UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedJune 30, 2008
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly transition period ended ______
0-49632
Commission file number:
SOLANEX MANAGMENT INC.
(Exact name of small business issuer as specified in its charter)
| Nevada | #98-0361151 |
| (State of Incorporation) | (I.R.S. Employer Identification No.) |
1500 East Tropicana Ave., Suite 100
Las Vegas, Nevada 89119
(Address of principal executive offices)
1 (888) 678-9446
(Issuer's telephone number)
Suite 440 - 1555 E. Flamingo Road, Las Vegas, Nevada 89119 (604) 601-2107
(Former name, former address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes [X] No (2) Yes [X] No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
State the number of shares outstanding of each of the Issuer's classes of common equity, as of the latest practicable date: As of July 25, 2008 the Issuer had 12,033,730 shares of common stock, par value $0.001, issued and outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
PART I - FINANCIAL INFORMATION
The interim Financial Statements of the Company, prepared without audit and required to be filed with this 10-QSB Quarterly Report were prepared by management and commence on the following page, together with related Notes. In the opinion of management, the interim Financial Statements fairly present the financial condition of the Company. The Company's auditors have expressed a going concern qualification with respect to the Company's audited financial statements at December 31, 2007.
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| ITEM 1.Interim Financial Statements |
| Solanex Management Inc. |
| (A Development Stage Company) |
| Interim Balance Sheets |
| (expressed in U.S. dollars) |
| June 30, | December 31, | |||||
| 2008 | 2007 | |||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| Current | ||||||
| Cash | $ | 3,665 | $ | 12,061 | ||
| Prepaid expense | 0 | 1,147 | ||||
| Total current assets | 3,665 | 13,208 | ||||
| Total assets | $ | 3,665 | $ | 13,208 | ||
| LIABILITIES | ||||||
| Current | ||||||
| Accounts payable and accrued liabilities | $ | 178,031 | $ | 139,124 | ||
| Payable to related parties | 19,500 | 18,790 | ||||
| Promissory notes payable | 193,760 | 173,500 | ||||
| Total current liabilities | 391,291 | 331,414 | ||||
| Total Liabilities | 391,291 | 331,414 | ||||
| STOCKHOLDERS’ DEFICIENCY | ||||||
| Preferred stock: 20,000,000 authorized at par value of $0.001 | ||||||
| Nil preferred shares issued and outstanding | 0 | 0 | ||||
| Common shares: 100,000,000 authorized at par value of $0.001 | ||||||
| 12,033,730 common shares issued and outstanding | 12,034 | 12,034 | ||||
| (December 31, 2007 – 12,033,730) | ||||||
| Additional paid-in capital | 395,005 | 395,005 | ||||
| Deficit accumulated during the development stage | (794,665 | ) | (725,245 | ) | ||
| Total stockholders’ deficiency | (387,626 | ) | (318,206 | ) | ||
| Total liabilities and stockholders’ deficiency | $ | 3,665 | $ | 13,208 |
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| Solanex Management Inc. |
| (A Development Stage Company) |
| Interim Statements of Operations |
| (expressed in U.S. dollars) |
| (Unaudited) |
| CUMULATIVE | |||||||||||||||
| PERIOD FROM | |||||||||||||||
| INCEPTION | |||||||||||||||
| OCTOBER 12, | |||||||||||||||
| THREE MONTHS ENDED | SIX MONTHS ENDED | 2000 TO | |||||||||||||
| JUNE 30 | JUNE 30 | JUNE 30, | |||||||||||||
| 2008 | 2007 | 2008 | 2007 | 2008 | |||||||||||
| Revenue | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||
| Expenses | |||||||||||||||
| Administration | 8,765 | 9,417 | 15,140 | 15,417 | 157,334 | ||||||||||
| Consulting fees | 15,000 | 12,473 | 30,000 | 36,246 | 223,389 | ||||||||||
| Feasibility study | 0 | 0 | 0 | 0 | 9,250 | ||||||||||
| Office and rent | 0 | 6,567 | 3,836 | 11,759 | 153,824 | ||||||||||
| Organization expenses | 0 | 0 | 0 | 0 | 6,228 | ||||||||||
| Professional fees | 1,491 | 10,330 | 18,511 | 27,534 | 135,349 | ||||||||||
| Technology cost | 0 | 0 | 0 | 0 | 100,000 | ||||||||||
| 25,256 | 38,787 | 67,487 | 90,956 | 785,374 | |||||||||||
| Net Loss From Operations | $ | (25,256 | ) | $ | (38,787 | ) | $ | (67,487 | ) | $ | (90,956 | ) | $ | (785,374 | ) |
| Other Income (Expense) | |||||||||||||||
| Interest | (999 | ) | 0 | (1,973 | ) | 0 | (5,869 | ) | |||||||
| Foreign exchange gain (loss) | 128 | 0 | 40 | 0 | (3,422 | ) | |||||||||
| Net loss before income taxes | (26,127 | ) | (38,787 | ) | (69,420 | ) | (90,956 | ) | (794,665 | ) | |||||
| Income tax expense | 0 | 0 | 0 | 0 | 0 | ||||||||||
| Net Loss For The Period | (26,127 | ) | (38,787 | ) | (69,420 | ) | (90,956 | ) | (794,665 | ) | |||||
| Basic And Diluted Loss Per Share | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | |||
| Weighted Average Number | |||||||||||||||
| Of Shares Outstanding | 12,033,730 | 12,033,730 | 12,033,730 | 12,033,730 | |||||||||||
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| Solanex Management Inc. |
| (A Development Stage Company) |
| Interim Statements of Cash Flows |
| (expressed in U.S. dollars) |
| (Unaudited) |
| CUMULATIVE | |||||||||
| PERIOD FROM | |||||||||
| INCEPTION | |||||||||
| SIX MONTHS ENDED | OCTOBER 12, | ||||||||
| JUNE 30 | 2000 TO JUNE | ||||||||
| 2008 | 2007 | 30, 2008 | |||||||
| Cash Flows (Used In) Operating Activities | |||||||||
| Net loss for the period | $ | (69,420 | ) | $ | (90,956 | ) | $ | (794,665 | ) |
| Adjustment for items not affecting cash: | |||||||||
| Expenses not paid with cash | 0 | 0 | 7,387 | ||||||
| Net changes in non cash operating working capital | |||||||||
| items: | |||||||||
| Account receivable and prepaid expense | 1,147 | (710 | ) | 0 | |||||
| Accounts payable and accrued liabilities | 38,907 | 9,704 | 292,090 | ||||||
| Net cash flow used by operations | (29,366 | ) | (81,962 | ) | (495,188 | ) | |||
| Cash Flows Provided By Financing Activities | |||||||||
| Issuance of common shares | 0 | 0 | 264,998 | ||||||
| Payable to related party | 710 | 0 | 19,500 | ||||||
| Loans payable | 20,260 | 0 | 216,742 | ||||||
| Net cash flow provided by financing activities | 20,970 | 0 | 501,240 | ||||||
| Foreign Exchange Effect On Cash | 0 | 0 | (2,387 | ) | |||||
| Increase (Decrease) In Cash | (8,396 | ) | (81,962 | ) | 3,665 | ||||
| Cash, Beginning Of Period | 12,061 | 93,797 | 0 | ||||||
| Cash, End Of Period | $ | 3,665 | $ | 11,835 | $ | 3,665 | |||
| Supplemental Disclosure Of Cash Flow | |||||||||
| Information | |||||||||
| Interest paid | $ | 0 | $ | 0 | $ | 0 | |||
| Income taxes paid | 0 | 0 | 0 | ||||||
| Supplemental Disclosure Of Non-Cash | |||||||||
| Financing Activities | |||||||||
| Shares issued for the acquisition of technology | $ | 0 | $ | 0 | $ | 3,500 | |||
| Shares issued on conversion of promissory note | 0 | 0 | 26,772 | ||||||
| Shares issued for organization of the Company | 0 | 0 | 1,500 | ||||||
| Shares issued to settle payables | 0 | 0 | 95,269 | ||||||
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| Solanex Management Inc. |
| (a Development Stage Company) |
| NOTES TO INTERIM FINANCIAL STATEMENTS |
| Six Months Ended June 30, 2008 |
1. ORGANIZATION AND BASIS OF PRESENTATION
Solanex Management Inc (the "Company") was incorporated in the State of Nevada on October 12, 2000 under the name EcoSoil Management Inc. and is in its developmental stage. The Company changed its name to Solanex Management Inc. on December 6, 2001. To date the Company's activities have been organizational, directed at acquiring a principal asset, raising initial capital, and developing its technology and business plan.
The interim financial statements of the Company are consolidated with the financial statements of its two wholly owned subsidiary companies: Solanex Placer Inc. and Solanex Recovery Inc. All inter company accounts and transactions have been eliminated on consolidation. At June 30, 2008 both subsidiary companies were inactive.
On October 12, 2000 Solanex acquired a license to certain technology and intellectual property from Colin V. Hall, the developer of the technology, and a group of investors. The license granted a non-exclusive right to manufacture, market and sell a thermal destructor for site remediation to industrial, petrochemical and site remediation organizations. The intellectual property assets acquired include all licensing, modification, marketing, distribution and sales rights worldwide in perpetuity. Under the terms of the Agreement and Assignment of Intellectual Property Rights Mr. Hall was compensated $2,000 dollars and 1,500,000 shares of Solanex common stock, and the group of investors were compensated an aggregate of 2,000,000 shares of Solanex common stock. The original agreement contemplated that the license may be revoked if the Company did not manufacture at least one Thermal Destructor within 3 years of the Licensing date. This Agreement and License of Intellectual Property Rights has been renewed on a month to month basis and has been supplemented with a joint venture agreement between Solanex Management Inc. and EcoTech Waste Management Systems, Inc., the terms of which continue to be negotiated. Mr. Hall is a director of the Company and a principal of EcoTech Waste Management Systems, Inc. (EcoTech).
2. DEVELOPMENT STAGE COMPANY AND GOING CONCERN
In a development stage company, management devotes most of its activities to preparing the business for operations. The ability of the Company to emerge from the development stage with respect to any planned principal business activity is dependent upon its successful efforts to obtain additional equity financing and/or attain profitable operations. There is no guarantee that the Company will be able to obtain any equity financing or sell any of its products at a profit. There is, therefore, doubt regarding the Company’s ability to continue as a going concern.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| a) | Technology Development Costs | |
The costs to acquire and develop new technology and enhancements to existing technology are expensed as incurred until such time as technological feasibility is demonstrated. | ||
| b) | Use of Estimates | |
The preparation of financial statements in conformity with generally accepted accounting principles 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 periods. Actual results could differ from these estimates. |
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| c) | Foreign Currency Translation | ||
The Company’s functional currency is the U.S. dollar. Transactions in foreign currency are translated into U.S. dollars as follows: | |||
| i) | monetary items at the rate prevailing at the balance sheet date; | ||
| ii) | non-monetary items at the historical exchange rate; | ||
| iii) | revenue and expense items at the average rate in effect during the applicable accounting period. | ||
| d) | Financial Instruments | ||
The Company’s financial instruments consist of cash, accounts payable and accrued liabilities, and loans payable. | |||
Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair values of these financial instruments approximate their carrying values, unless otherwise noted. | |||
3. BASIS OF ACCOUNTING PRESENTATION
These unaudited interim financial statements have been prepared by management on a going concern basis in accordance with accounting principles generally accepted in the United States of America for interim financial information, are condensed and do not include all disclosures required for annual financial statements. This disclosure presumes funds will be available to finance on-going development, operations and capital expenditures and the realization of assets and the payment of liabilities in the normal course of operations for the foreseeable future.
The organization and business of the Company, significant accounting policies followed by the Company and other information are contained in the notes to the Company’s audited financial statements filed as part of the Company’s Form 10-KSB for the year ended December 31, 2007.
In the opinion of the Company’s management these financial statements reflect all adjustments necessary to present fairly the Company’s financial position at June 30, 2008 and the results of its operations for the three months then ended. The results of operations for the six months ended June 30, 2008 are not necessarily indicative of the results to be expected for the entire fiscal year.
The Company has minimal capital resources presently available to meet obligations normally expected by similar companies and has an accumulated deficit of $794,665 to June 30, 2008.
These factors raise substantial doubt about the Company’s ability to continue as a going concern and the Company is dependent on its ability to obtain and maintain an appropriate level of financing on a timely basis and to achieve sufficient cash flows to cover obligations and expenses. The outcome of these matters cannot be predicted. These financial statements do not give effect to any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.
4. LICENSE AND TECHNOLOGY RIGHTS
On October 12, 2000, the Company acquired a license to certain technology and intellectual property from Colin V. Hall, the developer of the technology, and a group of investors. The license granted a non-exclusive right to manufacture, market and sell a thermal destructor (“soil Remediator”) for on site remediation to industrial, petrochemical and site remediation organizations. The technology and intellectual property acquired included all licensing, modification, marketing, distribution and sales rights worldwide in perpetuity. Under the terms of the Agreement and License, a cash payment of $2,000 was made on behalf of the Company and the Company issued 3,500,000 shares of common stock.
On October 1, 2002 the Company entered into a joint venture agreement (the “Agreement”) with EcoTech Waste Management Systems (1991) Inc. (“EcoTech”) to design the systems for the soil Remediator and
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provide marketing and business concept expertise. Under the terms of the Agreement, EcoTech will evaluate, improve and complete the assets of the Company, and market and/or find customers for the assets of the Company. Furthermore, EcoTech will search for, recommend and advise the Company on the acquisition of further technology, complementary to the current business direction and assets of the Company. In consideration for the services provided by EcoTech, the Company is required to pay $100,000 to EcoTech over the life of the contract (3 years), in cash or common stock.
As of June 30, 2008 the Company had paid $85,500 to EcoTech, and the remaining $14,500 is included in amounts payable to related parties. This agreement is being renegotiated by both parties.
On May 23, 2006 the Company entered into a joint venture with EcoTech (“the Strategic Alliance Agreement”) to develop a portable soil remediation system to clean soils contaminated by industrial use. The Company agreed to pay $40,000 in marketing costs for the initial customer (increasing to $50,000 for each subsequent customer).
Further, EcoTech agreed to build portable high temperature burner units for a cost not to exceed $2 million per unit. The Company would then be the exclusive distributor under revenue sharing arrangements to be negotiated. No units have been built and no revenue has been generated to date.
On October 12, 2006 the Company and EcoTech signed an addendum to the Strategic Alliance Agreement, whereby, in consideration for $2,000 to be paid to EcoTech, the parties agreed to expand their business relationship to include portable high temperature steam generation technology and to market portable high temperature burner gasifier systems.
The Company’s president, Colin Hall, is also a principal of EcoTech.
5. PROMISSORY NOTES AND LOANS PAYABLE
The promissory notes may be converted in whole or in part into common shares of the Company at the option of the lender(s) at a mutually agreed price per share. The promissory notes are unsecured and bear no interest and are due on demand. Management has imputed interest ranging from 2% to 8% and accrued the interest in the event of conversion.
6. COMMON STOCK
Stock issued to settle debt has been issued at fair market values as estimated by the Company.
On October 12, 2000 the Company issued 3,500,000 shares of common stock at $0.001 per share in compensation for the acquisition of a license agreement to certain technology and intellectual property, and issued 1,500,000 shares of common stock at $0.001 per share in compensation for organizational expenses.
In 2003 the Company issued 310,000 restricted shares of common stock at $0.01 per share pursuant to a private placement in the amount of $3,100, and issued 281,725 free trading and 2,267,000 restricted shares of common stock for settlement of a $96,939 payable.
On December 1, 2003 the Company acquired and cancelled 750,000 restricted shares of common stock for the consideration of $1.00.
On April 12, 2004 the Company issued 419,300 shares of common stock at $0.04 per share in settlement of $16,772 in promissory notes payable.
On September 30, 2005 the Company recorded the issuance of 2,130,705 common shares at $0.04 per share in settlement of share subscriptions received by the Company on October 1, 2004.
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On February 9, 2006 the Company issued 1,000,000 shares of common stock at $0.10 per share pursuant to a private placement in the amount of $100,000 and issued 375,000 shares for cash at $0.04 in the amount of $15,000.
On June 9, 2006 the Company issued 250,000 shares of common stock at $0.04 per share in settlement of a $10,000 promissory note payable.
On September 28, 2006 the Company issued 750,000 restricted shares of common stock at $0.10 per share pursuant to a private placement in the amount of $75,000.
7. RELATED PARTY TRANSACTIONS AND AMOUNTS OWING
Colin V. Hall, the Company’s President and the developer of the Company’s technology, together with EcoTech Waste Management Inc., a company of which he is a principal, owned 29.1% (2007: 29.1%) of the issued and outstanding shares of the Company as of June 30, 2008. As of June 30, 2008, $14,500 (2007: $14,500) was owing to EcoTech for services performed during prior periods. This amount is included in payable to related parties.
8. CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The Company has no significant contractual obligations or commitments with any parties respecting executive compensation, consulting arrangements, rental premises or other matters, except as disclosed elsewhere in these notes. Management services provided and rental of premises are on a month to month basis
ITEM 2.Management’s Discussion and Analysis or Plan
The following discussion should be read in conjunction with the accompanying unaudited interim financial statements.
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
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Overview of Our Business
We were incorporated as EcoSoil Management Inc. under the laws of the State of Nevada on October 12, 2000. We changed our name to Solanex Management Inc. (“Solanex” or “the Company”) on December 6, 2001. To date, our activities have been organizational in nature, directed at acquiring our principal assets, raising capital, and implementing measures under our business plan in hopes of achieving revenues.
Our business is divided into three areas: the development, manufacture, and sale of the Thermal Destructor; the development, manufacture, and sale of the portable Steam Injection System; and, investing in mineral resource properties.
Thermal Destructors
A Thermal Destructor is a self contained, mobile, soil residue combustion system to be used for cleaning contaminated sites by sterilizing soil. The Thermal Destructor consists of a high efficiency, waste or gas-fired combustion chamber and an exhaust gas, low-pressure drop liquid scrubber effective in trapping pollutants in air emissions. A common use of the Thermal Destructor is what oilfield engineers refer to as “post-op dirt burning”, the practice of cleaning up hydrocarbon spills at the end of the life of a production well by passing the soil and substrate through a rotary kiln, such as in our device, whereby the hydrocarbons are burned, delivering sterile and cleaned soil and clay residues.
Steam Injection System
The Steam Injection System is an offshoot from our original high temperature Thermal Destructor also being developed for use by the oil industry. We have utilized the body, drive mechanism, and heating components from the Thermal Destructor to create a portable high temperature, high pressure steam generation unit.
The Steam Injection System is designed specifically for use in oil fields where high-pressure steam can be injected into the oil formation to soften the material in which the oil is trapped and to help dilute and separate heavy oil from the earth. The injection of steam under high pressure also creates channels and cracks through which the oil can flow to the well. This is a tertiary retrieval method used to capture oil from wells already exhausted via primary and secondary means of oil retrieval.
The most immediate market for a quick-deployment, mobile or short term steam generation and delivery system such as our Steam Injection System is companies who are in the bitumen/heavy oil exploitation business. Bitumen is a semisolid, degraded, tar-like form of oil that does not flow at normal temperatures and pressures. Bitumen cannot be produced from a well unless it is heated or diluted. Most of today's major commercial on-site bitumen projects use steam to heat and dilute the bitumen.
Expansion of Business into Resource Sector
By using our contacts in the resources sector we have considered implementing steps including taking our Company into a new channel of business by way of actively seeking mineral resource property opportunities. We turned down an opportunity to acquire an option interest in a sand and gravel deposit for payment of up to $75,000 over four years and the issuance of up to 2,000,000 shares of common stock. Management believed that acquiring the option at this stage was premature in our development and would divert needed capital away from our core business pursuits. However, we have continued our search in the resource sector and intend to seize the right opportunity when our capital resources permit and when the timing is right. We are currently in a preliminary stage of review of a placer gold recovery operation located on property in Chile.
Plan of Operation
Our plans for the next 12 months related to our Thermal Destructor and our Steam Injection System are currently secondary to pursuing financing.
In order to focus our resources in marketing the Steam Injection System for its intended purpose and to cross-market our Thermal Destructor for potential clients in the same industry (oil production) that are in
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need of soil contamination cleanup on their old oil fields, we must obtain sufficient funding to cover our projected working capital requirements. The Company continues to seek out other opportunities in the resource sector which may become available to the Company and which may be funded at levels of funding attainable by the Company.
Product Development
We intend to finalize the technical designs for our Steam Injection System within the next twelve months, at which time we will begin the sale and manufacture of Steam Injection Systems to oil companies who do or could utilize steam injection as a method to recover oil held in Bitumen or oil sands. Our marketing program will begin in earnest prior to the completion of the finalization of our technical designs.
During the coming year, we will also seek out other applications for our technology, and may modify our product development plans based on new applications and opportunities that arise.
We expect ecoTECH to:
Manufacturing
During the next year, we plan to contract with third parties to manufacture and assemble our Steam Injection System according our technical specifications. There are a number of manufacturing facilities capable of producing technical products of this type and size. We have made initial arrangements with TS2000-Star Vehicle Technologies Inc. (www.ts2000-star.com), a company that has production facilities under construction in Malakwa, British Columbia in a joint venture with Heromin, the North American arm of Yituo China Manufacturing Group (“YTO”). YTO is a large company in China with approximately 52,000 employees (www.yto.com.cn). We are currently pursuing bids from other manufacturing companies, and intend to sign a contract with at least one company in the coming year.
The TS2000/Heromin Joint Venture has indicated that it may open a U.S. facility in the Free Trade Zone at the Port of Bellingham, once the Canadian operation is running smoothly in about 18 months. With assembly in Bellingham of components manufactured in China (heavy steel components) and others in the United States (controls, computer systems and electronics), an alliance with this manufacturer should prove be very advantageous in our U.S. operations and our Master USA license guarantees exclusivity to U.S. clients.
Because our Steam Injection System requires a significant amount of capital to manufacture, we will not maintain a standing inventory of products. As is customary with companies that develop and manufacture large construction and/or mining equipment, each unit will be made to order, manufactured to the customer’s specifications in order to meet their unique needs. This not only provides the most appropriate product to our customer, but allays our need to tie up large amounts of capital in inventory.
When a customer purchases one of our Steam Injection Systems, we plan to send a field operations specialist to their operations site. Our specialist will interview the customer’s engineers, survey the operations site, and collect other relevant data. He will then provide our technicians and our contract
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manufacturer with 3D terrain and site modeling and design specifications based upon the customer’s needs. As our liaison with the customer’s site engineers, he will provide information such as required delivery temperatures and pressures, and pumping distances. He will also help determine the number of systems we will need to supply to meet the customer’s needs for a particular operations site.
Marketing
To date, interest in our technology has been generated through the direct efforts of our executive officer, Mr. Hall, with engineers and engineering firms servicing the oil production industry in North America. Through this contact, Mr. Hall has been able to generate some positive interest in our technology. Additionally, Mr. Hall is commencing a program to identify marginal oil shale opportunities, from which oil could not previously be profitably recovered because of the high fixed costs associate with building large, permanent steam-generation units. By offering access to our technology, which will make oil recovery from such properties a profitable operation, Mr. Hall is seeking joint ventures with oil firms to bring those oil shale deposits into production.
In the next twelve months, we intend to continue to use the services of Mr. Hall to sell our technology, seeking joint ventures as well as direct sales. If future sales justify the expense, however, we may employ sales personnel to market our products to potential customers. These representatives will be responsible for soliciting, selecting and securing opportunities within a particular regional territory. We expect to pay such representatives on a commission basis, with commissions depending on the size of the sale. We expect to provide service and support to our representatives, including advertising, technical data sheets, design services (usually bespoke and on a fee basis), and sales materials. We do not intend to incur the costs of representation personnel in the next twelve months unless our revenues are enough to absorb the cost of these personnel, especially as it will be some months before we have field-ready systems to offer.
Access International Matting (“AIM”) and Heromin Machinery (Canada) will assist Mr. Hall in the development of an overall project marketing plan and a project financial plan. The intention is to have the first customer finance their initial plant, which it is anticipated will take nine months to build. AIM has recently employed three people to develop the Heromin market and we are to be represented by AIM on an ad-hoc, commission only basis, starting in September 2008. A web site describing Solanex Management's services is under construction and will be linked from the TS2000, ecoTECH, Heromin and AIM sites.
We are also currently working with engineering firms that are connected with steam stimulation or steam-assisted gravity drainage projects in Alberta, Canada. We hope to secure an agreement in the next 12 months with one or more of these firms on a project in Alberta. We anticipate that an engineering firm will help us provide consulting on engineering and product application needs, audit the finished system’s performance, and with proven performance, thereafter recommend the system to the firm’s clients, with an option to invest in, or take over the program.
Financing Plans
The completion of our business plan for the next twelve months is contingent upon us obtaining additional financing. As of June 30, 2008 we had cash in the amount of $3,665. We have forecasted expenditures of $150,000 for the next twelve months. Therefore, we will require financing to pursue our business plan for the next twelve months. We plan to offer equity securities in an exempt offering as a means of meeting our financial requirements over the next twelve months. Although neither Colin Hall, nor ecoTECH Waste Management Systems (1991), Inc. nor any other shareholders nor third parties have any legal obligations to infuse additional capital, it is anticipated that each party will continue to do so as reasonably necessary by providing short-term demand loans carrying a market interest rate. If we are unable to obtain additional financing, our business plan will be significantly delayed or will fail. Should this failure to finance occur the Company would abandon its current business plan.
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We have not contacted any broker-dealers or other parties regarding our financing plans but may do so in the future. We have not identified any broker-dealers to assist in our financing efforts. Currently, we believe we have the required funds to cover our expenses through the end of September 2008.
Results of Operations for the three and six months ended June 30, 2008 and 2007
No revenue was recorded for the three or six months periods ended June 30, 2008 and no revenue has been generated since inception.
Net loss for the three months period ended June 30, 2008 was $26,127 compared to a loss of $38,787 for the three months ended June 30, 2007. The expenditures comprising the loss for the three months ended June 30, 2008 consisted primarily of administrative expenses in the amount of $8,765 (2007 - $9,417), consulting and professional fees in the amount of $16,491 (2007 - $22,803) and office/rent in the amount of $nil (2007 - $6,432).
Net loss for the six months period ended June 30, 2008 was $69,420 compared to a loss of $90,956 for the six months ended June 30, 2007. The expenditures comprising the loss for the six months ended June 30, 2008 consisted primarily of administrative expenses in the amount of $15,140 (2007 - $15,417), consulting and professional fees in the amount of $48,511 (2007 - $63,780) and office/rent in the amount of $3,836 (2007 - $12,952). During the six months ended June 30, 2008 we expended $nil on outside consultants in our review of our Company’s high temperature burner technology and other opportunities available to it in the resource sector ($36,246 for the comparable period in 2007).
The Company has kept its office and business operations at a minimum and has relied mainly on its directors as the Company assesses its business plan and direction.
Liquidity and Capital Resources
The Company has not earned any revenue since inception and has been able to pay its expenses and costs through the issuance of common shares as well as by loans from directors and other shareholders. The Company did not issue any shares during the three months ended June 30, 2008 or during the three months ended June 30, 2008.
As of June 30, 2008 the Company has a working capital deficiency of $387,626 (at December 31, 2007 $318,206). The Company needs to raise additional funds through the sale of stock or borrowing just to maintain the corporate existence of the Company. The Company may not be successful in its efforts to obtain equity financing and/or attain profitable operations. There is doubt regarding the Company’s ability to continue as a going concern.
The Company’s cash requirements to operate for fiscal year 2008 are estimated at $150,000. The Company is currently seeking out options for financing from shareholders or private placements.
Off Balance Sheet Arrangements
As of June 30, 2008 there were no off balance sheet arrangements.
Going Concern
We have minimal capital resources presently available to meet obligations normally expected by similar companies and have an accumulated deficit of $794,665 through June 30, 2008.
These factors raise substantial doubt about our ability to continue as a going concern and we are dependent on our ability to obtain and maintain an appropriate level of financing on a timely basis and to
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achieve sufficient cash flows to cover obligations and expenses. The outcome of these matters cannot be predicted. The financial statements do not give effect to any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
ITEM 3.Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2008. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, Mr. Colin Hall. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2008 our disclosure controls and procedures are effective. There have been no changes in our internal controls over financial reporting during the quarter ended June 30, 2008.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
PART II - OTHER INFORMATION
ITEM 1.Legal Proceedings
To the Company’s knowledge, there are no lawsuits nor were any lawsuits commenced against the Company during the quarter ended June 30, 2008 nor did the Company commence any lawsuits during the same period.
ITEM 2.Changes in Securities and Use of Proceeds
During the six months ended June 30, 2008 the Company issued the following securities: No shares issued during this period.
Use of Proceeds:Not applicable.
ITEM 3.Defaults Upon Senior Securities
Not applicable.
ITEM 4.Submission of Matters to a Vote of Security Holders
No matters were put forward to a vote of the security holders of the Company this quarter. ITEM 5.Subsequent EventsNone.
ITEM 6.Exhibits and Reports on Form 8-K
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Exhibits
Reports on Form 8-K
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Solanex Management Inc.
| By: | /s/ Colin Hall |
| Colin Hall, | |
President and Director | |
| Date: | August 08, 2008 |
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