UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2010
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to ___________.
Commission File Number 000-52767
SUNERGY, INC.
(Exact name of registrant as specified in its charter)
Nevada 26-4828510
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
14362 N. Frank Lloyd Wright Blvd., Suite 1000, Scottsdale, AZ 85260
(Address of principal executive offices) (Zip Code)
480.477.5810
(Registrant's telephone number, including area code)
n/a
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ ] YES [X] NO
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company. See
the definitions of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] 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 Exchange Act [ ] YES [X] NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. [ ] YES [ ] NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 1,272,257,840 common shares
issued and outstanding as June 4, 2011
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The interim financial statements included herein are unaudited but reflect, in
management's opinion, all adjustments, consisting only of normal recurring
adjustments that are necessary for a fair presentation of our financial position
and the results of our operations for the interim periods presented. Because of
the nature of our business, the results of operations for the quarterly period
ended September 30, 2010 are not necessarily indicative of the results that may
be expected for the full fiscal year.
2
SUNERGY, INC.
(An Exploration Stage Company)
Balance Sheets
September 30, December 31,
2010 2009
------------ ------------
(unaudited) (audited)
ASSETS
Current assets
Cash and cash equivalents $ 32 $ 54
Prepaid expense-stock related -- 50,000
------------ ------------
Total current assets 32 50,054
Long term assets
Mineral properties 1,000,000 1,000,000
------------ ------------
Total assets $ 1,000,032 $ 1,050,054
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 29,625 $ 31,222
Accruals - Related party 24,361 93,859
Operational advances - Related party 62,529 22,950
Notes payable -- 237,500
Notes payable - Related party -- 250,000
------------ ------------
Total current liabilities 116,515 635,531
------------ ------------
Total liabilities 116,515 635,531
Stockholders' equity
Common stock, authorized
3,750,000,000 shares, par value $0.001,
issued and outstanding on September 30, 2010
and December 31, 2009 is 946,197,880
and 537,975,000, respectively 946,198 537,975
Additional paid in capital 3,056,071 440,283
Subscriptions payable (Note 5) -- 143,400
Accumulated deficit during exploration stage (3,118,752) (707,135)
------------ ------------
Total stockholders' equity 883,517 414,523
------------ ------------
Total liabilities and stockholders' equity $ 1,000,032 $ 1,050,054
============ ============
The accompanying notes are an integral part of these financial statements.
3
SUNERGY, INC.
(An Exploration Stage Company)
Statements of Operations
(Unaudited)
From Inception
(January 28, 2003)
Three Months Ended Nine Months Ended to
September 30, September 30, September 30,
2010 2009 2010 2009 2010
------------- ------------- ------------- ------------- -------------
Revenue $ -- $ -- $ -- $ -- $ --
------------- ------------- ------------- ------------- -------------
Operating expenses
General and administrative 8,428 8,156 16,831 12,574 70,327
General and administrative-related party 27,364 -- 48,287 -- 48,286
Management salary 186,000 12,000 347,500 39,000 500,500
Rent-related party -- 2,205 -- 6,085 37,500
Accounting and audit fees -- 8,266 -- 25,438 97,131
Legal fees -- 2,980 -- 16,696 52,876
Consulting fees 23,750 94,000 73,750 194,000 320,185
Exploration costs 6,861 -- 23,861 933 62,481
------------- ------------- ------------- ------------- -------------
Total expenses 252,403 127,607 510,229 294,726 1,189,286
------------- ------------- ------------- ------------- -------------
Net loss from operations (252,403) (127,607) (510,229) (294,726) (1,189,286)
Other expenses
Interest expense-Related party (1,252,388) (5,000) (1,901,388) (15,000) (1,929,466)
------------- ------------- ------------- ------------- -------------
Total expenses (1,252,388) (5,000) (1,901,388) (15,000) (1,929,466)
------------- ------------- ------------- ------------- -------------
Net loss $ (1,504,791) $ (132,607) $ (2,411,617) $ (309,726) $ (3,118,752)
============= ============= ============= ============= =============
Basic loss per share $ (0.00) $ (0.00) $ (0.00) $ (0.00)
------------- ------------- ------------- -------------
Basic weighted average number of shares 826,440,627 537,975,000 648,078,197 536,483,000
------------- ------------- ------------- -------------
The accompanying notes are an integral part of these financial statements.
4
SUNERGY, INC.
(An Exploration Stage Company)
Statement of Stockholders' Equity
From Inception (28-Jan-2003) to 30-Sep-2010
Deficit
Accumulated
Common Stock During the
-------------------- Paid in Subscriptions Exploration Total
Shares Amount Capital Receivable Stage Equity
------ ------ ------- ---------- ----- ------
BALANCE AT INCEPTION, JANUARY 28, 2003 -- $ -- $ -- $ -- $ -- $ --
Common shares issued for cash 500,000,000 500,000 (490,000) -- -- 10,000
Common shares issued for cash 6,975,000 6,975 6,975 -- -- 13,950
Net loss (30,313) (30,313)
------------ -------- ---------- --------- ----------- ----------
BALANCE, DECEMBER 31, 2003 506,975,000 506,975 (483,025) -- (30,313) (6,363)
Contributed capital -- -- 401 -- -- 401
Net loss (41,362) (41,362)
------------ -------- ---------- --------- ----------- ----------
BALANCE, DECEMBER 31, 2004 506,975,000 506,975 (482,624) -- (71,675) (47,324)
Contributed capital -- -- 938 -- -- 938
Net loss (26,093) (26,093)
------------ -------- ---------- --------- ----------- ----------
BALANCE, DECEMBER 31, 2005 506,975,000 506,975 (481,686) -- (97,768) (72,479)
Contributed capital -- -- 1,959 -- -- 1,959
Net loss (39,746) (39,746)
------------ -------- ---------- --------- ----------- ----------
BALANCE, DECEMBER 31, 2006 506,975,000 506,975 (479,727) -- (137,514) (110,266)
Net loss (55,103) (55,103)
------------ -------- ---------- --------- ----------- ----------
BALANCE, DECEMBER 31, 2007 506,975,000 506,975 (479,727) -- (192,617) (165,369)
Common shares issued for cash 6,000,000 6,000 144,000 -- -- 150,000
Common shares issued to acquire
mineral property 20,000,000 20,000 480,000 -- -- 500,000
Common shares subscribed -- -- -- 5,000 -- 5,000
Net loss (98,445) (98,445)
------------ -------- ---------- --------- ----------- ----------
BALANCE, DECEMBER 31, 2008 532,975,000 532,975 144,273 5,000 (291,062) 391,186
The accompanying notes are an integral part of these financial statements.
5
SUNERGY, INC.
(An Exploration Stage Company)
Statement of Stockholders' Equity (Continued)
From Inception (28-Jan-2003) to 30-Sep-2010
Deficit
Accumulated
Common Stock During the
-------------------- Paid in Subscriptions Exploration Total
Shares Amount Capital Receivable Stage Equity
------ ------ ------- ---------- ----- ------
Common shares subscribed -- -- -- 138,400 -- 138,400
Common shares issued for services 5,000,000 5,000 295,000 -- -- 300,000
Contributed capital -- -- 1,010 -- -- 1,010
Net loss (416,073) (416,073)
------------ -------- ---------- --------- ----------- ----------
BALANCE, DECEMBER 31, 2009 537,975,000 537,975 440,283 143,400 (707,135) 414,523
Contributed capital -- -- 8,960 -- -- 8,960
Common shares issued for services 20,000,000 20,000 110,000 -- -- 130,000
Common shares issued to settle debt 75,000,000 75,000 357,500 -- -- 432,500
Common shares issued to settle debt 150,000,000 150,000 574,000 -- -- 724,000
Common shares issued for subscriptions 40,992,880 40,993 102,407 (143,400) -- --
Common shares issued for services 25,000,000 25,000 142,500 -- -- 167,500
Common shares issued to settle debt 39,980,000 39,980 531,870 -- -- 571,850
Common shares issued to settle debt 14,700,000 14,700 201,390 -- -- 216,090
Common shares issued to settle debt 17,650,000 17,650 241,800 -- -- 259,450
Common shares issued for services 10,800,000 10,800 147,961 -- -- 158,761
Common shares issued to settle debt 14,100,000 14,100 197,400 -- -- 211,500
Net loss (2,411,617) (2,411,617)
------------ -------- ---------- --------- ----------- ----------
BALANCE, SEPTEMBER 30,
2010 (UNAUDITED) 946,197,880 $946,198 $3,056,071 $ -- $(3,118,752) $ 883,517
============ ======== ========== ========= =========== ==========
The accompanying notes are an integral part of these financial statements.
6
SUNERGY, INC.
(An Exploration Stage Company)
Statements of Cash Flows
(Unaudited)
From Inception
Nine Months Ended January 28, 2003 to
September 30, September 30,
2010 2009 2010
------------ ------------ ------------
Operating Activities
Net loss $ (2,411,617) $ (309,726) $ (3,118,752)
Adjustments to reconcile net loss to cash:
Prepaid expenses-stock related 50,000 175,000 --
Stock issued for services 456,261 -- 756,261
Stock issued to acquire mineral property -- -- 500,000
Interest paid with stock on debt settlement 1,760,988 -- 1,760,988
Changes in assets and liabilities
Increase/(decrease) in accounts payable and accruals 22,335 47,679 53,557
Increase/(decrease) in related party liabilities 48,482 -- 142,341
------------ ------------ ------------
Net cash provided by (used in) operating activities (73,551) (87,047) 94,395
------------ ------------ ------------
Investment Activities
Acquisition of mineral property -- -- (1,000,000)
------------ ------------ ------------
Cash used by investment activities -- -- (1,000,000)
------------ ------------ ------------
Financing Activities
Proceeds from sale of common stock -- -- 317,350
Subscriptions received -- 56,700 --
Operational advances 64,569 30,219 87,519
Note payable -- -- 237,500
Note payable-Related party -- -- 250,000
Contributed capital 8,960 -- 13,268
------------ ------------ ------------
Cash provided by financing activities 73,529 86,919 905,637
------------ ------------ ------------
Net increase/(decrease) in cash (22) (128) 32
Cash and cash equivalents, beginning of period 54 648 --
------------ ------------ ------------
Cash and cash equivalents, end of period $ 32 $ 520 $ 32
============ ============ ============
Supplemental disclosure cash flows for:
Interest $ -- $ -- $ --
------------ ------------ ------------
Income taxes $ -- $ -- $ --
------------ ------------ ------------
Supplemental disclosure of non-cash financing:
Stock issued for services $ 456,261 $ -- $ 756,261
------------ ------------ ------------
Stock issued to settle debt $ 654,402 $ -- $ 654,402
------------ ------------ ------------
Stock issued to acquire mineral property $ -- $ -- $ 500,000
------------ ------------ ------------
The accompanying notes are an integral part of these financial statements.
7
SUNERGY, Inc.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
SUNERGY, Inc. (The Company) was organized in the state of Nevada on January 28,
2003 and is an exploration phase mineral and mining company.
The Company has mineral properties located in the Republic of Ghana and has not
yet determined whether these properties contain reserves that are economically
recoverable. The recoverability of amounts from these properties will be
dependent upon the discovery of economically recoverable reserves, confirmation
of the Company's interest in the underlying properties, the ability of the
Company to obtain necessary financing to satisfy the expenditure requirements
under the property agreements to complete the development of the properties and
upon future profitable production or proceeds for the sale thereof.
These statements reflect all adjustments, consisting of normal recurring
adjustments, which in the opinion of management, are necessary for fair
presentation of the information contained therein. It is suggested that these
interim financial statements be read in conjunction with the financial
statements of the Company for the year ended December 31, 2009 and notes thereto
included in the Company's 10-K annual report and all amendments. The Company
follows the same accounting policies in the preparation of interim reports.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
The relevant accounting policies and procedures are listed below.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in banks and financial instruments which
mature within three months of the date of purchase.
RECLASSIFICATION
Certain reclassifications have been made to the prior years' financial
statements to conform to the current year presentation. These reclassifications
had no effect on previously reported results of operations or retained earnings.
The Company reclassified pre-paid expenses-stock related from the equity section
of the balance sheet to the current assets section.
CASH BALANCES
The Company maintains its cash in institutions insured by the Federal Deposit
Insurance Corporation (FDIC). On July 21, 2010 FDIC-insured institutions are
permanently insured up to at least $250,000 per depositor. On January 1, 2010,
FDIC deposit insurance for all deposit accounts, except for certain retirement
accounts, will return to at least $100,000 per depositor. Insurance coverage for
certain retirement accounts, which include all IRA deposit accounts, will remain
at $250,000 per depositor.
8
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONT.)
ACCOUNTING BASIS
The statements were prepared following generally accepted accounting principles
of the United States of America. The Company operates on a December 31 fiscal
year end.
REVENUE RECOGNITION
Revenues from services are recognized when there is persuasive evidence of an
arrangement, the fee is fixed or determinable, services have been rendered,
payment has been contractually earned and it is reasonably assured that the
related receivable or unbilled revenue is collectable.
EARNINGS PER SHARE
Basic earnings per share excludes dilution and is computed by dividing net
income (loss) by the weighted-average common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Currently the Company has no potentially dilutive
securities.
DIVIDENDS
The Company has not yet adopted any policy regarding payment of dividends. No
dividends have been paid during the periods shown.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
INCOME TAXES
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, including tax loss and credit carryforwards, 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. 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. Deferred income tax expense represents the change during the
period in the deferred tax assets and deferred tax liabilities. The components
of the deferred tax assets and liabilities are individually classified as
current and non-current based on their characteristics. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized.
STOCK BASED COMPENSATION
The Company has on occasion issued stock in lieu of cash to various vendors for
services rendered. In so doing the Company issued the stock at fair value
defined as the current market value.
9
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONT.)
EXPLORATION STAGE COMPANY
The Company complies with Accounting Standards Codification (ASC) Topic 915 and
for its characterization of the Company as exploration stage. All losses
accumulated since inception has been considered as part of the Company's
exploration stage activities.
The Company is subject to several categories of risk associated with its
exploration stage activities. Mineral exploration and production is a
speculative business, and involves a high degree of risk. Among the factors that
have a direct bearing on the Company's prospects are uncertainties inherent in
estimating mineral deposits, future mining production, and cash flows,
particularly with respect to properties that have not been fully proven with
economic mineral reserves; access to additional capital; changes in the price of
the underlying commodity; availability and cost of services and equipment; and
the presence of competitors with greater financial resources and capacity.
MINERAL PROPERTY COSTS
Mineral property exploration costs are expensed as incurred. Mineral property
acquisition costs are initially capitalized when incurred. The Company assesses
the carrying costs for impairment at each fiscal quarter end. When it has been
determined that a mineral property can be economically developed as a result of
establishing proven and probable reserves, the costs then incurred to develop
such property, are capitalized. Such costs will be amortized using the
units-of-production method over the estimated life of the probable reserve. If
mineral properties are subsequently abandoned or impaired, any capitalized costs
will be charged to operations.
ENVIRONMENTAL COSTS
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the cost can be reasonably
estimated. Generally, the timing of these accruals coincides with the earlier of
completion of a feasibility study or the Company's commitments to plan of action
based on the then known facts.
ASSET RETIREMENT OBLIGATION
The Company records asset retirement obligations as a liability in the period in
which a legal obligation associated with the retirement of tangible long-lived
assets result from the acquisition, construction, development and/or normal use
of the assets. As of September 30, 2010, the Company had not undertaken any
drilling activity on its properties and had not incurred significant reclamation
obligations. Consequently no asset retirement obligation was accrued in the
financial statements for the nine months ended September 30, 2010 and the year
ended December 31, 2009.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews the recoverability of its long-lived assets whenever events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. The estimated future cash flows are based upon, among other
things, assumptions about future operating performance, and may differ from
actual cash flows. Long-lived assets evaluated for impairment are grouped with
other assets to the lowest level for which identifiable cash flows are largely
independent of the cash flows of other groups of assets and liabilities. If the
sum of the projected undiscounted cash flows
10
IMPAIRMENT OF LONG-LIVED ASSETS-CONT.
(excluding interest) is less than the carrying value of the assets, the assets
will be written down to the estimated fair value in the period in which the
determination is made. During the quarter ended September 30, 2010 and the year
ended December 31, 2009 no impairment was recorded.
RECENT ACCOUNTING GUIDANCE NOT YET ADOPTED
In January 2010, the FASB issued guidance to amend the disclosure requirements
related to recurring and nonrecurring fair value measurements. The guidance
requires new disclosures on the transfers of assets and liabilities between
Level 1 (quoted prices in active market for identical assets or liabilities) and
Level 2 (significant other observable inputs) of the fair value measurement
hierarchy, including the reasons and the timing of the transfers. Additionally,
the guidance requires a roll forward of activities on purchases, sales,
issuance, and settlements of the assets and liabilities measured using
significant unobservable inputs (Level 3 fair value measurements). The guidance
will become effective for us with the reporting period beginning January 1,
2010, except for the disclosure on the roll forward activities for Level 3 fair
value measurements, which will become effective for us with the reporting period
beginning July 1, 2011. Other than requiring additional disclosures, adoption of
this new guidance will not have a material impact on our financial statements.
The Company has reviewed other recently issued accounting pronouncements and
believe none will have any material impact on our financial statements.
NOTE 3. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and the liquidation of liabilities in the normal course of business.
However, the Company has accumulated a loss of $3,118,752 during its exploration
stage. This raises substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include any adjustments that
might result from this uncertainty.
MANAGEMENTS' PLAN
Management has no formal plan in place to address this concern but is
considering obtaining additional funds by debt financing to the extent there is
a shortfall from operations. Management continues to seek funding from its
shareholders and other qualified investors to pursue its business plan however
there is no assurance that such activity will generate the necessary funds for
operations.
NOTE 4. MINERAL PROPERTIES
HUMMINGBIRD CLAIM
On April 10, 2003, the Company executed a mineral property staking and sales
agreement and acquired an 100% undivided right, title and interest in and to the
Hummingbird Claims located in the province of British Columbia, Canada. The
Company incurred exploration costs of $933 and $1,834 respectively for the years
ended December 31, 2009 and 2008 and inception to date exploration costs of
$13,872 on the Hummingbird Claims. As of June 30, 2009, the Company decided to
abandon the Hummingbird Claims and the asset was fully impaired.
11
NOTE 4. MINERAL PROPERTIES (CONT.)
NYINAHIN MINING CONCESSION
On October 31, 2008 and amended by agreement on December 5, 2008, the Company
executed a mining acquisition agreement and acquired an 100% interest in a
mineral concession located in the Ashanti region of Ghana, known as the Nyinahin
concession. Agreed to consideration consisted of the following:
1. $500,000 to be paid within 5 days of the effective date of the agreement.
* $12,500 by November 5, 2008; (paid by issuance of a promissory note)
* $37,500 by December 31, 2008; (paid by issuance of a promissory note)
* $200,000 by December 31, 2008; (paid by issuance of a promissory note)
* $250,000 by April 30, 2009; (paid $12,500)
2. 20,000,000 restricted shares of common stock of the Company valued at $0.025
per share (based upon the price per share received on a private placement around
the time of this agreement) for a total of $500,000.
On December 30, 2008, the Company entered into a promissory note in the amount
of $250,000 with a shareholder of the Company (see Note 6) who satisfied the
Company's aggregate consideration of $250,000 that were due by December 31,
2008.
During the year ended December 31, 2008, the Company paid $12,500 to the holder
of the Nyinahin Mining Concession which was credited toward the $250,000
obligation due on April 30, 2009.
On July 30, 2009, the Company entered into an agreement to settle the final
payment balance of $237,500. The holder agreed to receive 20,000,000 restricted
shares of common stock valued at $0.0125 per share or $250,000 in settlement and
the previous $12,500 payment recorded as interest expense for late payment. The
common stock was not issued in a timely fashion and subsequently the holder
assigned the debt. The Company has settled with the assignees.
The vendor shall retain a 5% Net Smelter Return on the Property.
NOTE 5. STOCKHOLDERS' EQUITY
COMMON STOCK
The Company originally authorized 75,000,000 shares of common stock at a $0.001
par value and on September 16, 2006 executed a 5:1 forward stock split bringing
the authorized common shares to 375,000,000 with a par value of $0.001 per share
and the issued and outstanding shares as of September 16, 2006 from 10,139,500
to 50,697,500 shares. On August 17, 2010 the Company executed a 10:1 forward
stock split bring the authorized common shares to 3,750,000,000 and the issued
and outstanding shares from 94,619,788 to 946,197,880 shares. The stock splits
are retroactively applied to these financial statements resulting in an increase
in the number of shares outstanding and a decrease in issued price per share.
All shares issued for services are valued at fair value which is the current
market price on the day shares are authorized to be issued.
12
NOTE 5. STOCKHOLDERS' EQUITY (CONT.)
COMMON STOCK-CONT.
A summary of shares issued follows:
* On January 31, 2003, the Company issued 500,000,000 common shares to
the founders for $10,000 cash.
* On September 22, 2003, the Company issued 6,975,000 common shares for
$13,950 cash.
* On October 10, 2008, the Company issued 6,000,000 common shares plus
an equal number of two-year detachable warrants exercisable at $0.025
per share in a private placement for $150,000 or $0.025 per share.
* On December 10, 2008, the Company issued 20,000,000 common shares
valued at $0.025 per share or $500,000 as partial payment for the
acquisition of the Nyinahin Mining Concession.
* On March 23, 2009, the Company issued 5,000,000 common shares valued
at $0.06 per share or $300,000 for one year consulting services and
recorded as prepaid expense.
* On June 3, 2010, the Company issued 20,000,000 common shares to its
officers for $18,000 of executive services. The fair value of the
shares on the date of issuance was $130,000
* On June 3, 2010, the Company issued 75,000,000 common shares valued
$0.0035 per share or $262,500 in full settlement of a $250,000 note
and $12,500 accumulated interest. The fair value of the shares issued
on the date of each individual settlement was $432,500, resulting in
the company allocating $250,000 to the note, $12,500 to accrued
interest and $170,000 to interest expense.
* On June 3, 2010, the Company issued 40,992,880 common shares at
$0.0035 per share for the $143,400 prepaid subscriptions.
* On July 30 2010, the Company issued 25,000,000 common shares at $0.009
per share to its officers for executive services. The fair value of
the shares on the date of issuance was $167,500
* On August 2, 2010, the Company issued 39,980,000 common shares at
$0.017 per share to settle $67,980 worth of debt. The fair value of
the shares on the date of issuance was $571,850 which was allocated as
$67,980 to the debt and $503,870 to interest expense.
* On August 4, 2010, the Company issued 14,700,000 common shares at
$0.017 per share to settle $24,990 in debt. The fair value of the
shares on the date of issuance was $216,090 which was allocated as
$24,990 to the debt and $191,100 to interest expense.
* On August 11, 2010, the Company issued 17,650,000 common shares at
$0.017 per share to settle $30,000 in debt. The fair value of the
shares on the date of issuance was $259,450 which was allocated as
$30,000 to the debt and $229,450 to interest expense.
* On August 13, 2010, the Company issued 150,000,000 common shares at
$0.0017 per share to settle $255,000 in debt. The fair value of the
shares issued on the date of each individual settlement was $724,000
resulting in the company allocating $237,500 to the note, $7,500 to
accrued interest and $479,000 to interest expense.
13
NOTE 5. STOCKHOLDERS' EQUITY (CONT.)
* On August 19, 2010, the Company issued 10,800,000 common shares at
$0.017 per share for $18,361 executive services with a fair value of
$158,761. Also the Company issued 14,100,000 common shares at $0.017
per share to settle $23,932 in debt. The fair value of the shares on
the dates of issuance was $211,500 which was allocated as $23,932 to
the debt and $187,568 to interest expense.
SUBSCRIPTIONS PAYABLE
As of March 30, 2009 the Company had received the benefit of either cash or
payment of outstanding liabilities with aggregate total of $143,400 from
non-related individuals as prepaid subscriptions for common stock. On June 3,
2010 40,992,880 common shares were issued to satisfy the subscriptions.
CONTRIBUTED CAPITAL
During the year ended 2003, an officer donated services valued at $401 which was
treated as contributed capital.
During the year ended 2004, an officer donated services valued at $938 which was
treated as contributed capital.
During the year ended 2005, an officer donated services valued at $1,959 which
was treated as contributed capital.
During the year ended 2009, an officer donated services valued at $1,010 which
was treated as contributed capital.
During the quarter ended March 31, 2010, an officer paid expenses on behalf of
the Company valued at $4,000 which was treated as contributed capital.
During the quarter ended June 30, 2010, an officer paid expenses on behalf of
the Company valued at $4,960 which was treated as contributed capital.
OUTSTANDING WARRANTS
On October 20, 2008 the Company issued 6,000,000 two-year detachable warrants
exercisable at $0.025 per share and considered the value of the warrants as a
stock issue cost netted against paid in capital.
Information relating to warrant activity during the reporting period follows:
Weighted
Average
Number of Exercise
Warrants Price
-------- -----
Warrants Outstanding at December 31, 2009 6,000,000 $ 0.025
Plus: Warrants Issued --
Less: Warrants Exercised --
Less: Warrants Expired --
---------
Total Warrants outstanding at September 30, 2010 6,000,000
=========
On September 30, 2010 the Company had warrants outstanding for the purchase of
an aggregate of 6,000,000 shares of its common stock, which are summarized in
the table below:
14
Warrants Exercise Expiration
Outstanding Price Date
----------- ----- ----
6,000,000 $ 0.025 10-Oct-2010
NOTE 6. RELATED PARTY TRANSACTIONS
ACCRUALS - RELATED PARTY
Related Party transactions include accruals of unpaid management and director
fees, rent for facility owned by a corporate officer, and interest accrued on
the note held by a shareholder. Summary of balances follow:
Related Party-Accruals 30-Sep-10 31-Dec-09
---------------------- --------- ---------
Management & Director Fees $24,361 $73,859
Interest -- 20,000
------- -------
Total Related Party Accruals $24,361 $93,859
======= =======
OPERATIONAL ADVANCES - RELATED PARTY
Operational advances are short term, unsecured, non-interest bearing operational
advances made by various related parties to maintain day to day operations.
Summary of balance follows:
30-Sep-10 31-Dec-09
--------- ---------
Operational Advances $ 62,529 $ 22,950
NOTES PAYABLE - RELATED PARTY
On December 30, 2008, the Company issued a promissory note to a shareholder in
the amount of $250,000 at 8% per annum with principal and interest due and
payable on December 31, 2009. Proceeds of the note were used to make payment of
an aggregate of $250,000 toward the acquisition of the Nyinahin Mining
Concession.
On August 3, 2009, the Company entered into a debt settlement agreement with the
shareholder to issue 21,000,000 common shares in full settlement of the $250,000
note including accrued interest. On June 3, 2010 the Company issued 75,000,000
common shares valued $0.0035 per share or $262,500 in full settlement of a
$250,000 note and $12,500 accumulated interest.
NOTE 7. NOTES PAYABLE
NOTES PAYABLE
On July 30, 2009, the Company entered into an agreement to settle the final
payment balance of the Nyinahin Mining Concession agreement of $237,500. The
holder agreed to receive 20,000,000 restricted shares of common stock valued at
$0.0125 per share or $250,000 in settlement and the previous $12,500 payment
recorded as interest expense for late payment.
On August 15, 2010 the Company issued 150,000,000 common shares at $0.0017 per
share or $255,000 total in settlement with the assignees of the outstanding
principal balance including accumulated interest. The fair value of the shares
issued on the date of each individual settlement was $724,000 resulting in the
company allocating $237,500 to the note and $486,500 to interest expense.
15
NOTE 8. SUBEQUENT EVENTS
On October 18, 2010, the Company entered into a membership purchase agreement
with Allied Mining and Supply, LLC for the purchase of 100% of the issued and
outstanding membership interest of Allied Mining, a Nevada Limited Liability
Company, which owns the rights to Exploration License #EXPL 5/2009 on the 140 sq
km Pampana River concession in Sierra Leone, West Africa.
In consideration for the purchase of the membership interests, the Company
agreed to pay $18,000 cash and issue 100,000,000 units at a deemed price of
$0.0025 to Allied Mining. Each unit consists of one share of restricted stock,
one 12 month share purchase warrant exercisable at $0.0025 per share and one 12
month share purchase warrant exercisable at $0.005 per share.
On January 11, 2011, the Company issued 125,400,000 units in a private
placement, raising gross proceeds of $313,500 at $0.0025 per unit. Each unit
consists of one share of common stock and one 12 month share purchase warrant
exercisable at $0.005 per share
On January 11, 2011, the Company issued 89,659,960 units in consideration for
debt outstanding and for compensation to directors and advisory board members at
a deemed price of $0.0025 per unit. Each unit consists of one share of common
stock and one 12 month share purchase warrant exercisable at $0.005 per share.
The total compensation was $179,300 and reimbursement for expenses (debt) was
$44,850 for a total of $224,150. The fair value of this transaction will be
determined at a later date.
On January 11, 2011, the Company authorized the issueance of 10,000,000 common
shares (2,500,000 to each of four new board members) with a market value of
$70,000. The shares were issued during February 2011.
On May 3, 2011, the Company issued 1,000,000 common shares as part of the
exercise of 1,000,000 warrants at $0.005 per share, for total cash consideration
of $5,000.
16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may", "should",
"expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors that may cause our or our industry's
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.
Our unaudited financial statements are stated in United States dollars and are
prepared in accordance with United States Generally Accepted Accounting
Principles. The following discussion should be read in conjunction with our
financial statements and the related notes that appear elsewhere in this
quarterly report. The following discussion contains forward-looking statements
that reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed below and elsewhere in this quarterly report.
In this quarterly report, unless otherwise specified, all dollar amounts are
expressed in United States dollars. All references to "common stock" refer to
the common shares in our capital stock.
As used in this quarterly report, the terms "we", "us", "our", "our company" and
"Sunergy" mean Sunergy, Inc. and our wholly owned subsidiary, Allied Mining and
Supply, LLC, a Nevada limited liability company, unless otherwise stated.
HISTORICAL OVERVIEW
We were incorporated in the State of Nevada, USA, on January 28, 2003. We are an
exploration stage company engaged in the acquisition, exploration and
development of mineral properties with a view to exploiting any mineral deposits
we discover that demonstrate economic feasibility.
On October 31, 2008, we entered into an agreement with General Metals
Corporation for the acquisition of its 100% owned Nyinahin Mining Concession
located in Ghana, West Africa. The aggregate purchase price was to consist of
$500,000 payable cash and 2,000,000 restricted shares of our common stock valued
at $0.25 per share. On December 5, 2008, we amended the agreement with General
Metals Corporation to defer our payment obligations.
On December 30, 2008, a shareholder of our company, Global Partners LLC, agreed
to settle the initial payment of $250,000 payable under the agreement with
General Metals Corporation on our behalf. As a result of this, we entered into a
promissory note with Global Capital Partners LLC on December 30, 2008, wherein
we agreed to pay the principal amount of $250,000 including interest at a rate
of 8% per annum by December 31, 2009. As of December 31, 2008, we had paid an
additional $12,500 to General Metal Corporation toward the purchase of the
Nyinahin Mining Concession and issued 2,000,000 restricted shares of our common
stock at a fair market value of $0.25 per share.
* On July 30, 2009, we entered into a settlement agreement with General
Metals Corporation in respect of the final balance of $237,500 payable
for our acquisition of the Nyinahin Mining Concession. Pursuant to the
settlement agreement, General Metals agreed to receive 20,000,000
restricted shares of our common stock valued at $0.0125 per share or
17
$250,000 in the aggregate as full and final consideration for our
acquisition of the Nyinahin Mining Concession. However, we did not
issue the 20,000,000 shares in a timely manner and subsequently, on
June 3, 2010, we issued 75,000,000 common shares to General Metals
Corporation valued $0.0035 per share ($262,500 in the aggregate) in
full settlement of the acquisition of the Nyinahin Mining Concession.
The fair value of the shares issued on the date of each individual
settlement was $432,500, resulting in the Company allocating $250,000
to the note and $182,500 to interest expense.
General Metals Corporation retains a 5% net smelter return on the property.
On August 15, 2010 we issued 150,000,000 common shares at $0.0017 per share or
$255,000 total in settlement with the assignees of the outstanding principal
balance including accumulated interest the fair value of the shares was
calculated as $724,000.
DEVELOPMENTS DURING AND SUBSEQUENT TO THE NINE MONTHS ENDED SEPTEMBER 30, 2010
On October 18, 2010, we entered into a membership purchase agreement with Allied
Mining and Supply, LLC for the purchase of 100% of the issued and outstanding
membership interest of Allied Mining, a Nevada Limited Liability company, which
owns the rights to Exploration License #EXPL 5/2009 on the 140 sq km Pampana
River concession in Sierra Leone, West Africa.
In consideration for the purchase of the membership interests, we agreed to pay
$18,000 cash and issue 100,000,000 units at a deemed price of $0.0025 to Allied
Mining. Each unit consists of one share of restricted stock, one 12 month share
purchase warrant exercisable at $0.0025 per share and one 12 month share
purchase warrant exercisable at $0.005 per share.
On January 11, 2011, we issued 125,400,000 units in a private placement, raising
gross proceeds of $313,500 at $0.0025 per unit. Each unit consists of one share
of common stock and one 12 month share purchase warrant exercisable at $0.005
per share
On January 11, 2011, we issued 89,659,960 units in consideration for debt
outstanding and for compensation to directors and advisory board members at a
deemed price of $0.0025 per unit. Each unit consists of one share of common
stock and one 12 month share purchase warrant exercisable at $0.005 per share.
The total compensation was $179,300 and reimbursement for expenses (debt) was
$44,850 for a total of $224,150. The fair value of this transaction will be
determined at a later date.
On January 11, 2011, we authorized the issuance of 10,000,000 common shares
(2,500,000 to each of four new board members) with a market value of $70,000.
The shares were issued during February 2011.
On May 3, 2011, we issued 1,000,000 common shares for the exercise of 1,000,000
warrants at $0.005 per share for total cash consideration of $5,000.
OUR CURRENT BUSINESS
We are an exploration stage mining company engaged in the exploration of
minerals on properties located in Ghana and Sierra Leone, West Africa.
18
NYINAHIN MINING CONCESSION - GHANA
The 150 square kilometer Nyinahin mining concession is located between two
geological gold belts, the Bibiani Belt to the west and the Asankrangwa to the
east. Our license allows for the exploration and mining of gold, silver, base
metals and diamonds. About 80% of the Nyinahin Concession lies to the west of
the Offin River within the Ashanti Region of Ghana. There are several historical
pits and adits with a strong clustering of artisan pits located along the Offin
River. Three old gold prospects exist on the concession. The property is
accessed via the main Kumasi-Bibiani trunk road. It falls under the jurisdiction
of the Atwima Mponua District Assembly with headquarters at Nyinahin.
The Nyinahin Mining Concession is comprised of the Nyinahin Mineral Licence LVB
8936/05 and Land Registry No. 1535/2005, and subsequently converted into a Full
Prospecting License (LVB 3857/08). The Concession is situated 20km northeast of
Bibiani and about 48km Southwest of Kumasi. The concession, which covers an
approximate area of 172 sq. km. has been reduced to 150 sq. km to conform to
statutory requirements regarding the maximum size for Prospecting Licenses by
the Minerals Commission of Ghana.
FUTURE EXPLORATION
We have designed a four-phased exploration program as detailed below:
We are committed in spending a total of US$286,000 over a two year period
depending on the type and size of any deposit to be discovered. This estimate
includes a 10% contingency cost. Phases II and III are contingent upon a
favorable result from earlier phases. We anticipate:
PHASES I AND II (DURATION 12 MONTHS - END OF FIRST YEAR)
PROPOSED EXPLORATION
* Geological Mapping
* Line Cutting
* Geochemical Soil Sampling
* Trenching
* Pitting
* Geophysical Investigation
The fieldwork will begin with preliminary geological mapping and documentation
to confirm the general structures and formations. A review of work done during
the reconnaissance licence period will also be carried out.
Line cutting will be carried out on known mineralized zones identified within
the concession at initial grid spacing of 800m. This will be in-filled with
lines spaced at 400m and 200m over selected grounds. It is expected that about
100km of lines will be cut in all. Geochemical soil-sampling program will be
conducted at an initial interval of 400 and in-filled at 100m and 50m along the
grid lines.
Trenching, the most cost effective exploration method available in locating
significant in-situ mineralization will be employed. Preliminary trenching based
on results of the geochemical soil sampling will be carried out. An estimated
800m of trenches will be excavated.
Pitting will be carried out at some soil location points along the proposed
mineralized trend where trenching is not merited. Areas without significant gold
values along the mineralized trend will also be pitted to check the possibility
of transported materials.
Geophysical methods (VLF-EM/SP) will be used to identify mineralized
zones/anomalies within the concession area. Other work to be tackled are
clarification of the general forms of the mineral deposits (or anomalies), the
size of the main ore bodies, their quality, mineralogy and technical problems
which will generally assist in the evaluation of the deposit.
Finally, other geological works will be carried out if considered necessary. It
is hoped that any geophysical work already conducted in the area by the
19
geological survey will help in the interpretation of the structural problems. At
the end of this phase, an internal report will be prepared. The report will form
the basis of the annual report and on which the detailed prospecting phase will
be projected and carried out as the next phase of the project.
PHASE III (DURATION UP TO 6 MONTHS - BEGINNING OF SECOND YEAR)
DETAILED PROSPECTING
* Geochemical Investigations
* Trenching and Pitting
* Structural Geological Mapping
* Assay
* Survey work
Geochemical samples will be taken along the geophysical traverses and analyzed
to cross check any prospects/anomalies picked up by the geophysics. All the
geochemical anomalies recorded will be "prioritized".
Detailed soil sampling at a closer grid system of 200 X 50m, and 100 X 25m will
be undertaken when it becomes necessary.
Trenching, pitting, sampling and structural geological mapping will be tightened
up. Any other geological work deemed necessary would also be carried out.
Assaying of all samples will be carried out locally in the first instance. Some
external cross checking of the assay values will also be made as and when
appropriate.
Survey work - all work from this stage will be performed on a surveyed grid
system. All trench locations from the previous phase and the subsequent ones
will be surveyed and put on plan and sections. This will enable a more effective
picture of the prospecting work to be viewed and interpreted.
Mineralogical and petrographical studies will be carried out.
A report will be prepared at the end of the period. This will involve project
appraisal and projections for the next phase of the prospecting program.
PHASE IV (DURATION UP TO 6 MONTHS - END OF SECOND YEAR)
TARGET DELINEATION AND RESOURCE ESTIMATION
* Trenching, Pitting and Sampling
* RC Drilling (1000m)
* Other Detailed Geological Work
* Geological Report.
Work will be concentrated in areas, which have shown positive results during the
previous phases and carried out according to the importance of the results.
Area(s), which could be mined first, will be prospected in more detail. The aim
will be to accurately define the geological structure, forms, attitude of the
ore bodies or the ore deposit.
Trenching will continue at an aggressive rate and at closer grid spacing than
before. Sampling, survey work and structural geological mapping of all
exploration work will be carried out.
RC drilling of the gold deposit for resource estimation will be carried out. It
is estimated that about 800m of RC drilling will be carried out.
Assay of all samples will be done locally and externally as and when necessary.
Resource estimation based on trench and RC drilling will be carried out.
Reserves estimation will be attempted at this stage to determine the extent of
the economic mineral potential of the concession area.
20
PAMPANA RIVER MINING CONCESSION - SIERRA LEONE
On October 18, 2010 we entered into a membership purchase agreement with Allied
Mining and Supply, LLC for the purchase of 100% of the issued and outstanding
membership interest of Allied Mining, a Nevada limited liability company, which
owns the rights to Exploration License #EXPL 5/2009 on the 140 sq km Pampana
River concession in Sierra Leone, West Africa. As a result of the transaction
Allied Mining became our wholly owned subsidiary.
Exploration Licence No. EXPL 5/2009 was issued to Allied Mining and Supply Ltd.
(AMS) on August 12, 2009 and is valid for a period of three years from the date
of issuance, subject to any renewals. The licence is located in the Kholifa
Rowalla, Kafe Simiria and Tane Chiefdoms in the Tonkolili District of the
Northern Province of Sierra Leone covering an area of 141.3 kms. The concession
is situated on the western fringes of the southern Sula Mountains greenstone
belt and for most of the northern and central part it straddles the Pampana
River. On the west of the southern part, the concession runs along the Pampana
River.
The property is in the heart of one of Sierra Leone's richest alluvial gold
mining fields, South of the Sula Mountains in the Greenstone belt on the North
Pampana River, around 120 miles east of the capital, Freetown.
Most recently, in January, 2011, our Company purchased and implemented 3 custom
built commercial dredges to further explore and develop the Pampana claim.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our unaudited
financial statements and the related notes that appear elsewhere in this
quarterly report. The following discussion contains forward-looking statements
that reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited to
those discussed below and elsewhere in this quarterly report, particularly in
the section entitled "Risk Factors" beginning on page 26 of this quarterly
report.
Our unaudited financial statements are stated in United States Dollars and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
RESULTS OF OPERATIONS
Inception
Three Months Ended Nine Months Ended (January 28, 2003) to
September 30, September 30, September 30,
2010 2009 2010 2009 2010
----------- ----------- ----------- ----------- -----------
Revenue $ Nil $ Nil $ Nil $ Nil $ Nil
Operating Expenses $ 252,403 $ 127,607 $ 510,229 $ 294,726 $ 1,189,286
Net loss $(1,504,791) $ (132,607) $(2,411,617) $ (309,726) $(3,118,752)
21
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND SEPTEMBER 30, 2009, FROM
INCEPTION (JANUARY 28, 2003) TO SEPTEMBER 30, 2010
EXPENSES
Our operating expenses for the three and nine months ended September 30, 2010
and September 30, 2009, and for the period from Inception ( January 28, 2003 )
and September 30, 2010 are outlined in the table below:
January 28, 2003
Three Months Ended Nine Months Ended (Inception)
September 30, September 30, September 30,
2010 2009 2010 2009 2010
----------- ----------- ----------- ----------- -----------
General and Administrative $ 8,428 $ 8,156 $ 16,831 $ 12,574 $ 70,327
General and Administrative
- related party $ 27,364 $ -- $ 48,287 $ -- $ 48,286
Management Salary $ 186,000 $ 12,000 $ 347,500 $ 39,000 $ 500,500
Rent - Related Party $ -- $ 2,205 $ -- $ 6,085 $ 37,500
Accounting and Audit Fees $ -- $ 8,266 $ -- $ 25,438 $ 97,131
Legal Fees $ -- $ 2,980 $ -- $ 16,696 $ 52,876
Consulting Fees $ 23,750 $ 94,000 $ 73,750 $ 194,000 $ 320,185
Exploration Costs $ 6,861 $ -- $ 23,861 $ 933 $ 62,481
Operating expenses for the three months ended September 30, 2010, increase by
approximately 97% as compared to the same period in 2009. Operating expenses for
the nine months ended September 30, 2010, increased by approximately 73% as
compared to the same period in 2009. The increase is primarily as a result of an
increase of management fees.
REVENUE
We have not earned any revenues since our inception on January 28, 2003. We do
not anticipate earning revenues until such time as we have entered into
commercial production on the Nyinahin property. We have not commenced the
development stage of our business and can provide no assurance that we will
discover economic mineralization on the property, or if such minerals are
discovered, that we will enter into commercial production.
EQUITY COMPENSATION
We currently do not have any stock option or equity compensation plans or
arrangements.
22
LIQUIDITY AND FINANCIAL CONDITION
WORKING CAPITAL
At At
September 30, December 31, Increase/
2010 2009 (Decrease)
---------- ---------- ---------
Current Assets $ 32 $ 50,054 (50,022)
Current Liabilities $ 116,515 $ 635,531 (519,016)
Working Capital (deficit) $ (116,483) $ (585,477) (468,994)
CASH FLOWS
Nine Months Nine Months January 28, 2003
Ended Ended (Inception) to
September 30, September 30, September 30,
2010 2009 2010
---------- ------------ -----------
Net Cash (Used) by Operating $ (73,551) $ (87,047) $ 94,395
Activities
Net Cash (Used) by Investing
Activities $ -- $ -- $(1,000,000)
Net Cash Provided by Financing
Activities $ 73,529 $ 86,919 $ 905,637
INCREASE (DECREASE) IN CASH
DURING THE PERIOD $ (22) $ (128) $ 32
CONTRACTUAL OBLIGATIONS
As a "smaller reporting company", we are not required to provide tabular
disclosure obligations.
GOING CONCERN
We anticipate that additional funding will be required in the form of equity
financing from the sale of our common stock. At this time, we cannot provide
investors with any assurance that we will be able to raise sufficient funding
from the sale of our common stock or through a loan from our directors to meet
our obligations over the next twelve months. We do not have any arrangements in
place for any future debt or equity financing.
OFF-BALANCE SHEET ARRANGEMENTS
We have no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
stockholders.
CRITICAL ACCOUNTING POLICIES
The discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with the accounting principles generally accepted in the United States of
America. Preparing financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenue, and expenses. These estimates and assumptions are affected by
management's application of accounting policies. We believe that understanding
the basis and nature of the estimates and assumptions involved with the
following aspects of our financial statements is critical to an understanding of
our financial statements.
23
EXPLORATION STAGE COMPANY
Our company complies with Accounting Standards Codification (ASC) Topic 915 and
for its characterization of our company as exploration stage. All losses
accumulated since inception has been considered as part of our company's
exploration stage activities.
Our company is subject to several categories of risk associated with its
exploration stage activities. Mineral exploration and production is a
speculative business, and involves a high degree of risk. Among the factors that
have a direct bearing on our company's prospects are uncertainties inherent in
estimating mineral deposits, future mining production, and cash flows,
particularly with respect to properties that have not been fully proven with
economic mineral reserves; access to additional capital; changes in the price of
the underlying commodity; availability and cost of services and equipment; and
the presence of competitors with greater financial resources and capacity.
MINERAL PROPERTY COSTS
Mineral property exploration costs are expensed as incurred. Mineral property
acquisition costs are initially capitalized when incurred. Our company assesses
the carrying costs for impairment at each fiscal quarter end. When it has been
determined that a mineral property can be economically developed as a result of
establishing proven and probable reserves, the costs then incurred to develop
such property, are capitalized. Such costs will be amortized using the units of
production method over the estimated life of the probable reserve. If mineral
properties are subsequently abandoned or impaired, any capitalized costs will be
charged to operations.
ENVIRONMENTAL COSTS
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the cost can be reasonably
estimated. Generally, the timing of these accruals coincides with the earlier of
completion of a feasibility study or our company's commitments to plan of action
based on the then known facts.
ASSET RETIREMENT OBLIGATION
Our company records asset retirement obligations as a liability in the period in
which a legal obligation associated with the retirement of tangible long-lived
assets result from the acquisition, construction, development and/or normal use
of the assets. At September 30, 2010, our company had not undertaken any
drilling activity on its properties and had not incurred significant reclamation
obligations. Consequently no asset retirement obligation was accrued in the
financial statements for the nine months ended September 30, 2010 and the year
ended December 31, 2009.
IMPAIRMENT OF LONG-LIVED ASSETS
Our company reviews the recoverability of its long-lived assets whenever events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. The estimated future cash flows are based upon, among other
things, assumptions about future operating performance, and may differ from
actual cash flows. Long-lived assets evaluated for impairment are grouped with
other assets to the lowest level for which identifiable cash flows are largely
independent of the cash flows of other groups of assets and liabilities. If the
sum of the projected undiscounted cash flows (excluding interest) is less than
the carrying value of the assets, the assets will be written down to the
estimated fair value in the period in which the determination is made. During
the nine months ended September 30, 2010 and the year ended December 31, 2009 no
impairment was recorded.
RECENT ACCOUNTING PRONOUNCEMENTS
RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In January 2010, the FASB issued guidance to amend the disclosure requirements
related to recurring and nonrecurring fair value measurements. The guidance
requires new disclosures on the transfers of assets and liabilities between
24
Level 1 (quoted prices in active market for identical assets or liabilities) and
Level 2 (significant other observable inputs) of the fair value measurement
hierarchy, including the reasons and the timing of the transfers. Additionally,
the guidance requires a roll forward of activities on purchases, sales,
issuance, and settlements of the assets and liabilities measured using
significant unobservable inputs (Level 3 fair value measurements). The guidance
will become effective for us with the reporting period beginning January 1,
2010, except for the disclosure on the roll forward activities for Level 3 fair
value measurements, which will become effective for us with the reporting period
beginning July 1, 2011. Other than requiring additional disclosures, adoption of
this new guidance will not have a material impact on our financial statements.
The Company has reviewed other recently issued accounting pronouncements and
believe none will have any material impact on our financial statements.
ITEM 3. QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS
As a "smaller reporting company", we are not required to provide the information
required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
MANAGEMENT'S REPORT ON DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed under the SECURITIES
EXCHANGE ACT OF 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and
communicated to our management, including our president (who is acting as our
principal executive officer) and our treasurer (who is acting as our principal
financial officer and principle accounting officer) to allow for timely
decisions regarding required disclosure. In designing and evaluating our
disclosure controls and procedures, our management recognizes that any controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and our
management is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation. Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. As of September 30, 2010, the end of the
quarter covered by this report, we carried out an evaluation, under the
supervision and with the participation of our president (who is acting as our
principal executive officer) and our treasurer (who is acting as our principal
financial officer and principle accounting officer), of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on the
foregoing, our president (who is acting as our principal executive officer) and
our treasurer (who is acting as our principal financial officer and principle
accounting officer) concluded that our disclosure controls and procedures were
not effective as of the end of the period covered by this quarterly report in
providing reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in
accordance's with US generally accepted accounting principles due to the
existence of significant deficiencies constituting material weaknesses. A
material weakness is a control deficiency, or combination of control
deficiencies, such that there is a reasonable possibility that a material
misstatement of the annual or interim financial statements will not be prevented
or detected on a timely basis.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal controls over financial reporting
that occurred during our quarter ended September 30, 2010 that have materially
or are reasonably likely to materially affect, our internal controls over
financial reporting.
25
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our
company, nor are we involved as a plaintiff in any material proceeding or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered or beneficial shareholder, is an
adverse party or has a material interest adverse to our interest.
ITEM 1A. RISK FACTORS
In addition to other information in this quarterly report, the following risk
factors should be carefully considered in evaluating our business because such
factors may have a significant impact on our business, operating results,
liquidity and financial condition. As a result of the risk factors set forth
below, actual results could differ materially from those projected in any
forward looking statements. Additional risks and uncertainties not presently
known to us, or that we currently consider to be immaterial, may also impact our
business, operating results, liquidity and financial condition. If any such
risks occur, our business, operating results, liquidity and financial condition
could be materially affected in an adverse manner. Under such circumstances, the
trading price of our securities could decline, and you may lose all or part of
your investment.
OUR PROPERTIES ARE IN THE EXPLORATION STAGE. THERE IS NO ASSURANCE THAT WE CAN
ESTABLISH THE EXISTENCE OF ANY MINERAL RESOURCE ON OUR PROPERTIES IN
COMMERCIALLY EXPLOITABLE QUANTITIES. UNTIL WE CAN DO SO, WE CANNOT EARN ANY
REVENUES FROM OPERATIONS AND IF WE DO NOT DO SO WE WILL LOSE ALL OF THE FUNDS
THAT WE EXPEND ON EXPLORATION. IF WE DO NOT DISCOVER ANY MINERAL RESOURCE IN A
COMMERCIALLY EXPLOITABLE QUANTITY, OUR BUSINESS COULD FAIL.
Despite pre-exploration work on our mineral properties, we have not established
that they contain any mineral reserve, nor can there be any assurance that we
will be able to do so. If we do not, our business could fail.
A mineral reserve is defined by the Securities and Exchange Commission in its
Industry Guide 7 (which can be viewed over the Internet at
http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7) as that part
of a mineral deposit which could be economically and legally extracted or
produced at the time of the reserve determination. The probability of an
individual prospect ever having a "reserve" that meets the requirements of the
Securities and Exchange Commission's Industry Guide 7 is extremely remote; in
all probability our mineral resource property does not contain any 'reserve' and
any funds that we spend on exploration will probably be lost.
Even if we do eventually discover a mineral reserve on one of our properties,
there can be no assurance that we will be able to develop our properties into
producing mines and extract those resources. Both mineral exploration and
development involve a high degree of risk and few properties which are explored
are ultimately developed into producing mines.
The commercial viability of an established mineral deposit will depend on a
number of factors including, by way of example, the size, grade and other
attributes of the mineral deposit, the proximity of the resource to
infrastructure such as a smelter, roads and a point for shipping, government
regulation and market prices. Most of these factors will be beyond our control,
and any of them could increase costs and make extraction of any identified
mineral resource unprofitable.
MINERAL OPERATIONS ARE SUBJECT TO APPLICABLE LAW AND GOVERNMENT REGULATION. EVEN
IF WE DISCOVER A MINERAL RESOURCE IN A COMMERCIALLY EXPLOITABLE QUANTITY, THESE
LAWS AND REGULATIONS COULD RESTRICT OR PROHIBIT THE EXPLOITATION OF THAT MINERAL
RESOURCE. IF WE CANNOT EXPLOIT ANY MINERAL RESOURCE THAT WE MIGHT DISCOVER ON
OUR PROPERTIES, OUR BUSINESS MAY FAIL.
Both mineral exploration and extraction require permits from various foreign,
federal, state, provincial and local governmental authorities and are governed
by laws and regulations, including those with respect to prospecting, mine
development, mineral production, transport, export, taxation, labour standards,
occupational health, waste disposal, toxic substances, land use, environmental
protection, mine safety and other matters. There can be no assurance that we
will be able to obtain or maintain any of the permits required for the continued
exploration of our mineral property or for the construction and operation of a
26
mine on our property at economically viable costs. If we cannot accomplish these
objectives, our business could fail.
We believe that we are in compliance with all material laws and regulations that
currently apply to our activities but there can be no assurance that we can
continue to remain in compliance. Current laws and regulations could be amended
and we might not be able to comply with them, as amended. Further, there can be
no assurance that we will be able to obtain or maintain all permits necessary
for our future operations, or that we will be able to obtain them on reasonable
terms. To the extent such approvals are required and are not obtained, we may be
delayed or prohibited from proceeding with planned exploration or development of
our mineral properties.
IF WE ESTABLISH THE EXISTENCE OF A MINERAL RESOURCE ON ONE OF OUR PROPERTIES IN
A COMMERCIALLY EXPLOITABLE QUANTITY, WE WILL REQUIRE ADDITIONAL CAPITAL IN ORDER
TO DEVELOP THE PROPERTY INTO A PRODUCING MINE. IF WE CANNOT RAISE THIS
ADDITIONAL CAPITAL, WE WILL NOT BE ABLE TO EXPLOIT THE RESOURCE, AND OUR
BUSINESS COULD FAIL.
If we do discover mineral resources in commercially exploitable quantities on
our property, we will be required to expend substantial sums of money to
establish the extent of the resource, develop processes to extract it and
develop extraction and processing facilities and infrastructure. Although we may
derive substantial benefits from the discovery of a major deposit, there can be
no assurance that such a resource will be large enough to justify commercial
operations, nor can there be any assurance that we will be able to raise the
funds required for development on a timely basis. If we cannot raise the
necessary capital or complete the necessary facilities and infrastructure, our
business may fail.
MINERAL EXPLORATION AND DEVELOPMENT IS SUBJECT TO EXTRAORDINARY OPERATING RISKS.
WE DO NOT CURRENTLY INSURE AGAINST THESE RISKS. IN THE EVENT OF A CAVE-IN OR
SIMILAR OCCURRENCE, OUR LIABILITY MAY EXCEED OUR RESOURCES, WHICH WOULD HAVE AN
ADVERSE IMPACT ON OUR COMPANY.
Mineral exploration, development and production involve many risks which even a
combination of experience, knowledge and careful evaluation may not be able to
overcome. Our operations will be subject to all the hazards and risks inherent
in the exploration for mineral resources and, if we discover a mineral resource
in commercially exploitable quantity, our operations could be subject to all of
the hazards and risks inherent in the development and production of resources,
including liability for pollution, cave-ins or similar hazards against which we
cannot insure or against which we may elect not to insure. Any such event could
result in work stoppages and damage to property, including damage to the
environment. We do not currently maintain any insurance coverage against these
operating hazards. The payment of any liabilities that arise from any such
occurrence would have a material adverse impact on our company.
MINERAL PRICES ARE SUBJECT TO DRAMATIC AND UNPREDICTABLE FLUCTUATIONS.
We expect to derive revenues, if any, either from the sale of our mineral
resource property or from the extraction and sale of precious and base metals.
The price of those commodities has fluctuated widely in recent years, and is
affected by numerous factors beyond our control, including international,
economic and political trends, expectations of inflation, currency exchange
fluctuations, interest rates, global or regional consumptive patterns,
speculative activities and increased production due to new extraction
developments and improved extraction and production methods. The effect of these
factors on the price of base and precious metals, and therefore the economic
viability of any of our exploration properties and projects, cannot accurately
be predicted.
THE MINING INDUSTRY IS HIGHLY COMPETITIVE AND THERE IS NO ASSURANCE THAT WE WILL
CONTINUE TO BE SUCCESSFUL IN ACQUIRING MINERAL CLAIMS. IF WE CANNOT CONTINUE TO
ACQUIRE PROPERTIES TO EXPLORE FOR MINERAL RESOURCES, WE MAY BE REQUIRED TO
REDUCE OR CEASE OPERATIONS.
The mineral exploration, development, and production industry is largely
un-integrated. We compete with other exploration companies looking for mineral
resource properties. While we compete with other exploration companies in the
effort to locate and acquire mineral resource properties, we will not compete
with them for the removal or sales of mineral products from our properties if we
should eventually discover the presence of them in quantities sufficient to make
production economically feasible. Readily available markets exist worldwide for
the sale of mineral products. Therefore, we will likely be able to sell any
mineral products that we identify and produce.
27
In identifying and acquiring mineral resource properties, we compete with many
companies possessing greater financial resources and technical facilities. This
competition could adversely affect our ability to acquire suitable prospects for
exploration in the future. Accordingly, there can be no assurance that we will
acquire any interest in additional mineral resource properties that might yield
reserves or result in commercial mining operations.
RISKS RELATED TO OUR COMPANY
WE HAVE A LIMITED OPERATING HISTORY ON WHICH TO BASE AN EVALUATION OF OUR
BUSINESS AND PROSPECTS.
We have been in the business of exploring mineral resource properties since 2003
and we have not yet located any mineral reserve. As a result, we have never had
any revenues from our operations. In addition, our operating history has been
restricted to the acquisition and exploration of our mineral properties and this
does not provide a meaningful basis for an evaluation of our prospects if we
ever determine that we have a mineral reserve and commence the construction and
operation of a mine. We have no way to evaluate the likelihood of whether our
mineral property contains any mineral reserve or, if it does that we will be
able to build or operate a mine successfully. We anticipate that we will
continue to incur operating costs without realizing any revenues during the
period when we are exploring our properties. We therefore expect to continue to
incur significant losses into the foreseeable future. We recognize that if we
are unable to generate significant revenues from mining operations and any
disposition of our property, we will not be able to earn profits or continue
operations. At this early stage of our operation, we also expect to face the
risks, uncertainties, expenses and difficulties frequently encountered by
companies at the start up stage of their business development. We cannot be sure
that we will be successful in addressing these risks and uncertainties and our
failure to do so could have a materially adverse effect on our financial
condition. There is no history upon which to base any assumption as to the
likelihood that we will prove successful and we can provide investors with no
assurance that we will generate any operating revenues or ever achieve
profitable operations.
THE FACT THAT WE HAVE NOT EARNED ANY OPERATING REVENUES SINCE OUR INCORPORATION
RAISES SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE TO EXPLORE OUR MINERAL
PROPERTIES AS A GOING CONCERN.
We have not generated any revenue from operations since our incorporation and we
anticipate that we will continue to incur operating expenses without revenues
unless and until we are able to identify a mineral resource in a commercially
exploitable quantity on either of our mineral properties and build and operate a
mine. We had cash in the amount of $32 as of September 30, 2010. At September
30, 2010, we had a working capital deficit of $116,483. We incurred a net loss
of $2,411,617 for the nine months ended September 30, 2010 and $3,118,752 since
inception. We will have to raise additional funds to meet our currently budgeted
operating requirements for the next 12 months. As we cannot assure a lender that
we will be able to successfully explore and develop our mineral properties, we
will probably find it difficult to raise debt financing from traditional lending
sources. We have traditionally raised our operating capital from sales of equity
and debt securities, but there can be no assurance that we will continue to be
able to do so. If we cannot raise the money that we need to continue exploration
of our mineral property, we may be forced to delay, scale back, or eliminate our
exploration activities. If any of these were to occur, there is a substantial
risk that our business would fail.
These circumstances lead our independent registered public accounting firm, in
their report dated April 7, 2009, to comment about our company's ability to
continue as a going concern. Management has plans to seek additional capital
through a private placement of our capital stock. These conditions raise
substantial doubt about our company's ability to continue as a going concern.
Although there are no assurances that management's plans will be realized,
management believes that our company will be able to continue operations in the
future.
RISKS ASSOCIATED WITH OUR COMMON STOCK
TRADING ON THE OTCQB MAY BE VOLATILE AND SPORADIC, WHICH COULD DEPRESS THE
MARKET PRICE OF OUR COMMON STOCK AND MAKE IT DIFFICULT FOR OUR STOCKHOLDERS TO
RESELL THEIR SHARES.
Our common stock is quoted on the OTCQB. Trading in stock quoted on the OTCQB is
often thin and characterized by wide fluctuations in trading prices, due to many
factors that may have little to do with our operations or business prospects.
This volatility could depress the market price of our common stock for reasons
unrelated to operating performance. Moreover, the OTCQB is not a stock exchange,
28
and trading of securities on the OTCQB is often more sporadic than the trading
of securities listed on a quotation system like NASDAQ or a stock exchange like
Amex. Accordingly, shareholders may have difficulty reselling any of their
shares.
OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S
PENNY STOCK REGULATIONS AND FINRA'S SALES PRACTICE REQUIREMENTS, WHICH MAY LIMIT
A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.
Our stock is a penny stock. The Securities and Exchange Commission has adopted
Rule 15g-9 which generally defines "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established
customers and "accredited investors". The term "accredited investor" refers
generally to institutions with assets in excess of $5,000,000 or individuals
with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document in a form prepared
by the SEC which provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in, and limit the marketability of, our common stock.
In addition to the "penny stock" rules promulgated by the Securities and
Exchange Commission, the Financial Industry Regulatory Authority has adopted
rules that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the Financial Industry Regulatory Authority believes that there
is a high probability that speculative low-priced securities will not be
suitable for at least some customers. The Financial Industry Regulatory
Authority requirements make it more difficult for broker-dealers to recommend
that their customers buy our common stock, which may limit your ability to buy
and sell our stock.
OTHER RISKS
TRENDS, RISKS AND UNCERTAINTIES
We have sought to identify what we believe to be the most significant risks to
our business, but we cannot predict whether, or to what extent, any of such
risks may be realized nor can we guarantee that we have identified all possible
risks that might arise. Investors should carefully consider all of such risk
factors before making an investment decision with respect to our common stock.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On July 30 2010, we issued 25,000,000 common shares at $0.009 per share to our
officers for executive services. The fair value of the shares on the date of
issuance was $167,500
On August 2, 2010, we issued 39,980,000 common shares at $0.017 per share to
settle $67,980 worth of debt. The fair value of the shares on the date of
issuance was $571,850 which was allocated as $67,980 to the debt and $503,870 to
interest expense
29
On August 4, 2010, we issued 14,700,000 common shares at $0.017 per share to
settle $24,990 of debt. The fair value of the shares on the date of issuance was
$216,090 which was allocated as $24,990 to the debt and $191,100 to interest
expense.
On August 11, 2010, we issued 17,650,000 common shares at $0.017 per share to
settle $30,000 of debt. The fair value of the shares on the date of issuance was
$259,450 which was allocated as $30,000 to the debt and $229,450 to interest
expense.
On August 13, 2010, we issued 150,000,000 common shares at $0.0017 per share to
settle $255,000 of debt. The fair value of the shares issued on the date of each
individual settlement was $724,000 which was allocated as $237,500 to the note,
$7,500 to accrued interest and $479,000 to interest expense.
On August 19, 2010, we issued 10,800,000 common shares at $0.017 per share for
$18,361 in executive services with a fair value of $158,761. We also issued
14,100,000 common shares at $0.017 per share to settle $23,932 of debt. The fair
value of the shares on the dates of issuance was $211,500 which was allocated as
$23,932 to the debt and $187,568 to interest expense.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. [REMOVED AND RESERVED]
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
Exhibit
Number Description
------ -----------
(3) ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Articles of Incorporation (incorporated by reference from our
Registration Statement on Form SB-2 filed on February 23, 2004)
3.2 Bylaws (incorporated by reference from our Registration Statement
on Form SB-2 filed on February 23, 2004)
(10) MATERIAL CONTRACTS
10.1 Mineral Property Staking and Purchase Agreement dated April 10,
2003 (incorporated by reference from our Registration Statement on
Form SB-2/A filed on June 30, 2004)
10.2 Mining Acquisition Agreement dated October 31, 2008 between our
company and General Metals Corporation (incorporated by reference
from our Current Report on Form 8-K filed on December 10, 2008)
10.3 Amending Agreement to the Mining Acquisition Agreement dated
December 5, 2008 between our company and General Metals
Corporation. (incorporated by reference from our Current Report on
Form 8-K filed on December 10, 2008)
30
(14) CODE OF ETHICS
14.1 Code of Ethics and Business Conduct (incorporated by reference
from our Annual Report on Form 10-K filed on April 20, 2009)
(21) SUBSIDIARIES OF THE REGISTRANT
21.1 Allied Mining and Supply, LLC
(31) RULE 13A-14(D)/15D-14(D) CERTIFICATIONS
31.1* Certification of the Principal Executive Officer filed pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of the Principal Financial Officer and Principal
Accounting Officer filed pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
(32) SECTION 1350 CERTIFICATIONS
32.1* Certification of the Principal Executive Officer filed pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of the Principal Financial Officer and Principal
Accounting Officer filed pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
----------
* Filed herewith
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SUNERGY, INC.
(Registrant)
Dated: July 18, 2011 /s/ Bryan Miller
----------------------------------------
BRYAN MILLER
President and Director
(Principal Executive Officer)
Dated: July 18, 2011 /s/ Mark Shelley
----------------------------------------
MARK SHELLEY
Secretary, Treasurer and Director
(Principal Financial Officer and
Principal Accounting Officer)
32