Attached files
| file | filename |
|---|---|
| EX-32.1 - EXHIBIT 32.1 - Todays Alternative Energy Corp | v324109_ex32-1.htm |
| EX-10.1 - EXHIBIT 10.1 - Todays Alternative Energy Corp | v324109_ex10-1.htm |
| EX-31.1 - EXHIBIT 31.1 - Todays Alternative Energy Corp | v324109_ex31-1.htm |
| EX-10.2 - EXHIBIT 10.2 - Todays Alternative Energy Corp | v324109_ex10-2.htm |
| EX-32.2 - EXHIBIT 32.2 - Todays Alternative Energy Corp | v324109_ex32-2.htm |
| EX-31.2 - EXHIBIT 31.2 - Todays Alternative Energy Corp | v324109_ex31-2.htm |
U.S. SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________
FORM 10-Q
| x | Quarterly report under Section 13 or 15(d) of the
Securities Exchange Act of 1934, For the quarterly period ended July 31, 2012 |
| o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File No. 001-32044
_____________________________________
TODAYS ALTERNATIVE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
|
Nevada (State or other jurisdiction of incorporation or organization) |
16-1576984 (I.R.S. Employer Identification Number) |
|
191 Post Road West, Westport, Connecticut (Address of principal executive offices) |
06880 (Zip Code) |
|
(888) 880-0994 (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 requirement for the past 90 days. Yes x No o
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 x No o
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 x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 2(b)-2 of the Exchange Act). Yes o No x
At September 19, 2012, the registrant had outstanding 28,132,026 shares of common stock.
Quarterly Report on Form 10-Q for the
Quarterly Period Ended July 31, 2012
Table of Contents
| Page | ||
| PART I. FINANCIAL INFORMATION | 3 | |
| Item 1. Financial Statements | 3 | |
| Condensed Consolidated Balance Sheets as of July 31, 2012 (unaudited) and October 31, 2011: | 3 | |
| Condensed Consolidated Statements of Operations for the Three and Nine Months Ended July 31, 2012 and 2011 and for the Period From November 1, 2007 (inception of development stage) through July 31, 2012 (unaudited): | 4 | |
| Condensed Consolidated Statement of Stockholders’ Deficit for the Period from October 31, 2007 to July 31, 2012 (unaudited): | 5 | |
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended July 31, 2012 and 2011 and for the Period From November 1, 2007 (inception of development stage) through July 31, 2012 (unaudited): | 6 | |
| Notes to Unaudited Condensed Consolidated Financial Statements July 31, 2012: | 7 | |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 17 | |
| Item 4. Controls and Procedures | 17 | |
| PART II. OTHER INFORMATION | 17 | |
| Item 1. Legal Proceedings | 17 | |
| Item 1A. Risk Factor | 18 | |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 18 | |
| Item 3. Defaults upon Senior Securities | 18 | |
| Item 4. Mine Safety Disclosures | 18 | |
| Item 5. Other Information | 18 | |
| Item 6. Exhibits | 18 | |
| Signatures | 19 |
| 2 |
PART 1: FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
Todays Alternative Energy Corporation
(A Development Stage Company)
Condensed Consolidated Balance Sheets
| July 31, | October 31, | |||||||
| 2012 | 2011 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 324 | $ | 44,245 | ||||
| Stock subscription receivable | - | 50,000 | ||||||
| Total current assets | 324 | 94,245 | ||||||
| Other assets: | ||||||||
| Security deposit | - | 7,478 | ||||||
| Other deposit | - | 41,522 | ||||||
| Total other assets | - | 49,000 | ||||||
| Total assets | $ | 324 | $ | 143,245 | ||||
| Liabilities and Stockholders' Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 1,240,524 | $ | 1,118,910 | ||||
| Advances payable | 23,500 | 111,000 | ||||||
| Legal settlement payable | 87,500 | |||||||
| Convertible notes payable (net of debt discount of $34,195 and $0 as of July 31, 2012 and October 31, 2011, respectively) | 1,494,350 | 1,429,965 | ||||||
| Total current liabilities | 2,845,874 | 2,659,875 | ||||||
| Long term portion of convertible notes payable (net of debt discount of $74,047 and $61,765 as of July 31, 2012 and October 31, 2011, respectively) | 26,953 | 38,130 | ||||||
| Total liabilities | 2,872,827 | 2,698,005 | ||||||
| Stockholders' deficit: | ||||||||
| Preferred stock, $0.00001 par value, 10,000,000 shares authorized,10,000 shares of Series A issued and outstanding as of July 31, 2012 and October 31, 2011 and 69,000 shares of Series B issued and outstanding as of July 31, 2012 and October 31, 2011 | 1 | 1 | ||||||
| Common stock, $0.00001 par value, 1,000,000,000 shares authorized, 28,132,026 and 25,782,081 shares issued and outstanding as of July 31, 2012 and October 31, 2011, respectively | 281 | 258 | ||||||
| Common stock to be issued | 1 | 1 | ||||||
| Additional paid-in capital | 8,116,934 | 8,014,642 | ||||||
| Deficit accumulated from November 1, 2007 (inception of development stage) | (3,481,399 | ) | (3,061,341 | ) | ||||
| Accumulated deficit | (7,508,321 | ) | (7,508,321 | ) | ||||
| Total stockholders' deficit | (2,872,503 | ) | (2,554,760 | ) | ||||
| Total liabilities and stockholders' deficit | $ | 324 | $ | 143,245 | ||||
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)
| Three Months Ended | Nine Months Ended | From Inception of Development Stage on November 1, 2007 | ||||||||||||||||||
| July 31, | July 31, | Through July 31, | ||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | 2012 | ||||||||||||||||
| Expenses: | ||||||||||||||||||||
| General and administrative expenses | $ | 14,617 | $ | 127,239 | $ | 210,189 | $ | 372,547 | $ | 2,182,994 | ||||||||||
| Total expenses | 14,617 | 127,239 | 210,189 | 372,547 | 2,182,994 | |||||||||||||||
| Loss from operations | (14,617 | ) | (127,239 | ) | (210,189 | ) | (372,547 | ) | (2,182,994 | ) | ||||||||||
| Other expenses: | ||||||||||||||||||||
| Loss on Settlement | (53,578 | ) | - | (53,578 | ) | - | (53,578 | ) | ||||||||||||
| Interest expense | (58,208 | ) | (45,553 | ) | (156,291 | ) | (191,944 | ) | (1,244,827 | ) | ||||||||||
| Total other expenses | (111,786 | ) | (45,553 | ) | (209,869 | ) | (191,944 | ) | (1,298,405 | ) | ||||||||||
| Net loss before provision for income taxes | (126,403 | ) | (172,792 | ) | (420,058 | ) | (564,491 | ) | (3,481,399 | ) | ||||||||||
| Provision for income taxes | - | - | - | - | - | |||||||||||||||
| Net loss | $ | (126,403 | ) | $ | (172,792 | ) | $ | (420,058 | ) | $ | (564,491 | ) | $ | (3,481,399 | ) | |||||
| Net loss per weighted average share - basic and diluted | $ | - | $ | (0.05 | ) | $ | (0.01 | ) | $ | (0.20 | ) | |||||||||
| Weighted average number of shares - basic and diluted | 28,132,081 | 3,579,908 | 28,028,614 | 2,879,690 | ||||||||||||||||
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)
| Preferred Stock Series A and B | Common Stock | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Common Stock to be Issued | Additional Paid in Capital | Deficit Accumulated During the Development Stage | Accumulated (Deficit) | Total Stockholders' (Deficit) | ||||||||||||||||||||||||||||
| Balance, October 31, 2007 | - | $ | - | 2,318 | $ | - | $ | - | $ | 5,866,870 | $ | - | $ | (7,508,321 | ) | $ | (1,641,451 | ) | ||||||||||||||||||
| Debt converted for shares | 800 | - | 106,560 | 106,560 | ||||||||||||||||||||||||||||||||
| Series A and common shares issued for services | 10,000 | 10 | 1,336 | - | 285,312 | 285,322 | ||||||||||||||||||||||||||||||
| Beneficial conversion feature | (55,990 | ) | (55,990 | ) | ||||||||||||||||||||||||||||||||
| Reclassification as a result of reincorporation | (10 | ) | 10 | - | ||||||||||||||||||||||||||||||||
| Net loss | (592,439 | ) | (592,439 | ) | ||||||||||||||||||||||||||||||||
| Balance, October 31, 2008 | 10,000 | $ | - | 4,454 | $ | - | $ | - | $ | 6,202,762 | $ | (592,439 | ) | $ | (7,508,321 | ) | $ | (1,897,998 | ) | |||||||||||||||||
| 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 | ||||||||||||||||||||||||||||||||
| 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 | 5,577,500 | 56 | 11,749 | 11,805 | ||||||||||||||||||||||||||||||||
| Shares issued for services rendered | 1,175,752 | 12 | 112,939 | 112,951 | ||||||||||||||||||||||||||||||||
| Common stock issued for cash and subscription receivable | 16,406,915 | 164 | 99,836 | 100,000 | ||||||||||||||||||||||||||||||||
| Beneficial conversion feature | 174,500 | 174,500 | ||||||||||||||||||||||||||||||||||
| Conversion of Series B shares for common shares | (11,000 | ) | 451,578 | 4 | - | (4 | ) | - | ||||||||||||||||||||||||||||
| Shares issued in satisfaction of fraction shares resulting from 1 for 20 reverse stock split | 1,782 | - | ||||||||||||||||||||||||||||||||||
| Net loss | (708,566 | ) | (708,566 | ) | ||||||||||||||||||||||||||||||||
| Balance, October 31, 2011 | 79,000 | $ | 1 | 25,782,081 | $ | 258 | $ | 1 | $ | 8,014,642 | $ | (3,061,341 | ) | $ | (7,508,321 | ) | $ | (2,554,760 | ) | |||||||||||||||||
| Debt converted for shares | 2,350,000 | 23 | 1,292 | 1,315 | ||||||||||||||||||||||||||||||||
| Fair value of beneficial conversion feature | 101,000 | 101,000 | ||||||||||||||||||||||||||||||||||
| Net loss | (420,058 | ) | (420,058 | ) | ||||||||||||||||||||||||||||||||
| Balance, July 31, 2012 | 79,000 | $ | 1 | 28,132,081 | $ | 281 | $ | 1 | $ | 8,116,934 | $ | (3,481,399 | ) | $ | (7,508,321 | ) | $ | (2,872,503 | ) | |||||||||||||||||
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)
| Nine Months Ended July 31, | From Inception of Development Stage on November 1, 2007 Through July 31, | |||||||||||
| 2012 | 2011 | 2012 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net loss | $ | (420,058 | ) | $ | (564,491 | ) | $ | (3,481,399 | ) | |||
| 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 | 54,523 | 99,132 | 712,033 | |||||||||
| Loss on Legal Settlement | 53,578 | - | 53,578 | |||||||||
| Shares issued for services rendered | - | 95,111 | 598,534 | |||||||||
| Shares issued for legal settlement | - | - | 92,000 | |||||||||
| Shares to be issued for officer’s compensation | - | - | 1 | |||||||||
| Shares issued for interest payment | - | - | 68,250 | |||||||||
| Write off of other assets | 49,000 | - | 49,000 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Prepaid expenses | - | 1,463 | 2,000 | |||||||||
| Other assets | - | (49,000 | ) | (49,000 | ) | |||||||
| Increase in due to officer | - | - | - | |||||||||
| Accounts payable and accrued expenses | 68,036 | 153,335 | 789,129 | |||||||||
| Legal settlement payable | 87,500 | - | 87,500 | |||||||||
| Net cash used in operating activities | (107,421 | ) | (264,450 | ) | (1,071,484 | ) | ||||||
| Net cash used in investing activities | - | - | - | |||||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds from advance payable | 23,500 | 87,500 | 134,500 | |||||||||
| Proceeds from notes payable | 10,000 | 174,500 | 901,194 | |||||||||
| Proceeds from sale of stock | 50,000 | - | 100,000 | |||||||||
| Payments of notes payable | (20,000 | )) | - | (68,922 | ) | |||||||
| Net cash provided by financing activities | 63,500 | 262,000 | 1,066,772 | |||||||||
| Net (decrease) increase in cash and cash equivalents | (43,921 | ) | (2,450 | ) | (4,712 | ) | ||||||
| Cash and cash equivalents – beginning of period | 44,245 | 4,446 | 5,036 | |||||||||
| Cash and cash equivalents – end of period | $ | 324 | $ | 1,996 | $ | 324 | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||||||
| Interest paid | $ | - | $ | - | $ | - | ||||||
| Income taxes paid | $ | - | $ | - | $ | - | ||||||
| NON CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||||||
| Contribution of accrued salaries by former officers | $ | - | $ | - | $ | 394,679 | ||||||
| Common stock issued for services to be rendered | $ | - | $ | - | $ | 2,500 | ||||||
| Exchange of advances payable for convertible note payable | $ | 91,000 | $ | - | $ | 91,000 | ||||||
| Accrued expenses forgiven by former officer | $ | - | $ | - | $ | 1,666 | ||||||
| Debt converted to equity | $ | 1,315 | $ | 7,550 | $ | 175,185 | ||||||
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
NINE MONTHS ENDED JULY 31, 2012 AND 2011
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 pursuant to the rules and regulations 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 on Form 10-K for the fiscal year ended October 31, 2011 filed with the SEC on January 30, 2012. Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. 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, 2011 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’s business has two primary opportunities that it is developing. The Company has a green cleaning products business that uses its scientific formulations to manufacture and sell a new line of industrial strength, environmentally friendly, and biodegradable cleaning products that contain natural non-toxic ingredients. The Company has a biodiesel business that uses 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 reduce 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 Company’s outstanding stock 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 Articles of Incorporation with the Secretary of State of Nevada to effectuate a reverse stock split of the Company’s outstanding common stock 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.
On March 22, 2012, the board of directors appointed Albertus Hendrik van Leiden as a director of the Company.
| 7 |
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 unaudited condensed consolidated 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 July 31, 2012, the Company has accumulated losses of $3,481,399.
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements 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 4,217,348,755 and 2,904,888,118 respectively at July 31, 2012 and 2011, 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 periods’ unaudited condensed consolidated financial statements to conform to classifications used in the current period.
Recent Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its unaudited condensed 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 nine months ended July 31, 2012, the Company has incurred net losses of $126,403 and $420,058, respectively and has a stockholders’ deficit of $2,872,503 as of July 31, 2012. 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. Although the Company may 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.
The Company continues to need to borrow cash from time to time in order to pay its operating costs and may need to pursue additional financing arrangements in order 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 |
NOTE 2 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses are comprised of the following:
| July 31, 2012 | October 31, 2011 | |||||||
| (unaudited) | ||||||||
| Accounts payable | $ | 7,805 | $ | 5,053 | ||||
| Salaries | 59,298 | 59,298 | ||||||
| Interest | 616,280 | 514,512 | ||||||
| Payroll taxes | 49,251 | 49,251 | ||||||
| Professional fees | 247,767 | 174,590 | ||||||
| Old accounts payable | 255,607 | 296,908 | ||||||
| Others | 4,516 | 19,298 | ||||||
| Total | $ | 1,240,524 | $ | 1,118,910 | ||||
NOTE 3 – ADVANCES PAYABLE
In June 2012, two existing note holders and an unrelated third party paid a total of $23,500 to certain vendors on behalf of the Company. The company has an agreement with the lenders to start accruing interest as of October 2012. As of October 31, 2011, there was a balance of $111,000 of advances from an existing note holder. The balance was satisfied with a cash payment and a conversion of the remainder of Advance Payable to a Convertible Promissory Note.
NOTE 4 – CONVERTIBLE NOTES PAYABLE
| July 31, 2012 (unaudited) | October 31, 2011 | |||||||
| Convertible notes payable: | ||||||||
| Convertible promissory note (a) | $ | 1,199,020 | $ | 1,199,020 | ||||
| Convertible promissory note (b) | 400 | 400 | ||||||
| Convertible promissory note (c) | 32,445 | 33,645 | ||||||
| Convertible promissory note (d) | 29,780 | 29,895 | ||||||
| Convertible promissory note (e) | 40,000 | 40,000 | ||||||
| Convertible promissory note (f) | 30,000 | 30,000 | ||||||
| Convertible promissory note (g) | 196,900 | 196,900 | ||||||
| Convertible promissory note (h) | 91,000 | - | ||||||
| Convertible promissory note (i) | 10,000 | |||||||
| 1,629,545 | 1,529,860 | |||||||
| Less: unamortized discount on debt | (108,242 | ) | (61,765 | ) | ||||
| 1,521,303 | 1,468,095 | |||||||
| Less: current portion | (1,494,350 | ) | (1,429,965 | ) | ||||
| Long term debt | $ | 26,953 | $ | 38,130 | ||||
| a) | Under loan agreements and corresponding secured convertible promissory notes dated November 29, 2006, the third party lender may, in its sole and absolute discretion, loan the Company up to an aggregate total of $2,000,000. In May 2008, the conversion price was amended to provide a fixed conversion price of $0.001 per share. In addition, the note holder 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. Each note accrues interest at an annual rate of eight percent (8%) and is payable on demand. |
| 9 |
| b) | On July 14, 2009, an unrelated third party investor acquired an interest in the November 29, 2006 loan agreement from the existing lender, since which time the investor has made various conversions to the principal and interest outstanding. | |
| c) | On May 26, 2010, unrelated third party investors acquired an interest in the November 29, 2006 loan agreement from the existing lender, since which time the investors have made various conversions to the principal and interest outstanding. During the nine months ended July 31, 2012, the note holder converted $1,200 of note principal into 1,200,000 shares of Company common stock valued at $0.001 per share. | |
| d) | On December 24, 2010, the Company sold and issued a convertible promissory note in the aggregate principal amount of $30,000 to an unrelated third party. The note matures on December 24, 2012 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. During the nine months ended July 31, 2012, the note holder converted $115 of note principal into 1,150,000 shares of Company common stock valued at $0.0001 per share. |
| e) | On January 25, 2011, the Company sold and issued a convertible promissory note in the aggregate principal amount of $40,000 to an unrelated third party. The note matures on January 25, 2013 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 an unrelated third party. The note matures on February 25, 2013 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. | |
| g) | On October 7, 2011, unrelated third party investors acquired an interest in the November 29, 2006 loan agreement from the existing lender, since which an investor has converted $3,100 of note principal outstanding into 3,100,000 shares of Company common stock. |
| h) |
On March 15, 2012, an unrelated third party investor acquired an interest in the Company’s advances payable from the existing lender and the Company converted $91,000 of the advances payable into a convertible note. The note matures on March 15, 2014 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 $91,000 of the convertible notes payable, which is equal to the intrinsic value of the imbedded amended beneficial conversion feature, to additional paid in capital and a debt discount against the note issued, with the discount being amortized over the note’s two-year term.
|
| i) | On May 4, 2012, the Company sold and issued a convertible promissory note in the aggregate principal amount of $10,000 to an existing investor. The note matures on May 4, 2014 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 $10,000 of the convertible note payable, which is equal to the intrinsic value of the imbedded beneficial conversion feature, to additional paid in capital and a debt discount against the note issued, with the discount being amortized over notes two-year term. | |
Beneficial conversion feature expenses of $23,878 and $54,523 were recorded in the three and nine months ended July 31, 2012, respectively and $712,033 was recorded from November 1, 2007 (the inception of development stage) through July 31, 2012, all of which were attributed to these loan agreements.
Beneficial conversion feature expenses of $12,742 and $99,132 were recorded in the three and nine months ended July 31, 2011, respectively and $657,510 was recorded from November 1, 2007 (the inception of development stage) through July 31, 2011, all of which were attributed to these loan agreements. |
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NOTE 5 - EQUITY TRANSACTIONS
Common Stock
During the nine months ended July 31, 2012, the Company issued 2,350,000 shares of common stock upon conversion of convertible promissory notes in the amount of $1,315. The conversions were done within the within the terms of the note. No gain or loss was recognized.
As of July 31, 2012 and October 31, 2011, there were 28,132,026 and 25,782,081 shares of Company common stock issued and outstanding, respectively.
Warrants and Options
During the nine months ended July 31, 2012 and 2011, the Company did not issue any stock warrants or options. As of July 31, 2012, no warrants or options are outstanding.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Operating Leases
In October 2010, the Company negotiated 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. In June 2011, the landlord informed the Company of an approximately $100,000 increase in anticipated costs to build the manufacturing facility. The Company rejected the landlord’s revised plans and does not plan to go forward with the lease on the present terms. The landlord objects to the Company’s rejection of the new lease terms and seeks to go forward with the lease. In connection with terminating the facility project, the Company wrote off a $7,478 security deposit and a $41,522 development cost deposit. The Company is currently reviewing other options on how to proceed with growing the GEM products business.
Rent expense for the three and nine months ended July 31, 2012 was $798 and $2,001, respectively. Rent expense for the three and nine months ended July 31, 2011 was $0.
Lawsuit
On October 20, 2011, Indeglia & Carney commenced an action in the Superior Court of California against the Company alleging causes of actions for breach of contract and account stated arising from legal fees allegedly owed Indeglia & Carney by the Company. The Company has agreed to pay Indeglia & Carney a total of $87,500 as part of a settlement agreement. This agreement represents the entire amount owed to Indeglia & Carney as of July 31, 2012.
Payroll taxes
At July 31, 2012, the Company is delinquent with remitting payroll taxes of $70,182, including estimated penalties and interest. The Company has recorded the delinquent payroll taxes, which are included in accrued expenses on the balance sheet. Although the Company has not entered into any formal repayment agreements with the respective tax authorities, management plans to make payment as funds become available. Penalties and interest amounts are subject to increase based on a number of factors that can cause the estimated liability to increase further.
NOTE 7 – SUBSEQUENT EVENTS
On August 2, 2012, Leonard Amato resigned from his positions as President, Chief Executive Officer, Principal Accounting Officer (CFO), Treasurer and Secretary.
On August 2, 2012, the board of directors appointed Albertus Hendrik van Leiden Chief Executive Officer, Principal Accounting Officer (CFO), Treasurer and Secretary.
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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”) is a development stage company. Our business has two primary opportunities that we are developing. We have a green cleaning products business that is organized to use our own scientific formulations to manufacture and sell a new line of industrial strength environmentally friendly biodegradable cleaning products that contain natural non-toxic ingredients. We have a biodiesel business that is organized to use our extraction technology to convert waste cooking oil and grease into a biodiesel fuel ingredient that we intend to sell to biodiesel fuel producers. Our biodiesel business is designed to reduce environmental issues associated with disposing of waste cooking oil and grease. We are expanding our strategy beyond our current technology to find new ways to produce biofuels feedstock.
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.
On May 20, 2011, the Company filed a certificate of amendment to its Articles of Incorporation with the Secretary of State of Nevada to effectuate a reverse stock split of our outstanding common stock 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.
On March 22, 2012, our board of directors appointed Albertus Hendrik van Leiden as a director of the Company.
On August 2, 2012, Leonard Amato resigned from his positions as President, Chief Executive Officer, Principal Accounting Officer (CFO), Treasurer and Secretary.
On August 2, 2012, the board of directors appointed Albertus Hendrik van Leiden Chief Executive Officer, Principal Accounting Officer (CFO), Treasurer and Secretary.
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Our executive offices are located at 191 Post Road West, Westport, Connecticut 06880. Our telephone number is (888) 880-0994.
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, 2011 and 2010, we incurred net losses of $708,566 and $833,129, respectively, and we have a stockholders’ deficit of $2,554,760 as of October 31, 2011. For the nine months ended July 31, 2012 and 2011, we incurred net losses of $420,058 and $564,491, respectively, and we have a stockholders’ deficit of $2,872,503 as of July 31, 2012. 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. Although we require 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.
We continue to need to borrow cash from time to time in order to pay our operating costs and may need to pursue additional financing arrangements in order 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 unaudited condensed consolidated 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.
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Results of Continuing Operations
Basis of Presentation
The results of operations set forth below for the three and nine months ended July 31, 2012 and 2011 and for the period from November 1, 2007 (inception of development stage) through July 31, 2012 are those of the continuing operations of Todays Alternative Energy Corporation which includes GEM and BESI on a consolidated basis.
The following table sets forth, for the periods indicated, certain selected unaudited financial data from continuing operations:
| Three Months Ended July 31, | Nine Months Ended July 31, | From Inception of Development Stage on November 1, 2007 Through | ||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | July 31, 2012 | ||||||||||||||||
| Net sales | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Cost of sales | - | - | - | - | - | |||||||||||||||
| Gross profit | - | - | - | - | - | |||||||||||||||
| Selling, general and administrative | 14,617 | 127,239 | 210,189 | 372,547 | 2,182,994 | |||||||||||||||
| Operating loss | $ | (14,617 | ) | $ | (127,239 | ) | $ | (210,189 | ) | $ | (372,547 | ) | $ | (2,182,994 | ) | |||||
Comparison of the Three Months Ended July 21, 2012 and 2011
Net sales. Net sales from operations were $0 for the three months ended July 31, 2012 and 2011.
Selling, general, and administrative. Selling, general, and administrative expenses were $14,617 for the three months ended July 31, 2012 compared to $127,239 for the three months ended July 31, 2011. The decrease of $112,622 or 88.5% was primarily due to decreases in expenses associated with professional and filing fees, salaries and advertising.
Operating loss. Operating losses incurred were $14,617 for the three months ended July 31, 2012 compared to $127,239 for the three months ended July 31, 2011. The decrease of $112,622 or 88.5% was primarily due to decreases in expenses associated with professional and filing fees, salaries and advertising.
Beneficial conversion feature expense. Beneficial conversion features expense was $23,878 for the three months ended July 31, 2012 compared to $12,742 for the three months ended July 31, 2011. The increase of $11,136 or 87.4% was primarily due to a greater debt discount balance during the current three-month period.
Interest expense. Interest expense was $34,330 for the three months ended July 31, 2012 compared to $32,811 for the three months ended July 31, 2011. The increase of $1,519 or 4.6% was primarily due to our having a greater amount of outstanding borrowings during the current three-month period.
Loss on Legal Settlement. On October 20, 2011, Indeglia & Carney (“Indeglia”) commenced an action in the Superior Court of California against the Company alleging causes of actions for breach of contract and account stated arising from legal fees allegedly owed Indeglia by the Company and seeking $132,111.52 plus prejudgment interest from the Company. The Company has agreed to pay Indeglia & Carney a total of $87,500.00 as part of a settlement agreement. This agreement represents the entire amount owed to Indeglia & Carney. As a result of this legal settlement the company recorded Loss on Legal Settlement of $53,578.
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Comparison of the Nine Months Ended July 31, 2012 and 2011
Net sales. Net sales from operations were $0 for the nine months ended July 31, 2012 and 2011.
Selling, general, and administrative. Selling, general, and administrative expenses were $210,189 for the nine months ended July 31, 2012 compared to $372,547 for the nine months ended July 31, 2011. The decrease of $162,358 or 43.6% was primarily due to decreases in expenses associated with professional and filing fees, salaries and advertising offset by an increase in expenses associated with terminating the San Antonio, Texas facility development.
Operating loss. Operating losses incurred were $210,189 for the nine months ended July 31, 2012 compared to $372,547 for the nine months ended July 31, 2011. The decrease of $162,358 or 43.6% was primarily due to decreases in expenses associated with professional and filing fees, salaries and advertising offset by an increase in expenses associated with terminating the San Antonio, Texas facility development.
Beneficial conversion feature expense. Beneficial conversion features expense was $54,523 for the nine months ended July 31, 2012 compared to $99,132 for the nine months ended July 31, 2011. The decrease of $44,609 or 45.0% was primarily due to the reduction in new borrowings during the current nine-month period.
Interest expense. Interest expense was $101,768 for the nine months ended July 31, 2012 compared to $92,812 for the nine months ended July 31, 2011. The increase of $8,956 or 9.6% was primarily due to our having a greater amount of outstanding borrowings during the current nine-month period.
Loss on Legal Settlement. On October 20, 2011, Indeglia & Carney (“Indeglia”) commenced an action in the Superior Court of California against the Company alleging causes of actions for breach of contract and account stated arising from legal fees allegedly owed Indeglia by the Company and seeking $132,111.52 plus prejudgment interest from the Company. The Company has agreed to pay Indeglia & Carney a total of $87,500.00 as part of a settlement agreement. This agreement represents the entire amount owed to Indeglia & Carney. As a result of this legal settlement the company recorded Loss on Legal Settlement of $53,578.
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 July 31, 2012 was $2,845,550 and $2,565,630 at October 31, 2011. We had cash of $324 at July 31, 2012 and $44,245 as of October 31, 2011.
We used $107,421 of net cash in operating activities for the nine months ended July 31, 2012 compared to $264,450 for the nine months ended July 31, 2011. The decrease of $157,029 or 59.4% was primarily due to nonrecurring payments, including salary payments, associated with the San Antonio, Texas facility made during the nine month ended July 31, 2011.
Net cash flows used in investing activities was $0 for the nine months ended July 31, 2012 and 2011.
Net cash flows provided by financing activities was $63,500 for the nine months ended July 31, 2012 compared to $262,000 for the nine months ended July 31, 2011. The net cash provided by financing activities is from the proceeds from the sales of our common stock and convertible promissory notes used to fund our operations.
Loan Agreement
On November 29, 2006, we entered into two separate loan agreements 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 $241,000 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. Our outstanding aggregate balances under the notes as of July 31, 2012 and October 31, 2011 were $1,503,977 and $1,429,965, respectively.
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On December 24, 2010, January 25, 2011 and February 25, 2011, we sold and issued convertible promissory notes 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 was used to fund the development of our business along with subsequent advances we received from a third party lender. Our outstanding aggregate balance under the notes as of July 31, 2012 and October 31, 2011 was $99,780.
On March 15, 2012, we converted $91,000 of advances payable into a convertible note. The note matures on March 15, 2014 and accrues interest at an annual rate of ten percent. The note is payable in full on the maturity date unless previously converted into shares of our common stock at a conversion price of $0.0001 per share. Our outstanding balance under the note as of July 31, 2012 was $91,000.
Capital Requirements
The report of our independent public accountants for the fiscal year ended October 31, 2011 states that we have incurred operating losses since inception and require additional capital to continue operations, and that these conditions raise substantial doubt about our ability to continue as a going concern.
As of July 31, 2012, we had a working capital deficit of $2,845,550. 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 approximately $2.5 million and we do not have the capital to build such plants. In our green cleaning products business, we need to construct a production facility or we need to outsource production. In the interim, we are not generating any revenues from this business. Our capital requirements will be significantly greater if we establish our own production facility as compared to outsourcing production to a contract manufacturer. We raised $174,000 from the sales of convertible notes to an investor during fiscal year ended October 31, 2011 and will need to raise the remaining funds needed through additional sales of securities. 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 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. From inception (November 1,2007 to July 2012, we obtained $134,500 of advances from the third party lender. We sold unsecured convertible notes to an investor and may need to sell additional unsecured convertible notes. As of the date hereof, we have received no firm commitment from investors to purchase additional securities 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 contains restrictions as to the payment of dividends.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in our market risks since the end of fiscal year 2011.
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 are 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 Albertus Hendrik van Leiden, the Company’s Chief Executive Officer who is also our 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 nine months ended July 31, 2012. 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. The Company’s management intends to address the material weakness in its disclosure control and procedures as soon as possible.
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 nine month period ended July 31, 2012. Based on that evaluation, our CEO/CFO concluded that the termination of certain outsourcing arrangements and the reassignment of certain administrative tasks has not had a materially adverse effect on the Company’s internal controls over financial reporting. The Company has also hired a new accounting firm to perform administrative functions that are integral to its system of internal controls and to ensure the effectiveness of the internal control system.
PART II: OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS
Indeglia & Carney v. Todays Alternative Energy Corporation, Case No. 30-2011-00517578 (Orange County Superior Court)
On October 20, 2011, Indeglia & Carney (“Indeglia”) commenced an action in the Superior Court of California against the Company alleging causes of actions for breach of contract and account stated arising from legal fees allegedly owed Indeglia by the Company and seeking $132,111.52 plus prejudgment interest from the Company. The Company has agreed to pay Indeglia & Carney a total of $87,500.00 as part of a settlement agreement. This agreement represents the entire amount owed to Indeglia & Carney.
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ITEM 1A – RISK FACTORS
Not Applicable.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On the dates specified below, we issued 2,350,000 shares of our common stock in private transactions not involving a public offering, as follows:
| · | On November 9, 2011, we issued 1,150,000 shares of our common stock to Ivano Angelastri upon the conversion of a convertible promissory note in the amount of $115.00. |
| · | On November 15, 2011, we issued 1,200,000 shares of our common stock to Ebony Finance Ltd. upon the conversion of a convertible promissory note in the amount of $1,200.00. |
All funds received from the sale of our securities were used for working capital purposes.
All securities bear a legend restricting their disposition.
The securities were issued in reliance upon an exemption from registration pursuant to Section 4(2) of the Securities Act or Rule 506 of Regulation D promulgated under the Securities Act. Each investor took his securities for investment purposes without a view to distribution and had access to information concerning us and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the purchase of our shares. Our securities were sold only to accredited investors, as defined in the Securities Act with whom we had a direct personal preexisting relationship, and after a thorough discussion. Finally, our stock transfer agent has been instructed not to transfer any of such securities, unless such securities are registered for resale or there is an exemption with respect to their transfer.
Each purchaser was provided with access to our filings with the SEC, including the following:
| · | Our annual report to stockholders for the most recent fiscal year, the definitive proxy statement filed in connection with that annual report, and, if requested by the purchaser in writing, a copy of our most recent Form 10-K under the Exchange Act. |
| · | The information contained in an annual report on Form 10-K under the Exchange Act. |
| · | The information contained in any reports or documents required to be filed by us under sections 13(a), 14(a), 14(c), and 15(d) of the Exchange Act since the distribution or filing of the reports specified above. |
| · | A brief description of the securities being offered, the use of the proceeds from the offering, and any material changes in our affairs that are not disclosed in the documents furnished. |
ITEM 3 – DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4 – MINE SAFETY DISCLOSURES.
Not Applicable.
ITEM 5 – OTHER INFORMATION
On March 15, 2012, the Company converted $91,000 of advances payable into a convertible promissory note. The note matures on March 15, 2014 and accrues interest at an annual rate of 10%. The note is payable in full on the maturity date unless previously converted in shares of common stock at a conversion price of $0.0001 per share. The form of the convertible promissory note is attached hereto as exhibit 10.1 and incorporated by reference.
On May 4, 2012, the Company sold and issued a convertible promissory note in the aggregate principal amount of $10,000 to an existing investor. The note matures on May 4, 2014 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 form of convertible promissory note is attached hereto as exhibit 10.2 and incorporated herein by reference.
ITEM 6 - EXHIBITS
| Exhibit No. | Identification of Exhibit |
| 10.1 | Form of Convertible Promissory Note dated as of March 15, 2012. |
| 10.2 | Form of Convertible Promissory Note dated as of May 4, 2012. |
| 31.1* | Certification of Albertus Hendrik van Leiden, Chief Executive Officer of TODAYS ALTERNATIVE ENERGY CORPORATION, pursuant to 18 U.S.C. §1350, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002. |
| 31.2* | Certification of Albertus Hendrik van Leiden, Chief Financial Officer and Principal Accounting Officer of TODAYS ALTERNATIVE ENERGY CORPORATION, pursuant to 18 U.S.C. §1350, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002. |
| 32.1* | Certification of Albertus Hendrik van Leiden, Chief Executive Officer of TODAYS ALTERNATIVE ENERGY CORPORATION, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002. |
| 32.2* | Certification of Albertus Hendrik van Leiden, Chief Financial Officer and Principal Accounting Officer of TODAYS ALTERNATIVE ENERGY CORPORATION, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002. |
| * | Filed herewith. |
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TODAYS ALTERNATIVE ENERGY CORPORATION | |||
| Date: September 19, 2012 | |||
| By | /s/ Albertus Hendrik van Leiden | ||
| Albertus Hendrik van Leiden, Chief Executive Officer | |||
| By | /s/ Albertus Hendrik van Leiden | ||
| Albertus Hendrik van Leiden, Chief Financial Officer and Principal Accounting Officer | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Albertus Hendrik van Leiden | Chief Executive Officer and Director | September 19, 2012 | ||
| /s/ Albertus Hendrik van Leiden | Chief Financial Officer, Principal Accounting Officer, and Director | September 19, 2012 |
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