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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-KSB (Mark One) þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended March 31, 2005 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.  Delaware
    
    20-0715816(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification Number)
 550 W. Cypress Creek Road Suite 410
Fort Lauderdale, FL 33309
(Address of principal executive offices) (954) 660-6565
(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 [X ] No [ ] 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. [ ] State issuers revenues for its most recent fiscal year. $48. 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




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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.) There is no public market for the issuers common
stock. At June 27, 2005, the number of shares outstanding of the issuers common stock was 100,670,270
shares. DOCUMENTS INCORPORATED BY REFERENCE
None. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]




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SPLINEX TECHNOLOGY INC.
Form 10-KSB
For the Year Ended March 31, 2005
INDEX PageNo.PART IItem 1.
    
    Description of Business
    
    
    4Item 2.
    
    Description of Property
    
    
    11Item 3.
    
    Legal Proceedings
    
    
    12Item 4.
    
    Submission of Matters to Vote
    
    
    12PART IIItem 5.
    
    Market for Common Equity and Related Stockholder Matters
    
    
    13Item 6.
    
    Managements Discussion and Analysis or Plan of Operations
    
    
    15Item 7.
    
    Financial Statements
    
    
    21Item 8.
    
    Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    37Item 8A.
    
    Controls and Procedures
    
    
    37Item 8B.
    
    Other Information
    
    
    37PART IIIItem 9.
    
    Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act
    
    
    38Item 10.
    
    Executive Compensation
    
    
    42Item 11.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
    
    
    47Item 12.
    
    Certain Relationships and Related Transactions.
    
    
    48Item 13.
    
    Exhibits
    
    
    52Item 14.
    
    Principal Accountant Fees and Services.
    
    
    55SignaturesCode of EthicsSection 302 Certification of Principal Executive OfficerSection 302 Certification of Principal Financial OfficerSection 906 Certification of Principal Executive OfficerSection 906 Certification of Principal Financial Officer
  3




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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, 2005. 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 may borrow funds under a
revolving loan agreement with an affiliate. At our current rate of expenditure, the funds
available to us under the revolving loan agreement would be sufficient to fund our operations
through August 2005, excluding the consideration of any revenues from the sale of our products.
Our independent auditors report on our financial statements for the year ended March 31, 2005
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. We have taken, and continue to take, steps to address our need for additional capital. We began
significant marketing and sales activities for our nVizx product line in late June 2005
under a marketing and distribution agreement (the Reseller Agreement) with a leading mathematical
computational software developer. In addition, we implemented cost reduction measures including
salary deferrals beginning in June 2005 and have deferred or delayed payments to some vendors until
we achieve positive cash flow. We are also exploring raising capital through sales of our
securities in order to fund our operations until we achieve positive cash flow from operations. 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 4




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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 550 W. Cypress Creek Road, Suite 410, Fort
Lauderdale, Florida 33309. Our telephone number is (954) 660-6565 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. Market opportunity We believe that most individuals, professionals and businesses that use graphics software currently
face two primary types of image visualization problems. One problem is the inability to rapidly and
precisely visualize natural 3D objects generated by laser radar scanners or other capture devices
such as digital cameras. The second problem is the inability to rapidly and precisely visualize
synthetic multi-dimensional objects, which are objects derived from mathematical equations or
formulas. We believe that these two problems have hindered the adoption and growth of 3D information
management and 3D digital content creation software and technology. Technology and software
currently available in the market are often not capable of delivering precise and rapid
visualization of 3D information unless the end-user is willing to invest in high cost proprietary
computer hardware for processing, storing and transmitting the 3D objects. Our Strategy Our strategy is to target markets, customers and software applications where productivity and
visual comprehension, particularly those involving large data files and/or complex relationships,
is currently hampered by the limited speed and precision available with the visualization and 3D
solid and surface modeling software products and technology available in the market today. We will
also provide technical support, professional consulting services and perform non-recurring
engineering services as demand warrants. We intend to obtain and increase our share of the visualization and multi-dimensional solid and
surface modeling software markets by doing the following:  
    
    Pairing our products, and marketing, with leading providers of technical computing and
imaging software. We will seek to provide specialized software in marketing alliances with
leading companies in order to build our name recognition and brand loyalty. In June, 2005
we entered into a marketing and distribution agreement with Waterloo Maple Inc.
(Maplesoft), a leading provider of technical computing software.
    
    Targeting organizations with a large number of employees who use software products that
can be effectively paired with our products. We are developing our products for use by
end-users in large collaborative environments ranging from universities to for-profit
corporations. We believe that it is possible to achieve sales to these customers and
organizations over the Internet based on targeted Internet-based marketing techniques that
reach existing software product end-users by offering them sample/trial use of our
products. Specifically, we will target organizations that have a large number of employees
using products such as AutoCAD®, Catia®, Mathematica®, MatLab®, Inventor®, SolidWorks® and
other products. 5




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
    
    Embedding our software. We intend to pursue opportunities to license our software and
technology in software applications whose users can benefit from improved visualization
capabilities. We believe that embedding our software in such a manner will also help
establish our brand name. To date, we have no formal licensing agreement with any company.
    
    Continuing to invest in research and development. We intend to continue to invest in
research and development in order to develop our products. As of June 1,2005, 90% of our
full and part-time employees and independent contractors were engaged in research and
development activities. In addition, we maintain close ties with numerous leading
technical universities in Russia which provides us with access to the latest research into
new technologies.
    
    Protecting intellectual property rights. We believe our software is superior in part
because it is based on unique problem-solving algorithms and mathematical procedures. We
will pursue new patent filings as our research team develops patentable processes. We also
intend to apply for patent protection on a country-by-country basis as needed to protect
our intellectual property rights if we decide to pursue sales outside of North America. In
addition, we will copyright our software where possible and take measures we believe are
appropriate and commercially reasonable to protect our trade secrets.
    
    Software programming based on open industry standards. We will adhere to industry
standards such as OpenGL throughout our product line. We believe that adherence to open
standards will strengthen our market position because our prospective customers prefer
products that conform to open standards. Principal Products and Their Markets Our principal product is nVizx, 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 nVizx 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. According to public statements made by the developers of computation products including Mathematica
and Maple, there are currently more than seven million users of computation products worldwide.
We expect the demand for increased visualization requirements will rise in correlation with the use
of increasingly large data sets and demand for more sophisticated and richly detailed models. We began marketing nVizx 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s sales force will
actively market the product and Maplesoft will publicize and make nVizx for Maplesoft
v1.5 available for purchase on its web site and engage in other marketing and sales activities. Using our core software libraries, we plan to develop additional versions of nVizx as
visualization add-ons for other technical computing software products similar to Mathematica and
Maple. We also are developing a version of nVizx specifically for use with spreadsheet
products like Microsoft Excel. In addition, we intend to develop derivative products for other
applications using our core software libraries and technologies. We may also license our software
and technology to users in various vertical markets. As use of nVizxgrows among users of technical computing software, and market awareness
of our products develops, we expect business opportunities associated with developing and selling
specialized high-value, high-margin application-
specific versions of nVizx and derivative products to increase. We anticipate that
these opportunities, which may include working with other software providers, will be driven in
part by the desire of end-users for comprehensive solutions that are tailored to the unique feature
and workflow requirements of their specific markets. Our strategy is to seek out market
opportunities for the sale of specialized versions of nVizx or derivative products, and
associated specialized consulting and support services. For example, we are investigating the
opportunity to develop a software product that will enable financial markets to more efficiently
model and visualize complex financial relationships to determine optimal bond pricing, and the
opportunity to develop a software product to assist with the design of logistics networks and
optimization of gate slotting at an airport. 6




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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 nVizx 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. To complement our web store sales, we may hire direct
salespersons and independent representatives to assist in the sales process. Advertising and promotion We market our products to end-users through a variety of methods, including:  
    
    providing direct sample/limited trial offers and sales through direct mail campaigns and over the Internet;
    
    through search engine and similar key word technology on the Internet;
    
    distributing trial and sample versions of our programs at seminars and industry events;
    
    buying sponsored search links, such as AdWords offered by Google, Inc., and banner
advertising on the Internet;
    
    entering into alliances with other software companies;
    
    through dealers, distributors and third-party sales representatives; and Customer service and support and training We currently offer technical support and customer service through in-house staff. We educate and
inform our customers about the use of our products through documentation included with our products
and on-line informational services on our website, such as community sections for discussion,
opinion, advice and commentary, and though regular webinars, 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 significant sales force and limited visibility in the market.
Initially we expect to rely on a small number of resellers such as Maplesoft, with well established
international sales and distribution networks, for the majority of our sales. We also intend to
leverage sales by these resellers to increase the market awareness of our products and company. 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. 7




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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 We have filed a trademark registration application for Splinex. We may also seek to register some
of our product names and logos 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 $113,800 and $1,208,722 for the period from inception
through March 31, 2004 and for the year ending March 31, 2005, respectively. Research and
development expenses for the year ended March 31, 2005 represent approximately 44% of our fiscal
year 2005 operating costs. Our research and development activities, which consist primarily of
computer programming development, are conducted by seven full time scientists and mathematicians at
our facilities in Fort Lauderdale, Florida and by approximately 30 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. 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 intend to target sales of our products and services to two primary customer groups:  
    
    end-users: educational and commercial creators of sophisticated computational and
analytic model, and end-users of digital content creation and 3D information management
software; and
    
    original equipment manufacturers or OEMs, and software vendors: businesses that bundle
software with image capture devices such as laser radar scanners, and software vendors who
provide 3D information management software to businesses and bundle third-party software. 8




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Educational and commercial end-user markets We intend to market our products to end-users who create sophisticated computational and analytical
models, digital content, or manage 3D information. Potential customers in this market segment include:  
    
    engineers, architects and mechanical and civil engineering designers that use computer
aided design, or CAD and computer aided manufacturing, or CAM, software;
    
    biometrics and forensics professionals;
    
    digital artists such as animators, graphic designers, web designers, videographers and photographers;
    
    medical imaging specialists;
    
    geographers, aerial and satellite image processing specialists, geologists and other
workers in the earth and environmental sciences (use of digital imaging in these fields is
known as geomatics);
    
    national security and military applications professionals and contractors; and
    
    mathematics, science and engineering educational institutions and students. We believe that as demand has increased for more sophisticated computational and analytical models
for applications ranging from options pricing for the financial markets to MRI analysis in the
medical field, so has the need to effectively and quickly communicate the information, visually. We also believe that a growing number of the end-users listed above will need to rapidly and
accurately convert laser radar scanner-generated data files. These files typically consist of
point clouds which are collections of three- dimensional data points typically obtained through
digital imaging or scanning. These data appear as dots or points to the human eye. To be of
greatest value to the end-user, these point clouds must be converted into accurate visual scenes
that human eyes can interpret. Among the many applications for these point clouds is the comparison
of as-built objects, such as comparing an existing building with its original plans in order to
create new plans or make modifications. When these files are large, the comparisons may be
difficult or slow on typical desktop or laptop computers. Our software enables more rapid
comparisons between these visual scenes and previously stored data using basic computing tools such
as a personal computer running Microsoft Windows XP®. OEM and software vendor markets We will seek to have our software and our underlying technology integrated with software
products offered by leading technical computing and image manipulation software providers. The
companies who sell these applications are generally seeking ways to differentiate their products
from competitors, increase or maintain average selling price, gain market share and lower product
development costs/risks. We believe these customers will be better able to achieve these goals if
they incorporate software modules based on our technology into their products because we believe
our technology can significantly enhance their visualization products and/or related services. We
are investigating the creation of software modules that can be used to enhance products and
services used in the following fields:  
    
    Medical imaging. Medical imaging generally involves the use of advanced electromagnetic,
ultrasonic and radiological imaging devices for scanning internal structures in human
bodies. Magnetic resonance imaging, or MRI, is one of the most complex and one of the
fastest-growing forms of diagnostic imaging. Software associated with MRI devices is used
to create graphical representations of scan data in order to assess existing medical
conditions. The key technical challenge for medical imaging is to visualize, accurately and
in near-real time, image features that indicate pathology or disease. We believe our
technology will be of value in medical imaging because it allows the user to manage larger
amounts of data than other technologies and subsequently remove redundant data points from
relatively large data files with over 5 gigabytes (a gigabyte or GB is a measure of
computer data storage capacity). We believe that these two capabilities will help generate
enhanced visual images to be used by trained medical personal with personal computers to
assess findings and make more accurate and timely diagnoses.
    
    Geomatics imaging. Geomatics is the science of measurement, analysis, management,
storage and display of Earth-related data in digital form. Geomatics imaging generally
involves the use of imaging from satellites and 9




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radar devices to scan existing topographic,
atmospheric or subsurface conditions. In simple terms, geomatics is a digital method for
creating highly detailed and accurate maps. The key technical challenge is to transform,
accurately and in near-real time, large data files containing over 100GB of data into
accurate visual scenes. This must be done accurately (to the nearest centimeter in some
cases) and in near-real time and may require the fusing of these images with existing
topological data. The goal is to use personal computers to identify target objects or make
data comparisons against existing geomatics data sets. Visual images highlighting
differences (using false color to emphasize differences, as an example) can be generated
for use by a trained geomatics specialist or non-professional.
    
    Terrestrial imaging. Terrestrial imaging generally involves the use of advanced optical
and laser radar devices to scan existing structures such as buildings, bridges and roads.
The key technical challenge is to obtain and process large data files that may combine
photographic and radar images. This processing needs to occur in near-real time and be
accurate to the nearest millimeter. The files typically contain over 10GB of data. Scanned
data are commonly transformed into visual scenes that professionals with CAD-capable
personal computers can use in the field to rapidly find target objects or make dimensional
comparisons among data sets.
    
    Metrological imaging. Metrology is the science of measurement. It includes the field of
biometrics, or measuring human dimensional characteristics. Imaging for metrology generally
involves the use of advanced optical and laser radar scanner devices combined with
calibrated high resolution digital photographic images which are referred to as
photogrametric images. For example, the contour of the upper part of a human face measured
with a high degree of precision can be reliably used for biometric identification of
individuals. The key technical challenge is to transform, accurately and in real time,
relatively small data files into visual scenes that are accurate to the nearest micron. The
goal is to allow professionals in the field using personal computers to make rapid data
comparisons against existing mechanical drawings or existing stored biometric data.
Aircraft, automotive and heavy equipment manufacturers, for example, use metrological
imaging to determine if finished components deviate from design specifications.
    
    Entertainment imaging. The use of computer generated original images and objects such as
backgrounds, characters and special effects, as well as scanned data to assist in digitally
re-creating locations, continues to grow in the film, commercial, corporate and computer
gaming markets. These markets are typically characterized by a constant need to provide
higher quality and more realistic images to meet consumers growing demand. One example is
the use of optical motion capture products which track and record performances of people
while they move on a stage and whose data is then converted for use with digital characters
in computer games to make the player movements more realistic.
    
    Seismic and sonar scan arrays imaging. Geologists, civil engineers and earth scientists
use seismic and sonar data for oil and mineral exploration and for fundamental geophysical
research. The technical challenge is to process 3D image data sets into usable forms for
use with personal computers more quickly and cost-effectively than is currently possible.
    
    National security & military imaging. National security imaging generally involves the
use of advanced optical and laser radar devices to accurately determine existing shapes for
mechanical or biometric conditions. The key technical challenge is to transform, accurately
and in real time, relatively small data files typically containing less than 1GB of data
into visual scenes accurate to the nearest micron. The primary objective in biometric and
surveillance imaging is to rapidly assess whether objects in the scanned scene represent a
threat. Ideally this would be accomplished by using personal computers or desktop
computers. This task involves identification of target objects, conditions or people by
making comparisons against stored data sets. Portal and facility surveillance and cargo
container inspection are examples of national security imaging. 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 nVizx 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). 10




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The products we primarily compete with in the professional end-user market segment are Dynamic
Visualizer  distributed by Wolfram Research and Simulink distributed by The MathWorks. Dynamic
Visualizer, like nVizx for Mathematica, can be used to create 3D graphics using data
from Mathematica. We believe nVizx 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 Mathematica, MatLab, Maple and MathCAD include some of
the basic functionality found within our products. As the demand for visualization within the
add-on market for nVizxgrows, 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. We believe that we will be able to compete effectively with the existing competitors in these
areas. However, we cannot be certain that we will be able to compete successfully in the future. Employees At June 15, 2005, we employed 11 people based at our Fort Lauderdale, Florida office, eight of whom
are engaged in research and product development-related activities. We have not experienced work
stoppages and believe our employee relations are good. None of our employees is represented by a
collective bargaining agreement. We expect that we will hire additional employees as we expand our
business. 
 Item 2. Description of Property We sublease 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 11




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February 28, 2008. We pay $62,274 annually to Ener1 Group
under this sublease, and we believe this property is adequately covered by insurance, 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. 12




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PART II 
 Item 5. Market for Common Equity and Related Stockholder Matters There is no established public trading market for our common stock. The approximate number of record holders of our common stock at June 27, 2005 was 197. 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 June 15, 2005. Number ofsecuritiesremaining availableNumber of
    
    
    
    
    
    
    for future issuanceSecurities to be
    
    
    
    
    
    
    under equityIssued Upon
    
    
    Weighted-average
    
    
    compensation plansExercise of
    
    
    exercise price of
    
    
    (excludingOutstanding
    
    
    outstanding
    
    
    securitiesOptions, Warrants
    
    
    options, warrants
    
    
    reflected in thePlan Category
    
    and Rights
    
    
    and rights
    
    
    first column)Equity compensation
plans approved by
security holders.
    
    
    4,875,000
    
    
    $
    0.16
    
    
    
    125,000Equity compensation
plans not approved
by security holders
    
    
    1,500,000
    
    
    $
    0.50
    
    
    NA
 (1) Excludes 750,000 shares of common stock that may be subject to an option that we agreed to
grant to an executive officer if we have not commenced development and committed funding of a
specified research and development project by January 26, 2006. The option will have an exercise
price per share equal to the fair market value of the common stock on the date of grant. (2) The terms of our equity compensation plan provide that after 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 Shares subject to equity compensation plans not approved by our stockholders include 1,500,000
shares subject to an option grant made to our chief executive officer in accordance with his
employment agreement. The material features of this option to Mr. Stojda are described in the
section of this Annual Report titled Executive Compensation  Employment Agreements. Recent Sales of Unregistered Securities On January 25, 2005, pursuant to an employment agreement dated January 12, 2005, we granted to
Christian Schormann, our Vice President of Research and Development, an option to purchase
1,000,000 shares of our common stock. This option was granted under the 2004 Stock Option Plan and
has an exercise price of $0.20 per share. On January 12, 2006, this option will vest with respect
to 250,000 shares. The option will vest with respect to an additional 20,833 shares per month
commencing February 12, 2005. On January 18, 2005, pursuant to an employment agreement dated September 1, 2004, we granted to
Michael Stojda, our Director, President and Chief Executive Officer, the following options: 13




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
    
    An option to purchase 2,000,000 shares of common stock under the 2004 Stock Option Plan
with 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.
    
    An option to purchase 1,500,000 shares of common stock. This option was not granted
under the 2004 Stock Option Plan and 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 Splinex exceed $50,000,000 or (2) September 1, 2009. On January 14, 2005, our Board of Directors approved the issuance of options to purchase an
aggregate of 1,825,000 shares of the common stock to employees of our company under the 2004 Stock
Option Plan. All employees received options. 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. Each of the securities issuances described above was a private placement that did not involve a
public offering and was exempt from registration under Section 4(2) of the Securities Act of 1933,
as amended. 14




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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, 2005. 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. 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 may borrow funds under a
revolving loan agreement with an affiliate. At our current rate of expenditure, the funds
available to us under the revolving loan agreement would be sufficient to fund our operations
through August,excluding the consideration of any revenues from the sale of our products. Our
independent auditors report on our financial statements for the year ended March 31, 2005 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. 15




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We have taken, and continue to take, steps to address our need for additional capital. We began
significant marketing and sales activities for our nVizx product in late June 2005 under
a Reseller Agreement with a leading mathematical computational software developer. In addition, we
implemented cost reduction measures including salary deferrals beginning in June 2005 and have
deferred or delayed payments to some vendors until we achieve positive cash flow. We are also
exploring raising capital through sales of our securities in order to fund our operations until we
achieve positive cash flow from operations. 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. Since October 1, 2004, we have directed most of our software development activities to developing
and releasing a commercial version of our software product called nVizx, 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.
nVizx 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 nVizx v1.0 for Mathematica was commercially released and made
available for purchase in March 2005. nVizx v1.5 for Maplesoft was commercially
released and made available for purchase on June 23, 2005. In June 2005 we entered into 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s sales force will actively sell the product and Maplesoft will
publicize nVizx for Maplesoft v1.5 on its web site and promote it through other
marketing activities. Using our core software libraries, we plan to develop additional versions of n nVizx as
visualization add-ons for other technical computing software products similar to Mathematica and
Maplesoft and for spreadsheet products like Microsoft Excel. We also intend to develop additional
commercial products for other applications using our core software libraries and technologies. We
may also license our software and technology to users in various vertical markets. We intend to raise additional capital to support and accelerate our product development, marketing
and sales plans. At June 15, 2005, there is approximately $235,000 remaining available to us under
the revolving loan agreement. At our current rate of expenditure, these funds would be sufficient
to fund our operations through August 2005. We estimate that we need approximately $2 million to
execute our product development, sales and corporate strategy for our fiscal year ending March 31,
2006. During the next nine months, we intend to seek to raise up to $10,000,000 through debt or
equity financing, including public or private sales of our securities. We are currently spending
approximately $250,000 per month for operating and development expenses, and, depending on our
ability to raise additional capital, we expect to increase this spending level to market and sell
nVizx and to commence additional development projects using our core technologies. If
we are successful in raising additional capital, we plan to hire additional programmers, developers
and other personnel and spend additional resources for sales, marketing and administration that
could raise our operating expenses to up to approximately $400,000 per month in our fiscal year
ending March 31, 2006. We cannot assure 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, your
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. If we are not able to raise a minimum of $2,000,000, we would delay or curtail our product
development activities and planned increases in sales, marketing and research and development
expenses. If we are unable to raise $10,000,000 in 16




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capital, we would need to alter our business model, reduce the number of planned additional product
launches, and consider alternative revenue models, including licensing some of our planned products
for development by other companies. Under these circumstances, our revenues and revenue growth may
be negatively affected. As of March 31, 2005, we have no material planned capital expenditures. Results of Operations for the Year Ended March 31, 2005 Compared to the Period from Inception
(October 28, 2003) through March 31, 2004 We incurred a loss of $3,296,189 for the year ended March 31, 2005 (which we refer to as fiscal
2005) compared to a loss of $822,847 for the period from inception, October 28, 2003, through
March 31, 2004 (which we refer to as fiscal 2004). Our total expenses for fiscal 2005 included
operating expenses of $2,770,859 and non-operating expenses of $512,321 related to the Merger. Our
total expenses for fiscal 2004 included operating expenses of $822,847. Our expenses increased
significantly during fiscal 2005 as we hired additional personnel, commenced sales and marketing
activities, expanded our research and development activities and became a public reporting company.
Our losses for fiscal 2005 increased as a result of our increasing start-up expenses, which were
not offset by significant revenues. Operating expenses for 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.
Operating expenses for the 2004 fiscal period included $709,047 for general and administrative
expenses, $113,800 for research and development costs and did not include any sales and marketing
expenses. 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. We did not engage in sales and marketing activity prior to July 2004. Advertising and
promotion activities, which included direct mail and email campaigns, began primarily in February
2005. 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. General and administrative expenses for fiscal, 2004 included $238,006 for wages and benefits;
$76,921 for patent, immigration and general legal expenses; $90,889 for executive search fees;
$40,000 for audit fees; $33,333 for consulting fees paid to a director, Dr. Novak and a related
party, Mr. Mike Zoi; $82,845 in consulting fees paid to administration and finance professionals;
rent of $20,714, employee relocation costs of $28,245; and travel expenses of $25,935. 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. Research and development expenses for fiscal 2004 included $113,800 for wages
and administrative costs of our Russian-based scientists and programmers The wages and benefits of
our U.S. based research and development department are currently approximately $900,000 on an
annualized basis. Our Russia based programming costs are currently approximately $300,000 on an
annualized basis. We expect both of these expenses to increase substantially in the future as
development activities increase. 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. During fiscal 2005, we
outsourced programming work to approximately 30 scientists and programmers in Russia. Between March
2004 and August 2004, five Russian scientists and programmers moved to the United States and began
working in our Florida offices as our employees. 17




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Related parties reimburse us for the time spent by one of our employees for patent and research
work; as a result, our administrative and research and development wages and benefits are net of
reimbursements of $17,160 and $43,080, respectively, for fiscal 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. We expect that our administrative expenses will continue to increase substantially as we continue
to build our corporate infrastructure and hire additional administrative and management staff. We
have entered into consulting agreements with two related parties, one of whom is our director and
former president, Dr. Peter Novak. We paid these consultants $200,000 during the year ending March
31, 2005. Also, as a new public reporting company, we expect our legal and accounting costs will
increase in connection with compliance with reporting requirements under the Securities Exchange
Act of 1934, and we expect that our investor relations and communications costs will also increase.
Our administrative expenses include compensation of approximately $160,000 for our chief
executive officer for the seven months since he commenced employment on September 1, 2004; his
annual salary is $275,000. Selling and marketing expenses consist primarily of advertising and other marketing related
expenses, compensation-related expenses, sales commissions and travel costs. Sales and marketing
costs are expected to be a significant percentage of revenues in future years as we release
additional products. We believe selling and marketing expenses in absolute dollars will increase
significantly in the short-term, including advertising and marketing costs associated with the
launch of our nVizx for Maplesoft product in June 2005. Liquidity and capital resources At March 31, 2005, we had negative working capital of $492,848 and cash of $256,347. Effective
January 18, 2005, we became eligible to borrow up to $2,500,000 under a revolving loan agreement,
of which we had borrowed $1,700,000 as of March 31, 2005 and $2,265,000 as of June 15, 2005. Our 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. We are in the development stage and have had minimal revenues since inception. Our
management recognizes that we must raise capital sufficient to fund start-up and development
activities until such time as we can generate revenues and net cash flows in amounts necessary to
enable us to continue in existence. The realization of assets and satisfaction of liabilities in
the normal course of business is dependent upon our achieving these goals. Our managements plans
include continuing efforts to develop our first commercial product, borrowing funds under our
revolving loan agreement, and raising additional capital. The continued development of our
technology and products will require significant additional capital investment. At our current rate of expenditure, the funds available to us under the revolving loan agreement
would be sufficient to fund our operations through August 2005, excluding the consideration of any
revenues from the sale of our products. In the absence of attaining profitable operations and
achieving positive cash flows from operations or obtaining significant additional debt or equity
financing, we will have difficulty meeting current and long-term obligations. We have taken, and continue to take, steps to address our need for additional capital. We began
marketing our nVizx product in June 2005 under a Reseller Agreement with a leading
mathematical computational software developer. In addition, we implemented cost reduction measures
including salary deferrals beginning in June 2005 and have deferred or delayed payments to some
vendors until we achieve positive cash flow. We are also exploring raising capital through sales
of our securities in order to fund our operations until we achieve positive cash flow from
operations. To date, we have financed our operations as follows. In accordance with the funding provisions in
Splinex, LLCs operating agreement, some members of Splinex, LLC were required to contribute
capital aggregating up to $2,000,000 to Splinex, LLC. All capital contributions required under the
operating agreement have been paid. Effective April 1, 2004, a company that is affiliated with our
company through common ownership entered into a revolving loan agreement with us under which we may
borrow up to $2,500,000 in aggregate principal through July 31, 2005. Loans under this agreement
bear interest at an annual rate of 5% and must be repaid within two years from the date of the
initial funding, which occurred on February 7, 2005. The maximum amount the lender is required to
loan under this agreement will be reduced by the proceeds from the sale of our equity or debt
securities or from any loans or other credit facilities extended to us prior to 18




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July 31, 2005. We borrowed $1,700,000 under this facility as of March 31, 2005, and an additional
$565,000 through June 15, 2005. 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, 2005. Off-balance sheet arrangements At March 31, 2005, 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 In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation (FIN)
No. 46, Consolidation of Variable Interest Entities (VIE), (revised December 2003 by FIN No.
46R), which addresses how a business enterprise should evaluate whether it has a controlling
financial interest in an entity through means other than voting rights and accordingly should
consolidate the entity. For variable interests in VIEs created before January 1, 2004, the
Interpretation will be applied beginning on January 1, 2005. For any VIEs that must be consolidated
under FIN No. 46R that were created before January 1, 2004, the assets, liabilities and
non-controlling interests of the VIE initially would be measured at their carrying amounts with any
difference between the net amount added to the balance sheet and any previously recognized interest
being recognized as the cumulative effect of an accounting change. If determining the carrying
amounts is not practicable, fair value at the date FIN No. 46R first applies may be used to measure
the assets, liabilities and non-controlling interest of the VIE. The adoption of FIN No. 46R did
not have a material impact on our financial position, results of operations or cash flows as we do
not have any VIEs. In March 2004, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 03-01, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF 03-01
provides guidance on other-than-temporary impairment models for marketable debt and equity
securities accounted for under SFAS No. 115, Accounting for Certain Investments in Debt and Equity
Securities, and SFAS No. 124, Accounting for Certain Investments Held by Not-for-Profit
Organizations, and non-marketable equity securities accounted for under the cost method. The EITF
developed a basic three-step model to evaluate whether an investment is other-than-temporarily
impaired. In September 2004, the FASB issued FASB Staff Position EITF 03-01-1, which delays the
effective date until additional guidance is issued for the application of the recognition and
measurement provisions of EITF 03-01 to investments in securities that are impaired; however, the
disclosure requirements are effective for annual periods ending after June 15, 2004. The adoption
of the disclosure provisions of EITF 03-01 did not have a material effect on our financial
position, results of operations or cash flows. In November 2004, the FASB issued SFAS 151, Inventory Costsan amendment of ARB No. 43, Chapter
4. The Statement amends the guidance of Accounting Research Bulletin (ARB) No. 43, Chapter 4,
Inventory Pricing , by clarifying that abnormal amounts of idle facility expense, freight, handling
costs, and wasted materials (spoilage) should be recognized as current-period charges and by
requiring the allocation of fixed production overheads to inventory based on the normal capacity of
the production facilities. We do not believe that SFAS 151 will have a material effect on our
financial position, results of operations or cash flows when it becomes effective in 2006. In December 2004, the FASB issued SFAS No. 123R Share-Based Payment (SFAS 123R), a revision to
SFAS No. 123 Accounting for Stock-Based Compensation (SFAS 123), and superseding APB Opinion
No. 25 Accounting for Stock 19




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Issued to Employees and its related implementation guidance. SFAS 123R establishes standards for
the accounting for transactions in which an entity exchanges its equity instruments for goods or
services, including obtaining employee services in share-based payment transactions. SFAS 123R
applies to all awards granted after the required effective date and to awards modified,
repurchased, or cancelled after that date. Adoption of the provisions of SFAS 123R is effective as
of the beginning of the first interim or annual reporting period that begins after June 15, 2005.
We adopted SFAS 123R during fiscal 2005. 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. 20




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Item 7. Financial Statements. (DASZKAL BOLTON LLP LOGO)
    
    Michael I. Daszkal, C.P.A., P.A.
Jeffrey A. Bolton, C.P.A., P.A.
Timothy R. Devlin, C.P.A., P.A.
Michael S. Kridel, C.P.A., P.A.
Marjorie A. Horwin, C.P.A., P.A.
Patrick D. Heyn, C.P.A., P.A.
Gary R. McConnell, C.P.A., P.A.
Colleen DeWoody Bracci, C.P.A.
Arthur J. Hurley, C.P.A.
 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders
of Splinex Technologies, Inc. We have audited the accompanying consolidated balance sheet of Splinex Technologies, Inc. (a
Development Stage Company) as of March 31, 2005, and the related consolidated statements of
operations, changes in stockholders deficiency in assets and cash flows for the year then ended
and for the period from October 28, 2003 (inception) through March 31, 2005. We did not audit the
period from October 28, 2003 (inception) through March 31, 2004, which statements reflect a
cumulative loss totaling $822, 847. Other auditors whose reports have been furnished to us audited
those statements and our opinion, insofar as it relates to the cumulative amounts for the period
ending October 28, 2003 through March 31, 2004, is based solely on the reports of the other
auditors. 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, 2005, and
the results of their operations and their cash flows for the year then ended and from October 28,
2003 (inception) through March 31, 2005, 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 15, 2005 (DASZKAL BOLTON CONTACT INFORMATION) 21




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 
 To the Board of Directors and Stockholders
Splinex Technology Inc. We have audited the accompanying statements of operations, changes in stockholders
equity (deficiency in assets) and cash flows for the period from inception (October 28,
2003) through March 31, 2004.of Splinex Technology Inc. (a development stage company).
These financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public 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. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material
respects, the results of operations and cash flows of Splinex Technology Inc. (a
development stage company) for the period from inception (October 28, 2003) through March
31, 2004, in conformity with accounting principles generally accepted in the United States
of America. The accompanying financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 2, the Company is in the development
stage and has no revenues. In the absence of attaining profitable operations and
achieving positive cash flows from operations or obtaining significant additional debt or
equity financing, the Company will have difficulty meeting current and long-term
obligations. These factors raise substantial doubt about the Companys ability to
continue as a going concern. Managements plans are also discussed in Note 2. The
financial statements do not include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts and classification of liabilities that
might be necessary in the event the Company cannot continue in existence. We have previously audited the consolidated financial statements of Splinex, LLC, which
included the accounts of its wholly owned subsidiary, Splinex Technology Inc., for the
period from inception (October 28, 2003) through March 31, 2004, and we issued an
unqualified opinion thereon dated April 20, 2004. As discussed in Note 1 and Note 6,
these financial statements include the accounts of Splinex Technology Inc. and its
predecessor, Splinex, LLC, from inception. KAUFMAN, ROSSIN & CO. September 30, 2004
Miami, Florida 22




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SPLINEX TECHNOLOGY INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET ASSETS
    
    March 31, 2005Current assetsCash
    
    $
    256,347Prepaid expenses and other
    
    
    76,119Loans and advances to employees  current portion
    
    
    13,834Total current assets
    
    
    346,300Property and equipment, net
    
    
    49,862Accounting software license
    
    
    37,000Other assets
    
    
    9,881Loans to employees  long term portion
    
    
    9,875Total assets
    
    $
    452,918LIABILITIES AND STOCKHOLDERS DEFICIENCY IN ASSETSCurrent liabilitiesAccounts payable
    
    
    434,967Accrued expenses
    
    
    221,572Due to related parties
    
    
    106,760Other current liabilities
    
    
    75,849Total current liabilities
    
    
    839,148Long term liabilitiesNote payable and accrued interest  related party
    
    
    1,708,240Total liabilities
    
    
    2,547,388COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS DEFICIENCY IN ASSETSPreferred stock ($.001 par value, 150,000,000 shares
authorized and no shares issued and outstanding)
    
    
    Common stock ($.001 par value, 300,000,000 shares
authorized and 100,670,270 shares issued and outstanding)
    
    
    100,670Paid in capital
    
    
    1,101,049Deficit accumulated during the development stage
    
    
    (3,296,189
    )Total stockholders deficiency in assets
    
    
    (2,094,470
    )Total liabilities and stockholders deficiency in assets
    
    $
    452,918
 See accompanying notes to consolidated financial statements. 23




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##### Table of Contents



SPLINEX TECHNOLOGY INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS CumulativeFrom Inception
    
    
    
    
    
    
    From Inception(October 28,
    
    
    
    
    
    
    (October 28,2003)
    
    
    Year
    
    
    2003)through
    
    
    Ended
    
    
    ThroughMarch 31, 2004
    
    
    March 31, 2005
    
    
    March 31, 2005Net sales
    
    $
    
    
    
    $
    49
    
    
    
    49Operating ExpensesSales and marketing
    
    
    
    
    
    
    365,278
    
    
    
    365,278General and administrative
    
    
    709,047
    
    
    
    1,196,859
    
    
    
    1,905,906Research and development
    
    
    113,800
    
    
    
    1,208,722
    
    
    
    1,322,522Total operating expenses
    
    
    822,847
    
    
    
    2,770,859
    
    
    
    3,593,706Costs of merger and registration
    
    
    
    
    
    
    512,321
    
    
    
    512,321Total expenses
    
    
    822,847
    
    
    
    3,283,180
    
    
    
    4,106,027Loss from operations
    
    
    (822,847
    )
    
    
    (3,283,131
    )
    
    
    (4,105,978
    )Interest expense, net
    
    
    
    
    
    
    (13,058
    )
    
    
    (13,058
    )Loss before income taxes
    
    
    (822,847
    )
    
    
    (3,296,189
    )
    
    
    (4,119,036
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (822,847
    )
    
    $
    (3,296,189
    )
    
    $
    (4,119,036
    )Net loss per basic and fully diluted share
    
    $
    (0.01
    )
    
    $
    (0.03
    )
    
    $
    (0.04
    )Weighted average shares outstanding
    
    
    95,000,000
    
    
    
    96,113,724
    
    
    
    95,766,999
 See accompanying notes to consolidated financial statements. 24




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##### Table of Contents



SPLINEX TECHNOLOGY INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS DEFICIENCY IN ASSETS DeficitAccumulated
    
    
    TotalAdditional
    
    
    During the
    
    
    Stockholders'Preferred Stock
    
    
    Common Stock
    
    
    Paid in
    
    
    Development
    
    
    DeficiencyShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Stage
    
    
    in AssetsCommon stock issued $0.001 per share
effective at inception on October 28, 2003
    
    
    
    
    
    
    
    
    
    
    95,000,000
    
    
    $
    95,000
    
    
    $
    (94,999
    )
    
    $
    
    
    
    $
    1Additional capital contributed during period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    849,999
    
    
    
    
    
    
    
    849,999Net loss (see Note 4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (822,847
    )
    
    
    
    
    
    
    (822,847
    )Balance at March 31, 2004
    
    
    
    
    
    
    
    
    
    
    95,000,000
    
    
    
    95,000
    
    
    
    (67,847
    )
    
    
    
    
    
    
    27,153Additional capital contributed during period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,150,000
    
    
    
    
    
    
    
    1,150,000Shares issued as executive compensation
and other 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
    )
 See accompanying notes to consolidated financial statements. 25




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##### Table of Contents



SPLINEX TECHNOLOGY INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS CumulativeFrom Inception
    
    
    
    
    
    
    From Inception(October 28,
    
    
    
    
    
    
    (October 28,2003)
    
    
    Year
    
    
    2003)Through
    
    
    Ended
    
    
    ThroughMarch 31, 2004
    
    
    March 31, 2005
    
    
    March 31, 2005Cash flows from operating activities:Net loss
    
    $
    (822,847
    )
    
    $
    (3,296,189
    )
    
    $
    (4,119,036
    )Adjustments to reconcile net loss to net
cash used in operating activities:Depreciation
    
    
    5,493
    
    
    
    24,075
    
    
    
    29,568Executive compensation and other expenses
paid with common stock
    
    
    
    
    
    
    24,566
    
    
    
    24,566Non cash interest expense
    
    
    
    
    
    
    8,240
    
    
    
    8,240Changes in operating assets and liabilities:
    
    
    
    
    
    
    
    
    
    
    Prepaid expenses and other
    
    
    (6,112
    )
    
    
    (31,158
    )
    
    
    (37,270
    )Due to related parties
    
    
    
    
    
    
    106,759
    
    
    
    106,759Other assets
    
    
    (9,881
    )
    
    
    
    
    
    
    (9,881
    )Accounts payable
    
    
    58,498
    
    
    
    376,469
    
    
    
    434,967Accrued expenses
    
    
    149,041
    
    
    
    72,531
    
    
    
    221,572Total adjustments
    
    
    197,039
    
    
    
    581,482
    
    
    
    778,521Net cash used in operating activities
    
    
    (625,808
    )
    
    
    (2,714,707
    )
    
    
    (3,340,515
    )Cash flows from investing activities:Purchase of equipment
    
    
    (55,229
    )
    
    
    (24,200
    )
    
    
    (79,429
    )Employee loans and advances, net
    
    
    (3,550
    )
    
    
    (20,159
    )
    
    
    (23,709
    )Net cash used in investing activities
    
    
    (58,779
    )
    
    
    (44,359
    )
    
    
    (103,138
    )Cash flows from financing activities:Note payable related party
    
    
    
    
    
    
    1,700,000
    
    
    
    1,700,000Contributed capital from equity investors
    
    
    850,000
    
    
    
    1,150,000
    
    
    
    2,000,000Net cash provided by financing activities
    
    
    850,000
    
    
    
    2,850,000
    
    
    
    3,700,000Net increase (decrease) in cash
    
    
    165,413
    
    
    
    90,934
    
    
    
    256,347Cash at beginning of period
    
    
    
    
    
    
    165,413
    
    
    
    Cash at end of period
    
    $
    165,413
    
    
    $
    256,347
    
    
    $
    256,347Supplemental 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 as
reduction in paid in capital
    
    $
    
    
    
    $
    (150,000
    )
    
    $
    (150,000
    )
 See accompanying notes to consolidated financial statements. 26




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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, 2005. 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. 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, 2005, 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, 2005, the Company had deposits of $163,321 in excess of FDIC insured limits. 27




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##### Table of Contents



Foreign Currency Transactions All transactions of the Company are denominated in U.S. dollars. The Company pays 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. 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 28




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##### Table of Contents



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 $116,935 and $0 for the years ended March 31, 2005 and
2004, 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, 2005 and 2004. Recently Issued Accounting Pronouncements and Interpretations In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation (FIN)
No. 46, Consolidation of Variable Interest Entities (VIE), (revised December 2003 by FIN No.
46R), which addresses how a business enterprise should evaluate whether it has a controlling
financial interest in an entity through means other than voting rights and accordingly should
consolidate the entity. For variable interests in VIEs created before January 1, 2004, the
Interpretation will be applied beginning on January 1, 2005. For any VIEs that must be consolidated
under FIN No. 46R that were created before January 1, 2004, the assets, liabilities and
non-controlling interests of the VIE initially would be measured at their carrying amounts with any
difference between the net amount added to the balance sheet and any previously recognized interest
being recognized as the cumulative effect of an accounting change. If determining the carrying
amounts is not practicable, fair value at the date FIN No. 46R first applies may be used to measure
the assets, liabilities and non-controlling interest of the VIE. The adoption of FIN No. 46R did
not have a material impact on the Companys financial position, results of operations or cash flows
as the Company does not have any VIEs. In March 2004, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 03-01, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF 03-01
provides guidance on other-than-temporary impairment models for marketable debt and equity
securities accounted for under SFAS No. 115, Accounting for Certain Investments in Debt and Equity
Securities, and SFAS No. 124, Accounting for Certain Investments Held by Not-for-Profit
Organizations, and non-marketable equity securities accounted for under the cost method. The EITF
developed a basic three-step model to evaluate whether an investment is other-than-temporarily
impaired. In September 2004, the FASB issued FASB Staff Position EITF 03-01-1, which delays the
effective date until additional guidance is issued for the application of the recognition and
measurement provisions of EITF 03-01 to investments in securities that are impaired; however, the
disclosure requirements are effective for annual periods ending after June 15, 2004. The adoption
of the disclosure provisions of EITF 03-01 did not have a material effect on the Companys
financial position, results of operations or cash flows. In November 2004, the FASB issued SFAS 151, Inventory Costsan amendment of ARB No. 43, Chapter
4. The Statement amends the guidance of Accounting Research Bulletin (ARB) No. 43, Chapter 4,
Inventory Pricing, by clarifying that abnormal amounts of idle facility expense, freight, handling
costs, and wasted materials (spoilage) should be recognized as current-period charges and by
requiring the allocation of fixed production overheads to inventory based on the normal capacity of
the production facilities. The Company does not expect that SFAS 151 will have a material effect on
the financial position, results of operations or cash flows of the Company when it becomes
effective in 2006. 29




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In December 2004, the FASB issued SFAS No. 123R Share-Based Payment (SFAS 123R), a revision to
SFAS No. 123 Accounting for Stock-Based Compensation (SFAS 123), and superseding APB Opinion
No. 25 Accounting for Stock Issued to Employees and its related implementation guidance. SFAS
123R establishes standards for the accounting for transactions in which an entity exchanges its
equity instruments for goods or services, including obtaining employee services in share-based
payment transactions. SFAS 123R applies to all awards granted after the required effective date and
to awards modified, repurchased, or cancelled after that date. The Company adopted SFAS 123R during
the quarter ending March 31, 2005. 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. During the year ending
March 31, 2005, the Company borrowed $1,700,000 under a revolving loan agreement with a company
that is affiliated with the Company through common ownership (the Bzinfin Loan). The Company
borrowed an additional $565,000 under this facility after March 31, 2005 and through June 15, 2005,
and has $235,000 remaining available under this facility at June 15, 2005. In June 2005 the Company began marketing its nVizx product under a Reseller Agreement
with a leading mathematical computational software developer. In addition, the Company has
implemented cost reduction measures including salary deferrals beginning in June 2005 and has
deferred or delayed payments to some vendors until the Company achieves positive cash flow. The
Company is exploring raising capital through sales of its securities in order to fund its
operations until the Company achieves positive cash flow. 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. 30




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NOTE 4. PROPERTY AND EQUIPMENT Property and equipment consisted of the following at March 31, 2005: 2005Office and computer equipment
    
    $
    53,082Computer software
    
    
    26,30879,390Less accumulated depreciation
    
    
    (29,529
    )$
    49,862
 Depreciation expense was $24,075 and $5,493 for the fiscal periods ending March 31, 2005 and 2004,
respectively. NOTE 5. EMPLOYEE LOANS AND ADVANCES The Company advances expatriate employees certain relocation-related costs. The employees sign
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. The current portion of these
notes receivable is included in current assets. 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, accrued liabilities consisted of the
following: Executive relocation and legal
    
    $
    85,472Audit
    
    
    40,000Accrued vacation
    
    
    35,285Russian programming costs
    
    
    17,627Consulting
    
    
    14,000Travel and lodging
    
    
    9,000Miscellaneous
    
    
    20,188$
    221,572
 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. 31




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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. 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. 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. 32




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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. The following table summarizes the options granted, the exercise price, and the number of shares
vested as of March 31, 2005. Exercisable at
    
    
    ExerciseGranted
    
    
    March 31, 2005
    
    
    PriceOptions granted at or above fair valueGrants under the Plan dated:January 18, 2005
    
    
    2,000,000
    
    
    
    388,885
    
    
    $
    0.20January 25, 2005
    
    
    1,000,000
    
    
    
    
    
    
    $
    0.20January 25, 2005
    
    
    1,825,000
    
    
    
    228,125
    
    
    $
    0.10Total grants under the Plan
    
    
    4,825,000
    
    
    
    617,010Grants not under the Plan dated January 18, 2005
    
    
    1,500,000
    
    
    
    
    
    
    $
    0.50Total grants
    
    
    6,325,000
    
    
    
    617,010
 No options have been exercised or cancelled since grant. 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 value 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: 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 does 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, 2005, the restrictions as to the transferability
of such shares had lapsed with respect to 233,333 shares and restrictions with respect to the
remaining restricted shares will lapse at the rate of 33,333 shares per month. The Company also
granted 250,000 shares of restricted common stock to an executive that will be 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. The Company recorded compensation expense of $19,500 for restricted stock
grants during fiscal 2005. 33




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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 may borrow up to
$2,500,000 in aggregate principal through July 31, 2005. Borrowings under the facility were
contingent upon the consummation of the merger of the Company with Ener1 Acquisition Corp., which
was effected as of January 18, 2005. 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. The maximum amount the lender is required to loan under this agreement will be reduced by the
proceeds from the sale of equity or debt securities by the Company or from any loans or other
credit facilities extended to the Company prior to July 31, 2005. The Company borrowed $1,700,000
under this facility as of March 31, 2005, and an additional $565,000 through June 15, 2005. At June
15, the Company has $235,000 remaining available under this agreement. 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 $1,700,000 outstanding balance at March 31,
2005 under the revolving loan agreement 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, 2005 and 2004, the Company had cumulative
federal net operating loss carry forwards (NOL) of approximately $2,780,000 and $0, respectively.
The NOL expires during the year 2025. The net provision (benefit) for income taxes consisted of the following at March 31, 2005: 2005Current Federal income taxes
    
    $
    Deferred income tax benefit
    
    
    (1,045,000
    )Change in valuation allowance
    
    
    1,045,000Total income tax provision
    
    $
    
 Significant components of the Companys deferred tax assets at March 31, 2005 are as follows: Net operating loss carryforwards
    
    $
    1,032,000Accrued vacation pay
    
    
    13,0001,045,000Valuation allowance for deferred tax assets
    
    
    (1,045,000
    )Net deferred tax asset
    
    $
    
 34




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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: U. S. Federal statutory rate on loss
before income taxes
    
    
    34.0
    %Non deductible items  registration costs
    
    
    -5.9
    %State income tax, net of federal tax benefit
    
    
    3.6
    %Increase in valuation allowance
    
    
    -31.7
    %Total income tax provision
    
    
    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. Pro forma net loss and net loss per share present the Companys net losses as
if the Company had been taxed as a C corporation for federal and state income tax purposes since
the beginning of the periods presented. 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, which
would have been fully offset by a valuation allowance. The provision for (benefit from) income
taxes was $0 for the period ending March 31, 2004. 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
period from inception through March 31, 2004 and for the year ended March 31, 2005 include
consulting fees under these agreements of $33,333 and $200,000, respectively. 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 $9,881 and $60,274 for the period from inception
through March 31, 2004 and for the year ended March 31, 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 and research and development wages and benefits are net
of reimbursements of $17,160 and $46,080, respectively, for the year ended March 31, 2005.
Administrative expenses for the year ended March 31, 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 $35,530, and other administrative services provided by personnel of Ener1, Inc. in
the amount of $5,849. The Company works 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 35




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##### Table of Contents



through March 31, 2005, the Company paid $260,000 to ANTAO, of which ANTAO has retained $10,000 for
minimum cash requirements and payment of its administrative expenses, and paid $250,000 to Splinex
Outsourcing LLC to date. The owner of the outstanding securities of Splinex Outsourcing LLC has agreed to contribute these
securities to ANTAO, as a result of which Splinex Outsourcing would become an indirect,
wholly-owned subsidiary of the Company. Splinex Outsourcing LLC has minimal assets and liabilities
and the contribution would be recorded at fair value. There are no immediate plans to complete
this contribution of securities. 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 outsources computer programming work to a company located in Ekaterinberg Russia. If
the Company were not able to outsource all or a significant part of this work to this outsourcing
company, it could have a material adverse effect on the Company. 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 continue 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. 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. Minimum commitments on the above agreement for the years subsequent to March 31, 2005 are as
follows: 2006
    
    $
    59,0002007
    
    
    62,0002008
    
    
    59,000$
    180,000
 36




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##### Table of Contents



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, 2005, we carried out an evaluation, under the supervision and with the
participation of our management, including our chief executive officer and our chief financial
officer, of the effectiveness of the design and operation of our disclosure controls and
procedures. Based on the foregoing, our chief executive officer and chief 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. 37




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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. Director orName
    
    Age
    
    Position
    
    Officer SinceMichael Stojda
    
    
    41
    
    
    Director, President and Chief
Executive Officer
    
    
    2004Kevin Fitzgerald
    
    
    48
    
    
    Chairman of the Board
    
    
    2004Dr. Peter Novak
    
    
    52
    
    
    Director
    
    
    2004Edward Dubrovsky
    
    
    31
    
    
    Director
    
    
    2004Alexander Yarmolinsky
    
    
    31
    
    
    Director
    
    
    2005Curtis Wolfe
    
    
    42
    
    
    General Counsel, Secretary and Director
    
    
    2004Gerard Herlihy
    
    
    52
    
    
    Chief Financial Officer
    
    
    2004Christian Schormann
    
    
    40
    
    
    Vice President- Research & Development
    
    
    2005
 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. Michael Stojdahas been our chief executive officer, president and director since September 2004.
Mr. Stojda has nearly 17 years of experience working in high-technology hardware and software
industries and has spent the last 9 years in the computer graphics and digital content creation
software industries. From 2001 to 2003, he was managing director of Softimage Co, a wholly-owned
Canadian subsidiary of Avid Technology, Inc., a public company, and a member of Avids executive
team. As managing director, Mr. Stojda directed the turnaround of the company with responsibility
for Softimages worldwide operations. From 1994 to 2001, he held positions with Avid and Softimage,
including periods during which Softimage was a subsidiary of Microsoft, Inc., directing the
editing, finishing, animation and graphics products. From 1988 through 1994, Mr. Stojda was
employed by Digital Equipment Corporation in the companys minicomputer, storage and customer
service business units and held positions including business development manager, program manager
and business segment manager. Prior to that, he held positions in engineering and production
management at Thomas C. Wilson, Inc. Mr. Stojda has a Master of Arts degree in Business
Administration from Boston University, a Master of Science degree in Industrial Engineering from
Polytechnic University, a Master of Science degree in Operations Management from Polytechnic
University, and a Bachelor of Science degree in Mechanical Engineering from New York Institute of
Technology. Kevin Fitzgeraldhas been chairman of our board of directors since June 2004. He currently serves
as a director and chief executive officer of Ener1, a position he has held since September 2003.
Prior to joining Ener1, he was president of Edison Advisors, LLC, an investment banking firm, from
2002 to 2003. From 2000 to 2001, Mr. Fitzgerald was president and chief executive officer of
Globaltron Corp., a public telecommunications company. Mr. Fitzgerald was president and chief
executive officer of Neff Corp., an industrial and construction equipment rental company, from 1995
to 2000. Mr. Fitzgerald has an undergraduate degree in Electrical Engineering and a Masters of
Science degree in Finance. As an engineer, Mr. Fitzgerald worked for General Dynamics and Sperry
Corporation. Mr. Fitzgerald also worked at Deloitte & Touche for seven years. Dr. Peter Novakhas been a director of our company since its founding in February 2004. 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. 38




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##### Table of Contents



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. Edward Dubrovskyhas been a director of our company since June 2004. Mr. Dubrovsky has also served
as a director of EnerLook Solutions, Inc., a subsidiary of Ener1, since 2002. From 1992 through the
present, Mr. Dubrovsky has been a licensed California real estate broker working in real estate
sales, financing and development as an independent contractor associated with E&J Realty. From 2001
through the present, Mr. Dubrovsky has also been the president and managing director of Maple
Ventures, Inc., a real estate financing firm in California. Mr. Dubrovsky earned a Bachelor of
Science degree in Business Administration with an emphasis in Business Finance and Accounting from
the University of San Francisco in 1995. Alexander Yarmolinskyhas been a director of our company since June 2005. From 1999 through the
present, Mr. Yarmolinsky has been employed by Burr, Pilger & Mayer, LLP, a public accounting firm,
most recently as a senior tax manager. 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 Wolfehas 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. Gerard Herlihyhas been our chief financial officer since June 2004. 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). 39




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##### Table of Contents



Christian Schormannhas been our vice president of research and development since January 2005.
During the four years prior to joining the company, Mr. Schormann was the chief technology officer
of the professional and broadcast systems division of Pinnacle Systems, a supplier of video and
distribution tools. During 2000, Mr. Schormann was employed as vice president of Zatso, Inc., an
internet start-up company engaged in the development of personalized streaming video news services.
Mr. Schormann has a Masters degree in Musicology from Frankfurt University. Board composition As of June 27, 2005, our board of directors currently consists of six 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. We intend to appoint at least one additional independent director to our board of directors. On
June 27, 2005, we appointed Alexander Yarmolinsky to the board of directors, who is an independent
director and who is a financial expert under the Commissions standards. Currently, Mr. Dubrovsky
and Mr. Yarmolinsky are 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 members of the Audit Committee are Mr. Fitzgerald, the chairman, and Mr.
Yarmolinsky, who joined the committee upon his appointment to the Board in June 2005. Mr.
Dubrovsky served on the Audit Committee from the date of its formation through June 21, 2005. Upon
the admission of additional independent members of our board of directors, our board of directors
intends to consider appointing such independent directors to additional positions on these
committees. 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. Our audit committee is comprised of Kevin Fitzgerald and Edward Dubrovsky. Mr. Fitzgerald is a
non-executive chairman of the company and Mr. Dubrovsky is a non-employee member of our board of
directors. Mr. Fitzgerald will be our audit committee financial expert as currently defined under
Securities and Exchange Commission rules. Mr. Fitzgerald is not independent as defined under the
NASD Listing Standards. 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 40




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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. 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 filed late the initial statement of beneficial ownership on Form
3 pursuant to Section 16(a) during fiscal 2005. 41




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##### Table of Contents



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 2004 and fiscal 2005 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
    
    
    AwardsSecuritiesRestricted
    
    
    UnderlyingStock
    
    
    Options/Name and Principal Position
    
    Fiscal Year
    
    
    Salary ($)
    
    
    Bonus ($)
    
    
    Other ($)
    
    
    Awards ($)
    
    
    SARs (#)Michael Stojda Director, President andChief Executive Officer (1)
    
    
    2005
    
    
    $
    156,561
    
    
    $
    
    
    
    $
    
    
    
    $
    12,000
    (2)
    
    
    400,000Christian Schormann Vice President, Research and
Development (3)
    
    
    2005
    
    
    $
    38,730
    
    
    $
    
    
    
    $
    
    
    
    $
    7,500
    (4)
    
    
    250,000Gerard Herlihy Chief Financial Officer (5)
    
    
    2005
    
    
    $
    91,116
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
  (1)
    
    Mr. Stojda joined us September 1, 2004. Mr. Stojdas base salary is $275,000 per
year.(2)
    
    Mr. Stojda received, under the terms of his employment agreement, 400,000 shares of
restricted common stock that are subject to a lapsing right of forfeiture. The right of
forfeiture lapsed with respect to 233,333 shares as of March 31, 2005 and the remaining
shares lapse at the rate of 33,333 shares per month until fully lapsed. No cash
consideration was paid for these restricted shares.(3)
    
    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.(4)
    
    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.(5)
    
    Mr. Herlihy joined us on June 1, 2004. His base salary is $110,000 per year, and he
is eligible to receive an annual performance bonus of up to 50% of his base salary. 42




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##### Table of Contents



The following table provides information about grants of stock options to our named executive
officers during fiscal 2005. Options/SAR Grants in Last Fiscal Year
Individual Grants Number of Securities
    
    
    % of Total Options/SARsUnderlying Options/SARs
    
    
    Granted to Employees in
    
    
    Exercise or
    
    
    ExpirationName
    
    Granted (#)
    
    
    Fiscal Year
    
    
    Base Price ($/S)
    
    
    DateMichael Stojda
    
    
    2,000,000
    (1)
    
    
    31.4
    %
    
    $
    0.20
    
    
    
    9/1/2014Michael Stojda
    
    
    1,500,000
    (2)
    
    
    23.5
    %
    
    $
    0.50
    
    
    
    9/1/2014Christian Schormann
    
    
    1,000,000
    (3)
    
    
    15.7
    %
    
    $
    0.20
    
    
    
    1/12/2015
  1.
    
    On January 18, 2005, pursuant to an employment agreement dated September 1, 2004, we granted
to Mr. Stojda an option to purchase 2,000,000 shares of common stock under the Stock Option
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.  2.
    
    On January 18, 2005, pursuant to an employment agreement dated September 1, 2004, we granted
to Mr. Stojda an option to purchase 1,500,000 shares of our common stock. This option was not
granted under the 2004 Stock Option Plan and 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.  3.
    
    On January 25, 2005, pursuant to an employment agreement dated January 12, 2005, we granted
to Mr. Schormann, an option to purchase 1,000,000 shares of our common stock. This option was
granted under the 2004 Stock Option Plan and has an exercise price of $0.20 per share. On
January 12, 2006, this option will vest with respect to 250,000 shares. The option will vest
with respect to an additional 20,833 shares per month commencing February 12, 2005. None of our named executive officers exercised options during fiscal 2005. The following table
provides information regarding unexercised options held as of March 31, 2005 by our named executive
officers. Aggregated Options/SAR Exercises in Last Fiscal Year
and FY-End Options/SAR Values Number of SecuritiesUnderlying Unexercised
    
    
    Value of Unexercised In-Options/SARs at FY-End
    
    
    the-Money Options/SARsShares
    
    
    
    
    
    
    (#)
    
    
    at FY-End ($)acquired on
    
    
    Value
    
    
    Exercisable/
    
    
    Exercisable/Name
    
    Exercise (#)
    
    
    realized
    
    
    Non Exercisable
    
    
    Non ExercisableMichael Stojda
    
    
    
    
    
    $
    
    
    
    
    388,888/3,111,112
    
    
    $
    Christian Schormann
    
    
    
    
    
    $
    
    
    
    
    0/1,500,000
    
    
    $
    
 43




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Employment Agreements Employment 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:  o
    
    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;o
    
    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; oro
    
    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. 44




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##### Table of Contents



Cause is defined in the employment agreement as:o
    
    Mr. Stojdas continued, willful and deliberate failure to perform his duties;o
    
    Mr. Stojda engages in misconduct materially and demonstrably injurious to us; oro
    
    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; oro
    
    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. 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. 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 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. 45




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##### Table of Contents




    
    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; includingany 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
    
    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. Director compensation We intend to grant Mr. Dubrovsky an option to purchase 100,000 shares of our common stock with an
exercise price equal to $0.20 per share, vesting in approximately equal installments over three
years. These options have not 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. 46




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##### Table of Contents



Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The table below contains information as of June 27, 2005 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 only
named executive officer, 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, 2005 there were 100,670,270 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., 550
West Cypress Creek Road, Suite 410, Fort Lauderdale, Florida 33309. Amount and Natureof Beneficial Owner(number of commonName and Address of Beneficial Owner
    
    shares)
    
    
    Percent of ClassSplinex, LLC (1)
    
    
    95,000,000
    
    
    
    94.4
    %Kevin Fitzgerald
    
    
    5,425
    
    
    
    *Michael Stojda (2)
    
    
    1,066,663
    
    
    
    1
    %Peter Novak (3)
    
    
    25,879
    
    
    
    *Edward Dubrovsky
    
    
    1,194
    
    
    
    *Alexander Yarmolinsky
    
    
    120
    
    
    
    *Curtis Wolfe (4)
    
    
    62,500
    
    
    
    *Gerard Herlihy (5)
    
    
    75,000
    
    
    
    *Christian Schormann
    
    
    0
    
    
    
    *All named executive officers and
directors as a group
    
    
    1,236,781
    
    
    
    1.2
    %
 
 *
    
    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)
    
    Includes options to purchase 666,663 shares of common stock which could be acquired
within 60 days of June 1, 2005.(3)
    
    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.(4)
    
    Includes options to purchase 61,250 shares of common stock which could be acquired
within 60 days of June 1, 2005.(5)
    
    Includes options to purchase 37,500 shares of common stock which could be acquired
within 60 days of June 1, 2005.   47




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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 WithOwnership InterestName
    
    (voting/economic)
    
    Ener1 Group
    
    Ener1, Inc.
    
    Splinex Technology Inc.Alexander Malovik
    
    50%/49%
    
    None
    
    None
    
    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
StockholderKevin Fitzgerald
    
    None
    
    None
    
    Chairman, Chief
Executive Officer,
Stockholder
    
    ChairmanCurtis Wolfe
    
    None
    
    General Counsel and
Secretary
    
    None
    
    Director, General
Counsel and Secretary
 48




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##### Table of Contents



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 75% of the outstanding common stock of Ener1 Group. Ener1 Group holds approximately
88% 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 additional 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. Kevin Fitzgerald is the chairman of the board of our company. He is also the chairman of the board
and chief executive officer of Ener1. Ener1 entered into an employment agreement with Mr. Fitzgerald under which he became Ener1s chief
executive officer, director and chairman of its board of directors, effective as of September 8,
2003, for a term lasting until December 31, 2005, with automatic annual renewals thereafter unless
terminated by Ener1 or Mr. Fitzgerald. Under the employment agreement, Mr. Fitzgerald is entitled
to receive an annual salary of $350,000 and option grants to purchase Ener1 common stock, the terms
of which are described in the section titled Equity Compensation Plan Information of the Form
10-KSB/A submitted by Ener1 to the Commission on May 16, 2005 for the fiscal year ended December
31, 2004. 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. 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 49




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##### Table of Contents



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. 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 95% 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 ANTAO to pay the costs associated with our
operations in Russia, including wages and benefits paid to Russian personnel and rent. 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 will be 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. We borrowed $1,700,000,
including $800,000 in aggregate principal 50




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amount of loans to us from Ener1 Group, Inc. assumed by
Bzinfin, under this agreement through March 31, 2005, and an additional $565,000 through June 15,
2005. 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. 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. 51




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Item 13. Exhibits ExhibitNumber
    
    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
of Splinex, 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 Merger of
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 of Splinex,
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.
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ExhibitNumber
    
    Description10.4
    
    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)
 53




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ExhibitNumber
    
    Description10.15
    
    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, 200514*
    
    Code of Ethics31.1*
    
    Certification of Principal Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200231.2*
    
    Certification of 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 200232.2*
    
    Certification of Principal Financial Officer pursuant to 18 U.S.C.
Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
 
 *
    
    Filed herewith. 54




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Item 14. Principal Accountant Fees and Services. Audit Fees. The aggregate fees, including expenses, billed by our former principal accountant in
connection with the audit of our annual financial statements for fiscal 2004 was $40,000. 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 for
fiscal 2005 and review of regulatory filings including the financial statements included in our
Quarterly Reports on Form 10-QSB was $18,867. 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,
2004 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, 2004 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. 55




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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.June 29, 2005
    
    By: /S/ Michael StojdaMichael StojdaChief Executive Officer and President
 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 June 29, 2005
    
    By: /S/ Michael StojdaMichael StojdaChief Executive Officer and President(Principal Executive Officer)June 29, 2005
    
    By: /S/ Kevin FitzgeraldKevin FitzgeraldChairman of the Board, DirectorJune 29, 2005
    
    By: /S/ Peter NovakPeter NovakDirectorJune 29, 2005
    
    By: /S/ Curtis WolfeCurtis WolfeDirector, General Counsel and SecretaryJune 29, 2005
    
    By: /S/ Edward DubrovskyEdward DubrovskyDirectorJune 29, 2005
    
    By: /S/ Alexander YarmolinskyAlexander YarmolinskyDirectorJune 29, 2005
    
    By: /S/ Gerard A. HerlihyGerard A. HerlihyChief Financial Officer(Principal Financial Officer and Principal Accounting Officer)
 56