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

FORM 10-QSB
 
(Mark One)
 
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended December 31, 2007
 
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ____________ to _________________

Commission file number 333-116817

Splinex Technology Inc. 
(Exact name of small business issuer as specified in its charter)
 
 
20-0715816
(State or other jurisdiction of incorporation or organization)
  
(IRS Employer Identification No.)

500 W. Cypress Creek Road Suite 100
Fort Lauderdale, FL 33309
(Address of principal executive offices)

(954) 556-4020
(Issuer’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)

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 o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes x No o
 
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: At December 1, 2007, the number of shares outstanding of the issuer’s common stock was 100,757,770 shares.

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

SPLINEX TECHNOLOGY INC.
Form 10-QSB
For the Quarter Ended December 31, 2007
INDEX

   
Page
   
No.
 
PART I — FINANCIAL INFORMATION
  
     
Item 1.
Financial Statements        
  
     
 
CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS – AS OF DECEMBER 31, 2007 AND MARCH 31, 2007
3
     
 
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS - FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2007 AND 2006 AND FOR THE PERIOD FROM INCEPTION (OCTOBER 28, 2003) THROUGH DECEMBER 31, 2007
4
     
 
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS - FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2007 AND 2006 AND FOR THE PERIOD FROM INCEPTION (OCTOBER 28, 2003) THROUGH DECEMBER 31, 2007
5
     
 
Notes to Condensed Consolidated Unaudited Financial Statements
6
     
Item 2.
Management’s Discussion and Analysis or Plan of Operation.
11
     
Item 3.
Controls and Procedures
13
     
 
PART II — OTHER INFORMATION
  
     
Item 1.
Legal Proceedings
13
     
Item 6.
Exhibits
14
     
 
Signatures
15
 
2
 
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

SPLINEX TECHNOLOGY INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEET

 
  
December 31,
2007
  
March 31,
2007
  
ASSETS 
          
Current assets
  
 
  
 
  
Cash
  
$
373,552
  
$
251
  
Prepaid expenses and other
    
-
   
5,132
 
Total current assets
    
373,552
   
5,383
 
     
          
Property and equipment, net
    
-
   
-
 
Total assets
  
$
373,552
  
$
5,383
  
     
          
LIABILITIES AND STOCKHOLDERS' DEFICIENCY IN ASSETS
          
Current liabilities
          
Demand note payable and accrued interest due to related party - Ener1 Group
    
-
   
776,476
 
Note payable and accrued interest due to related party - Bzinfin
    
-
   
2,805,207
 
Demand note payable due to related party - Splinex LLC
    
500,000
   
-
 
Accounts payable
    
154,786
   
557,120
 
Accrued expenses
    
17,500
   
500,927
 
Due to related parties
    
-
   
138,262
 
Total current liabilities
    
672,286
   
4,777,992
 
     
          
COMMITMENTS AND CONTINGENCIES
          
     
          
STOCKHOLDERS' DEFICIENCY IN ASSETS
          
Preferred 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 100,757,770 shares issued and outstanding)
    
100,758
   
100,758
 
Treasury stock, at cost; 250,000 shares
    
(62,500
)
  
(62,500
)
Paid in capital
    
1,247,974
    
1,109,712
 
Common stock subscriptions payable
    
3,771,047
    
-
 
Deficit accumulated during the development stage
    
(5,356,013
)
  
(5,920,579
)
Total stockholders' deficiency in assets
    
(298,734
)
  
(4,772,609
)
Total liabilities and stockholders' deficiency in assets
  
$
373,552
  
$
5,383
  

See accompanying notes.
 
3

SPLINEX TECHNOLOGY INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS

   
 
Three Months Ended
December 31, 2007
 
Three Months Ended
December 31, 2006
 
Nine Months Ended
December 31, 2007
 
Nine Months Ended
December 31, 2006
 
Cumulative
From Inception (October 28,
2003) Through December 31,
2006
 
Net sales
  
$
-
  
$
852
  
$
98
  
$
1,645
  
$
3,911
  
   
                      
Operating Expenses
                      
Sales and marketing
        
-
   
-
   
-
   
561,296
 
General and administrative
    
21,877
   
99,652
   
60,937
   
321,746
   
3,618,372
 
Research and development
    
-
   
-
   
-
   
24,996
   
1,984,516
 
Total operating expenses
    
21,877
   
99,652
   
60,937
   
346,742
   
6,164,183
 
Costs of merger and registration
    
-
   
-
   
-
   
-
   
512,321
 
Total expenses
    
21,877
   
99,652
   
60,937
   
346,742
   
6,676,504
 
Loss from operations
    
(21,877
)
  
(98,800
)
  
(60,839
)
  
(345,097
)
  
(6,672,593
)
Other income (expense)
                      
Other income from settlements
    
735,869
   
-
   
735,869
   
-
   
903,113
 
Interest expense, net
   
(27,734
)
  
(40,097
)
  
(110,464
)
  
(118,021
)
  
(409,380
)
Total other income and (expense)
    
708,135
   
(40,097
)
  
625,405
   
(118,021
)
  
493,733
 
Income (loss) before income taxes
    
686,258
   
(138,897
)
  
564,566
   
(463,118
)
  
(6,178,860
)
Income taxes
   
-
   
-
   
-
   
-
   
-
 
Net income (loss)
 
$
686,258
  
$
(138,897
)
$
564,566
  
$
(463,118
)
$
(6,178,860
)
   
                      
Net income (loss) per basic and fully diluted share
  
$
0.01
  
$
(0.00
)
$
0.01
  
$
(0.00
)
    
Weighted average shares outstanding
    
100,757,770
   
100,757,770
   
100,757,770
   
100,757,770
     


See accompanying notes.
 
4

SPLINEX TECHNOLOGY INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS

     
  
Nine Months Ended December 31, 2007
  
Nine Months Ended
December 31, 2006
  
Cumulative From Inception (October 28, 2003) Through December 31,
2007
  
Cash flows from operating activities:
  
 
  
 
  
 
  
Net income (loss)
  
$
564,566
  
$
(463,118
)
$
(6,178,860
)
Adjustments to reconcile net loss to net cash used in operating activities:
              
Depreciation
    
-
   
5,622
   
71,817
 
Non cash settlement income
              
Executive compensation paid with common stock and other non-cash expenses
    
-
   
-
   
32,179
 
Non cash interest expense
    
110,464
   
117,146
   
402,715
 
Changes in operating assets and liabilities:
            
-
 
Prepaid expenses and other
    
5,133
   
57,886
   
-
 
Due to related parties
    
-
 
  
-
   
138,261
  
Other assets
    
-
   
9,881
   
-
 
Accounts payable
    
(402,336
)
  
116,822
   
154,787
 
Accrued expenses
    
(463,427
)
  
(99,194
)
  
(16,250
)
Total adjustments
    
(888,427
)
  
208,163
   
645,247
 
Net cash used in operating activities
    
(323,861
)
  
(254,955
)
  
(5,533,612
)
     
              
Cash flows from investing activities:
              
Purchase of equipment
    
-
   
-
   
(79,429
)
Employee loans and advances, net
    
-
   
831
   
-
 
Net cash used in investing activities
    
-
   
831
   
(79,429
)
     
              
Cash flows from financing activities:
              
Note payable related parties
    
558,900
   
248,331
   
3,848,331
 
Contributed capital from equity investors
    
-
   
-
   
2,000,000
 
Net cash provided by financing activities
    
558,900
   
248,331
   
5,848,331
 
     
              
Net increase (decrease) in cash
    
235,039
   
(5,793
)
  
235,290
 
Cash at beginning of period
    
251
   
9,458
   
-
 
Cash at end of period
  
$
373,552
  
$
3,665
  
$
373,552
  
     
              
Supplemental Disclosure of Cash Flow Information
              
Non-cash investing and financing activities:
              
Related party debt and accrued interest to be exchanged for common stock
  
$
3,771,047
  
$
-
  
$
3,771,047
  
 
See accompanying notes.
 
5
SPLINEX TECHNOLOGY INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED 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. The Company began its development stage activity on October 28, 2003 (“Inception”).

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and Regulation S-B. Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results for the interim periods presented have been included. These results have been determined on the basis of generally accepted accounting principles and practices applied consistently with those used in the preparation of the Company's Annual Financial Statements for the year ended March 31, 2007. Operating results for the three and nine months ended December 31, 2007 are not necessarily indicative of the results that may be expected for the year ending March 31, 2008. It is recommended that the accompanying condensed consolidated financial statements be read in conjunction with the financial statements and notes for the year ended March 31, 2007 included in the Company’s Form 10-KSB filed with the Securities and Exchange Commission.

Reclassifications

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

Basis of Consolidation
 
The consolidated interim financial statements include the accounts of Technology 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

In 2004, the Company began developing visualization software, and commenced selling the software in 2005. Due to lack of significant sales, the Company substantially reduced its workforce and overhead costs beginning in September 2005. The Company terminated its use of software development services previously provided to us by Splinex Outsourcing, Inc., a Russian outsourcing company; terminated or accepted resignations from our personnel, certain executives, and managers; and ceased marketing activities. From September 2005 through July 2007, Ener1 Group, Inc., a related party, began loaning the Company money to fund its operations. In July 2007, Ener1 Group, Inc. stopped funding the Company operations and the Company stopped paying its remaining executive employee. In August and September 2007, two of the three members of the board of directors resigned. The Company had no employees at March 31, 2007; however, a non-paid executive continues to perform duties as necessary.

As further described in the Splinex Restructuring note, in December 2007, a related party structured a transaction that provided funds to the Company to settle its existing debts at a discount to the face amount of the obligations, restructured certain notes payable in exchange for newly issued common shares of the Company, and gave Splinex LLC a substantial majority of the outstanding common shares (the “Splinex Restructuring”). The Company expects its controlling shareholders to direct Splinex to acquire one or more companies, although no definitive purchase agreements have yet been signed.
 
6
 
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 December 31, 2007, the Company had no cash equivalents. The Company maintains its cash in a bank deposit account, the balance of which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. At December 31, 2007, the Company had $273,552 in excess of FDIC insured limits.

Foreign Currency Transactions

All transactions of the Company are denominated in U.S. dollars. The Company paid Russian research, programming and administrative costs under a U.S. dollar denominated agreement. Consolidated general and administrative expenses include immaterial foreign exchange rate losses on 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. No options were granted or exercised during the three and nine months ending December 31, 2007. At December 31, 2007, the Company has 300,000 options outstanding under its plan, all of which are vested, with an exercise price of $0.10 per share and with a remaining contractual term of 7 years.

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’s revenues, net of sales returns and other allowances, are from the licensing of products. The Company recognizes 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.

Net Income (Loss) Per Share

Basic net income per common share is computed by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net 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 issuable 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. The earnings per share calculation does not include the 113,500,000 shares that will be issued in accordance with the Exchange Agreement. Had the additional shares been outstanding for the entire period, the earnings per share would have been $0.00 and $0.00 for the three and nine months ended December 31, 2007, respectively.

7
 
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 nine months ended December 31, 2007.

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 business 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 such alternatives as an acquisition or merger with a company.

The Company has been unable to generate any significant sales of the product due in part to a lack of funds for marketing and promotion. In addition, a value added reseller of our product was unable to generate significant sales of the product. In September 2005, the Company changed its business strategy and took certain actions to reduce its overhead costs. The Company terminated its use of software development services previously provided to its by Splinex Outsourcing, Inc., a Russian outsourcing company; terminated or accepted resignations from most of its personnel, executives, and managers; and ceased marketing activities. From September 2005 through July 2007, Ener1 Group, Inc., a related party, loaned the Company money to fund its operations. In July 2007, Ener1 Group, Inc. stopped funding the Company operations and stopped paying its remaining executive employee. In August and September 2007, two of the three members of the board of directors resigned. The Company had no employees at March 31, 2007; however, a non-paid executive continues to perform duties as necessary.

In December 2007, a related party structured a transaction that provided funding to settle existing debts of the Company at a discount to the face amount of the obligations, restructured certain notes payable in exchange for newly issued common shares of the Company, and gave Splinex LLC substantial majority of the outstanding common shares (the “Splinex Restructuring”). The Company expects the Company’s controlling shareholders to direct the Company to acquire or merge with one or more companies, although no definitive purchase agreements have yet been signed.

The Company has engaged in discussions with several potential merger partners, but to date has been unable to reach agreement on terms for a merger primarily because the Company had been unable to reach a satisfactory settlement of certain severance and trade obligations. The Company has no formal agreements to merge with another company, and expects that Splinex LLC, the controlling shareholder, will direct Splinex to find an appropriate merger partner and complete a merger after completion of the Splinex Restructuring. If the Company did not complete the Splinex Restructuring, it is likely that the Company would discontinue operations and cease to do business.

In accordance with the funding provisions in the Predecessor’s operating agreement, certain members of the Predecessor contributed capital of $2,000,000 to the Predecessor. As of July 27, 2005, the Company had borrowed $2,500,000 under a $2,500,000 revolving loan agreement with Bzinfin, S. A., a company that is affiliated with the Company through common ownership (the “Bzinfin Loan”). The Company borrowed an additional $50,000 from Bzinfin during September 2005, and the loan agreement was amended to include the additional borrowing under the same terms and conditions. Loans under this agreement must be repaid two years from the date of the initial funding, which occurred on February 7, 2005. The Company received an extension of the due date of the Bzinfin Loan from February 7, 2007 until June 30, 2007. The loan is currently in default.

8
 
The Company borrowed funds from a related party, Ener1 Group, Inc., to pay certain ongoing expenses while the Company pursues various alternatives. The Company ceased receiving funding from Ener1 Group, Inc. effective July 2007. From October 2005 through December 31, 2007, the Company borrowed $798,331 from Ener1 Group, Inc., under a demand note that bears interest at an annual rate of 5% payable at maturity.

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

NOTE 3. SEGMENT INFORMATION

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

NOTE 4. ACCRUED EXPENSES

Accrued expenses represent expenses that are owed at the end of the period that either have not been billed by the provider or are expenses that are estimated for services provided. Accrued expenses at March 31, 2007 also include severance and other wage related expenses due to former employees. At December 31, 2007 and March 31, 2007, accrued expenses consisted of the following:

 
  
December 31,
2007
  
March 31,
2007
  
Accrued severance and termination obligations
  
$
-
  
$
467,416
  
Audit
    
17,500
   
24,000
 
Accrued vacation and wages
    
-
   
9,511
 
 
  
$
17,500
  
$
500,927
  

NOTE 5. STOCKHOLDERS’ EQUITY

The Company has the authority to issue 300,000,000 shares of common stock, par value of $0.001 per share. Each holder of common stock is entitled to one vote for each share held. The Company has the authority to issue 150,000,000 shares of preferred stock, par value $0.001 per share, which 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. Subscriptions payable reflect the expected exchange of debt for common shares expected to conclude in February 2007

NOTE 6. 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 providing 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 include consulting fees under these agreements of $50,000 and $150,000 for the three and nine months ended December 31, 2006, respectively. The Company and the related parties agreed to terminate the consulting agreements effective December 31, 2006, and agreed to forego collection of all payments due under the contract during December 2007.

The Company shared personnel with Ener1, Inc. and Ener1 Group, Inc., entities affiliated with the Company by common ownership and through common control.  Accordingly, amounts have been allocated to and from the Company for the services of personnel and other expenses. The Company incurred rent expense of $0 and $10,486 for its office space under a sublease with Ener1 Group, Inc. for the three and nine months ended December 31, 2006, respectively.  

9

Effective January 27, 2006, the Company’s President, Mr. Herlihy, began performing services for Ener1, Inc., including serving as its Chief Financial Officer from January 27, 2006 through October 16, 2006 and again as of November, 2007, in addition to his continuing role at Splinex. Splinex paid $60,000 and Ener1 paid $190,000 of Mr. Herlihy’s $250,000 annual salary through May 2007, at which time Splinex discontinued making salary payments to Mr. Herlihy. Mr. Herlihy dedicated substantially all of his time to Ener1 except for the time necessary to attend to the administrative and financial matters of Splinex. Mr. Herlihy resigned from Splinex in February 2008.

NOTE 7. DEBT DUE TO RELATED PARTIES

Effective April 1, 2004, a company that is affiliated with the Company through common ownership, entered into a revolving loan agreement, the Bzinfin Loan, with the Company under which the Company borrowed $2,550,000 in aggregate principal through March 31, 2006. Loans under this agreement bear interest at an annual rate of 5% and must be repaid two years from the date of the initial funding, which occurred on February 7, 2005. The Company received an extension of the due date of the Bzinfin Loan from February 7, 2007 until June 30, 2007. At December 31, 2007, the Company had restated this debt (see Note 9) and the balance was $0.

Prior to restructuring, the Company had borrowed $835,736 from Ener1 Group under a demand note bearing annual interest of 5% to fund working capital needs. Accrued interest at December 31, 2007 was $25,464. After the restructuring, this principal debt was eliminated and the total amount due was $0.

In December 2007, Bzinfin provided Splinex LLC a loan of $500,000 to pay for restructuring and settlement costs, which Splinex LLC loaned to the Company in the form of a non-interest bearing demand note. Splinex LLC is required to repay this amount to Bzinfin upon the completion of the Splinex Restructuring.

NOTE 8. COMMITMENTS AND CONTINGENCIES

Foreign subsidiary

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

NOTE 9. SPLINEX RESTRUCTURING

In December 2007, a related party structured a transaction that provided funds to the Company to settle its existing debts at a discount to the face amount of the obligations, restructured certain notes payable which will be exchanged for newly issued common shares of the Company, and gave Splinex LLC substantial majority of the outstanding common shares (the “Splinex Restructuring”). The Company expects its controlling shareholders to direct Splinex to acquire one or more companies, although no definitive purchase agreements have yet been signed. The actions taken to restructure the company are described in the following paragraph.

In December 2007, Bzinfin agreed to loan Splinex LLC up to $500,000 to be used to fund the settlement of certain financial obligations and the costs of audit and filing financial reports with the SEC. On or about December 17, 2007, under a Purchase Agreement, 1) certain holders, who had received shares in the Company as distributions from Splinex LLC, transferred their ownership of 35,162,334 shares of common stock of the Company to Splinex LLC for nominal consideration, and 2) Bzinfin and Ener1 Group assigned debt obligations to Splinex LLC in the amount of $2,805,207 and $845,864, respectively. Under a Purchase Agreement dated December 17, 2007, TGR Capital LLC, a Florida limited liability company (“TGR”) controlled by a related party, 1) acquired the membership interests in Splinex LLC, thereby giving TGR control over Splinex LLC, and 2) agreed to repay the Bzinfin loan of $500,000. Under an Exchange Agreement dated December 18, 2007, the Company agreed to issue 113,500,000 newly issued shares of the Company to Splinex LLC of which 8,500,000 shares will be issued to Bzinfin and 2,125,000 will be issued to Alexander Malovik in exchange for the Bzinfin and Ener1 Group notes. The shares will be issued after the new transfer agent for the Company administers the official records transfer, which is expected in February 2008. Splinex LLC owned 98,157,334 shares of the Company as of December 17, 2007 after the transfer and will own 201,032,334 shares after the completion of the Exchange Agreement. The Company had 100,757,769 shares outstanding at December 17, 2007 and will have 214,257,769 shares outstanding after the completion of the Exchange Agreement. On December 17, 2007, the Company agreed to revised payment terms related to a termination agreement with its former chief executive officer. The Company has terminated consulting agreements with Mike Zoi and Peter Novak, and the consultants have agreed to terminate all previous accrued consulting payment obligations. As of December 31, 2007, the Company has reached settlement agreements with substantially the majority of all remaining creditors; certain payments were made in January, 2008 in accordance with the settlement agreements.
 
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 Item 2. Management’s Discussion and Analysis or Plan of Operation.

This Quarterly Report on Form 10-QSB 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: our future business plans; 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; financing requirement and capital raising plans  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 Securities and Exchange Commission (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 Securities and Exchange Commission and the consolidated interim financial statements and related notes included in this Quarterly Report.
 
Plan of Operation
 
In 2004, we began developing visualization software, and commenced selling the software in 2005. Due to lack of significant sales, we substantially reduced our workforce and overhead costs beginning in September 2005. From September 2005 through July 2007, Ener1 Group, Inc., a related party, loaned us money to fund our operations. In July 2007, Ener1 Group, Inc. stopped funding our operations and we stopped paying our remaining executive employee. In August and September 2007, two of our three members of the board of directors resigned. The Company had no employees at March 31, 2007; however, a non-paid executive continued to perform duties as necessary, until his resignation on February 6, 2008.

In December 2007, a related party structured a transaction that provided funds to us to settle our existing debts at a discount to the face amount of the obligations, restructured certain notes payable in exchange for newly issued common shares of the company, and gave Splinex LLC substantial majority of the outstanding common shares (the “Splinex Restructuring”). We expect our controlling shareholders to direct Splinex to acquire one or more companies, although no definitive purchase agreements have yet been signed. The actions taken to restructure the company are described in the following paragraph.

In December 2007, Bzinfin, S.A., a company that is affiliated with the Company through common ownership, agreed to loan Splinex LLC up to $500,000 to lend to the Company to be used to fund the settlement of certain financial obligations and the costs of audit and filing financial reports with the SEC. On or about December 17, 2007, under a Purchase Agreement, 1) certain holders, who had received shares in the Company as distributions from Splinex LLC, transferred their ownership of 35,162,334 shares of common stock of the Company to Splinex LLC for nominal consideration, and 2) Bzinfin and Ener1 Group assigned debt obligations to Splinex LLC in the amount of $2,805,207 and $845,864, respectively. Under a Purchase Agreement dated December 17, 2007, TGR Capital LLC, a Florida limited liability company (“TGR”) controlled by a related party, 1) acquired the membership interests in Splinex LLC, thereby giving TGR control over Splinex LLC, and 2) agreed to repay the Bzinfin loan of $500,000. Under an Exchange Agreement dated December 18, 2007, the Company agreed to issue 113,500,000 newly issued shares of the Company to Splinex LLC of which 8,500,000 shares will be issued to Bzinfin and 2,125,000 will be issued to Alexander Malovik in exchange for the Bzinfin and Ener1 Group notes. The shares are expected to be issued in February 2008. The exchange of shares for the debt will occur after a qualified transfer agent has been retained. Splinex LLC owned 98,157,334 shares of the Company as of December 17, 2007 after the transfer and will own 201,032,334 shares after the completion of the Exchange Agreement. The Company had 100,757,769 shares outstanding at December 17, 2007 and will have 214,257,769 shares outstanding after the completion of the Exchange Agreement. On December 17, 2007, the Company agreed to revised payment terms related to a termination agreement with its former chief executive officer. The Company has terminated consulting agreements with Mike Zoi and Peter Novak, and the consultants have agreed to terminate all previous accrued consulting payment obligations. The Company has reached settlement agreements with substantially the majority of all remaining creditors. The sole director and the President and Chief Financial Officer resigned in January 2008, and Splinex LLC appointed two Board members and officers to replace them.  The owners and members of TGR intend to acquire one or more companies, although no definitive purchase agreements have yet been signed. Any potential acquisition would be financed primarily with new shares of Splinex, and therefore would result in substantial dilution to the existing shareholders.

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Several factors exist that raise significant doubt as to our ability to continue operating as a going concern. These factors include our history of net losses and the facts that our company is in the development stage and we have earned minimal revenues to date. We have no remaining funds available under our revolving loan agreement and are dependent upon Ener1 Group, Inc. to fund our operations. Our independent auditors’ report on our financial statements for the year ended March 31, 2007 contains an explanatory paragraph about our ability to continue as a going concern. Management believes that the Splinex Restructuring, as described in the preceding paragraphs, provides the opportunity for us to continue as a going concern; however, there is no assurance this will occur.

Results of Operations for the Three Month Period Ended December 31, 2007

We reported net income of $686,258, or $0.01 per share, for the three months ended December 31, 2007, compared to a loss of $138,897 or $(0.00) per share in the prior year quarter. Weighted average shares outstanding were 100,757,770 for both quarters. The net income for the three months ended December 31, 2007 reflects other income of $735,869 from settlement of vendor obligations and employment contracts which were concluded in December 2007.

General and administrative expenses for the three months ended December 31, 2007 were primarily accounting and audit costs. General and administrative expenses for the three months ended December 31, 2006 included wages and benefits of $15,812, consulting fees of $50,000 payable to a director, Dr. Novak and, a related party, Mike Zoi; audit fees of $9,000; and insurance costs of $17,683.

Interest expenses decreased from $40,097 for the three months ended December 31, 2006 to $27,734 in the three months ended December 31, 2007 due to the Splinex Restructuring which where the related party debt will be exchanged for common shares of the Company. The pending exchange is currently reported as subscriptions receivable at December 31, 2007.

Results of Operations for the Nine Month Period Ended December 31, 2007

We reported net income of $564,566, or $0.01 per share, for the nine months ended December 31, 2007 compared to a loss of $463,118, or $0.00 per share for the nine months ending December 31, 2006. The net income for the nine months ended December 31, 2007 reflects other income of $735,869 from settlement of vendor obligations and employment contracts which were concluded in December 2007.

General and administrative expenses for the nine months ended December 31, 2007 were primarily wages and accounting and audit expenses. General and administrative expenses for the nine months ended December 31, 2006 included wages and benefits of $50,622; consulting fees of $150,000 payable to a director and a related party, Mike Zoi; audit fees of $43,000; insurance costs of $60,726; and amortization of accounting software license fees of $42,064. Interest expenses decreased from $118,021 for the nine months ended December 31, 2006 to $110,464 in the nine months ended December 31, 2007; the related party debt will be exchanged for common shares of the Company under the Splinex Restructuring.

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 Liquidity and capital resources 
     
At December 31, 2007, we had negative working capital of $298,734 and cash of $373,552. The Company is dependent upon receiving funds from its controlling shareholder, Splinex, LLC. The Company reached settlement agreements with the majority of its creditors and former employees in December 2007.

In December 2007, Bzinfin agreed to loan Splinex LLC up to $500,000 to lend to the Company to be used to fund the settlement of certain financial obligations and the costs of audit and filing financial reports with the SEC. On or about December 17, 2007, under a Purchase Agreement, 1) certain holders, who had received shares in the Company as distributions from Splinex LLC, transferred their ownership of 35,162,334 shares of common stock of the Company to Splinex LLC for nominal consideration, and 2) Bzinfin and Ener1 Group assigned debt obligations to Splinex LLC in the amount of $2,805,207 and $845,864, respectively. Under a Purchase Agreement dated December 17, 2007, TGR Capital LLC, a Florida limited liability company (“TGR”) controlled by a related party, 1) acquired the membership interests in Splinex LLC, thereby giving TGR control over Splinex LLC, and 2) agreed to repay the Bzinfin loan of $500,000. Under an Exchange Agreement dated December 18, 2007, the Company agreed to issue 113,500,000 newly issued shares of the Company to Splinex LLC of which 8,500,000 shares will be issued to Bzinfin and 2,125,000 will be issued to Alexander Malovik in exchange for the Bzinfin and Ener1 Group notes. The shares will be issued after the new transfer agent for the Company administers the official records transfer, which is expected in February 2008. Splinex LLC owned 98,157,334 shares of the Company as of December 17, 2007 after the transfer and will own 201,032,334 shares after the completion of the Exchange Agreement. The Company had 100,757,770 shares outstanding at December 17, 2007 and will have 214,257,769 shares outstanding after the completion of the Exchange Agreement. On December 17, 2007, the Company agreed to revised payment terms related to a termination agreement with its former chief executive officer. The Company has terminated consulting agreements with Mike Zoi and Peter Novak, and the consultants have agreed to terminate all previous accrued consulting payment obligations. As of December 31, 2007, the Company has reached settlement agreements with substantially the majority of all remaining creditors; certain payments were made in January, 2008 in accordance with the settlement agreements.

We do not have material exposure to market risks associated with changes in interest rates related to cash equivalent securities held at December 31, 2007.
     
Off-balance sheet arrangements
     
At December 31, 2007, we did not have any off-balance sheet arrangements, as defined in item 303(c)(2) of Regulation S-B.

Item 3. 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 December 31, 2007, we carried out an evaluation, under the supervision and with the participation of our management, our general counsel, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our general counsel concluded that our disclosure controls and procedures were inadequate because there were a limited number of personnel insufficient to have an adequate segregation of duties. 
During the quarter ended December 31, 2007, 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.
 
PART II — OTHER INFORMATION

Item 1. 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 the outcome of which would have a material affect on our company.

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Item 6. Exhibits
 
 
Exhibit
Number
  
Description
 
2.1
 
Agreement and Plan of Merger among Ener1 Acquisition Corp., Splinex 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., Splinex and Ener1, Inc., dated as of October 13, 2004, incorporated herein by reference to Exhibit 2.2 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 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 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)
       
 
31.1
 
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
       
 
32.1
 
Certification of Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
Splinex Technology Inc.
  
 
 
 
Registrant
Date: February 20, 2008
 
By:
 
/s/ Curtis Wolfe
 
 
 
 
Name: Curtis Wolfe
 
 
 
 
Title: General Counsel
 
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