NOTE 1 - NATURE OF OPERATIONS
Nature of Operations
From 1989 through 2008, InMedica Development Corporation (“InMedica”) and its then majority-owned subsidiary, MicroCor, Inc. (“MicroCor”) were engaged in research and development of a device to measure hematocrit non-invasively (the “Non-Invasive Hematocrit Technology” and/or the “Technology”). On June 24, 2010, WindGen terminated the former Development Agreement with Wescor and entered into a new agreement whereby WindGen transferred 230,000 shares of MicroCor commons stock owned by WindGen reducing WindGen’s holdings in MicroCor from 1,700,000 common shares to 1,470,000 common shares, reducing its ownership percentage from 57% to 49%. Since WindGen’s ownership percentage is now less than 50%, MicroCor’s financial statements are no longer consolidated with WindGen’s financial statements. Synergistic Equities, Ltd. has acquired all of the shares of MicroCor previously owned by Chi Lin Technology, Ltd.
On April 17, 2009, we entered into a license agreement (the “License”) with Wind Sail Receptor, Inc. of Boulder City, Nevada (“WSR”), pursuant to which we were granted the exclusive license to assemble and market WSR’s wind sail receptor energy generation devices using blades of 15 feet or less in length in the United States, Canada, the United Kingdom and Ireland, with nonexclusive rights in the rest of the world except Latin America and the Caribbean. Under the License, we must acquire 100 blades from WSR during the first year after WSR is able to manufacture the blades. WSR is currently in the final stages of selecting the electrical generator that it will connect to the WSR wind turbine blade.
During 2010, the Company issued 1,900,000 shares of the Company’s restricted common stock to WSR in consideration of amending its License. The proposed amendment to the License Agreement currently in existence between the Company and WSR has not yet been executed. The reasons are various and include, but are not limited to, finalizing details regarding the need for the Company to be involved in assembly of the wind turbines in various license territory outside the US, final pricing that the units will be sold by WSR to the Company, final terms of the product Warranty to be provided by WSR, and possible additional exclusive territory added to the License. Under the terms of the existing License, the Company intended to use its best efforts to obtain Federal, State, Local, or Private Grant Funds and to share these Grant Funds with WSR up to a sum of $1,000,000. To date the Company has not been successful in obtaining Grant Funds. The proposed amendment also could result in altering the various financial dealings between the two companies. No monetary disputes currently exist between the two companies. WSR is hopeful that it will begin production of complete wind turbine systems during the fourth quarter of 2011. WSR is currently in the process of finalizing its supply chain relationships for the production of the wind turbine generator/alternator system with various suppliers in China. The wind turbine blade will be made in Nevada USA. WSR still anticipates that the six foot diameter small wind turbine will be available to WindGen in the fourth quarter of this year. WindGen is currently beginning to finalize its distribution network for the Western US.
We anticipate our first three wind turbine products will have blade diameters of 3, 6 and 12 feet with towers from 25 to 75 feet in height. The first unit to be offered in the market place will be the six foot blade diameter unit. We are currently negotiating terms for the formation of the working capital required to bring our first products to market at some point during the fourth quarter of 2011. The progress of the Company in marketing its new small wind turbine products is dependent on obtaining additional capital.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - NATURE OF OPERATIONS (Continued)
Nature of Operations (Continued)
To date during 2011, WSR has been developing a well-organized approach to the manufacturing/assembly process to assure high-quality, rapid-development cycles and overall competiveness. The Generator/Alternators will be manufactured by Ginlong Technologies Inc, an experienced wind turbine generator manufacturer located in China. WSR will also be responsible for the manufacture of the critical blade component at its plant near Boulder City, Nevada. At this time suppliers have been located for all of the non-blade components for our products.
To launch into the important rural small wind turbine market in the central wind belt and the western part of the United States (our initial marketing objective), we hope to join forces with some excellent partners and distributorships. We intend to recruit existing well established wind turbine distributors currently representing our competitors. In addition, we are currently in contact with various major name brand farm equipment dealers who have a well-established rural network of dealers throughout America, all with the ability to provide excellent sales, installation, and maintenance services. We also plan to sell distributorships to other existing service-oriented organizations such as cell tower installers.
We are currently in the process of finalizing our six foot diameter wind turbine that should be available during the fourth quarter of 2011. Subject to availability of adequate capital, product roll out could follow quickly in the central wind belt and the western part of the United States.
On December 4, 2009, the Company changed its name from InMedica Development Corp to WindGen Energy, Inc.
Basis of Presentation
The Company’s unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustment relating to recoverability and classification of recorded amounts of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The Company generated negative cash flows from operations of $107,012 and $148,882 for the six month periods ended June 30, 2011 and 2010, respectively, and net losses from operations of $199,541 and $161,776 for the six month periods ended June 30, 2011 and 2010, respectively. As of June 30, 2011, the Company had an accumulated deficit of $9,561,305 and a working capital deficit of $154,360. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s continued existence is dependent upon its ability to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company. Management’s operating plan includes pursuing additional fund raising as well as putting in place all the initial requirements in anticipation of the Company beginning operations and generating revenue during the fourth quarter of 2011.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - NATURE OF OPERATIONS (Continued)
Basis of Presentation (Continued)
The accompanying consolidated financial statements of the Company are unaudited. However, in management’s opinion, all adjustments, consisting only of normal recurring adjustments necessary for fair presentation of results for the interim periods shown, have been made. Results for interim periods are not necessarily indicative of those to be expected for the full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes to consolidated financial statements included in the Company’s annual report on form 10-K for the year ended December 31, 2010.
Principles of Consolidation
The consolidated financial statements include the accounts of WindGen Energy, Inc. (“WindGen”) and its majority owned subsidiary, MicroCor, Inc. (“MicroCor”) through June 24, 2010. As of June 24, 2010, MicroCor’s financial statements are no longer being consolidated with WindGen’s financial statements.
Research and Development
Research and development costs are expensed as incurred.
Net Loss per Common Share
Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the year. Diluted net loss per common share (“Diluted EPS”) reflects the potential dilution that could occur if stock options or other common stock equivalents were exercised or converted into common stock. At June 30, 2011 and 2010, respectively, there were 401,582 and 31,524 potentially dilutive common stock equivalents. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net loss per common share.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Comprehensive Income
There are no components of comprehensive income other than the net loss.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - NATURE OF OPERATIONS (Continued)
Cash Equivalents
For the purpose of reporting cash flows, the Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits.
Fair Value of Financial Instruments
The carrying value of the Company’s financial instruments, including receivables, accounts payable, accrued liabilities, and notes payable at June 30, 2011 and 2010 approximates their fair values due to the short-term nature of these financial instruments.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets are recorded under the provisions of the Financial Accounting Standards Board (FASB) ASC 350 (formerly Statement ASC No. 142 (SFAS 142), Goodwill and Other Intangible Assets). ASC 350 requires that an intangible asset that is acquired either individually or with a group of other assets (but not those acquired in a business combination) shall be initially recognized and measured based on its fair value. Goodwill acquired in business combinations is initially computed as the amount paid by the acquiring company in excess of the fair value of the net assets acquired.
Costs of internally developing, maintaining and restoring intangible assets (including goodwill) that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity as a whole, are recognized as an expense when incurred.
An intangible asset (excluding goodwill) with a definite useful life is amortized; an intangible asset with an indefinite useful life is not amortized until its useful life is determined to be no longer indefinite. The remaining useful lives of intangible assets not being amortized are evaluated at least annually to determine whether events and circumstances continue to support an indefinite useful life. If and when an intangible asset is determined to no longer have an indefinite useful life, the asset shall then be amortized prospectively over its estimated remaining useful life and accounted for in the same manner as other intangibles that are subject to amortization.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - NATURE OF OPERATIONS (Continued)
Goodwill and Other Intangible Assets (Continued)
An intangible asset (including goodwill) that is not subject to amortization shall be tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of the intangible assets with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. In accordance with ASC 350, goodwill is not amortized.
It is the Company’s policy to test for impairment no less than annually, or when conditions occur that may indicate impairment. The Company’s intangible assets, which consist of licensing rights valued at $190,000 recorded in connection with the acquisition of the license related to the agreement with Wind Sail Receptor, Inc., were acquired in 2009 and will be tested for impairment in 2011. The licensing rights were determined to have an indefinite life as of December 31, 2010.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Standards
In December 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-29 (ASU 2010-29), Business Combinations (Topic 805) – Disclosure of Supplementary Pro Forma Information for Business Combinations. This Accounting Standards Update requires a public entity to disclose pro forma information for business combinations that occurred in the current reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting period. The amendments in this Update affect any public entity as defined by Topic 805 that enters into business combinations that are material on an individual or aggregate basis. The amendments in this Update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. The Company does not expect the provisions of ASU 2010-29 to have a material effect on its financial position, results of operations or cash flows.
In August 2010, the FASB issued Accounting Standards Update 2010-22 (ASU 2010-22), Accounting for Various Topics -- Technical Corrections to SEC Paragraphs - An announcement made by the staff of the U.S. Securities and Exchange Commission. This Accounting Standards Update amends various SEC paragraphs based on external comments received and the issuance of SAB 112, which amends or rescinds portions of certain SAB topics. The Company does not expect the provisions of ASU 2010-22 to have a material effect on its financial position, results of operations or cash flows.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Standards (Continued)
In August 2010, the FASB issued Accounting Standards Update 2010-21 (ASU 2010-21), Accounting for Technical Amendments to Various SEC Rules and Schedules: Amendments to SEC Paragraphs Pursuant to Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies. The Company does not expect the provisions of ASU 2010-21 to have a material effect on its financial position, results of operations or cash flows.
In July 2010, the FASB issued Accounting Standards Update 2010-20 (ASU 2010-20), Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The amendments in this Update are to provide financial statement users with greater transparency about an entity’s allowance for credit losses and the credit quality of its financing receivables. The disclosures about activity that occurs during the reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The Company does not expect the provisions of ASU 2010-20 to have a material effect on its financial position, results of operations or cash flows.
In April 2010, the FASB issued Accounting Standards Update 2010-17 (ASU 2010-17), Revenue Recognition – Milestone Method (Topic 605). ASU 2010-17 provides guidance on applying the milestone method of revenue recognition in arrangements with research and development activities. The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The Company’s adoption of the provisions of ASU 2010-17 did not have a material impact on its revenue recognition.
In March 2010, the FASB issued Accounting Standards Update 2010-11 (ASU 2010-11), Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives. The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The Company’s adoption of the provisions of ASU 2010-11 did not have a material effect on its financial position, results of operations or cash flows.
In February 2010, the FASB Accounting Standards Update 2010-10 (ASU 2010-10), Consolidation (Topic 810): Amendments for Certain Investment Funds. The amendments in this Update are effective as of the beginning of a reporting entity’s first annual period that begins after November 15, 2009 and for interim periods within that first reporting period. Early application is not permitted. The Company’s adoption of provisions of ASU 2010-10 did not have a material effect on its financial position, results of operations or cash flows.
In February 2010, the FASB issued ASU No. 2010-09, Subsequent Events (ASC Topic 855) - Amendments to Certain Recognition and Disclosure Requirements (ASU 2010-09). ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The adoption did not have an impact on the Company’s financial position, results of operations or cash flows.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Standards (Continued)
In January 2010, the FASB issued Accounting Standards Update 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-09). ASU 2010-06 amends FASB Accounting Standards Codification (“ASC”) 820 and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value measurements and employers’ disclosures about postretirement benefit plan assets. This ASU is effective for interim and annual reporting periods beginning after December 15, 2009. The adoption of ASU 2010-06 did not have a material impact on the Company’s financial statements.
NOTE 3 – NOTES PAYABLE
On December 31, 2008, the Company converted $21,509 of accounts payable due to its attorney into a promissory note. At December 31, 2009, the balance due on this note was $22,799. During 2010, the Company paid-off the balance of this note by issuing 120,800 shares of the Company’s restricted common stock at $0.09 per share pursuant to the Company’s existing private placement offering and paying cash for the remainder of the balance.
On October 21, 2010, the Company borrowed $50,000 from a third party (the “8% Note Holder”). The note is due on July 21, 2011 and carries an interest rate of 8% per annum (the “8% Note”). The 8% Note is convertible after six months at a conversion price of 55% of the market price of the common stock. On April 25, 2011, the note holder converted $10,000 of its note to 227,273 shares of common stock pursuant to the conversion formula of the note. On May 4, 2011, the note holder converted $10,000 of its note to 246,914 shares of common stock pursuant to the conversion formula of the note. On May 11, 2011, the note holder converted $10,000 of its note to 278,552 shares of common stock pursuant to the conversion formula of the note. On June 24, 2011, the note holder converted $12,000 of its note to 476,190 shares of common stock pursuant to the conversion formula of the note. At June 30, 2011, the balance due on this note was $10,000, made up of $8,000 in principal and $2,000 in interest.
On June 30, 2011, the Company borrowed $25,000 from a third party (the “10% Note Holder”). The note is due 120 days from the date of the note and carries an interest rate of 10% per annum (the “10% Note”). In addition to the 10% interest factor, the 10% Note Holder will receive 100,000 shares of the Company's restricted common stock.
NOTE 4 – COMMON STOCK
The Company is authorized to issue 100,000,000 shares of common stock, $0.001 par value (the “Common Stock”), of which approximately 43,411,356 shares were issued and outstanding on June 30, 2011. All presently outstanding shares are duly authorized, fully-paid and non-assessable. Each share of the Common Stock is entitled to one vote on all matters to be voted on by the shareholders, such as the election of certain directors and other matters that directly impact the rights of the holders of such class. There is no cumulative voting in the election of directors. Holders of Common Stock are entitled to receive such dividends as may be declared from time to time by the Board of Directors out of funds legally available therefore. In the event of any dissolution, winding up or liquidation of the Company, the shares of Common Stock will share ratably in all the funds available for distribution after payment of all debts and obligations. The holders of Common Stock are subject to any rights that may be fixed for holders of preferred stock as designated upon issuance.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4 – COMMON STOCK (Continued)
On December 4, 2009, the Company changed its total authorized common shares from 40,000,000 to 100,000,000 shares.
During 2009, the Company issued 15,000,000 shares of common stock for cash of $95,000 and a stock subscription receivable of $17,500. The stock issuances were the result of the exercise of a stock purchase option agreement with Law Investments CR, S.A., a Costa Rica corporation. During 2010, $7,500 was paid toward the subscription receivable, leaving a balance of $10,000 at June 30, 2011.
During 2010, the Company issued 4,222,969 shares of common stock for cash of $316,423 pursuant to the Company’s Private Placement Memorandum.
During 2010, the Company completed the conversion of three of the four existing 8% Series A cumulative preferred shareholders by issuing 246,834 of the Company’s restricted common shares at a price of $0.50 per share plus a $5,000 cash payment to each preferred shareholder. The conversion of these preferred shares reduced the dividends payable from $64,309 at December 31, 2009 to $17,969 at December 31, 2010. As of June 30, 2011, the total dividends payable on the remaining shares of Series A cumulative preferred is $18,914.
During 2010, the Company issued 254,133 shares of the Company’s restricted common stock for the conversion of debt in the amount of $20,875.
During 2010, the Company issued 1,900,000 shares of the Company’s restricted common stock to Wind Sail Receptor in consideration of an amendment to the Company’s 2009 License Agreement with Wind Sail Receptor. The shares were value at $.10 per share.
During 2010, the Company registered 3,000,000 shares of its common stock pursuant to regulation S-8. As of December 31, 2010, 700,000 of these shares had been issued for consulting services valued at $63,000. The consulting services were originally recorded as a prepaid expense. As of December 31, 2010, the prepaid expense related to this stock issuance was $47,250. At June 30, 2011, the prepaid expense related to this stock was $15,750.
During 2010, the Company issued 285,000 shares of the Company’s restricted common stock for services valued at $28,500.
During the first quarter of 2011, the Company issued 466,665 shares of restricted common stock for cash of $35,000, as part of the Company’s Private Placement Memorandum.
During the second quarter of 2011, the Company issued 477,333 shares of restricted common stock for cash of $35,800, as part of the Company’s Private Placement Memorandum.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 – PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of preferred stock. The Company’s board of directors designated 1,000,000 shares of this preferred stock as Series A Cumulative Convertible Preferred Stock (“Series A Preferred”) with a par value of $4.50 per share. Holders of the Series A Preferred receive annual cumulative dividends of 8%, payable quarterly, which dividends are required to be fully paid or set aside before any other dividend on any class or series of stock of the Company is paid. As of June 30, 2011, cumulative preferred stock dividends are due and payable in the amount of $18,914 Holders of the Series A Preferred receive no voting rights but do receive a liquidation preference of $4.50 per share, plus accrued and unpaid dividends. Series A Preferred stockholders have the right to convert each share of Series A Preferred to the Company’s common stock at a rate of 1.5 common shares to 1 preferred share.
During 2010, the Company completed the conversion of three of the four existing 8% Series A cumulative preferred shareholders by issuing 246,834 of the Company’s restricted common shares at a price of $0.50 per share plus a $5,000 cash payment to each preferred shareholder. The conversion of these preferred shares reduced the dividends payable from $64,309 at December 31, 2009 to $17,969 at December 31, 2010. As of June 30, 2011, the total dividends payable on the remaining shares of Series A cumulative preferred is $18,914.
On January 30, 2009, the Company entered into an agreement with MicroCor, its subsidiary (the “MicroCor Agreement”). The MicroCor Agreement provided for the Company to create a Series B class of preferred stock, without dividend or voting rights (the “Series B Preferred”), which would receive 100% of any future benefit from the sale, spin-off, merger or liquidation of MicroCor or the commercialization of its hematocrit technology. The shares of the Series B Preferred were to be distributed as a dividend, subject to compliance with federal and state securities laws and regulations, to the Company’s common stockholders, as of January 30, 2009. The creation of the Series B Preferred would prevent any holder of the Company’s common stock after January 30, 2009 from sharing in any future benefit of or to MicroCor through the expiration date of January 30, 2011. The Series B Preferred Stock was not issued to the common shareholders of record at January 30, 2009 inasmuch as no benefit occurred prior to the expiration date of January 30, 2011.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6 – EARNINGS PER SHARE
The following data show the amounts used in computing earnings per share and the effect on income and the weighted average number of shares of dilutive potential common stock:
| | | For the Quarters Ended | |
| | | June 30, | |
| | | 2011 | | | 2010 | |
| | | | | | | |
| Net Income (Loss) | | $ | (107,521 | ) | | $ | 276,943 | |
| Less: preferred dividends | | | (473 | ) | | | (1,891 | ) |
| | | | | | | | | |
| Income (Loss) available to common stockholders used in basic EPS | | $ | (107,994 | ) | | $ | 275,052 | |
| | | | | | | | | |
| Convertible preferred stock | | | 473 | | | | 1,891 | |
| Convertible notes payable | | | | | | | – | |
| Income (Loss) available to common stockholders after assumed | | | | | | | | |
| conversion of dilutive securities | | $ | (107,521 | ) | | $ | 276,943 | |
| | | | | | | | | |
| Weighted average number of common shares used in basic EPS | | | 42,576,062 | | | | 35,538,903 | |
| Effect of dilutive securities: | | | | | | | | |
| Convertible preferred stock | | | 7,881 | | | | 31,524 | |
| Convertible notes payable | | | 393,701 | | | | – | |
| Options | | | | | | | – | |
| Weighted average number of common shares and dilutive potential | | | | | | | | |
| common stock used in diluted EPS | | | 42,977,644 | | | | 35,570,427 | |
NOTE 7 – DISCONTINUED OPERATIONS
On June 24, 2010, WindGen Energy, Inc. entered into an agreement with MicroCor, Inc., Chi Lin Technology Co., Ltd. and Wescor, Inc., whereby WindGen transferred 230,000 shares of MicroCor common stock owned by WindGen to Wescor, reducing WindGen’s holdings in MicroCor from 1,700,000 common shares to 1,470,000 common shares. WindGen’s percentage of ownership of MicroCor was reduced from approximately 57% to 49%. Since WindGen’s ownership percentage is below 50%, MicroCor’s financial statements are no longer consolidated with WindGen’s financial statements.
Operating results of this discontinued operation for the six months ended June 30, 2011 are shown separately in the accompanying consolidated statement of operations. The operating statement for the six months ended June 30, 2010 has been restated to conform with the current year’s presentation and are also shown separately. The operating results of this discontinued operation for the six months ended June 30, 2011 and 2010 consist of:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 7 – DISCONTINUED OPERATIONS (Continued)
| | | For the Six Months Ended | |
| | | June 30, | |
| | | 2011 | | | 2010 | |
| | | | | | | |
| Sales | | $ | – | | | $ | – | |
| General and administrative | | | – | | | | – | |
| Legal and professional | | | – | | | | – | |
| Interest Expense | | | – | | | | – | |
| Gain on deconsolidation of MicroCor | | | – | | | | 355,000 | |
| Net Income (Loss) attributable to noncontolling interest | | | – | | | | (11,512 | ) |
| Net Income (Loss) from discontinued operations | | $ | – | | | $ | 343,488 | |
Operating results of this discontinued operation for the three months ended June 30, 2011 are shown separately in the accompanying consolidated statement of operations. The operating statement for the three months ended June 30, 2010 has been restated to conform with the current year’s presentation and are also shown separately. The operating results of this discontinued operation for the three months ended June 30, 2011 and 2010 consist of:
| | | For the Three Months Ended | |
| | | June 30, | |
| | | 2011 | | | 2010 | |
| | | | | | | |
| Sales | | $ | – | | | $ | – | |
| General and administrative | | | – | | | | – | |
| Legal and professional | | | – | | | | – | |
| Interest Expense | | | – | | | | – | |
| Gain on deconsolidation of MicroCor | | | – | | | | 355,000 | |
| Net Income (Loss) attributable to noncontolling interest | | | – | | | | – | |
| Net Income (Loss) from discontinued operations | | $ | – | | | $ | 355,000 | |
NOTE 8 – RELATED PARTY TRANSACTIONS
During 2009, the Company accrued consulting expenses of $60,000 from officers of the Company. During 2010, the Company accrued additional consulting expenses from officers of $65,000. During the six months ending June 30, 2011, the Company accrued additional consulting expenses from officers of $15,250.
During 2009, an entity associated with Company, paid various expenses on behalf of the Company. At December 31, 2009, the Company owed $24,514 to the related entity. During 2010, the Company paid-off the balance due to the related party by issuing 133,333 shares of the Company’s restricted common stock at $0.075 per share pursuant to the Company’s existing private placement offering and paying cash for the remainder of the balance.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 9 – JOINT DEVELOPMENT AGREEMENT
On June 24, 2010, WindGen terminated the former Development Agreement with Wescor and entered into a new agreement whereby WindGen transferred 230,000 shares of MicroCor commons stock owned by WindGen reducing WindGen’s holdings in MicroCor from 1,700,000 common shares to 1,470,000 common shares, reducing its ownership percentage from 57% to 49%. Since WindGen’s ownership percentage is now less than 50%, MicroCor’s financial statements are no longer consolidated with WindGen’s financial statements. This transaction had the impact on WindGen’s financial statements of reducing the Company’s liabilities from December 31, 2009 in the amount of $570,019. Synergistic Equities Ltd acquired all of the shares of MicroCor previously owned by Chi Lin Technology, Ltd.
NOTE 10 – ROYALTY RIGHTS
At June 30, 2011, the Company had no outstanding Royalty Rights payable to any person or entity.
NOTE 11 – UNCERTAIN TAX POSITIONS
Effective January 1, 2007, the Company adopted the provisions of ASC 740 (formerly FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109”). ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The adoption of the provisions of ASC 740 did not have a material impact on the Company’s condensed consolidated financial position and results of operations. At June 30, 2011, the Company had no liability for unrecognized tax benefits and no accrual for the payment of related interest.
Interest costs related to unrecognized tax benefits are classified as “Interest Expense, Net” in the accompanying consolidated statements of operations. Penalties, if any, would be recognized as a component of “Selling, general and administrative expenses.” The Company recognized $0 of interest expense related to unrecognized tax benefits for the year ended December 31, 2010. In many cases the Company’s uncertain tax positions are related to tax years that remain subject to examination by relevant tax authorities. With few exceptions, the Company is generally no longer subject to U.S. federal, state, local or non-U.S. income tax examinations by tax authorities for years before 2007. The following describes the open tax years, by major tax jurisdiction, as of June 30, 2011:
| United States (a) | | 2007 – Present |
| __________ | | |
| (a) Includes federal as well as state or similar local jurisdictions, as applicable. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 12 – SUBSEQUENT EVENTS
The Company adopted ASC 855, and has evaluated all events occurring after December 31, 2010, the date of the most recent balance sheet, for possible adjustment to the financial statements or disclosures through June 30, 2011, which is the date on which the financial statements were issued.
The lease for the Company’s office premises located at 14550 N. Frank Lloyd Wright Blvd., Suite 100, Scottsdale, Arizona 85260 expired on July 31, 2011. The Company’s new office address is 8432 E. Shea Blvd., Suite 101, Scottsdale, Arizona 85260. The Company’s phone/fax numbers remain unchanged.
On July 5, 2011, the 8% Note Holder converted the remaining $10,000 balance of its note to 393,701 shares of common stock pursuant to the conversion formula of the note. The remaining balance was made up of $8,000 in principal and $2,000 in interest. The note holder agreed to a flat fee of $2,000 for interest and has declared the note paid in full.
