, the Company terminated the development work provided by Splinex
      Outsourcing.





NOTE
      12.
      ACQUISITION





On
      September 20, 2004, the sole stockholder of ANTAO, who is a member of Splinex,
      LLC, contributed the outstanding stock of ANTAO to the Company pursuant to
      his
      obligations under the Splinex, LLC operating agreement. ANTAO’s sole asset was
      cash of $2,509, which represents advances previously paid by the Company. This
      asset was offset by a liability of $2,509 for amounts due to Splinex Outsourcing
      LLC. The results of operations of ANTAO have been included in the consolidated
      interim results of operations of the Company from September 20,
      2004.





NOTE
      13.
      COMMITMENTS AND CONTINGENCIES





***Foreign
      subsidiary***





The
      Company has outsourced computer programming to a company located in Ekaterinberg
      Russia. The Company may engage in outsourcing in Russia again in the
      future. The outsourcing company’s operations in Russia are subject to
      significant risks not typically associated with companies in North America
      and
      Western Europe. These risks include, among others, political, economic
      and legal risks associated with doing business in Russia, limitations on foreign
      currency transactions, and risks associated with evolving Russian laws on
      issues including creditor rights and intellectual property. The Company’s
      ability to develop products and earn revenues may be adversely affected by
      changes in the political, economic, legal and social conditions in Russia,
      and
      by changes in governmental policies with respect to laws and regulations,
      anti-inflationary measures, foreign currency transactions, and rates and methods
      of taxation, among other things.




29




Lease
      Commitments




Effective
      April 1, 2004, the Company assumed the rights and obligations under a
      sublease agreement for its office facility that the Predecessor entered into
      in
      October 2003. The sublease agreement expires on February 28, 2008. The
      Company terminated the lease on June 1, 2006, and a subtenant assumed the lease
      obligations to Ener 1 Group.




Minimum
      commitments on the above agreement for the years subsequent to March 31, 2006
      are as follows:




2007
              
              $
              62,0002008
              
              
              59,000$
              121,000
  30




ITEM
      8:
      Changes in and Disagreements with Accountants on Accounting and Financial
      Disclosure




None




ITEM
      8A:
      Controls and Procedures





Our
      disclosure controls and procedures are designed to provide reasonable assurance
      that information required to be disclosed in our reports filed or
      submitted under
      the Securities Exchange Act of 1934 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 officer and chief financial
      officer ,
      as
      appropriate, to allow for 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, and management is required to apply its judgment in evaluating
      the
      cost-benefit relationship of possible controls and procedures.





As
      of
      March 31, 2006, we
      carried out an evaluation , under
      the supervision and with the participation of our management,
      which consisted solely of our president (principal executive officer) who also
      is our chief financial officer, of the
      effectiveness of the design and operation of our disclosure controls and
      procedures. Based on
      the foregoing, our principal executive and
      financial officer
      concluded that our disclosure controls and procedures were
      effective and were operating at the reasonable assurance level.




There
      were no changes in internal controls over financial reporting that have
      materially affected, or are reasonably likely to materially affect, our internal
      control over financial reporting.




ITEM
      8B:
      Other Information




None.




31




PART
      III





Item
      9.
      Directors, Executive Officers, Promoters and Control Persons; Compliance With
      Section 16(a) of the Exchange Act




**Directors
      and executive officers**




The
      following table sets forth information regarding our directors and executive
      officers.




Name
            Age
            Position
            Director
                or
              Officer
                SinceDr.
                Peter Novak
            53
            Chairman
                and Director
            2004Alexander
                Yarmolinsky
            32
            Director
            2005Curtis
                Wolfe
            43
            General
                Counsel, Secretary and Director
            2004Gerard
                Herlihy
            53
            President
                and Chief Financial Officer
            2004




Each
      of
      our directors will hold office until our next meeting of stockholders at which
      directors are elected or until his successor is duly elected and
      qualified.




***Dr. Peter
      Novak*** has
      been
      a director of our company since its founding in February 2004 and Chairman
      since September 2005. From February 2004 until September 1, 2004, Dr. Novak
      was
      our President. Since 2001, he has been the chief technology officer and a
      director of Ener1 Group and a director of Ener1. Since 1991, Dr. Novak has
      worked with Mike Zoi, who is also a director of Ener1, focusing on bringing
      advanced electronic technologies to market. In 1998, Dr. Novak worked with
      Mr. Zoi to form On Power Battery s.r.l. (subsequently renamed Ener1 s.r.l.).
      Dr.
      Novak is the “sole administrator,” a position equivalent to president, and sole
      director, for Ener1 s.r.l. which commenced development of a research,
      development and production facility for advanced lithium metal batteries in
      Italy in 1998. For the next three years, Dr. Novak worked with Mr. Zoi
      to manage the start-up business operations of Ener1 s.r.l. Dr. Novak was,
      during that period, and is now, primarily responsible for technology
      development. In that capacity, he performed and supervised research and
      development and developed numerous technologies for which patent applications
      are now in process at the United States Patent and Trademark office and
      elsewhere. In 2001, Dr. Novak and Mr. Zoi formed Ener1 Holdings, Inc.,
      now named Ener1 Group. As chief technology officer of Ener1 Group, Dr. Novak
      is
      responsible for all technology development, licensing and patent matters.
      Dr. Novak also assists in the management of the business affairs of Ener1
      Group. Dr. Novak graduated from the Ural Polytechnic Institute, Physics and
      Technical Department, with specialization in experimental nuclear physics.
      Dr. Novak obtained his Ph.D. degree in physical chemistry from the
      Institute of Solid State Chemistry, Ural Branch Academy of Science, Russia.





***Alexander
      Yarmolinsky*** has
      been
      a director of our company since June 2005. From 1999 through 2005,
      Mr. Yarmolinsky has been employed by Burr, Pilger & Mayer, LLP, a
      public accounting firm, most recently as a senior tax manager.  Currently,
      Mr. Yarmolinsky is employed by The Marcus and Millichap Company, a diversified
      real estate firm, as a Vice President of tax.  Mr. Yarmolinsky earned
      a Bachelor of Arts degree in accounting from the University of San Francisco
      and
      a Masters of Science in taxation from Golden Gate University.  Mr.
      Yarmolinsky is a member of the American Institute of Certified Public
      Accountants and the California Society of CPAs.




***Curtis
      Wolfe*** has
      been
      our general counsel and secretary since June 2004 and a director since
      December 2004. Mr. Wolfe also serves as general counsel for Ener1 Group. Prior
      to joining Ener1 Group, Mr. Wolfe was a partner at the law firm Steel
      Hector & Davis LLP where he practiced law from 1998 to 2004. While at Steel
      Hector, Mr. Wolfe built a practice focusing on complex corporate
      transactions, including mergers and acquisitions, finance and intellectual
      property with an expertise in software licensing. Prior to 1998, Mr. Wolfe
      practiced law in the business and finance department of Ballard Spahr Andrews
      & Ingersoll in Philadelphia, Pennsylvania. Mr. Wolfe is admitted to practice
      law in Florida, Delaware and Pennsylvania. Mr. Wolfe has served on the board
      of
      directors of the Zoological Society of Florida since 2002 and served from 2002
      until 2004 on the executive committee and board of directors of the Miami-Dade
      County Beacon Council, Inc., Miami-Dade County, Florida’s official economic
      development agency. Mr. Wolfe holds a Juris Doctor degree from the
      University of Iowa College of Law and a Bachelor of Integrated Studies degree
      in
      English, Mathematics and Latin American Studies from Weber State University
      in
      Ogden, Utah.




32




***Gerard
      Herlihy*** has
      been
      our chief financial officer since June 2004 and our president since
      September 2005. In February 2006, Mr. Herlihy was appointed Chief Financial
      Officer of Ener1 Group in addition to his current responsibilities at Splinex.
      In the year prior to joining our company, Mr. Herlihy provided accounting,
      financing and acquisition advisory consulting services to public and private
      companies. From 2001 through 2003, he was also the founder and chief executive
      officer of Putt Trak Inc., a vision systems software development company for
      sports training devices. From 1996 to 2000, Mr. Herlihy was chief financial
      and administrative officer of Williams Controls, Inc., a publicly-held
      manufacturer of sensors and controls. Mr. Herlihy held previous positions
      directing turnarounds in public and private companies and in investment banking
      and public accounting. Mr. Herlihy has a Masters of Business Administration
      degree from the Harvard Business School and a Bachelor of Science degree from
      the University of Rhode Island and is a Certified Public Accountant (inactive
      status).




**Board
      composition**




As
      of
      July 10, 2006, our board of directors currently consists of three members.
      The
      number of directors may change from time to time, solely as determined by
      resolution adopted by a majority of the board of directors. Our bylaws require
      a
      minimum of one director and allow a maximum of nine directors.




Alexander
      Yarmolinsky is an independent director who is a “financial expert” under the
      Commission’s standards. Currently, Mr. Yarmolinsky is “independent” as defined
      under Rule 4200(a)(15) of the National Association of Securities Dealers’
(“NASD”) Listing Standards for NASDAQ-listed companies.




**Committees
      of the board of directors**




In
      December 2004, our board of directors established a Nominating and Compensation
      Committee and an Audit Committee.  The current member, and
      chairman, of the Nominating and Compensation Committee is Dr. Novak. 
The current member of the Audit Committee is Mr. Yarmolinsky, who joined the
      committee upon his appointment to the Board in June 2005.




***Audit
      Committee***




Our
      audit
      committee’s main function is to oversee our accounting and financial reporting
      processes, internal systems of control, independent auditor relationships and
      the audits of our financial statements. This committee’s responsibilities
      include:




·
            Selecting
                and hiring our independent
                auditors.


·
            Evaluating
                the qualifications, independence and performance of our independent
                auditors.


·
            Approving
                the audit and non-audit services to be performed by our independent
                auditors.


·
            Reviewing
                the design, implementation, adequacy and effectiveness of our internal
                controls and our critical accounting
                policies.


·
            Overseeing
                and monitoring the integrity of our financial statements and our
                compliance with legal and regulatory requirements as they relate
                to
                financial statements or accounting
                matters.


·
            Reviewing
                with management and our auditors any earnings announcements and other
                public announcements regarding our results of
                operations.


·
            Preparing
                the audit committee report we are required to include in filings
                with the
                Commission.




**Code
      of Ethics**




We
      have a
      Code of Ethics that applies to our officers and directors. The code provides
      written standards that are reasonably designed to deter wrongdoing and promote:
      (1) honest and ethical conduct, including the ethical handling of actual or
      apparent conflicts of interests between personal and professional relationships;
      (2) full, fair, accurate, timely and understandable disclosure in reports and
      documents that we file with or submit to the SEC or in other public
      communications we make; (3) compliance with applicable laws, rules and
      regulations; (4) prompt reporting of internal violations of the code; and (5)
      accountability for the adherence to the code.




33




**Section
      16(a) reporting**




Section
      16(a) of the Securities Exchange Act of 1934, as amended, requires our
      directors, executive officers and holders of more than 10% of our outstanding
      common stock to file with the Securities and Exchange Commission reports
      regarding their ownership and changes in ownership of the common stock. Based
      solely upon a review of copies of forms furnished to our company or written
      representations from certain reporting persons, each of our officers and
      directors and holders of more than 10% of our common stock timely filed the
      statement of changes in beneficial ownership on Form 4 or the statement of
      beneficial ownership on Form 3 pursuant to Section 16(a) during fiscal
      2006 .




34




Item
      10.
      Executive Compensation




The
      following table sets forth all compensation awarded, earned or paid by us for
      services rendered in all capacities to us for fiscal 2005 and fiscal 2006 to
      our
      chief executive officer and president and our other executive officers who
      earn
      more than $100,000 in salary and bonus. We refer to these individuals as the
      “named executive officers.”




**Summary
      Compensation Table**




Long
                Term CompensationAnnual
                Compensation
            AwardsName
                and Principal Position
            Fiscal
                Year
            Salary
                ($)
            Bonus
                ($)
            Other
                ($)
            Restricted
                Stock
              Awards
                ($)
            Securities
              Underlying
                Options/
              SAR’s
                (#)Gerard
                Herlihy -
              President and Chief
              Financial Officer (1)
            2006
              2005
            $118,273
              $91,116
            $
                —
              $
                —
            $
                —
              $
                —
            $
                —
              $
                —
            —
              —Michael
                Stojda - former
              Director, President and
              Chief Executive
              Officer (2)
            2006
              2005
            $110,676
              $156,561
            $
                —
              $
—
            $
                35,007
              $
—
            $
                —
              $12,000
                (3)
            —
              400,000Christian
                Schormann -
              former Vice President,
              Research and
              Development (4)
            2006
              2005
            $90,320
              $38,730
            $
                —
              $
                —
            $
                —
              $
—
            $
                —
              $7,500
                (5)
            —
              250,000




(1)
            Mr.
                Herlihy joined us on June 1, 2004. His base salary was $110,000 per
                year
                until September 1, 2005; $145,000 until January 31, 2006, and $60,000
                effective February 1, 2006. Effective February 1, 2006, Splinex is
                paying
                $60,000 of Mr. Herlihy’s $250,000 annual salary as Chief Financial Officer
                of Ener1, and Ener1 is paying $190,000 of Mr. Herlihy’s salary. Mr.
                Herlihy is dedicating substantially all of his time to Ener1 except
                for
                the time necessary to attend to the administrative and financial
                matters
                of Splinex. He is eligible to receive an annual performance bonus
                of up to
                50% of his base salary.


(2)
            Mr. Stojda
                joined us September 1, 2004 and terminated his employment on September
                1,
                2005. Mr. Stojda’s base salary is $275,000 per year. Other compensation
                reflects payments under his termination
                agreement.


(3)
            Mr.
                Stojda received, under the terms of his employment agreement,400,000 shares of restrictedcommon
                stock thataresubject to a lapsing right of forfeiture.
                Therightof
                forfeiture lapsedwith
                respect to 233,333 sharesas
                of March 31, 2005andthe
                remaining shares lapse at the rate of33,333
                shares per month until fullylapsed.
                No cash consideration was paid for these restricted shares.


(4)
            Mr.
                Schormann joined us on January 12, 2005. His base salary is $190,000
                per
                year, and he is eligible to earn an annual bonus of up to 25% of
                his base
                salary. His employment terminated in October
                2005.


(5)
            Mr.
                Schormann receive, under the terms of his employment agreement, 250,000
                shares of restricted common stock that are subject to a lapsing right
                of
                forfeiture, which right will lapse with respect to 62,500 of the
                restricted shares on January 25, 2006 and at a rate of 5,208 shares
                per
                month thereafter. His employment terminated in October 2005, and
                he
                forfeited the restricted stock awards upon
                termination.





35




**Options/SAR
      Grants in Last Fiscal Year**


**Individual
      Grants**





There
      were no grants of stock options to our named executive officers during fiscal
      2006.




None
      of
      our named executive officers exercised options during fiscal
      2006. The
      following table provides information regarding unexercised options held as
      of
      March 31, 2006 by our named executive officers.




**Aggregated
      Options/SAR Exercises in Last Fiscal Year**


**and
      FY-End Options/SAR Values**




Name
            Shares
                acquired on Exercise (#)
            Value
                realized
            Number
                of Securities Underlying Unexercised Options/SARs at FY-End
                (#)
              Exercisable/
              Non
                Exercisable
            Value
                of Unexercised In-the-Money Options/SARs at FY-End ($)
              Exercisable/
              Non
                ExercisableGerard
                Herlihy
            -
            $
                -
            112,500
                / 187,500
            $
                -Michael
                Stojda
            -
            $
                -
            -
            $
                -Christian
                Schormann
            -
            $
                -
            -
            $
                -




**Employment
      Agreements**




***Employment
      Agreement and Severance Agreement with Michael Stojda***




We
      entered into an employment agreement with Mr. Stojda dated
      September 1, 2004, under which Mr. Stojda agreed to serve as our
      president and chief executive officer for a term of three years. He will receive
      an annual salary of $275,000, and is eligible to receive an annual performance
      bonus of up to 100% of his salary; payment of this bonus will be based on the
      achievement of performance objectives to be agreed upon by us and
      Mr. Stojda. In addition, we agreed to grant him, as of the date the Merger
      was consummated, 400,000 restricted shares of our common stock. As of the date
      of grant of the restricted stock, the restrictions as to 166,667 shares lapsed
      and restrictions with respect to the remaining restricted shares lapse with
      respect to 33,333 shares per month. We also agreed to grant to Mr. Stojda,
      as of the closing of the Merger, options to purchase an aggregate of 3,500,000
      shares of our common stock with exercise prices and vesting schedules as
      follows: an option to purchase 2,000,000 shares that will vest in equal monthly
      installments over three years with an exercise price of $0.20, and an option
      to
      purchase 1,500,000 shares which will vest in full at the earliest of:
      (1) the date we achieve cumulative revenue of $50,000,000 or (2) five
      years after he begins working, with an exercise price of $0.50 per share. The
      grant of options to purchase 2,000,000 shares with an exercise price of $0.20
      per share was made under our 2004 Stock Option Plan.




We
      agreed
      to grant Mr. Stojda piggyback registration rights and tag-along rights with
      respect to the shares underlying the grant of restricted stock and options
      described above.




Upon
      a
“Change in Control”, the grant of restricted stock and the options described
      above will become fully vested. A “Change in Control” will be deemed to have
      occurred:




·
            if
                any “person” (as defined in Sections 13(d)(3) and 14(d)(3) of the
                Exchange Act), other than us, our subsidiary, a compensation plan
                of ours
                or of our subsidiary or any person reported as a beneficial owner
                of our
                common stock in this prospectus, becomes the “beneficial owner” (as
                defined Rule 13d-3 of the Exchange Act) of thirty percent (30%) or
                more of our outstanding common
                stock;




36




·
            if
                there is a change in composition of our board within a two year period
                as
                a result of which a majority of our directors are individuals who
                were not
                either (1) directors as of September 1, 2004 or (2) elected,
                nominated for election or individuals whose election was confirmed
                by, at
                least a two-thirds majority of the Board;
                or


·
            if
                our stockholders approve (1) a sale, reorganization, merger or
                consolidation with respect to which persons who were our stockholders
                immediately prior to such transaction do not own securities representing
                more than fifty percent of the voting power entitled to elect directors
                of
                the surviving entity immediately after the transaction; (2) our
                liquidation or dissolution or (3) the sale of all or substantially
                all of
                our assets.




Either
      we
      or Mr. Stojda may terminate the employment agreement at any time on ninety
      days’ notice. If we terminate the agreement for “Cause,” or Mr. Stojda
      terminates the agreement without “Good Reason”, he will be entitled to receive
      only amounts that are due or accrued under the agreement as of the termination
      date. If we terminate the agreement without Cause, or Mr. Stojda terminates
      the agreement for Good Reason, he will be entitled to receive (1) an amount
      equal to twelve months’ salary, and (2) a percentage of his annual salary
      equal to the percentage of his annual salary paid to him as a bonus for the
      immediately preceding year. However, if his employment terminates after a Change
      in Control occurs, the bonus amount he will receive will be the greater of
      (a) the amount payable under clause (2) above or (b) fifty
      percent of his target bonus for the year in which his employment is terminated.
      In addition, any grant of restricted stock or options whose vesting is
      conditioned solely on the passage of time will vest in full. We will also pay
      our share of any group health insurance under COBRA, the Consolidated Omnibus
      Budget Reconciliation Act, for the period during which severance is paid.




“Cause”
      is defined in the employment agreement as:




·
            Mr. Stojda’s
                continued, willful and deliberate failure to perform his
                duties;


·
            Mr. Stojda
                engages in misconduct materially and demonstrably injurious to us;
                or


·
            Mr. Stojda
                is convicted of a felony.


·
            “Good
                reason” is defined in the employment agreement
                as:


o
            a
                Change in Control;


o
            a
                reduction of Mr. Stojda’s duties, title, reporting status or
                responsibilities;


o
            a
                reduction of Mr. Stojda’s
                salary;


o
            relocation
                of our principal place of business after Mr. Stojda relocates to
                south Florida; or


o
            our
                material breach of the employment
                agreement.





If
      we
      terminate the employment agreement due to Mr. Stojda’s inability to
      substantially perform his duties by reason of disability for at least three
      consecutive months, or due to his death, he or his estate, as applicable, will
      be entitled to receive (1) his base salary for the month in which his
      employment is terminated, (2) a pro rata portion of his target annual bonus
      and (3) any disability benefits to which he is entitled under our benefit
      plans then in effect. In addition, any grant of restricted stock or options
      will
      vest in full and remain exercisable for six months.





Mr. Stojda
      has agreed that he will not, directly or indirectly, (1) compete with us or
      our
      parents, subsidiaries or affiliates or (2) solicit any of our executives,
      employees or consultants, during the term of the employment agreement and for
      six months after the agreement terminates.





On
      November 21, 2005, the Company entered into a Severance Agreement with Michael
      Stojda in connection with Mr. Stojda’s resignation from the Company’s Board of
      Directors and from his positions as President and Chief Executive Officer.
      The
      Severance Agreement terminates the Employment Agreement between Mr. Stojda
      and
      the Company, dated August 30, 2004, except in the event of a default under
      the
      Severance Agreement. The Company agreed to make a payment of $5,000 on November
      25, 2005, bi-weekly payments to Mr. Stojda of $2,500.00 from December 9, 2005
      through February 17, 2006 and bi-weekly payments of $7,500.00 from March 3,
      2006
      through December 21, 2007. Mr. Stojda’s non-qualified stock options will vest as
      of November 21, 2005 and will expire on February 28, 2006.




37




***Employment
      letter with Gerard Herlihy***





Mr. Herlihy
      agreed in an employment letter dated May 20, 2004 to serve as our chief
      financial officer. He became our chief financial officer in June, 2004. He
      is an
“at will” employee. He receives an annual salary of $110,000, and is eligible to
      receive an annual performance bonus of up to 50% of his salary. His base salary
      was $110,000 per year until September 1, 2005; $145,000 until January 31, 2006,
      and $60,000 effective February 1, 2006. Effective February 1, 2006, Mr. Herlihy
      was appointed to the position as Chief Financial Officer of Ener1 in addition
      to
      his continuing role at Splinex. Splinex is paying $60,000 of Mr. Herlihy’s
      $250,000 annual salary as Chief Financial Officer of Ener1, and Ener1 is paying
      $190,000 of Mr. Herlihy’s salary. Mr. Herlihy is dedicating substantially all of
      his time to Ener1 except for the time necessary to attend to the administrative
      and financial matters of Splinex. He is eligible to receive an annual
      performance bonus of up to 50% of his base salary. In addition, we agreed to
      grant Mr. Herlihy an option to purchase 100,000 shares of our common stock,
      which in January 2005 the board of directors increased to an option to purchase
      300,000 shares of common stock at an exercise price of $.10 per share.





***Employment
      Agreement and Termination Agreement with Christian
      Schormann***





On
      January 12, 2005, we entered into an employment agreement with Christian
      Schormann, our Vice President of Research and Development. The term of his
      employment under this agreement is two years, with automatic renews for one
      year
      periods unless either party gives at least 90 days’ written notice to the other
      of its intent not to renew the agreement.





Mr.
      Schormann receives a base annual salary of $190,000 and is eligible to earn
      an
      annual bonus of up to 25% of his base salary, based on the achievement of
      performance objectives to be agreed upon by Mr. Schormann and our president,
      and
      approved by our board.





We
      agreed
      to issue the following securities to Mr. Schormann:





·
            250,000
                shares of our common stock that shall be subject to a lapsing right
                of
                forfeiture which right shall lapse with respect to 62,500 of the
                restricted shares on the first anniversary of the date of his employment
                and at a rate of 5,208 shares per month after such date.




·
            An
                option to purchase 1,000,000 shares of common stock with an exercise
                price
                of $.20 per share, which shall vest and become exercisable with respect
                to
                250,000 shares on the first anniversary of the date of his employment,
                and
                at a rate of 20,833 shares per month after such date.




·
            If
                we have not commenced development and committed funding of a specified
                research and development project by the first anniversary of the
                date of
                his employment, we will grant Mr. Schormann an option to purchase
                750,000
                shares of common stock with an exercise price per share equal to
                the fair
                market value on the date of grant. This option shall vest in three
                equal
                installments beginning on the first anniversary of the date of
                grant.





All
      restrictions on the restricted stock shall lapse and any unvested shares subject
      to the options described above will vest 90 days after the occurrence of any
      of
      the following “change of control” events, if the employment agreement is still
      in effect:





·
            Any
                change in control of our company, including a merger or consolidation
                with
                any other entity in which we are not the surviving corporation or
                in any
                transaction in which persons who are not a majority of our stockholders
                prior to such transaction acquire the power to appoint a majority
                of our
                directors;*including*any “person” (as such term is defined in Sections 13(d)(3) and
                Section 14(d)(3) of the Exchange Act) other than Splinex, a
                majority-owned subsidiary of Splinex or a compensation plan of Splinex
                or
                of a majority-owned subsidiary of Splinex, becomes the “beneficial owner”
                (as such term is defined in Rule 13d-3 of the Exchange Act), directly
                or indirectly, of our securities representing 50% or more of the
                combined
                voting power of our company; or




38




·
            our
                stockholders approve (1) a sale or merger with respect to which our
                stockholders immediately prior to such sale or merger do not immediately
                after such sale or merger own more than 50% of the combined voting
                power
                entitled to vote generally in the election of the directors of the
                sold,
                reorganized, merged or consolidated entity, and such sale or merger
                is
                consummated; (2) a liquidation or dissolution of our company; or
                (3) the sale of all or substantially all of our assets.





If
      Mr.
      Schormann's employment is terminated without cause by us, or for "good reason"
      by Mr. Schormann, we will pay him an amount equal to one year’s base salary. The
      definitions of “good reason” and “cause” in Mr. Schormann’s employment agreement
      are substantially equivalent to the definitions of these terms in Mr. Stojda’s
      employment agreement.





If
      we
      terminate the employment agreement due to Mr. Schormann’s inability to
      substantially perform his duties by reason of disability for at least three
      consecutive months, or due to his death, he or his estate, as applicable, will
      be entitled to receive (1) his base salary for the month in which his
      employment is terminated, (2) a pro rata portion of his target annual bonus
      and (3) any disability benefits to which he is entitled under our benefit
      plans then in effect. In addition, any grant of restricted stock or options
      will
      vest in full and any options will remain exercisable for six months.





Mr.
      Schormann has agreed he will not compete with us or any of our parent
      corporations, subsidiaries or affiliates, or solicit for employment any of
      our
      employees, during the term of his employment agreement and for one year
      following termination of his employment agreement.




On
      October 17, 2005, the Company entered into a Termination Agreement with
      Christian Schormann in connection with Mr. Schormann’s resignation as Vice
      President of Company. The Termination Agreement terminates the Employment
      Agreement between Mr. Schormann and the Company, dated January 12, 2005. The
      Company agreed to pay Mr. Schormann severance for ninety days in the amount
      of
      $47,500.00 and other amounts owed in the aggregate amount of $33,948.05.




**Director
      compensation**




We
      intend
      to grant independent directors options to purchase shares of our common stock,
      vesting in approximately equal installments over three years. No options have
      yet been formally granted ***.*** Other
      than as described in this paragraph, we do not pay any of our directors any
      additional amount for his or her services as director. We do, as described
      below, compensate one of our non-employee directors for his services to us
      as a
      consultant.




39




Item
      11.
      Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.




The
      table
      below contains information as of July 10, 2006 about stockholders whom we
      believe are the beneficial owners of more than five percent (5%) of our
      outstanding common stock, as well as information regarding stock ownership
      by
      our directors and our Chief Executive Officer, our named executive officers,
      and
      our directors and named executive officer as a group. Except as described below,
      we know of no person that beneficially owns more than 5% of our outstanding
      common stock. As of June 1, 2006 there were 100,507,770 shares of common stock
      outstanding. We believe, based on information supplied by the following persons
      that, except as noted, the persons named in this table have sole voting and
      investment power with respect to all shares of common stock which they
      beneficially own. The amount and percentage of common stock beneficially owned
      are reported on the basis of regulations of the SEC governing the determination
      of beneficial ownership of securities. Under the rules of the SEC, a person
      is
      deemed to be a “beneficial owner” of a security if that person has or shares
“voting power,” which includes the power to vote or to direct the voting of such
      security, or “investment power,” which includes the power to dispose of or to
      direct the disposition of such security. A person is also deemed to be a
      beneficial owner of any securities of which that person has a right to acquire
      beneficial ownership within 60 days. The address of each person or entity
      named in the following table is c/o Splinex Technology Inc., 500 West Cypress
      Creek Road, Suite 100, Fort Lauderdale, Florida 33309.




Name
                and Address of Beneficial Owner
            
            Amount
                and Nature of Beneficial Owner (number of common shares)
            
            Percent
                of ClassSplinex,
                LLC(1)
            
            
            62,995,000
            
            
            62.5
            %Alexander
                Malovik
            
            
            16,000,000
            
            
            15.9
            %Michael
                Stojda, 19 rue Lafford, Kirkland QC
              H9J
                3Y3, Canada
            
            
            400,000
            
            
            *Peter
                Novak (2)
            
            
            25,879
            
            
            *Alexander
                Yarmolinsky
            
            
            120
            
            
            *Curtis
                Wolfe (3)
            
            
            93,750
            
            
            *Gerard
                Herlihy (4)
            
            
            112,500
            
            
            *Christian
                Schormann, PMB255, 15127 NE 24th Street, Redmond, WA 98052
            
            
            0
            
            
            *All
                named executive officers and directors as a group
            
            
            632,249
            
            
            *




*
      less
      than 1%.




(1)
            Dr. Peter
                Novak, Mike Zoi, Ludmila Enilina and Albina Boeckli have dispositive
                and
                voting power over the shares of our common stock held by Splinex,
                LLC.


(2)
            Amount
                shown excludes shares owned indirectly through Splinex, LLC, of which
                Dr. Novak is a member and owned indirectly through Ener1 Group, Inc.,
                of which an entity owned by Dr. Novak is a stockholder. Mr. Novak
                disclaims beneficial ownership with respect to 2,000,000 shares owned
                byGalina
                Khartchenko,
                his spouse and 2,000,000 shares owned by Elena Novak, his
                daughter.


(3)
            Includes
                options to purchase 93,750 shares of common stock which could be
                acquired
                within 60 days of July 1, 2006.


(4)
            Includes
                options to purchase 112,500 shares of common stock which could be
                acquired
                within 60 days of July 1, 2006.




40




Item
      12.
      Certain Relationships and Related Transactions.




**Our
      company and Ener1, Inc. and some of its affiliates**




To
      aid
      your understanding of the relationships among us, our principals and Ener1
      we
      have included the following chart:




**Splinex,
                LLC**
            
            **Relationship
                With****Ownership
                Interest****Name**
            
            **(voting/economic)**
            
            **Ener1
                Group**
            
            **Ener1,
                Inc.**
            
            **Splinex
                Technology Inc.**Alexander
                Malovik
            
            50%/49%
            
            None
            
            None
            
            Owns
                16 million shares of Splinex Technology Inc. Indirect Stockholder.
                Owned
                100% of ANTAO Ltd, which he contributed to Splinex Technology pursuant
                to
                his obligations under the Splinex, LLC operating
                agreementBoris
                Zingarevich
            
            12.5%/12.75%
            
            Indirect
              Stockholder,
              Director
            
            Indirect
                Stockholder
            
            Indirect
                Stockholder and Beneficial owner of Bzinfin, which has entered into
                the
                Revolving Loan Agreement with Splinex TechnologyMikhail
                Zingarevich
            
            12.5%/12.75%
            
            Brother
                of Boris Zingarevich
            
            Brother
                of Boris Zingarevich
            
            Indirect
                StockholderPeter
                Novak
            
            12.5%/12.75%
            
            Chief
                Technology
              Officer,
                Indirect
              Stockholder,
              Director
            
            Consultant,
              Director,
                Indirect
              Stockholder
            
            Consultant,
                Director,
              Indirect
                StockholderMike
                Zoi
            
            12.5%/12.75%
            
            President,
                Indirect
              Stockholder,
              Director
            
            Consultant,
              Director,
                Indirect
              Stockholder
            
            Consultant,
                Indirect
              StockholderCurtis
                Wolfe
            
            None
            
            General
                Counsel and Secretary
            
            None
            
            Director,
                General Counsel and Secretary




41




As
      a
      result of the Merger and distribution, the shareholders of record of Ener1
      as of
      January 17, 2005 received approximately 5% of our common stock outstanding
      on
      the date the Merger was completed.




Dr. Peter
      Novak, one of our directors, is a 50% equityholder of Z-N, LLC, a company that
      holds approximately 31% of the outstanding common stock of Ener1 Group. Ener1
      Group holds approximately 90% of the outstanding common stock of Ener1. Mike
      Zoi, a consultant for our company, holds the other 50% equity interest in Z-N,
      LLC. Mr. Zoi’s consulting agreement is described under “—Additional
      agreements—Consulting agreement of Mike Zoi” below. Mike Zoi and Dr. Novak are
      directors of Ener1 and Ener1 Group. Each of Dr. Novak and Mr. Zoi also
      receive annual compensation of $250,000 and insurance benefits, and annual
      automobile allowances of $11,124 and $23,715, respectively, from Ener1 in return
      for their services as directors of Ener1.




The
      remaining equity of Ener1 Group is owned by Bzinfin, S.A., which is beneficially
      owned by Boris Zingarevich. Boris Zingarevich, Mike Zoi and Dr. Novak are
      directors of Ener1 Group.




Curtis
      Wolfe is our general counsel and secretary. He is also the general counsel
      for
      Ener1 Group. He receives his salary from Ener1 Group. At the end of every month,
      Ener1 Group invoices us at a rate equal to his base salary, plus 20% to cover
      benefits and other fixed costs, for the number of hours he worked for our
      company that month, based on the assumption that Mr. Wolfe works a total of
      160 hours per month. We will not be billed for more than 8 hours of
      Mr. Wolfe’s time per day, even if he works for us for more than 8 hours a
      day. This arrangement allows us to benefit from Mr. Wolfe’s legal skills at
      an effective rate that we believe, based on our knowledge of the local legal
      market, to be below that of an attorney in private practice with his experience
      and skill level. In addition, we benefit from having a general counsel without
      incurring liability for the salary and benefits for a full-time employee.
      Currently, the hourly billed rate for Mr. Wolfe’s time is $101 per hour.
      The percentage of Mr. Wolfe’s time that he devotes to our affairs varies
      from week to week depending on our need for his services.




One
      of
      our employees performs technology consulting and patent advisory work for Ener1
      and Ener1 Group related entities. We are reimbursed for these services at the
      rate of 120% of his direct hourly rate.




***Ener1
      Group***




In
      fiscal
      2005, Ener1 Group loaned us a total of $800,000 to fund our working capital
      needs. These loans bear interest at an annual rate of 5% and were assumed by
      Bzinfin SA effective February 5, 2005. In fiscal 2006, Ener1 Group loaned us
      $429,000 under demand notes that bear interest at an annual rate of 5%. On
      January 24, 2005, we issued 20,629 shares of restricted common stock to Ener1
      Group, Inc. in partial reimbursement for certain expenses paid for by Ener1
      Group, Inc. at a value of $0.25 per share.




***Sublease***




We
      have
      subleased commercial property, which serves as our headquarters and work space,
      through an assignment of a sublease from Splinex, LLC. Splinex, LLC subleased
      this property from Ener1 Group. Under the terms of our sublease, we are required
      to make monthly lease payments in the base amount of $4,661 to $5,453 per month
      through February, 2008. Our sublease and related documents are filed as exhibits
      to the registration statement of which this prospectus is a part. Due to
      Splinex, LLC’s lack of financial history at the time it entered into the
      sublease, it was unable to obtain a lease from a third party on terms comparable
      to or more favorable than those contained in the sublease. The rent we pay
      under
      the sublease is the same amount as the rent Ener1 Group pays under the lease
      with no mark-up; the other terms of the sublease are also the same terms as
      Ener1 Group is subject to under the lease. We believe the terms of the sublease,
      including the amount of rent, were comparable with terms that were generally
      available in the local market at the time we entered into the sublease, based
      on
      our knowledge of the local real estate market. Splinex vacated this lease and
      Ener1 Group has sublet the space to another tenant. Splinex is currently
      occupying space at the offices of Ener1 Inc. at 500 Cypress Creek Road, Suite
      100, Fort Lauderdale, FL 33309 with a phone number of 954 556-4020.




42




**Our
      company and Splinex, LLC**






In
      connection with our formation and in return for the issuance of all of our
      outstanding common stock, Splinex LLC agreed to contribute to us substantially
      all of its assets and liabilities. This contribution occurred as of
      April 1, 2004. We recorded this transaction at the book value of the assets
      and liabilities at the date of transfer. Splinex, LLC no longer conducts any
      operations but will continue to hold our common stock.




Splinex,
      LLC owns approximately 62.5% of our outstanding common stock.




Dr. Novak
      and Mike Zoi are both members and managers of Splinex, LLC and each holds 12.75%
      of the economic membership interests (and 12.5% of the voting membership
      interests) of Splinex, LLC. Each of Mikhail and Boris Zingarevich also
      indirectly holds 12.75% of the economic membership interests (and 12.5% of
      the
      voting membership interests) of Splinex, LLC.




Bzinfin,
      S.A., the company with whom we have a revolving loan agreement, is also a
      stockholder of Ener1 Group. Bzinfin S.A. is indirectly owned by Boris
      Zingarevich, who beneficially owns a limited liability company that is a member
      of Splinex, LLC and is a director of Ener1 Group.




Alexander
      Malovik is a member of Splinex, LLC and holds 49% of the economic membership
      interests (and 50% of the voting membership interests) of Splinex, LLC.
      Mr. Malovik formed ANTAO, Ltd. to be the administrative vehicle for our
      development efforts in Russia. Between July 1, 2004 and March 31, 2005, we
      paid
      an aggregate of $260,000 to to Splinex Outsourcing through ANTAO to pay the
      costs associated with our operations in Russia, including wages and benefits
      paid to Russian personnel and rent. During the year ending March 31, 2006,
      the
      Company paid $40,207 to Splinex Outsourcing through ANTAO. ANTAO sent these
      funds, after retaining sufficient funds to pay its administrative expenses
      and
      taxes, to Splinex Outsourcing LLC, a Russian limited liability corporation,
      which used the funds to pay these costs. Neither ANTAO nor Mr. Malovik
      received any consideration from us in return for these services.
      Mr. Malovik contributed the outstanding stock of ANTAO, Ltd. to us on
      September 20, 2004 as part of Mr. Malovik’s contribution obligation
      under the operating agreement of Splinex, LLC. Mr. Malovik does not have an
      ongoing operational role in the day-to-day operations of ANTAO, Ltd.




**Revolving
      Loan Agreement**




We
      are
      party to a revolving loan agreement with Bzinfin, S.A., a British Virgin Islands
      limited corporation. Bzinfin, S.A. is wholly owned by Boris Zingarevich.
      Additionally, Bzinfin, S.A. and Z-N, LLC are the sole owners of Ener1 Group.
      Ener1 Group is the majority shareholder of Ener1.




Under
      the
      revolving loan agreement, Bzinfin, S.A. has agreed that it or one of its
      affiliates will loan and reloan us amounts up to $2,500,000 upon our request,
      at
      an annual interest rate of 5%. This $2,500,000 commitment was available from
      January 18, 2005, through July, 2005. All outstanding principal and interest
      under this agreement must be repaid on the second anniversary of the first
      disbursement of funds under the revolving loan agreement. The maximum loan
      amount will be reduced dollar-for-dollar by the cumulative gross proceeds we
      receive from the sale of our equity or debt securities or from any loans or
      other credit facilities extended to us. As of July 27, 2005 and March 31, 2006,
      the Company had borrowed $2,500,000 under the revolving loan agreement and
      an
      additional $50,000 from Bzinfin during September 2005, and the loan agreement
      was amended to include the additional borrowing under the same terms and
      conditions.




**Consulting
      agreements**  **with
      Dr. Novak and Mr. Zoi**




Both
      Dr. Novak and Mr. Zoi have signed consulting agreements with us. We
      entered into a consulting agreement with Dr. Novak under which Dr. Novak
      agreed to work for us as an independent contractor providing technical advice,
      technical management, strategic planning and international licensing advice.
      We
      agreed to pay him a consulting fee of $100,000 per annum. Dr. Novak is
      required to submit statements on a monthly basis describing the nature of his
      work during the previous month. The agreement requires Dr. Novak to keep
      our proprietary information confidential and requires him to enter into a
      separate assignment of his intellectual property rights with respect to any
      inventions relating to business of Splinex to us. The agreement may be
      terminated at any time by either party upon written notice to the other party.
      Under the agreement, during the period of his consultancy and for 12 months
      thereafter, Dr. Novak has agreed not to solicit any of our employees to
      terminate their employment with us.




43




We
      entered into a consulting agreement with Mr. Zoi in February, 2004. Under
      the agreement, Mr. Zoi agreed to work for us as an independent contractor
      providing advice regarding capital formation, equity structuring, business
      planning, strategic planning and international licensing. We agreed to pay
      him a
      consulting fee of $100,000 per annum. Mr. Zoi is required to submit
      statements on a monthly basis describing the nature of his work during the
      previous month. The agreement requires Mr. Zoi to keep our proprietary
      information confidential. Under the agreement Mr. Zoi also assigned to us
      any intellectual property rights he may acquire while working with our
      technology. The consulting agreement may be terminated at any time by either
      party upon written notice to the other party. Under the agreement, during the
      period of his consultancy and for 12 months thereafter, Mr. Zoi has
      agreed not to solicit any of our employees to terminate their employment with
      us.




**Ener1
      Inc.**





Effective
      February 1, 2006, our President, Mr. Herlihy, was appointed to the position
      as
      Chief Financial Officer of Ener1, Inc. in addition to his continuing role at
      Splinex. Splinex is paying $60,000 of Mr. Herlihy’s $250,000 annual salary as
      Chief Financial Officer of Ener1, and Ener1 is paying $190,000 of Mr. Herlihy’s
      salary. Mr. Herlihy is dedicating substantially all of his time to Ener1 except
      for the time necessary to attend to the administrative and financial matters
      of
      Splinex.




44




Item
      13. Exhibits




Exhibit
              Number
            
            Description2.1
            
            Agreement
                and Plan of Merger among Ener1 Acquisition Corp., Registrant and
                Ener1,
                Inc., dated as of June 9, 2004, incorporated herein by reference to
                Exhibit 2.1 to Splinex’s Registration Statement on Form S-1 filed with the
                Commission on June 24, 2004 (Registration No.
                333-116817)2.2
            
            First
                Amendment to Agreement and Plan of Merger among Ener1 Acquisition
                Corp.,
                Registrant and Ener1, Inc., dated as of October 13,2004,
                incorporated herein by reference to Exhibit 2.2 to Amendment No,
                1 to
                Splinex’s Registration Statement on Form S-1 filed with the Commission on
                October 15,2004(Registration No. 333-116817)2.3
            
            Second
                Amendment to Agreement and Plan of Merger among Ener1 Acquisition
                Corp.,
                Splinex and Ener1, Inc., dated as of December 23, 2004, incorporated
                herein by reference to Exhibit 2.3 to Amendment No. 3 to Splinex’s
                Registration Statement on Form S-1 filed with the Commission on December
                27, 2004 (Registration No. 333-116817)3.1
            
            Certificate
                of Incorporation ofSplinex,
                incorporated herein by reference to Exhibit 3.1 to Splinex’s Registration
                Statement on Form S-1 filed with the Commission on June 24, 2004
                (Registration No. 333-116817)3.2
            
            Certificate
                of Mergerof
                Splinex, incorporated herein by reference to Exhibit 3.2 to Amendment
                No.
                3 to Splinex’s Registration Statement on Form S-1 filed with the
                Commission on December 27, 2004 (Registration No.
                333-116817)3.3
            
            Bylaws
                ofSplinex,
                incorporated herein by reference to Exhibit 3.3 to Splinex’s Registration
                Statement on Form S-1 filed with the Commission on June 24, 2004
                (Registration No. 333-116817)10.1
            
            Bridge
                Loan Agreement between Registrant and Ener1 Group, Inc. dated November
                2,
                2004 incorporated herein by reference to Exhibit 10.13 to Amendment
                No. 2
                to Splinex’s Registration Statement on Form S-1 filed with the Commission
                on December 3, 2004 (Registration No. 333-116817)10.2
            
            Amendment
                to Bridge Loan Agreement between Registrant and Ener1 Group, Inc.
                dated
                November 17, 2004 incorporated herein by reference to Exhibit 10.14
                to
                Amendment No. 2 to Splinex’s Registration Statement on Form S-1 filed with
                the Commission on December 3, 2004 (Registration No.
                333-116817)10.3
            
            Employment
                Agreement between Christian Schormann and Splinex dated January 12,
                2005,
                incorporated herein by reference to Exhibit 10.15 of the Current
                Report on
                Form 8-K filed with the Commission on January 25,
                2005.




45




10.4
            
            Revolving
                Debt Funding Commitment Agreement between Bzinfin, S.A. and Registrant,
                dated as of June 9, 2004, incorporated herein by reference to Exhibit
                10.1 to Splinex’s Registration Statement on Form S-1 filed with the
                Commission on June 24, 2004 (Registration No.
                333-116817)10.5
            
            2004
                Stock Option Plan of Registrant, incorporated herein by reference
                to
                Exhibit 10.2 to Splinex’s Registration Statement on Form S-1 filed with
                the Commission on June 24, 2004 (Registration No.
                333-116817)10.6
            
            Form of
                Stock Option Agreement of Registrant, incorporated herein by reference
                to
                Exhibit 10.3 to Splinex’s Registration Statement on Form S-1 filed with
                the Commission on June 24, 2004 (Registration No.
                333-116817)10.7
            
            Sublease
                Agreement between Ener1 Group, Inc. and Splinex, LLC, dated as of
                November 1, 2003, assigned to Registrant as of April 1, 2004,
                incorporated herein by reference to Exhibit 10.4 to Splinex’s Registration
                Statement on Form S-1 filed with the Commission on June 24, 2004
                (Registration No. 333-116817)10.8
            
            Contribution
                Agreement between Splinex, LLC and Registrant, dated as of April 1,
                2004, incorporated herein by reference to Exhibit 10.5 to Splinex’s
                Registration Statement on Form S-1 filed with the Commission on June
                24,
                2004 (Registration No. 333-116817)10.9
            
            Assignment
                and Assumption of Employment Agreements between Splinex, LLC and
                Registrant, dated as of April 1, 2004, incorporated herein by
                reference to Exhibit 10.6 to Splinex’s Registration Statement on Form S-1
                filed with the Commission on June 24, 2004 (Registration No.
                333-116817)10.10
            
            Global
                Bill of Sale and Assignment and Assumption Agreement between Splinex,
                LLC
                and Registrant, dated as of April 1, 2004, incorporated herein by
                reference to Exhibit 10.7 to Splinex’s Registration Statement on Form S-1
                filed with the Commission on June 24, 2004 (Registration No.
                333-116817)10.11
            
            Employment
                letter between Gerard Herlihy and Registrant, dated May 20, 2004,
                incorporated herein by reference to Exhibit 10.8 to Splinex’s Registration
                Statement on Form S-1 filed with the Commission on June 24, 2004
                (Registration No. 333-116817)10.12
            
            Consulting
                Agreement between Dr. Peter Novak and Registrant, dated
                January 1, 2004, incorporated herein by reference to Exhibit 10.9 to
                Splinex’s Registration Statement on Form S-1 filed with the Commission on
                June 24, 2004 (Registration No. 333-116817)10.13
            
            Form
                of Employee Innovations and Proprietary Rights Assignment Agreement,
                incorporated herein by reference to Exhibit 10.10 to Splinex’s
                Registration Statement on Form S-1 filed with the Commission on June
                24,
                2004 (Registration No. 333-116817)10.14
            
            Form
                of Indemnification Agreement, incorporated herein by reference to
                Exhibit
                10.11 to Amendment No. 3 to Splinex’s Registration Statement on Form S-1
                filed with the Commission on December 27, 2004 (Registration No.
                333-116817)




46




10.15
            
            Employment
                Agreement between Michael Stojda and Registrant, dated September 1,
                2004, incorporated herein by reference to Exhibit 10.12 to Amendment
                No. 1
                to Splinex’s Registration Statement on Form S-1 filed with the Commission
                on October 15, 2004 (Registration No. 333-116817)10.16
            
            Reseller
                Agreement between Waterloo Maple Inc. and Splinex Technology Inc.
                dated
                May 27, 2005., incorporated herein by reference to Exhibit 10.1 to
                Splinex’s Current Report on Form 8-K, filed with the Commission on June 3,
                200510.17
            
            Severance
                Agreement dated November 21, 2005 by and between Splinex and Michael
                Stojda, incorporated by reference to Exhibit 10.1 to Splinex’s Current
                Report on Form 8-K, filed with the Commission on November 21,
                200510.18
            
            Termination
                Agreement dated October 17, 2005 by and between Splinex and Christian
                Schormann, incorporated by reference to Exhibit 10.2 to Splinex’s Current
                Report on Form 8-K, filed with the Commission on November 21,
                200510.19
                *
            
            Master
                Loan Agreement and Note dated July 9, 2006 by and between Splinex
                and
                Ener1 Group, Inc.14
            
            Code
                of Ethics incorporated by reference to Exhibit 10.2 to Splinex’s Annual
                Report on Form 10-K for the year ended March 31, 2005, filed with
                the
                Commission on June 30, 200531.1*
            
            Certification
                of Principal Executive Officer and Principal Financial Officer pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 200232.1*
            
            Certification
                of Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002




*
      Filed
      herewith.





47




Item
      14.
      Principal Accountant Fees and Services.




Audit
      Fees.  The aggregate fees, including expenses, billed by our former
      principal accountant in connection with the review of financial statements
      included in our Form S-1 as amended, and review of regulatory filings during
      fiscal 2005 was $133,664. The aggregate fees, including expenses, billed by
      our
      current principal accountant in connection with the audit of our annual
      financial statements and review of regulatory filings including the financial
      statements included in our Quarterly Reports on Form 10-QSB was $44,485 for
      fiscal 2006 and $18,867 for fiscal 2005.




Audit
      Related Fees. The aggregate fees, including expenses, billed by our former
      and
      current principal accountants for services reasonably related to the audit
      for
      the years ended March 31, 2006 and 2005 were $0.




Tax
      Fees.
      The aggregate fees, including expenses, billed by our former and current
      principal accountants for services reasonably related to tax services during
      the
      fiscal years ending March 31, 2006 and 2005 were $0.




All
      Other
      Fees.  The aggregate fees, including expenses, billed for all other
      services rendered to us by our former and current principal accountants during
      fiscal 2004 and 2005 were $0.




**Audit
      Committee Pre-Approval Policy**




Our
      Audit
      Committee’s responsibilities include selecting and hiring our independent
      auditors and approving the audit and non-audit services to be performed by
      our
      independent auditors. The Audit Committee’s policy is that all audit and
      non-audit services provided by Splinex's independent auditor shall be approved
      before the independent auditor is engaged for the particular services. These
      services may include audit services and permissible audit-related services,
      tax
      services and other services. The Audit Committee may in the future establish
      pre-approval procedures pursuant to which our independent auditor may provide
      certain audit and non-audit services to us without first obtaining the Audit
      Committee's approval. All
      fees
      paid to the independent auditors in fiscal 2005 were pre-approved by the Audit
      Committee, and therefore no services were approved after the services were
      rendered pursuant to the *“de minimus”* exception established by the SEC for the provision of non-audit
      services.





48




SIGNATURES





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




Splinex
              Technology
              Inc.July
              14,
              2006
            by:
            /s/ Gerard
              A.
              HerlihyGerard
                A. Herlihy
              President
                and Chief Financial Officer





In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated




July
              14,
              2006
            by:
            /s/ Gerard
              A.
              HerlihyGerard
                A. Herlihy
              President
                and Chief Financial Officer
              (Principal
                Executive Officer, Principal Financial Officer and Principal Accounting
                Officer)  July
              14,
              2006
            by:
            /s/ Peter
              NovakPeter
                Novak
              Chairman
                of the Board and DirectorTitle




July
              14,
              2006
            by:
            /s/ Curtis
              WolfeCurtis
                Wolfe
              Director,
                General Counsel and Secretary




July
              14, 2006
            by:
            /s/ Alexander
              YarmolinskyAlexander
                Yarmolinsky
              Director





49