UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For The Quarterly Period Ended September 30, 2012 | ||
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from __________ to __________ | ||
Commission file number: 0-12968
WINDGEN ENERGY, INC.
(Exact name of registrant as specified in its charter)
| Utah | 87-0397815 | |
| (State or other jurisdiction of | (IRS Employer Identification No.) | |
| incorporation or organization) |
8432 E. Shea Blvd, Suite 101
Scottsdale, Arizona 85260
(Address of principal executive offices)
(480) 991-9500
(Registrant’s telephone number, including area code)
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 þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer ¨ | Accelerated filer ¨ | ||
| Non-accelerated filer ¨ | Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ¨ No þ
As of November 16, 2012, 47,068,058 shares of the issuer’s common stock were outstanding.
Table of Contents
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WINDGEN ENERGY, INC.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and should be read in conjunction with the Financial Statements of WindGen Energy, Inc. (the “Company” or “WindGen”). Such statements are not historical facts and reflect our current views regarding matters such as operations and financial performance. In general, forward-looking statements are identified by such words or phrases as “expects,” “anticipates,” “believes,” “could,” “approximates,” “estimates,” “may,” “intends,” “predicts,” “projects,” “plans,” or “will,” or the negative of those words or other terminology. These statements are not guarantees of future performance and involve certain known and unknown inherent risks, uncertainties and other factors that are difficult to predict; our actual results could differ materially from those expressed in these forward-looking statements, including those risks and other factors described elsewhere in this Quarterly Report. The cautionary factors, risks and other factors presented should not be construed as exhaustive. Other risks not presently known to us, or that we currently believe are immaterial, could also adversely affect our business, financial condition or results of operations.
Each forward-looking statement should be read in context with, and with an understanding of, the various disclosures concerning our business made elsewhere in this Quarterly Report, as well as other public reports filed by us with the United States Securities and Exchange Commission. Readers should not place undue reliance on any forward-looking statement as a prediction of actual results of developments. Except as required by applicable law or regulation, we undertake no obligation to update or revise any forward-looking statement contained in this Quarterly Report.
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| PART I. | FINANCIAL INFORMATION |
| Item 1. | Financial Statements |
CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2012 | 2011 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | — | $ | 22 | ||||
| Other Receivable | 24,496 | 24,464 | ||||||
| Prepaid Expenses & Other | 200 | 2,502 | ||||||
| TOTAL ASSETS | $ | 24,696 | $ | 26,988 | ||||
| LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Bank Overdraft | $ | 107 | $ | — | ||||
| Related Party Consulting Fees Payable | 204,150 | 162,750 | ||||||
| Accounts Payable | 36,438 | 38,061 | ||||||
| Note Payable | 28,144 | 26,048 | ||||||
| Shareholder Advances | 5,665 | — | ||||||
| Convertible Notes Payable, net of debt discount of $11,770 and $12,572, respectively | 54,323 | 49,412 | ||||||
| Preferred Stock Dividends Payable | 21,279 | 19,860 | ||||||
| TOTAL LIABILITIES | $ | 350,106 | $ | 296,131 | ||||
| STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Preferred Stock, 10,000,000 shares authorized; Series A Cumulative convertible preferred stock, 8% cumulative, $4.50 par value, 1,000,000 shares designated, 5,254 shares outstanding at September 30, 2012 , (aggregate liquidation preference of $44,923); 5,254 shares outstanding at December 31, 2011 (aggregate liquidation preference of $43,504) | 23,644 | 23,644 | ||||||
| Common Stock, $.001 par value: 100,000,000 shares authorized, 47,068,058 and 42,188,390 shares outstanding at September 30, 2012 and December 31, 2011, respectively | 47,068 | 42,188 | ||||||
| Additional Paid-In Capital | 9,602,454 | 9,430,409 | ||||||
| Stock Subscription Receivable | — | (10,000 | ) | |||||
| Accumulated Deficit | (9,998,576 | ) | (9,755,384 | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | (325,410 | ) | (269,143 | ) | ||||
| TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY | $ | 24,696 | $ | 26,988 | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS
| (Unaudited) | (Unaudited) | |||||||||||||||
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| REVENUES | $ | — | $ | — | $ | — | $ | — | ||||||||
| OPERATING EXPENSES | ||||||||||||||||
| General & Administrative | 4,810 | 49,451 | 32,585 | 126,634 | ||||||||||||
| Stock Compensation Expenses for Consulting | — | — | 50,000 | — | ||||||||||||
| Legal & Professional Fees | 2,063 | 16,418 | 40,256 | 50,227 | ||||||||||||
| Related Party Consulting Fees | 15,000 | 30,000 | 60,000 | 90,000 | ||||||||||||
| Total Operating Expenses | 21,873 | 95,869 | 182,841 | 266,861 | ||||||||||||
| INCOME (LOSS) FROM OPERATIONS | (21,873 | ) | (95,869 | ) | (182,841 | ) | (266,861 | ) | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Amortization of debt discount | (16,016 | ) | (13,854 | ) | (55,727 | ) | (41,126 | ) | ||||||||
| Interest Income (Expense) | (813 | ) | (1,191 | ) | (3,205 | ) | (2,468 | ) | ||||||||
| Total Other Income (Expense), Net | (16,829 | ) | (15,045 | ) | (58,932 | ) | (43,594 | ) | ||||||||
| NET INCOME (LOSS) | (38,702 | ) | (110,914 | ) | (241,773 | ) | (310,455 | ) | ||||||||
| PREFERRED STOCK DIVIDENDS | (473 | ) | (473 | ) | (1,419 | ) | (1,419 | ) | ||||||||
| NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS | $ | (39,175 | ) | $ | (111,387 | ) | $ | (243,192 | ) | $ | (311,874 | ) | ||||
| NET INCOME (LOSS) PER COMMON SHARE (BASIC & DILUTED) | $ | 0.00 | $ | 0.00 | $ | (0.01 | ) | $ | (0.01 | ) | ||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||||||
| BASIC | 44,941,342 | 43,538,263 | 44,152,347 | 42,632,859 | ||||||||||||
| DILUTED | 49,346,192 | 43,546,144 | 48,557,197 | 42,640,740 | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 5 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
| (Unaudited) | ||||||||
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2012 | 2011 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Loss | $ | (241,773 | ) | $ | (310,455 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Common stock issued for services | 50,000 | — | ||||||
| Interest expense from debt discount | 55,727 | 41,126 | ||||||
| Related party consulting fee payable | 41,400 | 13,550 | ||||||
| Prepaid expense | 2,302 | 42,634 | ||||||
| Accounts payable | (1,623 | ) | 38,330 | |||||
| Accrued interest payable | 3,205 | 2,468 | ||||||
| Other receivable | (32 | ) | (4,110 | ) | ||||
| Net cash provided by (used in) Operating Activities | (90,794 | ) | (176,457 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Net cash provided by Investing Activities | — | — | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Bank overdraft | 107 | — | ||||||
| Proceeds from sale of stock | — | 70,800 | ||||||
| Proceeds from notes payable | 75,000 | 85,000 | ||||||
| Proceeds from stock subscription receivable | 10,000 | — | ||||||
| Proceeds from shareholder advances | 5,665 | — | ||||||
| Net cash provided by Financing Activities | 90,772 | 155,800 | ||||||
| NET INCREASE (DECREASE) IN CASH | (22 | ) | (20,657 | ) | ||||
| CASH AT BEGINNING OF PERIOD | 22 | 33,278 | ||||||
| CASH AT END OF PERIOD | — | 12,621 | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW: | ||||||||
| Cash paid during the year for interest | $ | — | $ | — | ||||
| Cash paid during the year for income taxes | $ | 150 | $ | 150 | ||||
| SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING & FINANCING ACTIVITIES: | ||||||||
| Stock Subscription Receivable for exercise of stock options | $ | — | $ | 10,000 | ||||
| Notes Payable Converted to Common Stock | $ | 72,000 | $ | 52,000 | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS
Nature of Operations
From 1989 through 2008, InMedica Development Corporation (“InMedica”) and its then majority-owned subsidiary, MicroCor, Inc. (“MicroCor”) were engaged in research and development of a device to measure hematocrit non-invasively (the “Non-Invasive Hematocrit Technology” and/or the “Technology”).
On December 4, 2009, the Company changed its name from InMedica Development Corporation to WindGen Energy, Inc. (“WindGen”).
On June 24, 2010, WindGen terminated the former Development Agreement with Wescor and entered into a new agreement reducing its ownership percentage from 57% to 49%. Since WindGen’s ownership percentage is now less than 50%, MicroCor’s financial statements are no longer consolidated with WindGen’s financial statements. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – MicroCor, Inc.” for complete details.
On April 17, 2009, we entered into a license agreement (the “License Agreement”) with Wind Sail Receptor, Inc. of Boulder City, Nevada (“WSR”), pursuant to which we were granted the exclusive license to assemble and market certain of WSR’s wind sail receptor energy generation devices in the United States, Canada, the United Kingdom and Republic of Ireland, with nonexclusive rights in the rest of the world except Latin America. Under the License Agreement, we were to acquire the necessary blades from WSR during the first year after WSR was able to manufacture the blades.
During 2010, the Company issued 1,900,000 shares of the Company’s restricted common stock to WSR in consideration of amending the License Agreement (the “WSR Shares”). The proposed amendment to the License Agreement between the Company and WSR was not executed. The reasons are various and include, but are not limited to, finalizing details regarding the need for the Company to be involved in assembly of the wind turbines in various license territories outside the US, final pricing that the units would be sold by WSR to the Company, final terms of the product warranty to be provided by WSR, and possible additional exclusive territory added to the License. Under the terms of the License Agreement, the Company intended to use its best efforts to obtain Federal, State, Local, or Private Grant Funds and to share these Grant Funds with WSR. To date the Company has not been successful in obtaining Grant Funds. No monetary disputes currently exist between the two companies.
On March 20, 2012, the Company entered into two new agreements with WSR. These two agreements replaced the exclusive sales and distribution License Agreement previously held by the Company. One agreement is a perpetual Royalty Agreement whereby WSR will pay to the Company a royalty on each Wind Sail Receptor Small Wind Turbine System sold in the United States and Canada. A further provision of the new agreement with WSR returns the WSR Shares to the Company. These shares have been canceled on the books and records of the Company as of December 31, 2011, reducing the total issued and outstanding shares of the Company’s Common Stock. See “Note 4 – Common Stock” below. The second agreement is a Dealer Agreement which awarded the Company a dealership for the exclusive sale and distribution of the Wind Sail Receptor Small Wind Turbines with a blade diameter not to exceed twelve feet for the United Kingdom and the Republic of Ireland. The Company anticipates that at some point during 2012 it will enter into a joint venture in the two territories for the sale, distribution and installation of the small wind turbine systems. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Plan of Operation – Wind Energy” for complete details regarding these agreements.
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WINDGEN ENERGY, INC.
Basis of Presentation
The Company’s consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustment relating to recoverability and classification of recorded amounts of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The Company generated negative cash flows from operations of $199,056 and $280,681 in 2011 and 2010, respectively, and net losses from operations of $326,869 and $348,363 in 2011 and 2010, respectively. As of September 30, 2012, the Company had an accumulated deficit of $9,998,576 and a working capital deficit of $325,410. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s continued existence is dependent upon its ability to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company. Management’s operating plan includes pursuing additional fund raising as well as putting in place all the initial requirements in anticipation of the Company generating revenue in 2013.
Net Loss per Common Share
Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the year. Diluted net loss per common share (“Diluted EPS”) reflects the potential dilution that could occur if stock options or other common stock equivalents were exercised or converted into common stock. At September 30, 2012 and 2011, there were 4,404,851 and 7,881 potentially dilutive common stock equivalents, respectively. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net loss per common share.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Comprehensive Income
There are no components of comprehensive income other than the net loss.
Cash Equivalents
For the purpose of reporting cash flows, the Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits.
Fair Value of Financial Instruments
The carrying value of the Company’s financial instruments, including receivables, accounts payable, accrued liabilities, and notes payable at September 30, 2012 and December 31, 2011 approximates their fair values due to the short-term nature of these financial instruments.
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WINDGEN ENERGY, INC.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets are recorded under the provisions of the Financial Accounting Standards Board (FASB) ASC 350 (formerly Statement ASC No. 142 (SFAS 142), Goodwill and Other Intangible Assets). ASC 350 requires that an intangible asset that is acquired either individually or with a group of other assets (but not those acquired in a business combination) shall be initially recognized and measured based on its fair value. Goodwill acquired in business combinations is initially computed as the amount paid by the acquiring company in excess of the fair value of the net assets acquired.
Costs of internally developing, maintaining and restoring intangible assets (including goodwill) that are not specifically identifiable, have indeterminate lives, or are inherent in a continuing business and related to an entity as a whole, are recognized as an expense when incurred.
An intangible asset (excluding goodwill) with a definite useful life is amortized; an intangible asset with an indefinite useful life is not amortized until its useful life is determined to be no longer indefinite. The remaining useful lives of intangible assets not being amortized are evaluated at least annually to determine whether events and circumstances continue to support an indefinite useful life. If and when an intangible asset is determined to no longer have an indefinite useful life, the asset shall then be amortized prospectively over its estimated remaining useful life and accounted for in the same manner as other intangibles that are subject to amortization.
An intangible asset (including goodwill) that is not subject to amortization shall be tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of the intangible assets with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. In accordance with ASC 350, goodwill is not amortized.
On March 20, 2012, the Company entered into two new agreements with Wind Sail Receptor, Inc. These two agreements replaced the exclusive sales and distribution license previously held by the Company. As part of these agreements, the 1,900,000 shares (“WSR Shares”) issued to Wind Sail Receptor, Inc. for the licensing rights were returned to the Company and cancelled. ASC 855-10-25 indicates the Company should recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the balance sheet date. Since the original License Agreement that resulted in the Company recording the intangible asset of $190,000 was being modified and replaced, the Company determined that the stock cancellation and removal of the intangible asset should be recorded as of December 31, 2011. The financial statements presented as of September 30, 2012 reflect the cancellation of the WSR Shares and the removal from the books of the intangible asset. No gain or loss was recorded. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Plan of Operation – Wind Energy” for complete details regarding these agreements.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Standards
In December 2011, FASB issued ASU 2011-12 “Comprehensive Income (Topic 220).” In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. The amendments are being made to allow the Board time to re-deliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. While the Board is considering the operational concerns about the presentation requirements for reclassification adjustments and the needs of financial statement users for additional information about reclassification adjustments, entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. Management does not expect the adoption of ASU 2011-11 to have a material effect on the Company’s financial position, results of operations or cash flows.
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WINDGEN ENERGY, INC.
In June 2011, FASB issued ASU 2011-05 “Comprehensive Income (Topic 220).” Under the amendments in this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income. The amendments in this Update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The amendments do not require any transition disclosures. Management elected early adoption and has presented the total of comprehensive income, the components of net income, and the components of other comprehensive income in a single continuous statement of comprehensive income.
In May 2011, FASB issued ASU 2011-04 “Fair Value Measurement (Topic 820).” The amendments in ASU 2011-04 change the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments include (1) those that clarify the Board's intent about the application of existing fair value measurement and disclosure requirements and (2) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. In addition, to improve consistency in application across jurisdictions some changes in wording are necessary to ensure that U.S. GAAP and IFRS fair value measurement and disclosure requirements are described in the same way (for example, using the word shall rather than should to describe the requirements in U.S. GAAP). The amendments that clarify the Board's intent about the application of existing fair value measurement and disclosure requirements include (a) the application of the highest and best use and valuation premise concepts, (b) measuring the fair value of an instrument classified in a reporting entity's shareholders' equity, and (c) disclosures about fair value measurements that clarify that a reporting entity should disclose quantitative information about the unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy. The amendments in this Update that change a particular principle or requirement for measuring fair value or disclosing information about fair value measurements include (a) measuring the fair value of financial instruments that are managed within a portfolio, (b) application of premiums and discounts in a fair value measurement, and (c) additional disclosures about fair value measurements that expand the disclosures about fair value measurements. The amendments in ASU 2011-04 are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The Company does not expect the provisions of ASU 2010-29 to have a material effect on its financial position, results of operations or cash flows.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 – NOTES PAYABLE
On October 21, 2010, the Company borrowed $50,000 from a third party. The note was due on July 21, 2011 and carried an interest rate of 8% per annum (the “October 21, 2010 Note”). The note was convertible after six months at a conversion price of 55% of the market price of the common stock. Since the note contained a beneficial conversion feature, the intrinsic value of the conversion feature was calculated to be $40,909 at the commitment date of October 21, 2010, which was recorded to debt discount and to additional paid-in capital. The debt discount was amortized to interest expense over a period of six months. During 2011, the note holder converted the total principal of the note and interest to 1,622,630 shares of common stock pursuant to the conversion formula of the note. The note holder agreed to a flat fee of $2,000 for interest and has declared the note paid in full.
On June 30, 2011, the Company borrowed $25,000 from a third party. The note carries an interest rate of 10% per annum (the “June 30, 2011 Note”). The Company extended the due date of the note to December 31, 2012. At September 30, 2012, $3,144 in interest was due on the June 30, 2011 Note.
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WINDGEN ENERGY, INC.
On July 12, 2011, the Company borrowed $25,000 from a third party. The note was due on April 5, 2012 and carried an interest rate of 8% per annum (the “July 12, 2011 Note”). The note was convertible after six months at a conversion price of 58% of the market price of the common stock. Since the note contained a beneficial conversion feature, the intrinsic value of the conversion feature was calculated to be $18,160 at the commitment date of July 12, 2011, which was recorded to debt discount and to additional paid-in capital. The debt discount was amortized to interest expense over a period of six months. During the first two quarters of 2012, the note holder converted the total principal of the note to 770,233 shares of common stock pursuant to the conversion formula of the note. The July 12, 2011 Note has now been paid in full through conversion and the note holder has forgiven all of the interest payable.
On September 12, 2011, the Company borrowed $35,000 from a third party. The note was due on June 6, 2012 and carried an interest rate of 8% per annum (the “September 12, 2011 Note”). The note was convertible after six months at a conversion price of 55% of the market price of the common stock. Since the note contained a beneficial conversion feature, the intrinsic value of the conversion feature was calculated to be $28,636 at the commitment date of September 12, 2011, which was recorded to debt discount and to additional paid-in capital. The debt discount was amortized to interest expense over a period of six months. During the first and third quarters of 2012, the note holder converted the total principal of the note and interest to 2,421,316 shares of common stock pursuant to the conversion formula of the note. The note holder agreed to a flat fee of $1,400 for interest and has declared the note paid in full.
On January 9, 2012, the Company borrowed an additional $42,500 from a third party. The note was funded on January 18, 2012. The note was due on October 11, 2012 and carries an interest rate of 8% per annum (the “January 9, 2012 Note”). The note is convertible after six months at a conversion price of 60% of the market price of the common stock. The Company has the option to prepay the note at any time. Since the note contains a beneficial conversion feature, the intrinsic value of the conversion feature was calculated at the funding date of January 18, 2012. The intrinsic value was calculated to be $28,333, which was recorded to debt discount and to additional paid-in capital. The debt discount was amortized to interest expense over a period of six months. During the third quarter of 2012, the note holder converted $12,000 of the principal of the note to 1,188,119 shares of common stock pursuant to the conversion formula of the note. As of September 30, 2012, the principal balance due on the January 9, 2012 Note was $30,500, plus $2,366 in interest. Pursuant to communications with the note holders’ legal counsel, no action is being taken to declare the note in default and it is anticipated that the balance due on the note will be converted to common stock in the future. On September 28, 2012, the last trading day of the quarter, the market price of the common stock was $0.025, the conversion price would have been $0.01375, and the note was convertible into approximately 2,033,333 shares of common stock.
On June 4, 2012, the Company borrowed an additional $32,500 from a third party. The note was funded on June 21, 2012. The note is due on March 6, 2013 and carries an interest rate of 8% per annum (the “June 4, 2012 Note”). The note is convertible after six months at a conversion price of 55% of the market price of the common stock. The Company has the option to prepay the note at any time. Since the note contains a beneficial conversion feature, the intrinsic value of the conversion feature was calculated at the funding date of June 21, 2012. At that date, the market price of the stock was $0.04, the conversion price would have been $0.022 and the note would have been convertible into 1,477,273 shares of common stock. The intrinsic value was calculated to be $26,591, which was recorded to debt discount and to additional paid-in capital. The debt discount is being amortized to interest expense over a period of six months. At September 30, 2012, the remaining debt discount was $11,770. As of September 30, 2012, the balance due on the June 4, 2012 Note was $32,500, plus $727 in interest. On September 28, 2012, the last trading day of the quarter, the market price of the common stock was $0.025, the conversion price would have been $0.01375, and the note was convertible into approximately 2,363,636 shares of common stock.
See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” for complete details regarding the June 30, 2011 Note, July 12, 2011 Note, September 12, 2011 Note, January 9, 2012 Note and June 4, 2012 Note.
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WINDGEN ENERGY, INC.
NOTE 4 – COMMON STOCK
The Company is authorized to issue 100,000,000 shares of common stock, $0.001 par value (the “Common Stock”), of which approximately 47,068,058 shares were issued and outstanding on September 30, 2012. All presently outstanding shares are duly authorized, fully-paid and non-assessable. Each share of the Common Stock is entitled to one vote on all matters to be voted on by the shareholders, such as the election of certain directors and other matters that directly impact the rights of the holders of such class. There is no cumulative voting in the election of directors. Holders of Common Stock are entitled to receive such dividends as may be declared from time to time by the Board of Directors out of funds legally available therefore. In the event of any dissolution, winding up or liquidation of the Company, the shares of Common Stock will share ratably in all the funds available for distribution after payment of all debts and obligations. The holders of Common Stock are subject to any rights that may be fixed for holders of preferred stock as designated upon issuance.
On December 4, 2009, the Company changed its total authorized common shares from 40,000,000 to 100,000,000 shares.
During 2009, the Company issued 15,000,000 shares of common stock for cash of $95,000 and a stock subscription receivable of $17,500. The stock issuances were the result of the exercise of a stock purchase option agreement with Law Investments CR, S.A., a Costa Rica corporation. During 2011 and 2010, $0 and $7,500, respectively, was paid toward the subscription receivable leaving a balance due of $10,000 at June 30, 2012. During the third quarter of 2012, the balance of $10,000 due on the subscription was paid in full.
During 2010, the Company completed the conversion of shares of Series A Preferred (defined in Note 5, below) held by three of the four existing preferred shareholders by issuing 246,834 shares of the Company’s restricted common stock at a price of $0.50 per share plus a $5,000 cash payment to each preferred shareholder. The conversion of these preferred shares reduced the dividends payable from $64,309 at December 31, 2009 to $17,969 at December 31, 2010. As of September 30, 2012, the total dividends payable on the remaining shares of Series A Preferred was $21,279.
During 2010 the Company issued 1,900,000 shares of the Company’s restricted common stock to Wind Sail Receptor, Inc. (“WSR”) in consideration of an amendment to the Company’s 2009 License Agreement with WSR. The shares were valued at $0.10 per share. As of December 31, 2011, the Company recorded the cancellation of the WSR Shares that were returned subsequent to year-end, as part of the new agreements with WSR. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Plan of Operation – Wind Energy” for complete details regarding these agreements.
During 2011, the Company issued 1,077,331 shares of common stock for cash of $80,800 pursuant to the Company’s Rule 506 private placement.
During 2011, the Company issued 1,622,630 shares of the Company’s restricted common stock for the conversion of debt in the amount of $52,000.
During 2011, the Company issued 50,000 shares of the Company’s restricted common stock for a non-refundable retainer fee related to a finder’s fee agreement with BFS Financial, Inc. entered into by the Company. The shares were valued at $0.10 per share.
On January 6, 2012, the Board of Directors awarded 100,000 shares of restricted common stock to Wendy Carriere, the Company’s Secretary/Treasurer, Chief Financial Officer and Director, valued at $0.075 per share, for her services in 2011. Since the shares were issued for services related to 2011, the shares were recorded as of December 31, 2011.
On February 8, 2012, the Company issued 500,000 shares of restricted common stock to Wakabayashi Fund LLC of Tokyo, Japan. The shares are for consulting services to be provided by the Wakabayashi Fund LLC to assist the Company to establish International recognition, international market making, international financial PR/IR, and capital formation. The shares were valued at $0.10 per share.
| 12 |
WINDGEN ENERGY, INC.
During the first quarter of 2012, the Company issued 1,689,425 shares of the Company’s restricted common stock for the conversion of debt in the amount of $45,000.
During the third quarter of 2012, the Company issued 2,690,243 shares of the Company’s restricted common stock for the conversion of debt in the amount of $27,000.
NOTE 5 – PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of preferred stock. The Company’s board of directors designated 1,000,000 shares of this preferred stock as Series A Cumulative Convertible Preferred Stock (“Series A Preferred”) with a par value of $4.50 per share. Holders of the Series A Preferred receive annual cumulative dividends of 8%, payable quarterly, which dividends are required to be fully paid or set aside before any other dividend on any class or series of stock of the Company is paid. Holders of the Series A Preferred receive no voting rights but do receive a liquidation preference of $4.50 per share, plus accrued and unpaid dividends. Series A Preferred stockholders have the right to convert each share of Series A Preferred to the Company’s common stock at a rate of 1.5 common shares to one preferred share.
During 2010, the Company completed the conversion of shares of Series A Preferred (defined in Note 5, below) held by three of the four existing preferred shareholders by issuing 246,834 shares of the Company’s restricted common stock at a price of $0.50 per share plus a $5,000 cash payment to each preferred shareholder. The conversion of these preferred shares reduced the dividends payable from $64,309 at December 31, 2009 to $17,969 at December 31, 2010. As of September 30, 2012, the total dividends payable on the remaining shares of Series A Preferred was $21,279.
On January 30, 2009, the Company entered into an agreement with MicroCor, its subsidiary (the “MicroCor Agreement”). The MicroCor Agreement provided for the Company to create a Series B class of preferred stock, without dividend or voting rights (the “Series B Preferred”), which would receive 100% of any future benefit from the sale, spin-off, merger or liquidation of MicroCor or the commercialization of its hematocrit technology. The shares of the Series B Preferred were to be distributed as a dividend, subject to compliance with federal and state securities laws and regulations, to the Company’s common stockholders, as of January 30, 2009. The creation of the Series B Preferred would prevent any holder of the Company’s common stock after January 30, 2009 from sharing in any future benefit of or to MicroCor through the expiration date of January 30, 2011. The Series B Preferred Stock was not issued to the common shareholders of record at January 30, 2009 inasmuch as no benefit occurred prior to the expiration date of January 30, 2011.
NOTE 6 – RELATED PARTY TRANSACTIONS
During 2012, a shareholder advanced the Company $5,665 to pay various expenses. .
From 2009 through 2011, the Company accrued consulting expenses of $162,750 from officers of the Company. During 2012, the Company has accrued additional consulting expenses of $43,400 for a total due officers of the Company of $204,150.
NOTE 7 – UNCERTAIN TAX POSITIONS
Effective January 1, 2007, the Company adopted the provisions of ASC 740 (formerly FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109”). ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The adoption of the provisions of ASC 740 did not have a material impact on the Company’s condensed consolidated financial position and results of operations. At September 30, 2012, the Company had no liability for unrecognized tax benefits and no accrual for the payment of related interest.
| 13 |
WINDGEN ENERGY, INC.
Interest costs related to unrecognized tax benefits are classified as “Interest Expense, Net” in the accompanying consolidated statements of operations. Penalties, if any, would be recognized as a component of “Selling, general and administrative expenses”. The Company recognized zero interest expense related to unrecognized tax benefits for the year ended December 31, 2011. In many cases the Company’s uncertain tax positions are related to tax years that remain subject to examination by relevant tax authorities. With few exceptions, the Company is generally no longer subject to U.S. federal, state, local or non-U.S. income tax examinations by tax authorities for years before 2008. The following describes the open tax years, by major tax jurisdiction, as of December 31, 2011:
| United States (a) | 2008 – Present | |
| __________ | ||
| (a) Includes federal as well as state or similar local jurisdictions, as applicable. | ||
NOTE 8 – NEW OFFICE LEASE
Effective September 1, 2011, the Company moved its offices to 8432 E. Shea Blvd., Suite 101, Scottsdale, Arizona 85260. The Company is occupying the office space at the current address on a month-to-month basis. The landlord is a non-affiliate shareholder of the Company and is not currently charging the Company rent. The Company may pay to the landlord rent in the form of shares of the Company's restricted common stock at some point in the future.
See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – New Office Location” for complete details regarding the Company’s offices.
| 14 |
WINDGEN ENERGY, INC.
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Overview
WindGen Energy, Inc. (“WindGen” or the “Company”) was incorporated as a Utah corporation on June 16, 1983 under the name of InMedica Development Corporation. On December 4, 2009, a majority of the Company’s shareholders executed a consent resolution to amend the Company’s Articles of Incorporation to change the Company’s name to WindGen Energy, Inc. (“WindGen” or the “Company”) and to increase the number of authorized common stock shares from 40,000,000 to 100,000,000. A Certificate of Amendment for such amendments was filed by the Company with the Secretary of State of Utah effective on December 16, 2009. The name change and the new trading symbol, “WGEI,” were approved by FINRA on March 16, 2010.
MicroCor, Inc.
In 1985, the Company acquired MicroCor, Inc., a Utah corporation (“MicroCor”), engaged in the development of certain medical technology products. During 2008, MicroCor continued to engage in research and development on MicroCor’s hematocrit technology (a method for measuring hematocrit non-invasively without drawing blood) pursuant to the Joint Development Agreement (the “Wescor Agreement”) with Wescor, Inc., a Utah corporation (“Wescor”). The Agreement provided for Wescor to manage and provide funding for MicroCor’s development of its hematocrit technology. Wescor assumed day-to-day management of MicroCor as of September 7, 2004; however, Wescor breached the Wescor Agreement in 2008 by ceasing to fund additional research, and as of December 30, 2008, the day-to-day management was transferred to three of MicroCor’s Directors: Larry Clark, Ralph Henson and Richard Bruggeman.
On June 24, 2010, the Company, Chi Lin Technology Co., Ltd., a corporation organized and existing under the laws of the Republic of China (“Chi Lin”), MicroCor and Wescor executed an amendment (the “Amendment”) to the Wescor Agreement. The Company owned 57% of MicroCor as a result of the Wescor Agreement and Wescor and Chi Lin owned the interest in MicroCor. MicroCor owns three (3) patents covering various aspects of its hematocrit technology.
The Amendment provided for: (i) all debts between the parties to be extinguished and cancelled; (ii) the Company to transfer such stock ownership to Wescor so that Wescor would own 36.8% of MicroCor and the Company would only own 49.0% of MicroCor; and (iii) the Company to loan funds to MicroCor for the maintenance of its patents through 2011. The Amendment was effective as of March 31, 2010.
The Amendment also provides that in the event there are any net revenues from MicroCor’s hematocrit technology in the future, such net revenues will be distributed as follows: (i) the first $150,000 to Wescor; (ii) the Company will be repaid any sums loaned to MicroCor for the patent maintenance; (iii) the next $150,000 split pro-rata 80% to the Company and 20% to Chi Lin; and (iv) the remaining net revenues split pro-rata among MicroCor’s three shareholder’s: the Company (49.0%); Wescor (36.8%) and Chi Lin (14.2%).
As a result of the Company transferring shares in MicroCor to Wescor pursuant to the Amendment, the Company’s ownership in MicroCor became only 49.0%. Therefore, the financial statements of MicroCor are no longer consolidated into and reported with the financial statements of the Company.
Agreement with MicroCor, Inc.
On January 30, 2009, the Company entered into an agreement with MicroCor, its subsidiary (the “MicroCor Agreement”). The MicroCor Agreement provided for the Company to create a Series B class of preferred stock, without dividend or voting rights (the “Series B Preferred”), which would receive 100% of any future benefit from the sale, spin-off, merger or liquidation of MicroCor or the commercialization of its hematocrit technology should such an event occur prior to the expiration of the MicroCor Agreement. The shares of the Series B Preferred would be distributed as a dividend, subject to compliance with federal and state securities laws and regulations, to the Company’s common stockholders, as of January 30, 2009. The creation of the Series B Preferred would prevent any holder of the Company’s common stock after January 30, 2009 from sharing in any future benefit of or to MicroCor through the expiration date of January 30, 2011. The Series B Preferred Stock will no longer be issued to the common shareholders of record at January 30, 2009, as no commercial benefit from MicroCor’s hematocrit technology occurred prior to the expiration date of January 30, 2011.
| 15 |
WINDGEN ENERGY, INC.
Plan of Operation - Wind Energy
Since January 2009, management has refocused the Company on wind energy devices. On April 17, 2009, we entered into a license agreement (the “License Agreement”) with Wind Sail Receptor, Inc. of Boulder City, Nevada (“WSR”), pursuant to which we were granted the exclusive license to assemble and market WSR’s wind sail receptor energy generation devices using blades of 15 feet or less in length in the United States, Canada, the United Kingdom and the Republic of Ireland, with nonexclusive rights in the rest of the world except Latin America. Under the License Agreement, we were to acquire 100 blades from WSR during the first year after WSR is able to manufacture the blades.
During 2010, the Company issued 1,900,000 shares of the Company’s restricted common stock to WSR in consideration of amending the License Agreement. The proposed amendment to the License Agreement between the Company and WSR was not executed. The reasons are various and include, but are not limited to, finalizing details regarding the need for the Company to be involved in assembly of the wind turbines in various license territories outside the US, final pricing that the units would be sold by WSR to the Company, final terms of the product warranty to be provided by WSR, and possible additional exclusive territory added to the License. Under the terms of the existing License Agreement, the Company intended to use its best efforts to obtain Federal, State, Local, or Private Grant Funds and to share these Grant Funds with WSR up to a sum of $1,000,000. To date the Company has not been successful in obtaining Grant Funds. No monetary disputes currently exist between the two companies.
On March 20, 2012, the Company entered into two new agreements with WSR. These two agreements replaced the exclusive sales and distribution License Agreement previously held by the Company. One agreement is a perpetual Royalty Agreement whereby WSR will pay to the Company a royalty on each Wind Sail Receptor Small Wind Turbine System sold in the United States and Canada. The royalty amounts payable are $250 for three foot blade diameter units sold, $500 for six foot blade diameter units sold and $1,500 for twelve foot blade diameter units sold. WSR has ordered its first 100 six foot blade diameter units and has indicated they will be ready for sale some time during July 2012. Once the six foot blade diameter units begin selling, the Company will receive the royalty income on a monthly basis. WSR has indicated it expects to have the twelve foot blade diameter units available for sale by the first quarter of 2013. The three foot blade system is still in development inasmuch as WST is co-developing a totally different type of generator that the blade will be attached to. Once the sale of the twelve foot blade diameter units begins, the royalty income to the Company will significantly increase. A further provision of the new agreement with WSR returns the 1,900,000 restricted shares of the Company’s Common Stock. These shares have been canceled on the books and records of the Company as of December 31, 2011, reducing the total issued and outstanding shares of the Company’s Common Stock. See “Note 1” to the financial statements.
WSR previously ordered in excess of 100 six foot small wind turbines from a turbine manufacturer in India, 56 of which were received by WSR in August 2012. After close inspection of the first shipment of these units, WSR has elected not to accept the units as they do not meet the order specifications. The order for the remaining units has been canceled. WSR now intends to order all components parts for its small wind turbines from vendors in the United States and will then assemble the units at the new WSR facility in Boulder City, Nevada. It is expected that the first units will be available for delivery to end users during the first quarter of 2013.
The second agreement is a Dealer Agreement which awarded the Company a dealership for the exclusive sale and distribution of the Wind Sail Receptor Small Wind Turbines with a blade diameter not to exceed twelve feet for the United Kingdom and the Republic of Ireland. The Company anticipates that at some point during the first quarter of 2013 it will enter into a joint venture in the two territories for the sale, distribution and installation of the small wind turbine systems. Prior to being able to sell the small wind systems, the units will first have to go through a European certification process.
Other Alternative Energy Products
Management of the Company is also considering additional products in the alternative energy field in the future. At such time as management determines that there are other products which the Company may purchase and/or distribute, the Company may change its name in order to better reflect its development of a broader base of clean alternative energy products more clearly.
The Company is currently involved in discussions with a California-based energy storage company involving lithium-ion batteries. At present a letter of intent (“LOI”) is being circulated between the parties with the intent that the LOI will become the basis of a definitive purchase agreement for the Company to acquire the assets of the energy storage company.
| 16 |
WINDGEN ENERGY, INC.
Results of Operations
No revenues from operations were received in 2011 and 2010, nor during the three and nine months ended September 30, 2012. The Company generated negative cash flows from operations of $199,056 and $280,681 in 2011 and 2010, respectively, and net losses from operations of $326,869 and $348,363 in 2011 and 2010, respectively. As of September 30, 2012, the Company had an accumulated deficit of $9,998,576 and a working capital deficit of $325,410.
The Company had a net loss from operations for the three months ended September 30, 2012 of $21,873, as compared to a net loss from operations of $95,869 for the three months ended September 30, 2011. The Company had a net loss from operations for the nine months ended September 30, 2012 of $182,841, as compared to a net loss from continuing operations of $266,861 for the nine months ended September 30, 2011.
The decreases in the net loss from operations for the three and nine months ended September 30, 2012 resulted primarily from decreased General and Administrative Expenses, Marketing Expenses, and Related Party Consulting Fees.
Liquidity and Capital Resources
During the nine months ended September 30, 2012, we sold no shares of restricted common stock.
During the fiscal years ended 2009 and 2010, liquidity was generated from the private placement of restricted common stock sold upon the exercise of the options granted to Law Investments CR, S.A., a Costa Rica corporation (“LI”) pursuant to the terms of the December 8, 2008 stock purchase option agreement (the “LI Agreement”). During 2009, the Company issued 15,000,000 shares of restricted common stock to LI for cash of $95,000 and a stock subscription receivable of $17,500. During 2010, $7,500 was paid toward the subscription receivable leaving a balance due of $10,000 at June 30, 2012. During the third quarter of 2012, the balance of $10,000 due on the subscription was paid in full.
On June 30, 2011, the Company borrowed $25,000 from a third party. The note was due 120 days from the date of the note and carries an interest rate of 10% per annum (the “June 30, 2011 Note”). The Company has extended the due date of the note until December 31, 2012. At September 30, 2012, $3,144 in interest was due on the note.
On July 12, 2011, the Company borrowed $25,000 from a third party. The note was due on April 5, 2012 and carried an interest rate of 8% per annum (the “July 12, 2011 Note”). The note was convertible after six months at a conversion price of 58% of the market price of the common stock. On January 13, 2012, the note holder converted $10,000 of the note to 246,305 shares of common stock pursuant to the conversion formula of the note. On February 1, 2012, the note holder converted $8,000 of the note to 240,240 shares of common stock pursuant to the conversion formula of the note. On February 14, 2012, the note holder converted the remaining $7,000 of the note to 283,688 shares of common stock pursuant to the conversion formula of the note. The note has now been paid in full through conversion and the note holder has forgiven all of the interest payable.
On September 12, 2011, the Company borrowed $35,000 from a third party. The note was due on June 6, 2012 and carries an interest rate of 8% per annum (the “September 12, 2011 Note”). The note was convertible after six months at a conversion price of 55% of the market price of the common stock. On March 13, 2012, the note holder converted $8,000 of the note to 363,636 shares of common stock pursuant to the conversion formula of the note. On March 23, 2012, the note holder converted $12,000 of the note to 555,556 shares of common stock pursuant to the conversion formula of the Note. On August 27, 2012, the note holder converted $12,000 of the note to 1,090,909 shares of common stock pursuant to the conversion formula of the Note. On September 18, 2012, the note holder converted the remaining $3,000 of principal and interest to 411,215 shares of common stock pursuant to the conversion formula of the Note. The note holder agreed to a flat fee of $1,400 for interest and has declared the note paid in full.
| 17 |
WINDGEN ENERGY, INC.
On January 9, 2012, the Company borrowed an additional $42,500 from a third party. The note was funded on January 18, 2012. The note was due on October 11, 2012 and carries an interest rate of 8% per annum (the “January 9, 2012 Note”). The note is convertible after six months at a conversion price of 60% of the market price of the common stock. The Company has the option to prepay the note at any time. On September 24, 2012, the note holder converted $12,000 of the principal of the note to 1,188,119 shares of common stock pursuant to the conversion formula of the note. As of September 30, 2012, the principal balance due on the January 9, 2012 Note was $30,500, plus $2,366 in interest. Pursuant to communications with the note holders’ legal counsel, no action is being taken to declare the note in default and it is anticipated that the balance due on the note will be converted to common stock in the future. On September 28, 2012, the last trading day of the quarter, the market price of the common stock was $0.025, the conversion price would have been $0.01375, and the note was convertible into approximately 2,033,333 shares of common stock.
On June 4, 2012, the Company borrowed an additional $32,500 from a third party. The note was funded on June 21, 2012. The note is due on March 6, 2013 and carries an interest rate of 8% per annum (the “June 4, 2012 Note”). The note is convertible after six months at a conversion price of 55% of the market price of the common stock. The Company has the option to prepay the note at any time. Since the note contains a beneficial conversion feature, the intrinsic value of the conversion feature was calculated at the funding date of June 21, 2012. At that date, the market price of the stock was $0.04, the conversion price would have been $0.022 and the note would have been convertible into 1,477,273 shares of common stock. The intrinsic value was calculated to be $26,591, which was recorded to debt discount and to additional paid-in capital. The debt discount is being amortized to interest expense over a period of six months. At September 30, 2012, the remaining debt discount was $11,770. As of September 30, 2012, the balance due on the June 4, 2012 Note was $32,500, plus $727 in interest. On September 28, 2012, the last trading day of the quarter, the market price of the common stock was $0.025, the conversion price would have been $0.01375, and the note was convertible into approximately 2,363,636 shares of common stock.
Going Concern
The Company’s independent registered public accounting firm has issued a going concern opinion on the Company’s consolidated financial statements for the years ended December 31, 2011 and 2010. See “Note 1” to the financial statements. The Company’s liquidity shortage will continue through 2012.
The Company’s continued existence is dependent upon its ability to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company. Management’s operating plan includes pursuing additional fund raising as well as putting in place all the initial requirements in anticipation of the Company generating revenue in 2013.
New Office Location
In July 2009, the Company moved its offices to 14550 N. Frank Lloyd Wright Blvd., Suite 100, Scottsdale, Arizona 85260, and began paying rent in the amount of $992.52 per month on a month-to-month basis. The lease for the office expired on July 31, 2011. The Company’s new office address is 8432 E. Shea Blvd., Suite 101, Scottsdale, Arizona 85260. The Company’s phone number remained unchanged. The Company’s new fax number is 1-888-480-2543. Effective September 1, 2011, the Company is occupying approximately 400 square feet of office space at the new address on a month-to-month basis. The landlord is a non-affiliate shareholder of the Company and is not currently charging the Company rent. The Company may pay to the landlord rent in the form of shares of the Company's restricted common stock at some point in the future.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Not applicable.
| 18 |
WINDGEN ENERGY, INC.
| Item 4. | Controls and Procedures |
Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this Report. Based on such evaluation, the Company’s principal executive officer and principal financial officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective.
Internal Control Over Financial Reporting. There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| 19 |
WINDGEN ENERGY, INC.
| PART II. | OTHER INFORMATION |
| Item 1. | Legal Proceedings |
None.
| Item 1A. | Risk Factors |
Not applicable.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
| Item 3. | Defaults Upon Senior Securities |
None.
| Item 4. | Mine Safety Disclosures |
Not applicable.
| Item 5. | Other Information |
None.
| Item 6. | Exhibits |
| (a) | Exhibits |
| Exhibit No. | Description | |
| 10.1 | Joint Development Agreement Amendment between the Company, Chi Lin Technology Co., Ltd., MicroCor, Inc., and Wescor, Inc. (1) | |
| 10.2(a) | Exclusive License Agreement between the Company and Wind Sail Receptor, Inc. dated April 17, 2009 (2) | |
| 10.2(b) | Dealer Agreement between the Company and Wind Sail Receptor, Inc. dated March 20, 2012 (3) | |
| 10.2(c) | Royalty Agreement between the Company and Wind Sail Receptor, Inc. dated March 20, 2012 (4) | |
| 31.1 * | Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act | |
| 31.2 * | Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act | |
| 32.1 * | Certification by Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act |
| 20 |
WINDGEN ENERGY, INC.
| Exhibit No. | Description | |
| 101.INS * | XBRL Instance Document ** | |
| 101.SCH * | XBRL Taxonomy Extension Schema Document ** | |
| 101.CAL * | XBRL Taxonomy Extension Calculation Linkbase Document ** | |
| 101.DEF * | XBRL Taxonomy Extension Definition Linkbase Document ** | |
| 101.LAB * | XBRL Taxonomy Extension Labels Linkbase Document ** | |
| 101.PRE * | XBRL Taxonomy Extension Presentation Linkbase Document ** |
__________________
| * | Filed herewith. |
| ** | In accordance with Rule 406T of Regulation S-T, this XBRL-related information shall be deemed to be “furnished” and not “filed.” |
| (1) | Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by the Company on on June 30, 2010. |
| (2) | Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by the Company on April 23, 2009. |
| (3) | Incorporated by reference to Exhibit 10.4(a) of the Annual Report on Form 10-K filed by the Company on April 13, 2012. |
| (4) | Incorporated by reference to Exhibit 10.4(b) of the Annual Report on Form 10-K filed by the Company on April 13, 2012. |
| 21 |
WINDGEN ENERGY, INC.
SIGNATURES
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.
| WINDGEN ENERGY, INC. | |||
| Dated: November 16, 2012 | By: | /s/ Ronald Conquest | |
Ronald Conquest Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer) |
|||
| Dated: November 16, 2012 | By: | /s/ Wendy Carriere | |
Wendy Carriere Secretary/Treasurer, Chief Financial Officer and Director (Principal Financial Officer) |
|||
| 22 |
EXHIBIT 31.1
RULE 13a-14(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Ronald Conquest, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of WindGen 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 registrant’s other certifying officer(s) 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 registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting. |
| Date: November 16, 2012 | ||
| By: | /s/ Ronald Conquest | |
| Ronald Conquest | ||
| Chief Executive Officer |
EXHIBIT 31.2
RULE 13a-14(a) CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Wendy Carriere, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of WindGen 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 registrant’s other certifying officer(s) 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 registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting. |
| Date: November 16, 2012 | ||
| By: | /s/ Wendy Carriere | |
| Wendy Carriere | ||
| Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of WindGen Energy, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2012, filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officers of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:
| (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 material respects, the financial condition and results of operations of the Company, as of, and for the periods presented in the Report. |
| Date: November 16, 2012 | |
| /s/ Ronald Conquest | |
|
Ronald Conquest Chief Executive Officer | |
| /s/ Wendy Carriere | |
Wendy Carriere Chief Financial Officer |
|
COMMON STOCK (Unaudited)
|
9 Months Ended |
|---|---|
|
Sep. 30, 2012
|
|
| Common Stock [Abstract] | |
| COMMON STOCK | NOTE 4 – COMMON STOCK
The Company is authorized to issue 100,000,000 shares of common stock, $0.001 par value (the “Common Stock”), of which approximately 47,068,058 shares were issued and outstanding on September 30, 2012. All presently outstanding shares are duly authorized, fully-paid and non-assessable. Each share of the Common Stock is entitled to one vote on all matters to be voted on by the shareholders, such as the election of certain directors and other matters that directly impact the rights of the holders of such class. There is no cumulative voting in the election of directors. Holders of Common Stock are entitled to receive such dividends as may be declared from time to time by the Board of Directors out of funds legally available therefore. In the event of any dissolution, winding up or liquidation of the Company, the shares of Common Stock will share ratably in all the funds available for distribution after payment of all debts and obligations. The holders of Common Stock are subject to any rights that may be fixed for holders of preferred stock as designated upon issuance.
On December 4, 2009, the Company changed its total authorized common shares from 40,000,000 to 100,000,000 shares.
During 2009, the Company issued 15,000,000 shares of common stock for cash of $95,000 and a stock subscription receivable of $17,500. The stock issuances were the result of the exercise of a stock purchase option agreement with Law Investments CR, S.A., a Costa Rica corporation. During 2011 and 2010, $0 and $7,500, respectively, was paid toward the subscription receivable leaving a balance due of $10,000 at June 30, 2012. During the third quarter of 2012, the balance of $10,000 due on the subscription was paid in full.
During 2010, the Company completed the conversion of shares of Series A Preferred (defined in Note 5, below) held by three of the four existing preferred shareholders by issuing 246,834 shares of the Company’s restricted common stock at a price of $0.50 per share plus a $5,000 cash payment to each preferred shareholder. The conversion of these preferred shares reduced the dividends payable from $64,309 at December 31, 2009 to $17,969 at December 31, 2010. As of September 30, 2012, the total dividends payable on the remaining shares of Series A Preferred was $21,279.
During 2010 the Company issued 1,900,000 shares of the Company’s restricted common stock to Wind Sail Receptor, Inc. (“WSR”) in consideration of an amendment to the Company’s 2009 License Agreement with WSR. The shares were valued at $0.10 per share. As of December 31, 2011, the Company recorded the cancellation of the WSR Shares that were returned subsequent to year-end, as part of the new agreements with WSR. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Plan of Operation – Wind Energy” for complete details regarding these agreements.
During 2011, the Company issued 1,077,331 shares of common stock for cash of $80,800 pursuant to the Company’s Rule 506 private placement.
During 2011, the Company issued 1,622,630 shares of the Company’s restricted common stock for the conversion of debt in the amount of $52,000.
During 2011, the Company issued 50,000 shares of the Company’s restricted common stock for a non-refundable retainer fee related to a finder’s fee agreement with BFS Financial, Inc. entered into by the Company. The shares were valued at $0.10 per share.
On January 6, 2012, the Board of Directors awarded 100,000 shares of restricted common stock to Wendy Carriere, the Company’s Secretary/Treasurer, Chief Financial Officer and Director, valued at $0.075 per share, for her services in 2011. Since the shares were issued for services related to 2011, the shares were recorded as of December 31, 2011.
On February 8, 2012, the Company issued 500,000 shares of restricted common stock to Wakabayashi Fund LLC of Tokyo, Japan. The shares are for consulting services to be provided by the Wakabayashi Fund LLC to assist the Company to establish International recognition, international market making, international financial PR/IR, and capital formation. The shares were valued at $0.10 per share.
During the first quarter of 2012, the Company issued 1,689,425 shares of the Company’s restricted common stock for the conversion of debt in the amount of $45,000.
During the third quarter of 2012, the Company issued 2,690,243 shares of the Company’s restricted common stock for the conversion of debt in the amount of $27,000. |