UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended July 31, 2013
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ____________
Commission file number: 333-170118
ALTERNATIVE ENERGY & ENVIRONMENTAL SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 27-2830681 | |
| (State or other jurisdiction of | (I.R.S Employer Identification No.) | |
| incorporation or organization) | ||
100 Europa Drive, Suite 455 Chapel Hill, NC | 27517 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code 919-933-2720
| Securities registered under Section 12(b) of the Act: | ||
| Title of each class: | Name of each exchange on which registered: | |
| None | None | |
| Securities registered under Section 12(g) of the Act: |
| None |
| (Title of class) |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes x No o
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 ¨ No x
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 x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
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 | ¨ | Accelerated filer | ¨ |
| Non-accelerated filer | ¨ | Smaller reporting company | x |
| (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
Aggregate market value of the voting and non-voting common equity held by non-affiliates as of January 31, 2013: $782,932.69.
As of October 29, 2013, there were approximately 18,077,550 shares of the registrant’s common stock outstanding.
| PART I | PAGE | |
| Item 1. | 1 | |
| Item 1A. | 3 | |
| Item 1B. | 3 | |
| Item 2. | 3 | |
| Item 3. | 3 | |
| Item 4. | 3 | |
| PART II | ||
| Item 5. | 4 | |
| Item 6. | 5 | |
| Item 7. | 5 | |
| Item 7A. | 8 | |
| Item 8. | 9 | |
| Item 9. | 10 | |
| Item 9A. | 10 | |
| Item 9B. | 10 | |
| PART III | ||
| Item 10. | 11 | |
| Item 11. | 13 | |
| Item 12. | 14 | |
| Item 13. | 15 | |
| Item 14. | 15 | |
| PART IV | ||
| Item 15. | ||
| 16 | ||
| 18 | ||
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.
We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management, any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.
These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.
Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
CERTAIN TERMS USED IN THIS REPORT
When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to Alternative Energy & Environmental Solutions, Inc. “SEC” refers to the Securities and Exchange Commission.
The information presented in this 10-K reflects our 3-for-1 forward stock split, which became effective as of August 22, 2012.
PART I
Item 1. | Business. |
Our Company
Alternative Energy & Environmental Solutions, Inc. (the “Company”), a Nevada Corporation, was incorporated on June 10, 2010 to market an innovative new biotechnology that utilizes nutrient stimulants organic microbes to extract coalbed methane more efficiently in high-production, as well as from low-producing, depleted and abandoned coalmines in the U.S. Coalbed methane is a clean-burning natural gas used for heating in homes and is used to generate electricity.
Nutrient stimulation for coalbed methane production is considered by the U.S. Geological Survey to be an environmentally sound and inexpensive method to increase yields. As the U.S. shifts to cleaner and more environmentally friendly fuel sources for heating and electricity, coalbed methane is becoming more valuable. Innovative methods for cost-effectively and efficiently extracting more of this natural gas are now in demand.
The Company plans to apply for patents on its biotechnology solution based on in-situ biogenic nutrient-circulation methods and the nutritional amendments used in the biogenic process successfully piloted both in the lab and in the field during the last two years.
The Company plans to license this patent-pending biotechnology to owners and operators of coalmines in the Power River Basin, which spans parts of Montana and Wyoming. This area has the potential to yield nearly 22 trillion cubic feet (Tcf) of coalbed methane during the next 20 years. The overall market potential for coalbed methane from the Power River Basin is estimated to reach $10 billion in the next decade. Because coalbed methane is a clean-burning natural gas, companies developing greater reserves contribute in a major way to the U.S.’s drive for higher reliance on renewable and cleaner energy sources, and can possibly qualify for significant tax incentives to help fund operations.
The Company began operations in June 2010, and is currently a development-stage company with no operations or revenues.
The Company’s principal executive office location and mailing address is 100 Europa Drive, Suite 455, Chapel Hill, NC 27517 and its telephone number is 919-933-2720.
History
The Company was incorporated on June 10, 2010 in the State of Nevada. We are currently a development-stage company with no operations or revenues.
On July 8, 2011, we entered into an agreement (the "Merger Agreement") with U.S. EcoFuels, Inc., a Florida corporation ("ECO"), National Invest & Trade, Ltd., a Nevada corporation ("NIT") and Allen N. Sharpe the sole owner of NIT pursuant to which ECO would merge into a subsidiary to be formed by the Company (the “Merger”). Currently, NIT is ECO's sole shareholder, but we anticipated that ECO would issue shares to settle outstanding obligations before the merger closed. The target date in the Merger Agreement for closing the merger was September 30, 2011, which was not met because ECO failed to deliver audited financial statements and meet other closing conditions on time. On March 1, 2012, the Company terminated the Merger Agreement for breach by the other parties in connection with their failure to fulfil the conditions to closing by the date specified in the Merger Agreement.
1
On May 22, 2012, the Company, Scott Williams and David Callan (the “Sellers”) and Peter Coker (the “Purchaser”) entered into and closed a stock purchase agreement (the “Stock Purchase Agreement”), whereby the Purchaser purchased from the Sellers 14,700,000 shares of common stock of the Company, par value $0.0001 per share (the “Shares”), representing approximately 81.3% of the issued and outstanding shares of the Company, for an aggregate purchase price of $490 (the “Purchase Price”).
In connection with the closing of the Stock Purchase Agreement on May 22, 2012, Scott Williams, Dave Callan and John Tilger each submitted to the Company a resignation letter pursuant to which they resigned from their respective positions as directors of the Company. In addition, Scott Williams resigned from his position as President and Chief Executive Officer of the Company and Dave Callan resigned from his position as Chief Financial Officer and Secretary of the Company. The resignations of Mr. Williams, Mr. Callan and Mr. Tilger were not a result of any disagreements relating to the Company’s operations, policies or practices.
On May 22, 2012, by a consent to action without meeting by unanimous consent of the board of directors of the Company (the “Board”), the Board accepted the resignations of Mr. Williams, Mr. Callan and Mr. Tilger and appointed Peter Coker serve as the President, Chief Executive Officer, Chief Financial Officer and sole director of the Company.
Industry
According to the U.S Geological Survey (USGS) the Powder River Basin has the potential to produce 22 Tcf of natural gas in the next 20 years. More than half of the 22,000 natural gas wells in the Powder River Basin are considered low producing, depleted or abandoned. The Company’s proprietary biotech solution can become a cost-effective method for revitalizing the yields from these low-producing mines as well as valuable solution for helping to maintain yields in high-producing mines.
Growth Strategies
There are approximately 100 companies with mines in the Power River Basin that may be interested in cost-effective ways to develop additional reserves of this natural gas energy source. The Company plans to engage these companies in discussions geared toward developing licensing agreements, providing the Company’s biotech solution to aid these companies’ efforts to develop high yielding coalbed methane reserves.
Sales and Marketing
The Company’s initial marketing efforts will be focused on engaging with the 100 or so companies with coal mines and natural gas efforts in the Powder River basin of Montana and Wyoming. Company officials have developed relationships with a number of these companies and the goal is to field three new in-situ pilots with three of these companies as proof points for the participating companies and the industry.
Once the three pilots are complete, AEES plans to offer its biotechnology solution on a renewable, annual license agreement to those operators who seek to increase their coalbed methane yields over the next few years.
2
Competition
There are several other biotechnologies being piloted for extraction of natural gas using microbial stimulation. The first-mover position in this case is critical to long-term market success.
Employees
We presently have no employees apart from our management. Our officer and director devotes to our business approximately fifteen (15) hours per week.
Item 1A. Risk Factors. |
Smaller reporting companies are not required to provide the information required by this item.
Item 1B. Unresolved Staff Comments.
Smaller reporting companies are not required to provide the information required by this item.
Item 2. Properties. |
The Company neither rents nor owns any properties. We utilize the office space and equipment of our management at no cost. Management estimates such amounts to be immaterial. We currently have no policy with respect to investments or interests in real estate, real estate mortgages or securities of, or interests in, persons primarily engaged in real estate activities.
Item 3. Legal Proceedings. |
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 4. Mine Safety Disclosures. |
Not applicable.
3
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
Market Information
Our shares are traded on the over-the-counter bulletin board operated by the Financial Industry Regulatory Authority (“FINRA”) under the symbol “ALNE”. There were no public trades of the Company’s common stock recorded prior to June 2, 2011, at which time the Company’s common stock sold for $0.2667 per share.
| Fiscal Year 2013 | High | Low | ||||||
First quarter ended October 31, 2012 | $ | 2.75 | 1.38 | |||||
Second quarter ended January 31, 2013 | $ | 3.00 | 1.25 | |||||
Third quarter ended April 30, 2013 | $ | 1.25 | 0.50 | |||||
Fourth quarter ended July 31, 2013 | $ | 0.60 | 0.30 | |||||
| Fiscal Year 2012 | ||||||||
First quarter ended October 31, 2011 | $ | 0.8167 | 0.75 | |||||
Second quarter ended January 31, 2012 | $ | 0.83 | 0.7333 | |||||
Third quarter ended April 30, 2012 | $ | 1.6667 | 0.50 | |||||
Fourth quarter ended July 31, 2012 | $ | 1.6267 | 1.25 | |||||
Holders
As of October 29, 2013, there were 33 stockholders of record of the Company’s common stock.
Common Stock
Our Certificate of Incorporation authorizes the issuance of up to 100,000,000 shares of common stock, par value $0.0001 per share. As of October 29, 2013, there were 33 stockholders of record holding an aggregate of 18,077,550 shares of common stock.
Preferred Stock
Our certificate of incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock, par value $0.0001 per share. As of October 29, 2013, there were no shares of preferred stock issued and outstanding.
Dividends
To date, we have not declared or paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock, when issued pursuant to this offering. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future.
Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, which our Board of Directors may deem relevant.
Securities Authorized for Issuance Under Equity Compensation Plans
We presently do not have any equity based or other long-term incentive programs. In the future, we may adopt and establish an equity-based or other long-term incentive plan if it is in the best interest of the Company and our stockholders to do so.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
During the period from June 10, 2010 (inception) through July 31, 2013, the Company made the following sales of unregistered securities:
On June 18, 2010, the Company issued 15,000,000 shares of common stock to Scott Williams, the President and Chief Executive Officer of the Company at the time, pursuant to the exemption from registration set forth in section 4(2) of the Securities Act of 1933, as amended. Mr. Williams, the founder of the Company, contributed $500 for the 15,000,000 shares. The Company applied the proceeds towards working capital.
4
On February 17, 2012, the Company issued 40,002 shares to Kathleen Patten at a per share price of $0.25for an aggregate price of $10,000. These shares were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). These shares of our common stock qualified for exemption under Section 4(2) since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, the investors had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Act for this transaction.
Item 6. Selected Financial Data. |
Smaller reporting companies are not required to provide the information required by this item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation. |
The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition for the fiscal years ended July 31, 2013, and July 31, 2012. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Report. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements. See “Cautionary Statement On Forward-Looking Information.”
Overview
The Company was incorporated in the State of Nevada on June 10, 2010 to bring to market and license its innovative new biotechnology for the environmentally friendly and cost-effective extraction of natural gas (coalbed methane) from low-producing, depleted and abandoned coal mines in the U.S. Using organic stimulants to increase the availability of natural gas, the new AEES technology could help licensees tap a market with potential.
Coalbed methane is a clean-burning natural gas used for heating and electricity generation. According to the U.S Geological Survey, natural gas reserves from the Powder River Basin of Montana and Wyoming alone approach 22 trillion cubic feet (Tcf.) Between 1997 and 2007, the number of wells drilled for natural gas extraction in this area reached 22,000. With the U.S. energy industry aggressively trying to adopt cleaner, renewable energy sources, coalbed methane is becoming an extremely valuable fuel. Operators in the Powder River Basin area are seeking innovative new biotechnology for the efficient and cost-effective extraction of this natural gas from coalmines that are underperforming.
The Company plans to market its biotechnology to the 100 or so coalmine and natural gas concerns in the Power River Basin area. The business strategy is to license this innovative solution for cost-effective and efficient coalbed methane extraction from the 50 percent or more of the existing wells that are abandoned, depleted or under-producing. This technology can also be used on high-production wells to keep them at top capacity for far longer.
Change in Control
On May 22, 2012, the Company, Scott Williams and David Callan (the “Sellers”) and Peter Coker (the “Purchaser”) entered into and closed a stock purchase agreement (the “Stock Purchase Agreement”), whereby the Purchaser purchased from the Sellers 14,700,000 shares of common stock of the Company, par value $0.0001 per share (the “Shares”), representing approximately 81.5% of the issued and outstanding shares of the Company, for an aggregate purchase price of $490 (the “Purchase Price”).
5
In connection with the closing of the Stock Purchase Agreement, on May 22, 2012, Scott Williams, Dave Callan and John Tilger each submitted to the Company a resignation letter pursuant to which they resigned from their respective positions as directors of the Company. In addition, Scott Williams resigned from his position as President and Chief Executive Officer of the Company and Dave Callan resigned from his position as Chief Financial Officer and Secretary of the Company. The resignations of Mr. Williams, Mr. Callan and Mr. Tilger were not a result of any disagreements relating to the Company’s operations, policies or practices.
On May 22, 2012, by a consent to action without meeting by unanimous consent of the board of directors of the Company (the “Board”), the Board accepted the resignations of Mr. Williams, Mr. Callan and Mr. Tilger and appointed Peter Coker serve as the President, Chief Executive Officer, Chief Financial Officer and sole director of the Company.
On August 22, 2012, a three–for-one forward stock split was declared effective for stockholders of record on June 5, 2012.
Plan of Operation
Alternative Energy & Environmental Solutions, Inc. is a development-stage company.
The Company’s plan of operation over the next 12 months is to continue to decrease costs of operation. That will be in two distinct areas – monthly professional fees and general and administrative expenses. The Company reduced those expenses in the fiscal year ended July 31, 2013 by 21% and expects to reduce them in fiscal 2014. In addition, the Company will continue to look for a strategic partner in the alternative energy area. However, the Company cannot make any guarantee that it will be successful in obtaining a strategic partner, nor will it decrease its costs of operation.
Limited Operating History
We have not previously demonstrated that we will be able to expand our business. We cannot guarantee that the expansion efforts described in this annual report will be successful. Our business is subject to risks inherent in growing an enterprise, including limited capital resources and possible rejection of our renovation services offering.
6
Results of Operation
Revenue: Revenues for the fiscal year ended July 31, 2013 were $0, compared with $0 in fiscal year ended July 31, 2012, reflecting no change, which was primarily attributable to the lack of ability to secure a strategic partner.
Total Operating Expenses: Total operating expenses for the fiscal year ended July 31, 2013 were $117,845, compared with $149,216 in fiscal year ended July 31, 2012, reflecting a decrease of 21 %. The decrease in fiscal 2013 was primarily attributable to the Company’s effort to cut costs. The Company was able to reduce the monthly Professional Fees by $24,162 and also reduced some General and Administrative Expenses by $7,209.
Loss from Operations: Loss from operations for the fiscal year ended July 31, 2013 were $117,845, compared with $149,216 in fiscal year ended July 31, 2012, reflecting a decrease of 21%. The decrease in loss from operations in fiscal 2013 was primarily attributable to the Company’s effort to cut costs.
Net loss: We incurred a net loss of $125,757 in fiscal 2013 compared to a net loss of $154,172 in fiscal 2012.
Liquidity and Capital Resources
We raised cash to grow our business through a private placement that was completed on July 31, 2010. If we determine that we need more money to build our business, we will seek alternative sources, like a second private placement of securities or loans from our officers or others. At the present time, we do not have enough cash to continue operations for 12 months and we have not made any arrangements to raise additional cash. We are actively seeking a seeking a strategic partner to merge with or sell to. If we are unable to find an investor or strategic partner or buyer, we will either have to suspend or cease our expansion plans entirely. Other than as described in this Form 10-K, we have no other financing plans.
On June 18, 2010 we issued 15,000,000 shares of common stock to Scott Williams, the President and Chief Executive Officer of the Company, pursuant to the exemption from registration set forth in section 4(2) of the Securities Act of 1933. Mr. Williams, the founder of the Company, contributed $500 for the 15,000,000 shares.
We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.
As reflected in the accompanying financial statements, the Company is in the development stage with limited operations, a working capital and stockholders’ deficiency of $271,707, used cash in operations of $786,327 from inception and has a net loss since inception of $1,071,663. Our independent auditor raises substantial doubt about Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Critical Accounting Policies
We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. The list is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management's judgment in their application.
7
The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA and the SEC did not, or are not, believed by management to have a material impact on the Company’s present or future financial statements.
Off Balance Sheet Transactions
None.
Smaller reporting companies are not required to provide the information required by this item.
8
Item 8. Financial Statements and Supplementary Data. |
ALTERNATIVE ENERGY & ENVIRONMENTAL SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
| PAGE | F-1 | REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
| PAGE | F-2 | BALANCE SHEETS AS OF JULY 31, 2013 AND AS OF JULY 31, 2012 |
| PAGE | F-3 | STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JULY 31, 2013 AND 2012, AND FOR THE PERIOD FROM JUNE 10, 2010 (INCEPTION) TO JULY 31, 2013 |
| PAGE | F-4 | STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIENCY) FOR THE PERIOD FROM JUNE 10, 2010 (INCEPTION) TO JULY 31, 2013 |
| PAGE | F-5 | STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JULY 31, 2013 AND 2012 AND FOR THE PERIOD FROM JUNE 10, 2010 (INCEPTION) TO JULY 31, 2013 |
| PAGES | F-6 - F-12 | NOTES TO FINANCIAL STATEMENTS |
9
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of:
Alternative Energy & Environmental Solutions, Inc. (A Development Stage Company)
We have audited the accompanying balance sheets of Alternative Energy & Environmental Solutions, Inc. (a development stage company) (the “Company”) as of July 31, 2013 and 2012 and the related statements of operations, changes in stockholders’ equity/(deficiency) and cash flows for the years ended July 31, 2013 and 2012 and for the period from June 10, 2010 (Inception) to July 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in all material respects, the financial position of Alternative Energy & Environmental Solutions, Inc. (a development stage company) as of July 31, 2013 and 2012 and the results of its operations and its cash flows for the years ended July 31, 2013 and 2012 and for the period from June 10, 2010 (inception) to July 31, 2013 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 6 to the financial statements, the Company is in the development stage with limited operations, a working capital and stockholders ‘deficiency of $271,707, used cash in operations of $786,327 from inception and has a net loss since inception of $1,071,663. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning these matters are also described in Note 6. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Liggett, Vogt & Webb, P.A.
LIGGETT, VOGT & WEBB, P.A.
Certified Public Accountants
Boynton Beach, Florida
October 29, 2013
F-1
| Alternative Energy & Environmental Solutions, Inc. |
| (A Development Stage Company) |
| Balance Sheets |
| July 31, 2013 | July 31, 2012 | |||||||
ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 125 | $ | 434 | ||||
| Total Assets | $ | 125 | $ | 434 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIENCY | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable & Accrued Expenses | $ | 233,859 | $ | 139,402 | ||||
| Accrued Interest Payable | 2,222 | 937 | ||||||
| Notes Payable | 26,034 | 20,000 | ||||||
| Notes Payable Related Party | 9,717 | - | ||||||
| Total Liabilities | 271,832 | 160,339 | ||||||
| Commitments and Contingencies (See Note 4) | ||||||||
| Stockholders' Deficiency | ||||||||
Preferred stock, $0.0001 par value; 10,000,000 shares authorized, none issued and outstanding | - | - | ||||||
Common stock, $0.0001 par value; 100,000,000 shares authorized, 18,077,550 shares and 18,077,550 issued and outstanding, respectively | 1,808 | 1,808 | ||||||
| Additional paid-in capital | 798,148 | 782,193 | ||||||
| Deficit accumulated during the development stage | (1,071,663 | ) | (943,906 | ) | ||||
| Total Stockholders' Deficiency | (271,707 | ) | (159,905 | ) | ||||
| Total Liabilities and Stockholders' Deficiency | $ | 125 | $ | 434 | ||||
See accompanying notes to financial statements
F-2
| Alternative Energy & Environmental Solutions, Inc. |
| (A Development Stage Company) |
| Statements of Operations |
| For the Years Ended | For the period from June 10, 2010 (Inception) to | |||||||||||
| July 31, 2013 | July 31, 2012 | July 31, 2013 | ||||||||||
| Operating Expenses | ||||||||||||
| Professional fees | $ | 36,456 | $ | 60,618 | $ | 186,815 | ||||||
| Consulting Expense | 54,000 | 54,000 | 768,860 | |||||||||
| General and administrative | 27,389 | 34,598 | 101,120 | |||||||||
| Total Operating Expenses | 117,845 | 149,216 | 1,056,795 | |||||||||
| LOSS FROM OPERATIONS BEFORE INCOME TAXES | (117,845 | ) | (149,216 | ) | (1,056,795 | ) | ||||||
| Other Expense | ||||||||||||
| Interest Expense | (9,912 | ) | (4,956 | ) | (14,868 | ) | ||||||
| Total Other Expense - net | (127,757 | ) | (154,172 | ) | (1,071,663 | ) | ||||||
| Provision for Income Taxes | - | - | - | |||||||||
| NET LOSS | $ | (127,757 | ) | $ | (154,172 | ) | $ | (1,071,663 | ) | |||
| Net Loss Per Share - Basic and Diluted | $ | (0.01 | ) | $ | (0.01 | ) | ||||||
| Weighted average number of shares outstanding during the period - Basic and Diluted | 18,077,550 | 18,055,632 | ||||||||||
See accompanying notes to financial statements
F-3
| Alternative Energy & Environmental Solutions, Inc. | |
| (A Development Stage Company) | |
| Statement of Changes in Stockholders' Equity/(Deficiency) | |
| For the period from June 10, 2010 (Inception) to July 31, 2013 |
| Deficit | ||||||||||||||||||||||||||||||||
| Preferred Stock | Common stock | Additional paid-in | accumulated during the development | Subscription | Total Stockholders' Equity/ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | capital | stage | Receivable | (Deficiency) | |||||||||||||||||||||||||
| Balance June 10, 2010 | - | $ | - | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| Common stock issued for cash to founders ($0.00003 per share) | 15,000,000 | 1,500 | (1,000 | ) | - | - | 500 | |||||||||||||||||||||||||
| Common stock issued for cash ($0.25 per share) | - | - | 3,037,548 | 304 | 759,072 | - | (54,000 | ) | 705,376 | |||||||||||||||||||||||
| Stock Offering Costs | - | - | - | - | (15,000 | ) | - | - | (15,000 | ) | ||||||||||||||||||||||
| In kind contribution of services | - | - | - | - | 2,100 | - | - | 2,100 | ||||||||||||||||||||||||
| Net loss for the period June 10, 2010 (inception) to July 31, 2010 | - | - | - | - | - | (212,440 | ) | - | (212,440 | ) | ||||||||||||||||||||||
| Balance, July 31, 2010 | - | - | 18,037,548 | 1,804 | 745,172 | (212,440 | ) | (54,000 | ) | 480,536 | ||||||||||||||||||||||
| Collection of stock subscription receivable | - | - | - | - | - | - | 54,000 | 54,000 | ||||||||||||||||||||||||
| Stock Offering Costs | - | - | - | - | (4,175 | ) | - | - | (4,175 | ) | ||||||||||||||||||||||
| In kind contribution of services | - | - | - | - | 15,600 | - | - | 15,600 | ||||||||||||||||||||||||
| Net loss for the year ended July 31, 2011 | - | - | - | - | - | (577,294 | ) | - | (577,294 | ) | ||||||||||||||||||||||
| Balance, July 31, 2011 | - | - | 18,037,548 | 1,804 | 756,597 | (789,734 | ) | - | (31,333 | ) | ||||||||||||||||||||||
| Common stock issued for cash ($0.25 per share) | - | - | 40,002 | 4 | 9,996 | - | - | 10,000 | ||||||||||||||||||||||||
| In kind contribution of services | - | - | - | - | 15,600 | - | - | 15,600 | ||||||||||||||||||||||||
| Net loss for the year ended July 31, 2012 | - | - | - | - | - | (154,172 | ) | - | (154,172 | ) | ||||||||||||||||||||||
| Balance, July 31, 2012 | - | - | 18,077,550 | 1,808 | 782,193 | (943,906 | ) | - | (159,905 | ) | ||||||||||||||||||||||
| In kind contribution of services | - | - | - | - | 15,600 | - | - | 15,600 | ||||||||||||||||||||||||
| In kind contribution of interest | - | - | - | - | 355 | - | - | 355 | ||||||||||||||||||||||||
| Net loss for the year ended July 31, 2013 | - | - | - | - | - | (127,757 | ) | - | (127,757 | ) | ||||||||||||||||||||||
| Balance, July 31, 2013 | - | $ | - | 18,077,550 | $ | 1,808 | $ | 798,148 | $ | (1,071,663 | ) | $ | - | $ | (271,707 | ) | ||||||||||||||||
See accompanying notes to financial statements
F-4
| Alternative Energy & Environmental Solutions, Inc. |
| (A Development Stage Company) |
| Statements of Cash Flows |
| For the Years Ended | For the period from June 10, 2010 (Inception) to | |||||||||||
| July 31, 2013 | July 31, 2012 | July 31, 2013 | ||||||||||
| Cash Flows Used in Operating Activities: | ||||||||||||
| Net Loss | $ | (127,757 | ) | $ | (154,172 | ) | $ | (1,071,663 | ) | |||
| Adjustments to reconcile net loss to net cash used in operations | ||||||||||||
| In-kind contribution of services | 15,600 | 15,600 | 48,900 | |||||||||
| In-kind contribution of interest | 355 | - | 355 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Increase in accounts payable and accrued expenses | 95,742 | 103,050 | 236,081 | |||||||||
| Net Cash Used In Operating Activities | (16,060 | ) | (35,522 | ) | (786,327 | ) | ||||||
| Cash Flows From Financing Activities: | ||||||||||||
| Proceeds from note payable | 15,751 | 20,000 | 35,751 | |||||||||
| Proceeds from issuance of common stock, net of offering costs | - | 10,000 | 750,701 | |||||||||
| Net Cash Provided by Financing Activities | 15,751 | 30,000 | 786,452 | |||||||||
| Net Increase (Decrease) in Cash | (309 | ) | (5,522 | ) | 125 | |||||||
| Cash at Beginning of Period | 434 | 5,956 | - | |||||||||
| Cash at End of Period | $ | 125 | $ | 434 | $ | 125 | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||||||
| Cash paid for interest | $ | - | $ | - | $ | - | ||||||
| Cash paid for taxes | $ | - | $ | - | $ | - | ||||||
See accompanying notes to financial statements
F-5
Alternative Energy & Environmental Solutions, Inc.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF JULY 31, 2013
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A) Organization
Alternative Energy and Environmental Solutions, Inc. (a development stage company) (the "Company") was incorporated under the laws of the State of Nevada on June 10, 2010 to market an innovative new biotechnology that utilizes nutrient stimulants – organic microbes – to extract coalbed methane more efficiently in high-production as well as from low-producing, depleted and abandoned coalmines in the U.S. Coalbed methane is a clean-burning natural gas used for heating in homes and is used to generate electricity.
Activities during the development stage include developing the business plan and raising capital.
(B) Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include valuation of equity based transactions, the valuation of in kind contribution of services and the valuation on deferred tax assets.
(C) Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At July 31, 2013 and 2012, the Company had no cash equivalents.
(D) Loss Per Share
In accordance with the accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share” basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.
Since the Company reflected a net loss for the years ended July 31, 2013 and 2012, the effect of 6,155,100 and 6,155,100 outstanding warrants, respectively, is anti-dilutive. A separate computation of diluted earnings (loss) per share is not presented.
F-6
Alternative Energy & Environmental Solutions, Inc.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF JULY 31, 2013
(E) Income Taxes
The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The net deferred tax liability in the accompanying balance sheets includes the following amounts of deferred tax assets and liabilities:
| July 31, 2013 | July 31, 2012 | |||||||
| Deferred tax liability | $ | - | $ | - | ||||
| Deferred tax asset | ||||||||
| Net Operating Loss Carryforward | 394,147 | 351,047 | ||||||
| Valuation Allowance | (394,147 | ) | (351,047 | ) | ||||
| Net deferred tax asset | - | - | ||||||
| Net deferred tax liability | - | - | ||||||
| $ | - | $ | - | |||||
F-7
Alternative Energy & Environmental Solutions, Inc.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF JULY 31, 2013
The valuation allowance was established to reduce the deferred tax asset to the amount that will more likely than not be realized. This is necessary due to the Company’s continued operating losses and the uncertainty of the Company’s ability to utilize all of the net operating loss carryforwards before they will expire through the year 2033.
As of July 31, 2013, the Company has a net operating loss carryforward of approximately $1,022,409 available to offset future taxable income through July 31, 2033. The valuation allowance was established to reduce the deferred tax asset to the amount that will more likely than not be realized. This is necessary due to the Company’s continued operating losses and the uncertainty of the Company’s ability to utilize all of the net operating loss carryforwards before they will expire through the year 2033. The Company’s federal income tax returns for the years ended July 31, 2009 through July 31, 2013 remain subject to examination by the Internal Revenue Service and State Taxing Authorities as of July 31, 2013.
The net change in the valuation allowance for the year ended July 31, 2013 and 2012 was an increase of $43,099 and $53,420, respectively.
The components of income tax expense related to continuing operations are as follows:
| 2013 | 2012 | |||||||
| Federal | ||||||||
| Current | $ | - | $ | - | ||||
| Deferred | - | - | ||||||
| $ | - | $ | - | |||||
| State and Local | ||||||||
| Current | $ | - | $ | - | ||||
| Deferred | - | - | ||||||
| $ | - | $ | - | |||||
The Company's income tax expense differed from the statutory rates (federal 34% and state 4.55%) as follows:
| July 31, 2013 | July 31, 2012 | |||||||
| Statutory rate applied to earnings before income taxes: | $ | (49,250 | ) | $ | (59,434 | ) | ||
| Increase (decrease) in income taxes resulting from: | ||||||||
| State income taxes | - | - | ||||||
| Change in deferred tax asset valuation allowance | 43,099 | 53,420 | ||||||
| Non-deductible expenses | 6,151 | 6,014 | ||||||
| Income Tax Expense | $ | - | $ | - | ||||
F-8
Alternative Energy & Environmental Solutions, Inc.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF JULY 31, 2013
(F) Business Segments
The Company operates in one segment and therefore segment information is not presented.
(G) Revenue Recognition
The Company will recognize revenue on arrangements in accordance with FASB ASC No. 605, “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.
(H) Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA and the SEC did not, or are not, believed by management to have a material impact on the Company’s present or future financial statements.
NOTE 2 NOTES PAYABLE
During the year ended July 31, 2013, a related party paid $2,023 in expenses on Company’s behalf in exchange for a note payable. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and is due on demand. For the year ended July 31, 2013 the Company recorded $31 as an in-kind contribution of interest.
During June 2013, the Company received $7,694 from a related party. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and is due on demand. For the year ended July 31, 2013 the Company recorded $64 as an in-kind contribution of interest.
On November 13, 2012 the Company received $6,034 from an unrelated party. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and is due on demand. For the year ended July 31, 2013 the Company recorded $260 as an in-kind contribution of interest.
On August 23, 2011, the Company issued an unsecured promissory note in the amount of $10,000 due August 23, 2012 and bearing interest at a rate of 6% per annum. Interest on the outstanding principal balance is payable quarterly in arrears on the last day of each calendar quarter. The Company is currently in default of this note and expects to make the necessary payments whenever the Company is able to make such payments. Then on, on December 28, 2011, the Company issued an additional unsecured promissory note in the amount of $10,000 due December 28, 2012 and bearing interest at a rate of 6% per annum. Interest on the outstanding principal balance is payable quarterly in arrears on the last day of each calendar quarter. The Company is currently in default of this note and expects to make the necessary payments whenever the Company is able to make such payments. As of July 31,2013, the Company recorded $2,222 in accrued interest.
F-9
Alternative Energy & Environmental Solutions, Inc.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF JULY 31, 2013
NOTE 3 STOCKHOLDERS’ EQUITY/(DEFICIENCY)
(A) Common Stock and Warrants Issued for Cash
During the year ended July 31, 2012 the Company issued 40,002 units of common stock for $10,000 ($0.25/unit). Each unit consisted of one share of common stock and two warrants to purchase common stock for a total of 40,002 shares of common stock and 80,004 warrants to purchase common stock at an exercise price of $0.83 per share.
For the period ended July 31, 2010, the Company issued 3,037,548 units, for cash. Each unit consisted of one share of common stock and two warrants with a five year life, to purchase common stock for a total of 3,037,548 shares of common stock and 6,075,096 warrants to purchase common stock for $759,376($0.25/share) less stock offering costs of $15,000. In addition, the Company also received the right to immediately call the warrants if the Company’s common stock trades for a period of 20 consecutive days at an average trading price of $1.00 per share or greater (see Note 3(C)). Of the total funds raised, $54,000 was recorded as a subscription receivable. The $54,000 was received August 4, 2010 and $4,175 of stock offering costs were recorded.
The Company also issued 15,000,000 shares of common stock to its founders for $500 ($0.00003 per share) (See note 5).
(B) In-Kind Contribution
For the year ended July 31, 2013, a shareholder of the Company contributed services having a fair value of $15,600 (See Note 5).
For the year ended July 31, 2012, a shareholder of the Company contributed services having a fair value of $15,600 (See Note 5).
For the year ended July 31, 2011, a shareholder of the Company contributed services having a fair value of $15,600 (See Note 5).
For the year ended July 31, 2010, a shareholder of the Company contributed services having a fair value of $2,100 (See Note 5).
F-10
Alternative Energy & Environmental Solutions, Inc.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF JULY 31, 2013
(C) Warrants
The following tables summarize all warrant grants for the period ended July 31, 2013, and the related changes during these periods are presented below.
Number of Warrants | Weighted Average Exercise Price | |||||||
| Warrants | ||||||||
| Balance at July 31, 2012 | 6,155,100 | $ | 0.83 | |||||
| Granted | - | - | ||||||
| Exercised | - | - | ||||||
| Forfeited | - | - | ||||||
| Balance at July 31, 2013 | 6,155,100 | 0.83 | ||||||
| Warrants exercisable at July 31, 2013 | 6,155,100 | $ | 0.83 | |||||
Of the total warrants outstanding, 6,155,100 are fully vested, exercisable and non-forfeitable.
These warrants are immediately exercisable at $0.83 per share and are immediately callable by the Company if the Company’s common stock trades for a period of 20 consecutive days at an average trading price of $1.00 per share or greater. This option gives the Company the right, but not the obligation to repurchase the shares of common stock (See Note 3(A)). During the year ended July 31, 2013, the average trading price exceeded $1.00 per share and the options are callable by the Company, although none have been called to date.
(D) Stock Split
On August 22, 2012, a three–for-one forward stock split was declared effective for stockholders of record on June 5, 2012. Per share and weighted average amounts have been retroactively restated in the accompanying financial statements and related notes to reflect this stock split.
NOTE 4 COMMITMENTS
On June 4, 2010, the Company entered into a consulting agreement with a related party to receive administrative and other miscellaneous services. The Company is required to pay $4,500 a month. The agreement is to remain in effect unless either party desires to cancel the agreement (See Note 5).
F-11
Alternative Energy & Environmental Solutions, Inc.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF JULY 31, 2013
NOTE 5 RELATED PARTY TRANSACTIONS
During the year ended July 31, 2013, a related party paid $2,023 in expenses on Company’s behalf in exchange for a note payable. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and is due on demand. For the year ended July 31, 2013 the Company recorded $31 as an in-kind contribution of interest.
During June, 2013 the Company received $7,694 from a related party. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and is due on demand. For the year ended July 31, 2013 the Company recorded $64 as an in-kind contribution of interest.
For the year ended July 31, 2013, a shareholder of the Company contributed services having a fair value of $15,600 (See Note 3(B)).
For the year ended July 31, 2012, a shareholder of the Company contributed services having a fair value of $15,600 (See Note 3(B)).
For the year ended July 31, 2011, a shareholder of the Company contributed services having a fair value of $15,600 (See Note 3(B)).
For the year ended July 31, 2010, a shareholder of the Company contributed services having a fair value of $2,100 (See Note 3(B)).
On June 18, 2010, the Company issued 15,000,000 shares of common stock to its founders having a fair value of $500 ($0.00003/share) in exchange for cash provided (See Note 3 (A)).
On June 4, 2010, the Company entered into a consulting agreement with Tryon Capital Ventures, LLC (“Tryon”), a related party, to receive administrative and other miscellaneous services. Peter Coker is a 50% owner of Tryon. The Company is required to pay $4,500 a month. The agreement is to remain in effect unless either party desires to cancel the agreement (See Note 4).
NOTE 6 GOING CONCERN
As reflected in the accompanying financial statements, the Company is in the development stage with limited operations, a working capital and stockholders’ deficiency of $271,707, used cash in operations of $786,327 from inception and has a net loss since inception of $1,071,663. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.
F-12
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. |
None.
Item 9A. Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management's Annual Report on Internal Control Over Financial Reporting.
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of July 31, 2013. The framework used by management in making that assessment was the criteria set forth in the document entitled “ Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our management has determined that as of July 31, 2013, the Company’s internal control over financial reporting was effective for the purposes for which it is intended.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm as we are a smaller reporting company and not required to provide the report.
Changes in Internal Control over Financial Reporting
No change in our system of internal control over financial reporting occurred during the period covered by this report, fourth quarter of the fiscal year ended July 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information. |
None.
10
PART III
Item 10. Directors, Executive Officers and Corporate Governance. |
Our directors and officers, as of October 29, 2013, is set forth below. On May 22, 2012, Mr. Scott Williams resigned as our President and Chief Executive Officer, and member of the Board of Directors, and Mr. David Callan resigned as our Chief Financial Officer effective immediately, and Mr. Peter Coker was appointed as our President, Chief Executive Officer, Chief Financial Officer and Chairman of our Board of Directors effectively immediately. In accordance with Rule 14f-1 under the Exchange Act, Mr. Scott Williams’ and Mr. David Callans’ resignations from, and Mr. Peter Coker’s appointment to, our Board of Directors became effective on May 22, 2012.
On August 14, 2012, the Board of Directors unanimously appointed Allen Sharpe as a member of the Board bringing the number of members of the Board to two. Mr. Sharpe will hold office until the next annual general meeting of our shareholders or until removed from office in accordance with the Company’s bylaws.
| Name | Age | Position and Offices Held | ||
| Peter Coker | 71 | Chairman, President, Chief Executive Officer, and Chief Financial Officer | ||
| Allen Sharpe | 71 | Director |
Peter Coker is the founder and Managing Director of Tryon Capital Ventures, a Merchant Banking firm in Chapel Hill, NC since January 2004. Mr. Coker’s role has been to consult with companies and assist them in completing their funding, doing restructurings, or getting them public. He works with companies from the Southeastern part of the US and Asia. From January 2000 to December 2003 Mr. Coker was the founder and Managing Director of Tryon Capital Partners, a Merchant Banking firm in Chapel Hill, NC. Mr. Coker’s role was to consult with companies that needed to raise debt or equity and to take a position on the Board of those companies in order to help steer them to a goal. He assisted in the Capital Restructuring of companies along with assisting in the Leveraged Buy Out process with some entities. From January 1996 to December 1999 Mr. Coker was the Managing Director of Capital Investment Partners, an Investment Banking Firm in Raleigh, NC. Mr. Coker’s role was to assist companies in their Capital Raise, Capital Restructuring, Mergers and Acquisitions, Leveraged Buy Outs, and taking them to the Public Markets. From October 1979 to December 1995 Mr. Coker was the founder and Managing Director of American Asset Management Company, Inc., a Registered Investment Advisory firm in New York City. He managed both Institutional and Individual Portfolios with full discretion. He managed over a billion dollars with over half of that in Institutional Portfolios from the United States. Slightly less than half was from offshore investors which were invested in Sovereign Bonds with a Currency Hedge. American Asset Management Company, Inc. managed Endowment Funds, Taft Hartley Funds, Pension and Profit Sharing Funds, Corporate Funds, and High Net Worth Individuals.
Allen Sharpe has served as Director of Alternative Energy and Environmental Solutions, Inc. since August 14, 2012. Since the beginning of 2012, Mr. Sharpe has been the president of Biomass Industries Inc. From 2009 to 2012, Mr. Sharpe has been the President of U.S. Ecofuels, Inc. developing biomass torrefaction technology and projects. From 2005 to 2009, Mr. Sharpe was the President of Biomass Investment Group, Inc., where he developed biomass gasification and energy crop technology. From 1991 to 2005, Mr. Sharpe was a business consultant for various assisted living facilities. Prior to consulting, from 1982 to 1990, Mr. Sharpe was the President of P.B Scotts Music Hall, where he developed and operated entertainment facilities. Also, during that time, Mr. Sharpe was the President of Carolina Living, Inc. where he developed assisted living facilities. From 1972 to 1975, Mr. Sharpe was an attorney for CBIG, a REIT managed by First Union Bank. Prior to his position at CBIG, he was involved in the private practice of law. Mr. Sharpe received his Juris Doctor from the University Of North Carolina School Of Law and attended High Point University, where he received an A.B. in History and Political Science.
Employment Agreements
We currently do not have an employment agreement with Mr. Coker.
Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
| ● | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
11
| ● | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; |
| ● | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; |
| ● | been found by a court of competent jurisdiction in a civil action or by the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
| ● | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| ● | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
Compliance with Section 16(a) of the Exchange Act
The Company does not have a class of securities registered under the Exchange Act and therefore its directors, executive officers, and any persons holding more than ten percent of the Company’s common stock are not required to comply with Section 16 of the Exchange Act.
Code of Ethics
We have not adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions, because of the small number of persons involved in the management of the Company.
Board Committees
Our Board of Directors has no separate committees and our Board of Directors acts as the audit committee and the compensation committee. We do not have an audit committee financial expert serving on our Board of Directors.
12
Item 11. Executive Compensation. |
Summary Compensation Table
The following table sets forth information regarding each element of compensation that we paid or awarded to our executive officers for fiscal 2013 and 2012.
Name and Principal Position | Year | Salary | Bonus | Stock Awards ($) | Option Awards | Non-Qualified Deferred Compensation Earnings | All Other Compensation | Totals ($) | ||||||||||||||||||||||||
Peter Coker President Chief Executive Officer, and Chief Financial Officer (1) | 2013 2012 | $ | 0 0 | $ | 0 0 | $ | 0 0 | $ | 0 0 | $ | 0 0 | $ | 0 0 | $ | 0 0 | |||||||||||||||||
Scott Williams Former President and Chief Executive Officer (2) | 2013 2012 | $ | 0 0 | $ | 0 0 | $ | 0 0 | $ | 0 0 | $ | 0 0 | $ | 0 0 | $ | 0 0 | |||||||||||||||||
David Callan Former Chief Financial Officer (3) | 2013 2012 | $ | 0 0 | $ | 0 0 | $ | 0 0 | $ | 0 0 | $ | 0 0 | $ | 0 0 | $ | 0 0 | |||||||||||||||||
| (1) | Peter Coker was appointed as President, Chief Executive Officer, and Chief Financial Officer of the Company on May 22, 2012. |
| (2) | Scott Williams resigned as President and Chief Executive of the Company on May 22, 2012. |
| (3) | David Callan resigned as Chief Financial Officer of the Company on May 22, 2012. |
Director Compensation
We have provided no compensation to our directors for their services provided as directors.
Employment Agreements
We currently do not have an employment agreement with Mr. Coker.
Neither our current nor our former officers and directors have received any compensation for services rendered to us, have received compensation from us in the past, and are not accruing any compensation pursuant to any agreement with us. However, our officers and directors anticipate receiving benefits as a beneficial stockholder of us and, possibly, in other ways.
No retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by us for the benefit of our employees. We had no options outstanding as of July 31, 2013.
It is possible that, after the Company successfully consummates a business combination with an unaffiliated entity, that entity may desire to employ or retain one or a number of members of our management for the purposes of providing services to the surviving entity. However, the Company has adopted a policy whereby the offer of any post-transaction employment to members of management will not be a consideration in our decision whether to undertake any proposed transaction. There are no understandings or agreements regarding compensation our management will receive after a business combination or otherwise.
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Compensation Committee Interlocks and Insider Participation
Our Board of Directors does not have a compensation committee and the entire Board of Directors performs the functions of a compensation committee. No member of our Board of Directors has a relationship that would constitute an interlocking relationship with our executive officers or directors or another entity.
Item 12. Security Ownership of Certain Beneficial Owners and Management. |
The following table sets forth certain information regarding our shares of common stock beneficially owned as of October 29, 2013, for (i) each stockholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.
For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of October 29, 2013. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of October 29, 2013 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership. Unless otherwise specified, the address of each of the persons set forth below is care of the Company.
| Name and Address | Amount and Nature of Beneficial Ownership | Percentage of Class(1) | ||||||
| Beneficial owners of more than 5% of our common stock | ||||||||
Linda Hiatt | 7,350,000 | 40.658 | % | |||||
Peter Coker | 7,537,008 | 41.693 | % | |||||
| Directors and named executive officers | ||||||||
| Peter Coker | 7,537,008 | 41.693 | % | |||||
| Allen Sharpe | 0 | * | % | |||||
| All directors and executive officers as a group (2 persons) | 7,537,008 | 41.693 | % | |||||
* Denotes less than 1%
(1) Based on 18,077,550 shares issued and outstanding as of October 29, 2013.
We are not aware of any arrangements which may at a subsequent date result in a change of control of the Company.
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Item 13. Certain Relationships and Related Transactions, and Director Independence. |
Transactions with Related Persons
The following are the related party transactions in which we have engaged since August 1, 2012:
On June 4, 2010, the Company entered into a consulting agreement with Tryon Capital Ventures, LLC (“Tryon”), a related party, to receive administrative and other miscellaneous services. Peter Coker is a 50% owner of Tryon. The Company is required to pay $4,500 a month. The agreement is to remain in effect unless either party desires to cancel the agreement.
During the year ended July 31, 2013, Europa Capital Partners paid $2,023 in expenses on Company’s behalf in exchange for a note payable. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and is due on demand. For the year ended July 31, 2013 the Company recorded $31 as an in-kind contribution of interest.
During June, 2013, the Company received $7,694 from Peter Coker. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and is due on demand. For the year ended July 31, 2013 the Company recorded $64 as an in-kind contribution of interest.
For the year ended July 31, 2013, Peter Coker, President and Chief Executive Officer of the Company contributed services having a fair value of $15,600 (See Note 3(B)).
Director Independence
Allan Sharpe is our independent director. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
| ● | the director is, or at any time during the past three years was, an employee of the company; |
| ● | the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service); |
| ● | a family member of the director is, or at any time during the past three years was, an executive officer of the company; |
| ● | the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions); |
| ● | the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or |
| ● | the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit. |
Peter Coker is not considered independent because he is an executive officer of the Company.
We do not currently have a separately designated audit, nominating or compensation committee.
Audit Fees
For the Company’s fiscal years ended July 31, 2013 and 2012, we were billed approximately $14,711 and $13,500, respectively for professional services rendered for the audit and reviews of our financial statements.
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Audit Related Fees
The Company incurred fees of $0 and $0 for the fiscal years ended July 31, 2013 and 2012.
Tax Fees
For the Company’s fiscal years ended July 31, 2013 and 2012, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning.
All Other Fees
The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended July 31, 2013 and 2012.
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.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
| ● | approved by our audit committee; or |
| ● | entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee’s responsibilities to management. |
We do not have an audit committee. Our entire board of directors pre-approves all services provided by our independent auditors. The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records of what percentage of the above fees were pre-approved. However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered.
PART IV
Item 15. Exhibits, Financial Statement Schedules. |
(a) The following documents are filed as part of this report:
Financial Statements: See “Index to Consolidated Financial Statements” in Part II, Item 8 of this Report.
Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Report.
(b) The following are exhibits to this Report and, if incorporated by reference, we have indicated the document previously filed with the SEC in which the exhibit was included.
Certain of the agreements filed as exhibits to this Report contain representations and warranties by the parties to the agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties:
| ● | may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements; |
| ● | may apply standards of materiality that differ from those of a reasonable investor; and |
| ● | were made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances. |
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties were made or at any other time. Investors should not rely on them as statements of fact.
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| Exhibit Number | Description | ||
| 3.1 | Certificate of Incorporation [incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on October 25, 2010 (“Form S-1”)] | ||
| 3.2 | Bylaws [incorporated by reference to Exhibit 3.2 to the Form S-1] | ||
| 10.1 | Stock Purchase Agreement [ incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 25, 2012] | ||
| 31.1 | Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
| 32.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and Section 906 of the Sarbanes-Oxley Act of 2002 | ||
| 101.INS | * | XBRL Instance Document | |
| 101.SCH | * | XBRL Taxonomy Schema | |
| 101.CAL | * | XBRL Taxonomy Calculation Linkbase | |
| 101.DEF | * | XBRL Taxonomy Definition Linkbase | |
| 101.LAB | * | XBRL Taxonomy Label Linkbase | |
| 101.PRE | * | XBRL Taxonomy Presentation Linkbase |
In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.
* Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these 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.
| ALTERNATIVE ENERGY & ENVIRONMENTAL SOLUTIONS, INC. | |||
| Dated: October 29, 2013 | By: | /s/ Peter Coker | |
Peter Coker President, Chief Executive Officer, and Chief Financial Officer | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Name | Title | Date | ||
| /s/ Peter Coker | President, Chief Executive Officer, Chief Financial Officer, and Director | October 29, 2013 | ||
| Peter Coker | ||||
| /s/ Allen Sharpe | Director | October 29, 2013 | ||
| Allen Sharpe |
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