|
UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
WASHINGTON, D.C. 20549 |
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|
FORM 10-Q |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE |
SECURITIES EXCHANGE ACT OF 1934 |
|
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2012 |
|
COMMISSION FILE NUMBER: 000-54132 |
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11 GOOD ENERGY, INC. |
|
(Exact name of registrant as specified in its charter) |
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|
DELAWARE |
26-0299315 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
4450 Belden Village Street N.W., Suite 800 |
Canton, OH 44718 |
(Address of principal executive offices) |
|
(330) 492-3835 |
(Registrants telephone number, including area code) |
|
NOT APPLICABLE |
(Former name, former address and former fiscal year, if changed since last report) |
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|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 checkmark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the 12 preceding months (or such shorter period that the registrant was required to submit and post such file).
Yes o No x Interactive data is anticipated to be filed by amendment.
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Large Accelerated Filer |
o |
Accelerated Filer |
o |
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Accelerated Filer |
o |
Smaller Reporting Company |
x |
Yes o No x
As of May 15, 2012, the registrant had a total of 17,991,239 shares of Common Stock issued and outstanding.
11 GOOD ENERGY, INC. AND SUBSIDIARY
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Page |
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PART I |
Financial Information |
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Item 1. |
Financial Statements (unaudited) |
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Condensed Consolidated Balance Sheets March 31, 2012 (Unaudited) and December 31, 2011 |
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3 |
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4 |
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5 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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6 |
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
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12 |
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15 |
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15 |
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15 |
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16 |
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17 |
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Certifications |
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2
11 GOOD ENERGY, INC. AND SUBSIDIARY
(a development stage company)
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31, 2012 |
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(Unaudited) |
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December 31, 2011 |
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ASSETS |
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Current assets: |
|
|
|
|
|
|
|
Cash |
|
$ |
9,252 |
|
$ |
12,895 |
|
Inventory |
|
|
258,743 |
|
|
323,422 |
|
Accounts receivable, net |
|
|
18,233 |
|
|
43,906 |
|
Available for sale securities |
|
|
790 |
|
|
940 |
|
Other current assets |
|
|
19,716 |
|
|
25,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total current assets |
|
|
306,734 |
|
|
406,841 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Property, plant and equipment, net |
|
|
2,075,090 |
|
|
2,167,434 |
|
|
|
|
|
|
|
|
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Other assets: |
|
|
|
|
|
|
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Patents |
|
|
60,531 |
|
|
79,874 |
|
Deposits |
|
|
2,163 |
|
|
2,163 |
|
|
|
|
|
|
|
|
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Total other assets |
|
|
62,694 |
|
|
82,037 |
|
|
|
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|
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Total assets |
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$ |
2,444,518 |
|
$ |
2,656,312 |
|
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable and accrued liabilities |
|
$ |
1,445,960 |
|
$ |
1,362,922 |
|
Advances, related party |
|
|
65,927 |
|
|
67,427 |
|
Notes payable, related party |
|
|
294,000 |
|
|
306,000 |
|
Convertible notes payable, net of deferred debt discount of $19,800 and $75,139, respectively |
|
|
630,220 |
|
|
474,861 |
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|
|
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|
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Total current liabilities |
|
|
2,436,107 |
|
|
2,211,210 |
|
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|
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Commitments and contingencies |
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Stockholders equity: |
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Series A Preferred stock, $0.0001 par value; 11,000,000 shares authorized, issued and outstanding at December 31, 2011 and 2010 |
|
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1,100 |
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1,100 |
|
Common stock, $0.0001 par value; 65,000,000 shares authorized; 20,946,561 and 20,856,561 shares issued as of March 31, 2012 and December 31, 2011, respectively; 19,991,239 and 19,901,239 shares outstanding as of March 31, 2012 and December 31, 2011, respectively |
|
|
2,095 |
|
|
2,086 |
|
Additional paid in capital |
|
|
25,254,690 |
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|
24,853,960 |
|
Common stock subscription |
|
|
|
|
|
270,000 |
|
Due from shareholder |
|
|
|
|
|
(108,519 |
) |
Deficit accumulated during development stage |
|
|
(23,663,064 |
) |
|
(22,987,265 |
) |
Accumulated other comprehensive loss |
|
|
(88,910 |
) |
|
(88,760 |
) |
Treasury stock, 955,322 and 955,322 shares as of March 31, 2012 and December 31, 2011 |
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|
(1,497,500 |
) |
|
(1,497,500 |
) |
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|
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Total stockholders equity |
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|
8,411 |
|
|
445,102 |
|
|
|
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Total liabilities and stockholders equity |
|
$ |
2,444,518 |
|
$ |
2,656,312 |
|
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See the accompanying notes to these unaudited condensed financial statements
3
11 GOOD ENERGY, INC. AND SUBSIDIARY
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
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Three months ended March 31, |
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From
May 23, 2007 |
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2012 |
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2011 |
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March 31, 2012 |
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REVENUE: |
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Sales |
|
$ |
60,868 |
|
$ |
29,222 |
|
$ |
768,633 |
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|
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|
|
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Cost of sales |
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|
176,674 |
|
|
114,397 |
|
|
1,614,928 |
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Gross loss |
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|
(115,806 |
) |
|
(85,175 |
) |
|
(846,295 |
) |
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OPERATING EXPENSES: |
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|
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General, selling and administrative expenses |
|
|
359,921 |
|
|
961,260 |
|
|
15,938,944 |
|
Research and development |
|
|
|
|
|
100,551 |
|
|
1,334,070 |
|
Impairment of goodwill |
|
|
|
|
|
|
|
|
639,504 |
|
Depreciation and amortization |
|
|
33,115 |
|
|
29,185 |
|
|
380,561 |
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Total operating expenses |
|
|
393,036 |
|
|
1,090,996 |
|
|
18,293,079 |
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|
|
|
|
|
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|
|
|
|
|
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LOSS FROM OPERATIONS |
|
|
(508,842 |
) |
|
(1,176,171 |
) |
|
(19,139,374 |
) |
|
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|
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|
|
|
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|
Other income/(expense): |
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
55,384 |
|
Interest expense |
|
|
(182,281 |
) |
|
|
|
|
(4,509,473 |
) |
Realized (loss) on sale of securities |
|
|
|
|
|
(17,782 |
) |
|
(84,277 |
) |
Gain on sale of property, plant and equipment |
|
|
15,324 |
|
|
|
|
|
14,676 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Total other (expense) |
|
|
(166,957 |
) |
|
(17,782 |
) |
|
(4,523,690 |
) |
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes |
|
|
(675,799 |
) |
|
(1,193,953 |
) |
|
(23,663,064 |
) |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Provision for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS |
|
$ |
(675,799 |
) |
$ |
(1,193,953 |
) |
$ |
(23,663,064 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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Net loss per common share (basic and fully diluted) |
|
$ |
(0.03 |
) |
$ |
(0.06 |
) |
$ |
(1.32 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding (basic and fully diluted) |
|
|
19,976,401 |
|
|
19,856,239 |
|
|
17,471,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(675,799 |
) |
$ |
(1,193,953 |
) |
$ |
(23,663,064 |
) |
Unrealized (loss) gain on securities available for sale |
|
|
(150 |
) |
|
4,841 |
|
|
(88,910 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
$ |
(675,949 |
) |
$ |
(1,189,112 |
) |
$ |
(23,751,974 |
) |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to these unaudited condensed consolidated financial statements
4
11 GOOD ENERGY, INC. AND SUBSIDIARY
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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|
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|
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For the months |
|
From
May 23, 2007 |
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2012 |
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2011 |
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|
|
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Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
Net loss for the period |
|
$ |
(675,799 |
) |
$ |
(1,193,953 |
) |
$ |
(23,663,064 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
99,756 |
|
|
95,827 |
|
|
1,018,987 |
|
Amortization of debt discount |
|
|
155,359 |
|
|
|
|
|
3,765,907 |
|
Equity compensation of services by a related party |
|
|
|
|
|
|
|
|
2,024,840 |
|
Equity compensation of services to consultant |
|
|
|
|
|
|
|
|
59,000 |
|
Reserve for due to shareholder |
|
|
108,519 |
|
|
|
|
|
108,519 |
|
Fair value of warrants issued in connection with related party debt |
|
|
|
|
|
|
|
|
139,145 |
|
Fair value of options issued for services |
|
|
30,739 |
|
|
|
|
|
1,843,934 |
|
Impairment of goodwill |
|
|
|
|
|
|
|
|
639,504 |
|
(Gain) loss on sale of property and equipment |
|
|
(15,324 |
) |
|
|
|
|
14,585 |
|
Realized loss on sale of securities available for sale |
|
|
|
|
|
17,782 |
|
|
84,277 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
Inventory |
|
|
64,679 |
|
|
92,353 |
|
|
(232,507 |
) |
Accounts receivable |
|
|
25,673 |
|
|
36,932 |
|
|
(18,233 |
) |
Other current assets |
|
|
5,962 |
|
|
6,950 |
|
|
138,294 |
|
Accounts payable and accrued liabilities |
|
|
81,538 |
|
|
253,948 |
|
|
1,484,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(118,898 |
) |
|
(690,161 |
) |
|
(12,621,581 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
Acquisition, net of cash acquired |
|
|
|
|
|
|
|
|
(588,952 |
) |
Proceeds from sale of property and equipment |
|
|
27,255 |
|
|
|
|
|
49,955 |
|
Purchase of property, plant and equipment |
|
|
|
|
|
|
|
|
(3,039,723 |
) |
Payments for acquisition of patent |
|
|
|
|
|
(7,027 |
) |
|
(79,874 |
) |
Proceeds from sale of securities available for sale |
|
|
|
|
|
556,069 |
|
|
1,108,515 |
|
Purchase of securities available for sale |
|
|
|
|
|
|
|
|
(1,282,492 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
27,255 |
|
|
548,862 |
|
|
(3,832,571 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of shares to founders |
|
|
|
|
|
|
|
|
2,070 |
|
Due from shareholder |
|
|
|
|
|
|
|
|
(895,663 |
) |
Proceeds from related party advance |
|
|
|
|
|
170,350 |
|
|
67,427 |
|
Proceeds from common stock subscription and sale of common stock |
|
|
|
|
|
|
|
|
10,748,069 |
|
Proceeds from issuance of convertible notes |
|
|
100,000 |
|
|
|
|
|
8,689,323 |
|
Proceeds from related party note payable |
|
|
|
|
|
|
|
|
331,000 |
|
Purchase of treasury stock |
|
|
|
|
|
(25,000 |
) |
|
(647,500 |
) |
Payments of related party note payable |
|
|
(12,000 |
) |
|
|
|
|
(37,000 |
) |
Payments of notes payable |
|
|
|
|
|
|
|
|
(84,322 |
) |
Payments of convertible notes |
|
|
|
|
|
|
|
|
(1,710,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
88,000 |
|
|
145,350 |
|
|
16,463,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
(3,643 |
) |
|
4,051 |
|
|
(3,643 |
) |
|
||||||||||
Cash and cash equivalents at beginning of period |
|
|
12,895 |
|
|
29,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
9,252 |
|
$ |
33,930 |
|
$ |
9,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
|
Income taxes paid |
|
$ |
|
|
$ |
|
|
$ |
|
|
Interest paid |
|
$ |
|
|
$ |
|
|
$ |
|
|
Non cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
Common stock issued to acquire 11 Goods Energy, LTD |
|
$ |
|
|
$ |
|
|
$ |
429 |
|
Common stock issued in exchange for convertible note and accrued interest |
|
$ |
|
|
$ |
|
|
$ |
20,970 |
|
Common stock subscribed for conversion of convertible notes |
|
$ |
|
|
$ |
|
|
$ |
6,498,709 |
|
Treasury stock received in exchange for related party note receivable and accrued interest |
|
$ |
|
|
$ |
|
|
$ |
787,144 |
|
Beneficial conversion feature and value of warrants in conjunction with debt |
|
$ |
155,359 |
|
$ |
|
|
$ |
672,414 |
|
See the accompanying notes to these unaudited condensed consolidated financial statements
5
11 GOOD ENERGY, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2012 AND 2011
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
Basis and business presentation
The accompanying unaudited condensed consolidated financial statements of 11 Good Energy, Inc., (the Company), have been prepared in accordance with Regulation S-X of the Securities and Exchange Act, as amended, and instructions to Form 10-Q. Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.
In the opinion of management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results from operations for the three month period ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.
The unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2011, included in the Companys annual report on its Form 10-K filed with the SEC on April 16, 2012.
The condensed consolidated financial statements as of December 31, 2011 have been derived from the audited consolidated financial statements at that date but do not include all disclosures required by the accounting principles generally accepted in the United States of America.
The consolidated financial statements include the accounts of the Company, and its wholly-owned subsidiaries 11 Goods Energy, LTD (11 Goods) and 11 Good Energy Sciences, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.
Dependency on key management
The Company entered into an agreement with its former Chief Executive Officer, Frederick C. Berndt, and with its former Chief Financial Officer, Daniel T. Lapp, for them to resign as executive officers and directors of the Company in effective April 27, 2012. Gary R. Smith, Chief Operating Officer and a director, has tentatively agreed to act as interim Chief Executive Officer and E. Jamie Schloss, a director of the Company, has agreed to serve as interim Chief Financial Officer. As both of these appointments are expected to be for a short term, the success of the Company and its ability to pursue its business strategy will depend upon the successful recruitment and retention of highly skilled and experienced managerial, marketing and technical personal. The Company can provide no assurances that such personnel will be obtained by us on terms satisfactory to us, if at all.
Reclassifications
Certain reclassifications have been made to prior years consolidated financial statements and notes thereto for comparative purposes to conform to current periods presentation. These reclassifications have no effect on previously reported results of operations.
New accounting pronouncements
There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Companys consolidated financial position, results of operations or cash flows.
NOTE 2 GOING CONCERN MATTERS
The Companys unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company incurred net losses attributable to common shareholders of $675,799 and used of $118,898 in cash for operating activities for the quarter ended March 31, 2012, incurred negative working capital (current liabilities exceeded current assets) of $2,129,373 and deficit accumulated during development stage of $23,663,064 as of March 31, 2012. These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.
The Companys existence is dependent upon managements ability to develop profitable operations and to obtain additional funding sources. There can be no assurance that the Companys financing efforts will result in profitable operations or the resolution of the Companys liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
NOTE 3 INTANGIBLE ASSETS
Patents
Patents are capitalized at incurred costs and are amortized ratably over the lesser of their economic or legal life. As of January 1, 2012 the patents are being amortized over a 12 month life and $19,343 was amortized during the period ended March 31, 2012.
6
11 GOOD ENERGY, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012 AND 2011
NOTE 3 INTANGIBLE ASSETS (CONTINUED)
Goodwill
The Company did not amortize goodwill. The Company recorded goodwill in the amount of $639,504 as a result of the acquisition of 11 Goods Energy LTD during the year ended December 31, 2007.
During the year ended December 31, 2011, the Companys management performed an evaluation of its goodwill for purposes of determining the implied fair value of the assets at the end of the year. The test indicated that the recorded remaining book value of its goodwill exceeded its fair value at December 31, 2011 and therefore recorded an impairment charge to 2011s operations of $639,504 ($0.03 per share) reducing the carrying value to $0. Considerable managements judgment is necessary to estimate the fair value. Accordingly actual results could vary significantly from managements estimates.
NOTE 4 INVENTORIES
Inventory is stated at the lower of cost or market. The cost is determined using the first-in first-out method. Costs of finished goods inventory include costs associated with the procurement and transportation of Soybean oil and other raw materials used in the manufacture of G2 Diesel.
|
|
|
|
|
|
|
|
|
|
2012 |
|
2011 |
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
Raw materials |
|
$ |
216,200 |
|
$ |
240,223 |
|
Finished fuel |
|
|
42,543 |
|
|
83,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
258,743 |
|
$ |
323,422 |
|
|
|
|
|
|
|
|
|
NOTE 5 OTHER CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
2012 |
|
2011 |
|
||
|
|
|
|
|
|
||
Prepaid insurance |
|
$ |
19,716 |
|
$ |
17,553 |
|
Prepaid other expenses |
|
|
|
|
|
8,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
19,716 |
|
$ |
25,678 |
|
|
|
|
|
|
|
|
|
NOTE 6 PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
2012 |
|
2011 |
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
Leasehold improvements |
|
$ |
345,381 |
|
$ |
345,381 |
|
Factory equipment |
|
|
2,381,478 |
|
|
2,381,478 |
|
Furniture and fixtures |
|
|
21,709 |
|
|
21,709 |
|
Office equipment |
|
|
20,545 |
|
|
20,545 |
|
Vehicles |
|
|
|
|
|
45,213 |
|
Computer equipment and software |
|
|
102,846 |
|
|
102,846 |
|
Web design |
|
|
51,505 |
|
|
51,505 |
|
|
|
|
|
|
|
|
|
Total |
|
|
2,923,464 |
|
|
2,968,677 |
|
Less accumulated depreciation |
|
|
848,374 |
|
|
801,243 |
|
|
|
|
|
|
|
|
|
|
|||||||
Net |
|
$ |
2,075,090 |
|
$ |
2,167,434 |
|
|
|
|
|
|
|
|
|
Property and equipment are recorded on the basis of cost. For financial statement purposes, property, plant and equipment are depreciated using the straight-line method over their estimated useful lives.
The Company recorded a gain of $15,324 from the sale of an automobile during the quarter ended March 31, 2012.
Depreciation expense was $80,413 and $95,827 for the three months ended March 31, 2012 and 2011, respectively, of which $66,641 and $66,642 were included as part of cost of sales, respectively.
7
|
11 GOOD ENERGY, INC. AND SUBSIDIARY |
(a development stage company) |
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
MARCH 31, 2012 AND 2011 |
NOTE 7 CONVERTIBLE NOTES PAYABLE
|
|
|
|
|
|
|
|
|
|
2012 |
|
2011 |
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
Senior convertible note, 11% per annum, due December 31, 2011, currently in default |
|
$ |
250,000 |
|
$ |
250,000 |
|
Senior convertible note, 11% per annum, due December 31, 2011; currently in default |
|
|
100,000 |
|
|
100,000 |
|
Senior convertible note, 11% per annum, due March 8, 2012, currently in default |
|
|
200,000 |
|
|
124,861 |
|
Senior Convertible note, 11% per annum, due April 18, 2012 (1) |
|
|
80,220 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
630,220 |
|
|
474,861 |
|
Less current portion |
|
|
630,220 |
|
|
474,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term portion |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Currently in default. |
During the three months ended March 31, 2012 the Company issued a $100,000 secured Convertible Promissory Note that matures on April 18, 2012. The Promissory Note bears interest at a rate of 11% per annum and will be convertible into 33,333 shares of the Companys common stock, at a conversion rate of $3.00 per share. Interest can also be converted into common stock at the conversion rate of $3.00 per share. In connection with the issuance of the Convertible Promissory Note, the Company issued warrants to purchase 60,000 shares of the Companys common stock at $5.00 per share through December 31, 2014. In accordance ASC 470-20, the Company recognized an embedded beneficial conversion feature present in the notes. The Company allocated a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The Company recognized and measured an aggregate of $100,000 of the proceeds during the three months ended March 31, 2012, which is equal to the intrinsic value of the embedded beneficial conversion feature, to additional paid-in capital and a discount against the note. The debt discount attributed to the beneficial conversion feature is amortized over the notes maturity period as interest expense.
The Company valued the warrants in accordance with ASC 470-20 using the Black-Scholes pricing model and under the following assumptions contracted terms of 3 years, an average risk free interest rate of 0.35% a dividend yield of 0%, and volatility of 129.65%.
The Company amortized debt discount of $155,359 to current period operations as interest expense for the three months ended March 31, 2012.
NOTE 8 RELATED PARTY TRANSACTIONS
Due to related party
During the year ended December 31, 2011 the Companys prior years officers advanced an aggregate of $67,427 for working capital purposes to the Company. The advances are short term, non-interesting bearing and are due upon demand. As of March 31, 2012 the total outstanding to the officers is $65,927.
Notes payable, related party
|
|
|
|
|
|
|
|
|
|
2012 |
|
2011 |
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
Note payable, issued May 15, 2011 with interest at 9% per annum, due on demand, unsecured |
|
$ |
50,000 |
|
$ |
50,000 |
|
Note payable, issued August 5, 2011 with interest at 6% per annum, due on demand, unsecured |
|
|
100,000 |
|
|
100,000 |
|
Note payable, issued August 11, 2011 with interest at 6% per annum, due on demand, unsecured |
|
|
68,000 |
|
|
68,000 |
|
Note payable, issued August 19, 2011 with interest at 6% per annum, due on demand, unsecured |
|
|
68,000 |
|
|
68,000 |
|
Note payable, issued November 21, 2011 with interest at 6% per annum, due on demand, unsecured |
|
|
8,000 |
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
294,000 |
|
|
306,000 |
|
Less current portion |
|
|
294,000 |
|
|
306,000 |
|
|
|
|
|
|
|
|
|
Long term portion |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
In connection with the issuance of the August, 2011 promissory notes, the Company issued detachable warrants granting the holders the right to acquire an aggregate of 180,000 shares of the Companys common stock at $3.00 per share. The warrants expire three years from the issuance. In accordance with ASC 470-20, the Company recognized the value attributable to the warrants in the amount of $139,145 to additional paid in capital and a charge to interest in 2011s operations. The Company valued the warrants in accordance with ASC 470-20 using the Black-Scholes pricing model and the following assumptions: contractual terms of 3 years, an average risk free interest rate of 0.34% to 0.49%, a dividend yield of 0%, and volatility of 126.31% to 127.23%.
8
|
11 GOOD ENERGY, INC. AND SUBSIDIARY |
(a development stage company) |
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
MARCH 31, 2012 AND 2011 |
NOTE 8 RELATED PARTY TRANSACTIONS (CONTD)
Facilities
Since April 1, 2008, the Company has occupied warehouse space provided by one of the Companys founders. The Company agreed to pay a total of $1 per month for the space. The Company records this fee as rent expense when incurred. During this time period, the Company constructed a leasehold improvement to the leased warehouse space for the purpose of locating our bio-fuel manufacturing facility.
Receivable from purchase of treasury stock
Pursuant to his employment agreement, Frederick C. Berndt entered into a revolving note agreement with the Company beginning on November 11, 2007. The Company initiated the note arrangement to allow Mr. Berndt to assist the Company, primarily in the early stages of development, personally with operating capital as required. In addition, the Company initiated the note to allow the Company to assist Mr. Berndt with cash advances used for costs incurred during the process of improving the Companys marketing, political and regulatory exposure. The cash advances exceeded the amounts of reimbursable costs resulting in amounts Mr. Berndt owed back to the Company. Mr. Berndt has agreed to reimburse the Company for the excess costs of these promotions. These costs consisted primarily of travel and sponsorship costs. The Company charges 5% interest per annum calculated on the last day of the year based on an average of the quarterly balance of the note. The balance of the note including interest of $27,915 becomes due on December 31, 2009, with a term of 30 days to settle the note payable.
On December 15, 2009, the Company accepted 425,000 shares of the Companys common stock held by Mr. Berndt in full settlement of the outstanding note receivable and related accrued interest for $787,144 and recorded an accrued liability due to Mr. Berndt for $62,856. The fair value of the shares issued was determined based on the recent sale of the Companys common stock. The amount due from Mr. Berndt at March 31, 2012 was $65,927.
In November 2010, the Company advanced $53,519 to acquire the Companys common stock (treasury stock) from a shareholder. During the year ended December 31, 2011, the Company advanced an additional $55,000 to acquire the Companys common stock (treasury stock) from the same shareholder. As of December 31, 2011, the common stock has not been received and accordingly was accounted for as due from shareholder and included in the stockholders equity.
Consistent with ASC 505-10-45 (Equity-Other Presentation), the amount recorded on the balance sheet at December 31, 2011 was presented as a deduction from stockholders equity. This is also consistent with Rule 5-02.30 of Regulation S-X of the Code of Federal Regulations.
As of March 31, 2012, the Companys management performed an assessment of the collectability of the amount due from shareholder of $108,519 and provided a full reserve and charged to operations for the three months ended March 31, 2012.
NOTE 9 CAPITAL STOCK
Preferred stock
On June 22, 2007, the Board of Directors designated 11,000,000 shares as Series A preferred stock (Series A Preferred Stock), with a par value of $0.0001 per share. This is the total number of authorized preferred Series A shares outstanding. The preferred stock is not entitled to any preference upon liquidation, dividend rights and has no conversion rights into the Companys common stock. The Series A Preferred Stock is entitled to one vote equivalent to one share of common stock on the record date for the vote or consent of shareholders, and with respect to such vote, each holder of Series A Preferred Stock shall have full voting rights and powers equal to the voting rights and powers of the holders of the Companys common stock.
On June 22, 2007, the Company issued at par value an aggregate of 11,000,000 shares of preferred stock to founders for activities prior to the formation of the Company and relating to its incorporation.
As of March 31, 2012 and December 31, 2011, there were 11,000,000 Series A preferred stock issued and outstanding.
Common stock
In March 2010, the Board approved and the stockholders ratified an increase in the number of authorized common shares to 65,000,000. To reflect this change, a certificate of amendment to the Companys certificate of incorporation was filed with the Secretary of state of the state of Delaware on March 22, 2010.
On May 23, 2007, the Company issued at par value an aggregate of 9,700,000 shares of common stock to founders for activities prior to the formation of the Company and relating to its incorporation.
On June 27, 2007, the Company issued an aggregate of 300,000 shares of common stock in exchange for future services valued at $156,000. The fair value of the common stock was determined based upon the quoted market price on the date of issuance of the shares. Management assumes all responsibility for the amounts recorded as a result of the consulting services performed.
On October 23, 2007, the Company issued an aggregate of 4,285,714 shares of its common stock in connection with the acquisition of 11 Goods at par value.
Between August 2009 and February 2010, the Company has received net proceeds of $10,253,069, through the subscription for common stock consisting of 3,977,333 shares of common stock and 1,988,667 warrants. All common shares subscribed were issued during the year ended December 31, 2010. Between April and May 2011, the Company received additional gross proceeds of $225,000 from the sale of 45,000 shares of Common Stock at $5.00 per share and two year Warrants to purchase 22,500 shares, exercisable at $7.50 per share from date of issuance through June 30, 2013. Between July 2011 and December 2011, the Company received $270,000 from the sale of 90,000 shares of common stock at $3.00 per share and Warrants to purchase 90,000 shares, exercisable at $5.00 per share from two years from the date of issuance. The 90,000 shares of common stock have not been issued as of December 31, 2011 and were accounted for as common stock subscription payable, which shares were issued on March 20, 2012.
9
|
11 GOOD ENERGY, INC. AND SUBSIDIARY |
(a development stage company) |
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
MARCH 31, 2012 AND 2011 |
NOTE 9 CAPITAL STOCK (CONTD)
As of March 31, 2012, there were 20,946,561 shares issued and as a result of there being 955,322 shares held in treasury, the outstanding shares were reduced to 19,991,239. In April, 2012, Mr. Berndt, a former officer and director of the Company, agreed to return 2,000,000 shares of common stock to the Company (which will be held in treasury upon receipt) in exchange for warrants to purchase 2,000,000 shares of the Companys common stock. As of March 31, 2012 and December 31, 2011, there were 20,946,561 and 20,856,561 common shares issued and 19,991,239 and 19,901,239 shares outstanding; respectively.
On April 9, 2012, Mr. Berndt in connection with his resignation (see Note 12 Subsequent Events) agreed to transfer his 11,000,000 shares of the Companys Series A Preferred Stock to John D. Lane. Mr. Berndt also agreed to return to the Company of 2,000,000 shares of Common Stock owned by him (which will be held in treasury stock upon receipt) in exchange for Warrants to purchase 2,000,000 shares of Common Stock, exercisable over a term of five years at $5.00 per share. The Warrants provide for a cashless exercise of same in the event the Companys Common Stock is exercised at a time when the Companys Common Stock is trading on NASDAQ, Exchange or Over-the-Counter Market at a price of at least $15.00 per share.
During the quarter ended March 31, 2012, the Company granted 300,000 shares of non-employee stock options at $5.00 per share which 100,000 shares vested during the three months ended March 31, 2012 with a value of $30,739 and 200,000 shares commence vesting in April, 2012.
In addition, the Company issued warrants to purchase 100,000 shares of its common stock for services exercisable at $5.00 per share over a period of five years commencing April 2012.
NOTE 10 COMMITMENTS AND CONTINGENCIES
Employment and consulting contracts
As of March 31, 2012 and December 31, 2011, all commitments for business consulting services expired and are on a month to month basis.
Litigation
In September 2011, William L. Miller Plaintiff commenced an action in the Court of Common Pleas, Stark County, Ohio, against Frederick C. Berndt and 11 Good Energy, Inc. Defendants Plaintiff alleges that Mr. Berndt incurred charges for expenses relating to the business of the Corporation utilizing Plaintiffs credit card account with American Express, which card Plaintiff allegedly permitted Mr. Berndt to utilize so long as Defendants would repay Plaintiff prior to the time he became liable for interest and penalties. The cause of action for breach of contract and unjust enrichment seeks the return of approximately $81,000 allegedly loaned by Plaintiff to the Defendants. From monies the Company owes Frederick C. Berndt, the Company recorded the $81,000 liability due to the filed judgment Mr. Berndt has agreed to reduce the balance due to him in the amount of $81,000 from the funds he advanced to the Company. In 2012, the Company paid approximately $11,000 to Mr. Miller and Mr. Berndt paid approximately $13,500 to Mr. Miller. The Company anticipates this liability to be paid in 2012, either through the Company or Mr. Berndt personally.
In February 2012, a stockholder Plaintiff commenced a lawsuit against the Company and other Defendants in the Circuit Court in Orange County, Florida. The lawsuit pertains to the stockholders investment of $400,000 in the Companys securities. Prior to the filing of the lawsuit, Frederick C. Berndt, Chief Executive Officer of the Company, verbally agreed with the stockholder to return his $400,000 in periodic payments against the return and cancellation of the related securities. The Company made payment of $108,519 before ceasing of making any additional payments. The Plaintiff has failed to return to the Company the securities which relate to the monies received by Plaintiff. Plaintiff is alleging fraud in the inducement as it pertains to his investment in the Company as well as fraudulent and negligent misrepresentations, breach of contract and conversion. Plaintiff is seeking damages which include, but are not limited to $400,000 (less payments received by plaintiff), attorney, court costs and interest. The Company anticipates that upon receipt of funding and/or its common stock begins trading on a public market, this shareholder would be able to sell their common stock.
On March 7, 2012, Jason A. Weiss Plaintiff commenced an action in the Court of Common Pleas, Stark County, Ohio against Defendants, 11 Good Energy and Frederick C. Berndt Defendants. Mr. Weiss alleges that he was employed by the Company for a term of one year at a salary of $15,000 per month, that he was entitled to receive relocation expenses and reimbursement of certain expenses and he was entitled to receive 130,000 shares of Common Stock of the Company upon his commencing of employment with Defendant, 11 Good Energy, in January 2011. Plaintiff alleges that Defendants made various representations to him pertaining to his employment and otherwise which were false and misleading. Plaintiff is suing the Defendants for breach of contract, unjust enrichment, promissory estoppel, fraudulent inducement, seeking to pierce the corporate veil, wrongful termination in violation of public policy and Defendants liability under the whistle blower provisions of Ohio law. The amount of money being sought by Plaintiff will be the amount allegedly damaged and proven at trial. The Company believes this suit to be from a disgruntled former consultant. We had no written agreement with Mr. Weiss and worked with him on certain marketing efforts on the condition of performance. He performed none of his promised actions and we terminated our relationship with the Plaintiff. The Company plans to vigorously contest these allegations and is contemplating a countersuit for damages to the Company.
From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm its business. The Company is currently not aware of any such legal proceedings other than described above that it believes they may have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.
We are unable to determine the outcome of the above lawsuits and or the related costs, if any, at this time.
NOTE 11 FAIR VALUE
ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
10
|
11 GOOD ENERGY, INC. AND SUBSIDIARY |
(a development stage company) |
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
MARCH 31, 2012 AND 2011 |
NOTE 11 FAIR VALUE (CONTD)
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement. Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of March 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
Quoted |
|
Significant |
|
Significant |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale |
|
$ |
790 |
|
$ |
790 |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
790 |
|
$ |
790 |
|
$ |
|
|
$ |
|
|
The following table provides a summary of changes in fair value of the Companys Level 1 financial assets as of March 31, 2012:
|
|
|
|
|
Balance, December 31, 2010: |
|
$ |
576,990 |
|
Securities sold |
|
|
(773,851 |
) |
Unrealized gain |
|
|
197,801 |
|
|
|
|
|
|
Balance, December 31, 2011 |
|
$ |
940 |
|
Unrealized loss |
|
|
(150 |
) |
|
|
|
|
|
Balance, March 31, 2012 |
|
$ |
790 |
|
|
|
|
|
|
The Company adopted the provisions of ASC 825-10 prospectively effective as of the beginning of Fiscal 2008. For financial assets and liabilities included within the scope of ASC 825-10, the Company will be required to adopt the provisions of ASC 825-10 prospectively as of the beginning of Fiscal 2009. The adoption of ASC 825-10 did not have a material impact on our consolidated financial position or results of operations.
The fair value of the assets, securities available for sale, at March 31, 2012 was grouped as Level 1 valuation as the market price was readily available.
NOTE 12 SUBSEQUENT EVENTS
On April 9, 2012, the Company entered into an agreement with its former Chief Executive Officer, Frederick C. Berndt, and with its former Chief Financial Officer, Daniel T. Lapp, for them to resign as executive officers and directors of the Company effective April 27, 2012. Gary R. Smith, Chief Operating Officer and a director, has tentatively agreed to act as interim Chief Executive Officer. E. Jamie Schloss, a director of the Company, has tentatively agreed to serve as interim Chief Financial Officer. As both of these appointments are expected to be for a short term, the success of the Company and its ability to pursue its business strategy will depend upon the successful recruitment and retention of highly skilled and experienced managerial, marketing and technical personal. We can provide no assurances that such personnel will be obtained by us on terms satisfactory to us, if at all.
On April 9, 2012, Mr. Berndt in connection with the resignations described in the preceding paragraph agreed to transfer his 11,000,000 shares of Series A Preferred Stock to John D. Lane. Mr. Berndt also agreed to return to the Company of 2,000,000 shares of Common Stock owned by him (which will be held in the treasury stock upon receipt) in exchange for Warrants to purchase 2,000,000 shares of Common Stock, exercisable over a term of five years at $5.00 per share. The Warrants provide for a cashless exercise of same in the event the Companys Common Stock is exercised at a time when the Companys Common Stock is trading on NASDAQ, Exchange or Over-the-Counter Market at a price of at least $15.00 per share.
On May 15, 2012, the Company entered into an employment agreement dated as of May 9, 2012 to engage Mario Larach as Chief Executive Officer and a director of the Company, it being understood that he will assume these positions the morning after the Company files its Form 10-Q for the quarter ended March 31, 2012.
Mr. Larach will be paid $10,000 per month, which will increase to $16,250 per month at such time as the Company raises additional financing of at least $2,000,000 (the financing). Mr. Larach also received a $20,000 signing bonus payable upon the Company completing such financing. Mr. Larach received warrants to purchase 200,000 shares of the Companys Common Stock exercisable over a term of five years at an exercise price of $5 per share. These Warrants contain a cashless exercise provision in the event the Companys Common Stock is trading in the Over-the-Counter Market at a price above $15 per share for at least ten consecutive trading days. Mr. Larach was issued Warrants to purchase 50,000 shares of Common Stock also exercisable at $5 per share for a period of five years from the date that Mr. Larach joined the Board of Directors. These Warrants do not have a cashless exercise provision. Six months after commencement of his employment contract, the Board of Directors will meet with Mr. Larach to review his performance and his compensation. While the term of his employment agreement is for a term of two years, there are provisions in the contract which could lead to an earlier termination.
On May 15, 2012, the Company entered into an independent sales agreement with MAX V LLC for it to act as a sales representative of the Company. The agreement provides for MAX V to sell the crude glycerin by-product in North America and to directly invoice customers and to handle sales, marketing and collections. The Company is to be paid by the sales representative 50% of all sales collected by MAX V. MAX V will make every effort to sell the glycerin by-product at $25 per gallon to dairy farmers. While MAX V is under no obligation to order a minimum amount of the glycerin by-product, MAX V has agreed to order the crude glycerin from the Company as necessary to fill its orders. The agreement is for a term of six months and shall be renewed automatically for a term of one year if not terminated pursuant to the provisions of the agreement. The Company also entered into a separate agreement with MAX V to receive a sales commission on sales of the Companys G-2 biodiesel products.
11
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The information contained in this Form 10-Q for the quarter ended March 31, 2012 and documents incorporated herein by reference are intended to update the information contained in the Companys Annual Report on Form 10-K for the year ended December 31, 2011 and such information presumes that readers have access to, and will have read, the Managements Discussion and Analysis of Financial Condition and Results of Operations, Risk Factors and other information contained in such Form 10-K and other Company filings with the Securities and Exchange Commission (SEC).
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties, and actual results could be significantly different than those discussed in this Form 10-Q. Certain statements contained in Managements Discussion and Analysis, particularly in Liquidity and Capital Resources, and elsewhere in this Form 10-Q are forward-looking statements. These statements discuss, among other things, expected growth, future revenues and future performance. Although we believe the expectations expressed in such forward-looking statements are based on reasonable assumptions within the bounds of our knowledge of our business, a number of factors could cause actual results to differ materially from those expressed in any forward-looking statements, whether oral or written, made by us or on our behalf. The forward-looking statements are subject to risks and uncertainties identified under the Risk Factors section of the aforementioned Form 10-K for the fiscal year ended December 31, 2010. The risk factors of said Form 10-K should not be construed as an exhaustive list of all factors that could cause actual results to differ materially from those expressed in forward-looking statements made by us. All forward-looking statements included in this document are made as of the date hereof, based on information available to the Company on the date thereof, and the Company assumes no obligation to update any forward-looking statements.
Overview
11 Good Energy, Inc. is a Delaware corporation formed on May 23, 2007 for the purposes of developing, testing, manufacturing and distributing bio-fuel with energy related plans and pursuits relying on the commercialization of our proprietary fuel product, G2 Diesel, as discussed below.
On October 23, 2007, we completed the purchase of an existing biodiesel manufacturer, 11 Goods Energy, LTD, a limited liability company (becoming our wholly-owned subsidiary), formed in the State of Ohio in February 2006. Historically, our subsidiary has been a development stage company, which has primarily engaged in research activities to develop a proprietary manufacturing process to produce bio-fuel for diesel applications.
In early 2008, we began construction on our manufacturing facility at the location of our operating subsidiary in Magnolia, Ohio (Magnolia Plant). In June 2008, we began placing tanks and constructing the infrastructure of the Magnolia Plant. Unfortunately, the industry experienced changes in fire suppression regulations requiring us to invest over $1,500,000 in additional infrastructure not anticipated in the original capital expenditure budget. We had to cease plant construction and operations from November 2008 to October 2009 in order to secure the financing and make the necessary changes to the fire suppression system and design of the Magnolia Plant.
Acquisition of 11 Goods Energy, LTD
As a result of the purchase of 11 Goods Energy, LTD (11 Goods) all of the assets, liabilities and proprietary technology of 11 Goods were transferred to us by the former partners of 11 Goods in exchange for cash of $611,900, $111,230 in assumed liabilities and 4,285,714 shares of common stock of the company valued at $429. The assets and liabilities of 11 Goods were recorded at fair market value at the time of acquisition. 11 Goods is our sole subsidiary and operations and the management of 11 Goods and us are the same. The consolidated financial statements include the accounts of us and our wholly-owned subsidiary and all intercompany balances and transactions have been eliminated.
The Company accounts for acquisitions in accordance with the provisions of ASC 805-10. The Company assigns to all identifiable assets acquired a portion of the cost of the acquired company equal to the estimated fair value of such assets at the date of acquisition. The Company records the excess of the cost of the acquired company over the sum of the amounts assigned to identifiable assets acquired as goodwill. Management determined the fair values assigned to inventory based upon selling prices less cost of disposal and the Companys profit allowance and the case of work in process less cost to complete. The Fair value of plant and equipment are based on current replacement costs. The Company recorded goodwill in the amount of $639,504 as a result of the acquisition of 11 Goods Energy LTD during the year ended December 31, 2007. The Company accounts for and reports acquired goodwill under Accounting Standards Codification subtopic 350-10, Intangibles-Goodwill and Other (ASC 350-10). The Company does not amortize goodwill. In accordance with ASC 350-10, the Company tests its intangible assets for impairment on an annual basis or more often if events and circumstances warrant. Any write-downs will be included in results from operations.
Development Stage Company - Product Development
We are currently in an early stage of our current business plan. We have limited operating history with respect to the construction and operation of biodiesel refineries for our own use. In this respect, from May 23, 2007 (date of inception) through March 31, 2012, our cumulative revenues totaled $768,633 and our deficit accumulated during our development stage was $23,663,064. Further, our operating subsidiary incurred from February 2006 through October 2007, costs of approximately $100,000 in the development of our subsidiarys proprietary manufacturing process and G2 Diesel product which are not reflected in our accumulated deficit since their costs were incurred prior to the acquisition date of our subsidiary. These costs were primarily comprised of feedstock materials, labor and facilities costs. Since the acquisition, we have further developed our process and product through testing and trials and have expended money on labor, consulting, facilities and media productions in order to further our product development. Currently, the development of the fuels functionality is complete, although we continue to incur research and development costs to develop new feedstock alternatives and to improve materials procurement and fuel manufacturing techniques.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements requires management to make estimates and disclosures on the date of the financial statements. On an on-going basis, we evaluate our estimates including, but not limited to, those related to revenue recognition. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates. We believe that the following critical accounting policies affect our more significant judgments and estimates in the preparation of our financial statements.
12
Revenue Recognition. We recognize revenue from product sales in accordance with ASC 605 Revenue Recognition. Four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists (through written sales documentation); (2) delivery has occurred (through delivery into customers tanks and acceptance); (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. For criteria (1) we generate a sales order and a shipping document defining number of gallons of fuel ordered, delivery and payment terms based on standing customer data and the customers purchase order. For criteria (2) we ensure delivery has occurred by documented delivery terms defining where the customer accepts the fuel delivery. Fuel stored off-site by the company remains as inventory until the customer receives the fuel from the offsite storage facility. For criteria (3) management determines the selling price based on feedstock costs and our desired margin level. Our selling price fluctuates as feedstock prices increase or decrease, primary the cost of soybean oil. Currently, management determines our selling price on a weekly basis. For criteria (4) we establish creditworthiness of the customer based on a review of established credit limits and current financial health of the entity placing the fuel order. Provisions for estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded, although we have not experienced any such items to date and do not expect any significant provisions in the future. We have no discount, rebate or warranty programs. Payments received in advance are deferred until revenue recognition is appropriate. We have no post-delivery obligations related to our products.
Inventory Valuation. We are required to make judgments based on historical experience and future expectations, as to the realizability of our inventory. We make these assessments based on the following factors: (a) existing orders and usage, (b) age of the inventory, and (c) historical experience.
Property and Equipment. We are required to make judgments based on historical experience and future expectations, as to the realizability of our property and equipment. We made these assessments based on the following factors: (a) the estimated useful lives of such assets, (b) technological changes in our industry, and (c) the changing needs of our customers.
Fair Value of Intangible Assets. We have adopted Statement of Accounting Standards Codification subtopic 805-10 (ASC 805-10). ASC 805-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period.
Stock-Based Compensation
We account for our stock based compensation under ASC 718 Compensation Stock Compensation using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entitys equity instruments or that may be settled by the issuance of those equity instruments.
There were no employee stock options and employee stock purchases granted to employees and directors during the period from May 23, 2007 (date of inception) through December 31, 2008.
During the quarter ended March 31, 2012, the Company granted 300,000 shares of non-employee stock options at $5.00 per share which 100,000 shares vested during the three months ended March 31, 2012 with a value of $30,739 and 200,000 shares for services commence vesting in April, 2012. There were no other unvested options outstanding as of the date of adoption of FASB ASC Topic 718.
We use the fair value method for equity instruments granted to non-employees (if any) and will use the Black-Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.
Results of Operations
By virtue of our purchase of 11 Goods, which became our sole operations, the Company is considered to be in the development stage in accordance with the FASB ASC Topic 915 Development Stage Enterprises. Since its inception, the Company has devoted substantially all of its time to raising capital, obtaining financing, research and development activities and obtaining many governmental organizations, municipalities and corporations to test our G2 Diesel and its performance as a blend with traditional #2 diesel fuel.
Three months Ended March 31, 2012 Compared to the Three months Ended March 31, 2011
The following table sets forth certain selected unaudited condensed consolidated statement of operations data for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
||||||||||
|
|
2012 |
|
% |
|
2011 |
|
% |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
|||||||||||||
Revenue |
|
$ |
60,868 |
|
|
100 |
% |
$ |
29,222 |
|
|
100 |
|
Cost of goods sold |
|
|
176,674 |
|
|
>100 |
% |
|
114,397 |
|
|
>100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross loss |
|
|
(115,806 |
) |
|
|
|
|
(85,175 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
359,921 |
|
|
>100 |
% |
|
961,260 |
|
|
>100 |
% |
Research and development |
|
|
|
|
|
>100 |
% |
|
100,551 |
|
|
>100 |
% |
Depreciation and amortization |
|
|
33,115 |
|
|
<100 |
% |
|
29,185 |
|
|
<100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses: |
|
|
393,036 |
|
|
|
|
|
1,090,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(508,842 |
) |
|
|
|
|
(1,176,171 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income/expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(182,281 |
) |
|
<100 |
% |
|
|
|
|
<100 |
% |
Other income (expense), net |
|
|
15,324 |
|
|
<100 |
% |
|
(17,782 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(675,799 |
) |
|
<100 |
% |
$ |
(1,193,953 |
) |
|
<100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
The revenues increased by $31,646 for the three months ended March 31, 2012 of $60,868 compared to revenues in the three months ended March 31, 2011 of $29,222.
The minimal revenues recognized in the quarter ended March 31, 2012 is primarily due to retracting our business due to cash restraints. Most of our testing programs completed in mid-2011 did not generate the demand originally anticipated. Our largest customer, the Kenan Advantage group completed their testing and agreed to convert 10 terminals in the Ohio area to sell G2 Diesel. However the build out requires approximately $150,000 to complete and we have not had the capital to do so. Therefore we have been unable to operate our plant without the capital to purchase raw materials leading to an inventory allocation requirement with the Kenan advantage group. We currently deliver to one of their terminals using the finished fuel we have on hand to keep that terminal using G2 Diesel. Once the Company receives a cash infusion, Management believes that the Kenan Advantage Group will order fuel for the other 9 terminals they agreed to convert to purchase G2. Also, Management continues to believe that the completed testing programs will result in increased demand and sales orders for our G2 Diesel at premium prices which as of March 31, 2012 is approximately $5.00 per gallon compared to traditional #2 diesel fuel currently priced at approximately $3.50 per gallon.
Cost of goods sold was $176,674 for the three months ended March 31, 2012 and $114,397 for the three months ending March 31, 2011. Cost of goods sold exceeded revenues for both periods as a result of applying fixed factory depreciation and overhead to cost of goods sold, even though only a small volume of sales were generated. Costs of goods sold primarily consist of the procurement and transportation of soybean oil, ethanol and other raw materials used in the manufacture of G2 Diesel; including payroll costs associated with labor, depreciation of manufacturing equipment, manufacturing facilities expense, insurance costs and other operating costs directly related to production.
Current margins for our testing programs resulted in gross losses of $115,806 for the three months ended March 31, 2012 and $85,175 for the three months ending March 31, 2011. Gross loss, which includes depreciation, will vary from period to period depending upon the extent of fuel testing with potential customers and the pricing offered by the Company. Also, we experience a significant amount of manufacturing depreciation that is recorded entirely to cost of goods sold. The gross loss for 2012 and 2011 is not necessarily indicative of the margins that may be realized in future periods.
Research and development costs were $100,551 for the three months ended March 31, 2011 and none for the three months ending March 31, 2012. In 2011, the Company paid money for research and development for the use of our glycerin in a dairy farm application as well as providing money to Kai Bioenergy, Inc. for their research and development efforts associated with algae technologies and the converting of same into oil. It should be noted that in July 2011, the Company entered into an agreement to acquire Kai, but the Company failed to raise sufficient funding to complete the transaction.
Depreciation and amortization of $33,115 included in operating expenses increased by $3,930 in 2012 from $29,185 in the comparable three month period in 2011, primarily as a result of amortizing patent expense in 2012 in the amount of $19,343.
Selling, general, and administrative expenses for the three months ended March 31, 2012 were $359,921 compared with $961,260 in the comparable period in 2011, a decrease of $601,339. Such decreased costs include, among others, payroll and related expenses, insurance costs and occupancy costs. The decrease in selling, general and administrative expenses of $601,339 in 2011 over the comparable period of the prior year is primarily related to a reduction in payments of common stock to consultants and employees., a decrease in consulting, legal, accounting fees, and bonus costs of approximately $220,000. Other overhead costs such as travel, marketing and promotional cost decreased approximately $195,000 and salaries and payroll costs increased by approximately $177,000 in comparison to the first quarter of 2011.
The net loss attributable to common shareholders was $675,799 in the three months ended March 31, 2012 as compared to $1,193,953 for the comparable period in 2011, a decrease in net loss of $518,154.
Basic and fully diluted net loss per share for the three months ended March 31, 2012 and March 31, 2011 was $(0.03) and $(0.06), respectively. Basic and fully diluted weighted average shares outstanding for the fiscal three months ended March 31, 2012 and March 31, 2011 were 19,976,401 and 19,856,239, respectively.
As of May 16, 2012, we have no long-term contracts or backlog of orders from customers to purchase our G2 Diesel fuel or our crude glycerin by-product described herein. In general, the testing programs and sales efforts conducted with potential customers have shown a longer order cycle than first anticipated 11 Good Energy has allocated its marketing efforts toward fleet users. These are customers that have centralized fueling and their vehicles return to the terminal every day after usage. This allows the vehicles to receive consistent product. 11 Good Energys key strategic partner and largest customer is the Kenan Advantage Group (The KAG.) The KAG distributes over 20 billion gallons of liquid fuels and specialty chemicals annually making them the largest transportation company of bulk transport in the United States. After extensive testing, the KAG has commissioned 11 Good Energy to build storage tanks and containment pads at 10 of their almost 200 terminals in the United States as a phase 1 of development. In addition to being a user of G2 Diesel, The KAG also assists 11 Good in providing logistic solutions through the utilization of their fleet to efficiently deliver blended G2 Diesel to the Companys customer base. In addition, there is a potential marketing fit to integrate G2 Diesel into the KAGs current customer base.
Liquidity and Capital Resources
The company had cash and cash equivalents of $9,252 at March 31, 2012 compared with cash of $12,895 at December 31, 2011.
Net cash used in operating activities for the quarter ended March 31, 2012 was $118,898. Cash used in operations was a result of a net loss for the period of $675,799 partially offset by amortization of debt discount of $155,359, reserved for due from shareholder of $108,519, depreciation and amortization of $99,756, decrease in inventory of $64,679 and increase in account payables and accrued liabilities of $81,538. Net cash was provided by investing activities of $27,255 as a result of the proceeds of sale of certain property and equipment. Net cash was provided by financing activities of $88,000 for the quarter ended March 31, 2012 as a result of the proceeds received from the issuance of convertible notes of $100,000 partially offset by payment of notes payable of $12,000.
Net cash was used in operating activities of $690,161 for the three months ended March 31, 2011. Cash used in operations was a result of a net loss for the period of $1,193,953; a decrease in inventory of $92,353; a decrease in accounts receivable of $36,932; an increase in account payables and accrued liabilities of $253,948, depreciation and amortization of $95,827 and a decrease in other assets of $6,950. Net cash investing activities of $548,862 for the three months ended March 31, 2011, included patent costs of $7,207 and proceeds from the sale of securities available for sale of $556,069. Net cash provided by financing activities of $145,350 for the three months ended March 31, 2011, included proceeds from a related party advance of $170,350, partially offset by $25,000 due from a related party.
Previously, the company had converted $6,498,709 of Convertible notes payable to Common Stock issued at a price of $2.55 per share, and issued 2,548,513 shares of common stock and warrants to purchase 3,228,523 shares of Common Stock. All remaining note balances and accrued interest were redeemed in cash.
Between August 2009 and the first quarter of 2010, the Company received gross proceeds of $11,932,000 (net proceeds of $10,253,069) through the sale of its Common Stock at a price of $3.00 per share, for a total of 3,977,333 shares.
14
The Companys consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company incurred net losses attributable to common shareholders of $675,799 and used cash of $118,898 for operating activities for the quarter ended March 31, 2012, incurred negative working capital (current liabilities exceeded current assets) of $2,129,373 and deficit accumulated during development stage of $23,663,064 as of March 31, 2012. These factors among others may indicate that the Company may be unable to continue as a going concern for a reasonable period of time.
The Companys existence is dependent upon managements ability to develop profitable operations and to obtain additional funding sources. There can be no assurance that the Companys financing efforts will result in profitable operations or the resolution of the Companys liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
We are currently in the process of attempting to raise capital through a private placement sale of common stock. No assurances can be given that we will be able to successfully raise the financing necessary to continue as a going concern.
We anticipate that our future liquidity requirements will arise from the need to finance our accounts receivable and inventories, and from the need to fund our current obligations and capital expenditures. The primary sources of funding for our current operations will be cash generated from operations and the sale of current inventory and raising additional capital from the sale of equity and debt securities.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our short term money market investments. The Company does not have any financial instruments held for hedging or other speculative purposes and does not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our CEO and CFO, an evaluation was performed on the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report due to the Companys limited resources and limited number of employees. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and outsourced accounting professionals. As we grow, we expect to increase our number of employees, which, we believe, will enable us to implement adequate segregation of duties within the internal control framework.
There were no changes in the Companys internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Companys internal control over financial reporting.
Item 1. Legal Proceedings
As of the filing date of this Form 10-Q, we are a party to several legal proceedings. See Note 12 for a detailed explanation of litigation matters.
Item 1A. Risk Factors
As a Smaller Reporting Company as defined Rule 12b-2 of the Exchange Act and in item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item 1A. Nevertheless, the Company encourages stockholders of the Company to read the risk factors contained under Item 1A of the Companys Form 10-K filed with the Securities and Exchange Commission on April 16, 2012 for the fiscal year ended December 31, 2011.
Item 2. Changes in Securities
(a) Recent sale of unregistered Securities.
15
From January 1, 2012 through March 31, 2012, we had limited private sales of our securities, summarized as follows:
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Date of |
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Title of |
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Number Sold |
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Consideration |
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Exemption |
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If Option, |
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January 2012 |
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Notes and Warrants |
|
$100,000 principal amount; 60,000 warrants |
|
$100,000; no commissions paid |
|
Rule 506 |
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Exercisable as of January 18, 2012 at $5.00 per share through December 2014 |
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February 2012 |
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Options/Warrants |
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300,000 options/warrants |
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Services rendered; no commissions paid |
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Rule 506 and/or Section 4(2) |
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(1) |
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(1) |
Includes warrants to purchase 100,000 shares of Common Stock exercisable at $5.00 per share over a period of five years commencing April 1, 2012. Also includes options to purchase 200,000 shares of the Companys Common Stock for services exercisable over a period of three years at $5.00 per share which commence vesting in April, 2012. |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mining Safety Disclosures
Not applicable.
Item 5. Other Information
See Note 12 in the Notes to Unaudited Condensed Consolidated Financial Statements.
Except for the exhibits listed below, other required exhibits have been previously filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.
Except as otherwise noted, all exhibits were previously filed with the Securities and Exchange Commission under its Form S-1 Registration Statement, file No. 333-166149.
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Exhibit |
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Description of Exhibit |
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2.1 |
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Agreement and Plan of Organization between Registrant and 11 Goods Energy, LTD. |
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2.2 |
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Corrections to Exhibit 2.1 |
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3.1 |
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Certification of Incorporation |
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3.2 |
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By-Laws |
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3.3 |
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Certificate of Amendment to Certificate of Incorporation |
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3.4 |
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Certificate of Designation |
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10.1 |
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Employment Contract - Frederick C. Berndt |
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10.2 |
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Employment Contract - Daniel Lapp |
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10.3 |
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Employment Contract - Aaron Harnar |
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10.4 |
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Consulting Agreement with Clayton R. Livengood |
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10.5 |
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Employment Agreement - Gary R. Smith |
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10.6 |
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Finders Agreement - Jesup Lamont |
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10.7 |
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Consulting Agreement with Capital Keys |
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10.8 |
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Consulting Agreement with California Strategies |
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10.9 |
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Office Lease dated April 25, 2007 between the Registrant and Triad Realty, LLC, including a First Lease Amendment dated June 21, 2007 and a Second Amendment dated July 15, 2009. |
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10.10 |
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Employment Contract Mario Larach dated as of May 9, 2012 (Incorporated by reference to the Registrants Form 8-K filed with the SEC on May 17, 2012. |
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10.11 |
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Sales Representative Agreement with Max V LLC dated May 15, 2012 (Incorporated by reference to the Registrants Form 8-K filed with the SEC on May 17, 2012. |
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21.1 |
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Subsidiary of Registrant |
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31.1 |
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Principal Executive Officer Rule 13a-14(a)/15d-14(a) Certification (*) |
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31.2 |
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Principal Financial Officer Rule 13a-14(a)/15d-14(a) Certification (*) |
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32.1 |
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Principal Executive Officer Section 1350 Certification (*) |
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32.2 |
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Principal Financial Officer Section 1350 Certification (*) |
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101.INS XBRL |
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Instance Document (**) |
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101.SCH XBRL |
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Taxonomy Extension Schema Document (**) |
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101.CAL XBRL |
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Taxonomy Extension Calculation Linkbase Document (**) |
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101.DEF XBRL |
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Taxonomy Extension Definition Linkbase Document (**) |
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101.LAB XBRL |
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Taxonomy Extension Labels Linkbase Document (**) |
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101.PRE XBRL |
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Taxonomy Extension Presentation Linkbase Document (**) |
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* |
Filed herewith. |
** |
Furnished herewith. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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11 GOOD ENERGY, INC. |
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Date: May 21, 2012 |
By: /s/ Gary R. Smith |
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Gary Smith, President (interim principal executive officer) |
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Date: May 21, 2012 |
By: /s/ E. Jamie Schloss |
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E. Jamie Schloss, |
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Interim Chief Financial Officer (interim principal financial officer) |
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EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Gary R. Smith, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of 11 Good Energy, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
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DATE: May 21, 2012 |
/S/ GARY R. SMITH |
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GARY R. SMITH |
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INTERIM PRINCIPAL EXECUTIVE OFFICER |
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, E. Jamie Schloss, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of 11 Good Energy, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
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DATE: May 21, 2012 |
/S/ E. JAMIE SCHLOSS |
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E. JAMIE SCHLOSS, INTERIM PRINCIPAL FINANCIAL OFFICER |
EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18U.S.C. SECTION 1350
In connection with the Quarterly Report of 11 Good Energy, Inc. (the Company) on Form 10-Q for the period ending March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Frederick C. Berndt, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
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/S/ GARY R. SMITH |
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GARY R. SMITH |
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INTERIM PRINCIPAL EXECUTIVE OFFICER |
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May 21, 2012 |
EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18U.S.C. SECTION 1350
In connection with the Quarterly Report of 11 Good Energy, Inc. (the Company) on Form 10-Q for the period ending March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Daniel T. Lapp, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
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/S/ E. JAMIE SCHLOSS |
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E. JAMIE SCHLOSS |
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INTERIM PRINCIPAL FINANCIAL OFFICER |
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May 21, 2012 |
INVENTORIES
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2012
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Inventory Disclosure [Text Block] | NOTE 4 – INVENTORIES Inventory is stated at the lower of cost or market. The cost is determined using the first-in first-out method. Costs of finished goods inventory include costs associated with the procurement and transportation of Soybean oil and other raw materials used in the manufacture of G2 Diesel.
As of March 31, 2012 and December 31, 2011,
inventories are comprised of the following:
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