Attached files
| file | filename |
|---|---|
| EX-31.1 - Todays Alternative Energy Corp | v225681_ex31-1.htm |
| EX-32.1 - Todays Alternative Energy Corp | v225681_ex32-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended April 30, 2011
For the transition period from _________________ to _________________
Commission File No.: 001-32044
TODAYS ALTERNATIVE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
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Nevada
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16-1576984
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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857 Post Road, Suite 397,
Fairfield, Ct. 06824
(Address of principal executive offices)
Issuer’s telephone number: (888) 880-0994
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filter ¨
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Accelerated filter ¨
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Non-accelerated filter ¨
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(Do not check if a smaller reporting company)
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Smaller reporting company x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes ¨ No x
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨
APPLICABLE ONLY TO CORPORATE ISSUERS
As of June 13, 2011, there were 3,640,184 shares of our common stock issued and outstanding.
Transitional Small Business Disclosure Format: Yes ¨ No x
Quarterly Report on Form 10-Q for the
Quarterly Period Ended April 30, 2011
Table of Contents
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Page
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|||
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PART I. FINANCIAL INFORMATION
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3 | ||
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Item 1. Financial Statements
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3 | ||
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Condensed Consolidated Balance Sheets as of April 30, 2011 (unaudited) and October 31, 2010:
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3 | ||
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Condensed Consolidated Statements of Operations for the Three and Six Months Ended April 30, 2011 and 2010 and for the Period From November 1, 2007 (inception of development stage) through April 30, 2011 (unaudited):
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4 | ||
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Condensed Consolidated Statement of Stockholders’ Deficit for Period October 31, 2007 to April 30, 2011 (unaudited):
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5 | ||
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Condensed Consolidated Statements of Cash Flows for the Six Months Ended April 30, 2011 and 2010 and for the Period From November 1, 2007 (inception of development stage) through April 30, 2011 (unaudited):
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6 | ||
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Notes to Unaudited Condensed Consolidated Financial Statements April 30, 2011:
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7 | ||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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12 | ||
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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17 | ||
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Item 4 Controls and Procedures
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17 | ||
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PART II. OTHER INFORMATION
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17 | ||
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Item 1. Legal Proceedings
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17 | ||
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Item 1A Risk Factor
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17 | ||
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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17 | ||
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Item 3. Defaults upon Senior Securities
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18 | ||
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Item 4. Removed and Reserved
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18 | ||
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Item 5. Other Information
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18 | ||
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Item 6. Exhibits
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18 | ||
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CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
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|||
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CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
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2
Todays Alternative Energy Corporation
(A Development Stage Company)
Condensed Consolidated Balance Sheets
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April 30,
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October 31,
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|||||||
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2011
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2010
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|||||||
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(unaudited)
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||||||||
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Assets
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||||||||
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||||||||
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Current assets:
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||||||||
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Cash
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$ | 8,445 | $ | 4,446 | ||||
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Prepaid expense
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2,988 | 1,463 | ||||||
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Total current assets
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11,433 | 5,909 | ||||||
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Other assets:
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||||||||
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Security deposit
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7,478 | - | ||||||
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Other deposits
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46,522 | - | ||||||
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Total other assets
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54,000 | - | ||||||
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Total assets
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$ | 65,433 | $ | 5,909 | ||||
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Liabilities and Stockholders' (Deficit)
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||||||||
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Current liabilities:
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||||||||
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Accounts payable and accrued expenses
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$ | 989,153 | $ | 884,194 | ||||
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Advance payable
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10,000 | - | ||||||
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Due to officer
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5,613 | - | ||||||
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Convertible notes payable, net of long term portion
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1,434,115 | 1,367,165 | ||||||
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Total current liabilities
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2,438,881 | 2,251,359 | ||||||
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Long term portion of convertible notes payable (net of debt discount of $88,110 and $0 as of April 30, 2011 and October 31, 2010, respectively)
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11,890 | - | ||||||
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Stockholders' (deficit):
|
||||||||
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Preferred stock, $0.00001 par value, 10,000,000 authorized,10,000 shares of Series A issued and outstanding as of April 30, 2011 and October 31, 2010 and 74,000 and 80,000 shares of Series B issued and outstanding as of April 30, 2011 and October 31, 2010, respectively
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1 | 1 | ||||||
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Common stock, $0.00001 par value, 1,000,000,000 shares authorized, 3,431,834 and 2,168,554 shares issued and outstanding as of April 30, 2011 and October 31, 2010, respectively
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34 | 22 | ||||||
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Common stock to be issued
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1 | 1 | ||||||
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Additional paid-in capital
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7,867,421 | 7,615,622 | ||||||
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Deficit accumulated from November 1, 2007 (inception of development stage)
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(2,744,474 | ) | (2,352,775 | ) | ||||
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Accumulated deficit
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(7,508,321 | ) | (7,508,321 | ) | ||||
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Total stockholders' (deficit)
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(2,385,338 | ) | (2,245,450 | ) | ||||
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Total liabilities and stockholders' deficit
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$ | 65,433 | $ | 5,909 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Todays Alternative Energy Corporation
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
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Three Months Ending
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Six Months Ending
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From Inception of
Development Stage
on November 1, 2007
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||||||||||||||||||
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April 30,
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April 30,
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Through April 30,
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||||||||||||||||||
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2011
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2010
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2011
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2010
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2011
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||||||||||||||||
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Expenses:
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||||||||||||||||||||
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General and administrative expenses
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$ | 123,146 | $ | 66,635 | $ | 245,308 | $ | 180,549 | $ | 1,749,608 | ||||||||||
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Total expenses
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123,146 | 66,635 | 245,308 | 180,549 | $ | 1,749,608 | ||||||||||||||
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Loss from operations
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(123,146 | ) | (66,635 | ) | (245,308 | ) | (180,549 | ) | (1,749,608 | ) | ||||||||||
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Other expenses:
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||||||||||||||||||||
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Beneficial conversion feature expense
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(9,906 | ) | (113,644 | ) | (86,390 | ) | (186,244 | ) | (631,165 | ) | ||||||||||
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Interest expense
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(30,648 | ) | (24,357 | ) | (60,001 | ) | (47,448 | ) | (363,701 | ) | ||||||||||
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Total other expenses
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(40,554 | ) | (138,001 | ) | (146,391 | ) | (233,692 | ) | (994,866 | ) | ||||||||||
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Net loss before provision for income taxes
|
(163,700 | ) | (204,636 | ) | (391,699 | ) | (414,241 | ) | (2,744,474 | ) | ||||||||||
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Provision for income taxes
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- | - | - | - | ||||||||||||||||
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Net loss
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$ | (163,700 | ) | $ | (204,636 | ) | $ | (391,699 | ) | $ | (414,241 | ) | $ | (2,744,474 | ) | |||||
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Net loss per weighted average share - basic and diluted
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$ | (0.06 | ) | $ | (0.15 | ) | $ | (0.16 | ) | $ | (0.31 | ) | ||||||||
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Weighted average number of shares - basic and diluted
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2,807,532 | 1,333,063 | 2,523,779 | 1,331,943 | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Todays Alternative Energy Corporation
(A Development Stage Company)
Condensed Consolidated Statement of Stockholders’ Deficit
(Unaudited)
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Preferred Stock
Series A and B
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Common Stock
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Common
Stock to
be
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Additional
Paid in
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Deficit Accumulated
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Accumulated
|
Total
Stockholders'
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|||||||||||||||||||||||||||||
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Shares
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Amount
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Shares
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Amount
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Issued
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Capital
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During the Development Stage
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(Deficit)
|
(Deficit)
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|||||||||||||||||||||||||||
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Balance, October 31, 2007
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-
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$
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-
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2,318
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$
|
-
|
$
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-
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$
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5,866,870
|
$
|
-
|
$
|
(7,508,321
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)
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$
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(1,641,451
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)
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|||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
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Debt converted for shares
|
|
800
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-
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106,560
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106,560
|
||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
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Series A and common shares issued for services
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10,000
|
10
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1,336
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-
|
285,312
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285,322
|
|||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
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Beneficial conversion feature
|
|
(55,990
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)
|
(55,990
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)
|
||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||||||
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Reclassification as a result of reincorporation
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(10
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)
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10
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-
|
||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||||||
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Net loss
|
|
(592,439
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)
|
|
(592,439
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)
|
|||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
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Balance, October 31, 2008
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10,000
|
$
|
-
|
4,454
|
$
|
-
|
$
|
-
|
$
|
6,202,762
|
$
|
(592,439
|
)
|
$
|
(7,508,321
|
)
|
$
|
(1,897,998
|
)
|
||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
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Shares issued in satisfaction of fraction shares resulting from 1-for-1,000 reverse stock split
|
|
101
|
-
|
-
|
|||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
Debt converted for shares
|
|
1,319,750
|
13
|
113,937
|
113,950
|
||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
Shares issued for services
|
|
6,555
|
-
|
66,818
|
66,818
|
||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
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Series B shares issued for legal settlement
|
92,000
|
1
|
91,999
|
92,000
|
|||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
Beneficial conversion feature
|
|
331,157
|
331,157
|
||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
Net loss
|
|
(927,207
|
)
|
-
|
(927,207
|
)
|
|||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
Balance, October 31, 2009
|
102,000
|
$
|
1
|
1,330,860
|
$
|
13
|
$
|
-
|
$
|
6,806,673
|
$
|
(1,519,646
|
)
|
$
|
(7,508,321
|
)
|
$
|
(2,221,280
|
)
|
||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
Debt converted for shares
|
|
400,250
|
4
|
8,001
|
8,005
|
||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
Shares issued for services
|
|
385,455
|
4
|
134,996
|
135,000
|
||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
Conversion of Series B shares for common shares
|
(12,000
|
)
|
51,989
|
1
|
(1
|
)
|
-
|
||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
Beneficial conversion feature
|
|
269,608
|
269,608
|
||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
Contributed services by former officers
|
|
394,679
|
394,679
|
||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
Accrued expenses forgiven by former officer
|
|
1,666
|
1,666
|
||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
15 shares of common stock to be issued to former officer
|
|
1
|
1
|
||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
Net loss
|
|
(833,129
|
)
|
(833,129
|
)
|
||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
Balance, October 31, 2010
|
90,000
|
$
|
1
|
2,168,554
|
$
|
22
|
$
|
1
|
$
|
7,615,622
|
$
|
(2,352,775
|
)
|
$
|
(7,508,321
|
)
|
$
|
(2,245,450
|
)
|
||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
Debt converted for shares
|
|
377,500
|
4
|
7,546
|
7,550
|
||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
Shares issued for services rendered and to be rendered
|
|
770,752
|
8
|
69,753
|
69,761
|
||||||||||||||||||||||||||||||
|
Beneficial conversion feature
|
|
174,500
|
174,500
|
||||||||||||||||||||||||||||||||
|
Conversion of Series B shares for common shares
|
(6,000
|
)
|
115,028
|
1
|
(1)
|
-
|
|||||||||||||||||||||||||||||
|
Rounding
|
(1)
|
1
|
-
|
||||||||||||||||||||||||||||||||
|
Net loss
|
|
(391,699
|
)
|
(391,699
|
)
|
||||||||||||||||||||||||||||||
|
Balance, April 30, 2011
|
84,000
|
$
|
1
|
3,431,834
|
$
|
34
|
$
|
1
|
$
|
7,867,421
|
$
|
(2,744,474
|
)
|
$
|
(7,508,321
|
)
|
$
|
(2,385,338
|
)
|
||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Todays Alternative Energy Corporation
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
Six Months Ended
April 30,
|
From Inception of
Development Stage
on November 1, 2007
Through April 30,
|
|||||||||||
|
2011
|
2010
|
2011
|
||||||||||
|
CASH FLOWS FROM OERATING ACTIVITIES
|
||||||||||||
|
Net loss
|
$ | (391,699 | ) | $ | (414,241 | ) | $ | (2,744,474 | ) | |||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||||||
|
Depreciation and amortization
|
- | - | 3,570 | |||||||||
|
Loss on disposition of fixed assets
|
- | - | 3,320 | |||||||||
|
Beneficial conversion feature expense
|
86,390 | 186,245 | 631,165 | |||||||||
|
Shares issued for services rendered
|
67,261 | - | 554,401 | |||||||||
|
Shares issued for legal settlement
|
- | - | 92,000 | |||||||||
|
Shares to be issued for officer’s compensation
|
- | - | 1 | |||||||||
|
Shares issued for interest payment
|
- | - | 68,250 | |||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Prepaid expenses
|
975 | - | 1,512 | |||||||||
|
Other assets
|
(54,000 | ) | - | (54,000 | ) | |||||||
|
Accounts payable and accrued expenses
|
104,959 | 74,287 | 589,779 | |||||||||
|
Due to officer
|
5,613 | - | 5,613 | |||||||||
|
Net cash used in operating activities
|
(180,501 | ) | (153,709 | ) | (848,863 | ) | ||||||
|
Net cash used in investing activities
|
- | - | - | |||||||||
|
Cash flows from financing activities:
|
||||||||||||
|
Proceeds from advance payable
|
10,000 | - | 10,000 | |||||||||
|
Proceeds from notes payable
|
174,500 | 163,238 | 891,194 | |||||||||
|
Payments on notes payable
|
- | (5,475 | ) | (48,922 | ) | |||||||
|
Net cash provided by financing activities
|
184,500 | 157,763 | 852,272 | |||||||||
|
Net increase in cash
|
3,999 | 4,054 | 3,409 | |||||||||
|
Cash and cash equivalents – beginning
|
4,446 | 3,423 | 5,036 | |||||||||
|
Cash and cash equivalents – ending
|
$ | 8,445 | $ | 7,477 | $ | 8,445 | ||||||
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW:
|
||||||||||||
|
Interest paid
|
$ | - | $ | - | $ | - | ||||||
|
Income taxes paid
|
$ | - | $ | - | $ | - | ||||||
|
NON CASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||||||
|
Contribution of accrued salaries by former officers
|
$ | - | $ | - | $ | 394,679 | ||||||
|
Accrued expenses forgiven by former officer
|
$ | - | $ | - | $ | 1,666 | ||||||
|
Common stock issued for services to be rendered
|
$ | 2,500 | $ | - | $ | 2,500 | ||||||
|
Debt converted to equity
|
$ | 7,550 | $ | - | $ | 169,615 | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
TODAYS ALTERNATIVE ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED APRIL 30, 2011 AND 2010
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Todays Alternative Energy Corporation (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the unaudited condensed consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the fiscal year ended October 31, 2010 as reported in the 10-K have been omitted.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Guaranteed Enzyme Miracle Corporation (“GEM”) and Bio-Extraction Services, Inc. (“BESI”). Significant inter-company accounts and transactions have been eliminated.
Nature of Business and History of Company
The Company business has two primary opportunities that it is developing. The Company has a green cleaning products business that is organized to use its scientific formulations to manufacture and sell a new line of powerful industrial strength environmentally friendly biodegradable cleaning products that contain natural non-toxic ingredients. The Company has a biodiesel business that is organized to use its extraction technology to convert waste cooking oil and grease into a biodiesel fuel ingredient that it intends to sell to biodiesel fuel producers. The Company’s biodiesel business is designed to eliminate environmental issues associated with disposing of waste cooking oil and grease.
Corporate Changes
On April 19, 2010, holders of the majority of the voting power of the outstanding stock of Bio-Solutions Manufacturing, Inc. as of April 16, 2010, voted in favor of changing the Company’s name to Todays Alternative Energy Corporation. On June 9, 2010, the Company filed a certificate of amendment with the Secretary of State of Nevada in order to effect the name change.
On May 20, 2011, the Company filed a certificate of amendment to its Certificate of Incorporation with the Secretary of State of Nevada to effectuate a reverse stock split on a 1 to 20 basis. Each holder of common stock received 1 share of the Company’s common stock for each 20 shares of the Company’s common stock held. Fractional shares were rounded up to the nearest whole share. All per share numbers quoted herein are reflective of the 1:20 reverse split. All common stock and related information have been retroactively restated.
Development Stage Company
As a result of impairing the value of the Company’s intangible assets, at October 31, 2007, the Company began implementing new plans to enter the biodiesel fuel market on November 1, 2007. As a result, the Company is a development stage enterprise, as defined by Accounting Standards Codification (the “Codification” or “ASC”) 915-10. The Company is devoting all of its present efforts in securing and establishing a new business, and its planned principle operations have not commenced, and, accordingly, no revenue has been derived during the organization period. From its inception of development stage through the date of these financial statements, the Company has not generated any revenues and has incurred significant operating expenses. Consequently, its operations are subject to all risks inherent in the establishment of a new business enterprise. For the period from November 1, 2007 (the inception of development stage) through April 30, 2011, the Company has accumulated losses of $2,744,474.
7
Use of Estimates
The preparation of the financial statement in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Loss per Share
Basic and diluted loss per share amounts are computed based on net loss divided by the weighted average number of common shares outstanding. Potentially dilutive shares of common stock realizable from the conversion of our convertible debentures of 2,904,888,118 and 1,624,966,664, respectively at April 30, 2011 and 2010, are excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive.
Reclassifications
Certain reclassifications have been made in prior year's financial statements to conform to classifications used in the current year.
Recent Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the results of its operations.
Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. Going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time. The Company has incurred losses since inception and has negative cash flows from operations. For the three and six months ended April 30, 2011, the Company has incurred net losses of $163,700 and $391,699, respectively and has a stockholders’ deficit of $2,385,338 as of April 30, 2011. The future of the Company is dependent upon its ability to obtain additional equity or debt financing and upon future successful development and marketing of the Company’s products and services. Management is pursuing various sources of equity and debt financing. Although the Company plans to pursue additional financing, there can be no assurance that the Company will be able to secure such financing or obtain financing on terms beneficial to the Company. Failure to secure such financing may result in the Company’s inability to continue as a going concern and the impairment of the recorded long lived assets.
As of April 30, 2011, the Company employees consist of its Chief Executive Officer and a vice president. To conserve cash, minimize borrowing and minimize overhead costs, the Company is outsourcing certain administrative and operating activities under an arrangement that allows it to pay for the services with shares of the Company’s common stock. The Company continues to need to borrow cash from time to time in order to pay its operating costs while it seeks substantial financing needed to generate sales from its Biodiesel Division and Cleaning Division. The Company anticipates future losses from operations as a result of ongoing overhead expenses incurred while it attempts to resume selling activities.
These unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classifications of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
8
Accrued expenses are comprised of the following:
|
April 30,
2011
|
October 31,
2010
|
|||||||
|
(unaudited)
|
||||||||
|
Accounts payable
|
$
|
245,482
|
$
|
261,539
|
||||
|
Salaries
|
59,298
|
66,814
|
||||||
|
Interest
|
447,008
|
387,186
|
||||||
|
Payroll taxes
|
70,182
|
74,367
|
||||||
|
Professional fees
|
147,390
|
77,992
|
||||||
|
Other
|
19,793
|
16,296
|
||||||
|
Total
|
$
|
989,153
|
$
|
884,194
|
||||
NOTE 3 – ADVANCE PAYABLE
As of April 30, 2011, the Company owed $10,000 to a note holder for cash advanced to the Company for operating purposes. The advance accrues interest at 10% per annum and is repayable on demand.
NOTE 4 – CONVERTIBLE NOTES PAYABLE
|
April 30,
2011
|
October 31,
2010
|
|||||||
|
(unaudited)
|
||||||||
|
Convertible notes payable:
|
||||||||
|
Convertible promissory note (a)
|
$
|
1,400,070
|
$
|
1,333,120
|
||||
|
Convertible promissory note (b)
|
400
|
400
|
||||||
|
Convertible promissory note (c)
|
33,645
|
33,645
|
||||||
|
Convertible promissory note (d)
|
30,000
|
-
|
||||||
|
Convertible promissory note (e)
|
40,000
|
-
|
||||||
|
Convertible promissory note (f)
|
30,000
|
-
|
||||||
|
1,534,115
|
1,367,165
|
|||||||
|
Less: discount on debt
|
(88,110
|
)
|
-
|
|||||
|
1,446,005
|
1,367,165
|
|||||||
|
Less: current portion
|
(1,434,115
|
)
|
(1,367,165
|
)
|
||||
|
Long term debt
|
$
|
11,890
|
$
|
-
|
||||
|
|
a)
|
On November 29, 2006, the Company entered into a loan agreement with certain existing third-party lenders and a new lender, pursuant to which the Company borrowed approximately $164,000 and certain outstanding debt obligations were amended and restated. Under the loan agreement, the existing lenders received amended and restated secured convertible promissory notes in the aggregate principal amounts of $537,955 and $264,625, respectively, and the new lender received a convertible promissory note in the aggregate principal amount of $164,000. Under the loan agreement and the notes, each lender may, in its sole and absolute discretion, make additional loans to the Company, up to an aggregate total of $1,000,000 per lender. Each note was convertible into shares of the Company’s common stock at a conversion rate equal to the lower of (a) $0.05 per share, or (b) seventy percent (70%) of the three day average of the closing bid price of the Company’s common stock immediately prior to conversion, although such conversions could not be less than $0.01 per share, in any circumstances. In May 2008, the conversion price was amended to provide a fixed conversion price of $0.001 per share. In addition, the note holders cannot convert any principal or interest under the notes to the extent that such conversion would require the Company to issue shares of its common stock in excess of its authorized and unissued shares of common stock. The notes were transferred to a single entity. Each note accrues interest at an annual rate of eight percent (8%) and is payable on demand. During the six months ended April 30, 2011, the note holder converted $7,550 of note principal into 377,500 shares of Company common stock.
|
9
|
|
b)
|
On July 14, 2009, an unrelated third party investor acquired an interest in the November 26, 2006 loan agreement from the existing lender, since which the investor has made various conversions to the principal and interest outstanding.
|
|
|
c)
|
On May 26, 2010, an unrelated third party investor acquired an interest in the November 26, 2006 loan agreement from the existing lender, since which the investor has made various conversions to the principal and interest outstanding.
|
|
|
d)
|
On December 24, 2010, the Company sold and issued a convertible promissory note in the aggregate principal amount of $30,000 to a certain investor. The note matures on the two-year anniversary of the date of issuance and accrues interest at an annual rate of ten percent (10%). The note is payable in full on the maturity date unless previously converted into shares of Company common stock at a conversion price of $0.0001 per share. The Company recognized and measured an aggregate of $30,000 of the proceeds, which is equal to the intrinsic value of the imbedded beneficial conversion feature, to additional paid in capital and a discount against the note issued, with the discount being amortized over the note’s two-year term.
|
|
|
e)
|
On January 25, 2011, the Company sold and issued a convertible promissory note in the aggregate principal amount of $40,000 to a certain investor. The note matures on the two-year anniversary of the date of issuance and accrues interest at an annual rate of ten percent (10%). The note is payable in full on the maturity date unless previously converted into shares of Company common stock at a conversion price of $0.0001 per share. The Company recognized and measured an aggregate of $40,000 of the proceeds, which is equal to the intrinsic value of the imbedded beneficial conversion feature, to additional paid in capital and a discount against the note issued, with the discount being amortized over the note’s two-year term.
|
|
|
f)
|
On February 25, 2011, the Company sold and issued a convertible promissory note in the aggregate principal amount of $30,000 to a certain investor. The note matures on the two-year anniversary of the date of issuance and accrues interest at an annual rate of ten percent (10%). The note is payable in full on the maturity date unless previously converted into shares of Company common stock at a conversion price of $0.0001 per share. The Company recognized and measured an aggregate of $30,000 of the proceeds, which is equal to the intrinsic value of the imbedded beneficial conversion feature, to additional paid in capital and a discount against the note issued, with the discount being amortized over the note’s two-year term.
|
Beneficial conversion feature expenses of $9,906 and $86,390 were recorded in the three and six months ended April 30, 2011, respectively and $631,165 was recorded from November 1, 2007 (the inception of development stage) through April 30, 2011, all of which were attributed to these loan agreements.
Beneficial conversion feature expenses of $113,644 and $186,244 were recorded in the three and six months ended April 30, 2010, respectively and $461,411 was recorded from November 1, 2007 (the inception of development stage) through April 30, 2010, all of which were attributed to these loan agreements.
NOTE 5 - EQUITY TRANSACTIONS
Preferred Stock
During the six months ended April 30, 2011, a Series B preferred stock holder converted 6,000 shares of Series B Preferred Stock into 92,855 shares of common stock.
Common Stock
On March 16, 2011, the Company adopted its 2011 Equity Incentive Plan (“2011 Plan”). The Company is permitted to issue up to 1,250,000 shares of common stock under the Plan in the form of stock options, restricted stock awards, and stock awards to directors, officers, consultants, advisors and employees of the Company.
During the six months ended April 30, 2011, the Company issued 115,028 shares of common stock, including 22,173 common stock to be issued, in exchange for the conversion of Series B Preferred Stock.
As of April 30, 2011 and October 31, 2010, there were 3,431,834 and 2,168,554 shares of Company common stock issued and outstanding, respectively.
10
Warrants
During the six months ended April 30, 2011 and 2010, the Company did not issue any stock warrants or options. As of April 30, 2011, no warrants or options are outstanding.
NOTE 6 - RELATED PARTY TRANSACTIONS
On November 9, 2010, Len Amato was appointed as the Company’s Chairman of the Board of Directors, President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer. From 2007 to October 2010, Mr. Amato was a managing member of Interstellar Holdings, LLC, an investment banking firm that has provided financing under the Company’s November 29, 2006 loan agreement.
On December 20, 2010, the former Chief Financial Officer sold 10,000 shares of her Series A Preferred Stock in a private transaction to the Company’s current President, Chief Executive Officer and Chief Financial Officer.
At April 30, 2011, the Company owed its president $5,613 for invoices that he paid on its behalf.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Operating Leases
In October 2010, the Company entered into a 64 month lease agreement for a 14,833 square foot facility in San Antonio, Texas. The lease contains real estate tax and operating escalations and a termination option after the third year. Monthly rental payments start five months after completion of leasehold improvements to the facility and receipt of a certificate of occupancy.
Rent expense for the three and six months ended April 30, 2011 and 2010 was $0.
NOTE 8 – SUBSEQUENT EVENTS
Since April 30, 2011, the Company has issued 206,699 shares of Company common stock in satisfaction of notices to convert 2,000 shares of Series B Preferred Stock.
On May 20, 2011, the Company filed a certificate of amendment to its Certificate of Incorporation with the Secretary of State of Nevada to effectuate a reverse stock split on a 1 to 20 basis. Each holder of common stock received 1 share of the Company’s common stock for each 20 shares of the Company’s common stock held. Fractional shares were rounded up to the nearest whole share. All per share numbers quoted herein are reflective of the 1:20 reverse split. All common stock and related information have been retroactively restated.
11
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this report. This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The statements contained in this report that are not historic in nature, particularly those that utilize terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “estimates,” “believes,” or “plans” or comparable terminology are forward-looking statements based on current expectations and assumptions.
Various risks and uncertainties could cause actual results to differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from expectations include, but are not limited to, those set forth under the section “Risk Factors” set forth in this report.
The forward-looking events discussed in this report, the documents to which we refer you and other statements made from time to time by us or our representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us. For these statements, we claim the protection of the “bespeaks caution” doctrine. All forward-looking statements in this document are based on information currently available to us as of the date of this report, and we assume no obligation to update any forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.
General
Todays Alternative Energy Corporation (the “Company” or “we”) has two primary business opportunities. Our green cleaning products business is organized to use our scientific formulations to manufacture and sell a new line of powerful industrial strength environmentally friendly biodegradable cleaning products that contain natural non-toxic ingredients. Our biodiesel business is organized to use extraction technology to convert waste cooking oil and grease into a biodiesel fuel ingredient for sale to biodiesel fuel producers. Our biodiesel business is designed to eliminate environmental issues associated with disposing of waste cooking oil and grease.
On June 9, 2010, we changed our name from “Bio Solutions Manufacturing, Inc.” to “Todays Alternative Energy Corporation” to better reflect the direction of our business.
On July 1, 2010, we announced plans to brand our new line of industrial strength, environmentally friendly biodegradable cleaning products with the GEM name, a Company-owned brand. The GEM brand name and the accompanying tagline, "Guaranteed Enzyme Miracle," call attention to the natural enzymes and other eco-friendly industrial strength ingredients in GEM cleansers that safely and quickly remove oil, grease and other stains. GEM products contain no ammonia, phosphates, dyes, artificial scents or toxins, and are biodegradable. GEM products are designed to enter a large expanding market for green cleaners through direct marketing and retail sales.
On October 6, 2010, we formed Guaranteed Enzyme Miracle Corporation, a Texas corporation, to operate our green cleaning products business.
In October 2010, we entered into a lease agreement for a facility in San Antonio, Texas for the manufacture of GEM products using our scientific formulations. In June 2011, the landlord informed us of an approximately $100,000 increase in anticipated costs to build our manufacturing facility. We are currently reviewing the anticipated cost overrun and our options.
12
Critical Accounting Policies
Our discussion and analysis of our financial conditions and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of financial statements requires managers 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 the following critical accounting policies affect our more significant judgments and estimates in the preparation of our unaudited condensed consolidated financial statements.
Going Concern
The unaudited condensed consolidated financial statements contained in this report have been prepared assuming that we will continue as a going concern. Going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time. We have incurred losses since inception and have negative cash flows from operations. For the years ended October 31, 2010 and 2009, we incurred net losses of $833,129 and $927,207, respectively, and we have a stockholders’ deficit of $2,245,450 as of October 31, 2010. For the three months ended April 30, 2011 and 2010, we incurred net losses of $163,700 and $204,636, respectively, and for the six months ended April 30, 2011 and 2010, we incurred net losses of $391,699 and $414,241, respectively and we have a stockholders’ deficit of $2,385,338 as of April 30, 2011. Our future is dependent upon our ability to obtain additional equity or debt financing and upon future successful development and marketing of our products and services. Management is pursuing various sources of equity and debt financing. Although we plan to pursue additional financing, there can be no assurance that we will be able to secure such financing or obtain financing on terms beneficial to us. Failure to secure such financing may result in our inability to continue as a going concern and the impairment of the recorded long lived assets.
To conserve cash, minimize borrowing and minimize overhead costs, we are outsourcing certain administrative and operating activities under an arrangement that allows us to pay for the services with shares of our common stock. We continue to need to borrow cash from time to time in order to pay our operating costs while we seek substantial financing needed to generate sales from our Biodiesel Division and Cleaning Division. We anticipate future losses from operations as a result of ongoing overhead expenses incurred while we attempt to resume selling activities.
The financial statements contained in this report do not include any adjustments relating to the recoverability and classifications of recorded assets, or the amounts and classification of liabilities that might be necessary in the event we cannot continue in existence.
Revenue Recognition
Sales are recorded at the time title passes to the customer, which, based on shipping terms, generally occurs when the product is shipped to the customer. Based on prior experience, we reasonably estimate our sales returns and warranty reserves and both are recorded when such reserve estimates are required. Due to lack of sales, there currently are no such reserves recorded for sales returns or warranty reserves. Sales are presented net of discounts and allowances.
Results of Continuing Operations
Basis of Presentation
The results of operations set forth below for the six months ended April 30, 2011 and 2010 and for the period from November 1, 2007 (inception of development stage) through April 30, 2011 are those of the continuing operations of Todays Alternative Energy Corporation which includes GEM and BESI on a consolidated basis.
13
The following table sets forth, for the periods indicated, certain selected unaudited financial data from continuing operations:
|
Six Months Ended
April 30,
|
From Inception of
Development
Stage on
November 1, 2007
Through
|
|||||||||||
|
2011
|
2010
|
April 30, 2011
|
||||||||||
|
Net sales
|
$ | - | $ | - | $ | - | ||||||
|
Cost of sales
|
- | - | - | |||||||||
|
Gross profit
|
- | - | - | |||||||||
|
Selling, general and administrative
|
245,308 | 180,549 | 1,749,608 | |||||||||
|
Operating loss
|
$ | (245,308 | ) | $ | (180,549 | ) | $ | (1,749,608 | ) | |||
Comparison of the Three Months Ended April 30, 2011 and 2010
Net sales. Net sales from operations were $0 for the three months ended April 30, 2011 and 2010.
Selling, general, and administrative. Selling, general, and administrative expenses were $123,146 for the three months ended April 30, 2011 compared to $66,635 for the three months ended April 30, 2010. The increase of $56,511 or 84.8% was primarily due to a one-time elimination of a number of accounts payable in the three months ended April 30, 2010 for which we were no longer liable as a result of individual settlements with vendors and the assumption by other parties in accordance with the terms of our Settlement Agreement dated October 22, 2007. The elimination of the accounts payable reduced selling, general and administrative expenses for the three months ended April 30, 2010 on a one-time basis. Excluding the effects of the one-time elimination of accounts payable, the level of selling, general and administrative expenses for the comparable three-month periods was substantially the same.
Operating loss. Operating losses incurred were $123,146 for the three months ended April 30, 2011 compared to $66,635 for the three months ended April 30, 2010. The increase of $56,511 or 84.8% was primarily due to a one-time elimination of a number of accounts payable in the three months ended April 30, 2010 for which we were no longer liable as a result of individual settlements with vendors and the assumption by other parties in accordance with the terms of our Settlement Agreement dated October 22, 2007 The elimination of the accounts payable reduced selling, general and administrative expenses for the three months ended April 30, 2010 on a one-time basis. Excluding the effects of the one-time elimination of accounts payable, the operating loss for the comparable three-month periods was substantially the same.
Loss from Beneficial Conversion Feature. Loss from beneficial conversion features was $9,906 for the three months ended April 30, 2011 compared to $113,644 for the three months ended April 30, 2010. The decrease of $103,738 or 91.3% was primarily due to was due to the reduction in new borrowings during the current three- month period.
Interest expense. Interest expense was $30,648 for the three months ended April 30, 2011 compared to $24,357 for the three months ended April 30, 2010. The increase of $6,291 or 25.8% was primarily due to our having a greater amount of outstanding borrowings during the current three-month period.
Comparison of the Six Months Ended April 30, 2011 and 2010
Net sales. Net sales from operations were $0 for the six months ended April 30, 2011 and 2010.
Selling, general, and administrative. Selling, general, and administrative expenses were $245,308 for the six months ended April 30, 2011 compared to $180,549 for the six months ended April 30, 2010. The increase of $64,759 or 35.9% was primarily due to a one-time elimination of a number of accounts payable in the six months ended April 30, 2010 for which we were no longer liable as a result of individual settlements with vendors and the assumption by other parties in accordance with the terms of our Settlement Agreement dated October 22, 2007. The elimination of the accounts payable reduced selling, general and administrative expenses for the six months ended April 30, 2010 on a one-time basis. Excluding the effects of the one-time elimination of accounts payable, the level of selling, general and administrative expenses for the comparable six-month periods was substantially the same.
14
Operating loss. Operating losses incurred were $245,308 for the six months ended April 30, 2011 compared to $180,549 for the six months ended April 30, 2010. The increase of $64,759 or 35.9% was primarily due to a one-time elimination of a number of accounts payable in the six months ended April 30, 2010 for which we were no longer liable as a result of individual settlements with vendors and the assumption by other parties in accordance with the terms of our Settlement Agreement dated October 22, 2007. The elimination of the accounts payable reduced selling, general and administrative expenses for the six months ended April 30, 2010 on a one-time basis. Excluding the effects of the one-time elimination of accounts payable, the operating loss for the comparable six-month periods was substantially the same.
Loss from Beneficial Conversion Feature. Loss from beneficial conversion features was $86,390 for the six months ended April 30, 2011 compared to $186,244 for the six months ended April 30, 2010. The decrease of $99,854 or 53.6% was primarily due to was due to the reduction in new borrowings during the current six- month period.
Interest expense. Interest expense was $60,001 for the six months ended April 30, 2011 compared to $47,448 for the six months ended April 30, 2010. The increase of $12,553 or 26.5% was primarily due to our having a greater amount of outstanding borrowings during the current six-month period.
Liquidity and Capital Resources
We have financed our operations, acquisitions, debt service, and capital requirements through cash flows generated from debt financing, and issuance of equity securities. Our working capital deficit at April 30, 2011 was $2,427,448 and $2,245,450 at October 31, 2010. We had cash of $8,445 at April 30, 2011 and $4,446 as of October 31, 2010.
We used $180,501 of net cash from operating activities for the six months ended April 30, 2011, compared to $153,709 in the six months ended April 30, 2010.
Net cash flows used in investing activities was $0 for the six months ended April 30, 2011, compared to $0 in the six months ended April 30, 2010.
Net cash flows provided by financing activities were $184,500 for the six months ended April 30, 2011, compared to $157,763 in the six months ended April 30, 2010. The net cash provided by financing activities is from the proceeds from our lines of credit, notes and advance payable, which are net of repayments.
Loan Agreement
On November 29, 2006, we entered into two separate loan agreement with certain lenders that provided for the potential for us to borrow up to $1,000,000 under each loan agreement. Under the loan agreements, the lenders received convertible promissory notes in the aggregate principal amounts of $164,000, $537,955 and $264,625, respectively, for loans made prior to the November 29, 2006 loan agreements. As a result of subsequent agreements between the lenders, a single lender now holds both $1,000,000 loan agreements. The lender may, in its sole and absolute discretion, make additional loans to us, up to an aggregate total of $2,000,000. Borrowings under the loan agreements bear interest at the rate of eight percent (8%) per annum and are payable on demand. Outstanding principal and accrued interest is also convertible into shares of our common stock at a fixed conversion rate of $0.001 per share as a result of a May 2008 amendment to the loan agreements. In addition, the lender cannot convert any principal or interest to the extent that such conversion would require us to issue shares of our common stock in excess of our authorized and unissued shares of common stock. The notes are secured by a first priority security interest in all of our assets. By their terms, the holder of the notes may not convert the notes to the extent such conversion would cause the holder to have acquired a number of shares of common stock that would exceed 4.99% of our then outstanding common stock. Since July 2009, third party investors have acquired $41,000 in principal under the loan agreement. We have reduced the amount of unpaid principal and interest under the loan agreement through issuances of our common stock in satisfaction of conversion requests.
15
On December 24, 2010, January 25, 2011 and February 25, 2011, we sold and issued convertible promissory note in the aggregate principal amounts of $30,000, $40,000 and $30,000, respectively, to a certain investor. The notes mature on the two-year anniversary of the respective dates of issuance and accrue interest at an annual rate of ten percent. The notes are payable in full on the maturity dates unless previously converted into shares of our common stock at a conversion price of $0.0001 per share. The $100,000 in aggregate proceeds are being used to fund the development of our business along with a $10,000 advance we received from a lender in April 2011.
Capital Requirements
The report of our independent accountants for the fiscal year ended October 31, 2010 states that we have incurred operating losses since inception and requires additional capital to continue operations, and that these conditions raise substantial doubt about our ability to continue as a going concern.
As of April 30, 2011, we had a working capital deficit of $2,427,448. Currently, we do not generate any revenues. To operate our biodiesel fuel ingredient production business, we need to construct or lease biodiesel plants and we will not generate any revenues from this business until we have established plants that are operational. The expected cost to build each biodiesel plant is $2.5 million and we do not have the capital to build such plants. In our green cleaning products business, we need to complete the build out of our leased space in San Antonio, Texas and buy production equipment in order to begin producing cleaning products to sell. We expect to begin generating revenues in our green cleaning products business once the production facility is fully operational and our sales and marketing campaigns our launched in our fiscal third quarter ended July 31, 2011. The expected cost to open a production facility is $400,000 and we are seeking the capital to begin buying production equipment. We raised $100,000 from the sales of convertible notes to an investor and expect to raise the remaining funds needed through additional sales of convertible notes. If we cannot raise additional debt and/or equity capital, we will be unable to generate any revenues.
We believe that, as of the date of this report, our existing working capital and cash flows generated from operations will be insufficient to fund our plan of operations over the next 12 months, and accordingly, we will need to continue to obtain additional financing.
As set forth above, we have entered into a secured loan agreement with a third party lender, under which the lender, in its sole and absolute discretion, can lend to us up to $2,000,000. However, such loans are completely discretionary with the lender, and as of the date hereof, we have received no commitment from the lender to advance us additional funds under the terms of the loan agreement or under new terms. In April 2011, we obtained a $10,000 advance from the third party lender. We sold unsecured convertible notes to an investor and seek to sell additional unsecured convertible notes, and as of the date hereof, we have received no firm commitment from investors to purchase additional notes from us.
In the event that our lenders do not advance us additional funds under the loan agreement and investors do not purchase additional unsecured convertible notes, we would need to seek additional debt or equity financing, strategic alliance, or a joint venture. Such additional financing, alliances, or joint venture opportunities might not be available to us, when and if needed, on acceptable terms or at all. If we are unable to obtain additional financing in sufficient amounts or on acceptable terms under such circumstances, our operating results and prospects could be adversely affected. In addition, any debt financings or significant capital expenditures require the written consent of our existing lenders.
We intend to retain any future earnings to retire debt, finance the expansion of our business and any necessary capital expenditures, and for general corporate purposes. The loan agreement with our lenders contains restrictions as to the payment of dividends.
Off-Balance Sheet Arrangements
None.
16
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information required by this item.
ITEM 4 – CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Pursuant to Rule 13a-15(b) under the Exchange Act, the Company's management, consisting of Len Amato, the Company’s Chief Executive Officer and Chief Financial Officer (“CEO/CFO”), carried out an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the three months ended April 30, 2011. Based upon that evaluation, the Company's CEO/CFO concluded that the Company's disclosure controls and procedures are not effective to ensure that information requiring disclosure by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company’s CEO/CFO, as appropriate, to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROLS
Our management, consisting of our CEO/CFO, performed an evaluation to determine whether any change in our internal controls over financial reporting occurred during the three month period ended April 30, 2011. Based on that evaluation, our CEO/CFO concluded that no change occurred in the Company's internal controls over financial reporting during the three months ended April 30, 2011, that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.
PART II: OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS
From time to time, the Company may become involved in litigation relating to claims arising out of its operations in the normal course of business. We are not currently involved in any pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on the Company.
ITEM 1A – RISK FACTORS
As a “small reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended April 30, 2011, the Company issued 262,500 shares of common stock in payment of principal due on an unregistered convertible promissory note (after giving effect to reverse split of the Company’s common stock on a 1 for 20 basis). The note and the shares were issued in a transaction that was exempt from the registration requirements of the Securities Act pursuant to Section 4(2) of the Securities Act, which exempts transactions of an issuer not involving a public offering.
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During the three months ended April 30, 2011, the Company issued 39,385 shares of common stock (after giving effect to reverse split of the Company’s common stock on a 1 for 20 basis) in conversion of shares of Series B preferred stock. The preferred and common shares were issued in a transaction that was exempt from the registration requirements of the Securities Act pursuant to Section 4(2) of the Securities Act, which exempts transactions of an issuer not involving a public offering.
ITEM 3 – DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4 – REMOVED AND RESERVED
ITEM 5 – OTHER INFORMATION
None.
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a.
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(a)
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The following exhibits are filed with this report.
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31.1
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Certification by Chief Executive Officer and Chief Financial Officer pursuant to Sarbanes Oxley Section 302.
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32.1
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Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S. C. Section 1350.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Dated: June 13, 2011
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/s/ Len Amato
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By: Len Amato
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Its: Chief Executive Officer, President, Chief Financial Officer and Director
(Principal Executive Officer and Principal Financial and Accounting Officer)
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