UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2011
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 000-52767
SUNERGY, INC.
(Exact name of registrant as specified in its charter)
Nevada 26-4828510
(State or other jurisdiction of (IRS Employer
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 has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). [ ] YES [ ] 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.
1,521,032,117 common shares issued and outstanding as of February 23, 2012.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The interim financial statements included herein are unaudited but reflect, in
management's opinion, all adjustments, consisting only of normal recurring
adjustments that are necessary for a fair presentation of our financial position
and the results of our operations for the interim periods presented. Because of
the nature of our business, the results of operations for the quarterly period
ended March 31, 2011 are not necessarily indicative of the results that may be
expected for the full fiscal year.
2
SUNERGY, INC.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2011 2010
------------ ------------
(unaudited) (audited)
(restated)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 34,839 $ 97,251
Deposits -- 50,000
Prepaid financing cost 27,768 --
------------ ------------
TOTAL CURRENT ASSETS 62,607 147,251
------------ ------------
LONG TERM ASSETS
Exploratory properties 1,753,497 1,753,497
Property and equipment 190,941 2,254
------------ ------------
TOTAL ASSETS $ 2,007,045 $ 1,903,002
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 7,601 $ 7,601
Accruals - related party 13,500 --
Operational advances - related party 71,516 83,991
Notes payable-(net of $30,984 unamortized discount) 206,516 --
Total current liabilities 299,133 91,592
------------ ------------
TOTAL LIABILITIES 299,133 91,592
------------ ------------
STOCKHOLDERS' EQUITY
Common Stock, authorized
3,750,000,000 shares, par value $0.001, issued and
outstanding on March 31, 2011 and December 31, 2010
is 1,271,257,840 and 1,046,197,880, respectively 1,271,258 1,046,198
Additional paid in capital 3,046,712 2,709,122
Subscriptions payable 61,550 414,861
Subscriptions receivable (74,850) --
Accumulated deficit during exploration stage (2,596,758) (2,358,771)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 1,707,912 1,811,410
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,007,045 $ 1,903,002
============ ============
The accompanying notes are an integral part of these statements.
3
SUNERGY, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
From Inception
Quarter Ended January 28, 2003 to
March 31, March 31,
2011 2010 2011
-------------- -------------- --------------
(restated) (restated)
INCOME $ -- $ -- $ --
-------------- -------------- --------------
OPERATING EXPENSES
General and administrative 50,522 11,033 247,060
Management salary 13,500 18,000 237,500
Management stock based compensation -- -- 297,500
Rent-related party -- -- 37,500
Legal fees 3,000 -- 57,602
Professional fees 14,500 50,000 344,816
Exploration costs 140,078 6,500 286,687
-------------- -------------- --------------
TOTAL EXPENSES 221,600 85,533 1,508,665
-------------- -------------- --------------
Net loss from operations (221,600) (85,533) (1,508,665)
-------------- -------------- --------------
OTHER EXPENSES
Interest expense-related party (16,387) (5,000) (1,088,093)
-------------- -------------- --------------
TOTAL OTHER EXPENSES (16,387) (5,000) (1,088,093)
-------------- -------------- --------------
NET LOSS $ (237,987) $ (90,533) $ (2,596,758)
============== ============== ==============
LOSS PER SHARE-BASIC $ (0.00) $ (0.00)
============== ==============
WEIGHTED AVERAGE NUMBER OF SHARES-BASIC 1,243,750,512 537,975,000
============== ==============
The accompanying notes are an integral part of these statements.
4
SUNERGY, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
From Inception
Quarter Ended January 28, 2003 to
March 31, March 31,
2011 2010 2011
------------ ------------ ------------
(restated) (restated)
OPERATING ACTIVITIES
Net loss $ (237,987) $ (90,533) $ (2,596,758)
Adjustments to reconcile net loss to cash used
in operating activities:
Amortized prepaid expense -- -- 200,000
Depreciation 113 -- 113
Management stock based compensation -- -- 340,700
Stock based consulting expense 25,000 50,000 25,000
Non cash interest expense 16,387 -- 1,050,015
Advisory service expense 6,250 -- 6,250
Changes in assets and liabilities
Increase in accruals-related party 13,500 28,000 231,800
------------ ------------ ------------
NET CASH USED BY OPERATING ACTIVITIES (176,737) (12,533) (742,880)
INVESTMENT ACTIVITIES
Acquisition of property and equipment (103,800) -- (168,554)
Cash acquired through acquisition of subsidiary -- -- 39
------------ ------------ ------------
CASH USED BY INVESTMENT ACTIVITIES (103,800) -- (168,515)
FINANCING ACTIVITIES
Proceeds from sale of common stock 27,000 -- 657,850
Proceeds from notes payable 165,000 -- 165,000
Contributed capital -- 4,000 13,268
Operational advances 26,125 9,128 110,116
------------ ------------ ------------
CASH PROVIDED BY FINANCING ACTIVITIES 218,125 13,128 946,234
------------ ------------ ------------
Net increase/(decrease) in cash (62,412) 595 34,839
Cash and cash equivalents, beginning of period 97,251 54 --
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 34,839 $ 649 $ 34,839
============ ============ ============
SUPPLEMENTAL DISCLOSURE CASH FLOWS FOR:
Interest $ -- $ -- $ --
------------ ------------ ------------
Income taxes $ -- $ -- $ --
------------ ------------ ------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING:
Stock issued to settle operational advances $ (38,601) $ -- $ (703,003)
------------ ------------ ------------
Debt issued to acquire assets $ -- $ -- $ 487,500
------------ ------------ ------------
Stock issued to acquire assets $ -- $ -- $ (500,000)
------------ ------------ ------------
Assets acquired through acquisition of subsidiary $ -- $ -- $ (753,497)
------------ ------------ ------------
Liabilities assumed through acquisition of subsidiary $ -- $ -- $ 42,725
------------ ------------ ------------
Shares issued to acquire subsidiary $ -- $ -- $ 290,000
------------ ------------ ------------
Warrants issued to acquire subsidiary $ -- $ -- $ 420,811
------------ ------------ ------------
Shares and warrants issued for financing cost $ 34,550 $ -- $ 34,550
------------ ------------ ------------
Deposit applied toward acquisition of property and equipment $ 50,000 $ -- $ 50,000
------------ ------------ ------------
Note issued for acquisition of property and equipment $ 35,000 $ -- $ 35,000
------------ ------------ ------------
The accompanying notes are an integral part of these statements.
5
SUNERGY, INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
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.
The Company entered into a purchase agreement, which closed October 18, 2010, to
acquire Allied Mining and Supply LLC., a Nevada limited liability company.
Allied Mining and Supply LLC also has one subsidiary, a Sierra Leone company,
Allied Mining and Supply Ltd. As part of the acquisition the Company now has a
concession in Sierra Leone. The Company has been in the exploration phase of
this concession since the purchase. No revenues have been generated as of yet.
This concession, if determined to be economically feasible, may produce gold and
rare metals.
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, 2010 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.
Principles of Consolidation
The consolidated financial statements include the accounts of Sunergy, Inc and
its subsidiaries Mikite Gold Resources Limited, a Ghanaian company (100%) and
Allied Mining and Supply LLC, a Nevada limited liability company (100%). Allied
Mining and Supply LLC also has one 100% owned subsidiary, a Sierra Leone
company, Allied Mining and Supply Ltd which are 100% consolidated in the
financial statements. All material inter-company accounts and transactions have
been eliminated.
6
SUNERGY, INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONT.)
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.
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. There have been no
revenues since inception.
Earnings per Share
Basic earnings-per-share excludes dilution and is computed by dividing net
income (loss) by the weighted-average common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. The Company has potentially dilutive common
shares consisting of warrants, which are excluded from the diluted earnings per
share computation in periods where the Company has incurred a net loss.
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
7
SUNERGY, INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONT.)
Income Taxes-Cont.
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. The Company has adopted FASB ASC 718-10, "Compensation-Stock
Compensation", which requires the compensation cost related to share-based
payments, such as stock options and employee stock purchase plans, be recognized
in the financial statements based on the grant-date fair value of the award. The
Company accounts for equity instruments issued in exchange for the receipt of
goods or services from other than employees in accordance with FASB ASC 718-10
and the conclusions reached by the FASB ASC 505-50. Costs are measured at the
estimated fair market value of the consideration received or the estimated fair
value of the equity instruments issued, whichever is more reliably measurable.
The value of equity instruments issued for consideration other than employee
services is determined on the earliest of a performance commitment or completion
of performance by the provider of goods or services as defined by FASB ASC
505-50.
Exploration Stage Company
The Company complies with Accounting Standards Codification (ASC) Topic 915 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.
8
SUNERGY, INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONT.)
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. At March 31, 2011, 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 three month period ended March 31, 2011 and the
year ended December 31, 2010.
Property, Plant and Equipment
Property and equipment are recorded at historical cost. Minor additions and
renewals are expensed in the year incurred. Major additions and renewals are
capitalized and depreciated over their estimated useful lives. When property and
equipment are retired or otherwise disposed of, the cost and accumulated
depreciation is removed from the accounts and any resulting gain or loss is
included in the results of operations for the respective period. Depreciation is
provided over the estimated useful lives of the related assets using the
straight-line method for financial statement purposes. The Company uses other
depreciation methods (generally accelerated) for tax purposes where appropriate.
The estimated useful lives for significant property and equipment categories are
as follows:
Furniture and Fixtures 5 - 7 Years
Equipment 3 - 5 Years
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 (excluding interest) is less than
the carrying value of the assets, the assets will be written down to the
9
SUNERGY, INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONT.)
Impairment of Long-Lived Assets-Cont.
estimated fair value in the period in which the determination is made. During
the period ended March 31, 2011 and the year ended December 31, 2010, no
impairment charges were deemed necessary.
Recent Accounting Guidance Not Yet Adopted
The Company has reviewed recently issued accounting pronouncements thru ASU
2011-09 and believes none will have any material impact on our financial
statements.
NOTE 3. RESTATEMENT
As a result of the review of the Company's valuation methods for shares issued
during the quarter ended March 31, 2011 the Company discovered that shares were
improperly valued using a unit of measurement that was not equivalent. Since the
Company had a Caveat Emptor, the Company does not believe the free trading stock
market price is a reasonable measurement for the restricted shares being issued.
As such management revalued the various stock transactions issued during the
quarter based on private sales of the Company's restricted stock as this was
deemed to be a level 1 equivalent unit of measurement. The following is a
summary of the effect on restatement:
The effect of the restatement on financial position as of March 31, 2011:
Reported As Previously Restated
March 31, Restatement March 31,
2011 Adjustment 2011
------------ ------------ ------------
Prepaid financing cost $ 140,680 $ (112,912) $ 27,768
------------ ------------ ------------
TOTAL CURRENT ASSETS 175,519 (112,912) 62,607
------------ ------------ ------------
TOTAL ASSETS $ 2,119,957 $ (112,912) $ 2,007,045
============ ============ ============
Additional paid in capital $ 3,487,441 $ (440,729) $ 3,046,712
Subscriptions payable 120,200 (58,650) 61,550
Subscriptions receivable (202,404) 127,554 (74,850)
Accumulated deficit (2,855,671) 258,913 (2,596,758)
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY 1,820,824 (112,912) 1,707,912
------------ ------------ ------------
TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $ 2,119,957 $ (112,912) $ 2,007,045
============ ============ ============
The effect of the restatement on result of operations for the three month period
ended March 31, 2011:
Management stock based compensation $ 113,044 $ (113,044) $ --
Exploration costs 195,328 (55,250) 140,078
------------ ------------ ------------
Net loss from operations (389,894) 168,294 (221,600)
Interest expense-related party (107,006) 90,619 (16,387)
------------ ------------ ------------
Net loss $ (496,900) $ 258,913 $ (237,987)
============ ============ ============
Loss per share-basic $ (0.00) $ -- $ (0.00)
============ ============ ============
10
SUNERGY, INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
NOTE 3. RESTATEMENT (CONT.)
The effect of the restatement on result of operations for the period from
inception (January 28, 2003) to March 31, 2011:
Management stock based compensation $ 410,544 $ (113,044) $ 297,500
Exploration costs 341,937 (55,250) 286,687
------------ ------------ ------------
Net loss from operations (1,676,959) 168,294 (1,508,665)
Interest expense-related party (1,178,712) 90,619 (1,088,093)
------------ ------------ ------------
Net loss $ (2,855,671) $ 258,913 $ (2,596,758)
============ ============ ============
Loss per share-basic $ (0.00) $ -- $ (0.00)
============ ============ ============
The effect of the restatement on the cash flow for the period three month period
ended March 31, 2011:
Net loss $ (469,900) $ 258,913 $ (237,987)
Warrants issued for management fees 113,044 (113,044) --
Interest expense-related party 107,006 (90,619) 16,387
Stock based consulting expense 70,000 (45,000) 25,000
Advisory service expense 16,500 (10,250) 6,250
------------ ------------ ------------
Net cash used by operating activities $ (176,737) $ -- $ (176,737)
============ ============ ============
Cash and cash equivalent, end of period $ 34,839 $ -- $ 34,839
============ ============ ============
The effect of the restatement on cash flow for the period from inception
(January 28, 2003) to March 31, 2011:
Net loss $ (2,855,671) $ 258,913 $ (2,596,758)
Warrants issued for management fees 113,044 (113,044) --
Interest expense-related party 1,140,634 (90,619) 1,050,015
Stock based consulting expense 70,000 (45,000) 25,000
Advisory service expense 16,500 (10,250) 6,250
------------ ------------ ------------
Net cash used by operating activities $ (742,880) $ -- $ (742,880)
============ ============ ============
Cash and cash equivalent, end of period $ 34,839 $ -- $ 34,839
============ ============ ============
NOTE 4. 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 $2,596,758 during its exploration
stage. This raises substantial doubt about the Company's ability to continue as
a going concern. These financials do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might result from this uncertainty.
It should be noted that all mining, mineral and oil and gas companies show a
loss in the exploration stage of each project. By its very nature exploration is
expenditures with no income. To expect otherwise is not reality. In the
exploration stage almost all of the expenditures are expensed and not
capitalized. At the end of the exploration phase revenues begin with the
production phase and result in a better match of revenue with expenses. In the
production phase many expenses are capitalized and spread over the expected life
of the mining project.
11
SUNERGY, INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
NOTE 4. GOING CONCERN (CONT.)
Sunergy will continue to seek additional funds from its investors to complete
its exploration stage of determining when a particular project is economically
feasible. Production will begin once a project is determined to be economically
feasible then and profit can be expected.
As of March 31, 2011, our expectations were centered on our only mineral
concession in Ghana. With the addition of Sierra Leone we have the potential of
two highly successful ventures. However, two projects require more initial
capital until we enter the production phase with at least one project.
NOTE 5. PURCHASE OF ALLIED MINING AND SUPPLY LLC.
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 along with various
exploration equipment.
In consideration for the purchase of the membership interests, the Company
agreed to issue 100,000,000 units at a market price of $0.0029 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. The value of the purchase is based on the
market price of the stock issued and the intrinsic value of the warrants as
calculated using the Black-Sholes option pricing model. The Company recorded the
purchase allocating market value of the stock and the value of the warrants to
Common Stock and Additional Paid in Capital as follows:
Cash $ 39
Pampana river concession 753,497
--------
TOTAL ASSETS $753,536
========
Accounts payable 42,725
--------
TOTAL LIABILITIES $ 42,725
========
Net Assets in excess of liabilities $710,811
========
Common Stock $100,000
Additional paid in capital 610,811
--------
TOTAL COST OF ACQUSITION $710,811
========
Please refer to the Company's 10-K filing for December 31, 2010 for additional
information on Allied Mining and Supply, LLC.
NOTE 6. PROPERTY, PLANT AND EQUIPMENT
As of March 31, 2011 Sunergy, Inc. was an exploration company. The main thrust
of our testing has been in the Sierra Leone concession with our wholly owned
subsidiary, Allied Mining & Supply LLC. We purchased some computers in December
2010 and additional equipment during the quarter ended March 31, 2011. Since the
equipment was not put into service until second quarter of 2011 we have only
recorded $113 in depreciation on the Company's office equipment.
12
SUNERGY, INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
NOTE 6. PROPERTY, PLANT AND EQUIPMENT (CONT.)
Property and equipment consisted of the following at March 31, 2011 and December
31, 2010:
March 31, December 31,
2011 2010
-------- --------
Exploration equipment $175,000 $ --
Rolling stock 10,000 --
Power generating equipment 3,800 --
Office furniture and equipment 2,254 2,254
-------- --------
Subtotal $191,054 $ 2,254
-------- --------
Accumulated depreciation (113) --
-------- --------
Property, plant and equipment - net $190,941 $ 4,508
======== ========
NOTE 7. NOTES PAYABLE
During the quarter we issued $237,500 in note payables to various investors,
which consisted of $200,000 in loans and $37,500 in interest due at maturity for
the purchase of equipment used in exploration. During the quarter we amortized
$6,516 of interest due at maturity leaving an unamortized discount of $30,984.
As an incentive for the note holders we also agreed to issue 13,000,000 units
consisting of one share of restricted common stock and one share purchase
warrant exercisable at $0.005 and 300,000 units consisting of one share of
common stock and one share purchase warrant exercisable at $0.0075. The
13,300,000 incentive units were valued at $0.0025 each or $34,350. During the
quarter we amortized $6,582 of financing cost leaving a balance of $27,768 in
prepaid financing cost.
Of the above loans, $52,500 were collateralized by 19,000,000 shares of common
stock, 14,000,000 one year share purchase warrants exercisable at $0.005 per
share, and 5,000,000 one year share purchase warrants exercisable at $0.007 per
share. In the event of default, the note holders are able to convert the
outstanding balance owed to the common share collateral.
A summary of the outstanding balance for the periods ended March 31, 2011 and
December 31, 2010 follows:
31-Mar-11 31-Dec-10
--------- ---------
Notes Payable $ 237,500 $ --
Interest Discount (30,984) --
--------- ---------
Total Notes Payable $ 206,516 $ --
========= =========
NOTE 8. STOCKHOLDERS' EQUITY
Common Stock
The Company originally had 75,000,000 shares of common stock authorized 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.
13
SUNERGY, INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
NOTE 8. STOCKHOLDERS' EQUITY (CONT.)
On August 17, 2010 the Company executed a 10:1 forward stock split increasing
the authorized common shares to 3,750,000,000 and the issued and outstanding
shares as of August 17, 2010 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.
On October 18, 2010 the Company issued 100,000,000 units at a market price of
$0.0029 or $290,000 for the purchase of 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.
A summary of shares issued during the quarter ended March 31, 2011 follows:
* On January 11, 2011 the Company issued 125,400,000 units consisting of
one common share and one 12 month warrant exercisable at $0.005 for
$0.0025 per share or $313,500 cash received and recorded as stock
subscription payable during 2010. The Company entered into various
transactions to issue equivalent units of one common stock and one 12
month purchase warrant exercisable at $0.005 during the quarter. Since
the Company currently has a caveat emptor status, the Company
determined that the $.0025 per unit price was the market price of its
restricted stock, as such transaction for which equivalent units were
granted were valued at the $.0025 per share.
* On December 15, 2010, the Company settled $47,500 in accounts payable
through the execution of a subscription to issue 19,000,000 units at
$0.0025 with each unit consisting of one common share and one 12 month
warrant exercisable at $0.005. The Company issued the 19,000,000
shares on January 11, 2011.
* On January 11, 2011 the Company issued 18,779,960 units consisting of
one common share and one 12 month warrant exercisable at $0.005 for
the market price of $0.0025 per unit to satisfy $44,861 of
subscriptions payable.
* On January 11, 2011 the Company issued 4,000,000 units consisting of
one common share and one 12 month warrant exercisable at $0.005 for
the market value of $0.0025 per share valued at $10,000 to satisfy
$9,000 in subscriptions payable.
* On January 11, 2011 the Company issued 15,440,000 units consisting of
one common share and one 12 month warrant exercisable at $0.005 for
$0.0025 per share or $38,600 to satisfy $38,600 in operational
advances.
* On January 11, 2011 the Company issued 17,940,000 units consisting of
one common share and one 12 month warrant exercisable at $0.005 valued
at $0.0025 per share or $44,850 in error. The holder has agreed to
return the shares and the Company has recorded them as subscriptions
receivable until returned and cancelled.
* On January 11, 2011 the Company issued 2,500,000 units consisting of
one common share and one 12 month warrant exercisable at $0.005 for
$0.0025 per share or $6,250 for consulting services.
* On January 25, 2011 the Company issued 12,000,000 shares of common
stock with a market value of $0.0025 or $30,000 in error. The holder
has agreed to return the shares and the Company has recorded them as
subscriptions receivable until returned and cancelled.
14
SUNERGY, INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
NOTE 8. STOCKHOLDERS' EQUITY (CONT.)
* On February 24, 2011 the Company issued 10,000,000 shares of common
stock valued at $0.0025 per share or $25,000 for consulting services
and is recorded in exploration expense.
Stock Payable
During the quarter ended March 31, 2011, the Company entered into various note
payable agreements for the purchase of equipment. As an incentive to enter into
these notes, the Company agreed to issue 13,000,000 units consisting of one
share of common stock and one 12 month warrant exercisable at $0.005 and 300,000
untits consisting one common share and one 12 month warrant exercisable at or
$0.0075. The units were valued at $34,550 on the date of agreement and was
recorded as stock payable.
During the first quarter of 2011, the Company received cash in the amount of
$27,000 for prepaid stock subscriptions at $0.0035 for the purchase of 7,714,285
units consisting of one share of common stock and one 12 month warrant
exercisable at $0.006 per share. As of March 31, 2011 the shares have not been
issued and were recorded as stock payable.
Outstanding Warrants
On October 18, 2010, the Company authorized the issuance of 100,000,000 one year
warrants exercisable at $0.0025 and 100,000,000 one year warrants exercisable at
$0.005 per share. The warrants were issued as consideration for the acquisition
of Allied Mining and subsidiary. See Note 4 for further discussion. The warrants
were valued using the Black-Scholes pricing model using a one year term, 231%
volatility and a .23% risk free rate. The total value of the warrants is
$420,811.
On January 11, 2011, the Company issued 125,400,000 one year warrants
exercisable at $0.005 per share. The warrants were issued as consideration for
the cash purchase of an equal number of common shares at $0.0025 per share.
On January 11, 2011, the Company issued 18,779,960 one year warrants exercisable
at $0.005 per share. The warrants were issued as consideration to settle related
party management services. The warrants were valued with their associated common
stock issued as units at the current private placement price of $0.0025 per
unit.
On January 11, 2011, the Company issued 4,000,000 one year warrants exercisable
at $0.005 per share for services. The warrants were valued as units with common
stock at the current private placement price of $0.0025 per unit.
On January 11, 2011, the Company issued 19,000,000 one year warrants exercisable
at $0.005 per share for settlement of debt. The warrants were valued as units
with common stock at the current private placement price of $0.0025 per unit.
On January 11, 2011, the Company issued 15,440,000 one year warrants exercisable
at $0.005 per share for the settlement of debt. The warrants were valued as
units with common stock at the current private placement price of $0.0025 per
unit.
On January 11, 2011, the Company issued 17,940,000 one year warrants exercisable
at $0.005 per share in error. The holder has agreed to return the warrants and
the Company has recorded the warrants with the accompanying shares in
subscriptions receivable.
15
SUNERGY, INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
NOTE 8. STOCKHOLDERS' EQUITY (CONT)
Outstanding Warrants (Cont.)
On January 11, 2011, the Company issued 2,500,000 one year warrants exercisable
at $0.005 per share for the consulting. The warrants were valued as units with
common stock at the current private placement price of $0.0025 per unit.
During the first quarter of 2011, the Company issued 13,000,000 one year
warrants exercisable at $0.005 per share and 300,000 one year warrants
exercisable at $0.0075 per share. The warrants were issued as incentive to
obtain equipment loans. The warrants were valued as units with common stock at
the current private placement price of $0.0025 per unit.
During the first quarter of 2011, the Company issued 7,714,285 one year warrants
exercisable at $0.006 per share. The warrants were issued as an incentive to
obtain cash purchase of common stock.
Information relating to warrant activity during the reporting period follows:
Warrants Exercise Expiration
Outstanding Price Date
----------- ----- ----
100,000,000 0.0025 11-Jan-2012
100,000,000 0.005 11-Jan-2012
125,400,000 0.005 11-Jan-2012
18,779,960 0.005 11-Jan-2012
4,000,000 0.005 11-Jan-2012
8,000,000 0.005 25-Jan-2012
6,000,000 0.005 22-Feb-2012
5,000,000 0.005 28-Feb-2012
15,440,000 0.005 16-Jul-2012
17,940,000 0.005 16-Jul-2012
2,500,000 0.005 16-Jul-2012
13,000,000 0.005 22-Dec-2012
300,000 0.0075 22-Dec-2012
7,714,285 0.006 22-Dec-2012
-----------
Total 424,074,245
===========
On March 31, 2011 the Company had warrants outstanding for the purchase of an
aggregate of 424,074,245 shares of its common stock, which are summarized in the
table below:
Weighted
Average
Number of Exercise
Warrants Price
-------- -----
Total Warrants outstanding
at December 31, 2010 200,000,000 0.00375
Plus: Warrants Issued 224,074,245 0.00441
Less: Warrants Exercised -- --
Less: Warrants Expired -- --
------------ ------------
Total Warrants outstanding
at March 31, 2011 424,074,245 0.0082
============ ============
16
SUNERGY, INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
NOTE 9. RELATED PARTY TRANSACTION
Accruals - Related Party
Related Party transactions include accruals of unpaid management and director
fees Summary of balance follows:
Related Party-Accruals 31-Mar-11 31-Dec-10
---------------------- --------- ---------
Management & Director Fees $ 13,500 $ --
Accrued Interest -- --
--------- ---------
Total Related Party Accruals $ 13,500 $ --
========= =========
Operational Advances - Related Party
Operational advances are short term, unsecured, non-interest bearing operational
loans made by various related parties to maintain day to day operations. During
the period ended March 31, 2011 the Company incurred $3,289 in related party
interest expense. Summary of balance follows:
31-Mar-11 31-Dec-10
-------- ---------
Operational Advances $ 71,516 $ 83,991
NOTE 10. SUBSEQUENT EVENTS
On May 3, 2011, the Company issued 1,000,000 common shares for $5,000 cash for
the exercise of 1,000,000 warrants.
On June 22, 2011, the Company issued 13,300,000 units consisting of one common
share and one 12 month warrant with 13,000,000 warrants exercisable at $0.005
and 300,000 warrants exercisable at $0.0075 per share in satisfaction of
subscriptions payable of $34,550.
On June 22, 2011, the Company issued 7,714,285 units consisting of one common
share and one 12 month warrant exercisable at $0.006 to satisfy subscriptions
payable of $27,000.
On June 22, 2011, the Company issued 1,200,000 units for cash at $0.025 per unit
with each unit consisting of one common share and one 12 month warrant
exercisable at $0.005 and 27,928,567 units for cash at $0.0035 per unit with
each unit consisting of one common share and one 12 month warrant exercisable at
$0.006.
On June 22, 2011, the Company issued 100,000,000 units consisting of one common
share and one 12 month warrant exercisable at $0.007 for cash at $0.0035 per
unit. Upon exercise each original warrant will be issued an incentive warrant if
exercised within seven months. The number of incentive warrants issued for each
original warrant exercised will decrease to 80%, 70%, 60%, 50%, and 40% if
exercised on the 8th, 9th, 10th, 11th or 12th month respectively. Incentive
warrants will be exercisable at a 30% discount of the preceding five day average
price per share.
17
SUNERGY, INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
NOTE 10. SUBSEQUENT EVENTS (CONT.)
On June 22, 2011, the Company issued 900,000 units consisting of one share of
common stock and one 12 month warrant exercisable at $0.0075 per share, as
incentive to enter into various loan agreements. The units were valued at $3,350
based on the $0.0035 unit price from subscriptions sold for cash in the same
period.
During the third quarter 2011, the Company issued 10,000,000 common shares for
the exercise of warrants at $0.0025 per share, 8,000,000 common shares for the
exercise of warrants at $0.005 per share.
During the third quarter 2011, the Company issued 3,000,000 common shares for
various services. These shares were valued at $10,500 based on the $0.0035 cash
subscription price sold during the same period.
During the third quarter 2011, 10,357,142 units were issued for cash at $0.0035
per unit with each unit consisting of one common share and one 12 month warrant
exercisable at $0.007 per share.
During the fourth quarter 2011, the Company issued 22,000,000 units to settle
$52,500 debt with each unit consisting of one common share and one 12 month
warrant with 14,000,000 exercisable at $0.0075 and 8,000,000 exercisable at
$0.005 per share.
During the fourth quarter 2011, 1,428,571 units were issued for cash at $0.0035
per unit with each unit consisting of one common share and one 12 month warrant
exercisable at $0.007 per share.
During the fourth quarter 2011, 4,500,000 shares were issued for consulting
services at $0.0035 per share.
During the fourth quarter 2011, 6,000,000 units were issued for consulting
services at $0.0035 per unit with each unit consisting of one common share and
one 12 month warrant exercisable at $0.005 per share.
During the fourth quarter 2011, 5,000,000 common shares were issued for cash in
the exercise of warrants at $0.0025 per share.
During the fourth quarter 2011, 2,000,000 common shares were issued for cash in
the exercise of warrants at $0.005 per share.
During the first quarter of 2012, the Company received and cancelled 29,940,000
common share previously issued in error along with 17,940,000 of $0.005 12
months warrants.
During the first quarter of 2012, the Company issued 10,000,000 common shares in
the exercise of warrants at $0.005 per share; 14,600,000 common shares in the
exercise of warrants at $0.0025 per share.
During the fourth quarter 2011, 14,642,855 units were issued for cash at $.0035
per unit, with each unit consisting of one common share and one 12 month warrant
exercisable at $0.005 per share and issued 16,142,857 units consisting of one
common share and one 12 warrant with 9,142,857 exercisable at $0.005 and
7,000,000 exercisable at $0.0075 per share.
These events cover activity through February 23, 2012.
18
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 subsidiaries, Mikite Gold
Resources Limited, a Ghanaian company and Allied Mining and Supply LLC, a Nevada
limited liability, unless otherwise stated.
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.
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.
NYINAHIN CONCESSION, GHANA:
We have commenced the exploration stage of our operations on Nyinahin but can
provide no assurance that we will discover economic mineralization on the
property, or if such minerals are discovered, that we will enter into commercial
production. This year's exploration is designed to confirm initial discoveries
of gold on our concession contained in a report that accompanied the purchase of
the property. A budget of $50,000 was committed to initiate this sampling
program. The program will commence as soon as funding becomes available..
Alluvial mining operations for gold have sprung up along the Offin River which
runs through the eastern portion of our concession, and surround this area of
our concession. Immediately adjacent on the east to the Nyinahin concession is
the Esaase-Jeni (Gyeni) properties, held by Keegan Resources of Canada. Prior to
Keegan's acquisition of the Bonte (now called Esaase) and the Jeni (Gyeni)
concessions, they were mined for alluvial gold by Bonte Gold Mines, a subsidiary
of Akrokeri-Ashanti Gold Mines of Canada.
19
The Nyinahin concession is located between two geological gold belts, the
Bibiani Belt to the west and the Asankrangwa to the east. The license allows for
the exploration and mining of gold, silver, base metals and diamonds. About 80%
of the Nyinahin Concession lies to the west of the Offin River within the
Ashanti Region of Ghana. There are several historical pits and adits with a
strong clustering of artisan pits located along the Offin River. Three old gold
prospects exist on the concession. The property is accessed via the main
Kumasi-Bibiani trunk road. It falls under the jurisdiction of the Atwima Mponua
District Assembly with headquarters at Nyinahin.
PAMPANA RIVER CONCESSION, SIERRA LEONE:
The Pampana River Concession is an alluvial mining concession consisting of
Exploration License No. EXPL 5/2009 which was issued to Allied Mining and Supply
Ltd. (AMS) on 12th August 2009. The license is located in the Kholifa Rowalla,
Kafe Simiria and Tane Chiefdoms in the Tonkolili District of the Northern
Province of Sierra Leone covering an area of 141.3 km2. The concession is
situated on the western fringes of the southern Sula Mountains greenstone belt
and for most of the northern and central part it straddles the Pampana River. On
the west of the southern part, the concession runs along the Pampana River. The
property is South of the Sula Mountains in the Greenstone belt, around 120 miles
east of the capital, Freetown.
When we purchased the Pampana River Concession in 2010, Allied Mining and Supply
had been conducting exploration there for 2 years and had laid out a program to
exploit the newly discovered Rare Earth Elements in the heavy mineral sands that
exist in association with the gold. To further that program, we contracted to
purchase approximately $200,000 worth of dredges and associated support
equipment to deploy on the Pampana River directly to establish our ability to
recover the gold and other valuable minerals associated with the heavy mineral
sands. Our exploration budget for 2011 is $216,000.
Rare Earth Elements (REEs) are a unique group of chemical elements that exhibit
a range of special electronic, magnetic, optical and catalytic properties. REEs
are used in a wide range of alloys and compounds, and can greatly affect the
performance of complex engineered systems. They occur in a variety of chemical
forms and have a wide variety of applications, including the processing of
materials. REEs are used in components in engineered products, and their uses
include fluid cracking catalysts, automotive catalytic convertors, polishing
materials, permanent magnets, energy storage, phosphors, and glass additives. In
modern society, many of these uses are critical for high tech devices including
electronics, jet planes and rocks, and vital engineered components.
The Rare Earth Elements include the 15 elements of the Lanthanide Series,
(Atomic Numbers 57 through 71), and consist of Lanthanum, Cerium, Praseodymium,
Neodymium, Promethium, Samarium, Europium, Gadolinium, Terbium, Dysprosium,
Holmium, Erbium, Thulium, Ytterbium, and Lutetium. In addition, several
non-Lanthanides, which have similar or related properties and uses, are
sometimes classified with the REEs, and these include Yttrium, Niobium, and
Tantalum.
The Company intends to focus its efforts on our planned dredging operation on
the Pampana concession. We are also committed to purchasing three 8" dredges
from Gold Dredge Warehouse in Idaho to be deployed on the concession. These
custom dredges should process around 50-60 tons per hour each (150-180
tons/hour) and are designed specifically to capture even the finest gold,
gemstones and smaller diamonds as well as the light and heavy rare earths
(REEs). Additional dredges are planned to be deployed in Sierra Leone throughout
the next year pending operations needs and available funding.
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 23 of this quarterly
report.
20
Our unaudited financial statements are stated in United States dollars and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
THREE MONTHS ENDED MARCH 31, 2011, MARCH 31, 2010 AND FROM INCEPTION (JANUARY
28, 2003) TO MARCH 31, 2011
Inception
Three Months Three Months (January 28, 2003)
Ended Ended to
March 31, March 31, March 31,
2011 2010 2011
------------ ------------ ------------
Revenue $ Nil $ Nil $ Nil
Operating Expenses $ 221,600 $ 85,533 $ 1,508,665
Interest Expense-Related Party $ 16,387 $ 5,000 $ 1,088,093
------------ ------------ ------------
Net loss $ (237,987) $ (90,533) $ (2,596,758)
============ ============ ============
EXPENSES
Our operating expenses for the three months ended March 31, 2011 and March 31,
2010, and for the period from Inception ( January 28, 2003 ) and March 31, 2011
are outlined in the table below:
Inception
(January 28, 2003)
Three Months Ended to
March 31, March 31,
2011 2010 2011
------------ ------------ ------------
General and administrative $ 50,522 $ 11,033 $ 247,060
Management salary $ 13,500 $ 18,000 $ 237,500
Management stock based
compensation $ Nil $ Nil $ 297,500
Rent - related party $ Nil $ Nil $ 37,500
Legal fees $ 3,000 $ Nil $ 57,602
Professional fees $ 14,500 $ 50,000 $ 344,816
Exploration costs $ 140,078 $ 6,500 $ 286,687
Operating expenses for the three months ended March 31, 2011, increased by
approximately 159% as compared to the same period in 2010. Two major factors for
this increase were the addition of the Allied management team, which includes on
the ground personnel in Sierra Leone. We have spent more this quarter than a
year ago. Some of the expense was paid with issuances of restricted common
stock. During the first quarter of 2011 we were also beginning our exploration
of the Sierra Leone concession. We had purchased dredges and other assets and
were getting in-place to begin the exploratory dredging phase, which would last
into July of 2011. The increase of $133, 578 in exploration expenses includes
rents for our compound in Sierra Leone, fees for our country director, purchase
of supplies and travel for the US personnel to go to Sierra Leone and back
various times.
21
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.
LIQUIDITY AND FINANCIAL CONDITION
THREE MONTH COMPARISON
Working Capital
At At
March 31, December 31, Increase/
2011 2010 (Decrease)
---------- ---------- ----------
Current Assets $ 62,607 $ 147,251 (84,644)
Current Liabilities $ 299,133 $ 91,592 207,541
Working Capital (deficit) $ (236,526) $ 55,659 (292,185)
To facilitate the exploration of the Sierra Leone concession which the company
acquired when it acquired Allied, the Company purchased dredging equipment. The
increase in notes relates to this exploration equipment.
Cash Flows
Three Months Three Months January 28, 2003
Ended Ended (Inception) to
March 31, March 31, March 31,
2011 2010 2011
---------- ---------- ----------
Net Cash (Used) by Operating Activities $ (176,737) $ (12,533) $ 742,880
Net Cash (Used) by Investing Activities $ (103,800) $ Nil $ (168,515)
Net Cash Provided by Financing Activities $ 218,125 $ 13,128 $ 946,234
---------- ---------- ----------
INCREASE (DECREASE) IN CASH DURING THE PERIOD $ (62,412) $ 595 $ 34,839
========== ========== ==========
After the Company purchased Allied in the fall of 2010 it raised funds to
continue the exploration of the Sierra Leone concession. Our actual cash
decreased from December 31, 2010 to March 31, 2011 by $62,412. This decrease is
due to the Company expending funds as the exploration phase began in earnest
with the funds previously raised.
CONTRACTUAL OBLIGATIONS
As a "smaller reporting company", we are not required to provide tabular
disclosure obligations.
22
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.
EXPLORATION STAGE COMPANY
Our company complies with Accounting Standards Codification (ASC) Topic 915 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.
RECENT ACCOUNTING PRONOUNCEMENTS
RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
Our company has reviewed recently issued accounting pronouncements thru ASU
2011-09 and believes 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.
23
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 (our principal executive
officer, 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 the end of the quarter covered by this report, we carried out an
evaluation, under the supervision and with the participation of our president
(our principal executive officer, 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 (our
principal executive officer, 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 March 31, 2011 that have materially or
are reasonably likely to materially affect, our internal controls over financial
reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our
company, nor are we involved as a plaintiff in any material proceeding or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered or beneficial shareholder, is an
adverse party or has a material interest adverse to our interest.
24
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, labor 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
mine on our property at economically viable costs. If we cannot accomplish these
objectives, our business could fail.
25
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.
26
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 $34,839 as of March 31, 2011. We had a
working capital deficit of $236,526 and incurred a net loss of $237,987 for the
three months ended March 31, 2011 and $2,596,758 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 11, 2011, 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.
27
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,
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.
28
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 December 15, 2010, the Company settled $47,500 in accounts payable through
the execution of a subscription to issue 19,000,000 shares of stock at $.0025.
The fair value was based on private subscriptions as the settlement was
finalized concurrent with the sale of stock to private investors The Company
issued the 19,000,000 shares on January 11, 2011. These securities were issued
pursuant to an exemption from registration relying on Regulation D.
On January 11, 2011 the Company issued 18,779,960 units consisting of one common
share and one 12 month warrant exercisable at $0.005 for the market price of
$0.0025 per unit to satisfy $44,861 of subscriptions payable. These securities
were issued pursuant to an exemption from registration relying on Regulation D.
On January 11, 2011 the Company issued 4,000,000 shares of common stock with a
market value of $0.0025 per share to satisfy $9,000 in subscriptions payable.
These securities were issued pursuant to an exemption from registration relying
on Regulation D.
On January 11, 2011 the Company issued 125,400,000 units consisting of one
common share and one 12 month warrant exercisable at $0.005 for $0.0025 per
share or $313,500 cash received and recorded as stock subscription payable
during 2010. These securities were issued pursuant to an exemption from
registration relying on Regulation D.
On January 11, 2011 the Company issued 15,440,000 shares of common stock with a
market value of $0.0025 per share to satisfy $38,600 in operational advances.
These securities were issued pursuant to an exemption from registration relying
on Regulation D.
On January 11, 2011 the Company issued 17,940,000 shares of common stock with a
market value of $0.0025 per share or $44,850 in error. The holder has agreed to
return the shares and the Company has recorded them as subscriptions receivable
until returned and cancelled. These securities were issued pursuant to an
exemption from registration relying on Regulation D.
On January 11, 2011 the Company issued 2,500,000 shares of common stock with a
market value of $0.0025 per share or $6,250 for consulting services. These
securities were issued pursuant to an exemption from registration relying on
Regulation D.
On January 25, 2011 the Company issued 12,000,000 shares of common stock with a
market value of $0.0025 or $30,000 in error. The holder has agreed to return the
shares and the Company has recorded them as subscriptions receivable until
returned and cancelled. These securities were issued pursuant to an exemption
from registration relying on Regulation D.
On February 24, 2011 the Company issued 10,000,000 shares of common stock with a
market value of $0.0025 per share or $25,000 for consulting services and is
recorded in exploration expense. These securities were issued pursuant to an
exemption from registration relying on Regulation D.
29
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. [REMOVED AND RESERVED]
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibit Number Description
-------------- -----------
(3) ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Articles of Incorporation (incorporated by reference from our
Registration Statement on Form SB-2 filed on February 23, 2004)
3.2 Bylaws (incorporated by reference from our Registration Statement
on Form SB-2 filed on February 23, 2004)
(10) MATERIAL CONTRACTS
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) 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) 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)
(21) SUBSIDIARIES OF THE REGISTRANT
Allied Mining and Supply, LLC, a Nevada limited liability company
21.1 Mikite Gold Resources Limited, a Ghanaian company
(31) RULE 13A-14(A)/15D-14(A) CERTIFICATIONS Certification of the
Principal Executive Officer, Principal Financial Officer and
Principal
31.1* Accounting Officer filed pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
(32) SECTION 1350 CERTIFICATIONS
32.1* Certification of the Principal Executive Officer, Principal
Financial Officer and Principal Accounting Officer filed pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
----------
* Filed herewith
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SUNERGY, INC.
Date: March 30, 2012 By: /s/ Bryan Miller
-------------------------------------
Name: Bryan Miller
Title: President and Director (Principal
Executive Officer, Principal
Financial and Principal
Accounting Officer)
31