Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2010
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 333-169485
JA ENERGY
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(Exact name of registrant as specified in its charter)
Nevada 27-3349143
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4800 W. Dewey Drive, Las Vegas, NV 89118
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(Address of principal executive offices)(Zip Code)
Issuer's telephone number, including area code: (702) 358-8775
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 smaller reporting company. See
definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of
the Exchange Act (Check one).
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 |_|
As of January 14, 2011, the registrant's outstanding common stock consisted
of zero (0) shares, $0.001 par value. Authorized - 70,000,000 common
voting shares. No preferred issued, 5,000,000 preferred shares, par value
$0.001 authorized.
Table of Contents
JA Energy
Index to Form 10-Q
For the Quarterly Period Ended November 30, 2010
Part I. Financial Information
Page
Item 1. Financial Statements
Balance Sheets as of November 30, 2010 and August 31, 2010 3
Statements of Operations for the three months ended November 30, 2010
and from Inception(August 26, 2010) to November 30, 2010 4
Statements of Stockholders' Equity 5
Statements of Cash Flows for the three months ended November 30, 2010
and from Inception(August 26, 2010) to November 30, 2010 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
Item 4. Controls and Procedures 21
Part II Other Information
Item 1. Legal Proceedings 25
Item 1A. Risk Factors 25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 25
Item 3 -- Defaults Upon Senior Securities 25
Item 4 -- Submission of Matters to a Vote of Security Holders 25
Item 5 -- Other Information 25
Item 6. Exhibits 26
Signatures 27
2
Part I. Financial Information
Item 1. Financial Statements
JA Energy
(A Development Stage Company)
Balance Sheets
November 30, August 31,
2010 2010
(Unaudited) (Audited)
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Assets
Current assets:
Cash and equivalents $ - $ -
------------- -------------
Total current assets - -
Total assets $ - $ -
============= =============
Liabilities and Stockholders' Deficit
Current liabilities:
Accrued expense $ 1,750 $ 2,500
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Total current liabilities 1,750 2,500
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Total liabilities $ 1,750 $ 2,500
============= =============
Stockholders' deficit:
Preferred stock, $0.001 par value,
5,000,000 shares authorized, none issued - -
Common stock, $0.001 par value, 70,000,000
shares authorized, none issued and
outstanding as of 11/30/10 and 8/31/10,
respectively - -
Additional paid-in capital 2,825 325
Deficit accumulated during development
stage (4,575) (2,825)
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Total stockholders' deficit (1,750) (2,500)
------------- -------------
Total liabilities and stockholders' deficit $ - $ -
============= =============
The accompanying notes are an integral part of these financial statements.
3
JA Energy
(A Development Stage Company)
Statements of Operations
(Unaudited)
For the three From Inception
months ended (August 26, 2010)
November 30, to November 30,
2010 2010
---------------- ----------------
Revenue $ - $ -
---------------- ----------------
Expenses:
General & administrative 1,750 4,575
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Total expenses 1,750 4,575
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Net loss $ (1,750) $ (4,575)
================ ================
Weighted average number of
common shares outstanding-basic 0
================
Net loss per share-basic $ (0.00)
================
The accompanying notes are an integral part of these financial statements.
4
JA Energy
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
For the three From Inception
months ended (August 26, 2010)
November 30, to November 30,
2010 2010
---------------- ----------------
Operating activities:
Net loss $ (1,750) $ (4,575)
Adjustments to reconcile net loss
to net cash used by operating activities:
Increase in accrued expense (750) 1,750
---------------- ----------------
Net cash used by operating activities (2,500) (2,825)
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Financing activities:
Additional paid-in capital 2,500 2,825
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Net cash provided by financing activities 2,500 2,825
---------------- ----------------
Net increase (decrease) in cash - -
Cash - beginning - -
---------------- ----------------
Cash - ending $ - $ -
================ ================
Supplemental disclosures:
Interest paid $ - $ -
================ ================
Income taxes paid $ - $ -
================ ================
Non-cash transactions $ - $ -
================ ================
The accompanying notes are an integral part of these financial statements.
5
JA Energy
(A Development Stage Company)
Notes to Financial Statements
November 30, 2010
(Unaudited)
NOTE 1 - FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at November 30, 2010 and for
all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. It
is suggested that these financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's
August 31, 2010 audited financial statements filed therewith along with the
amended S-1 registration statement. Operating results for the three months
ended November 30, 2010 are not necessarily indicative of the results that
may be expected for the year ending August 31, 2011. The Company is a
development stage company, as defined in FASB ASC 915 "Development Stage
Entities."
NOTE 2 - GOING CONCERN
These financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. The Company has an
accumulated deficit since inception of $4,575. The Company has not generated
any revenues to date, and its ability to continue as a going concern is
contingent upon the successful completion of additional financing
arrangements and its ability to achieve and maintain profitable operations.
Management plans to raise equity capital to finance the operating and capital
requirements of the Company. Amounts raised will be used for further
development of the Company's products, to provide financing for marketing and
promotion and for other working capital purposes. While the Company is
putting forth its best efforts to achieve the above plans, there is no
assurance that any such activity will generate funds that will be available
for operations.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. These financial statements 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.
6
JA Energy
(A Development Stage Company)
Notes to Financial Statements
November 30, 2010
(Unaudited)
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
The relevant accounting policies are listed below.
Basis of Accounting
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The basis is United States generally accepted accounting principles.
Cash and Cash Equivalents
-------------------------
The Company considers all short-term investments with a maturity of three
months or less at the date of purchase to be cash and cash equivalents.
Use of Estimates
----------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reported
period. Actual results could differ from those estimates.
Advertising
-----------
Advertising costs are expensed when incurred. The Company has not incurred
any advertising expenses since inception.
Income Taxes
------------
The provision for income taxes is the total of the current taxes payable
and the net of the change in the deferred income taxes. Provision is made
for the deferred income taxes where differences exist between the period
in which transactions affect current taxable income and the period in
which they enter into the determination of net income in the
financial statements.
Year end
--------
The Company's fiscal year-end is August 31.
7
JA Energy
(A Development Stage Company)
Notes to Financial Statements
November 30, 2010
(Unaudited)
Recent Accounting Pronouncements
--------------------------------
The Company's management has evaluated all the recently issued accounting
pronouncements through the filing date of these financial statements and does
not believe that any of these pronouncements will have a material impact on
the Company's financial position and results of operations.
NOTE 4 - Stockholders' Deficit
The Company is authorized to issue 70,000,000 shares of its $0.001 par value
common stock and 5,000,000 shares of its $0.001 par value preferred stock.
There have been no issuances of common or preferred stock.
On August 26, 2010, a director of the Company contributed capital of $325
for incorporating fees.
On November 8, 2010, a director of the Company contributed capital of
$2,500 for audit fees.
NOTE 5. Related Party Transactions
The Company does not lease or rent any property. Office services are
provided without charge by a director. Such costs are immaterial to the
financial statements and, accordingly, have not been reflected therein. The
officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interests. The Company has not formulated a policy for the
resolution of such conflicts.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Information
The Company may from time to time make written or oral "forward-looking
statements" including statements contained in this report and in other
communications by the Company, which are made in good faith by the Company
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995.
These forward-looking statements include statements of the Company's plans,
objectives, expectations, estimates and intentions, which are subject to
change based on various important factors (some of which are beyond the
Company's control). The following factors, in addition to others not listed,
could cause the Company's actual results to differ materially from those
expressed in forward looking statements: the strength of the domestic and
local economies in which the Company conducts operations, the impact of
current uncertainties in global economic conditions and the ongoing financial
crisis affecting the domestic and foreign banking system and financial
markets, including the impact on the Company's suppliers and customers,
changes in client needs and consumer spending habits, the impact of
competition and technological change on the Company, the Company's ability
to manage its growth effectively, including its ability to successfully
integrate any business which it might acquire, and currency fluctuations.
All forward-looking statements in this report are based upon information
available to the Company on the date of this report. The Company undertakes
no obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events, or otherwise, except
as required by law.
9
Overview of Current Operations
------------------------------
The Company was organized August 26, 2010 (Date of Inception) under the laws
of the State of Nevada, as JA Energy The Company was incorporated as a
subsidiary of Reshoot Production Company, a Nevada corporation.
JA Energy Business Plan
-----------------------
JA Energy will manufacture and sell the Modular Distillation Units ("MDU"),
and Hydroponics Greenhouse packages to individuals, non profit organizations
or companies. The company will organize and manage farm cooperatives for the
growing of Jerusalem Artichoke, which will be used in the MDU to produce
ethanol. JA Energy plans to use a patented varietal Jerusalem Artichoke to
control the expansion of the crop. Additionally, JA Energy will manage the
processing the crop in the field, separating the pulp from the juice (the
equipment is unique to this application). The "juice" will be harvest by a
harvester which separates the juice for the plant pulp. The juice is
transferred via the harvester to an accompanying tank truck. When each tank
truck is filled it then drives to the centrally located processing plant.
The juice will be transported to a centrally located processing plant to
condense the juice to a syrup (JA Energy plans to apply for patent on this
process). The "syrup" once processed will be packaged in containers commonly
called totes (used primarily for the shipping of molasses). These totes will
be shipped to the various MDU locations via trucking companies contracted by
the cooperative for processing into ethanol.
The varietal Jerusalem Artichoke is a nonflowering plant. The Jerusalem
Artichoke is a relative of the Sunflower and is not related to the the Globe
Artichoke. It sets itself apart from all other varietals of the plant. The
unique characteristic will make unauthorized use of the plant easier to
detect. Jerusalem Artichoke normally produces a flower that has infertile
seeds, requiring the crop to be expanded by using the root systems (tubers)
similarly to the way potatoes are grown. Only authorized growers will be
allowed to plant the crop. Limiting the number of growers and the acreage
they are authorized to plant will control the expansion of the crop.
The Jerusalem Artichoke does not produce an oil. The inulin is converted in
to ethanol, at a rate of 1,200 gallons of ethanol per acre per USDA
statistics. The crop is used one hundred percent and there are no waste by-
products. The stalks are juiced and processed into a syrup or directly into
ethanol via distillation. The pulp of the stalks is used for cattle feed
comparable to distillers grains. The root tubers are used a seed for
planting next seasons' crop. Once the rate of cultivation slows the root
tubers will be used for chicken or hog feed, and can be processed into a
gluden free flour. JA Energy Inc. does not intend to be involved in these
other areas.
10
The greenhouse gases from the distillation process are redirected into a
hydroponics greenhouse that is attached to the modular distillation unit as
is the liquid residue. The entire process is free of waste products, even
the plant material for the greenhouses will be collected and mulched.
The condensed syrup will be packaged similarly to molasses and shipped by
common carrier to modular distillation units that have contracted for the
syrup. Each modular distillation unit will be purchased from JA Energy
to be operated by the purchaser.
We plan to establish small portable conversion plants in inner-cities. We
plan to begin this program in Nevada. The conversion plants can only convert
a limited amount of artichoke extract to ethanol. We plan to have one of
these portable conversion plants in operation during 2011. We shall be
targeting local charities to assist in the payment and operations of this
facility. We expect each facility will require six employees to operate the
distilling equipment. The first unit was constructed and has been tested by
Green Global Systems LLC. Mr. Lusk is currently a member of Green Global
Systems and controls 50% of this limited liability company. Green Global
Systems LLC had built a MDU using the specifications of a patent owned by
our CEO. The cost of construction for the first unit was $35,000. Although
Green Global Systems LLC spent $94,000 in research and development costs to
build the first MDU. Now that the first prototype has been built, we have
costed out the process to construct a small distillation unit and we believe
we can produce units for $25,000. The MDU is currently under the control of
Green Global Systems, LLC which has agreed to a buyout of their interest for
the amount of funds expended. We have identified a company that construct
the unit for us at this cost. The Company plans to setup a Modular
Distillation Unit which was manufactured and tested by Green Global Systems,
LLC, in Central Nevada. The unit will be permanently housed in Central
Nevada as part of the company's demonstration and training facility. The
unit will be operated by the Company. The Company will apply for the
applicable permits for operation and use the ethanol produced as fuel to
deliver the fruit and vegetables grown in the hydroponics greenhouses to
customers in Las Vegas. The Company plans to lease 50 acres for a
demonstration crop to supply the Jerusalem Artichoke juice. The company
plans to establish a demonstration facility as well as a training facility
to train the purchasers of the MDUs.
Management has identified land in Caliente, Lincoln County, Nevada it can
lease land to begin its first planting. This land is arid and suitable for
growing artichokes. The company plans to form farmer cooperatives where the
farmers will own 90% of crop grown and the company will own 10% of the
crop. The farmers will be responsible for all the funding or financing to
establish the processing plant and acquire the necessary equipment. The
company plans to sign management agreements with the cooperatives whereby
the Company will have control of processing production. The agreements will
be for ten years with an option to renew for an additional ten years. The
management of the cooperatives will require the farmers to create a board of
directors for each cooperative. The purpose of the board is to give guidance
to management.
11
The farmers will be compensated by the amount of dry matter and juice their
acreage produces. Dry matter will be valued by the ton while the juice will
be by volume. The farmers are responsible for the cultivation of their
farms. The cooperative will be responsible for the selling of the syrup,
cattle feed (pulp), and tubers.
Since Jerusalem Artichokes grow like weeds, their stalks will provide three
harvests during one calendar year. At the end of the calendar year, the
remaining stalks (tuber) in the field can be used as seeds to multiply the
harvest in the following year by twenty percent. When the harvest stalks
are harvested, the harvesting machinery will divide the harvest into two
parts: 1) animal feeds; and 2) juice that can be condense into syrup.
The artichoke juice has a short shelf-life, as compared to the syrup that
can be stored for a longer length of time. The Company has developed a
small [size of a tractor trailer] distiller that can convert the artichoke
syrup into 1,000 gallons of ethanol per week. The MDU was tested using
molasses as the distillation feedstock. The test was for the efficiency of
the MDU, which is designed to distill a variety of feedstocks. The unit
will distill at a rate of 144 gallons per day which is the 1,000 gallons per
week rate. The Company plans to control the harvesting of the crop via
the management agreements with the cooperatives. At this time, the
Company does not plan own or operate its own harvesting machinery.
We developed a model based on 50 acres of the Jerusalem artichoke crop.
Based on three harvests, we believe this would produce a total 50,000
gallons of ethanol per year on 50 acres of land. We estimate our total
operating costs, including equipment depreciation, seeds, costs to harvest
and, overhead costs will equate to $1.24 per gallon. We estimate the
residual animal feed for the 50 acres after costs will equal $23,120.
Therefore, based on the current market price of ethanol of $1.80 per gallon,
we estimate our 50 acres will yield 50,000 gallons per year with a profit of
$0.56 per gallon or $28,000 plus $23,120 in residual animal feed.
This estimated operating costs to produce one gallon of ethanol includes
the necessary energy and water inputs. The energy cost savings associated
with the MDU is derived from a design methodology to introduce distillate
into the still area. This method of heating and the redirection of the
waste heat into heat exchangers reduces the energy costs, which increase
the effectiveness of the distillation process.
Jerusalem artichoke
-------------------
The Jerusalem Artichoke is a relative of the Sunflower, it is considered a
perennial native sunflower species, and is not related to the Globe
Artichoke. This plant begins it growth from its underground roots. The
plant produces a product called inulin, which is a white, starchlike
polysaccharide that yields very sweet sugar called fructose. The plant
stores the inulin in its stem until it flowers. When the plant begins to
flower, the inulin is then translocated to the tuber, which are the roots of
the plant.
12
Jerusalem Artichoke stalk must be cut above the underground stems immediately
before the plant flowers to retain all of the sugar in the stalk; the stalk
is then ground in a hammermill to release the sugars from the center of the
stalk; the sugar juices from the hammermill are collected; the remaining mass
of the center of the stalk, and bark is squeezed to remove the remaining
sugar juices; the entire collected sugar juice is then processed by heating
and adding yeast, then fermenting. The remaining product is then distilled
to produce ethanol. The method produces the maximum quantity of high grade
ethanol per acre of plant of any known plant source.
Management has identified a varietal Jerusalem Artichoke, which regulates
flowering and the translocation of sugars in the plant. This varietal
Jerusalem Artichoke contains genes that prolong the growing season, increase
sugar production, and delay the translocation of sugars.
Management is considering the purchase varietal Jerusalem Artichoke seeds
from a supplier in New Zealand, who holds the patent on this varietal
Jerusalem Artichoke. At this time, we have not entered into any formal
agreement with this supplier. As a back-up, we are trying to identify
other varieties of the Jerusalem Artichoke seeds currently available in the
U.S. The primary reason for the use of this varietal, is that, it is the
only nonflowering variety. This unique characteristic provides the company
greater control on the expansion of the crop.
Farm Cooperative Business Strategy
----------------------------------
The Company plans to organize and manage Jerusalem Artichoke farm
cooperatives under a management agreement with the cooperatives. The
Company will hold a ten percent organizers share of the ownership of the
cooperatives, in addition to being compensated as the manager. Each
cooperative will have am advisory board to work with the contracted
management team to advance the interest of the cooperative. Management is
not aware of any Jerusalem Artichoke Growers cooperatives in the U.S. There
is a farm association of Jerusalem Artichoke Growers on the East Coast. The
uses of Jerusalem Artichokes include: animal feed usually grown by the user,
health food produce, a flour used for a diabetic sensitive pasta and a by-
product used in health foods.
Management is currently exploring opportunities for the establishment of
growing districts. The control of establishing growing districts is
important to the Company's business plan. An over-supply of the crop would
depress prices and have an adverse effect on the future of Jerusalem
Artichoke as a source of ethanol. Management expects to have the first
growing districts in place by the 2012 growing season. The 2011 growing
season will be dedicated to fifty acres, in Central Nevada for the sole
purpose of producing crops to demonstrate the process.
13
The cooperatives will be organized similarly to the Citrus Growers
cooperatives. For example, the Citrus Growers cooperatives are responsible
for the farming or cultivation of the crop, and the cooperative is
responsible for the harvesting and marketing the crop. Using this model,
the cooperative members will be able to finance and share the costs for the
equipment necessary for the harvesting and processing of the crop on a larger
scale, while being freed of the marketing of the crop to the end user.
MDU unit purchaser needs to have a reliable supply of syrup for the
production of ethanol. In order to help create reliable supplies of the
syrup, the Company plans to place these contracts with the cooperatives,
thereby matching customer with producer.
Each cooperative will be organized in a hub and spoke structure. The
processing plant will be located as close as possible to the center of a
growing district. The size of the growing district is expected not to exceed
a twenty-five mile radius. This will reduce the transportation costs from
the field to the condensing facilities. The facilities will be designed in
such a manner that they can be expanded to accommodate addition cooperative
growers.
The marketing will be done at a centralized marketing location to gain
economies of scales. Each cooperative may elect to process their crop.
The by-products of the tuber (root system) and the pulp portion of the crop
are currently being researched to identify other commercial uses. Once a
commercial size crop is grown, the by-products from the crop itself can
offer the cooperatives another source of revenue.
The Ethanol Market
------------------
Ethanol is produced from starch or sugar-based feed products such as corn,
potatoes, wheat, and sorghum, artichokes as well as from agricultural waste
products including sugar, rice straw, cheese whey, beverage wastes and
forestry and paper wastes. Historically, corn has been the primary source
because of its relatively low cost, wide availability and ability to produce
large quantities of carbohydrates that convert into glucose more easily than
other products. Management believes that Jerusalem Artichokes, in which its
stalks can be harvested three times per year, and can be grown in an arid
climate offer a high percent of end product that can be converted into
ethanol.
14
Ethanol has been utilized as a fuel additive since the late 1970's when its
value as a product extender for gasoline was discovered during the OPEC oil
embargo crisis. In the 1980's, ethanol began to see widespread use as an
octane enhancer, replacing other environmentally harmful components in
gasoline such as lead and benzene. Ethanol's use as an oxygenate continued to
increase with the passage of the Clean Air Act Amendments of 1990, which
required the addition of oxygenates to gasoline in the nation's most polluted
areas. Ethanol contains approximately 35% oxygen and when combined with
gasoline, it acts as an oxygenate that increases the percentage of oxygen in
gasoline. As a result, the gasoline burns cleaner and releases less carbon
monoxide and other exhaust emissions into the atmosphere. Although not all
scientists agree about the existence or extent of environmental benefits
associated with its use, the use of ethanol is commonly viewed as a way to
improve the quality of automobile emissions.
Ethanol Pricing
---------------
The price of ethanol tends to be volatile. Historically, ethanol prices have
tended to correlate with wholesale gasoline prices, due largely to the
primary use of ethanol as an additive to gasoline. Over the last couple of
years, however, as ethanol production has expanded rapidly, ethanol prices
have been particularly volatile and ethanol and gasoline prices have at times
diverged significantly.
Sales and Marketing
-------------------
We plan to establish small portable conversion plants in inner-cities. We
plan to begin this program in Nevada. Working with City redevelopment
agencies and nonprofits organization to establish MDU's in their
jurisdiction the community will help create jobs.
Once these units are established management hopes other communities will see
the value of participating. If there is increased demand for the MDUs, the
amount of crop acreage will be expanded creating jobs in the rural
communities. The ethanol produced can be sold to local fuel blenders or to
the municipalities for use in their fleets.
The conversion plants can only convert a limited amount of artichoke extract
to ethanol. We plan to have one of these portable conversion plants in
operation during 2011. We shall be soliciting local charities to purchase a
small portable conversion plant. In this sense, we expect each conversion
plant will require six employees to operate the distilling equipment. This
will provide new jobs in the inner-cities, and the charities will have an
opportunity to make money for their organizations by owning a small ethanol
distilling plant.
The marketing will be expanded to areas outside the inner cities, such as
Indian Reservation where there is also a need for fresh produce and jobs.
Beyond those areas the company intends to market to individuals or business
that what to operate one of the MDU sites.
15
Competition
-----------
We expect to be in direct competition with producers of ethanol and other
alternative fuel additives. Many of these producers have significantly
greater resources than we do. We also expect the number of competitors to
increase. The development of other ethanol plants, particularly those in
close proximity to our ethanol plant, will increase the supply of ethanol and
may result in lower local ethanol prices. Ethanol plants in close proximity
will also compete with us for, among other things, resources and personnel.
Because of their close proximity, these competitors may also be more likely
to sell to the same markets that we intend to target for our ethanol product.
We will be in direct competition with numerous other ethanol plants. We plan
to compete with other ethanol producers on the basis of price and delivery
service. We believe that we will be able, if necessary, to sell some of our
products at lower prices because of the amount of sugar available in the
Jerusalem Artichoke. This is primarily due to the fact that the Jerusalem
Artichoke can be harvested three times in the same year, and the average yield
of alcohol per acre for the Jerusalem Artichoke is 1,200 gallons, as compared
to Sugarcane (Hawaii) that yields 889 gallons per acre; sugar cane
(Louisiana) that yields 555 gallons per acre; sugar beet that yields 412
gallons per acre; and corn that yield 400 gallons per acre, according the
USDA.
As of March 2007, according to the Renewable Fuels Association, 114 U.S.
ethanol plants have the capacity to produce approximately 5.6 billion gallons
of ethanol annually, with another 87 plants under construction or expansion
expected to add approximately 6.4 billion more gallons of annual productive
capacity. A majority of the ethanol production capacity is located in the
Midwest, in the corn-producing states of Illinois, Iowa, Minnesota, Nebraska
and South Dakota. The largest ethanol producers include Abengoa Bioenergy
Corp., Archer Daniels Midland Company, Aventine Renewable Energy, LLC.,
Cargill, Inc., Hawkeye Renewables, LLC, New Energy Corp., US BioEnergy Corp.
and VeraSun Energy Corporation.
We may also compete with ethanol that is produced or processed in certain
countries in Central America and the Caribbean region, Brazil and other
countries. Ethanol produced in the Caribbean basin and Central America may be
imported into the United States at low tariff rates or free of tariffs under
the Caribbean Basin Initiative and the Dominican Republic-Central America-
United States Free Trade Agreement. According to the Renewable Fuels
Association, Brazil produced approximately 4.5 billion gallons of ethanol in
2006. Although tariffs presently impede large imports of Brazilian ethanol
into the United States, low production costs, other market factors or tariff
reductions could make ethanol imports from various countries a major
competitive factor in the U.S.
16
Alternative Fuel Additives
--------------------------
Alternative fuels, gasoline oxygenates and ethanol production methods are
continually under development by various ethanol and oil companies that have
far greater resources than we do. New products or methods of ethanol
production developed by larger and better-financed competitors could provide
them competitive advantages over us and harm our business.
PATENTS, TRADEMARKS, FRANCHISES, CONCESSIONS, ROYALTY AGREEMENTS, OR LABOR
CONTRACTS
Mr. James Lusk, our CEO has filed for a patent for the modular distillation
unit and accompanying hydroponics greenhouse. Upon the completion of the
spin-off these pending patent rights will be assigned to the Company. Mr.
James Lusk will not seek any consideration for this assignment, and plans to
donate the patent to the Company.
Our ability to compete depends, in part, upon successful protection of our
intellectual property. We do not have the financial resources to protect our
rights to the same extent as major ethanol producers. We will attempt to
protect proprietary and intellectual property rights to manufacturing
processes by applying for a process patent. Despite these precautions,
existing patent laws afford only limited practical protection in certain
countries. We also plan to conduct business in other countries in which
there is little patent protection. As a result, it may be possible for
unauthorized third parties to copy and distribute our processes and artichoke
seeds, which could have a material adverse effect on our business, results
of operations and financial condition. We do not own the process for
enhancing yields of sugar production from the Jerusalem Artichoke seed we
plan to utilize. The referenced varietal is covered by a patent filing in
New Zealand and the patent holder is currently pursuing a patent in the
United States.
Despite measures we have taken to protect our proprietary rights,
unauthorized parties may attempt to reverse engineer or copy aspects of our
products or obtain and use information that we regard as proprietary.
Policing unauthorized use of our products is difficult and expensive. In
addition, litigation may be necessary in the future to enforce our
intellectual property rights, to protect our trade secrets, to determine the
validity and scope of the proprietary rights of others, or to defend against
claims of infringement or invalidity. Any such litigation could result in
substantial costs and the diversion of resources and could have a material
adverse effect on our business, results of operations and financial
condition. We cannot assure you that infringement or invalidity claims will
not materially adversely affect our business, results of operations and
financial condition. Regardless of the validity or the success of the
assertion of these claims, we could incur significant costs and diversion of
resources in enforcing our intellectual property rights or in defending
against such claims, which could have a material adverse effect on our
business, results of operations and financial condition.
17
Results of Operations for the quarter ended November 30, 2010
--------------------------------------------------------------
During the three month period ended November 30, 2010, the Company did not
generate any revenues. In addition, the Company does not expect to generate
any profit for the next year.
In its most recent three month operating period ended November 30, 2010, the
Company generated no revenues. During the three months ended November 30,
2010, the Company had expenses of $1,750. These expenses represented review
fees to keep the Company full reporting. Since the Company's inception on
August 26, 2010, the Company experienced a net lost $(4,575).
Revenues
--------
The Company has generated no revenues since its inception. As of
November 30, 2010, the Company had an accumulated deficit of $(4,575)
dollars. There can be no assurances that the Company can achieve or
sustain profitability or that the Company's operating losses will not
increase in the future.
Plan of Operation
-----------------
Management does not believe that the Company will be able to generate
any significant profit during the coming year, as the company seeks financing
to execute its business plan. Management believes developmental and marketing
costs will most likely exceed any anticipated revenues for the coming year.
Management intends to personally finance JA Energy, without seeking
reimbursement, to ensure that the Company has enough funds to operate
for the next twelve (12) months without the need to raise additional capital
to meet its fully reporting obligations in its normal course of business.
JA Energy Funding Requirements
------------------------------
JA Energy needs funding to fully execute its business plan. JA Energy will
require at least $1,500,000 to acquire other business opportunities, market
its services and build a client base.
Future funding could result in potentially dilutive issuances of equity
securities, the incurrence of debt, contingent liabilities and/or
amortization expenses related to goodwill and other intangible assets, which
could materially adversely affect the Company's business, results of
operations and financial condition. Any future acquisitions of other
businesses, technologies, services or product(s) might require the Company to
obtain additional equity or debt financing, which might not be available on
terms favorable to the Company, or at all, and such financing, if available,
might be dilutive.
18
Going Concern
-------------
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, the Company has suffered
recurring losses from operations and has a net capital deficiency that
raises substantial doubt about its ability to continue as a going concern.
The Company's ability to continue as a going concern is dependent upon its
ability to generate profitable operations in the future and/or obtain the
necessary financing to meet its obligations and repay its liabilities
arising from normal business operations when they come due. These financial
statements 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.
Summary of any product research and development that we will perform for the
term of our plan of operation.
-----------------------------------------------------------------------------
JA Energy plans manufacture and sell the Modular Distillation Units which
will convert Jerusalem Artichokes into ethanol. The Modular Distillation
Units have been designed and a prototype has been built. The Company needs
to raise funding to purchase this unit. The Company does not anticipate
performing any additional significant product research and development under
our current plan of operation.
Expected purchase or sale of plant and significant equipment.
-------------------------------------------------------------
With the exception of Modular Distillation Units, we do not anticipate the
purchase or sale of any plant or significant equipment; as such items are
not required by us at this time.
Significant changes in the number of employees.
-----------------------------------------------
As of November 30, 2010, we did not have any employees. We are dependent
upon our directors for our future business development. As our operations
expand we anticipate the need to hire additional employees, consultants and
professionals; however, the exact number is not quantifiable at this time.
19
Liquidity and Capital Resources
-------------------------------
The Company is authorized to issue 70,000,000 shares of its $0.001 par value
common stock and 5,000,000 shares of its $0.001 par value preferred stock.
As of January 14, 2011, the Company has no shares of common stock issued and
outstanding. The Company filed a Registration Statement on Form S-1, which
became effective on January 5, 2011. The Company is a spin-off of Reshoot
Production, a Nevada Corporation. Shareholders who own stock in Reshoot
Production, as of the January 27, 2011 record date, will receive
one-point-four (1.4) common shares, par value $0.001, of JA Energy common
stock for every share of Reshoot Production Company common stock owned. The
JA Energy stock dividend will be based on 47,033,334 shares of Reshoot
Production Company common stock that are issued and outstanding as of the
Record Date. Following the issuance of the stock dividend, JA Energy will
have 65,846,667 common shares issued and outstanding. Reshoot Production
Company will retain no ownership in JA Energy following the spin-off.
Further, JA Energy will no longer be a subsidiary of Reshoot Production
Company.
The Company has limited financial resources available, which has had an
adverse impact on the Company's liquidity, activities and operations.
These limitations have adversely affected the Company's ability to obtain
certain projects and pursue additional business. Without realization of
additional capital, it would be unlikely for the Company to continue as a
going concern. In order for the Company to remain a Going Concern it will
need to find additional capital. Additional working capital may be sought
through additional debt or equity private placements, additional notes
payable to banks or related parties (officers, directors or stockholders),
or from other available funding sources at market rates of interest, or a
combination of these. The ability to raise necessary financing will depend
on many factors, including the nature and prospects of any business to be
acquired and the economic and market conditions prevailing at the time
financing is sought. No assurances can be given that any necessary financing
can be obtained on terms favorable to the Company, or at all.
Our Chief Executive Officer has agreed to donate funds to the operations of
the Company, in order to keep it fully reporting for the next twelve (12)
months, without seeking reimbursement for funds donated.
As a result of our the Company's current limited available cash, no officer
or director received compensation through the three months ended November 30,
2010. No officer or director received stock options or other non-cash
compensation since the Company's inception through November 30, 2010. The
Company has no employment agreements in place with its officers. Nor does
the Company owe its officers any accrued compensation, as the Officers agreed
to work for company at no cost, until the company can become profitable on a
consistent Quarter-to-Quarter basis.
20
Off-Balance Sheet Arrangements
------------------------------
We do not have any 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 or operations,
liquidity, capital expenditures or capital resources that is material to
investors.
Critical Accounting Policies and Estimates
------------------------------------------
Revenue Recognition: We recognize revenue from product sales once all of the
following criteria for revenue recognition have been met: pervasive evidence
that an agreement exists; the services have been rendered; the fee is fixed
and determinable and not subject to refund or adjustment; and collection of
the amount due is reasonable assured.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
Item 4T. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
------------------------------------------------
Our disclosure controls and procedures, as defined in Rule 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), are designed to ensure that information required to be
disclosed in reports filed or submitted under the Exchange Act is recorded,
processed, summarized, and reported within the time periods specified in
rules and forms adopted by the SEC, and that such information is accumulated
and communicated to management, including the Chief Executive Officer and
the Chief Financial Officer, to allow timely decisions regarding required
disclosures.
Management, with the participation of the Chief Executive Officer and the
Chief Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this report.
Based on such evaluation, the Chief Executive Officer and the Chief Financial
Officer concluded that, our disclosure controls and procedures were not
effective. Our disclosure controls and procedures were not effective
because of the "material weaknesses" described below under "Management's
report on internal control over financial reporting," which are in the
process of being remediated as described below under "Management Plan to
Remediate Material Weaknesses."
21
Management's Report on Internal Control over Financial Reporting
----------------------------------------------------------------
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting. Internal control over financial
reporting, as defined in rules promulgated under the Exchange Act, is a
process designed by, or under the supervision of, our Chief Executive Officer
and Chief Financial Officer and affected by our Board of Directors,
management and other personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with GAAP. Internal control
over financial reporting includes those policies and procedures that:
o pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of our assets;
o provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP, and that
our receipts and expenditures are being made only in accordance with
authorizations of our management and our Board of Directors; and
o provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have
a material effect on our financial statements
Because of its inherent limitations, a system of internal control over
financial reporting can provide only reasonable, not absolute, assurance
that the objectives of the control system are met and may not prevent or
detect misstatements. Internal control over financial reporting is a process
that involves human diligence and compliance and is subject to lapses in
judgment and breakdowns resulting from human failures. Internal control
over financial reporting also can be circumvented by collusion or improper
override. Because of such limitations, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal
control over financial reporting. However, these inherent limitations are
known features of the financial reporting process, and it is possible to
design into the process safeguards to reduce, though not eliminate, this
risk. Further, over time control may become inadequate because of changes in
conditions or the degree of compliance with the policies or procedures may
deteriorate.
Our management assessed the effectiveness of our internal control over
financial reporting as of November 30, 2010. In making its assessment,
management used the criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission ("COSO"). Based on its assessment, management has
concluded that we had certain control deficiencies described below that
constituted material weaknesses in our internal controls over financial
reporting. As a result, our internal control over financial reporting was
not effective as of November 30, 2010.
22
A "material weakness" is defined under SEC rules as a deficiency, or a
combination of deficiencies, in internal control over financial reporting
such that there is a reasonable possibility that a material misstatement of
a company's annual or interim financial statements will not be prevented or
detected on a timely basis by the company's internal controls. As a result
of management's review of the investigation issues and results, and other
internal reviews and evaluations that were completed after the end of
quarter related to the preparation of management's report on internal
controls over financial reporting required for this quarterly report on
Form 10-Q, management concluded that we had material weaknesses in our
control environment and financial reporting process consisting of the
following:
1) lack of a functioning audit committee due to a lack of a majority of
independent members and a lack of a majority of outside directors on our
board of directors, resulting in ineffective oversight in the establishment
and monitoring of required internal controls and procedures;
2) inadequate segregation of duties consistent with control objectives;
We do not believe the material weaknesses described above caused any
meaningful or significant misreporting of our financial condition and results
of operations for the fiscal period ended November 30, 2010. However,
management believes that the lack of a functioning audit committee and the
lack of a majority of outside directors on our board of directors results in
ineffective oversight in the establishment and monitoring of required
internal controls and procedures, which could result in a material
misstatement in our financial statements in future periods.
Management Plan to Remediate Material Weaknesses
------------------------------------------------
Management is pursuing the implementation of corrective measures to address
the material weaknesses described below. In an effort to remediate the
identified material weaknesses and other deficiencies and enhance our
internal controls, we have initiated, or plan to initiate, the following
series of measures:
We will create a position to segregate duties consistent with control
objectives and will increase our personnel resources and technical accounting
expertise within the accounting function when funds are available to us.
We plan to appoint one or more outside directors to our board of directors who
shall be appointed to an audit committee resulting in a fully functioning audit
committee who will undertake the oversight in the establishment and monitoring
of required internal controls and procedures such as reviewing and approving
estimates and assumptions made by management when funds are available to us.
23
We believe the remediation measures described above will remediate the
material weaknesses we have identified and strengthen our internal control
over financial reporting. We are committed to continuing to improve our
internal control processes and will continue to diligently and vigorously
review our financial reporting controls and procedures. As we continue to
evaluate and work to improve our internal control over financial reporting,
we may determine to take additional measures to address control deficiencies
or determine to modify, or in appropriate circumstances not to complete,
certain of the remediation measures described above.
Changes in Internal Control over Financial Reporting
----------------------------------------------------
There were no changes in our internal control over financial reporting (as
such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act)
during the most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
This amended quarterly report does not include an attestation report of the
Corporation's registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation
by the Corporation's registered public accounting firm pursuant to temporary
rules of the SEC that permit the Corporation to provide only the management's
report in this quarterly report.
(c) Changes in internal controls over financial reporting
----------------------------------------------------------
There was no change in our internal controls over financial reporting that
occurred during the period covered by this report, that has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
24
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings
From time to time, we may become involved in various lawsuits and legal
proceedings, which arise in the ordinary course of business. However,
litigation is subject to inherent uncertainties, and an adverse result in
these or other matters may arise from time to time that may harm our
business.
We are not presently a party to any material litigation, nor to the knowledge
of management is any litigation threatened against us, which may materially
affect us.
Item 1A - Risk Factors
See Risk Factors set forth in Part I, Item 1A of the Company's Registration
Statement on Form S-1/A for the fiscal year ended August 31, 2010 and the
discussion in Item 1, above, under " Liquidity and Capital Resources."
Item 2 -- Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3 -- Defaults Upon Senior Securities
None.
Item 4 -- Submission of Matters to a Vote of Security Holders
Item 5 -- Other Information
The Company filed its initial Registration Statement on Form S-1 with the
U.S. Securities and Exchange Commission on September 20, 2010. The
Registration Statement was declared effective on January 5, 2011.
25
Item 6 -- Exhibits
Incorporated by reference
-------------------------
Filed Period Filing
Exhibit Exhibit Description herewith Form ending Exhibit date
------------------------------------------------------------------------------
3.1 Articles of Incorporation, S-1 8/31/10 3.1 9/20/10
as currently in effect
------------------------------------------------------------------------------
3.2 Bylaws S-1 8/31/10 3.2 9/20/10
as currently in effect
-------------------------------------------------------------------------------
31.1 Certification of President X
and Principal Financial
Officer, pursuant to Section
302 of the Sarbanes-Oxley
Act
-------------------------------------------------------------------------------
31.2 Certification of President X
and Principal Financial
Officer, pursuant to Section
906 of the Sarbanes-Oxley
Act
-------------------------------------------------------------------------------
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
JA Energy
--------------------------
Registrant
Date: January 14, 2011 By: /s/ James Lusk
---------------- -------------------------------------------
James Lusk
Title: Chief Executive Officer
President and Director
Principal Executive, Financial,
and Accounting Officer
27
