Organization, Consolidation and Presentation of Financial Statements

3 Months Ended

Jun. 30, 2011

Organization, Consolidation and Presentation of Financial Statements

Nature of Operations [Text Block]

Note 1.  Business and Organization

GeoBio Energy, Inc. (“GeoBio” or the “Company”) formerly known as Better Biodiesel, Inc., was incorporated in Colorado in November 1990.  The Company was known as Mountain State Holdings, Inc., (“MSH”) until September 2006, when it was renamed in anticipation of a merger in September 2006, when it acquired all of the Member Units of Domestic Energy Partners, LLC, (“DEP”), a Utah limited liability corporation.  The previous assets and liabilities of MSH were spun off to two stockholders in August 2006 in exchange for the return of common shares.  At the time of the acquisition of DEP, the Company had no assets and no liabilities and 2,000,001 shares of common stock issued and outstanding carried at nil.

The merger of the Company and DEP was accounted for as a reverse merger. The assets and liabilities of DEP are presented in the condensed consolidated balance sheet at book value.  The historical operations presented in our condensed consolidated statements of operations are those of DEP.  On December 20, 2007, the Company entered into and closed an Asset Purchase, Settlement and Mutual Release Agreement with the former Members of DEP and effectively disposed of their interest in DEP.

In March 2008, we completed our Share Exchange with GeoAlgae Technologies, Inc. (“GeoAlgae”) and acquired GeoAlgae as a wholly owned subsidiary.  GeoAlgae was a recently formed company and its net assets at the date of acquisition were nil. The entire purchase price was allocated to intangible assets which in total constituted a business plan. The intangible assets were subsequently deemed to be impaired.  GeoAlgae is not currently an operating company.

As further discussed in Note 7, Stockholders’ Equity (Deficit), on December 1, 2010, we effected a decrease of our issued and outstanding common stock, in the form of a reverse stock-split, on a one-for-five thousand, five hundred basis (1:5,500) (the “Reverse Stock-Split”).  The Reverse Stock-Split was approved in September 2010 by the consent of a majority of the voting capital stock of the Company.  All share and per share amounts included in the condensed consolidated financial statements have been adjusted retroactively to reflect the effects of the Reverse Stock-Split.

Acquisitions in Process

On February 28, 2011, we terminated our Stock Purchase Agreement with Collins Construction, Inc. (“Collins”), dated March 30, 2010, previously amended on June 1, 2010, July 14, 2010, September 9, 2010 and on November 30, 2010 (the “Collins Stock Purchase Agreement”), for the purchase of 100% of the issued and outstanding capital stock of Collins. We have obtained a refund of a $50,000 down payment and in February 2011, we issued 200,000 shares of our common stock to the parties pursuant to the terms of the agreement as amended in connection with its termination.  No further consideration is due under the terms of the agreement.

As of the date of this filing, the parties have jointly stopped pursuing the completion of the October 2010 equity purchase agreement to purchase 100% of the issued and outstanding equity interests of Magna Energy Services, LLC.  

On April, 25, 2011, we terminated our February 2011 equity purchase agreement to purchase 100% of the issued and outstanding equity interests of Moody Construction & Sons, Inc.

On July 12, 2011, we entered into a stock purchase agreement (the "Agreement") with Lary Archer & Associates, Inc., Archer Equipment Rental, Inc., The Archer Company Inc., and Archer Testing Services, Inc., each a Texas corporation (together  referred to as “Archer”), under which Archer agreed to sell all (100%) of the issued and outstanding capital stock of Archer to us in exchange for total consideration (the “Purchase Price”) including an amount to be determined and equal to the product of the verifiable 12-month trailing cumulative “adjusted” earnings before interest, taxes, depreciation and amortization for the 12-months prior to the month preceding the month of the Closing Date, defined herein, multiplied by 4.5, payable as follows:

(i)   75% of the Purchase Price in cash, at closing (the “Cash Consideration”);

(ii)   12.5% of the Purchase Price in our common stock (the “Equity Consideration”), at a per share price equal to the public, volume-weighted average closing-trading price per share of our common stock for the ten (10) trading days immediately prior to the closing and the ten (10) trading days immediately after the Closing Date; and

(iii)   12.5% of the Purchase Price in a 5-year, 8% promissory note (the “Note”).   The Note shall pay interest only during first year of the 5-year Note and equal payments of principal and interest payable on a quarterly basis during the second through the fifth year.

Additionally, the parties shall also enter into a pledge agreement in order to secure the Equity Consideration.

The Agreement is subject to, among other things, (i) Archer’s preparation and delivery to the Company, not later than 30 days prior to Closing, of audited financial statements prepared in compliance with GAAP and (ii) our raising and providing the Cash Consideration by the closing, which is scheduled for not later than October 12, 2011 (the “Closing Date”) .

Additionally, the Agreement provides that Lary Archer, president of Archer, agrees, prior to closing, to enter an employment agreement with us to remain president of Archer following the Closing Date.

Going Concern Note

Note 2.  Going Concern

We have prepared our condensed consolidated financial statements assuming that we will continue as a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business.  As of June 30, 2011, we had a deficit accumulated during the development stage of approximately $27.9 million and expect to incur additional losses in the future. Our working capital deficit was approximately $3.7 million as of June 30, 2011. These conditions raise substantial doubt about our ability to continue as a going concern.

We have funded our losses primarily through sales of common stock and warrants in private placements and borrowings from related parties and other investors.  The further development of our business will require capital. Our current cash levels are not sufficient to enable us to execute our business strategy.  We require additional financing to satisfy our near-term working capital requirements.  Our operating expenses will also consume a material amount of our cash resources.  Company management intends to raise additional debt and equity financing to fund future operations and to provide additional working capital. However, there is no assurance that such financing will be obtained in sufficient amounts necessary to meet our needs. In the event that we cannot obtain additional funds, on a timely basis or our operations do not generate sufficient cash flow, we may be forced to curtail or cease our activities, which would likely result in the loss to investors of all or a substantial portion of their investment.  We are actively seeking to raise additional capital through the sale of shares of our capital stock to institutional investors and through strategic investments, including convertible bridge loans.  If management deems necessary, we might also seek additional loans from related parties or others.  However, there can be no assurance that we will be able to consummate any of these transactions, or that these transactions will be consummated on a timely basis or on terms favorable to us. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.