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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014 or

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________to ____________

Commission File Number 000-55178

Galenfeha, Inc.
(Exact name of registrant as specified in its charter)

Nevada 46-2283393
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

2705 Brown Trail, Suite 100
Bedford, Texas 76021
(Address of principal executive offices) (Zip code)

(800) 280-2404
(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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

Yes [X]                                   No [   ]

Indicate by check mark whether the registrant 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 (section 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 [   ]  

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.

Large Accelerated Filer [   ] Accelerated Filer [   ]
Non-Accelerated Filer [   ] Smaller Reporting Company [X]

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

Yes [   ]                                   No [X]

As of November 14, 2014, there were 77,812,000 shares of the registrant’s common stock outstanding, each with a par value of $0.001.


TABLE OF CONTENTS
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED September 30, 2014

PART I - FINANCIAL INFORMATION  
   
   
ITEM 1. - FINANCIAL STATEMENTS  
   
Condensed Financial Statements Table of Contents F-1
   
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3
ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  
ITEM 4. - CONTROLS AND PROCEDURES 4
  4
   
PART II - OTHER INFORMATION  
   
   
ITEM 1. - LEGAL PROCEEDINGS 5
ITEM 1A. - RISK FACTORS 5
ITEM 2. - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 5
ITEM 3. - DEFAULTS UPON SENIOR SECURITIES 5
ITEM 4. - MINE SAFETY DISCLOSURES 5
ITEM 5. - OTHER INFORMATION 5
ITEM 6. - EXHIBITS 5
   
SIGNATURES 5


Galenfeha, Inc.
INDEX TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

  Page
Condensed Balance Sheets at September 30, 2014 and December 31, 2013 F-2
Condensed Statements of Operations for the three and nine month periods ended September 30, 2014 and 2013 F-3
Condensed Statement of Changes in Shareholders’ Equity as of September 30, 2014 F-4
Condensed Statements of Cash Flows for the nine month periods ended September 30, 2014 and 2013 F-5
Notes to Condensed Financial Statements F-6

F-1


Galenfeha, Inc.
CONDENSED BALANCE SHEETS

    September 30,     December 31, 2013  
    2014        
    (Unaudited)        
ASSETS            
             
CURRENT ASSETS            
   Cash $  134,752   $  73,480  
   Accounts receivable   27,500     -  
   Inventory   231,508     -  
   Prepaid rent   2,550     -  
   Due from officer   8,695     8,695  
   Total current assets   405,005     82,175  
FIXED ASSETS, net of $4,431 and $827 accumulated depreciation   82,444     10,060  
OTHER ASSETS   500     250  
TOTAL ASSETS $  487,949   $  92,485  
             
LIABILITIES AND STOCKHOLDERS’ EQUITY            
             
CURRENT LIABILITIES            
Accounts payable and accrued liabilities $  37,603   $  5,180  
     Total liabilities   37,603     5,180  
             
COMMITTMENTS AND CONTINGENCIES        
             
STOCKHOLDERS’ EQUITY            
Common stock subscribed   -     22,500  
Capital stock            
Authorized: 500,000,000 common shares, $0.001 par value        
Issued and outstanding shares:            
77,812,000 shares at September 30, 2014 and 51,252,000 shares at December 31, 2013   77,812     51,252  
Additional paid-in capital   784,988     150,048  
Accumulated deficit   (412,454 )   (136,495 )
                                 Total stockholders’ equity   450,346     87,305  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $  487,949   $  92,485  

See notes to the condensed financial statements.

F-2


Galenfeha, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

 

  For the Three     For the Three     For the Nine     Inception March 14,  

 

  Months Ended     Months Ended     Months Ended     2013 to  

 

  Sept. 30, 2014     Sept. 30, 2013     Sept. 30, 2014     Sept. 30, 2013  

 

                       

Revenues:

$  156,500   $  -   $  164,500   $  -  

 

                       

Cost of Sales

  102,030     -     112,071     -  

 

                       

Gross Profit

  54,470     -     52,429     -  

 

                       

Expenses:

                       

General and administrative

  65,067     33,531     132,626     51,983  

Payroll expenses

  93,586     -     132,290     -  

Professional fees

  5,732     2,979     37,542     15,979  

Engineering research and development

  -     12262     22,350     12,262  

Depreciation expense

  1,663     275     3,604     552  

             Total expenses

  166,048     49,047     328,412     80,776  

 

                       

Loss from continuing operations

  (111,578 )   (49,047 )   (275,983 )   (80,776 )

 

                       

Other (expense) income

               

Interest income

  10     16     46     23  

Interest expense

  (22 )   -     (22 )   -  

             Total other (expense)

  (12 )   16     24     23  

 

                       

Net loss

$  (111,590 ) $  (49,031 ) $  (275,959 ) $  (80,753 )

 

                       

Net (loss) per share basic and diluted

$  (0.00 ) $  (0.00 ) $  (0.00 ) $  (0.00 )

Weighted average number of common
shares outstanding, basic and diluted

  77,812,000     50,699,826     67,643,722     47,563,192  

See notes to the condensed financial statements.

F-3


Galenfeha, Inc.
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)

 

  Common Stock     Common     Additional Paid     Deficit        

 

              Stock     in Capital     Accumulated        

 

              Subscribed           during        

 

                          Development        

 

                          Stage        

 

  Shares     Amount                       Total  

Inception March 14, 2013

                       

Common shares issued for cash and assets at $0.001 per share

  45,000,000   $ 45,000   $  -   $  -   $  -   $ 45,000  

Common shares issued for cash at $0.025 per share

  6,252,000     6,252     -     150,048     -     156,300  

Common shares subscribed

  -     -     22,500     -     -     22,500  

Loss for the period from inception on March 14, 2013 to December 31, 2013

  -     -     -     -     (136,495 )   (136,495 )

Balance – December 31, 2013

  51,252,000     51,252     22,500     150,048     (136,495 )   87,305  

 

                                   

Common shares issued for cash at $0.020 per share

  500,000     500     -     9,500     -     10,000  

Issuance of subscribed shares

  900,000     900     (22,500 )   21,600     -     -  

Common shares issued for cash at $0.025 per share

  25,160,000     25,160     -     603,840     -     629,000  

Net loss – September 30, 2014

  -     -     -     -     (275,959 )   (275,959 )

Balance – September 30, 2014

  77,812,000   $ 77,812   $  -   $  784,988   $  (412,454 ) $ 450,346  

See notes to the condensed financial statements.

F-4


Galenfeha, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

    Nine Months     Inception March 14,  
    Ended     2013 to  
    Sept.30, 2014     Sept. 30, 2013  
             
OPERATING ACTIVITIES            
             

Net loss

$  (275,959 ) $  (80,753 )

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

       

Depreciation and amortization

  3,604     552  

Changes in Operating Assets and Liabilities:

       

Increase in accounts receivable

  (27,500 )   -  

Increase in inventory

  (231,508 )   -  

Increase in prepaid expenses and other assets

  (2,800 )   (250 )

Increase in accounts payable and accrued liabilities

  32,423     8,000  

Net cash used in operating activities

  (501,740 )   (72,451 )

 

           

INVESTING ACTIVITIES

           

 

           

Purchase of fixed assets

  (75,988 )   (8,387 )

Net cash used in financing activities

  (75,988 )   (8,387 )

 

           

FINANCING ACTIVITIES

           

Advance to officer

  -     (8,695 )

Sale of capital stock

  639,000     198,800  

 

           

Net cash provided by financing activities

  639,000     190,105  

 

           

INCREASE IN CASH

  61,272     109,267  

 

           

CASH AT BEGINNING OF PERIOD

  73,480      

 

           

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$  134,752   $  109,267  

 

           

SUPPLEMENTAL INFORMATION AND NON- MONETARY TRANSACTIONS

       

 

           

Assets contributed for common stock

$  -   $  2,500  

Cash paid for:

           
Interest expense $  22   $  -  
Income taxes $  -   $  -  

See notes to the condensed financial statements.

F-5


Galenfeha, Inc.
Notes to Unaudited Condensed Financial Statements
September 30, 2014

NOTE 1 - NATURE OF BUSINESS

The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at September 30, 2014, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2013 audited financial statements included in its Form 10-K filed with the Securities and Exchange Commission. The results of operations for the period ended September 30, 2014 and the same period last year are not necessarily indicative of the operating results for the full years.

Galenfeha incorporated in the State of Nevada on March 14, 2013, as a for-profit company with a fiscal year end of December 31. Our business office is located at 2705 Brown Trail, Suite 100, Bedford, Texas 76021. We are an engineering company who will be providing engineering services and an alternative power product mainly to natural gas producers. Not only will we be providing contractual engineering services, we hope to implement our new and proprietary technology in a new product, and provide this product to natural gas producers.

Our intended revenue stream will come from our contractual engineering services and products we develop and manufacture for natural gas producers, initially in the states of Texas and Louisiana. Our engineering services and product will reduce our customer’s cost associated with current energy production, including carbon footprint, hazardous waste, and other non-sustainable aspects of producing energy with current technologies. Since we are presently in the development stage of our business, we can provide no assurance that we will successfully develop and sell any product or services related to our planned activities.

NOTE 2 - GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the period ended September 30, 2014, the Company had limited operations and had not emerged from the development stage. In view of these matters, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to begin operations and to achieve a level of profitability. The Company intends on financing its future development activities and its working capital needs largely from the sale of equity securities with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States (See Note 2 regarding the assumption that the Company is a “going concern”).

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.

F-6


REVENUE RECOGNITION

The Company recognizes revenue for sales and billing for freight charges upon delivery of the product to the customer at a fixed and determinable price with a reasonable assurance of collection, passage of title to the customer as indicated by shipping terms and fulfillment of all significant obligations, pursuant to the guidance provided by Accounting Standards Codification (“ASC”) Topic 605. For sales to all customers, including manufacturer representatives, distributors or their third-party customers, these criteria are met at the time product is shipped. When other significant obligations remain after products are delivered, revenue is recognized only after such obligations are fulfilled. In addition, judgments are required in evaluating the credit worthiness of our customers. Credit is not extended to customers and revenue is not recognized until we have determined that collectability is reasonably assured. The Company estimates customer product returns based on historical return patterns and reduces sales and cost of sales accordingly. As of September 30, 2014, 100% of sales were to a single customer.

CASH AND CASH EQUIVALENTS

All cash, other than held in escrow, is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance provided on such deposits. Temporary cash investments with an original maturity of three months or less are considered to be cash equivalents. Cash at September 30, 2014 and December 31, 2013 was $134,752 and $73,480, respectively.

ACCOUNTS RECEIVABLE

Accounts receivable represents the uncollected portion of amounts recorded as revenues. Management performs periodic analyses to evaluate all outstanding accounts receivable to estimate an allowance for doubtful accounts that may not be collectible, based on the best facts available to management. Management considers historical collection patterns, accounts receivable aging trends and specific identification of disputed invoices in its analyses. After all reasonable attempts to collect a receivable have failed, the receivable is directly written off. As of September 30, 2014 and December 31, 2013, the balance of the allowance for doubtful accounts was $0 and $0, respectively.

As of September 30, 2014, accounts receivable from one customer comprised 100% of total accounts receivable for a sales made in the quarter ended September 30, 2014.

INVENTORIES

Inventories are stated at the lower of cost, determined on a first-in, first-out basis (“FIFO”), or market, including direct material costs and direct and indirect manufacturing costs. As of September 30, 2014, all work in process inventory assembled had been sold and only cost of materials and freight-in are included in raw material inventory.

PROPERTY

Property, plant and equipment is recorded at cost. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years for furniture, fixtures, and equipment. Expenditures for repairs and maintenance are charged to expense as incurred.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs, predominately internal labor costs and costs of materials, are charged to expense when incurred.

SHIPPING AND HANDLING CHARGES

The Company incurs costs related to shipping and handling of its manufactured products. These costs are expensed as incurred as a component of cost of sales. Shipping and handling charges related to the receipt of raw materials are also incurred, which are recorded as a cost of the related inventory.

NET INCOME (LOSS) PER COMMON SHARE

Net income (loss) per share is calculated in accordance with FASB ASC topic, “Earnings Per Share.” The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised.

Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding at September 30, 2014. As of September 30, 2014, the Company had no dilutive potential common shares.

F-7


FAIR VALUE ACCOUNTING

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The three levels of the fair value hierarchy are described below:

Level 1           Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2           Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3           Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic 915), Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, "Consolidation” (“ASU 2014-10”). The amendments in ASU 2014-10 remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from accounting principles generally accepted in the United States of America (“U.S. GAAP”). In addition, the amendments eliminate the requirements for development stage entities to: (i) present inception-to-date information in the statements of income, cash flows, and shareholder equity; (ii) label the financial statements as those of a development stage entity; (iii) disclose a description of the development stage activities in which the entity is engaged; and (iv) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The presentation and disclosure requirements in ASC Topic 915, "Development Stage Entities" are no longer required for interim and annual reporting periods beginning after December 15, 2014. The revised consolidation standards will take effect in annual periods beginning after December 15, 2015, however, early adoption is permitted. The Company has elected to early adopt the provisions of ASU 2014-10 for this unaudited condensed consolidated financial statements.

Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification™ (“ASC”) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company. Management has reviewed the aforementioned rules and releases and believes any effect will not have a material impact on the Company’s present or future financial statements.

NOTE 4 - SHAREHOLDERS’ EQUITY

COMMON STOCK

The authorized common stock of the Company consists of 500,000,000 shares with a par value of $0.001.

On March 11, 2014, the Company sold 500,000 shares at the fixed price of $0.02 to an employee of the Company for $10,000.

On April 17, 2013, the Company filed with the Securities and Exchange Commission an exemption from registration offering on Form D. The offering was closed on April 17, 2014. During this private offering, the Company issued 32,312,000 shares that were subscribed in the one year period at a fixed price of $.025 per share for total proceeds of $807,800.

There are no warrants or options outstanding to acquire any additional shares of common stock of the Company.

There are no warrants or options outstanding to acquire any additional shares of common stock of the Company.

F-8


NOTE 5 - COMMITMENTS AND CONTINGENCIES

The Company entered into a lease agreement for office and research facilities in Texas. One lease is for five years at $24,000 per year beginning September 20, 2013. The second lease is for $10,200 per year for 24 months beginning in June 2014. The lease commitments for the facilities are:

Year      
Ended   Amount  
2014 $  8,550  
2015   34,200  
2016   27,400  
2017   24,000  
2018   11,750  
                                                                                                                                            $ 105,900  

From time to time the Company may be a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.

F-9


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 the consolidated financial statements and related notes included in this report and those in our Form 10-K filed with the Securities and Exchange Commission on March 27, 2014. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in such forward-looking statements as a result of certain factors, including but not limited to, those described under “Risk Factors” included in Part II, Item IA of this report.

The purpose of the Company is to offer energy producer’s contractual engineering services, and develop alternative power products that will assist these producers in reducing cost and operating more efficiently. To date, operations have been on a limited basis, mostly on acquiring inventory for the production of Company’s patent pending new battery technology with battery sales to a single customer. These batteries provide an environmentally friendly, inherently safe, internally temperature regulated un-interruptible power supply for oil and gas well location monitoring and measurement equipment. By the end of first quarter 2014, these batteries had proven effective in the field, and in April 2014, the Company ordered the first material to begin production of these batteries. During the first part of the third quarter, the Company began manufacturing the larger 120 amp hour batteries. During the middle of the third quarter, the Company began selling said batteries. The Company will begin adding additional products beginning fourth quarter, and will be manufacturing 30 amp hour units. The Company’s immediate future goals are to reduce operating cost associated with the initial design and manufacturing associated with the startup of production. Some of these goals will be met by larger production runs, more products made in the United States thereby reducing cost of shipping which in turn will offset cost made outside of the U.S. During Second and Third Quarter 2014, the Company has been developing a private label, unique, user interface driven, real-time battery state of charge and asset tracking system that is internally integrated within the Company’s line of LiFePO4 battery systems. The system communicates the current battery performance, and operates as a Cloud driven database to collect and collate individual client information and uses unique ESN numeric identifiers to reference each client’s specific asset performance and inventory. The system then utilizes a combination of CDMA technologies coupled with satellite geo-location referencing to accurately monitor and track the battery system in the event of theft. This feature functioning as an integrated component within the battery product was a specific engineering request from several of the Company’s oil and gas clients.

On November 10, 2014, the system was successfully field tested when a battery with the asset tracking system was stolen from a natural gas location in East Texas. This event allowed for the immediate alert of local authorities and provided detailed directions to the perpetrator’s home where he was arrested without incident and the asset was recovered. The Company is investigating providing this technology to U.S. Military applications.

Since the Company’s inception, the Company has accomplished key milestones outlined in our 2013-2014 statement of work. A majority of the monies spent to date have been for initial financing actives related to creating a public company, developing new products, and R&D cost. We anticipate that in 2015, the Company will become profitable, and that the initial cost for formation activities will be greatly reduced, and the majority use of capital will be in purchasing inventory for production, and the research and development of new products.

A condensed version of our anticipated 2014 Statement of Work is as follows:

1.

Finalize test results in the field for new battery technology. (3/14) (complete)

  
2.

Open manufacturing facility offices in Louisiana. (5/14) (complete)

  
3.

Begin production of our first line of products (6/14)( complete)

  
4.

Develop new products (7/14-12/14) (on going)

  
5.

Search for merger acquisitions for Engineering, Oil, and Gas production (ongoing)

 

3


Results of Operations for the Three Months ending September 30, 2014

Revenues

Revenues for the three months ended September 30, 2014 and 2013 were $156,500 and $0, respectively. Sales commenced in June 2014.

Cost of Revenues

Cost of Revenues for the three months ended September 30, 2014 and 2013 were $102,030 and $0, respectively. 2014 costs were cost of materials and manufacturing supplies.

Operating Expense

Total operating expenses for the three months ended September 30, 2014 and 2013 were $166,048 and $49,047, respectively. Expenses increased as the Company incurred engineering and other professional expenses in preparation for the manufacturing of batteries compared to 2013 when the Company had compliance costs and research and development.

Net Loss

Net loss for the three months ended September 30, 2014 and 2013 were $111,590 and $49,031 respectively as the Company had increased expenses in 2014 for research and development and implementing business plan.; in 2013 there were compliance costs and minimal research and development.

Results of Operations for the Nine Months ending September 30, 2014

Revenues

Revenues for the nine months ended September 30, 2014 and 2013 were $164,500 and $0, respectively. Sales commenced in June 2014.

Cost of Revenues

Cost of Revenues for the nine months ended September 30, 2014 and 2013 were $112,071 and $0, respectively. 2014 costs were cost of materials and manufacturing supplies.

Operating Expense

Total operating expenses for the nine months ended September 30, 2014 and 2013 were $328,412 and $80,776, respectively. Expenses increased as the Company incurred engineering and other professional expenses in preparation for the manufacturing of batteries compared to 2013 when the Company had compliance costs and research and development.

Net Loss

Net loss for the nine months ended September 30, 2014 and 2013 were $275,959 and $80,753 respectively as the Company had increased expenses in 2014 for research and development and implementing business plan.; in 2013 there were compliance costs and minimal research and development.

Liquidity and Capital Resources

At September 30, 2014, we had $134,752 in cash compared to $73,480 at December 31, 2013. Our current commitments are research and development expenses related to the development of new technologies for energy producers and the administrative support services. We have sufficient cash for short-term operations and have raised funds through the registration statement to continue research and start production.

Critical Accounting Policies and Estimates

Our critical accounting policies are disclosed in our Form 10-K filed with the Securities and Exchange Commission on March 27, 2014. During the period ended September 30, 2014 there have several critical accounting policies adopted with the implementation of the business plan.

REVENUE RECOGNITION

The Company recognizes revenue for sales and billing for freight charges upon delivery of the product to the customer at a fixed and determinable price with a reasonable assurance of collection, passage of title to the customer as indicated by shipping terms and fulfillment of all significant obligations, pursuant to the guidance provided by Accounting Standards Codification (“ASC”) Topic 605. For sales to all customers, including manufacturer representatives, distributors or their third-party customers, these criteria are met at the time product is shipped. When other significant obligations remain after products are delivered, revenue is recognized only after such obligations are fulfilled. In addition, judgments are required in evaluating the credit worthiness of our customers. Credit is not extended to customers and revenue is not recognized until we have determined that collectability is reasonably assured. The Company estimates customer product returns based on historical return patterns and reduces sales and cost of sales accordingly.

4


ACCOUNTS RECEIVABLE

Accounts receivable represents the uncollected portion of amounts recorded as revenues. Management performs periodic analyses to evaluate all outstanding accounts receivable to estimate an allowance for doubtful accounts that may not be collectible, based on the best facts available to management. Management considers historical collection patterns, accounts receivable aging trends and specific identification of disputed invoices in its analyses. After all reasonable attempts to collect a receivable have failed, the receivable is directly written off.

INVENTORIES

Inventories are stated at the lower of cost, determined on a first-in, first-out basis (“FIFO”), or market, including direct material costs and direct and indirect manufacturing costs.

PROPERTY

Property, plant and equipment is recorded at cost. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years for furniture, fixtures, and equipment. Expenditures for repairs and maintenance are charged to expense as incurred.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs, predominately internal labor costs and costs of materials, are charged to expense when incurred.

SHIPPING AND HANDLING CHARGES

The Company incurs costs related to shipping and handling of its manufactured products. These costs are expensed as incurred as a component of cost of sales. Shipping and handling charges related to the receipt of raw materials are also incurred, which are recorded as a cost of the related inventory.

Equity Distribution

Since our incorporation, we have raised capital through private sales of our common equity. As of November 12, 2014, we have issued 77,812,000 shares of our common stock to various shareholders, in exchange for cash.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Item 3. Quantitative & Qualitative Disclosures about Market Risks

Not applicable.

Item 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

At the end of the period covered by this Quarterly Report on Form 10-Q, our management, under the supervision and with the participation of our Chief Executive Officer has evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer believes that:

  • Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

  • Our disclosure controls and procedures operate such that important information flows to appropriate collection and disclosure points in a timely manner and are effective to ensure that such information is accumulated and communicated to our management, and made known to our Chief Executive Officer particularly during the period when this Report was prepared, as appropriate to allow timely decisions regarding the required disclosure.


The Company’s Chief Executive Officer has evaluated our disclosure controls and procedures and concluded that these controls and procedures were not effective as of September 30, 2014.

Unremediated Material Weakness

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies, which result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

We converted from an outside contractor to in-house for the preparation of the financial statements for our Independent Registered Public Accounting Firm. The internal statements had not been prepared on a basis in accordance with GAAP as of September 30, 2014 without the proper recording of accruals, inventory and stock sales.

To initially address this material weakness, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

Remediation of Material Weakness

To remediate the material weakness in our disclosure controls and procedures identified above, we have done or intend to do the following subsequent to the fiscal quarter ended September 30, 2014. We have brought the accounting and preparation of the financial statements in-house. The accruals, inventory and other accounting items are being corrected with the implementation of the new accounting processes. With the transition from the outside contractor the process to proper accrual accounting is expected to be complete in the before the end of 2014.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

None

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On April 17, 2013, the Company filed with the Securities and Exchange Commission an exemption from registration offering on Form D. The offering was closed on April 17, 2014. During this private offering, the Company issued 32,312,000 shares that were subscribed in the one year period at a fixed price of $.025 per share for total proceeds of $807,800.

On March 11, 2014, the Company sold 500,000 shares at the fixed price of $0.02 to an employee of the Company for $10,000.

We claim reliance on Section 4(a)(2) of the Securities Act for an exemption from registration of the shares. All investors have received a Private Placement Memorandum and had a previous existing relationship with our Directors with persons who had previously purchased shares in the offering made by the Private Placement Memorandum, were apprised of all the risks, and signed a share purchase agreement acknowledging they had reviewed the Private Placement Memorandum and were aware of the risk involved with their investment. No broker, dealer or finder or person other than our directors and officers were involved in making offers and sales of the Registrant's securities and no person received any compensation in connection with the sale of the shares. No form of advertising was used to solicit purchasers. We assert that the offer and sale of the shares did not involve a public offering. Each purchaser represented that he, she or it purchased with investment intent and was informed that the shares were "restricted securities" as defined in Rule 144 under the Securities Act. Certificates representing the shares, when issued, have contained a restrictive legend as recommended by Regulation D under the Securities Act advising that the shares cannot be resold without registration under the Securities Act or an opinion of counsel that an exemption from registration is available.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None

Item 4. MINE SAFETY DISCLOSURES

Not applicable

Item 5. OTHER INFORMATION

None

Item 6. EXHIBITS

(a) Exhibits:

Number   Description
31.1   Certification of Chief Executive and Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)
32.1   Certification of Chief Executive and Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.


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.

  Galenfeha, Inc.
     
     
Date: November 14, 2014 By: /s/ James Ketner
  Name: James Ketner
    President and Director
    (Principal Executive Officer, Principal
    Financial Officer, Principal Accounting Officer)