UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-Q
_______________
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended November 30, 2008
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
GLOBAL EARTH ENERGY, INC.
(Exact name of registrant as specified in Charter)
| NEVADA | | 000-31343 | | 36-4567500 |
(State or other jurisdiction of incorporation or organization) | | (Commission File No.) | | (IRS Employee Identification No.) |
534 Delaware Avenue, Suite 412
Buffalo, New York 14202
(Address of Principal Executive Offices)
_______________
(910) 616-0077
(Issuer Telephone number)
_____________
(Former Name or Former Address if Changed Since Last Report)
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company x
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.
Yes o No x
State the number of shares outstanding of each of the issuer’s classes of common equity, as of January 13, 2009: 26,983,403 shares of common stock.
Global Earth Energy, Inc.
FORM 10-Q
November 30, 2008
EXPLANATORY NOTE: This Amended Form 10-Q/A is being filed with the Securities and Exchange Commission (the “Commission”) to include updated financial information which was the subject of the Form 8-K filed with the Commission on July 16, 2009.
Table of Contents
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PART I FINANCIAL INFORMATION | | |
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| | | Balance Sheets as at November 30, 2008 (unaudited) and August 31, 2008 (Restated) | | |
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| | | Consolidated Statements of Operations for the Three Months Ended November 30, 2008 and 2007 (Unaudited) (Restated) | | |
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| | | Consolidated Statements of Cash Flows for the three months ended November 30, 2008 and 2007 (Unaudited) (Restated) | | |
| | | |
| | | Notes to Consolidated Financial Statements | | |
| | | |
| | Management Discussion and Analysis of Financial Condition and Results of Operations. | | |
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| | Quantitative and Qualitative Disclosures About Market Risk. | | |
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PART II OTHER INFORMATION | | |
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| | Unregistered Sales of Equity Securities and Use of Proceeds. | | |
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| | Defaults Upon Senior Securities. | | |
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| | Submission of Matters to a Vote of Security Holders. | | |
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Item 1. Financial Information
GLOBAL EARTH ENERGY, INC.
(FORMERLY KNOWN AS GLOBAL WATAIRE INC.)
(A NEVADA CORPORATION)
Buffalo, New York
| FINANCIAL REPORTS |
| AT |
| November 30, 2008 |
GLOBAL EARTH ENERGY, INC. (FORMERLY KNOWN AS GLOBAL WATAIRE INC.) (A NEVADA CORPORATION) Buffalo, New York TABLE OF CONTENTS | |
| | |
Consolidated Balance Sheets at November 30, 2008 (Unaudited) and August 31, 2008 (Restated) | 1 |
| | |
Consolidated Statements of Operations for the Three Months Ended November 30, 2008 and 2007 (Unaudited)(Restated) | 2 |
| | |
Consolidated Statements of Cash Flows for the Three Months Ended November 30, 2008 and 2007 (Unaudited) (Restated) | 3 |
| | |
| Notes to Consolidated Financial Statements | 4-7 |
| | | | | | | |
| GLOBAL EARTH ENERGY, INC. | | | | | | |
| (FORMERLY KNOWN AS GLOBAL WATAIRE INC.) | | | | | | |
| (A NEVADA CORPORATION) | | | | | | |
| Buffalo, New York | | | | | | |
| | | | | | | |
| CONSOLIDATED BALANCE SHEETS | | | | | | |
| | | (Unaudited) | | | | |
| | | (Restated) | | | (Restated) | |
| | | November 30, | | | August 31, | |
| | | 2008 | | | 2008 | |
| | | | | | | |
| ASSETS | | | | | | |
| Current Assets | | | | | | |
| Cash and Cash Equivalents | | $ | 263 | | | $ | 1,009 | |
| Prepaid Expenses | | | 44,000 | | | | –– | |
| | | | | | | | | |
| Total Assets | | $ | 44,263 | | | $ | 1,009 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | | | | | |
| | | | | | | | | |
| Current Liabilities | | | | | | | | |
| Accrued Expenses | | $ | 177,880 | | | $ | 183,968 | |
| Accrued Compensation - Directors | | | 1,160,990 | | | | 976,811 | |
| Due to Directors | | | 377,412 | | | | 350,435 | |
| | | | | | | | | |
| Total Liabilities | | | 1,716,282 | | | | 1,511,214 | |
| | | | | | | | | |
| Stockholders' Deficit | | | | | | | | |
| Common Stock: $.001 Par; 800,000,000 Shares Authorized; | | | | | | | | |
| 26,983,403 and 26,483,403 Issued and 23,983,403and 23,483,403, Outstanding, Respectively | | | 23,983 | | | | 23,483 | |
| | | | | | | | | |
| Common Stock, Class B: $.001 Par; 50,000 Shares Authorized; | | | | | | | | |
| -0- Issued and Outstanding | | | –– | | | | –– | |
| | | | | | | | | |
| Preferred Stock, Class A: $.001 Par; 1,000,000 Shares Authorized; | | | | | | | | |
| 66,000 Issued and Outstanding | | | 66 | | | | 66 | |
| Preferred Stock, Class B: $.001 Par; 5,000,000 Shares Authorized; | | | | | | | | |
| 1,000,000 Issued and Outstanding | | | 1,000 | | | | 1,000 | |
| Preferred Stock, Class C: $.001 Par; 15,000,000 Shares Authorized; | | | | | | | | |
| -0- Issued and Outstanding | | | –– | | | | –– | |
| Preferred Stock, Class D: $.001 Par; 13,000,000 Shares Authorized; | | | | | | | | |
| -0- Issued and Outstanding | | | –– | | | | –– | |
| Additional Paid-In Capital | | | 4,339,120 | | | | 4,256,820 | |
| Accumulated Deficit | | | (6,033,188 | ) | | | (5,788,574 | ) |
| Treasury Stock – 3,000,000 Shares at $.001 Par | | | (3,000 | ) | | | (3,000 | ) |
| | | | | | | | | |
| Total Stockholders' Deficit | | | (1,672,019 | ) | | | (1,510,205 | ) |
| | | | | | | | | |
| Total Liabilities and Stockholders' Deficit | | $ | 44,263 | | | $ | 1,009 | |
| | | | | | | | | |
| GLOBAL EARTH ENERGY, INC. | |
| (FORMERLY KNOWN AS GLOBAL WATAIRE INC.) | |
| (A NEVADA CORPORATION) | |
| Buffalo, New York | |
| | |
| | |
| CONSOLIDATED STATEMENTS OF OPERATIONS | |
| | |
| | | Unaudited | |
| | | (Restated) | | | (Restated) | |
For the Three Months Ended November 30, | | 2008 | | | 2007 | |
| | | | | | | |
| Revenues, Net | | $ | — | | | $ | — | |
| | | | | | | | | |
| Cost of Goods Sold | | | — | | | | — | |
| | | | | | | | | |
| Gross Profit | | | –– | | | | –– | |
| | | | | | | | | |
| Expenses | | | | | | | | |
| Compensation Expense – Stock Options | | | 2,800 | | | | –– | |
| Consulting Fees | | | 183,500 | | | | 172,500 | |
| General and Administrative | | | 24,457 | | | | 56,849 | |
| Interest Expense | | | 33,857 | | | | 20,220 | |
| | | | | | | | | |
| Total Expenses | | | 244,614 | | | | 249,569 | |
| | | | | | | | | |
| Loss from Operations Before | | | | | | | | |
| Provision for Taxes | | | (244,614 | ) | | | (249,569 | ) |
| | | | | | | | | |
| Provision for Taxes | | | — | | | | — | |
| | | | | | | | | |
| Net Loss for the Period | | $ | (244,614 | ) | | $ | (249,569 | ) |
| | | | | | | | | |
| Weighted Average Number of | | | | | | | | |
| Common Shares Outstanding - | | | | | | | | |
| Basic | | | 23,983,403 | | | | 22,541,383 | |
| Diluted | | | 26,983,403 | | | | 25,541,383 | |
| Net Loss Per Common Share - | | | | | | | | |
| Basic and Diluted | | $ | (0.01 | ) | | $ | (0.01 | ) |
| GLOBAL EARTH ENERGY, INC. | | | | | | |
| (FORMERLY KNOWN AS GLOBAL WATAIRE INC.) | | | | | | |
| (A NEVADA CORPORATION) | | | | | | |
| Buffalo, New York | | | | | | |
| | | | | | | |
| | | | | | | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | | | | | | |
| | | | |
| | | Unaudited | |
| | | (Restated) | | | (Restated) | |
| For the Three Months Ended November 30, | | 2008 | | | 2007 | |
| | | | | | | |
| Cash Flows from Operating Activities | | | | | | |
| | | | | | | |
| Net Loss for the Period | | $ | (244,614 | ) | | $ | (249,569 | ) |
| | | | | | | | | |
| Non-Cash Adjustments: | | | | | | | | |
| Interest on Loans | | | 33,857 | | | | 20,220 | |
| Common Stock Issued In Exchange for Services Rendered | | | 80,000 | | | | — | |
| Compensation Expense – Stock Options | | | 2,800 | | | | — | |
| Changes in Assets and Liabilities: | | | | | | | | |
| Prepaid Expenses | | | (44,000 | ) | | | — | |
| Accounts Payable | | | — | | | | 1,328 | |
| Accrued Expenses | | | (8,941 | ) | | | 8,621 | |
| Accrued Compensation - Directors | | | 159,127 | | | | 28,417 | |
| | | | | | | | | |
| Net Cash Flows from Operating Activities | | | (21,771 | ) | | | (190,983 | ) |
| | | | | | | | | |
| Cash Flows from Investing Activities | | | — | | | | — | |
| | | | | | | | | |
| Cash Flows from Financing Activities | | | | | | | | |
| Proceeds from Issuance of Regulation S Shares | | | — | | | | 153,982 | |
| Advances from (Repayment) to Directors - Net | | | 21,025 | | | | (56,667 | ) |
| | | | | | | | | |
| Net Cash Flows from Financing Activities | | | 21,025 | | | | 97,315 | |
| | | | | | | | | |
| Net Change in Cash and Cash Equivalents | | | (746 | ) | | | (93,668 | ) |
| | | | | | | | | |
| Cash and Cash Equivalents - Beginning of Period | | | 1,009 | | | $ | 197,593 | |
| | | | | | | | | |
| Cash and Cash Equivalents - End of Period | | $ | 263 | | | $ | 103,925 | |
| | | | | | | | | |
| | | | | | | | | |
| Supplemental Disclosures | | | | | | | | |
| Interest Paid | | $ | — | | | $ | — | |
| Income Taxes Paid | | $ | — | | | $ | — | |
| | | | | | | | | |
GLOBAL EARTH ENERGY, INC.
(FORMERLY KNOWN AS GLOBAL WATAIRE INC.)
(A NEVADA CORPORATION)
Buffalo, New York
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE A – | Basis of Presentation |
| | The condensed consolidated financial statements of Global Earth Energy, Inc. (the “Company”) included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in conjunction with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the annual audited financial statements and the notes thereto included in the Company’s registration statement on Form 10-KSB, and other reports filed with the SEC. |
| | The accompanying unaudited interim financial statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year taken as a whole. Certain information that is not required for interim financial reporting purposes has been omitted. |
| | The Company has changed its primary business objective from advisory services to the biodiesel production industry. Consequently, the Company changed their name on February 5, 2008 to Global Earth Energy, Inc. |
| | Principles of Consolidation |
| | The consolidated financial statements include the accounts of Global Earth Energy, Inc., and its wholly owned subsidiary, Knightbridge Corp. (the “Company”). All significant intercompany balances have been eliminated in consolidation. |
| | The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has reported recurring losses from operations. As a result, there is an accumulated deficit of $6,033,188 at November 30, 2008. |
| | The Company’s continued existence is dependent upon its ability to raise capital or acquire a marketable company. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. |
GLOBAL EARTH ENERGY, INC.
(FORMERLY KNOWN AS GLOBAL WATAIRE INC.)
(A NEVADA CORPORATION)
Buffalo, New York
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE C – | Recently Issued Accounting Standards |
| | In February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 155, “Accounting for Certain Hybrid Financial Instruments – an amendment of FASB Statement No. 133 and 140” (“SFAS 155”). |
| | SFAS 155 resolves issues addressed in Statement 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interest in Securitized Financial Assets.” SFAS 155 is effective for all financial instruments acquired or issued after the beginning of the first fiscal year that begins after September 15, 2006. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended August 31, 2008. The adoption of SFAS 155 did not have a material effect on its consolidated financial instruments. |
| | In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140” (“SFAS 156”). SFAS 156 amends FASB Statement No. 140 with respect to the accounting for separately recognized servicing assets and servicing liabilities. SFAS 156 requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practical. SFAS 156 is effective as of the beginning of the first fiscal year that begins after September 15, 2006. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended August 31, 2008. The adoption of SFAS 156 did not have a material effect on its consolidated financial statements. |
| | In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 157, "Fair Value Measurements”. SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective as of the beginning of the first fiscal year that begins after November 15, 2007. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended August, 2009. The Company is currently evaluating the impact of SFAS 157 on its consolidated financial statements. In February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115”. SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. This Statement applies to all entities, including not-for-profit organizations. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended August, 2009. The Company is currently evaluating the impact of SFAS 159 on its consolidated financial statements. |
| | In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 160, "Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended August, 2009. The Company is currently evaluating the impact of SFAS 160 on its consolidated financial statements but does not expect it to have a material effect. |
GLOBAL EARTH ENERGY, INC.
(FORMERLY KNOWN AS GLOBAL WATAIRE INC.)
(A NEVADA CORPORATION)
Buffalo, New York
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE C – | Recently Issued Accounting Standards – continued |
| | In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 141(R), "Business Combinations”. SFAS 141(R) establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, an any noncontrolling interest in the acquiree, recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended August, 2009. The Company is currently evaluating the impact of SFAS 141(R) on its consolidated financial statements but does not expect it to have a material effect. In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 161, "Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133”. SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 with early application encouraged. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended August, 2009. The Company is currently evaluating the impact of SFAS 161 on its consolidated financial statements but does not expect it to have a material effect. In May 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 162, "The Hierarchy of Generally Accepted Accounting Principles”. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company is currently evaluating the impact of SFAS 162 on its consolidated financial statements but does not expect it to have a material effect. In May 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 163, "Accounting for Financial Guarantee Insurance Contracts—an interpretation of FASB Statement No. 60" (“SFAS 163”). SFAS 163 interprets Statement 60 and amends existing accounting pronouncements to clarify their application to the financial guarantee insurance contracts included within the scope of that Statement. SFAS 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended August, 2009. The Company is currently evaluating the impact of SFAS 163 on its consolidated financial statements but does not expect it to have a material effect. |
GLOBAL EARTH ENERGY, INC.
(FORMERLY KNOWN AS GLOBAL WATAIRE INC.)
(A NEVADA CORPORATION)
Buffalo, New York
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE D – | Share Activity Regulation S Stock |
| | On January 26, 2007, the Company issued a press release announcing that they had launched anequity offering on the Berlin Stock Exchange. The company originally was offering 10,000,000 shares for sale. On August 1, 2007, the board authorized an additional 5,000,000 shares for sale. All shares are being offered at a price of $0.50 per share and if completely subscribed will yield $7,500,000. This offering is on a best effort basis. As of November 30, 2008, 15,978,165 shares had been issued including 2,300,000shares which were issued in exchange for financial services rendered. Gross proceeds from the sale of stock were $2,770,861 less stock issuance costs of $1,669,583. Net proceeds from the sale of stock were $1,101,278.
Stock Options On October 18, 2008 the Company approved the granting of stock options to its CFO of 40,000 Class A Preferred Stock Shares. On September 25, 2008 a stockholder that is closely related to Betty-Ann and Sydney Harland received 400,000 shares of regulation 144 common stock. This stock was to reimburse the stockholder for 400,000 shares that he gave to the company on August 27, 2008 to pay the Company’s Consultant. On August 31, 2008 the Company entered into an agreement with Larry Ricci (Contractor). Pursuant to the agreement the Contractor agrees to assist the Company in identifying and researching potential acquisitions for the Company’s subsidiary Knightbridge Corp. The term of the contract is for one year, expiring on August 31, 2009. In consideration for his services, the Contractor received 100,000 common shares on August 31, 2008. |
| NOTE E – | Note E – Restatement of Prior Quarter Financials |
| | The financial statements included herein have been restated to correct an error in accounting for services rendered by a consultant during the three months ended November 30, 2008 and 2007 and for the year ended August 31, 2008. A contract was entered into by the Company and the consultant during the quarter ended November 30, 2006. Services by the consultant were rendered but not accrued thereby causing accrued interest expense and the following restatements: For August 31, 2008, accrued expenses increased by $30,448 from $153,520 to $183,968 resulting from an increase in accrued consulting expenses of $20,000 and accrued interest expense of $10,448. Accumulated deficit increased by $30,448 from $5,758,126 to $5,788,574 as a result of these increased accruals. For the three months ended November 30, 2007, consulting expenses increased by $20,000 and interest expense increased by $2,356, thereby increasing net loss for the quarter by $22,356 from $227,213 to $249,569. For the three months ended November 30, 2008, interest expense increased by $2,853, thereby increasing net loss by $2,853 from $241,761 to $244,614. Accumulated Deficit increased by $2,853 from $6,030,335 to $6,033,188. Accrued expenses also increased by $2,853 from $175,027 to $177,880.November 30, 2008 and 2007 was restated for the cumulative effect of the above items. |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this prospectus. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.
Much of the discussion in this Item is "forward looking." Actual operations and results may materially differ from present plans and projections due to changes in economic conditions, new business opportunities, changed business conditions, and other developments. Other factors that could cause results to differ materially are described in our filings with the Securities and Exchange Commission.
The following are factors that could cause actual results or events to differ materially from those anticipated, and include, but are not limited to general economic, financial and business conditions, changes in and compliance with governmental laws and regulations, including various state and federal environmental regulations, our ability to obtain additional financing from outside investors and/or bank and mezzanine lenders; and our ability to generate sufficient revenues to cover operating losses and position us to achieve positive cash flow.
Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. We believe the information contained in this Form 10-Q to be accurate as of the date hereof. Changes may occur after that date. We will not update that information except as required by law in the normal course of its public disclosure practices.
For the three months ended November 30, 2008 and 2007 the company had no sales. Net loss for the three months ended November 30, 2008 was $(244,614) compared to the net loss of $ (249,569) for the three months ended November 30, 2007.
Expenses have de creased by $ 4,955 for the first three months of our current fiscal year from $ 249,569 for the three months ended November 30, 2007 to $ 244,614 for the three months ended November 30, 2008. The decrease can be attributed to an increase in compensation expense stock options of $2,800, an increase in consulting fees of $ 11,000 and a decrease in general and administrative expenses of $32,392. An increase in interest expense of $ 13,637 is due to the company having no revenues.
Going Concern
The Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has reported recurring losses from operations. As a result, there is an accumulated deficit of $6,033,188 at November 30, 2008.
The Company’s continued existence is dependent upon its ability to raise capital or acquire a marketable company. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
Liquidity and Capital Resources
Our operations used approximately $21,771 in cash for the three months ended November 30, 2008. Cash required during the three months ended November 30, 2008 came principally from advances from directors in the amount of $21,025.
In pursuing our marketing and sale of our products under our new business plan, we estimate our operational expenses during the next 12 months will be approximately $3,500,000.
As discussed by our accountants in the audited financial statements included in this report, our revenues are currently insufficient to cover our costs and expenses and our lack of sources of revenue raise substantial doubts about our ability to continue as a going concern.
Pursuant to this report, we are attempting to raise additional capital. In addition, certain of our directors and stockholders may continue to provide the Company with the funds needed to continue our development and operations. To the extent our revenue shortfall exceeds our capital raising efforts and the willingness and ability of our directors and stockholders to continue providing the Company with the funds needed, we anticipate raising any necessary capital from other outside investors coupled with bank or mezzanine lenders. As of the date of this report, we have not entered into any negotiations with any third parties to provide such capital.
We anticipate that our current financing strategy of equity offerings and private debt will meet our anticipated objectives and business operations for the next 12 months. Subject to our ability to obtain adequate financing at the applicable time, we may enter into definitive agreements on one or more of those opportunities.
Critical Accounting Policies
Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Critical accounting policies include revenue recognition and impairment of long-lived assets.
We recognize revenue in accordance with Staff Accounting Bulletin No.101, “Revenue Recognition in Financial Statements.” Sales are recorded when products are shipped to customers. Provisions for discounts and rebates to customers, estimated returns and allowances and other adjustments are provided for in the same period the related sales are recorded.
We evaluate our long-lived assets for financial impairment on a regular basis in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” which evaluates the recoverability of long-lived assets not held for sale by measuring the carrying amount of the assets against the estimated discounted future cash flows associated with them. At the time such evaluations indicate that the future discounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values
Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)”. This statement requires employers to recognize the over-funded or under-funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. The provisions of SFAS No. 158 are effective for employers with publicly traded equity securities as of the end of the fiscal year ending after December 15, 2006. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.
In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, “Fair Value Measurements”. The adoption of this statement is not expected to have a material effect on the Company's financial statements.
In December 2007, the FASB issued SFAS No. 160, “ Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51” (“ SFAS 160” ). SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. An ownership interest in subsidiaries held by parties other than the parent should be presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. SFAS 160 requires that changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary should be accounted for similarly as equity transactions. When a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary should be initially measured at fair value, with any gain or loss recognized in earnings. SFAS 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interests. SFAS 160 is effective for fiscal years (including interim periods within those fiscal years) beginning on or after December 15, 2008 (October 1, 2009 for the Company). Earlier adoption is prohibited. The statement shall be applied prospectively as of the beginning of the fiscal year in which it is initially applied, except for the presentation and disclosure requirement which shall be applied retrospectively for all periods presented. The Company is currently evaluating the impact SFAS 160 will have on its consolidated financial statements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).
Item 3. Quantitative and Qualitative Disclosures about Market Risks
We conduct our business in United States dollars. Our market risk is limited to the United States domestic, economic and regulatory factors.
Item 4T. Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Accounting Officer (“CAO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CAO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CAO, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Controls over Financial Reporting
Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of consolidated financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. There has been no change in the Company’s internal control over financial reporting during the quarter ended November 30, 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company’s management, including the Company’s CEO and CAO, does not expect that the Company’s disclosure controls and procedures or the Company’s internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of the controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the company’s internal control over financial reporting was effective as of November 30, 2008.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
A default judgment was entered against the Company in a Texas Court in a legal dispute initiated by the Company’s former attorney over the amount of his legal charges, the amount and entitlement to which the Company is currently disputing.
Item 1A. Risk Factors.
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None
Item 6. Exhibits and Reports of Form 8-K.
(a) Exhibits
31.1 Certifications pursuant to Section 302 of Sarbanes Oxley Act of 2002
32.1 Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002
(b) Reports of Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | Global Earth Energy, Inc. |
| | |
| Date: July __, 2009 | By: | /s/ Sydney A. Harland |
| | | Sydney A. Harland |
| | | Chief Executive Officer |
| | | /s/ Edmund J. Gorman |
| | | Edmund J. Gorman Chief Financial Officer |
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