UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 January 31, 2011 | |
| [ ] | Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the transition period from __________ to __________ | |
Commission File Number: 333-145794 |
Harmonic Energy, Inc.
(Exact name of registrant as specified in its charter)
| Nevada | 26-0164981 |
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
| #406 - 917 85th Street SW, Suite 167, Calgary, Alberta, Canada |
| (Address of principal executive offices) |
| (403) 698-9477 |
| (Registrant’s telephone number) |
_____________________________________________________________________ |
| (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 [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
[ ] Large accelerated filer [ ] Non-accelerated filer | [ ] Accelerated filer [X] Smaller reporting company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [X] Yes [ ] No
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 54,724,119 common shares as of March 16, 2011.
Page | ||
PART I – FINANCIAL INFORMATION | ||
PART II – OTHER INFORMATION | ||
Our financial statements included in this Form 10-Q are as follows: | |
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended January 31, 2011 are not necessarily indicative of the results that can be expected for the full year.
3
(Formerly Aviation Surveillance Systems, Inc.)
(A Development Stage Company)
Balance Sheets
(unaudited)
| ASSETS | January 31, 2011 | July 31, 2010 | |||
| CURRENT ASSETS | |||||
| Cash | $ | 1,843 | $ | 10,983 | |
| TOTAL ASSETS | $ | 1,843 | $ | 10,983 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |||||
| LIABILITIES | |||||
| CURRENT LIABILITIES | |||||
| Accounts payable and accrued expenses | $ | 31,092 | $ | 30,993 | |
| Accrued Interest - related party | 746 | 154 | |||
| Notes payable - related party | 20,000 | 20,000 | |||
| Total Current Liabilities | 51,838 | 51,147 | |||
| STOCKHOLDERS' EQUITY (DEFICIT) | |||||
Preferred stock - $0.001 par value; 10,000,000 shares authorized; -0- shares issued and outstanding | - | - | |||
Common stock - $0.001 par value; 90,000,000 shares authorized; 54,724,119 shares issued and outstanding | 54,724 | 54,724 | |||
| Additional paid-in capital | 27,711 | 27,711 | |||
| Deficit accumulated during the development stage | (132,430) | (122,599) | |||
| Total Stockholders' Equity (Deficit) | (49,995) | (40,164) | |||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ | 1,843 | $ | 10,983 | |
See accompanying notes to financial statements.
HARMONIC ENERGY, INC.
(Formerly Aviation Surveillance Systems, Inc.)
(A Development Stage Company)
Statements of Operations
(unaudited)
For the Three Months Ended January 31 | For the Six Months Ended January 31 | From Inception on May 1, | ||||||||||||
| 2011 | 2010 | 2011 | 2010 | 2011 | ||||||||||
| REVENUES | $ | - | $ | - | $ | $ | $ | 200 | ||||||
| OPERATING EXPENSES | ||||||||||||||
| Professional fees | 8,382 | 8,382 | 204,407 | |||||||||||
| Website development | 9,000 | |||||||||||||
| General and administrative | 132 | 26,763 | 857 | 7,021 | 5,015 | |||||||||
| Total Operating Expenses | 8,514 | 26,763 | 9,239 | 7,021 | 218,422 | |||||||||
| LOSS FROM OPERATIONS | (8,514 | ) | (26,763 | ) | (9,239 | ) | (7,021 | ) | (218,222) | |||||
| OTHER EXPENSES | ||||||||||||||
| Gain on settlement of accrued expense | 86,748 | |||||||||||||
| Interest Expense | (296 | ) | (24 | ) | (592 | ) | (40 | ) | (956) | |||||
| Total other (income) expense | (296 | ) | (24 | ) | (592 | ) | (40 | ) | 85,792 | |||||
| NET LOSS BEFORE INCOME TAXES | (8,810 | ) | (26,787 | ) | (9,831 | ) | (7,061 | ) | (132,430) | |||||
| INCOME TAX EXPENSE | - | - | - | - | - | |||||||||
| NET LOSS | $ | (8,810 | ) | $ | (26,787 | ) | $ | (9,831 | ) | $ | (7,061 | ) | $ | (132,430) |
| BASIC AND DILUTED LOSS PER SHARE | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | 54,724,119 | 16,488,827 | 54,724,119 | 16,488,827 | ||||||||||
See accompanying notes to financial statements.
F-2
HARMONIC ENERGY, INC.
(Formerly Aviation Surveillance Systems, Inc.)
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
(unaudited)
| Common Stock | Additional Paid-In | Deficit Accumulated | ||||||||||||
| Shares | Amount | Capital | Stage | Total | ||||||||||
| Balance May 1, 2007 | - | $ | - | $ | - | $ | - | $ | - | |||||
| Contributed capital | - | - | 300 | - | 300 | |||||||||
Shares issued for cash at $0.001 per share on May 14, 2007 | 11,798,803 | 11,799 | (7,799 | ) | - | 4,000 | ||||||||
Shares issued for cash at $0.004 per share on June 22, 2007 | 4,690,022 | 4,690 | 7,235 | - | 11,925 | |||||||||
Net loss from inception through July 31, 2007 | - | - | - | (153 | ) | (153) | ||||||||
| Balance, July 31, 2007 | 16,488,825 | 16,489 | (264 | ) | (153 | ) | 16,072 | |||||||
Net loss for the year ended July 31, 2008 | - | - | - | (15,709 | ) | (15,709) | ||||||||
| Balance, July 31, 2008 | 16,488,825 | 16,489 | (264 | ) | (15,862 | ) | 363 | |||||||
Net loss for year ended ended July 31, 2009 | - | - | - | (68,873 | ) | (68,873) | ||||||||
| Balance, July 31, 2009 | 16,488,825 | 16,489 | (264 | ) | (84,735 | ) | (68,510) | |||||||
Conversion of shareholder loan and accrued interest to contributed capital | 1,210 | 1,210 | ||||||||||||
| Common shares issued | 38,235,294 | 38,235 | 26,765 | 65,000 | ||||||||||
Net loss for year ended ended July 31, 2010 | (37,864 | ) | (37,864) | |||||||||||
| Balance, July 31, 2010 | 54,724,119 | 54,724 | 27,711 | (122,599 | ) | (40,164) | ||||||||
Net Loss for the six months ended January 31, 2011 | (9,831 | ) | (9,831) | |||||||||||
| Balance, January 31, 2011 | 54,724,119 | $ | 54,724 | $ | 27,711 | $ | (132,430 | ) | $ | (49,995) | ||||
See accompanying notes to financial statements.
Statements of Cash Flows
(unaudited)
For the Six Months Ended January 31, | From Inception on May 1, | |||||||
| 2011 | 2010 | 2011 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (9,831 | ) | $ | (70,830 | ) | $ | (132,430) |
| Change in non-cash working capital items | ||||||||
| Conversion of related party accrued interest | 210 | |||||||
| Gain on settlement of debt | (86,748) | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in accounts payable and accrued expenses | 99 | 69,589 | 117,840 | |||||
| Increase in accrued interest - related party | 592 | 746 | ||||||
| NET CASH USED IN OPERATING ACTIVITIES | (9,140 | ) | (1,241 | ) | (100,382) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from Note payable - related party | 21,000 | |||||||
| Proceeds from common stock issued | - | 81,225 | ||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | - | - | 102,225 | |||||
| NET INCREASE (DECREASE) IN CASH | (9,140 | ) | (1,241 | ) | 1,843 | |||
| CASH AT BEGINNING OF PERIOD | 10,983 | 1,638 | - | |||||
| CASH AT END OF PERIOD | $ | 1,843 | $ | 397 | $ | 1,843 | ||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| CASH PAID FOR: | ||||||||
| Interest | $ | - | $ | - | $ | - | ||
| Income Taxes | $ | - | $ | - | $ | - | ||
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Conversion of note payable – related party | ||||||||
| to contributed capital | $ | $ | 1,000 | |||||
See accompanying notes to financial statements.
HARMONIC ENERGY, INC.
(formerly Aviation Surveillance Systems, Inc.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
January 31, 2011
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Harmonic Energy, Inc. (the Company), formerly known as Aviation Surveillance Systems, Inc. and Fairytale Ventures, Inc., was incorporated in the State of Nevada on May 1, 2007. The Company is currently seeking to acquire oil and gas prospects and/or producing oil and gas properties in the United States and internationally. The Company has not realized significant revenues to date and therefore is classified as a development stage company.
Development Stage Company
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles related to development-stage companies. A development-stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from.
Basis of Presentation
The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K filed with the SEC as of and for the period ended January 31, 2010. In the opinion of management, all adjustments necessary for the financial statements to be not misleading for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. The Company has adopted a July 31 fiscal year end.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, accrued expenses and accrued interest – related party. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
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 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.
Basic (Loss) per Common Share
Basic (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of January 31, 2011.
Revenue Recognition
The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.
Advertising Costs
The Company’s policy regarding advertising is to expense advertising when incurred. The Company has not incurred any advertising expense as of January 31, 2011 and 2010.
HARMONIC ENERGY, INC.
(formerly Aviation Surveillance Systems, Inc.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
January 31, 2011
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.
Reclassifications
Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options. As of January 31, 2011, the Company has not issued any stock-based payments to its employees.
Recent Accounting Pronouncements
Harmonic Energy does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
NOTE 3 – ACCRUED EXPENSES
Accrued expenses consisted of the following as of January 31, 2011 and July 31, 2010:
January 31, 2011 | July 31, 2010 | ||||
| Accrued legal fees | $ | 31,092 | $ | 25,470 | |
| Accrued accounting and audit fees | 0 | 4,473 | |||
| Accrued filing fees | 0 | 875 | |||
| Accrued bank fees | 0 | 175 | |||
| Total Accrued Expenses | $ | 31,092 | $ | 30,993 | |
HARMONIC ENERGY, INC.
(formerly Aviation Surveillance Systems, Inc.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2011
NOTE 4 – LOAN PAYABLE – RELATED PARTY
The Company had a loan of $1,000 outstanding to an officer as of July 31, 2009. The loan was unsecured, due on demand with an interest rate of 8%. The loan and accrued interest were converted to capital during the year ended July 31, 2010. The total amount recorded as contributed capital was $1,210. Interest expense on the above loan was $47 for the year ended July 31, 2010.
On June 14, 2010, the Company signed a promissory note for $20,000 with an officer. The loan is due on June 14, 2011, bears 6% interest and is unsecured. Interest expense on this loan was $296 and $592 for the three and six months ended January 31, 2010.
NOTE 5 – PREFERRED AND COMMON STOCK
The Company has 10,000,000 preferred shares and 90,000,000 common shares of $0.001 par value stock authorized.
On May 14, 2007, the Company received $4,000 from its founders for 7,374,252 shares of its common stock. On June 22, 2007, the Company completed an unregistered private offering under the Securities Act of 1933, as amended, relying upon the exemption from registration afforded by Rule 504 of Regulation D promulgated there under. The Company sold 2,931,265 shares of its $0.001 par value common stock at a price of $0.004 per share for $11,925 in cash.
On July 21, 2008, the Company’s shares of common stock were forward split on the basis of 1.84356289 shares for 1.
On May 1, 2009, the Company’s shares of common stock were forward split on the basis of 1.6 shares for 1. The forward stock split has been recognized in the Company’s financial statements on a retroactive basis.
On March 15, 2010, the Company sold 38,235,294 shares of common stock for total cash proceeds of $65,000.
As of January 31, 2011, the Company has 54,724,119 shares of common stock issued and outstanding.
NOTE 6 – GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern. However, the Company has accumulated deficit of $132,430 as of January 31, 2010. The Company currently has limited liquidity, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
HARMONIC ENERGY, INC.
(formerly Aviation Surveillance Systems, Inc.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2011
NOTE 7 – INCOME TAXES
As of January 31, 2011, the Company had net operating loss carry forwards of approximately $132,430 that may be available to reduce future years’ taxable income in various amounts through 2031. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
The provision for Federal income tax consists of the following:
| 2011 | 2010 | ||||
| Federal income tax benefits attributable to: | |||||
| Current Operations | $ | 3,3421 | $ | 2,400 | |
| Less: valuation allowance | (3,342) | (2,400) | |||
| Net provision for Federal income taxes | $ | 0 | $ | 0 | |
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
| 2011 | 2010 | ||||
| Deferred tax asset attributable to: | |||||
| Net operating loss carryover | $ | 45,026 | 41,684 | ||
| Less: valuation allowance | (45,026) | (41,684) | |||
| Net deferred tax asset | $ | 0 | $ | 0 | |
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of $132,430 for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Harmonic Energy neither owns nor leases any real or personal property. An officer has provided office services without charge. There is no obligation for this arrangement to continue. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.
NOTE 9 – SUBSEQUENT EVENTS
Management has evaluated subsequent events through February 15, 2011, the date these financial statements were issued, and has determined it does not have any material subsequent events to disclose.
Item 2. Management’s Discussion and Analysis or Plan of Operation
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.
Company Overview and Plan of Operation
We are a Nevada corporation, formed May 1, 2007. As reported in our Current Report on Form 8-K filed March 18, 2010, we experienced a change in control on March 15, 2010. Following the change in control, our new management began to evaluate business opportunities in the area of oil and gas and acquired an option to purchase the working interest in a group of oil and gas leases covering approximately 4,480 acres in McIntosh County, Oklahoma known as the Checotah Field Development Project (the “Checotah Project”). In addition, our option included the purchase of a natural gas gathering, treatment, and pipeline system located within the Checotah Project.
Our option on the Checotah Project called for an initial deposit of $20,000 upon signing of a formal purchase and sale agreement. The option called for a sixty (60) day due diligence period following the signing of formal purchase and sale agreements and the option required closing within ten (10) days of the end of the due diligence period. Upon closing of a formal purchase and sale agreement, the option required us to invest a minimum of $6,500,000 in the exploration and development of the project in accord with a project budget to be developed and mutually agreed upon with the sellers of the project. The required investments were to be made over time during the development of the project, and would have resulted in our ultimate ownership of a total seventy-five percent (75%) undivided interest in the leasehold interests and equipment on the project.
To date, we have been unable to perform our obligations under the option for the Checotah Project and, under its terms, the option has expired. Advanced negotiations regarding the formal purchase contract for the project have been conducted, but to date we have been unable to raise the capital necessary to fund the proposed acquisition. On or about October 13, 2010, the sellers of the Checotah Project demanded the payment of certain funds called for under the option and we were unable to furnish the required funds.
Our efforts to raise the capital necessary to acquire the Checotah Project have ceased. Our original option has expired and the owners of the project have elected to sell it to another party or pursue other options for funding its exploration and development.
We will continue to search for promising oil and gas prospects and/or producing oil and gas properties in the United States and internationally and the capital required to fund such projects.
Expected Changes in Number of Employees, Plant, and Equipment
We have no employees and do not currently have specific plans to change the number of our employees during the next twelve months.
Results of Operations for the three and six months ended January 31, 2011 and 2010
We have not earned significant revenues since the inception of our business and we earned no revenues during the three and six months ended January 31, 2011 and January 31, 2010. We are presently in the development stage of our business and we can provide no assurance that we will produce significant revenues or, if revenues are earned, that we will be profitable.
We incurred net losses in the amount of $132,430 from our inception on May 1, 2007 through the period ending January 31, 2011. During the three months ended January 31, 2011, we incurred operating expenses in the amount of $8,514, together with interest expense of $296, resulting in a net loss of $8,810. By comparison, we experienced operating expenses of $26,763, interest expense of $24, and net losses the amount of $26,787 during the three months ended January 31, 2010. We incurred operating expenses and net operating losses in the amount of $9,239 during the six months ended January 31, 2011 together with interest expense of $592, resulting in a net loss of, $9,831compared to operating expenses and net operating losses the amount of $7,021 interest expense of $40, and net losses the amount of$7,061 during the six months ended January 31, 2010. Our operating expenses from inception through January 31, 2011 consisted primarily of general and administrative expenses. Our losses are attributable to our operating expenses combined with a lack of significant revenues during our current stage of development.
Liquidity and Capital Resources
As of January 31, 2011, we had current assets $1,843, consisting entirely of cash, and current liabilities of $51,838. Thus, we had a working capital deficit of $49,995 as of January 31, 2011.
We have not attained profitable operations and may be dependent upon obtaining financing to pursue a long-term business plan. As discussed above, we will require substantial additional financing in order to purchase, fund and to undertake any exploration and development activities or acquire any project. We currently do not have any arrangements for financing and we may not be able to obtain financing when required. For these reasons our auditors stated in their report that they have substantial doubt we will be able to continue as a going concern.
Off Balance Sheet Arrangements
As of January 31, 2011, there were no off balance sheet arrangements.
Going Concern
Our financial statements have been prepared on a going concern basis. We had a working capital deficit of $49,995 as of January 31, 2011 and have an accumulated deficit of $132,430 since inception. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. The outcome of these matters cannot be predicted with any certainty at this time. We will require substantial additional financing in order to pursue any substantial oil and gas property acquisition. We currently do not have any firm arrangements for financing and we may be unable to obtain financing when required. For these reasons, our auditors stated in their report that they have substantial doubt we will be able to continue as a going concern. These factors raise substantial doubt that we will be able to continue as a going concern. Management plans to continue to provide for our capital needs by the issuance of common stock and related party advances.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We do not believe that any accounting policies currently fit this definition.
Recently Issued Accounting Pronouncements
There were various updates and other recently issued pronouncements, most of which represented technical corrections to the accounting literature or application to specific industries that are not expected to a have a material impact on the Company's financial position, results of operations or cash flows.
A smaller reporting company is not required to provide the information required by this Item.
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 April 30, 2010. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Mr. Dan Forigo and our Chief Financial Officer, Mr. Mark Mroczkowski. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of January 31, 2011, our disclosure controls and procedures are not effective. There have been no changes in our internal controls over financial reporting during the quarter ended January 31, 2011. Management determined that the material weaknesses that resulted in controls being ineffective are primarily due to lack of resources and number of employees. Material weaknesses exist in the segregation of duties required for effective controls and various reconciliation and control procedures not regularly performed due to the lack of staff and resources.
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.
Limitations on the Effectiveness of Internal Controls
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. 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 controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
PART II – OTHER INFORMATION
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
A smaller reporting company is not required to provide the information required by this Item.
None.
None
No matters have been submitted to our security holders for a vote, through the solicitation of proxies or otherwise, during the quarterly period ended January 31, 2011.
None
| No. | Description of Exhibit |
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Harmonic Energy, Inc. | |
| Date: | March 17, 2011 |
By: /s/ Dan Forigo Dan Forigo Title: Chief Executive Officer and Director |