What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2009-04-13 compared with 2009-01-16 · 44 added, 18 removed, 74 unchanged (46% of the section changed)

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Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995:

Except for the historical information presented in this document, the matters discussed in this annual report on Form 10-Q for the three and six month periods ended November 30, 2008 or otherwise incorporated by reference into this document, contain "forward-looking statements" (as such term is defined in the Private Securities Litigation Reform Act of 1995).

Except for the historical information presented in this document, the matters discussed in this quarterly report on Form 10-Q for the three and nine month periods ended February 28, 2009 or otherwise incorporated by reference into this document, contain "forward-looking statements" (as such term is defined in the Private Securities Litigation Reform Act of 1995).

These statements are identified by the use of forward-looking terminology such as "believes", "plans", "intend", "scheduled", "potential", "continue", "estimates", "hopes", "goal", "objective", expects", "may", "will", "should" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties.

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We believe these applications can create market opportunities that cover homeland security, health care, process control, and environmental protection, remediation and control.

Effective January 1, 2009, we acquired a 100% interest in Cummins Family Produce, Inc.

("CFP"), a potato packing facility in Idaho.

We consider our acquisition of CFP strictly as a financial transaction by which we intend to procure cash flow from CFP over a five year period that will help support development, marketing and sales of our atmospheric glow plasma technology.

As we have previously indicated, we need approximately $2.5 million over a period of time in order to execute our business plan with respect to the acquired atmospheric glow plasma technology.

It became apparent that we would not be able to raise that amount of equity in a single transaction as a result of the deterioration of our financial condition, the delisting from Amex, the decline of our share price and the current state of the financial markets.

Our management and directors therefore explored other means to provide the needed capital.

On January 14, 2009, we completed the sale of $440,000 of our Series A Convertible Preferred Stock.

The cash provided by our sale of this Preferred Stock provides us with the initial capital to continue product development and start sales and marketing effort in our plasma business.

We anticipate the cash provided by the CFP packing facility acquisition will supplement the initial capital as well as continue to supplement our monthly cash needs into our fourth fiscal quarter that began March 1, 2009 so as to enable us to continue to operate and enable our wholly owned subsidiary, APP, to continue to develop the atmospheric plasma glow technology.

However, we anticipate that by the end of April 2009, we will need to secure additional working capital financing, until product revenues and cash flow from the packing facility create a sustainable operation of which there can be no assurance.

However, we cannot predict or estimate the timing or amount of our working capital needs, with certainty as the timing and amounts will depend on many variables, such as potential third party development or licensing fees, the pace and success of our product development and sales, and cash generated by CFP.

In the event we are unable to secure additional working capital as and when we need it, we will have to curtail our operations accordingly, thus slowing down our product development and marketing efforts.

Any curtailment of our operations could have a material adverse effect on our operations and financial position.

The report of our independent registered public accountant issued in conjunction with our audited financial statements and notes thereto for the year-ended May 31, 2008 indicated that there is substantial doubt about our ability to continue as a going concern.

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Results of Operations

Revenues for the three and six months ended November 30, 2008 and 2007 of $82,858, $75,144, $137,713 and $121,345 respectively, consisted entirely of revenue from our hydrodynamic software development contracts issued by companies in the maritime industry.

The level of revenues is dependent upon the hours worked on the tasks required.

Revenues for the three months ended February 28, 2009 and February 29, 2008 were $1,531,804 and $125,885, respectively.

The increase of $1,405,919 consisted primarily of revenues of $1,527,604 from CFP which was acquired as of January 1, 2009 offset by the decrease in revenues in our APP segment of $121,685.

Revenues in our APP segment came primarily from our hydrodynamic software development contracts issued by companies in the maritime industry.

As of November 30, 2008, we terminated these contracts as the software developer who worked on them resigned.

We do not have the personnel to complete these contracts, nor do we believe we can hire such replacement personnel, therefore we expect these contracts to be cancelled.

Revenues for the nine months ended February 28, 2009 and February 29, 2008 were $1,669,517 and $247,230, respectively.

The increase of $1,422,287 consisted primarily of revenues of $1,527,604 from CFP, offset by the decrease in revenues of $105,317 from our hydrodynamic software development contracts, discussed above.

Cost of revenues:

Cost of revenues for the three and six months ended November 30, 2008 and 2007 were $35,997, $35,265, $61,036 and $78,016, respectively.

It is comprised of subcontract, consultant and direct labor costs.

The variances between the periods reported reflects the differences in direct labor hours incurred and billed and whether subcontractors and consultants were used.

Cost of revenues for the three months ended February 28, 2009 and February 29, 2008 were $1,322,812 and $31,269, respectively.

The increase of $1,291,543 is attributable to costs of $1,320,632 associated with CFP revenues offset by reduced costs of the remaining business segment of $29,089 associated with its reduced revenues.

Cost of revenues for the nine months ended February 28, 2009 and February 29, 2008 were $1,383,848 and $109,285, respectively.

The increase of $1,247,563 is attributable to costs of $1,320,632 associated with CFP revenues offset by reduced costs of the remaining business segment of $73,069 associated with its reduced revenues.

Selling, general and administrative expenses:

Selling, general and administrative expenses for the three and six months ended November 30, 2008 and 2007 were $427,137, $742,980, $765,536 and $1,557,907, respectively.

For the three-months ended November 30, 2008 and 2007, the decrease in expenses of $315,843 resulted from the curtailment of operations in the aviation security part of our business which reduced expenditures by $408,709, partially offset by expenses relating to acquisition and development of our newly acquired plasma gas technology of $92,866.

For the six months ended November 30, 2008 and 2007, the decrease in expenses of $792,371 also related to the curtailment of operations in the aviation security part of our business which reduced expenditures by $885,237, partially offset by expenses of $92,866 of the plasma gas technology.

Selling, general and administrative expenses for the three months ended February 28, 2009 and February 29, 2008 were $449,364 and $791,777, respectively.

The decrease of $342,413 is attributable to reduced total corporate expenses of $505,065 partially offset by aggregate expenses of APP and CFP of $162,652.

In the 2009 three-month reporting period we did not incur 2008 reporting period incurred expenses relating to share-based compensation, legal and litigation settlement of approximately $290,000, and business development, lobbying and fund raising activities of approximately $145,000, in addition to reduced personnel and related costs.

Selling, general and administrative expenses for the nine months ended February 28, 2009 and February 29, 2008 were $1,214,900 and $2,349,685, respectively.

The decrease of $1,134,785 is attributable to reduced total corporate expenses of $1,390,303 partially offset by aggregate expenses of APP and CFP of $255,518.

In the 2009 nine-month reporting period we did not incur the 2008 reporting period incurred expenses relating to share-based compensation, legal and litigation settlement costs of approximately $750,000, business development, lobbying and fund raising activities of approximately $450,000 with the balance attributable to reduced personnel and related costs.

Depreciation and amortization:

Depreciation and amortization expense for the three and six months ended November 30, 2008 and 2007 was $18,753, $27,250, $25,941 and $54,500, respectively.

For all periods involved, the reduction in depreciation and amortization related to the write-down or disposition of several assets and the completion of depreciation on other assets, partially offset by depreciation expense relating to the Plasma business.

Depreciation and amortization expense for the three months ended February 28, 2009 and February 29, 2008 was $105,190, $27,250, respectively.

For the nine months ended February 28, 2009 and February 29, 2008 the expense was $131,131 and $81,750, respectively.

For both periods the increases were attributable to the amortization of intangible assets attributable to the CFP and APP acquisitions, offset by reduced depreciation and amortization relating to the aviation related technologies.

Research and development:

Research and development expenses for the three and six months ended November 30, 2008 and 2007 were $$69,644, $84,338, 90,726 and $193,760, respectively.

The reductions in each of the respected periods resulted from the decision to suspend all development activities on our aviation related technologies until we are able to raise sufficient working capital for such purposes.

Research and development expenses for the three months ended February 28, 2009 and February 29, 2008 was $84,903, and $36,373, respectively.

For the nine months ended February 28, 2009 and February 29, 2008 the expense was $175,629 and $230,133, respectively.

The increase of $48,530 in the three month period was attributable to APP's plasma development expenses of $84,993 offset by the suspension of work on the aviation related technologies.

The decrease of $54,504 in the nine month period was attributable to the suspension of work on the aviation related technologies offset by plasma research and development expenses of $152,597.

Other income:

Other income for the three and six month periods ending November 31, 2008 relates to the disposition of several vehicles and fully-depreciated surplus equipment..

Other income for the nine month period ending February 28, 2009 relates to the disposition of several vehicles and surplus equipment.

Interest income, net:

Interest income, net for the three and six months ended November 30, 2008 and 2007 was $2,330, $30,973, $5,462 and $70,773, respectively.

The reduction in each of the periods presented was attributable to a reduction in cash available for investment in interest bearing investments and accounts.

Interest income, net for the three and nine months ended February 28, 2009 decreased as a result of the reduction in cash available for investment in interest bearing investments and accounts and interest on debt attributable to the CFP acquisition.

Provision for income taxes:

The tax provision relates to Idaho state income tax on CFP results.

Dividends on preferred stock:

Preferred stock dividends were accrued from date of receipt of investors' funds through the end of our fiscal quarter.

The dividends are anticipated to be paid in kind and not in cash.

Liquidity and Capital Resources

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On January 14, 2009, we completed a series of transactions in order to generate a portion of the required additional working capital, including the acquisition of a potato packing business located in Idaho known as Cummins Family Produce Inc., an Idaho corporation.

In Item 5 of this Report on Form 10-Q, we describe these transactions and their anticipated impact on us and we refer the reader to Item 5 which must be read as a continuation of this discussion of our liquidity and capital resources.

Reference is made to Notes 1, 9 and 10 to the consolidated financial statements herein, and to Item 5 of this Report on Form 10-Q, where we describe these transactions and their anticipated impact on us and we refer the reader to Item 5 which must be read as a continuation of this discussion of our liquidity and capital resources.

Qualitative and Quantitative Disclosures About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis