Sunergy (SNEYD) 10-Q 2012 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

S      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended     March 31, 2012

or

£     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to __________

Commission File Number     000-52767

SUNERGY, INC.

(Exact name of registrant as specified in its charter)

Nevada	26-4828510
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

14362 N. Frank Lloyd Wright Blvd., Suite 1000, Scottsdale, AZ	85260
(Address of principal executive offices)	(Zip Code)

480.477.5810

(Registrant’s telephone number, including area code)

N/A

Former name, former address and former fiscal year, if changed since last report)

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   S  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   S  NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small 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    £   (Do not check if a smaller reporting company)	Smaller reporting company     S

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act

£  YES   S NO

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.     

£  YES   £ NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

1,746,953,540 as of July 12, 2012

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

The interim financial statements included herein are unaudited but reflect, in management's opinion, all adjustments, consisting only of normal recurring adjustments that are necessary for a fair presentation of our financial position and the results of our operations for the interim periods presented. Because of the nature of our business, the results of operations for the quarterly period ended March 31, 2012 are not necessarily indicative of the results that may be expected for the full fiscal year.

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SUNERGY, INC.

(An Exploration Stage Company)

CONDENSED BALANCE SHEETS

(Unaudited)

	March 31,			December 31,
	2012			2011
Assets
Current assets:
Cash and cash equivalents	$	625		$	85,515
Prepaid expense		14,750			-
Total current assets		15,375			85,515
Long-term assets:
Exploratory properties		1,753,497			1,753,497
Property and equipment		211,969			225,007
Total assets	$	1,980,841		$	2,064,019
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities	$	160,971		$	205,089
Accrued interest		165,400			101,700
Accounts payable - related parties		349,140			172,202
Notes payable		65,585			65,585
Total current liabilities		741,096			544,576
Total liabilities		741,096			544,576
Commitments and contingencies		-			-
Stockholders' equity:
Common Stock, authorized 3,750,000,000 shares, par value $0.001, issued and outstanding on March 31, 2012 and December 31, 2011 is 1,578,710,685 and 1,557,717,831 respectively		1,578,711			1,557,718
Additional paid in capital		3,993,465			3,787,902
Deficit accumulated during exploration stage		(4,332,431	)		(3,826,177	)
Total stockholders' equity		1,239,745			1,519,443
Total liabilities and stockholders' equity	$	1,980,841		$	2,064,019

The accompanying notes are an integral part of these statements.

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SUNERGY, INC.

(An Exploration Stage Company)

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

							From Inception
	Three Months Ended						January 28, 2003
	March 31,						to March 31,
	2012			2011			2012
Income	$	-		$	-		$	-
Operating Expenses
General and administrative		64,042			50,522			523,843
Management salary		21,000			13,500			683,500
Depreciation		13,038			-			51,045
Professional fees		104,886			17,500			752,103
Exploration costs		79,307			140,078			760,764
Total expenses		282,273			221,600			2,771,255
Net loss from operations		(282,273	)		(221,600	)		(2,771,255	)
Other expenses
Financing costs		(160,281	)					(160,281	)
Interest expense		(63,700	)		(16,387	)		(1,400,895	)
Total other expenses		(223,981	)		(16,387	)		(1,561,176	)
Net loss	$	(506,254	)	$	(237,987	)	$	(4,332,431	)
Loss per share-basic	$	(0.00	)	$	(0.00	)
Weighted average number of shares-basic		1,569,296,949			1,243,750,512

The accompanying notes are an integral part of these statements.    

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SUNERGY, INC.

(An Exploration Stage Company)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

							From Inception
	Three Months Ended						January 28, 2003
	March 31,						to March 31,
	2012			2011			2012
Operations
Net loss	$	(506,254	)	$	(237,987	)	$	(4,332,431	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation		13,038			113			51,044
Stock based compensation		1,250			31,250			462,139
Non cash interest expense		-			16,387			1,180,027
Non cash financing costs		160,281						160,281
Amortized prepaid expense					-			200,000
Changes in assets and liabilities
Increase/(Decrease) in accounts payable and accruals		(44,118	)		-			371,670
(Increase) in prepaid expense		(1,000	)					(1,000	)
Increase in accrued interest payable		63,700						179,700
Increase in accounts payable-related party		176,938			39,625			349,140
Net cash used in operations		(136,165	)		(150,612	)		(1,379,430	)
Investing
Acquisition of property and equipment		-			(103,800	)		(275,512	)
Cash acquired through acquisition of subsidiary		-			-			39
Net cash used in investing		-			(103,800	)		(275,473	)
Financing
Proceeds from sale of common stock		51,275			27,000			1,464,175
Proceeds from notes payable		-			165,000			210,000
Repayment of related party notes		-			-			(31,915	)
Contributed capital		-			-			13,268
Net cash provided by financing		51,275			192,000			1,655,528
Net change in cash and cash equivalents		(84,890	)		(62,412	)		625
Cash and cash equivalents, beginning of period		85,515			97,251			-
Cash and cash equivalents, end of period	$	625		$	34,839		$	625
Supplemental disclosure of cash flows for:
Interest	$	-		$	-		$	-
Income taxes	$	-		$	-		$	-
Supplemental disclosure of non-cash financing and investing:
Shares issued for prepaid expenses	$	13,750		$	-		$	13,750
Shares issued to settle debt	$	-		$	73,151		$	941,624
Debt issued to acquire assets	$	-		$	85,000		$	487,500
Stock issued to acquire assets	$	-		$	-		$	500,000
Assets acquired through acquisition of subsidiary	$	-		$	-		$	753,497
Liabilities assumed through acquisition of subsidiary	$	-		$	-		$	42,725
Shares issued to acquire subsidiary	$	-		$	-		$	290,000
Warrants issued to acquire subsidiary	$	-		$	-		$	420,811

 The accompanying notes are an integral part of these statements.

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SUNERGY, INC.

(An Exploration Stage Company)

Notes to the Condensed Financial Statements

March 31, 2012

NOTE 1. GENERAL ORGANIZATION AND BUSINESS

SUNERGY, Inc. (The Company) was organized in the state of Nevada on January 28, 2003 and is an exploration phase mineral and mining company.

The Company has precious and rare earth element (“REE”) mineral properties located in the Republic of Ghana and Sierra Leone, Africa and has not yet determined whether these properties contain reserves that are economically recoverable. The recoverability, if any, of amounts from these properties will be dependent upon the discovery of economically recoverable reserves located within the property interests held by the Company, the ability of the Company to obtain necessary financing to satisfy the expenditure requirements under the property agreements to complete the development of the properties and upon future profitable production or proceeds for the sale thereof.

Since inception, through the date of this report, the Company has not generated any revenue and is considered an exploration stage entity as defined by accounting principles generally accepted in the United States (“US GAAP”).

NOTE 2. CONDENSED FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2012, and for all periods presented herein, have been made.

In accordance with Article 8-03 of Regulation S-X certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2011 audited financial statements.  The results of operations for the period ended March 31, 2012 are not necessarily indicative of the operating results for the full year.

The consolidated financial statements include the accounts of Sunergy, Inc. and its subsidiaries, Mikite Gold Resources Limited, a Ghanaian company, and Allied Mining and Supply LLC, a Nevada limited liability company (100%). Allied Mining and Supply LLC also has one 100% owned subsidiary, a Sierra Leone company, Allied Mining and Supply Ltd. which are 100% consolidated in the financial statements.  All material inter-company accounts and transactions have been eliminated.

The Company is considered a development (exploration) stage entity for financial reporting purposes by United States generally accepted accounting principles (US GAAP) since it has not generated material revenue from its principal business activities.

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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

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Cash and Cash Equivalents

Cash and cash equivalents include cash in banks and financial instruments which mature within three months of the date of purchase.

Earnings per Share

Basic earnings per share excludes dilution and is computed by dividing net income (loss) by the weighted-average common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. The Company has potentially dilutive common shares consisting of warrants, which are excluded from the diluted earnings per share computation in periods where the Company has incurred net loss.

Stock Based Compensation

The Company has on occasion issued equity and equity linked instruments to non-employees in lieu of cash to various vendors for the receipt of goods and services and, in certain circumstances the settlement of short-term loan arrangements.   The applicable GAAPestablishes that share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

In these transactions, we issue unregistered and restricted equity instruments along with equity-linked instruments that are convertible into unregistered and restricted shares of our common stock.

While we have 611,931,378 shares of freely-traded stock with a quoted market price (a Level 1 input within the GAAP hierarchy). The fair value of the unregistered and restricted shares issued from December 13, 2010 through the present as valued by the quoted market price does not reflect the economic substance of the transactions, correspondingly, the quoted market price is not the most reliably measurable fair value.  We made this determination based upon the significant liquidity restrictions placed upon our unregistered restricted equity instruments since December 13, 2010. 

When unregistered common shares and equity-linked instruments convertible into unregistered common shares are issued for the settlement of short-term financing arrangements (that are not initially convertible), the reacquisition price of the extinguished financing arrangement is determined by the value of the debt which is more clearly evident, and no additional inducement expense is recognized.

In situations in which we issue unregistered restricted common shares and equity-linked instruments in exchange for goods and services, and the value of the goods and services are not the most reliably measurable, we recognize the fair value of the unregistered restricted equity instruments based on the value of similar instruments issued in private placements in exchange for cash in the most recent transactions (a Level 2 input within the GAAP hierarchy). We have determined this methodology reflects the risk adjusted fair value of our unregistered restricted equity instruments using a commercially reasonable valuation technique. 

Recent Accounting Guidance Not Yet Adopted

The Company has reviewed recently issued accounting pronouncements and does not expect any to have a material impact on our financial position, results of operations, or cash flows.

NOTE 3. GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. However, the Company has accumulated a loss of $4,332,431 during its exploration stage. This raises substantial doubt about the Company’s ability to continue as a going concern. These financials do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

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Our ability to raise capital since we received the Caveat Emptor status on December 13, 2010 has been restricted. While we have been successful in raising enough capital to buy and pay for the dredge equipment and the 2011 exploration operations and to pay for audit and accounting fees to file our delinquent financial statements which are now nearly complete, we have not had the ability to raise any significant additional capital to advance our exploration and mining operations.

We expect to have the Caveat Emptor status removed as soon as this Quarterly report is filed. Upon removal of the Caveat Emptor status, it is anticipated that the increased liquidity potential for our investors will have a positive impact on our ability to raise additional capital from private placements and future warrant exercises, however, there can be no guarantee that this will be so as we currently do not have any outstanding firm commitments to purchase our equity and equity linked instruments.

NOTE 4. PROPERTY, PLANT AND EQUIPMENT

Property, Plant and Equipment consisted of the following at March 31, 2012 and December 31, 2011:

	March 31,			December 31,
	2012			2011
Exploration equipment	$	247,259		$	247,259
Rolling stock		13,500			13,500
Office furniture and equipment		2,254			2,254
Subtotal	$	263,013		$	263,013
Less accumulated depreciation		(51,044	)		(38,006	)
Property, and equipment - net	$	211,969		$	225,007

NOTE 5. NOTES PAYABLE

During the period ended March 31, 2012 we accrued $63,700 of interest expense on the outstanding principal balance of our notes payable in default totaling $65,585 as of March 31, 2012 and December 31, 2011. The individual notes carry daily interest penalties between $100 and $500.

NOTE 6. STOCKHOLDERS’ EQUITY

Common Stock

The following provides additional information for certain stock transactions that occurred during the three months ended March 31, 2012. For additional details for all stock transactions please see the consolidated statement of changes in stockholders’ equity as reported in the Company’s 10-K for the period ended December 31, 2011 and filed with the Securities Exchange Commission on July 2, 2012.

A summary of shares issued follows:

· During the quarter ended March 31, 2012, the Company issued 14,992,854 shares of common stock for total cash of $51,275.

· During the quarter ended March 31, 2012, the Company issued 6,000,000 equity units at $0.0025 per unit for prepaid consulting services with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.005 per share.

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Outstanding Warrants

On January 23, 2012 the Company extended the expiration date of all outstanding warrants as of December 31, 2011 for six months. In accordance with the modification, the Company recognized the estimatedexcess value of the modified award over the fair value of the original award immediately before its terms were modified, based on the pertinent factors on the modification date. The excess value totaling $160,281 was estimated by using a Black-Scholes pricing model, and comparison of the unregistered and restricted shares underlying the warrants to those that are currently freely trading. The Company used a historically derived volatility rate of 151%; the remaining contractual terms for each award between one month and one year; a risk free rate of 0.52%; and an estimated forfeiture rate of 55% for its Black-Scholes model assumptions.

On March 31, 2012 the Company had warrants outstanding summarized in the table below:

	Warrants		Exercise		Expiration
	Outstanding		Price		Date
		71,900,000		0.0025		16-Jul-2012
		100,000,000		0.005		16-Jul-2012
		157,819,960		0.005		16-Jul-2012
		14,200,000		0.005		22-Dec-2012
		31,642,852		0.006		22-Dec-2012
		100,000,000		0.007		22-Dec-2012
		1,200,000		0.0075		22-Dec-2012
		10,357,142		0.007		31-Jan-2013
		84,807,139		0.005		31-Dec-2013
		3,857,141		0.007		31-Dec-2013
		21,000,000		0.0075		31-Dec-2013
Total		596,784,234

Information relating to warrant activity during the reporting period follows:

					Weighted
					Average
	Number of		Contingent		Exercise
	Warrants		Warrants		Price
Total Warrants outstanding at December 31, 2011		592,319,951		100,000,000		0.00375
Plus:  Warrants Issued		4,464,283		-		0.0057
Less:  Warrants Exercised		-		-
Less: Warrants Expired		-		-
Total Warrants outstanding at March 31, 2012		596,784,234		100,000,000		0.0050

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NOTE 7. RELATED PARTY TRANSACTIONS

Certain related parties assist in financing operations by personally paying expenses which the company considers to be in the nature of accounts payable since the obligations are incurred within the normal course of business and classified as related party accounts payable. Unpaid officer and director fees are also classified as related party accounts payable.

NOTE 8. SUBSEQUENT EVENTS

During the second quarter of 2012, the Company issued 13,142,855 equity units for cash of $46,000 at $0.0035 per unit with each unit consisting of one common share and one 12 month share purchase warrant exercisable at $0.007 per share.

During the second quarter of 2012, the Company issued 26,600,000 equity units for cash of $54,000 at $0.0025 per unit with each unit consisting of one common share and one 12 month share purchase warrant exercisable at $0.005 per share.

During the second quarter of 2012, the Company issued 285,714 shares for cash of $1,714 for the exercise of warrants at $0.006 per share.

During the second quarter of 2012, the Company issued 133,500,000 equity units to settle $333,750 of accounts payable and or related party payables $0.0025 per unit with each unit consisting of one common share and one 12 month share purchase warrant exercisable at $0.005 per share.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This quarterly and unaudited report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited financial statements are stated in United States dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

In this quarterly and unaudited report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "common stock" refer to the common shares in our capital stock.

As used in this quarterly and unaudited report, the terms "we", "us", "our", "our company" and "Sunergy" mean Sunergy, Inc. and our wholly owned subsidiaries, Mikite Gold Resources Limited, a Ghanaian company and Allied Mining and Supply LLC, a Nevada limited liability, unless otherwise stated.

Overview and Current Business

We were incorporated in the State of Nevada, USA, on January 28, 2003. We are an exploration stage company engaged in the acquisition, exploration and development of mineral properties with a view to exploiting any mineral deposits we discover that demonstrate economic feasibility. Our current exploration efforts are focused on our two properties; one of which is located in Sierra Leone, Africa and the other is located in Ghana, Africa.

Nyinahin Concession, Ghana:

We have commenced the exploration stage of our operations on Nyinahin but can provide no assurance that we will discover economic mineralization on the property, or if such minerals are discovered, that we will enter into commercial production. This year’s exploration is designed to confirm initial discoveries of gold on our concession contained in a report that accompanied the purchase of the property. A budget of $50,000 was committed to initiate this sampling program. The program commenced in the third quarter beginning July 2011 and ended in November 2011 with a Technical Report filed in December with the Minerals Commission in Ghana. The results indicate further exploration involving geochemical and geophysical work which, if successful, should set the stage for drilling in the bedrock that is a direct extension of the Keegan Esaase-Jeni Project.

Alluvial mining operations for gold have sprung up along the Offin River which runs through the eastern portion of our concession, and surround this area of our concession.Immediately adjacent on the east to the Nyinahin concession are the Esaase-Jeni (Gyeni) properties, held by Keegan Resources of Canada. Prior to Keegan's acquisition of the Bonte (now called Esaase) and the Jeni (Gyeni) concessions, they were mined for alluvial gold by Bonte Gold Mines, a subsidiary of Akrokeri-Ashanti Gold Mines of Canada. This recent alluvial activity suggests the strong viability of the alluvial opportunity on our concession and alluvial Joint Venture partners are being sought at this time.

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The Nyinahin concession is located between two geological gold belts, the Bibiani Belt to the west and the Asankrangwa to the east. The license allows for the exploration and mining of gold, silver, base metals and diamonds. About 80% of the Nyinahin concession lies to the west of the Offin River within the Ashanti region of Ghana. There are several historical pits and adits with a strong clustering of artisan pits located along the Offin River. Three old gold prospects exist on the concession. The property is accessed via the main Kumasi-Bibiani trunk road. It falls under the jurisdiction of the Atwima Mponua District Assembly with headquarters at Nyinahin. The Offin River area offers strong alluvial operations potential as well as the underlying bedrock is a continuation of the Keegan Esaase-Jeni Project. The large area west of the Offin River area contain some significant geological anomalies that warrant additional exploration activities. In the overall, this concession represents a significant future development opportunity for our Company.

Pampana River Concession, Sierra Leone:

The Pampana River concession is an alluvial mining concession consisting of Exploration License No. EXPL 5/2009 which was issued to Allied Mining and Supply Ltd. (AMS) on August 12, 2009. The license is located in the Kholifa Rowalla, Kafe Simiria and Tane Chiefdoms in the Tonkolili District of the Northern Province of Sierra Leone covering an area of 141.3 km2. The concession is situated on the western fringes of the southern Sula Mountains greenstone belt and for most of the northern and central part it straddles the Pampana River. On the west of the southern part, the concession runs along the Pampana River. The property is south of the Sula Mountains in the Greenstone belt, around 120 miles east of the capital, Freetown.

To begin our operating season in 2011, we purchased approximately $200,000 worth of dredges and associated support equipment to deploy directly on the Pampana River and establish our ability to recover the gold and other valuable minerals, commonly referred to as rare earth elements (REE), associated with the heavy mineral sands (HMS).

We commenced our initial dredging April 16, 2011which was well into the mining season that generally ends with the beginning of rainy season in July. The dredging took place in theMasanga Area that is believed to have limited overburden and good river accessibility. Shortly after deployment the two Allied dredges were producing daily quantities of heavy mineral sands (HMS). This effort validated our early extraction estimate of 400 to 500 pounds of HMS per dredge per 10 hour day. The process involved regular performance evaluation resulting in modifications and adjustments of the dredges and support equipment in order to maximize the efficiency of the advanced exploration.

Multiple areas along the river were sampled involving considerable de-staging, repositioning and deployment in order to generate target appraisals and gauge future recovery potential. Operations were suspended in July 2011 during the rainy season. Due to our limited exploration budget, our 2012 exploration activities consist of investigation of additional areas of our Pampana River concession and other potential areas where we have been looking for gold, diamonds, REE’s and coltan minerals. Our activities have been designed to make ready for renewed aggressive exploration activity once the Caveat Emptor status is removed and we have greater ability to attract exploration and development capital in 2012.

Rare earth elements are a unique group of chemical elements that exhibit a range of special electronic, magnetic, optical and catalytic properties. REEs are used in a wide range of alloys and compounds, and can greatly affect the performance of complex engineered systems. They occur in a variety of chemical forms and have a wide variety of applications, including the processing of materials. REEs are used in components in engineered products, and their uses include fluid cracking catalysts, automotive catalytic convertors, polishing materials, permanent magnets, energy storage, phosphors, and glass additives. In modern society, many of these uses are critical for high tech devices including electronics, jet planes and rocks, and vital engineered components.

The REEs include the 15 elements of the lanthanide series, (Atomic Numbers 57 through 71), and consist of lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium. In addition, several non-lanthanides, which have similar or related properties and uses, are sometimes classified with the REEs, and these include yttrium, niobium, and tantalum.

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Due to the complex nature and broad range of apparent minerals of the Pampana sands, additional mineralogy is required in order toprove their full mineralogical and elemental content,and to accurately describethe economical value and overall potential of the Allied EXPL.

Once additional mineralogical studies are completed, under the control and supervision of Sunergy board advisor, Alexander Beckmann, we are committed to opening up an entirely new area in the mining sector in Sierra Leone subject to our ability to raise additional capital. We expect to receive the results of these studies during the third quarter 2012.

Our steadfast commitment to community development has led to our current standing in the district of Tonkolli which has never been higher. Our employees, some of whom have been with us for three years, are capable, hard working and well respected among the villages on our concession. We have historically employed 70 to 80 men and women each year during the mining season. Most are full-time, while others are part-time or temporary help. This effort is important to maintain a high level of confidence in the communities and the country of Sierra Leone, which gives us a strong foundation to develop additional business in the Country.

Results of Operations

The following discussion should be read in conjunction with our unaudited financial statements and the related notes contained in this report for the period ended March 31, 2012. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed in this interim report.

Of major significance during this quarter we extended all of the outstanding warrants for six months. The assumption was made when these warrants were purchased that the caveat emptor would be removed shortly resulting in a significant influx of capital. The board of directors felt that since the company had not been able to of catch up with its government filings at that point, it would be fair and prudent to extend the warrant date. With this filing we expect to become current and have the Caveat Emptor lifted resulting in a significant portion of the outstanding warrants to be exercised.

Interest and financing expenses were increased by $207,594 with 77% of that amount resulting from the non –recurring incremental cost associated with the modification of the warrant expiration date. The remaining increase is the result of interest and penalty expenses for unsettled notes payable expected to be settled with equity instruments during the third quarter.

Total operating expenses for the three months ended March 31, 2012, increased by approximately 27% as compared to the comparative period in 2011 primarily as a result of an increase in administrative expense. Exploration and development cost are expected to go up substantially over the next year as we ramp up pilot and small scale production operations. With over 40 KM of river on our concession, future exploration designed to develop resources and reserves will be undertaken limited only by our future financial capabilities.

Revenue

We are an exploration stage entity and have not commenced any revenue producing activities since our inception. We do not anticipate earning revenues until such time as we have entered into commercial production on the Nyinahin or Pampana River concessions.

Equity Compensation

We currently do not have any formalized stock option or equity compensation plans or arrangements however, from time to time we settle obligations via the issuance of equity and equity-linked instruments.

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Liquidity and Financial Condition

Working Capital

	At
	March 31,
	2012
Current Assets	$	15,375
Current Liabilities		741,096
Working Capital (deficit)	$	(725,721	)

Cash Flows

	Three Months Ended
	March 31,
	2012			2011
Net Cash (used) in Operating Activities	$	(136,165	)	$	(150,612	)
Net Cash (used) in Investing Activities		-			(103,800	)
Net Cash Provided by Financing Activities		51,275			192,000
Increase/(decrease) in Cash During
the Period	$	(84,890	)	$	(62,412	)

Our ability to raise capital since we received the Caveat Emptor status on December 13, 2010 has been restricted. While we have been successful in raising enough capital to buy and pay for the dredge equipment and the 2011 exploration operations and to pay for audit and accounting fees to file our delinquent financial statements which are now nearly complete, we have not had the ability to raise any significant additional capital to advance our exploration and mining operations. As part of our fund raising activities we extended the expiration date of all outstanding warrants by six months so that as we become current in our reporting the Caveat Emptor status will be lifted and our investors will be in a position to exercise warrants that are “in the money.” There is no guarantee that any of these warrants will be exercised in the future, but we have received exercise notices for over 49,500,000 in the last 18 months.

We expect to have the Caveat Emptor status removed as soon as this Quarterly report is filed which will cause our ’34 Act filings to become current. Upon removal of the Caveat Emptor status, it is anticipated that the increased liquidity potential for our investors will have a positive impact on our ability to raise additional capital from private placements and future warrant exercises, however, there can be no guarantee that this will be so as we currently do not have any outstanding firm commitments to purchase our equity and equity linked instruments.

During the last three months the company has been successful in eliminating over $330,000 of its trade and related party accounts payable through the issuance of equity instruments which will allow a larger percentage of incoming capital to be used to expand our exploration activity.

Contractual Obligations

As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

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Critical Accounting Policies

The Company has on occasion issued equity and equity linked instruments to non-employees in lieu of cash to various vendors for the receipt of goods and services and, in certain circumstances the settlement of short-term loan arrangements.   The applicable GAAPestablishes that share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

In these transactions, we issue unregistered and restricted equity instruments along with equity-linked instruments (warrants) that are convertible into unregistered and restricted shares of our common stock.

When unregistered common shares and equity-linked instruments convertible into unregistered common shares are issued for the settlement of short-term financing arrangements (that are not initially convertible), the reacquisition price of the extinguished financing arrangement is determined by the value of the debt which is more clearly evident, and no additional inducement expense is recognized.

In situations in which we issue unregistered restricted common shares and equity-linked instruments in exchange for goods and services, and the value of the goods and services are not the most reliably measurable, we recognize the fair value of the unregistered restricted equity instruments based on the value of similar instruments issued in private placements in exchange for cash in the most recent transactions (a Level 2 input within the GAAP hierarchy).   We have determined this methodology reflects the risk adjusted fair value of our unregistered restricted equity instruments using a commercially reasonable valuation technique.   

Of major significance during this quarter is the extension of all of the warrants for six months. The assumption was made when these warrants were purchased that theCaveat Emptorwould be removed shortly. Although progressing toward current filings, this has not happened yet. The board of directors felt that since the company was had not been able to at that point of catch up with its government filings, it would be fair and prudent to extend the warrant date.

In accordance with ASC 718, a modification of the terms of an equity instrument for financial reporting purposes is treated as an exchange of the original award for a new award. We recognized, as financing costs, the excess value of the modified award over the fair value of the original award immediately before its terms were modified, based on the pertinent factors on the modification date, We estimated the excess value by using a Black-Scholes pricing model, and comparison of the unregistered and restricted shares underlying the warrants to those that are currently freely trading.

In addition to assuming a volatility rate of approximately 151% (historically derived), we estimated a forfeiture rate of approximately 55% based on prior exercise history and our prior experience with several of the warrant holders. Increases in the volatility rate assumption along with decreases in the forfeiture rate would result in the recognition of additional excess value.

Item 3. Quantitative Disclosures About Market Risks

As a "smaller reporting company", we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Management's Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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As of the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer and our Chief Financial Officer (principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer) and our Chief Financial Officer ( principal accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US generally accepted accounting principles due to the existence of significant deficiencies constituting material weaknesses.

A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Changes in Internal Control over Financial Reporting

During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Item 1A. Risk Factors

We have had no material changes in our risk factors as disclosed in our Form 10-K for the year ended December 31, 2011 filed on July 2, 2012.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the second quarter of 2012, the Company issued 13,142,855 units for $46,000 cash at $0.0035 per unit with each unit consisting of one common share and one 12 month share purchase warrant exercisable at $0.007 per share. These securities were issued pursuant to an exemption from registration relying on Regulation D of the Securities Act of 1933.

During the second quarter of 2012, the Company issued 26,600,000 units for $54,000 cash at $0.0025 per unit with each unit consisting of one common share and one 12 month share purchase warrant exercisable at $0.005 per share. These securities were issued pursuant to an exemption from registration relying on Regulation D of the Securities Act of 1933.

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On April 24, 2012, the Company issued 285,714 shares for $1,714 cash for the exercise of warrants at $0.006 per share. These securities were issued pursuant to an exemption from registration relying on Regulation D of the Securities Act of 1933.

During the second quarter of 2012, the Company issued 133,500,000 units to settle $333,750 debt at $0.0025 per unit with each unit consisting of one common share and one 12 month share purchase warrant exercisable at $0.005 per share. These securities were issued pursuant to an exemption from registration relying on Regulation D of the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities

The Company has outstanding loans, $35,000 collateralized by 14,000,000 shares of common stock and 14,000,000 one year share purchase warrants exercisable at $0.005 per share. In the event of default, the note holders are able to convert the outstanding balance owed to the common share collateral. As of March 31, 2012, the notes are in default however, neither of the note holders has converted any of the 14,000,000 collateralized equity units nor have they made any demand for settlement. The Company expects to fully settle with the issue of equity units during the third quarter.

Item 4. [Removed and Reserved]

None.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Number	Description
(3)	Articles of Incorporation and By-Laws
3.1	Articles of Incorporation (incorporated by reference from our Registration Statement on Form SB-2 filed on February 23, 2004)
3.2	Bylaws (incorporated by reference from our Registration Statement on Form SB-2 filed on February 23, 2004)
3.3	Certificate of Change (incorporated by reference from our Current Report on Form 8-K filed on October 8, 2008)
3.4	Certificate of Amendment (incorporated by reference from our Current Report on Form 8-K filed on August 26, 2010)
(10)	Material Contracts
10.1	Mineral Property Staking and Purchase Agreement dated April 10, 2003 (incorporated by reference from our Registration Statement on Form SB-2/A filed on June 30, 2004)
10.2	Mining Acquisition Agreement dated October 31, 2008 between our company and General Metals Corporation (incorporated by reference from our Current Report on Form 8-K filed on December 10, 2008)
10.3	Amending Agreement to the Mining Acquisition Agreement dated December 5, 2008 between our company and General Metals Corporation. (incorporated by reference from our Current Report on Form 8-K filed on December 10, 2008)
10.4	Membership Purchase Agreement dated October 18, 2010 between our company and Allied Mining and Supply, LLC. (incorporated by reference from our Current Report on Form 8-K filed on February 4, 2011)
(14)	Code of Ethics
14.1	Code of Ethics and Business Conduct (incorporated by reference to our Annual Report on Form 10-K filed on April 20, 2009)
(21)	Subsidiaries of the Registrant
21.1	Allied Mining and Supply, LLC, a Nevada limited liability company Mikite Gold Resources Limited, a Ghanaian company
(31)	Rule 13a-14(a)/15d-14(a) Certifications
31.1*	Certification of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32)	Section 1350 Certifications
32.1*	Certification of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer filed pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101**	Interactive Data Files
101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE	XBRL Instance Document XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Definition Linkbase Document XBRL Taxonomy Extension Label Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

		SUNERGY, INC.
Date:	July 24, 2012	By:	/s/ Bryan Miller
		Name:	Bryan Miller
		Title:	Chief Executive Officer, President, Director (Principal Executive Officer)
Date:	July 24, 2012	By:	/s/ Mark Shelley
		Name:	Mark Shelley
		Title:	Chief Financial Officer (Principal Financial and Accounting Officer)

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