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EX-32.2 - 11 GOOD ENERGY INCc65727_ex32-2.htm
EX-31.2 - 11 GOOD ENERGY INCc65727_ex31-2.htm
EX-31.1 - 11 GOOD ENERGY INCc65727_ex31-1.htm
EX-32.1 - 11 GOOD ENERGY INCc65727_ex32-1.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2011

 

COMMISSION FILE NUMBER: 000-54132

 

11 GOOD ENERGY, INC.


(Exact name of registrant as specified in its charter)


 

 

DELAWARE

26-0299315

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)


 

4450 Belden Village Street N.W., Suite 800

Canton, OH 44718

(Address of principal executive offices)

 

(330) 492-3835

(Registrant’s telephone number, including area code)

 

NOT APPLICABLE

(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 o

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the 12 preceding months (or such shorter period that the registrant was required to submit and post such file).

Yes o   No o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller 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

o

Accelerated Filer

o

 

Accelerated Filer

o

Smaller Reporting Company

x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o   No x

As of May 13, 2010, the registrant had a total of 19,856,239 shares of Common Stock outstanding


11 GOOD ENERGY, INC. AND SUBSIDIARY

INDEX

 

 

 

 

 

 

 

 

 

Page
Number

PART I

 

Financial Information

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (unaudited)

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets – March 31, 2011 (Unaudited) and December 31, 2010

 

3

 

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Operations – Three Months Ended March 31, 2011 and March 31, 2010 and for the period May 23, 2007 (date of inception) to March 31, 2011

 

4

 

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Stockholders Equity – For the period May 23, 2007 (date of inception) to March 31, 2011

 

5-8

 

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2011 and March 31, 2010 and for the period May 23, 2007 (date of inception) to March 31, 2011

 

9-10

 

 

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

11

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

20

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

26

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

26

 

 

 

 

 

PART II

 

Other Information

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

27

 

 

 

 

 

SIGNATURES

 

 

 

29

2


PART I.

FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

11 GOOD ENERGY, INC. AND SUBSIDIARY
(a development stage company)
CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

March 31,
2011

 

December 31,
2010

 

 

 


 


 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash

 

$

33,930

 

$

29,879

 

Inventory

 

 

532,386

 

 

624,739

 

Accounts receivable, net

 

 

14,869

 

 

51,801

 

Available for sale securities

 

 

7,980

 

 

576,990

 

Other current assets

 

 

18,024

 

 

24,974

 

 

 



 



 

Total current assets

 

 

607,189

 

 

1,308,383

 

 

 



 



 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

2,466,848

 

 

2,562,675

 

 

 



 



 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

Patents

 

 

65,479

 

 

58,272

 

Goodwill

 

 

639,504

 

 

639,504

 

Deposits

 

 

2,163

 

 

2,163

 

 

 



 



 

Total other assets:

 

 

707,146

 

 

699,939

 

 

 



 



 

 

 

 

 

 

 

 

 

Total assets

 

$

3,781,183

 

$

4,570,997

 

 

 



 



 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

711,991

 

$

458,043

 

Advances, related party

 

 

170,350

 

 

 

 

 



 



 

Total current liabilities

 

 

882,341

 

 

458,043

 

 

 



 



 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Series A Preferred stock, $0.0001 par value; 11,000,000 shares authorized, issued and outstanding at March 31, 2011 and December 31, 2010

 

 

1,100

 

 

1,100

 

Common stock, $0.0001 par value; 65,000,000 shares authorized; 20,811,561 issued as of March 31, 2011 and December 31, 2010; 19,856,239 outstanding as of March 31, 2011 and December 31, 2010

 

 

2,081

 

 

2,081

 

Additional paid in capital

 

 

22,498,920

 

 

22,498,920

 

Receivable from purchase of treasury stock

 

 

(78,519

)

 

(53,519

)

Deficit accumulated during development stage

 

 

(17,745,520

)

 

(16,551,567

)

Accumulated other comprehensive income

 

 

(281,720

)

 

(286,561

)

Treasury stock, 955,322 shares as of March 31, 2011 and December 31, 2010

 

 

(1,497,500

)

 

(1,497,500

)

 

 



 



 

Total stockholders’ equity

 

 

2,898,842

 

 

4,112,954

 

 

 



 



 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

3,781,183

 

$

4,570,997

 

 

 



 



 

See the accompanying notes to these unaudited condensed consolidated financial statements

3


11 GOOD ENERGY, INC. AND SUBSIDIARY
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

From May 23, 2007
(date of inception) through

 

 

 

2011

 

2010

 

March 31, 2011

 

 

 


 


 


 

 

 

 

 

(restated)

 

 

 

 

 

 

 


 

 

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

Sales

 

$

29,222

 

$

48,427

 

$

499,222

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

114,397

 

 

107,248

 

 

1,021,960

 

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

Gross (loss)

 

 

(85,175

)

 

(58,821

)

 

(522,738

)

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

General, selling and administrative expenses

 

 

961,260

 

 

2,552,440

 

 

12,358,478

 

Research and development

 

 

100,551

 

 

101,323

 

 

912,533

 

Depreciation and amortization

 

 

29,185

 

 

41,047

 

 

269,397

 

 

 



 



 



 

Total operating expenses

 

 

1,090,996

 

 

2,694,810

 

 

13,540,408

 

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS) FROM OPERATIONS

 

 

(1,176,171

)

 

(2,753,631

)

 

(14,063,146

)

 

 

 

 

 

 

 

 

 

 

 

Other income/(expense):

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

 

55,384

 

Interest expense

 

 

 

 

(7,077

)

 

(3,849,982

)

Realized (loss) on sale of securities

 

 

(17,782

)

 

 

 

111,024

 

Gain on sale of property, plant and equipment

 

 

 

 

 

 

1,200

 

 

 



 



 



 

Total other (expense)

 

 

(17,782

)

 

(7,077

)

 

(3,682,374

)

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

Net loss before provision for income taxes

 

 

(1,193,953

)

 

(2,760,708

)

 

(17,745,520

)

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

 

 

 

 

 

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

(1,193,953

)

$

(2,760,708

)

$

(17,745,520

)

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share (basic and fully diluted)

 

$

(0.06

)

$

(0.20

)

$

(1.17

)

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding (basic and fully diluted)

 

 

19,856,239

 

 

14,154,603

 

 

15,221,872

 

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,193,953

)

$

(2,760,708

)

$

(17,745,520

)

Unrealized gain (loss) on securities available for sale

 

 

4,841

 

 

(173,336

)

 

(281,720

)

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

$

(1,189,112

)

$

(2,934,044

)

$

(18,027,240

)

 

 



 



 



 

See accompanying notes to these unaudited condensed consolidated financial statements

4


11 GOOD ENERGY, INC. AND SUBSIDIARY
(a development stage company)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FROM MAY 23, 2007 (DATE OF INCEPTION) THROUGH MARCH 2011
(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred

 

Common

 

Common stock
subscribed
Convertible Notes

 

Common stock
Subscribed

 

Additional
Paid in
Capital

 

Due from
Related party

 

Treasury
Stock

 

Other
Comprehensive
Income

 

Accumulated
Deficit during
Development
Stage

 

Total

 

 

 

Stock

 

Amount

 

Stock

 

Amount

 

Stock

 

Amount

 

Stock

 

Amount

 

 

 

 

 

 

 

 

 



 



 



 



 



 



 



 



 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 23, 2007, date of inception

 

 

11,000,000

 

$

1,100

 

 

9,700,000

 

$

970

 

 

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

2,070

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for services to be rendered

 

 

 

 

 

 

300,000

 

 

30

 

 

 

 

 

 

 

 

 

 

155,970

 

 

 

 

 

 

 

 

 

 

156,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued to acquire 11 Good’s Energy LTD

 

 

 

 

 

 

4,285,714

 

 

429

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

420

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beneficial conversion feature relating to the issuance of convertible notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

639,719

 

 

 

 

 

 

 

 

 

 

639,710

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase in due from related party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(211,034

)

 

 

 

 

 

 

 

(211,034

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(771,405

)

 

(771,405

)

 

 



 



 



 



 



 



 



 



 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2007

 

 

11,000,000

 

 

1,100

 

 

14,285,714

 

 

1,429

 

 

 

 

 

 

 

 

 

 

795,689

 

 

(211,034

)

 

 

 

 

 

(771,405

)

 

(184,221

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beneficial conversion feature relating to the issuance of convertible notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

613,254

 

 

 

 

 

 

 

 

 

 

613,254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase in due from related party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(297,654

)

 

 

 

 

 

 

 

(297,654

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,064,728

)

 

(2,064,728

)

 

 



 



 



 



 



 



 



 



 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2008

 

 

11,000,000

 

$

1,100

 

 

14,285,714

 

$

1,429

 

 

 

$

 

$

 

$

 

$

1,408,943

 

$

(508,688

)

$

 

$

 

$

(2,836,133

)

$

(1,933,349

)

See the accompanying notes to these unaudited condensed consolidated financial statements

5


11 GOOD ENERGY, INC. AND SUBSIDIARY
(a development stage company)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FROM MAY 23, 2007 (DATE OF INCEPTION) THROUGH MARCH 2011
(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred

 

Common

 

Common stock
subscribed
Convertible Notes

 

Common stock
Subscribed

 

Additional
Paid in
Capital

 

Due from
Related party

 

Treasury
Stock

 

Other
Comprehensive
Income

 

Accumulated
Deficit during
Development
Stage

 

Total

 

 

 

Stock

 

Amount

 

Stock

 

Amount

 

Stock

 

Amount

 

Stock

 

Amount

 

 

 

 

 

 

 

 

 



 



 



 



 



 



 



 



 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2009

 

 

11,000,000

 

$

1,100

 

 

14,285,714

 

$

1,429

 

 

 

$

 

$

 

$

 

$

1,408,943

 

$

(508,688

)

$

 

$

 

$

(2,836,133

)

$

(1,933,349

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beneficial conversion feature relating to the issuance of convertible notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,054,806

 

 

 

 

 

 

 

 

 

 

2,054,806

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock to be issued in exchange for convertible notes and accrued interest

 

 

 

 

 

 

 

 

 

 

2,540,290

 

 

6,477,739

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,477,739

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation of services by a related party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

531,000

 

 

 

 

 

 

 

 

 

 

531,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation of services by a consultant

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

59,000

 

 

 

 

 

 

 

 

 

 

59,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of common stock

 

 

 

 

 

 

770,000

 

 

77

 

 

 

 

 

 

2,931,333

 

 

7,137,223

 

 

2,309,923

 

 

 

 

 

 

 

 

 

 

9,447,223

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of options granted to directors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

200,205

 

 

 

 

 

 

 

 

 

 

200,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase in due from related party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(278,456

)

 

 

 

 

 

 

 

(278,456

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock re-acquired for cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(450,000

)

 

 

 

 

 

(450,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock re-acquired for receivable due from related party and issuance of related party note

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

787,144

 

 

(850,000

)

 

 

 

 

 

(62,856

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on securities available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49,504

 

 

 

 

49,504

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,549,809

)

 

(6,549,809

)

 

 



 



 



 



 



 



 



 



 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2009 (Restated)

 

 

11,000,000

 

$

1,100

 

 

15,055,714

 

$

1,506

 

 

2,540,290

 

$

6,477,739

 

$

2,931,333

 

$

7,137,223

 

$

6,563,877

 

$

 

$

(1,300,000

)

$

49,504

 

$

(9,385,942

)

$

9,545,007

 

See the accompanying notes to these unaudited condensed consolidated financial statements

6


11 GOOD ENERGY, INC. AND SUBSIDIARY
(a development stage company)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FROM MAY 23, 2007 (DATE OF INCEPTION) THROUGH MARCH 2011
(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred

 

Common

 

Common stock
subscribed
Convertible Notes

 

Common stock
Subscribed

 

Additional
Paid in
Capital

 

Receivable
from
purchase of
treasury
stock

 

Treasury
Stock

 

Other
Comprehensive
Income

 

Accumulated
Deficit during
Development
Stage

 

Total

 

 

 

Stock

 

Amount

 

Stock

 

Amount

 

Stock

 

Amount

 

Stock

 

Amount

 

 

 

 

 

 

 

 

 



 



 



 



 



 



 



 



 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2010

 

 

11,000,000

 

$

1,100

 

 

15,055,714

 

$

1,506

 

 

2,540,290

 

$

6,477,739

 

 

2,931,333

 

$

7,137,223

 

$

6,563,877

 

$

 

$

(1,300,000

)

$

49,504

 

$

(9,385,942

)

$

9,545,007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock to be issued in exchange for convertible notes and accrued interest

 

 

 

 

 

 

 

 

 

 

8,223

 

 

20,970

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,970

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

276,000

 

 

805,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

805,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contribution of services by a related party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,493,840

 

 

 

 

 

 

 

 

 

 

1,493,840

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock reacquired

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(197,500

)

 

 

 

 

 

(197,500

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivable from purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(53,519

)

 

 

 

 

 

 

 

(53,519

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on securities available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(336,065

)

 

 

 

(336,065

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued in settlement of common stock subscriptions

 

 

 

 

 

 

5,755,847

 

 

575

 

 

(2,548,513

)

 

(6,498,709

)

 

(3,207,333

)

 

(7,943,069

)

 

14,441,203

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,165,625

)

 

(7,165,625

)

 

 



 



 



 



 



 



 



 



 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2010

 

 

11,000,000

 

$

1,100

 

 

20,811,561

 

$

2,081

 

 

 

$

 

 

 

$

 

$

22,498,920

 

$

(53,519

)

$

(1,497,500

)

$

(286,561

)

$

(16,551,567

)

$

4,112,954

 

 

 



 



 



 



 



 



 



 



 



 



 



 



 



 



 

See the accompanying notes to these unaudited condensed consolidated financial statements

7



 

11 GOOD ENERGY, INC. AND SUBSIDIARY

(a development stage company)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

FROM MAY 23, 2007 (DATE OF INCEPTION) THROUGH MARCH 2011

(unaudited)


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional
Paid in
Capital

 

Receivable
from
purchase of
treasury
stock

 

Treasury
Stock

 

Other
Comprehensive
Income

 

Accumulated
Deficit during
Development
Stage

 

 

 

 

 

 

Preferred

 

Common

 

 

 

 

 

 

 

 

 

 

 

Stock

 

Amount

 

Stock

 

Amount

 

 

 

 

 

 

Total

 

 

 


 


 


 


 


 


 


 


 


 


 

 

Balance, January 1, 2011

 

 

11,000,000

 

$

1,100

 

 

20,811,561

 

$

2,081

 

$

22,498,920

 

$

(53,519

)

$

(1,497,500

)

$

(286,561

)

$

(16,551,567

)

$

4,112,954

 

 

Receivable from purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

(25,000

)

 

 

 

 

 

 

 

(25,000

)

Unrealized gain on securities available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,841

 

 

 

 

4,841

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,193,953

)

 

(1,193,953

)

 

 



 



 



 



 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2011

 

 

11,000,000

 

$

1,100

 

 

20,811,561

 

$

2,081

 

$

22,498,920

 

$

(78,519

)

$

(1,497,500

)

$

(281,720

)

$

(17,745,520

)

$

2,898,842

 

 

 



 



 



 



 



 



 



 



 



 



 

See the accompanying notes to these unaudited condensed consolidated financial statements

8



11 GOOD ENERGY, INC. AND SUBSIDIARY

(a development stage company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

From May 23, 2007
(date of inception) through
March 31, 2011

 

 

 

2011

 

2010

 

 

 

 


 


 


 

 

 

 

 

(restated)

 

 

 

 

 

 

 


 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net loss for the period

 

$

(1,193,953

)

$

(2,760,708

)

$

(17,745,520

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

95,827

 

 

97,926

 

 

641,165

 

Amortization of debt discount

 

 

 

 

 

 

3,307,777

 

Compensation of services by a related party

 

 

 

 

1,493,840

 

 

2,024,840

 

Compensation of services to consultant

 

 

 

 

 

 

59,000

 

Fair value of options issued for services

 

 

 

 

 

 

200,205

 

Gain on sale of property and equipment

 

 

 

 

 

 

(1,200

)

Realized gain (loss) on sale of securities available for sale

 

 

17,782

 

 

 

 

(111,024

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Inventory

 

 

92,353

 

 

(402,862

)

 

(506,150

)

Accounts receivable

 

 

36,932

 

 

(888

)

 

(14,869

)

Other current assets

 

 

6,950

 

 

179,543

 

 

139,986

 

Accounts payable and accrued liabilities

 

 

253,948

 

 

(168,478

)

 

752,023

 

 

 



 



 



 

Net cash (used in) operating activities

 

 

(690,161

)

 

(1,561,627

)

 

(11,253,767

)

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

Acquisition, net of cash acquired

 

 

 

 

 

 

(588,952

)

Proceeds from sale of property and equipment

 

 

 

 

 

 

3,200

 

Purchase of property, plant and equipment

 

 

 

 

(107,144

)

 

(3,039,723

)

Payments for acquisition of patent

 

 

(7,207

)

 

 

 

(65,479

)

Proceeds from sale of securities available for sale

 

 

556,069

 

 

 

 

1,103,816

 

Purchase of securities available for sale

 

 

 

 

(89,700

)

 

(1,282,492

)

 

 



 



 



 

Net cash provided by (used in) investing activities

 

 

548,862

 

 

(196,844

)

 

(3,869,630

)

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

Proceeds from sale of shares to founders

 

 

 

 

 

 

2,070

 

Receivable from purchase of treasury stock

 

 

(25,000

)

 

 

 

(865,663

)

Proceeds from related party advance

 

 

170,350

 

 

 

 

170,350

 

Proceeds from common stock subscription

 

 

 

 

805,846

 

 

10,253,069

 

Proceeds from issuance of convertible notes

 

 

 

 

 

 

8,039,323

 

Proceeds from related party note payable

 

 

 

 

 

 

25,000

 

Purchase of treasury stock

 

 

 

 

(122,500

)

 

(647,500

)

Payments of related party note payable

 

 

 

 

(25,000

)

 

(25,000

)

Payments of notes payable

 

 

 

 

 

 

(84,322

)

Payments of convertible notes

 

 

 

 

(15,000

)

 

(1,710,000

)

 

 



 



 



 

Net cash provided by financing activities

 

 

145,350

 

 

643,346

 

 

15,157,327

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

4,051

 

 

(1,115,125

)

 

33,930

 

Cash and cash equivalents at beginning of period

 

 

29,879

 

 

4,869,749

 

 

 

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

33,930

 

$

3,754,624

 

$

33,930

 

 

 



 



 



 

See the accompanying notes to these unaudited condensed consolidated financial statements

9



 

11 GOOD ENERGY, INC. AND SUBSIDIARY

(a development stage company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From May 23, 2007
(date of inception) through
March 31, 2011

 

 

 

 

 

 

 

 

Three months ended March 31,

 

 

 

 

2011

 

2010

 

 

 

 


 


 


 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

 

 

Taxes paid

 

$

 

$

 

$

 

Interest paid

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

Non cash financing activities:

 

 

 

 

 

 

 

 

 

 

Common stock issued to acquire 11 Good’s Energy, LTD

 

$

 

$

 

$

429

 

Common stock issued in exchange for convertible note and accrued interest

 

$

 

$

 

$

20,970

 

Common stock subscribed for conversion of convertible notes

 

$

 

$

 

$

6,498,709

 

Treasury stock received in exchange for related party note receivable and accrued interest

 

$

 

$

 

$

787,144

 

See the accompanying notes to these unaudited condensed consolidated financial statements

10


11 GOOD ENERGY, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND 2010
(UNAUDITED)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

Basis and business presentation

The accompanying unaudited condensed consolidated financial statements of 11 Good Energy, Inc., (the “Company”), have been prepared in accordance with Regulation S-X of the Securities and Exchange Act, as amended, and instructions to Form 10-Q and should be read in conjunction with the audited financials for the year ended December 31, 2010 included in the Company’s SEC on Form 10-K filed on April 15, 2011. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results from operations for the three month period ended March 31, 2011, are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

The consolidated financial statements include the accounts of the Company, and its wholly-owned subsidiary 11 Good’s Energy, LTD (“11 Good’s”). All significant intercompany balances and transactions have been eliminated in consolidation.

Dependency on key management

The future success or failure of the Company is dependent primarily upon the continued services of its key executives and founder, in particular, the services of Frederick C. Berndt, Chief Executive Officer, Gary R. Smith, the company’s Chief Operations Officer, and Daniel T. Lapp, the company’s Chief Financial Officer. The ability of the company to pursue its business strategy effectively will also depend upon, among other factors, the successful recruitment and retention of additional highly skilled and experienced managerial, marketing, engineering and technical personnel. There can be no assurance that the company will be able to retain or recruit such personnel.

New accounting pronouncements

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

NOTE 2 – GOING CONCERN MATTERS

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying unaudited condensed consolidated financial statements during the three months ended March 31, 2011, the Company incurred net losses attributable to common shareholders of $1,193,953 and used $690,161 in cash for operating activities during three months ended March 31, 2011. These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.

11


The Company’s existence is dependent upon management’s ability to develop profitable operations and to obtain additional funding sources. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

NOTE 3 – RESTATEMENT

The Company restated the financial statements for the three months ended March 31, 2010 and from May 23, 2007 (date of inception) through March 31, 2010 to correct the amortization of previously capitalized nonmonetary intangible assets acquired with the purchase of 11 Good’s Energy LTD and the related amortization.

Consolidated Statement of Operations
Three months ended March 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As
Previously
Reported

 

Adjustment

 

Reference

 

As
Restated

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

48,427

 

$

 

 

 

 

 

$

48,427

 

Cost of sales

 

 

107,248

 

 

 

 

 

 

 

 

107,248

 

 

 


 


 


 


 

Gross (loss)

 

 

(58,821

)

 

 

 

 

 

 

 

(58,821

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

General, selling and administrative

 

 

2,552,440

 

 

 

 

 

 

 

 

2,552,440

 

Research and development

 

 

101,323

 

 

 

 

 

 

 

 

101,323

 

Depreciation and amortization

 

 

62,201

 

 

(21,154

)

 

1

 

 

41,047

 

 

 


 


 


 


 

Total operating expenses

 

 

2,715,964

 

 

(21,154

)

 

 

 

 

2,694,810

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (expense)

 

 

(7,077

)

 

 

 

 

 

 

 

(7,077

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 



 



 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 











Net loss

 

$

(2,781,862

)

$

21,154

 

 

1

 

$

(2,760,708

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share

 

$

(0.20

)

$

0.00

 

 

 

 

$

(0.20

)


 

 

1.

Correct amortization of intangible assets recorded as a result of determining $0 value assigned to intangible assets at the date of acquisition.

12


Consolidated Statement of Operations
From May 23, 2007 (date of inception) through March 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As
Previously
Reported

 

Adjustment

 

Reference

 

As
Restated

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

226,361

 

$

 

 

 

 

 

$

226,361

 

Cost of sales

 

 

269,150

 

 

 

 

 

 

 

 

269,150

 

 

 


 


 


 


 

Gross (loss)

 

 

(42,789

)

 

 

 

 

 

 

 

(42,789

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

General, selling and administrative

 

 

7,893,837

 

 

 

 

 

 

 

 

7,893,837

 

Research and development

 

 

369,904

 

 

 

 

 

 

 

 

369,904

 

Depreciation and amortization

 

 

357,152

 

 

(201,945

)

 

1

 

 

155,207

 

 

 


 


 


 


 

Total operating expenses

 

 

8,620,893

 

 

(201,945

)

 

 

 

 

8,418,948

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (expense)

 

 

(3,685,693

)

 

 

 

 

1

 

 

(3,685,693

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 



 



 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 















Net loss

 

$

(12,349,375

)

$

201,945

 

 

1

 

$

(12,147,430

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share

 

$

(0.91

)

$

0.02

 

 

 

 

$

(0.89

)


 

 

1.

Correct amortization of intangible assets recorded as a result of determining $0 value assigned at the date of acquisition.

13


Consolidated Statement of Cash Flows
For the three months ended March 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As Previously
Reported

 

Adjustment

 

Reference

 

As Restated

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(2,781,862

)

$

21,154

 

 

1

 

$

(2,760,708

)

Adjustments to reconcile net loss to net cash used in operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

119,080

 

 

(21,154

)

 

1

 

 

97,926

 

Other operating activities

 

 

1,101,155

 

 

 

 

 

 

 

 

1,101,155

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 















Net cash used in operating activities

 

 

(1,561,627

)

 

 

 

 

 

 

 

(1,561,627

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(196,844

)

 

 

 

 

 

 

 

(196,844

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided in financing activities

 

 

643,346

 

 

 

 

 

 

 

 

643,346

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 















Net decrease in cash

 

 

(1,115,125

)

 

 

 

 

 

 

 

(1,115,125

)

Cash and cash equivalents, beginning of period

 

 

4,869,749

 

 

 

 

 

 

 

 

4,869,749

 

 

 



 

 

 

 

 

 

 



 

Cash and cash equivalents, end of period

 

$

3,754,624

 

 

 

 

 

 

 

$

3,754,624

 

 

 



 

 

 

 

 

 

 



 

1          Correction of amortization and depreciation due to change in fair values.

14


Consolidated Statement of Cash Flows
From May 23, 2007 (date of inception) through March 31, 2010)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As Previously
Reported

 

Adjustment

 

Reference

 

As Restated

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(12,349,375

)

$

201,945

 

 

1

 

$

(12,147,430

)

Adjustments to reconcile net loss to net cash used in operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

446,003

 

 

(201,945

)

 

1

 

 

244,058

 

Other operating activities

 

 

4,675,632

 

 

 

 

 

 

 

 

4,675,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 















Net cash used in operating activities

 

 

(7,227,740

)

 

 

 

 

 

 

 

(7,227,740

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(4,099,609

)

 

 

 

 

 

 

 

(4,099,609

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided in financing activities

 

 

15,081,973

 

 

 

 

 

 

 

 

15,081,973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 















Net increase in cash

 

 

3,754,624

 

 

 

 

 

 

 

 

3,754,624

 

Cash and cash equivalents, beginning of period

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

Cash and cash equivalents, end of period

 

$

3,754,624

 

 

 

 

 

 

 

$

3,754,624

 

 

 



 

 

 

 

 

 

 



 

1.          Correction of amortization and depreciation due to change in fair values

NOTE 4 – INTANGIBLE ASSETS

Patents

Patents are capitalized at incurred costs and are amortized ratably over the lesser of their economic or legal life. The patents are currently in development stage not subject to current period amortization.

Goodwill

The Company does not amortize goodwill. The Company recorded goodwill in the amount of $639,504 as a result of the acquisition of 11 Good’s Energy LTD during the year ended December 31, 2007.

The Company accounts for and reports acquired goodwill under Accounting Standards Codification subtopic 350-10, Intangibles-Goodwill and Other (“ASC 350-10”). In accordance with ASC 350-10, the Company tests its intangible assets for impairment on an annual basis or more often if events and circumstances warrant. Any write-downs will be included in results from operations.

During the years ended December 31, 2010 and 2009, the Company management performed an evaluation of its goodwill for purposes of determining the implied fair value of the assets at the end of each respective year. The test indicated that the recorded remaining book value of its goodwill did not exceed its fair value for the years ended December 31, 2010 and 2009. Considerable management judgment is necessary to estimate the fair value. Accordingly, actual results could vary significantly from management’s estimates.

15


NOTE 5 - INVENTORIES

Inventory is stated at the lower of cost or market. The cost is determined using the first-in first-out method. Costs of finished goods inventory include costs associated with the procurement and transportation of Soybean oil and other raw materials used in the manufacture of G2 Diesel.

As of March 31, 2011 and December 31, 2010, inventories are comprised of the following:

 

 

 

 

 

 

 

 

 

 

March 31,
2011

 

December 31,

 

 

 

(unaudited)

 

2010

 

 

 


 


 

Raw materials

 

$

351,874

 

$

351,874

 

Finished fuel

 

 

180,512

 

 

272,865

 

 

 


 


 

Total

 

$

532,386

 

$

624,739

 

 

 



 



 

NOTE 6 – OTHER CURRENT ASSETS

Other assets as of March 31, 2011 and December 31, 2010 are comprised of the following:

 

 

 

 

 

 

 

 

 

 

March 31,
2011

 

December 31,

 

 

 

(unaudited)

 

2010

 

 

 


 


 

 

 

 

 

 

 

Prepaid fuel/product testing

 

$

 

$

19,637

 

Prepaid insurance

 

 

12,687

 

 

 

Prepaid other

 

 

5,337

 

 

5,337

 

 

 


 


 

Total

 

$

18,024

 

$

24,974

 

 

 



 



 

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT

The Company’s property, plant and equipment at March 31, 2011 and December 31, 2010 consist of the following:

 

 

 

 

 

 

 

 

 

 

March 31,
2011

 

December

 

 

 

(unaudited)

 

31, 2010

 

 

 


 


 

Leasehold improvements

 

$

345,381

 

$

345,381

 

Factory equipment

 

 

2,381,478

 

 

2,381,478

 

Furniture and fixtures

 

 

21,709

 

 

21,709

 

Office equipment

 

 

20,545

 

 

20,545

 

Vehicles

 

 

131,225

 

 

131,225

 

Computer equipment and software

 

 

148,300

 

 

148,300

 

Web design

 

 

51,505

 

 

51,505

 

 

 


 


 

Total

 

 

3,100,143

 

 

3,100,143

 

Less accumulated depreciation

 

 

633,295

 

 

537,468

 

 

 


 


 

Net

 

$

2,466,848

 

$

2,562,675

 

 

 



 



 

16


Property and equipment are recorded on the basis of cost. For financial statement purposes, property, plant and equipment are depreciated using the straight-line method over their estimated useful lives.

Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations. Management periodically reviews the carrying value of its property and equipment for impairment.

Depreciation expense was $95,827 and $97,926 for the three months ended March 31, 2011 and 2010, respectively, of which $66,642 and $56,879 was included as part of cost of sales for the three months ended March 31, 2011 and 2010, respectively.

NOTE 8 – AVAILABLE-FOR-SALE SECURITIES

Cost and fair value of marketable equity securities at March 31, 2011 and December 31, 2010 are as follows:

 

 

 

 

 

 

 

 

 

 

March 31,
2011

 

December 31,

 

 

 

(unaudited)

 

2010

 

 

 


 


 

 

 

 

 

 

 

Available for sale securities:

 

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

Fair value

 

$

7,980

 

$

576,990

 

Total (losses) gains in accumulated other comprehensive income

 

$

(281,720

)

$

(286,561

)

During the three months ended March 31, 2011 and 2010, the Company realized an aggregate loss of $17,782 and Nil with the sales of marketable securities, respectively. Unrealized gains (losses) are accounted for as other comprehensive income (loss).

NOTE 9 – COMMON STOCK

As of March 31, 2011, the Company has received net proceeds of $10,253,069, through the subscription for common stock consisting of 3,977,333 shares of common stock and 1,988,667 warrants. All common shares subscribed were issued during the year ended December 31, 2010.

NOTE 10 – RELATED PARTY TRANSACTIONS

Facilities

Since April 1, 2008, the Company has occupied warehouse space provided by one of the Company’s founders. The Company agreed to pay a total of $1 per month for the space. The Company records this fee as rent expense when incurred. During this time period, the Company constructed a leasehold improvement to the leased warehouse space for the purpose of locating our bio-fuel manufacturing facility.

Due to related party

During the three months ended March 31, 2011, the Company’s President and CEO advanced an aggregate of $170,350 for working capital purposes to the Company. The advances are short term, non-interesting bearing, and are due upon demand.

17


Receivable from purchase of treasury stock

During the three months ended March 31, 2011, the Company paid $25,000 to acquire the Company’s common stock (treasury stock). As of March 31, 2011, the common stock has not been received.

Consistent with ASC 505-10-45 (“Equity-Other Presentation”), the amount recorded on the balance sheet is presented as a deduction from stockholders’ equity (deficit). This is also consistent with Rule 5-02.30 of Regulation S-X of the Code of Federal Regulations.

NOTE 11 – FAIR VALUE

ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of March 31, 2011:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

Quoted
Prices in
Active
Markets for
Identical
Instruments
Level 1

 

Significant
Other
Observable
Inputs
Level 2

 

Significant
Unobservable
Inputs
Level 3

 

 

 


 


 


 


 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale

 

$

7,980

 

$

7,980

 

$

 

$

 

 

 


 


 


 


 

Total

 

$

7,980

 

$

7,980

 

$

 

$

 

 

 



 



 



 



 

18


The Company adopted the provisions of ASC 825-10 prospectively effective as of the beginning of Fiscal 2008. For financial assets and liabilities included within the scope of ASC 825-10, the Company will be required to adopt the provisions of ASC 825-10 prospectively as of the beginning of Fiscal 2009. The adoption of ASC 825-10 did not have a material impact on our consolidated financial position or results of operations.

The fair value of the assets, securities available for sale, at March 31, 2011 was grouped as Level 1 valuation as the market price was readily available.

NOTE 12 – SUBSEQUENT EVENTS

We are currently in the process of raising capital through a private placement sale of common stock. The current private placement memorandum outlines the sale of up to 2,000,000 shares of common stock at $5 per share for an aggregate of up to $10,000,000. Subsequent to the date of the financial statements and as of the date of this filing, we have raised and collected $225,000 as a result of a private placement sale of equity.

19


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

The information contained in this Form 10-Q and documents incorporated herein by reference are intended to update the information contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 and such information presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and other information contained in such Form 10-K and other Company filings with the Securities and Exchange Commission (“SEC”).

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties, and actual results could be significantly different than those discussed in this Form 10-Q. Certain statements contained in Management’s Discussion and Analysis, particularly in “Liquidity and Capital Resources,” and elsewhere in this Form 10-Q are forward-looking statements. These statements discuss, among other things, expected growth, future revenues and future performance. Although we believe the expectations expressed in such forward-looking statements are based on reasonable assumptions within the bounds of our knowledge of our business, a number of factors could cause actual results to differ materially from those expressed in any forward-looking statements, whether oral or written, made by us or on our behalf. The forward-looking statements are subject to risks and uncertainties identified under the “Risk Factors” section of the aforementioned Form 10-K for the fiscal year ended December 31, 2010. The risk factors of said Form 10-K should not be construed as an exhaustive list of all factors that could cause actual results to differ materially from those expressed in forward-looking statements made by us. All forward-looking statements included in this document are made as of the date hereof, based on information available to the Company on the date thereof, and the Company assumes no obligation to update any forward-looking statements.

Overview

11 Good Energy, Inc. is a Delaware corporation formed on May 23, 2007 for the purposes of developing, testing, manufacturing and distributing bio-fuel with energy related plans and pursuits relying on the commercialization of our proprietary fuel product, G2 Diesel, as discussed below.

On October 23, 2007, we completed the purchase of an existing biodiesel manufacturer, 11 Good’s Energy, LTD, a limited liability company (becoming our wholly-owned subsidiary), formed in the State of Ohio in February 2006. Historically, our subsidiary has been a development stage company, which has primarily engaged in research activities to develop a proprietary manufacturing process to produce bio-fuel for diesel applications.

In early 2008, we began construction on our manufacturing facility at the location of our operating subsidiary in Magnolia, Ohio (Magnolia Plant). In June 2008, we began placing tanks and constructing the infrastructure of the Magnolia Plant. Unfortunately, the industry experienced changes in fire suppression regulations requiring us to invest over $1,500,000 in additional infrastructure not anticipated in the original capital expenditure budget. We had to cease plant construction and operations from November 2008 to October 2009 in order to secure the financing and make the necessary changes to the fire suppression system and design of the Magnolia Plant.

20


Acquisition of 11 Good’s Energy, LTD

As a result of the purchase of 11 Good’s Energy, LTD (“11 Good’s”) all of the assets, liabilities and proprietary technology of 11 Good’s were transferred to us by the former partners of 11 Good’s in exchange for cash of $611,900, $111,230 in assumed liabilities and 4,285,714 shares of common stock of the company valued at $429. The assets and liabilities of 11 Good’s were recorded at fair market value at the time of acquisition. 11 Good’s is our sole subsidiary and operations and the management of 11 Good’s and us are the same. The consolidated financial statements include the accounts of us and our wholly-owned subsidiary and all intercompany balances and transactions have been eliminated.

The Company accounts for acquisitions in accordance with the provisions of ASC 805-10. The Company assigns to all identifiable assets acquired a portion of the cost of the acquired company equal to the estimated fair value of such assets at the date of acquisition. The Company records the excess of the cost of the acquired company over the sum of the amounts assigned to identifiable assets acquired as goodwill. Management determined the fair values assigned to inventory based upon selling prices less cost of disposal and the Company’s profit allowance and the case of work in process less cost to complete. The Fair value of plant and equipment are based on current replacement costs. The Company recorded goodwill in the amount of $639,504 as a result of the acquisition of 11 Good’s Energy LTD during the year ended December 31, 2007. The Company accounts for and reports acquired goodwill under Accounting Standards Codification subtopic 350-10, Intangibles-Goodwill and Other (“ASC 350-10”). The Company does not amortize goodwill. In accordance with ASC 350-10, the Company tests its intangible assets for impairment on an annual basis or more often if events and circumstances warrant. Any write-downs will be included in results from operations.

Development Stage Company - Product Development

We are currently in an early stage of our current business plan. We have limited operating history with respect to the construction and operation of biodiesel refineries for our own use. In this respect, from May 23, 2007 (date of inception) through March 31, 2011, our revenues have totaled $499,222 and our deficit accumulated during our development stage was $17,745,520. Further, our operating subsidiary incurred from February 2006 through October 2007, costs of approximately $100,000 in the development of our subsidiary’s proprietary manufacturing process and G2 Diesel product which are not reflected in our accumulated deficit since their costs were incurred prior to the acquisition date of our subsidiary. These costs were primarily comprised of feedstock materials, labor and facilities costs. Since the acquisition, we have further developed our process and product through testing and trials and have expended money on labor, consulting, facilities and media productions in order to further our product development. Currently, the development of the fuel’s functionality is complete, although we continue to incur research and development costs to develop new feedstock alternatives and to improve materials procurement and fuel manufacturing techniques.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements requires management to make estimates and disclosures on the date of the financial statements. On an on-going basis, we evaluate our estimates including, but not limited to, those related to revenue recognition. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates. We believe that the following critical accounting policies affect our more significant judgments and estimates in the preparation of our financial statements.

21


Revenue Recognition. We recognize revenue from product sales in accordance with ASC 605 “Revenue Recognition”. Four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists (through written sales documentation); (2) delivery has occurred (through delivery into customer’s tanks and acceptance); (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. For criteria (1) we generate a sales order and a shipping document defining number of gallons of fuel ordered, delivery and payment terms based on standing customer data and the customers purchase order. For criteria (2) we ensure delivery has occurred by documented delivery terms defining where the customer accepts the fuel delivery. Fuel stored off-site by the company remains as inventory until the customer receives the fuel from the offsite storage facility. For criteria (3) management determines the selling price based on feedstock costs and our desired margin level. Our selling price fluctuates as feedstock prices increase or decrease, primary the cost of soybean oil. Currently, management determines our selling price on a weekly basis. For criteria (4) we establish creditworthiness of the customer based on a review of established credit limits and current financial health of the entity placing the fuel order. Provisions for estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded, although we have not experienced any such items to date and do not expect any significant provisions in the future. We have no discount, rebate or warranty programs. Payments received in advance are deferred until revenue recognition is appropriate. We have no post-delivery obligations related to our products.

Inventory Valuation. We are required to make judgments based on historical experience and future expectations, as to the realizability of our inventory. We make these assessments based on the following factors: (a) existing orders and usage, (b) age of the inventory, and (c) historical experience.

Property and Equipment. We are required to make judgments based on historical experience and future expectations, as to the realizability of our property and equipment. We made these assessments based on the following factors: (a) the estimated useful lives of such assets, (b) technological changes in our industry, and (c) the changing needs of our customers.

Fair Value of Intangible Assets. We have adopted Statement of Accounting Standards Codification subtopic 805-10 (“ASC 805-10”). ASC 805-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period.

We evaluate the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 805-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.

Stock-Based Compensation

We account for our stock based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

There were no employee stock options and employee stock purchases granted to employees and directors during the period from May 23, 2007 (date of inception) through December 31, 2008. On July 22, 2009, the company granted 500,000 stock options to outside directors at an exercise price of $3.00 per share. We recorded the fair value of $200,205 as compensation expense during the year ended December 31, 2009 as a result of this transaction. These options are for a period of three years and are fully vested. There were no unvested options outstanding as of the date of adoption of FASB ASC Topic 718.

22


We use the fair value method for equity instruments granted to non-employees (if any) and will use the Black-Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

Results of Operations

By virtue of our purchase of 11 Good’s, which became our sole operations, the company is considered to be in the development stage in accordance with the FASB ASC Topic 915 – Development Stage Enterprises. Since its inception, the company has devoted substantially all of its time to raising capital, obtaining financing, research and development activities and obtaining many governmental organizations, municipalities and corporations to test our G2 Diesel and its performance as a blend with traditional #2 diesel fuel.

Three months Ended March 31, 2011 Compared to the Three months Ended March 31, 2010

The following table sets forth certain selected condensed consolidated statement of operations data for the periods indicated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 


 

 

 

2011

 

%

 

2010

 

%

 

 

 


 


 


 


 

Revenue

 

$

29,222

 

 

100

%

$

48,427

 

 

100

 

Cost of goods sold

 

 

114,397

 

 

>100

%

 

107,248

 

 

>100

%

 

 



 



 



 



 

Gross loss

 

 

(85,175

)

 

 

 

(58,821

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

961,260

 

 

>100

%

 

2,552,440

 

 

>100

%

Research and development

 

 

100,551

 

 

>100

%

 

101,323

 

 

>100

%

Depreciation and amortization

 

 

29,185

 

 

<100

%

 

41,047

 

 

<100

%

 

 



 

 

 

 



 

 

 

 

Total operating expenses:

 

 

1,090,966

 

 

 

 

 

2,694,810

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss from operations

 

 

(1,176,171

)

 

 

 

 

(2,753,631

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income/expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest, net

 

 

 

 

 

 

 

(7,077

)

 

<100

%

Other income, net

 

 

(17,782

)

 

<100

%

 

 

 

 

 

 

 



 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 



 

 

 

 

Net loss

 

$

(1,193,953

)

 

<100

%

$

(2,760,708

)

 

<100

%

 

 



 

 

 

 



 

 

 

 

The decrease in revenues of $19,205 from the three months ended March 31, 2011 of $29,222 compared to the three months ended March 31, 2010 of $48,427 and the minimal amount of revenues in total is the result of our testing and pilot programs continuing beyond our original time estimates due to regulatory milestones that have proven more difficult to acquire than originally anticipated, which has also led to a longer sales order cycle than the Company originally anticipated. For our testing programs that completed in 2010, results showed both efficiency and emissions improvements that remain of great interest to metropolitan bus systems and the rail and trucking industries. We are currently cultivating these pilot programs to sales orders. The remaining existing pilot programs and regulatory approvals are expected to be finalized in 2011 and continue to show great promise to generate significant demand over the next quarter leading to more significant sales orders and contracts to purchase our fuel.

23


Our most significant efforts have been focused on approval of our fuel variance in the state of California. The fuel variance is required for our fuel to meet California regulations to sell bio-diesel fuel, which is the result of G2 Diesel’s flash point being less than traditional Biodiesel. This is the result of the small amount of ethanol in our finished fuel, which creates a lower flashpoint. We have spent considerable resources to meet California’s requirements to meet this regulation and have received positive feedback from our representatives that it should pass in 2011. We currently are licensed to sell fuel in California; however, we must meet this regulation to sell G2 Diesel. The variance requirement has certainly delayed our ability to expand our market presence in California and has delayed our ability to sell our fuel in California. Its passage will allow many of our customers in California, which have tested and approved the use of G2 Diesel, to go to order and purchase G2 Diesel.

Cost of goods sold was $114,397 for the three months ended March 31, 2011 and $107,248 for the three months ending March 31, 2010. Cost of goods sold exceeded revenues for both periods as a result of applying fixed factory depreciation and overhead to cost of goods sold, even though only a small volume of sales were generated. The first quarter of 2011 experienced less sales activity as described in the preceding paragraph. For the three months ended March 31, 2011, there were certain factory costs associated with operating the plant and selling fuel applied to cost of goods sold, whereas there was no such cost in the first quarter of 2010.

Current margins for our testing programs resulted in gross losses of $85,175 for the three months ended March 31, 2011 and $58,821 for the three months ending March 31, 2010. We expect sales margins to improve once we have sales contracts in place at our scheduled premium prices after the testing programs are concluded. Currently, our G2 Diesel is being sold to companies and governmental organizations and municipalities at reduced prices equivalent to the cost of traditional #2 diesel fuel or less, to encourage them to test our G2 Diesel as a blended product for:

 

 

power performance, maintenance and engine noise;

emissions and exhaust smell; and

fuel economy.

Research and development costs were $100,551 for the three months ended March 31, 2011 and $101,323 for the three months ending March 31, 2010. Our Research and Development activities have shown consistent from quarter to quarter. We have continued our focus on developing new feedstock alternatives and improving fuel manufacturing techniques to gain production efficiencies.

Depreciation and amortization included in operating expenses decreased by $11,862. We have allocated more depreciation to cost of goods sold during the quarter ended March 31, 2011 when compared to the quarter ended March 31, 2010 as a result of more fixed assets purchased and used in production.

Selling, general, and administrative expenses for the three months ended March 31, 2011 of $961,260 exceeded revenues by $932,038. Such costs include, among others, payroll and related expenses, insurance costs and occupancy costs. The decrease in selling, general and administrative expenses of $1,591,180 in 2011 over the comparable period of the prior year is primarily related to payments of common stock to consultants and employees from the Company’s CEO and a founding shareholder, which was treated for accounting purposes as operating expenses and donated capital, in the amount of $1,493,850. The company also experienced a decrease in consulting, legal and bonus costs of approximately $28,000. Other overhead costs such as travel, marketing and promotional cost decreased approximately $195,000 and salaries and payroll costs increased by approximately $11,000 in comparison to the first quarter of 2010.

Net loss was $1,193,953 in the three months ended March 31, 2011 as compared to $2,760,708 for the comparable period in 2010. Basic and fully diluted net loss per share for the three months ended March 31, 2011 and March 31, 2010 was $(0.06) and $(0.20), respectively. Basic and fully diluted weighted average shares outstanding for the fiscal three months ended March 31, 2011 and March 31, 2010 was 19,856,239 and 14,154,603, respectively.

24


Liquidity and Capital Resources

The company had cash and cash equivalents of $33,930 at March 31, 2011. Net cash was used in operating activities of $690,161 for the three months ended March 31, 2011. Cash used in operations was a result of a net loss for the period of $1,193,953; a decrease in inventory of $92,353; a decrease in accounts receivable of $36,932; an increase in payables of $253,948, depreciation and amortization of $95,827 and a decrease in other assets of $6,950. Net cash investing activities of $548,862 for the three months ended March 31, 2011, included patent costs of $7,207 and proceeds from the sale of securities available for sale of $556,069. Net cash provided by financing activities of $145,350 for the three months ended March 31, 2011, included proceeds from a related party advance of $170,350, partially offset by $25,000 due from a related party.

The company had cash and cash equivalents of $3,754,624 at March 31, 2010. Net cash was used in operating activities of $1,561,627 for the three months ended March 31, 2010. Cash used in operations was a result of a net loss for the period of $2,760,708, net changes in assets and liabilities in the amount of $392,685, partially offset by non cash compensation of services by a related party of $1,493,840, depreciation and amortization of $97,926. Net cash used in investing activities of $196,844 for the three months ended March 31, 2010, included the purchase of property, plant and equipment of $107,144 and the purchase of securities available for sale of $89,700. Net cash provided by financing activities of $643,346 for the three months ended March 31, 2010, included proceeds from common stock subscriptions of $805,846, offset by the purchase of Treasury stock of $122,500, and payments totaling $40,000 for convertible and related party notes payable.

From May 23, 2007 (date of inception) through March 31, 2011, the company raised $7,930,000 by issuing notes payable convertible into Common Stock, bearing 8% interest per annum. These Notes, in aggregate of $8,039,323 (including principal and accrued interest thereon), became convertible at a price of $2.55 per share (the “Conversion Price”) based upon a 15% discount to the company’s equity raise which was completed at an offering price of $3.00 per share between August 2009 and March 2010. In addition to the number of conversion shares to be delivered to each Holder of this Note, upon conversion of the Principal Amount and accrued interest thereon, the company also delivered Warrants expiring June 30, 2012 to purchase a number of shares of Common Stock equal to the number of Conversion Shares. As March 31, 2011 and December 31, 2010, the company had outstanding $0 of these convertible notes.

As of March 31, 2011, the company had converted $6,498,709 of Convertible notes payable to Common Stock issued at a price of $2.55 per share, and issued 2,548,513 shares of common stock and warrants to purchase 3,228,523 shares of Common Stock. All remaining note balances and accrued interest were redeemed in cash.

As of March 31, 2011, the company received gross proceeds of $11,932,000 (net proceeds of $10,253,069) through the sale of its Common Stock at a price of $3.00 per share, for a total of 3,977,333 shares.

We have a history of losses from operations and an accumulated deficit of $17,745,520 at March 31, 2011 and negative working capital (total current liabilities in excess of total current liabilities) of $275,152. As of March 31, 2011, we are operating one production facility; currently have a total of 11 employees, with a burn rate of approximately $285,000 per month. In the absence of significant revenues, management believes that we will require capital funding and liquidity needs for our current corporate and plant operations. While the company anticipates more than nominal revenues will result during 2011, our ability to achieve profitable operations will depend on our ability to raise additional financing in 2011, on terms satisfactory to us, particularly if cash flow from operations continues at its current level. Further, there is no guarantee that we will ever be able to operate profitably or derive any significant revenues from our operations.

We anticipate that our future liquidity requirements will arise from the need to finance our accounts receivable and inventories, and from the need to fund our current obligations and capital expenditures. The primary sources of funding for our current operations will be cash generated from operations and the sale of current inventory and raising additional capital from the sale of equity securities.

25


We are currently in the process of raising capital through a private placement sale of common stock. The current private placement memorandum outlines the sale of up to 2,000,000 shares of common stock at $5 per share for an aggregate of up to $10,000,000. As of the date of this filing, we have raised and collected $225,000 as a result of a private placement sale of equity. Exemption is claimed under Section 4(2) and/or Rule 506 of Regulation D of the Securities Act of 1933, as amended.

Our future plans include purchasing and/or leasing a site for the purpose of constructing a second production facility with an estimated annual output capacity of 30,000,000 gallons of G2 Diesel. To date, we have completed engineering and construction plans for such a facility and have made inquiries into potential sites in the State of Ohio for such a facility. However, detailed milestones of these plans and the specific steps needed to accomplish each milestone do not currently exist. Management estimates that once a site is secured, that construction permitting and all the other steps necessary to have such a site constructed and operational would take approximately one year to complete.

The actual costs of this new facility will depend upon many factors, including, without limitation, the location and cost of the land, demolition costs of existing facilities (if any) on the site, environmental concerns (if any) and the size of the new plant. We can provide no assurances that the company will be able to obtain adequate financing for its second production facility on terms satisfactory to us, if at all.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our short term money market investments. The Company does not have any financial instruments held for hedging or other speculative purposes and does not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit 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 Commissions rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our CEO and CFO, an evaluation was performed on the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report due to the Company’s limited resources and limited number of employees. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and outsourced accounting professionals. As we grow, we expect to increase our number of employees, which, we believe, will enable us to implement adequate segregation of duties within the internal control framework.

There were no changes in the Company’s internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

26


PART II. OTHER INFORMATION

Item 1. Legal Proceedings

          As of the filing date of this Form 10-Q, we are not a party to any pending legal proceedings.

Item 1A. Risk Factors

          As a Smaller Reporting Company as defined Rule 12b-2 of the Exchange Act and in item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item 1A.

Item 2. Changes in Securities

          None.

Item 3. Defaults Upon Senior Securities

          None.

Item 4. Reserved

Item 5. Other Information

          We are currently in the process of raising capital through a private placement sale of common stock. The current private placement memorandum outlines the sale of up to 2,000,000 shares of common stock at $5 per share for an aggregate of up to $10,000,000. As of the date of this filing, we have raised and collected $225,000 as a result of a private placement sale of equity. Exemption is claimed under Section 4(2) and/or Rule 506 of Regulation D of the Securities Act of 1933, as amended.

Item 6. Exhibits

          Except for the exhibits listed below, other required exhibits have been previously filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

The following exhibits were previously filed under a Form S-1 Registration Statement, file No. 333-166149 unless otherwise noted:

 

 

 

Exhibit
No.

 

Description of Exhibit


 


 

 

 

2.1

 

Agreement and Plan of Organization between Registrant and 11 Good’s Energy, LTD.

 

 

 

2.2

 

Corrections to Exhibit 2.1

 

 

 

3.1

 

Certification of Incorporation

 

 

 

3.2

 

By-Laws

 

 

 

3.3

 

Certificate of Amendment to Certificate of Incorporation

27



 

 

 

3.4

 

Certificate of Designation

 

 

 

10.1

 

Employment Contract - Frederick C. Berndt

 

 

 

10.2

 

Employment Contract - Daniel Lapp

 

 

 

10.3

 

Employment Contract - Aaron Harnar

 

 

 

10.4

 

Consulting Agreement with Clayton R. Livengood

 

 

 

10.5

 

Employment Agreement - Gary R. Smith

 

 

 

10.6

 

Finder’s Agreement - Jesup Lamont

 

 

 

10.7

 

Consulting Agreement with Capital Keys

 

 

 

10.8

 

Consulting Agreement with California Strategies

 

 

 

10.9

 

Office Lease dated April 25, 2007 between the Registrant and Triad Realty, LLC, including a First Lease Amendment dated June 21, 2007 and a Second Amendment dated July 15, 2009.

 

 

 

21.1

 

Subsidiary of Registrant

 

 

 

31.1

 

Principal Executive Officer Rule 13a-14(a)/15d-14(a) Certification (*)

 

 

 

31.2

 

Principal Financial Officer Rule 13a-14(a)/15d-14(a) Certification (*)

 

 

 

32.1

 

Principal Executive Officer Section 1350 Certification (*)

 

 

 

32.2

 

Principal Financial Officer Section 1350 Certification (*)

 

 

 

99.1

 

Results of Operations - Press Release dated May___, 2011*


 


* Filed herewith.

28


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 thereunto duly authorized.

 

 

 

11 GOOD ENERGY, INC.

 

 

Date: May 19, 2011

By: /s/ Frederick C. Berndt

 


 

Frederick C. Berndt, President (principal executive officer)

 

 

Date: May 19, 2011

By: /s/ Daniel T. Lapp

 


 

Daniel T. Lapp,

 

Chief Financial Officer (principal financial officer)


29