BlackRidge Technology International, Inc. - FORM 10-Q

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - BlackRidge Technology International, Inc.	Financial_Report.xls
EX-31.1 - SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE AND CHIEF FINANCIAL OFFICER - BlackRidge Technology International, Inc.	ex31-1.htm
EX-32.1 - SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER - BlackRidge Technology International, Inc.	ex32-1.htm
EX-10.1 - PROMISSORY NOTE DATED JULY 21, 2011 - BlackRidge Technology International, Inc.	ex10-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2011

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ___________ to __________

Commission File No. 0-18958

Grote Molen, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Nevada		20-1282850
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

322 West Griffith Road
Pocatello, Idaho 83201
(Address of principal executive offices, including zip code)

(208) 234-9352
(Registrant’s telephone number, including area code)

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 ý 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 ý 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. (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company ý

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No ý

As of November 10, 2011, there were 21,000,000 shares of the Registrant’s common stock, $0.001 par value per share, outstanding.

GROTE MOLEN, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2011

PART I - Financial Information

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of September 30, 2011 (unaudited) and December 31, 2010	2
	Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2011 and 2010 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010 (unaudited)	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15

Item 4.	Controls and Procedures	15


PART II - Other Information

Item 1.	Legal Proceedings	16

Item 1A.	Risk Factors	16

Item 2.	.Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 3.	Defaults upon Senior Securities	16

Item 4.	(Removed and Reserved)	16

Item 5.	Other Information	16

Item 6.	Exhibits	17

Signatures		18

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

GROTE MOLEN, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2011		December 31, 2010
ASSETS	(Unaudited)
Current Assets:
Cash	$	178,553	$	111,759
Accounts Receivable		48,318		28,466
Inventories		137,622		160,347
Deposits		364,413		384,544
Prepaid Expenses		1,900		2,131

Total Current Assets		730,806		687,247

Property and Equipment, net		7,750		8,916
Intangible Assets, net		4,819		5,608

Total Assets	$	743,375	$	701,771

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$	29,374	$	30,685
Accrued Interest Payable – Related Parties		22,270		18,452
Accrued Interest Payable		950		-
Current Portion of Long-Term Debt – Related Party		36,524		2,917
Notes Payable – Related Parties		95,627		95,627
Notes Payable		35,000		-

Total Current Liabilities		219,745		147,681

Long-Term Debt – Related Party		144,750		191,170

Total Liabilities		364,495		338,851

Stockholders’ Equity:
Preferred Stock, $.001 Par Value, 5,000,000 Shares Authorized, No Shares Issued and Outstanding		-		-
Common Stock, $.001 Par Value, 100,000,000 Shares Authorized, 21,000,000 Shares Issued and Outstanding		21,000		21,000
Additional Paid-In Capital		89,000		89,000
Retained Earnings		268,880		252,920

Total Stockholders’ Equity		378,880		362,920

Total Liabilities and Stockholders’ Equity	$	743,375	$	701,771

See Notes to Condensed Consolidated Financial Statements

GROTE MOLEN, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010


Sales	$	370,384		$	284,253		$	1,254,792		$	812,230

Cost of Sales		267,857			210,714			904,356			564,141

Gross Profit		102,527			73,539			350,436			248,089

Operating Costs and Expenses:
General and Administrative		104,205			97,447			311,910			220,748
Depreciation and Amortization		627			608			1,955			1,824

Total Operating Costs and Expenses		104,832			98,055			313,865			222,572

Income (Loss) From Operations		(2,305	)		(24,516	)		36,571			25,517

Other Expense: Interest Expense – Related Parties		4,505			4,468			13,816			13,441
Interest Expense		618			-			950			-

Total Other Expense		5,123			4,468			14,766			13,441

Income (Loss) Before Income Taxes		(7,428	)		(28,984	)		21,805			12,076

Income Tax (Provision) Benefit		1,202			5,879			(5,845	)		(3,610	)

Net Income (Loss)	$	(6,226	)	$	(23,105	)	$	15,960		$	8,466

Net Income (Loss) Per Common Share -
Basic and Diluted	$	(0.00	)	$	(0.00	)	$	0.00		$	0.00

Weighted Average Shares Outstanding -
Basic and Diluted		21,000,000			21,000,000			21,000,000			21,000,000

See Notes to Condensed Consolidated Financial Statements

GROTE MOLEN, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30,
	2011			2010

Cash Flows from Operating Activities:
Net Income	$	15,960		$	8,466
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities:
Depreciation and Amortization		1,955			1,824
(Increase) Decrease in:
Accounts Receivable		(19,852	)		(13,669	)
Inventories		22,725			(138,616	)
Deposits		20,131			121,471
Prepaid Expenses		231			(9,784	)
Increase (Decrease) in:
Accounts Payable		(1,311	)		(9,701	)
Accrued Interest Payable – Related Parties		3,818			3,206
Accrued Interest Payable		950			-
Income Taxes Payable		-			(9,723	)
Net Cash Provided by (Used in) Operating Activities		44,607			(46,526	)

Cash flows from Investing Activities		-			-

Cash Flows from Financing Activities:
Proceeds from Notes Payable		35,000			-
Repayment of Long-Term Debt – Related Party		(12,813	)		(2,023	)

Net Cash Provided by (Used in) Financing Activities		22,187			(2,023	)

Net Increase (Decrease) in Cash		66,794			(48,549	)

Cash, Beginning of Period		111,759			101,104
Cash, End of Period	$	178,553		$	52,555

See Notes to Condensed Consolidated Financial Statements

GROTE MOLEN, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(AMOUNTS PRESENTED AS OF SEPTEMBER 30, 2011 AND FOR THE THREE MONTHS

AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 ARE UNAUDITED)

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNICANT ACCOUNTING POLICIES

Organization

Grote Molen, Inc. (“Grote Molen”) was incorporated under the laws of the State of Nevada on March 15, 2004. BrownWick, LLC (“BrownWick”), a wholly-owned subsidiary, was formed in the State of Idaho on June 5, 2005. The principal business of Grote Molen and BrownWick (collectively the “Company”) is to distribute grain mills and related accessories for home use.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Grote Molen and BrownWick. All significant inter-company balances and transactions have been eliminated.

Basis of Presentation

The accompanying condensed consolidated financial statements as of September 30, 2011 and for the three months and nine months ended September 30, 2011 and 2010 are unaudited. In the opinion of management, all adjustments have been made, consisting of normal recurring items, that are necessary to present fairly the consolidated financial position as of September 30, 2011 as well as the consolidated results of operations for the three months and nine months ended September 30, 2011 and 2010 and consolidated cash flows for the nine months ended September 30, 2011 and 2010 in accordance with U.S. generally accepted accounting principles. The results of operations for any interim period are not necessarily indicative of the results expected for the full year. The interim condensed consolidated financial statements and related notes thereto should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 2010.

Earnings Per Share

The computation of basic earnings per common share is based on the weighted average number of shares outstanding during the period.

The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the common stock equivalents which would arise from the exercise of stock options and warrants outstanding using the treasury stock method and the average market price per share during the period. Common stock equivalents are not included in the diluted earnings per share calculation when their effect is anti-dilutive. We have not granted any stock options or warrants since inception of the Company.

Comprehensive Income (Loss)

Comprehensive income (loss) is the same as net income (loss).

NOTE 2 – DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS

Accounts receivable consist of the following:

	September 30, 2011		December 31, 2010
	(Unaudited)

Trade accounts receivable – related parties	$	35,222	$	13,205
Trade accounts receivable		8,096		10,261
Employee advances		5,000		5,000

	$	48,318	$	28,466

Property and equipment consist of the following:

	September 30, 2011			December 31, 2010
	(Unaudited)

Office equipment	$	3,527		$	3,527
Warehouse equipment		10,097			10,097
Website development		2,000			2,000

		15,624			15,624
Accumulated depreciation		(7,874	)		(6,708	)

	$	7,750		$	8,916

Intangible assets consist of the following:

	September 30, 2011			December 31, 2010
	(Unaudited)

License	$	10,500		$	10,500
Patent		100			100

		10,600			10,600
Accumulated amortization		(5,781	)		(4,992	)

	$	4,819		$	5,608

NOTE 3 – DEBT

Notes payable – related parties are unsecured and are comprised of the following:

	September 30, 2011		December 31, 2010
	(Unaudited)

Note payable to a stockholder, due on demand, with interest at 6% per annum	$	30,000	$	30,000

Note payable to a stockholder, due on demand, with interest at 6% per annum		3,500		3,500

Note payable to a stockholder, due on demand, with interest at 6% per annum		38,000		38,000

Note payable to a stockholder, due on demand, with interest at 6% per annum		10,000		10,000

Note payable to a stockholder, due on demand, with interest at 6% per annum		5,000		5,000

Non-interest bearing advances from stockholders, with no formal repayment terms		9,127		9,127

Total	$	95,627	$	95,627

The notes payable of $35,000 at September 30, 2011 are comprised of two notes payable to a non-related party, are unsecured, payable upon demand, and bear interest at 8% per annum.

Long-term debt – related party is comprised of the following:

	September 30, 2011			December 31, 2010
	(Unaudited)

Note payable to a stockholder, due in monthly installments of $4,000 through February 2016, with interest at 6.97 % per annum	$	181,274		$	194,087
Less current portion		(36,524	)		(2,917	)

Long-term portion	$	144,750		$	191,170

Effective June 1, 2011, the parties agreed to increase the monthly payment on the long-term debt – related party from $1,362 to $4,000.

Interest expense on related party debt was $4,505 and $4,468 for the three months ended September 30, 2011 and 2010, respectively, and $13,816 and $13,441 for the nine months ended September 30, 2011 and 2010, respectively. Accrued interest payable to related parties was $22,270 and $18,452 at September 30, 2011 and December 31, 2010, respectively.

NOTE 4 – RELATED PARTY TRANSACTIONS

Pursuant to an agreement effective in June 2007, we pay a monthly management fee to a company owned by one of the major stockholders of the Company to manage our day-to-day business activities and to provide business space. We paid monthly management fees in varying amounts to this related party pursuant to prior agreements approved by the stockholders of the Company. The agreement is on a month-to-month basis and can be cancelled at any time by the vote of management. Effective February 1, 2011, the monthly fee was increased to $10,700. Also included in management fees are monthly payments of $150 to another major stockholder of the Company for expense reimbursement. Included in general and administrative expenses were management fees totaling $32,550 and $28,050 for the three months ended September 30, 2011 and 2010, respectively, and $96,150 and $84,150 for the nine months ended September 30, 2011 and 2010, respectively.

Each of the two principal stockholders of the Company own companies that are our customers. Sales to these related parties totaled $37,128 and $21,105 for the three months ended September 30, 2011 and 2010, respectively, or approximately 10% and 7% of total sales, respectively. Sales to these related parties totaled $90,829 and $67,360 for the nine months ended September 30, 2011 and 2010, respectively, or approximately 7% and 8% of total sales, respectively. Accounts receivable from these related parties totaled $35,222 and $13,205 at September 30, 2011 and December 31, 2010, respectively.

See Note 3 for discussion of related party debt and interest expense.

NOTE 5 – CAPITAL STOCK

The Company’s preferred stock may have such rights, preferences and designations and may be issued in such series as determined by our Board of Directors. No shares of preferred stock were issued and outstanding at September 30, 2011 and December 31, 2010.

NOTE 6 – SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION

During the nine months ended September 30, 2011 and 2010, we had no non-cash financing and investing activities.

We paid cash for income taxes of $5,707 and $23,107 for the nine months ended September 30, 2011 and 2010, respectively. We paid cash for interest of $9,998 and $10,236 for the nine months ended September 30, 2011 and 2010, respectively.

NOTE 7 – SIGNIFICANT CUSTOMERS

In addition to the sales to related parties discussed in Note 4, we had sales to one customer that accounted for approximately 9% and 10% of total sales for the three months ended September 30, 2011 and 2010, and 12% and 11% for the nine months ended September 30, 2011 and 2010, respectively.

NOTE 8 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

There were no new accounting pronouncements issued during the nine months ended September 30, 2011 and through the date of this filing that we believe are applicable or would have a material impact on the consolidated financial statements of the Company.

NOTE 9 – SUBSEQUENT EVENTS

We have evaluated events occurring after the date of our accompanying consolidated balance sheets through the date the financial statements were issued. We did not identify any material subsequent events requiring adjustment to or disclosure in our accompanying consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements reflect the Company’s views with respect to future events based upon information available to it at this time. These forward-looking statements are subject to certain uncertainties and other factors that could cause actual results to differ materially from these statements. These uncertainties and other factors include, but are not limited to the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2010 in Part I, Item 1A under the caption “Risk Factors.” The words “anticipates,” “believes,” “estimates,” “expects,” “plans,” “projects,” “targets” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, changes in assumptions, future events or otherwise.

You should read the following discussion in conjunction with our condensed consolidated financial statements, which are included elsewhere in this report. The following information contains forward-looking statements. (See “Forward-Looking Statements” and “Risk Factors.”)

General

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation of financial statements, including the following:

Accounts Receivable

Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts. We determine the allowance for doubtful accounts by identifying potential troubled accounts and by using historical experience and future expectations applied to an aging of accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded as income when received. We determined that no allowance for doubtful accounts was required at September 30, 2011 and December 31, 2010.

Inventories

Inventories, consisting primarily of grain mills, parts and accessories, are stated at the lower of cost or market, with cost determined using primarily the first-in-first-out (FIFO) method. We purchase substantially all inventories from two foreign suppliers, and have been dependent on those suppliers for substantially all inventory purchases since we commenced operations.

Deposits

At times, we are required to pay advance deposits toward the purchase of inventories from our principal suppliers. Such advance payments are recorded as deposits, a current asset in the accompanying condensed consolidated financial statements.

Property and Equipment

Property and equipment are carried at cost, less accumulated depreciation. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets, which range from 3 to 10 years. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed and any resulting gain or loss is recognized in operations for the period. The cost of maintenance and repairs is charged to operations as incurred. Significant renewals and betterments are capitalized.

Intangible Assets

Intangible assets are recorded at cost, less accumulated amortization. Amortization is computed using the straight-line method based on the estimated useful lives or contractual lives of the assets, which range from 10 to 30 years.

Impairment of Long-Lived Assets

We periodically review our long-lived assets, including intangible assets, for impairment when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. No events or changes in circumstances have occurred to indicate that the carrying amount of our long-lived assets may not be recoverable. Therefore, no impairment loss was recognized during the three months and nine months ended September 30, 2011 and 2010.

Revenue Recognition

We record revenue from the sales of grain mills and accessories in accordance with the underlying sales agreements when the products are shipped, the selling price is fixed and determinable, and collection is reasonably assured.

Warranties

We provide limited warranties to our customers for certain of our products sold. We perform warranty work at our service center in Pocatello, Idaho or at other authorized service locations. Warranty expenses have not been material to our condensed consolidated financial statements.

Research and Development Costs

Research and development costs are expensed as incurred in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification™ (“ASC”) Topic 730, Research and Development. The costs of materials and other costs acquired for research and development activities are charged to expense as incurred. Salaries, wages, and other related costs of personnel, as well as other facility operating costs are allocated to research and development expense through management’s estimate of the percentage of time spent by personnel in research and development activities. We had no material research and development costs for the three months and nine months ended September 30, 2011 and 2010.

Income Taxes

We account for income taxes in accordance with FASB ASC Topic 740, Income Taxes, using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

FASB ASC Topic 740, Income Taxes, requires us to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, we must measure the tax position to determine the amount to recognize in our consolidated financial statements. We performed a review of our material tax positions in accordance with recognition and measurement standards established by ASC Topic 740 and concluded we had no unrecognized tax benefit which would affect the effective tax rate if recognized for the three months and nine months ended September 30, 2011 and 2010.

We include interest and penalties arising from the underpayment of income taxes, if any, in our condensed consolidated statements of operations in general and administrative expenses. As of September 30, 2011 and December 31, 2010, we had no accrued interest or penalties related to uncertain tax positions.

Fair Value of Financial Instruments

Our financial instruments consist of cash, accounts receivable, accounts payable and notes payable. The carrying amount of cash, accounts receivable and accounts payable approximates fair value because of the short-term nature of these items. The carrying amount of the notes payable approximates fair value because the interest rates on the notes approximate market rates of interest.

Results of Operations

Sales

Our business is not seasonal; however, our quarterly sales, including sales to related parties, may fluctuate materially from period to period. At times, we have historically derived a significant portion of our revenues from sales to related parties. Each of our two principal stockholders own companies that are significant customers. Our sales have been comprised of the following:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010

Sales	$	333,256	$	263,148	$	1,163,963	$	744,870
Sales – related parties		37,128		21,105		90,829		67,360

Total sales	$	370,384	$	284,253	$	1,254,792	$	812,230

Sales to related parties represented approximately 10% and 7% of total sales for the three months ended September 30, 2011 and 2010, and 7% and 8% for the nine months ended September 30, 2011 and 2010, respectively.

Our total sales increased $86,131, or approximately 30%, during the three months ended September 30, 2011 compared to the three months ended September 30, 2010, and increased $442,562, or approximately 54%, during the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010. The increase in sales is due primarily to the successful marketing of our hand operated grain mills.

Cost of Sales

Cost of sales for the three months ended September 30, 2011 was $267,857, compared to $210,714 for the three months ended September 30, 2010, an increase of $57,143, or approximately 27%. Cost of sales for the nine months ended September 30, 2011 was $904,356, compared to $564,141 for the nine months ended September 30, 2010, an increase of $340,215, or approximately 60%.This increase in cost of sales is primarily attributed to the increase in sales for the current three-month and nine-month periods. Cost of sales as a percentage of sales may fluctuate from period to period, based on the mix of products sold during a particular period and pricing arrangements with our suppliers. Cost of sales as a percentage of sales was approximately 72% for the three months ended September 30, 2011 compared to approximately 74% for the three months ended September 30, 2010. Cost of sales as a percentage of sales was approximately 72% for the nine months ended September 30, 2011 compared to approximately 69% for the nine months ended September 30, 2010. We purchase substantially all inventories from two foreign suppliers, and have been dependent on those suppliers for substantially all inventory purchases since we commenced operations.

General and Administrative Expenses

General and administrative expenses were $104,205 for the three months ended September 30, 2011, compared to $97,447 for the three months ended September 30, 2010, an increase of $6,758 or approximately 7%. General and administrative expenses were $311,910 for the nine months ended September 30, 2011, compared to $220,748 for the nine months ended September 30, 2010, an increase of $91,162 or approximately 41%. The increase in these expenses in the first three-month and nine-month periods of the current year is primarily attributed to an increase in our monthly management fee, legal and accounting expenses, website development and maintenance expenses and medical related benefits.

Pursuant to an agreement effective in June 2007, we pay a monthly management fee to a company owned by one of the major stockholders of the Company to manage the day-to-day business activities of the Company and provide business space. The agreement is on a month-to-month basis and can be cancelled at any time by the vote of management. We paid monthly management fees in varying amounts to this related party pursuant to prior agreements approved by the stockholders of the Company. Effective February 1, 2011, the monthly fee was increased from $9,200 to $10,700 as a result of the increase in costs of providing space to the Company. Also included in management fees are monthly payments of $150 to another major stockholder of the Company for expense reimbursement. Included in general and administrative expenses were management fees totaling $32,550 and $28,050 for the three months ended September 30, 2011 and 2010, respectively, and $96,150 and $84,150 for the nine months ended September 30, 2011 and 2010, respectively.

Depreciation and Amortization Expense

Depreciation and amortization expense currently is not material to our business and has remained relatively constant for all periods presented. Depreciation and amortization expense was $627 and $608 for the three months ended September 30, 2011 and 2010, and $1,955 and $1,824 for the nine months ended September 30, 2011 and 2010, respectively.

Research and Development Expenses

Research and development activities are not currently significant to our business. We did not incur material research and development expenses in the three months and nine months ended September 30, 2011 and 2010.

Other Expense: Interest Expense

Other expense includes interest expense on our indebtedness, substantially all of which is indebtedness to related parties. Total interest expense – related parties was $4,505 and $4,468 for the three months ended September 30, 2011 and 2010, and $13,816 and $13,441 for the nine months ended September 30, 2011 and 2010, respectively. Other interest expense to non-related parties was $618 and $0 for the three months ended September 30, 2011 and 2010, and $950 and $0 for the nine months ended September 30, 2011 and 2010, respectively.

Liquidity and Capital Resources

As of September 30, 2011, we had total current assets of $730,806, including cash of $178,553, and current liabilities of $219,745, resulting in working capital of $511,061. Our current assets and working capital included inventories of $137,622 and deposits of $364,413. At times, we are required to pay significant advance deposits toward the purchase of inventories from our principal suppliers. In addition, as of September 30, 2011, we had total stockholders’ equity of $378,880. We have financed our operations, the acquisition of inventories, and the payment of vendor deposits from our operations, short-term loans from our principal stockholders and third parties and from the issuance of our common stock.

For the nine months ended September 30, 2011, net cash provided by operating activities was $44,607, as a result of our net income of $15,960, non-cash expenses of $1,955, decreases in inventories of $22,725, deposits of $20,131 and prepaid expenses of $231, and increases in accrued interest payable – related parties of $3,818 and accrued interest payable of $950, partially offset by an increase to accounts receivable of $19,852 and a decrease in accounts payable of $1,311.

By comparison, for the nine months ended September 30, 2010, net cash used in operating activities was $46,526, as a result of increases to accounts receivable of $13,669, inventories of $138,616 and prepaid expenses of $9,784 and decreases in accounts payable of $9,701 and income taxes payable of $9,723, partially offset by our net income of $8,466, non-cash expenses of $1,824, decrease in deposits of $121,471, and an increase in accrued interest payable – related parties of $3,206.

We had no cash used in or provided by investing activities in the nine months ended September 30, 2011 and 2010.

For the nine months ended September 30, 2011, net cash provided by financing activities was $22,187, comprised of proceeds from non-related party notes payable of $35,000, partially offset by repayment of long-term debt – related party of $12,813.

For the nine months ended September 30, 2010, net cash used in financing activities was $2,023, comprised of repayment of long-term debt – related party.

At September 30, 2011, we had short-term notes payable – related parties totaling $95,627, which are payable to our stockholders, are unsecured, bear interest at 6% per annum and are generally due on demand. In addition, at September 30, 2011, we had long-term debt – related party of $181,274 (including current portion of $36,524) payable to a principal stockholder, bearing interest at 6.97% per annum and due in monthly installments of $4,000 through February 2016. Effective June 1, 2011, the parties agreed to increase the monthly payment on the long-term debt – related party from $1,362 to $4,000. Accrued interest payable – related parties was $22,270 and $18,452 at September 30, 2011 and December 31, 2010, respectively.

During the nine months ended September 30, 2011, we borrowed a total of $35,000 from a non-related party and issued two promissory notes payable of $15,000 and $20,000. The notes are unsecured, payable on demand and bear interest at an annual rate of 8%. Accrued interest payable to non-related parties was $950 and $0 at September 30, 2011 and December 31, 2010, respectively.

We believe we will have adequate funds to meet our obligations for the next twelve months from our current cash and projected cash flows from operations.

Recent Accounting Pronouncements

Off-Balance Sheet Arrangements

We also pay another major stockholder of the Company at the rate of $150 per month for expense reimbursement.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable. The Company is a “smaller reporting company.”

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures.

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our management including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act. Based on this evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, in a manner that allows timely decisions regarding required disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in internal controls over financial reporting.

Because our Form 10 registration statement became effective in July 2010, our first annual report on Form 10-K did not contain a report of management's assessment regarding internal control over financial reporting with respect to the fiscal year ended December 31, 2010 due to a transition period established by rules of the Securities and Exchange Commission for newly public companies. Until our first annual assessment regarding internal control over financial reporting has been performed, our quarterly reports on Form 10-Q will not contain an evaluation of any material changes in our internal control over financial reporting that occurred during the fiscal quarters to which such reports pertain.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material pending legal proceedings.

Item 1A. Risk Factors

See the risk factors described in Item 1A of the Company’s annual report on Form 10-K for the year ended December 31, 2010 filed with the SEC on March 31, 2011.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not Applicable.

Item 3. Defaults upon Senior Securities

Not Applicable.

Item 4. (Removed and Reserved)

Item 5. Other Information

Not Applicable.

Item 6: Exhibits

The following exhibits are filed as part of this report:

Exhibit No.	Description of Exhibit
3.1	Articles of Incorporation (1)
3.2	Bylaws (1)
10.1	Promissory Note dated July 21, 2011*
31.1	Section 302 Certification of Chief Executive and Chief Financial Officer*
32.1	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer*
101.INS**	XBRL Instance Document*
101.SCH**	XBRL Taxonomy Extension Schema*
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase*
101.DEF**	XBRL Taxonomy Extension Definition Linkbase*
101.LAB**	XBRL Taxonomy Extension Label Linkbase*
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase*

(1) Incorporated by reference from Exhibit Numbers 3.1 and 3.2 of the Company’s registration statement on Form 10 filed with the SEC on May 14, 2010.

* Exhibits filed with this report.

**XBRL information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under those sections, is not part of any registration statement or prospectus to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document.

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.

	Grote Molen, Inc.


Dated: November 10, 2011	By /s/ John B. Hofman
	John B. Hofman
	President, Secretary and Treasurer
	(Principal Executive and Accounting Officer)

BlackRidge Technology International, Inc. - FORM 10-Q - November 10, 2011

Attached files

BlackRidge Technology International, Inc. Reports